STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
the 9th day of June, 1999 between Titan Technologies and Information Systems
Corporation, a Delaware corporation ("Buyer"), a wholly-owned subsidiary of The
Titan Corporation ("Parent"), System Resources Corporation, a Delaware
corporation ("SRC"), and the Stockholders of SRC (each a "Stockholder,"
collectively the "Stockholders") identified on Exhibit A hereto (the "Schedule
of Stockholders").
Recitals
A. The Stockholders own a total of 7,150,000 shares of Common Stock of
SRC, in the amounts indicated on the Schedule of Stockholders, which constitute
all of the outstanding capital stock of SRC (the "Shares").
B. Buyer wishes to acquire from the Stockholders, and the Stockholders
wish to sell to Buyer, all of the Shares upon the terms and subject to the
conditions contained in this Agreement.
C. This Agreement has been approved by the Boards of Directors of SRC,
Parent and Buyer.
D. Buyer and the Stockholders desire that Buyer and the Stockholders
make a joint election under Sections 338(a) and 338(h)(10) of the Internal
Revenue Code (and a comparable election under state or local Law) with respect
to the purchase and sale of the Shares by Buyer.
Agreement
Now, Therefore, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions of this
Agreement, in consideration of the payments to be made to the Stockholders by
Buyer pursuant to Section 2 below, at the Closing, each of the Stockholders
hereby sells, assigns, conveys and transfers to Buyer, and Buyer hereby
purchases from each of the Stockholders, all right, title and interest in and to
the Shares held by the Stockholders free and clear of any liens or other
Encumbrances.
2. Purchase Price.
2.1 Purchase Price. The aggregate purchase price for the Shares (the
"Purchase Price") shall be $35,000,000, subject to adjustment as provided in
Section 2.3(a), payable at the Closing as follows:
(a) $33,000,000 (less a $500,000 holdback) payable in
immediately available funds; and
(b) Promissory notes by Buyer in the aggregate principal
amount of $2,000,000 (the "Notes"), substantially in the form attached hereto as
Exhibit B and subject to adjustment as more fully described below in Section
2.3(b), as guaranteed by Parent by a guarantee (the "Guarantee") in
substantially the form attached hereto as Exhibit C. The Notes shall bear
interest at the rate of seven percent (7%) per annum. The Notes shall mature and
shall be fully due and payable (subject to offset as expressly provided in this
Agreement) on the first anniversary of this Agreement. SRC shall deduct from any
principal and interest payment made on the Notes, the corporate level Taxes
payable by SRC with respect to the Notes resulting from the Election or the
closing of the purchase and sale of the Shares. The amount of the Tax shall be
determined by SRC after consultation with its tax consultant, Xxxxxx Xxxxxxxx
llp.
2.2 Allocation of Purchase Price. At the Closing, Buyer shall pay each
Stockholder an amount in cash equal to the product of (i) the Stockholder's
Applicable Fraction multiplied (ii) by $32,500,000 (or such greater or lesser
amount as Buyer delivers at the Closing as set forth in Section 2.3(a) hereof)
and shall deliver to each Stockholder a Note in the principal amount equal to
the product of (x) the Stockholder's Applicable Fraction and (y) $2,000,000. A
Stockholder's "Applicable Fraction" shall be the fraction (i) having a numerator
equal to the number of Shares held by such Stockholder on the Closing Date as
set forth on the Schedule of Stockholders, and (ii) having a denominator equal
to the total number of Shares held by all of the Stockholders on the Closing
Date as set forth on the Schedule of Stockholders.
2.3 Adjustments to Purchase Price.
(a) The Purchase Price payable pursuant to Section 2.1(a)
shall be increased by the Excess Working Capital, or reduced by the amount of
the Deficient Working Capital, if any, as of the Closing Date as determined from
the Unaudited Interim Balance Sheet.
(b) Following completion of the audit in accordance with
Section 2.3(d), the principal amount of the Notes shall be adjusted based upon
any adjustments to the calculation of Excess Working Capital or Deficient
Working Capital, if any, made pursuant to Section 2.3(d). If the principal
amount of the Notes is adjusted, then the interest accruals shall also be
adjusted so that interest accrues on the adjusted principal amount of the Notes
from the Closing Date. The Stockholders' shall exchange the original Notes for
new Notes reflecting any adjustments to principal.
(c) For purposes of this Section 2.3, the following terms mean
as follows:
(i) "Accounts Payable, Accrued and Current
Liabilities" means, as of the Unaudited Interim Balance Sheet Date, accounts
payable and other liabilities currently payable, including state income taxes,
that were incurred by SRC in the normal course of business (but excluding Other
Accrued Liabilities and any accrued deferred compensation liability provided
that there is sufficient restricted cash or marketable securities (valued at
current fair market value) in the System Resources Corporation Management
Deferred Compensation Trust ("Deferred Compensation Trust") at the Closing to
fund all of such deferred compensation liability).
(ii) "Below Normal Accounts Payable" means the
aggregate amount by which (1) the amount determined by multiplying (A) 0.123288
by (B) SRC's gross revenues as computed in accordance with GAAP consistently
applied for the four quarters ending on March 26, 1999 exceeds (2) the total
Accounts Payable, Accrued and Current Liabilities.
(iii) "BIG Tax Benefit" means the benefit derived by
the Stockholders from the deduction of up to $630,000 in built in gains tax
pursuant to Section 1366(f)(2) of the Internal Revenue Code resulting from the
Election (as defined in Section 8.2 hereof) (determined using the highest
federal and applicable capital gains rates).
(iv) "Deficient Working Capital" means any negative
Working Capital.
(v) "Excess Accounts Payable" means the aggregate
amount by which (1) the total Accounts Payable, Accrued and Current Liabilities
exceeds (2) the amount determined by multiplying (A) 0.123288 by (B) SRC's gross
revenues as computed in accordance with GAAP consistently applied for the four
quarters ending on March 26, 1999.
(vi) "Excess Working Capital" means any Working
Capital in excess of zero.
(vii) "Excess Accounts Receivable" means, as of the
Unaudited Interim Balance Sheet Date (as shown on the Unaudited Interim Balance
Sheet for purposes of Section 2.3(a) and as shown on the Audited Balance Sheet
for purposes of Section 2.3(b)) the sum of (1) all billed accounts receivable
that are aged between 91 to 720 days from the date originally billed and (2) all
amounts accrued for work performed but not yet billed under contracts
(unbilled), including the total of any fee retainages on completed contracts and
any unbilled rate variances for completed contracts that SRC has not
aggressively billed or collected due to SRC's status as a S corporation;
provided that all such amounts under this item (vii)(2) are billed and
collectible within 270 days of the Closing. Each of the Excess Accounts
Receivable that SRC believes are Excess Accounts Receivable as so defined are
listed on Schedule 2.3(c)(vii).
(viii) "Old Excess Accounts Receivable" shall mean
SRC's accounts receivable, all of which are set forth on Schedule 2.3(c)(viii)
listed on the Unaudited Interim Balance Sheet that are aged more than 720 days
from the date of billing and unbilled fee retainages and rate variances for
completed contracts by SRC that are not immediately billable and collectible.
(ix) "Other Accrued Liabilities" means any liabilities
incurred outside the normal course of business, including bonuses of any kind
accrued, committed or promised, attorneys fees, accounting fees, financial
advisor fees and other transaction related costs, including filing fees payable
by SRC under Section 10.2 (which SRC shall accrue in full prior to Closing), any
taxes other than the up to $630,000 in federal Built-In Gain taxes under Section
1374 of the Internal Revenue Code resulting from the Election or the closing of
the purchase and sale of the Shares that is not paid immediately prior to the
Closing in accordance with Section 3.2(j) (which SRC shall accrue in full prior
to Closing), and all additional contributions, costs, liabilities, penalties and
expenses, including attorneys' fees, accounting fees and other professional fees
necessary to bring SRC's 401(k) Plan into compliance with ERISA and other
applicable law and plan documents accrued by the SRC prior to Closing (based
upon the advice of Ernst & Young llp, after consulting with Xxxxxx Xxxxxxxx llp
about the basis for and adequacy of the accrual). Other Accrued Liabilities does
not include Accounts Payable, Accrued and Current Liabilities or any
indebtedness.
(x) "Unaudited Interim Balance Sheet" means the
balance sheet of SRC as of the Closing Date as delivered at Closing by SRC.
(xi) "Unaudited Interim Balance Sheet Date" means the
Closing Date.
(xii) "Working Capital means as of the Interim Balance
Sheet Date (as shown on the Unaudited Interim Balance Sheet for purposes of
Section 2.3(a) and as shown on the Audited Balance Sheet (as defined below) for
purposes of Section 2.3(b)), the difference between:
(1) the sum of (A) SRC's unrestricted cash and
cash equivalents, (B) the current fair market value of all marketable securities
held by SRC for investment or sale, (C) the total of Excess Accounts Receivable
and (D) the total of any Below Normal Accounts Payable; and
(2) the sum of (A) SRC's Excess Accounts
Payable, (B) all indebtedness not included in current liabilities, including
notes payable and debt to related parties, (C) all Other Accrued Liabilities and
(D) the BIG Tax Benefit.
(d) Within 60 days following the Closing, Xxxxxx Xxxxxxxx llp
shall audit the Unaudited Interim Balance Sheet for conformity to generally
accepted accounting principles, consistently applied ("GAAP") and issue a report
thereon. In performing the audit Xxxxxx Xxxxxxxx llp will not recommend any
changes to any method of accounting or accounting practice, such as depreciation
methods, used by SRC in preparing the Unaudited Interim Balance Sheet so long as
such methods and practices are in accordance with GAAP, consistently applied.
Any adjustment to the Unaudited Interim Balance Sheet proposed by Xxxxxx
Xxxxxxxx llp shall be subject to review by SRC's auditors, Ernst & Young llp. If
the opinions of Xxxxxx Xxxxxxxx llp and Ernst & Young llp differ as to the
necessity of the adjustment, a third auditing firm mutually agreeable to the
parties shall be selected to review the disputed adjustments. The decision of
the third independent auditing firm regarding any such adjustment shall be
binding on the parties. The final audited Interim Balance Sheet is referred to
as the "Audited Balance Sheet." The final determination of the amounts payable
under the Notes shall be based on the final determination of Excess Working
Capital, Deficient Working Capital and each component in the calculation of such
amounts shall be made using the Audited Balance Sheet; provided that no
adjustment will be made to the Notes unless the aggregate effect of the audit
adjustment on the Working Capital calculation exceeds $250,000.
2.4 Offsets to Notes. If any billed accounts receivable from 91 to 720
days included in the calculation of Excess Accounts Receivable are not collected
prior to the date of maturity of the Notes or if any unbilled fee retainages and
rate variances included in the calculation of Excess Accounts Receivable are not
collected within 270 days of the Closing Date, then the uncollected amounts
shall be deducted dollar for dollar from and offset against first the principal
of the Notes (pro rata), and then against any accrued and unpaid interest on the
Notes (pro rata). If the principal amount of the Notes is adjusted, then the
interest accruals shall also be adjusted so that interest accrues on the
adjusted principal amount of the Notes from the Closing Date. The Stockholders
shall exchange the original Notes for new Notes reflecting any adjustments to
principal. All other terms and conditions of such Notes will remain unchanged
(except for changes in accrued interest).
2.5 Excess Accounts Receivable. At Closing, SRC shall deliver to Buyer
a detailed schedule setting forth by contract each billed or unbilled
receivable, each unbilled retainages for completed contracts and each rate
variances for completed contracts included in SRC's Excess Accounts Receivable
and SRC's Old Excess Accounts Receivable, which shall be attached hereto as
Schedule 2.5. Following the Closing, SRC, Buyer or Parent shall administer the
collection of the Excess Accounts Receivable and the Old Excess Accounts
Receivable using reasonable billing and collection practices to collect such
receivables within a reasonable period of time given the nature and age of the
receivables and, in the case of the receivables in the Excess Accounts
Receivable, the terms of the Notes. Neither SRC, Buyer nor any affiliate of
Buyer shall act as a fiduciary of the Stockholders in collecting such
receivables. SRC shall maintain records with respect to its collection of all
Excess Accounts Receivable and the Old Excess Accounts Receivable and its
out-of-pocket collection costs specific to such receivables and shall send the
Stockholders a monthly report of all such collections and collection costs
during the preceding month. The Stockholder Representative may contact a
designated representative of Buyer to discuss any questions about the monthly
reports. Upon the request of the Stockholder Representative, Buyer will meet
with such representative quarterly in San Diego, California (or such other place
as is mutually agreed to by the Stockholder Representative and the designated
representative of Buyer), at a mutually convenient date and time to review the
progress in collecting all Excess Accounts Receivable and Old Excess Accounts
Receivable. SRC shall pay the Stockholders (based upon their Applicable
Fraction) 50% of the net collections of Old Excess Accounts Receivable made
during the period from the Closing Date to the second anniversary of the Closing
Date less all corporate level Taxes payable by SRC resulting from the Election
or the closing of the purchase and sale of the Shares attributable to the Old
Excess Receivables (the "Collection Amount"). Net collections shall mean total
collections of Old Excess Accounts Receivable, net of all accrued out-of-pocket
costs of collection, including legal fees, reasonable collection agency fees or
other similar fees but excluding any allocations of corporate overhead. (The
Stockholders shall not receive any amount for the collection of Excess Accounts
Receivable.) SRC shall pay to the Stockholders (pro rata) the Collection Amount
for each of the first and second year following the Closing, within 30 days
following receipt by Buyer of a certification from Xxxxxx Xxxxxxxx llp (which
certification shall be presented on or before April 15 of each of 2000, 2001 and
2002) of the amount of Old Excess Accounts Receivable collected during such
period, net of the accrued out-of-pocket costs of collection, which
certification shall be done in conjunction with Buyer's annual financial audits
for the fiscal years ending December 31, 1999, 2000 and 2001. Buyer may offset
any amount due to the Buyer under Section 2.4 against any amount due to the
Stockholders under this Section 2.5.
3. The Closing; Delivery.
3.1 The Closing. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place at the offices of Parent, 0000
Xxxxxxx Xxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000-0000 concurrent with the
execution of this Agreement (the "Closing Date").
3.2 Delivery and Satisfaction of Conditions at Closing. At the Closing:
(a) The Stockholders shall deliver to Buyer stock
certificates, with duly executed assignments separate from certificate endorsing
the certificates in Buyer's name, representing the Shares being sold, assigned,
conveyed and transferred hereunder by the Stockholders to Buyer.
(b) Each Stockholder shall receive an amount in cash (paid by
wire transfer, cashier's or certified check, or other means of payment of
immediately available funds) equal to the amount specified by Section 2.2.
(c) Each Stockholder shall receive a Note and the Guarantee,
for the principal amount specified by Section 2.2.
(d) Buyer shall receive the Noncompetition Agreement in
accordance with Section 7.4.
(e) Buyer shall have received from each of the Stockholders a
general release in the form of Exhibit D.
(f) Buyer shall have received from the Stockholders' counsel
an opinion of such counsel in the form of Exhibit E.
(g) The Stockholders shall have received from Buyer's counsel
an opinion of such counsel in the form of Exhibit F.
(h) Buyer shall have received from SRC resignations of all of
the directors of SRC.
(i) Immediately following the Closing, each of the
Stockholders shall deliver to Buyer the Election pursuant to Section 8.2.
(j) Buyer, to its reasonable satisfaction, shall have received
from SRC's evidence of payment of a best estimate of the corporate level Taxes
payable by SRC for the period ending on Closing Date, resulting from the
Election (other than the federal built-in gains tax assumed by Buyer pursuant to
Section 8). Such estimate shall have been determined by SRC's tax preparer and
shall have been reviewed by Xxxxxx Xxxxxxxx llp prior to the making of the
estimated tax payment ("the Estimated Tax Payment").
(k) SRC shall have accrued on its balance sheet the 401(k)
liability described in Section 2.3(c)(ix).
(l) Buyer shall have satisfactorily completed its
pre-acquisition investigation and review of SRC's business, condition, assets,
liabilities, operations, financial performance, net income and prospects and
shall be satisfied with the results of that investigation and review.
(m) SRC shall have accrued on its balance sheet any costs for
correcting, as listed on Schedule 4.29, replacing or otherwise remediating the
SRC systems that are not Year 2000 compliant that have not yet been incurred by
SRC.
(n) SRC and its landlords on the leases identified on Schedule
3.2(n) (the "Leases") shall have executed and delivered amendments to each of
the leases providing for the early termination of such leases on certain
conditions as set forth on Exhibit I hereto.
4. Representations and Warranties of SRC. Except as set forth in the
disclosure schedules attached hereto (each a "Schedule," collectively, the
"Disclosure Schedule"), SRC and each of the Stockholders, jointly and severally,
represents and warrants to Buyer, as of the Closing Date, as follows:
4.1 Organization and Standing. SRC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified or licensed to do business and is in good standing under the
laws of each of the States listed on Schedule 4.1. SRC has all requisite
corporate power and all necessary governmental approvals to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted. SRC is qualified or licensed to do business in all jurisdictions in
which the nature of its business or properties requires such qualification,
except where the failure to so qualify will not cause a material adverse effect
on the business, assets or financial condition of SRC. Except as disclosed in
Schedule 4.1, SRC has not conducted business under, or otherwise used, for any
purpose or in any jurisdiction any fictitious name, assumed name, trade name or
other name other than "System Resources Corporation."
4.2 No Subsidiaries. Except as set forth on Schedule 4.2, SRC has no
direct or indirect subsidiaries and does not own or control, directly or
indirectly, any interest in any other corporation, association, partnership,
joint venture or other business entity. SRC has not agreed and is not obligated
to make any future investment in or capital contribution to any other
corporation, association, partnership, joint venture or other business entity.
4.3 Authorization. The Stockholders have all requisite power and
authority to enter into this Agreement, to sell and transfer the Shares pursuant
to this Agreement and to carry out and perform all of their obligations under
the terms of this Agreement. All corporate action on the part of SRC, if any,
and all actions on the part of SRC's officers, directors, Stockholders and
security holders that are necessary for the authorization, execution, delivery
and performance of the Agreement have been taken. The Agreement, when executed
and delivered, shall constitute the legal and binding obligation of SRC and the
Stockholders, enforceable against SRC and the Stockholders, respectively, in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditor's rights and by rules of law
governing specific performance, injunctive relief or other equitable remedies.
4.4 Title to Stock; Encumbrances. The Stockholders are the true, lawful
record and beneficial owners of the Shares being transferred and sold to Buyer
hereunder, with no restrictions on the Stockholders' voting rights or rights of
transfer or disposition pertaining to such Shares, except as may be imposed
under applicable securities laws, and the Shares constitute all of the shares of
capital stock of SRC owned beneficially or of record by the Stockholders. None
of the Shares is subject to any voting trust or other agreement or arrangement
with respect to the voting thereof. Upon the Closing, Buyer will own all of the
outstanding shares of capital stock of SRC free and clear of any lien or other
Encumbrances (as defined in Section 4.30). All outstanding shares of capital
stock of SRC have been issued in compliance with applicable securities laws and
other applicable Legal Requirements (as defined in Section 4.30) and in
compliance with all requirements of applicable Contracts (as defined in Section
4.30).
4.5 No Breach, Etc. The execution and delivery of this Agreement and
all documents and certificates to be delivered hereunder by SRC and the
Stockholders in connection with the transactions contemplated hereby do not, and
the performance and consummation by SRC and the Stockholders of their
obligations hereunder will not result in any conflict with, breach or violation
of or default, termination, forfeiture or Encumbrance under any terms or
provisions of SRC's Certificate of Incorporation or Bylaws, any statute, rule,
regulation, judicial or governmental decree, order or judgment or any material
agreement, lease or other instrument or other obligation, to which SRC or the
Stockholders are a party or to which SRC's assets or any Stockholders' assets
are subject and do not require any consent, approval, authorization or permit of
or filing with or notification to any Governmental Body (as defined in Section
4.30), other than a filing under the Xxxx-Xxxxx Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), or, except as disclosed in Schedule
4.5, require any notice, consent or approval of any third party, including any
party to a Material Contract (as defined in Section 4.16(a)).
4.6 Capitalization. The authorized capital stock of SRC consists of
Fifteen Million (15,000,000) shares of Common Stock, no par value, of which
Seven Million One Hundred Fifty Thousand (7,150,000) shares of Common Stock are
and will be, immediately prior to the Closing, issued and outstanding. All of
such shares of outstanding Common Stock are owned by the Stockholders in the
amounts indicated on the Schedule of Stockholders and are being sold to Buyer
hereunder. No other shares of capital stock or securities of SRC are
outstanding. All of the issued and outstanding shares of Common Stock of SRC are
duly authorized, validly issued, fully paid and nonassessable, were not issued
in violation or breach of any preemptive or similar rights, and have been issued
in compliance with all applicable federal and state securities laws. There are
no outstanding options, warrants, convertible securities or other rights under
which SRC is or may become obligated to issue, assign or transfer any shares of
its capital stock, and none of the foregoing will arise as a result of the
execution or performance of the Agreement or the transactions contemplated
herein. Except as set forth in Schedule 4.6, SRC has never repurchased, redeemed
or otherwise reacquired any shares of its capital stock or other securities and
none of the shares of capital stock or securities of SRC is subject to a right
of repurchase in favor of SRC.
4.7 Taxes.
(a) All tax returns required to be filed by or on behalf of
SRC with any Governmental Body on or before the Closing Date or for periods
occurring on or before the Closing Date (i) have been or will be filed when due,
including extensions and (ii) have been, or will be when filed, accurately
prepared in all material respects. SRC has, within the time (including any
extensions of applicable due dates) and in the manner prescribed by law, paid
all Taxes that are due and payable. SRC's Financial Statements (as defined in
Section 4.8) fully accrue all liabilities for Taxes required to be recorded in
accordance with GAAP consistently applied with respect to all periods through
the dates thereof in accordance with GAAP consistently applied, with the
exception of any federal built-in gains tax resulting from the Election. "Tax or
Taxes" shall mean all federal, state, county, city, municipality, assessment
districts, local and foreign taxes and other assessments and governmental
charges of a similar nature owed by SRC including, but not limited to, income,
sales, use, excise, personal and real property (tangible and intangible) taxes
imposed by any Government Body (as defined in Section 4.30) (whether imposed
directly or through withholding), including interest, penalties and additions to
Tax applicable thereto, but excluding any other Tax payable by the Stockholders.
(b) No claim or legal proceeding is pending or has been
threatened against or with respect to SRC in respect of any Tax. There are no
unsatisfied liabilities for Taxes (including liabilities for interest, additions
to tax and penalties thereon and related expenses) with respect to any written
notice of deficiency or similar document received by SRC. There are no liens for
Taxes upon any of the assets of SRC, except liens for current Taxes not yet due
and payable. No extension or waiver of any limitation period applicable to any
SRC Tax returns has been granted by SRC (or any other person) and no such
extension or waiver has been requested. Since January 1, 1993, no SRC return
relating to Taxes has been examined or audited by any Governmental Body except
as disclosed on Schedule 4.7(b).
(c) At all times from October 1, 1989 through the Closing
Date, SRC has been an S corporation for federal tax purposes within the meaning
of Section 1361(a)(1) of the Code and has used the last Friday prior to the 1st
day of October as its taxable year. Prior to Closing, SRC and the Stockholders
have not taken any action that has or shall result in the termination of SRC's
status as an S corporation within the meaning of Section 1361(a)(1) of the Code
or imposition of a tax on SRC under the provisions of Section 1374 of the Code.
Except as disclosed on Schedule 4.7(c), as of the date hereof SRC has not
conducted any business in any state or political subdivision in which the
disposition of any of its assets including goodwill in a transaction in which
gain or income would be realized would result in the imposition by that state or
political subdivision of a corporate level tax. Except as disclosed on Schedule
4.7(c), SRC does not conduct any business which is a historic business of, a
continuation of, or successor to any business which was previously conducted by
another corporation or any other entity which was subject to a United States
corporate level tax on its gain or income including a tax imposed by reason of
the provisions of Section 1374 and 1375 of the Code, or any predecessor
provisions thereto. SRC has never acquired any asset, including goodwill, the
basis of which was determined in whole or in part by reference to the basis of
the asset in the hands of a C corporation within the meaning of Section
1361(a)(2) of the Code or S corporation subject to the provisions of Section
1374 of the Code or predecessor provisions thereto. Except as disclosed on
Schedule 4.7(c), SRC has no accumulated earnings and profits.
(d) Except for potential Tax on built-in gain under Section
1374 of the Code as disclosed on Schedule 4.7(c), which shall not exceed the
Excluded Liability (as defined in Section 8.1), SRC will not be liable from and
after the Closing for any Tax under Section 1374 of the Code in connection with
the deemed sale of assets caused by the Election.
4.8 Financial Statements.
(a) SRC has delivered to Buyer the following financial
statements and notes (collectively, the "Financial Statements"):
(i) the audited balance sheets of SRC as of September
25, 1998 and September 26, 1997, and the related audited income statements,
statements of stockholders' equity and statements of cash flows of SRC for the
years then ended, together with the notes thereto audited by Ernst & Young llp;
and
(ii) the unaudited balance sheet ended March 26, 1999,
and the related unaudited income statement of SRC for the six-month period then
ended.
(b) The Financial Statements are accurate and complete in all
material respects and present fairly the financial position of SRC as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 4.8(a)(i)) cash flows of SRC for the
periods covered thereby. The Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods covered (except
that the financial statements referred to in Section 4.8(a)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude).
4.9 No Undisclosed Liabilities. Except as set forth in this Agreement
and except for liabilities identified as such in the "liabilities" column of the
unaudited balance sheet dated March 26, 1999, and accrued liabilities that have
been incurred by SRC since March 26, 1999, in the ordinary course of business
and consistent with past practices, SRC has no material liabilities, commitments
or obligations (secured or unsecured, and whether accrued, absolute, contingent,
direct, indirect, matured or unmatured or otherwise).
4.10 Absence of Certain Changes. Since September 25, 1998, except as
disclosed in Schedule 4.10, there has not been any:
(a) material adverse change in the financial condition,
assets, liabilities, business or operations of SRC not disclosed in the
Financial Statements;
(b) material loss, damage or destruction, whether covered by
insurance or not, affecting SRC's business or properties or any material
interruption in the use of any of SRC's properties;
(c) more than a 15% increase since March 1, 1999 in the
salaries, wages or other remuneration or compensation to any employee or agent
of SRC, individually or to all employees or agents of SRC in the aggregate, or
in any benefits payable or to become payable to any employee or agent of SRC
(including, without limitation, any increase or change pursuant to any bonus,
pension, profit sharing, retirement, incentive compensation, deferred
compensation or other plan or commitment or the establishment or adoption of any
new employee benefit plan), or any material bonus or other employee benefit
granted, made or accrued to any such person, individually or to all employees or
agents of SRC in the aggregate, except as set forth on Schedule 4.10(c)
completed on both an individual and aggregate basis;
(d) hiring of any new employee with an annual base
compensation rate (including projected commissions) in excess of $70,000 other
than employees who are chargeable as direct labor on SRC's existing Government
Contracts;
(e) declaration, setting aside, or payment of any dividend or
any other distribution to any of the Stockholders; any redemption, purchase or
other acquisition by SRC of any shares or other interest in SRC, or any security
relating thereto; or any other payment to any Stockholder or Stockholders of
SRC;
(f) sale, lease or other transfer or disposition of any
material properties or assets of SRC, except for the sale of inventory items in
the ordinary course of business;
(g) except as set forth on the September 25, 1998 balance
sheet, indebtedness for borrowed money incurred, assumed or guaranteed by SRC;
(h) mortgage, pledge, lien or Encumbrance made on any of the
properties or assets of SRC other than capital leases incurred in the ordinary
course of business;
(i) capital expenditures and capital leases in excess of
$300,000 in the aggregate or $100,000 as to any individual capital expenditure;
(j) written waiver of material rights signed by an officer of
SRC under any material contract to which SRC is a party;
(k) sale, issuance or authorization of any capital stock or
other security, or any option or right to acquire any capital stock, or any
instrument convertible into or exchangeable for any capital stock or other
security;
(l) amendment to SRC's Certificate of Incorporation or Bylaws,
and SRC has not effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(m) formation of a subsidiary or acquisition of any other
entity;
(n) write-off as uncollectible, or establishment of any
reserve with respect to, any account receivable in excess of $10,000 or other
indebtedness, except for amounts disclosed in the September 25, 1998 audited
Financial Statements;
(o) change in SRC's method of accounting or accounting
practices;
(p) commencement or settlement of legal proceedings;
(q) loan or advance (other than advances to employees in the
ordinary course of business for travel in accordance with past practice) to any
person including, but not limited to, any officer, director or employee of SRC;
(r) except for end-user licenses entered into in the ordinary
course of business and rights granted as a matter of law under government
contracts, entering into of any type of license agreement or other agreement
regarding intellectual property rights;
(s) other material commitment or transaction by SRC
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice; or
(t) agreement or commitment to take any of the actions
referred to in clauses "(c)" through "(s)" above.
4.11 Title to Assets. SRC owns, and has good, valid and marketable
title to, all assets purported to be owned by it, including: (i) all assets
owned and reflected on the Unaudited Interim Balance Sheet; (ii) all of its
rights under the Contracts identified in Schedule 4.16; and (iii) all other
assets reflected in its books and records as being owned by SRC. Except as set
forth in Schedule 4.11, all of said assets are owned by SRC free and clear of
any liens or other Encumbrances, except for any lien for current taxes not yet
due and payable. Schedule 4.11 identifies all assets that are material to the
business of SRC and that are being leased or licensed to SRC and the lease or
license agreement relating to each such asset.
4.12 Bank Accounts; Receivables.
(a) Schedule 4.12(a) provides accurate information with
respect to each account maintained by or for the benefit of SRC at any bank or
other financial institution.
(b) Schedule 4.12(b) provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other
receivables of SRC as of March 26, 1999. Except as set forth in Schedule
4.12(b), all existing accounts receivable of SRC (i) represent valid obligations
of customers of SRC arising from bona fide transactions entered into in the
ordinary course of business and (ii) as to receivables from the U.S. federal
government, are current within the meaning of the Prompt Payment Act and SRC has
received no written notice from any Governmental Body disputing such account
receivable, and as to non-U.S. federal government receivables are current and
will be collected in full when due, and as to both U.S. federal government
receivables and non-U.S. federal government receivables without any counterclaim
or set off (net of an adequate reserve for each category of accounts as
determined in accordance with GAAP consistently applied).
4.13 Equipment. All material items of equipment and other tangible
assets owned by or leased to SRC are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of SRC's business, in the manner in which such
business is currently being conducted.
4.14 Litigation, Etc. Except as disclosed on Schedule 4.14, no action,
claim, suit, proceeding, or investigation of any nature is pending or, to the
best knowledge of SRC, threatened against SRC. The foregoing includes: any
action, claim, suit, proceeding or investigation, pending or threatened, which
questions the validity of the Agreement or the right of SRC or the Stockholders
to enter into the Agreement or to sell and transfer the Shares being sold and
transferred hereunder, or which might result, either individually or in the
aggregate, in any material adverse change in the condition or affairs of SRC,
financial or otherwise; or is any litigation pending or threatened by or against
SRC or any Stockholder by reason of the past or current employment relationships
of any employee, officer or consultant of SRC or the activities of any
Stockholder, including but not limited to negotiations by any Stockholder with
possible purchasers of, or investors in, SRC or its business. There is no
judgment, decree, injunction, ruling or order of any court, governmental
department, commission agency, instrumentality or arbitrator or other similar
ruling outstanding against SRC or any Stockholder with respect to SRC. No
action, claim, suit, proceeding or investigation is pending or threatened by SRC
or any Stockholder or, to the best knowledge of SRC, pending or threatened by
any third party with respect to SRC.
4.15 Intellectual Property. The term "SRC Intellectual Property" shall
include all (i) registered and unregistered trademarks, service marks and
applications therefor (collectively "Marks"), (ii) patents (including any
extension, continuation, registration, confirmation, reissue, renewal or
re-examination thereof) and patent applications (collectively "Patents"), (iii)
copyrights in both published works and unpublished works ("Copyrights"), and
(iv) know-how, trade secrets and other confidential information ("Trade
Secrets"), in each case owned, used or licensed by SRC as licensee or licensor.
All material SRC Intellectual Property owned or licensed by SRC is listed on
Schedule 4.15. The SRC Intellectual Property includes all intellectual property
rights necessary for the operation of the business of SRC as it is currently
conducted. The operation of the business of SRC as it is currently conducted
(excluding any commercial off the shelf software for which SRC holds valid
licenses) does not infringe, violate or misappropriate any intellectual property
rights of any third party. SRC is the owner or licensee of all right, title and
interest in and to all of the SRC Intellectual Property free and clear of all
liens and Encumbrances, and has the right to use without further payment to a
third party all of the SRC Intellectual Property. To the best knowledge of SRC,
there are no actual or claimed infringements, violations or misappropriations
existing by or against any third party with respect to the SRC Intellectual
Property. To the best knowledge of SRC, all of the SRC Intellectual Property is
valid and enforceable, and neither SRC nor any Stockholder has, by act or
failure to act, including without limitation, by failure to attach any required
notice or failure to pay fees, transferred any rights to the SRC Intellectual
Property into the public domain. SRC is not making use of any SRC Intellectual
Property in connection with the business of SRC in which any present or past
employee, partner, Stockholder, licensor, licensee or agent of SRC has or has
claimed an interest, and to the best knowledge of SRC, there are no facts that
could reasonably be expected to give rise to such a claim.
4.16 Contracts.
(a) Schedule 4.16(a) identifies each Contract of SRC:
(i) relating to the employment of, or the performance
of services by, any employee, consultant or independent contractor which
involves a potential commitment in excess of $75,000 per year other than
employees who are chargeable as direct labor on SRC's existing Government
Contracts;
(ii) relating to the acquisition, transfer, use,
development, sharing or license of any technology or any SRC Intellectual
Property;
(iii) imposing any restriction on SRC's right or
ability (A) to compete with any other person or entity, (B) to acquire any
product or other asset or any services from any other person or entity, to sell
any product or other asset to or perform any services for any other person or
entity or to transact business or deal in any other manner with any other person
or entity, or (C) to develop or distribute any technology, other than
restrictions imposed under Government Contract regulations;
(iv) creating or involving any creation of a
distribution arrangement or franchise relationship or authorizing any person
(other than an officer of SRC) to make any commitment or agreement on behalf of
SRC;
(v) relating to the acquisition, issuance or transfer
of any securities;
(vi) relating to the creation of any Encumbrance with
respect to any material asset of SRC;
(vii) involving or incorporating any guaranty, any
pledge, any performance or completion bond, any indemnity or any surety
arrangement;
(viii) creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or liabilities;
(ix) relating to the purchase or sale of any product
or other asset by or to, or the performance of any services by or for, any
Related Party (as defined in Section 4.21);
(x) constituting or relating to a Government Contract
(as defined in Section 4.30) or Government Bid (as defined in Section 4.30);
(xi) that was entered into outside the ordinary course
of business; and
(xii) that has a term of more than 60 days and that
may not be terminated by SRC (without penalty) within 60 days after the delivery
of a termination notice by SRC and represents a potential liability to SRC in
excess of $75,000;
(Contracts in the respective categories described in clauses "(i)" through
"(xii)" above are referred to in this Agreement as "Material Contracts.")
(b) SRC has made available to Buyer accurate and complete
copies of all written Material Contracts identified in Schedule 4.16, including
all amendments thereto. Schedule 4.16(b) provides an accurate description of the
terms of each Material Contract that is not in written form. Each Material
Contract is valid and in full force and effect, and, to the best of the
knowledge of SRC, is enforceable by SRC in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) Except as set forth in Schedule 4.16(b) and 4.16(c):
(i) SRC has not violated or breached, or committed any
material default under, any Material Contract, and, to the best of the knowledge
of SRC, no other person or entity has violated or breached, or committed any
material default under, any Material Contract;
(ii) to the best knowledge of SRC, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A) result in a
material violation or breach of any of the provisions of any Material Contract,
(B) give any person or entity the right to declare a default or exercise any
remedy under any Material Contract, (C) give any person or entity the right to
accelerate the maturity or performance of any Material Contract, or (D) other
than pursuant to applicable government regulations, give any person the right to
cancel, terminate or modify any Material Contract;
(iii) since October 1, 1995, SRC has not received any
written notice or other communication regarding any actual or possible material
violation or breach of, or default under, any Material Contract; and
(iv) SRC, through an officer of SRC, has not waived
any of its material rights under any Material Contract; .
(d) Other than customary ongoing renegotiations of government
contracts, no person or entity is renegotiating, or has a right pursuant to the
terms of any Material Contract to renegotiate, any amount paid or payable to SRC
under any Material Contract or any other material term or provision of any
Material Contract.
(e) The Contracts identified in Schedule 4.16(a) and Schedule
4.16(b) collectively constitute all of the contracts necessary to enable SRC to
conduct its business in the manner in which its business is currently being
conducted.
(f) Schedule 4.16(f) is a copy of SRC internally prepared Task
Opportunity Tracking System and Contract Opportunity Tracking Schedules.
Schedule 4.16(f) also identifies each proposed contract as to which any bid,
offer, award, written proposal, term sheet or similar document has been
submitted or received by SRC that is still being pursued.
(g) Except as set forth in Schedule 4.16(a) and Schedule
4.16(b), since October 1, 1995:
(i) SRC has not had any determination of
noncompliance, entered into any consent order or undertaken any internal
investigation relating directly or indirectly to any Government Contract or
Government Bid;
(ii) SRC has complied in all material respects with
all Legal Requirements with respect to all Government Contracts and Government
Bids;
(iii) SRC is in substantial compliance with respect to
all obligations under any Government Contract and the following laws and
regulations in obtaining and performing any Government Contract: (A) the Truth
in Negotiations Act of 1962, as amended, (B) the Service Contract Act of 1963,
as amended, (C) the Contract Disputes Act of 1978, as amended, (D) the Office of
Federal Procurement Policy Act, as amended, (E) the Federal Acquisition
Regulations (the "FAR") or any applicable agency supplement thereto, (F) the
Cost Accounting Standards, (G) the Defense Industrial Security Manual (DOD
5220.22-M), (H) the Defense Industrial Security Regulation (DOD 5220.22-R) or
any related security regulations, or (I) any other applicable procurement law or
regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by SRC in
any certification, representation or disclosure statement submitted by SRC with
respect to any Government Contract or Government Bid were current, accurate and
complete in all substantial respects as of the date of submission;
(v) neither SRC nor any of its employees has been
debarred or suspended from doing business with any Governmental Body, and, to
the best of the knowledge of SRC, no circumstances exist that would warrant the
institution of debarment or suspension proceedings against SRC or any employee
of SRC;
(vi) no negative determinations of responsibility have
been issued against SRC in connection with any Government Contract or Government
Bid;
(vii) no direct or indirect costs incurred by SRC have
been questioned or disallowed in writing as a result of a finding or
determination of any kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor
or higher-tier subcontractor of any Governmental Body, has withheld or set off,
or threatened to withhold or set off, any material amount due to SRC under any
Government Contract other than routine retentions that are not in dispute;
(ix) there are not and have not been any
irregularities, misstatements or omissions relating to any Government Contract
or Government Bid that have led to or could reasonably be expected to lead to
(A) any administrative, civil, criminal or other investigation by any
governmental authority, legal proceeding or indictment involving SRC or any of
its employees (other than normal routine audits conducted in the ordinary course
of business), (B) the disallowance in writing of any material costs submitted
for payment by SRC, (C) the recoupment of any material payments previously made
to SRC, (D) a finding or claim of fraud, defective pricing or improper payments
on the part of SRC, or (E) the assessment of any penalties or damages of any
kind against SRC;
(x) there is not and has not been any material (A)
outstanding claim against SRC by, or dispute involving SRC with, any prime
contractor, subcontractor, vendor or other person arising under or relating to
the award or performance of any Government Contract, (B) fact known by SRC upon
which any such material claim could reasonably be expected to be based or which
may give rise to any such material dispute, or (C) final decision of any
Governmental Body against SRC;
(xi) SRC is not undergoing and has not undergone any
audit, and to the best knowledge of SRC there is no basis for any impending
audit, arising under or relating to any Government Contract (other than normal
routine audits conducted in the ordinary course of business);
(xii) SRC has not entered into any financing
arrangement or assignment of proceeds (other than the grant of a security
interest to its primary lender) with respect to the performance of any
Government Contract;
(xiii) no payment has been made by SRC or by any
person acting on SRC's behalf to any person (other than to any bona fide
employee or agent (as defined in subpart 3.4 of the FAR) of SRC) which is or was
contingent upon the award of any Government Contract or which would otherwise be
in violation of any applicable procurement law or regulation or any other Legal
Requirement;
(xiv) SRC's cost accounting system is in compliance
with applicable regulations and other applicable Legal Requirements, and has not
been determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xv) to the best knowledge of SRC, SRC has complied in
all material respects with all applicable regulations and other Legal
Requirements and with all applicable contractual requirements relating to the
placement of legends or restrictive markings on technical data, computer
software and other proprietary assets;
(xvi) in each case in which SRC has delivered or
otherwise provided any technical data, computer software or SRC Intellectual
Property to any Governmental Body in connection with any Government Contract, to
the best knowledge of SRC, SRC has marked such technical data, computer software
or SRC Intellectual Property with all markings and legends (including any
"restricted rights" legend and any "government purpose license rights" legend)
necessary (under the FAR or other applicable Legal Requirements) to ensure that
no Governmental Body or other person or entity is able to acquire any unlimited
rights with respect to such technical data, computer software or SRC
Intellectual Property;
(xvii) SRC has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
(xviii) SRC has reached agreement in writing with the
cognizant government representatives approving and "closing" all indirect costs
charged to Government Contracts for all years from inception through September
30, 1995, for Department of Defense contracts;
(xix) the responsible government representatives have
agreed with SRC as to the "provisional billing rates" that SRC is charging on
cost-type Government Contracts and including in Government Bids for the period
from September 30, 1995 through the date of this Agreement;
(xx) except as previously described in Section 4.5,
SRC is not and will not be required to make any filing with or give any notice
to, or to obtain any consent from, any Governmental Body under or in connection
with any Government Contract or Government Bid as a result of or by virtue of
the execution, delivery of performance of this Agreement or any of the other
agreements referred to in this Agreement; and
(xxi) neither SRC nor any director or officer of SRC,
nor to the best knowledge of SRC, any agent, employee or other person acting on
behalf of SRC, has used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds. Neither SRC nor any director or
officer of SRC, nor, to the best knowledge of SRC, any agent, employee or other
person acting on behalf of SRC, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
4.17 Security Matters. SRC is in substantial compliance with all
security and related requirements on its Government Contracts.
4.18 Employee and Labor Matters; Benefit Plans.
(a) Schedule 4.18(a)(i) identifies each salary, bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by SRC for the
benefit of any employee of SRC ("Employee"). Schedule 4.18(a)(ii) identifies the
schedule of payments under SRC's deferred compensation and incentive
compensation programs. Except as specified in Schedule 4.18(a)(i) and payments
under SRC's 401(k) plan, or as otherwise required by law, SRC has no obligation
to any current or former employee or beneficiary of such individuals for any
deferred compensation or other deferred payments.
(b) Except as set forth in Schedule 4.18(a)(i), SRC does not
maintain, sponsor or contribute to, and, has not at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees (a "Pension Plan").
(c) SRC maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Schedule
4.18(a) (the "Welfare Plans"), none of which is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, SRC has prepared and delivered
to Buyer:
(i) an accurate and complete copy of such Plan
(including all amendments thereto);
(ii) an accurate and complete copy of completed annual
reports, if required under ERISA, with respect to such Plan for the last two
years;
(iii) an accurate and complete copy of the most recent
summary plan description, together with each Summary of Material Modifications,
if required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies of the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and record
keeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) SRC is not and has never been required to be treated as a
single employer with any other Person under Section 4001(b)(1) of ERISA or
Section 414(b), (c), (m) or (o) of the Code. SRC has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code. SRC
has never made a complete or partial withdrawal from a multiemployer plan, as
such term is defined in Section 3(37) of ERISA, resulting in "withdrawal
liability," as such term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA).
(f) SRC does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities on
the Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Except as specified in Schedule 4.18(i), each of the Plans
has been operated and administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA and the Code.
(j) Except as specified in Schedule 4.18(i), each of the Plans
intended to be qualified under Section 401(a) of the Code has received (or is
the subject of) a favorable determination from the Internal Revenue Service, and
neither SRC nor any of the Stockholders is aware of any reason why any such
determination letter could reasonably be expected to be revoked.
(k) Except as set forth in Schedule 4.18(k), neither the
execution, delivery or performance of this Agreement, nor the consummation of
the sale of Shares or any of the other transactions contemplated by this
Agreement, will result in any payment by SRC (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
SRC (whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or vesting
of any such benefits.
(l) Schedule 4.18(l) contains a list of all salaried Employees
of SRC as of the date of this Agreement, and correctly reflects, in all material
respects, their salaries, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or commission
arrangements), their dates of employment and their positions. Schedule 4.18(l)
also contains a list of all Employees of SRC with security clearances and the
level of such security clearance. SRC is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
Employees. Except as specified in Schedule 4.18(l), all of SRC's employees are
"at will" employees.
(m) Except as set forth on Schedule 4.18(m) there are no
Employees currently on disability or other leave.
(n) SRC is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters including without limitation Legal Requirements
respecting employment discrimination, workers' compensation, family and medical
leave, the Immigration Reform and Control Act, and occupational safety and
health requirements, and has not and is not engaged in any unfair labor
practice.
(o) Neither SRC nor any Shareholder has made any
representation or promise to any employee of SRC regarding any benefits,
compensation or other payments that might be paid or distributed by SRC to any
employee of SRC as a result of the consummation of any transaction involving a
change of control of SRC, including the transaction contemplated hereby.
(p) SRC has good labor relations generally with its Employees.
(q) All persons classified by SRC as independent contractors
do satisfy and have satisfied the requirements of law in effect at that time to
be so classified, and SRC has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so, except to the extent that any
misclassification of any such person will not have a material adverse effect on
SRC.
(r) There is no charge or compliance proceeding actually
pending or, to the best knowledge of SRC threatened against SRC before the Equal
Employment Opportunity Commission or any state, local, or foreign agency
responsible for the prevention of unlawful employment practices.
4.19 Compliance with Laws. SRC is, and at all times during the period
prior to the date hereof SRC has been, in material compliance with all
applicable Legal Requirements. Except as set forth on Schedule 4.19, since
October 1, 1995, SRC has not received any notice or communication from any
Governmental Body regarding any material violation of, or failure to comply
with, any Legal Requirements.
4.20 Governmental Authorizations. SRC has all Governmental
Authorizations necessary to enable SRC to conduct its business in the manner in
which business is currently being conducted, except where any failure to have
such Governmental Authorizations has not had and will not have a material
adverse effect on SRC. SRC is, and at all times has been, in compliance with the
material terms and requirements of such Governmental Authorizations. SRC has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization. "Governmental Authorization" shall mean any (a)
permit, license, consent, certificate, franchise, permission, clearance,
registration, qualification, or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement; or (b) right under any Government Contract.
4.21 Related Persons. Except as set forth in Schedule 4.21, (a) no
Stockholder, director, officer, former director or officer of SRC, or any member
of the immediate family of such person or any entity owned or controlled in
whole or in part by any such person or any trust for the benefit of any such
person or any member of such person's immediate family ("Related Party") has,
and no Related Party has at any time had, any direct or indirect interest in any
material asset used in or otherwise relating to the businesses of SRC; (b) no
Related Party is, or has at any time been, indebted to SRC; (c) no Related Party
has entered into, or has had any direct or indirect financial interest in, any
material Contract, transaction or business dealing with or involving SRC; (d) no
Related Party is competing, or has at any time, competed, directly or
indirectly, with SRC; and (e) no Related Party has any claim or right against
SRC (other than rights to receive compensation for services performed as an
employee of SRC).
4.22 Insurance. Schedule 4.22 sets forth (a) an accurate summary
description of each insurance policy providing coverage for liability exposure
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) to which SRC is
currently, or has been during the past three years, a party, a named insured or
otherwise the beneficiary of coverage and (b) all insurance loss runs or
worker's compensation claims received for the past three policy years. With
respect to each such insurance policy: to SRC's knowledge, (a) the policy is
legal, valid, binding, enforceable and in full force and effect; (b) there will
be no breach or other violation of the policy resulting from this transaction;
and (c) SRC is not in material breach or default with respect to each policy it
maintains (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification
or acceleration, under each such policy.
4.23 Real Property; Owned or Leased. Schedule 4.23 sets forth a
complete and accurate description of each parcel of real property owned by or
leased to SRC. All the leases listed on Schedule 4.23 are valid and in full
force and effect, and there does not exist any default or event that with notice
or lapse of time, or both, would constitute a default under any of these leases
and no person (except SRC and the owner of such real property under the terms of
the applicable lease) has any right of possession to such leased property or any
part thereof. SRC owns clear and marketable title, free of any liens or
Encumbrances, to all improvements and fixtures located on these real properties
and reflected on SRC's Unaudited Interim Balance Sheet. There is presently no
pending or, to SRC's knowledge, contemplated condemnation of any of the property
listed on Schedule 4.23 or any part thereof, and SRC has made no commitment to
any governmental or quasi-governmental entity or to any other person or entity
which relates to such property or imposes upon SRC or SRC's successors or
assigns any obligation to pay or contribute property or money or to construct,
install or maintain any improvements on or off such property. There are no
violations by SRC of any law, including any building, planning or zoning law
relating to any owned or leased real properties that would have a material
adverse effect on SRC or its financial condition, assets, liabilities, business,
or operations.
4.24 Environmental Matters. SRC is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by SRC of all permits and other Government Authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof. SRC has not received any written notice or other
communication, whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that SRC is not or was not in compliance with any
Environmental Law, and, to the best knowledge of SRC, there are no circumstances
that may prevent or interfere with SRC's compliance with any Environmental Law
in the future. During the term of any of SRC's leases, no current or prior owner
of any property leased or controlled by SRC has notified SRC that it has
received any written notice or other communication, whether from a Governmental
Body, citizens group, employee or otherwise, that alleges that such current or
prior owner or any occupier of the property is or was not in compliance with any
Environmental Law. SRC is not required to obtain any Government Authorizations
pursuant to Environmental Laws in connection with the operation of its business
as currently conducted. Except as disclosed on Schedule 4.24, none of the real
properties leased by SRC pursuant to the Leases (including, without limitation,
soils, surface water and groundwater located at such properties) is contaminated
with any Materials of Environmental Concern. To the best knowledge of SRC none
of the property leased by SRC (other than pursuant to the Leases) is
contaminated with any Materials of Environmental Concern. "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern. "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.
4.25 Corporate Records SRC has delivered, or made available for
inspection, to Buyer accurate and complete copies of (1) SRC's articles of
incorporation and bylaws, including all amendments thereto; (2) the stock
records of SRC; and (3) the minutes and other records of the formal meeting and
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the Stockholders, the board of directors of SRC and all committees
of the board of directors of SRC. There have been no formal meetings or other
proceedings of the Stockholders, the board of directors of SRC or any committee
of the board of directors of SRC that are not fully reflected in such minutes or
other records. The stock records and minutes books are accurate, up to date and
complete in all material respects.
4.26 Full Disclosure. No statement by the Stockholders or SRC contained
in this Agreement, or the Exhibits, Schedules or other attachments hereto, or
any written certificate furnished or to be furnished to Buyer pursuant hereto
(when read together) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
4.27 Brokers. Other than Granite Hill Advisors, llc, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement based on any arrangement or
agreement made by or on behalf of SRC or the Stockholders.
4.28 Disallowable Expense Items. Except as disclosed on Schedule 4.28,
all costs related to any Related Party (as defined in Section 4.21), including,
but not limited, to compensation, consultation fees, life insurance premiums,
auto allowances, business meals, related party facility cost and any facility
purchase options have been properly classified as unallowable costs for
Government Contract accounting purposes as described below in Schedule 4.28.
4.29 Year 2000 Compliance. Except as set forth in Schedule 4.29, all of
SRC's products and internal systems are designed to be used prior to, during and
after the year 2000, and are Year 2000 Compliant. At Buyer's request, SRC will
provide the results of the testing to date of all of SRC's products and systems
to determine whether they are or will become Year 2000 Compliant in accordance
with Buyer's compliance plan.
4.30 Certain Definitions. For purposes of this Agreement:
(a) "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, understanding, instrument, note,
warranty, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
(b) "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security
(excluding restrictions under applicable federal and state securities laws) or
other asset, any restriction on any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
(c) "Government Bid" shall mean any written quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
(d) "Governmental Body" shall mean any (i) nation, state,
commonwealth, province, territory, county, city, municipality, district or other
jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or
other government; or (iii) governmental or quasi-governmental authority of any
nature (including governmental division, department, agency, commission, board,
instrumentality, official, organization, unit, or body).
(e) "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor otherwise has or may acquire any right or interest other than
any contract, subcontract, letter contract, purchase order or delivery order
that was fully performed by SRC before December 31, 1996 and has been closed.
(f) "Legal Requirement" shall mean any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into effect
by or under the authority of any Governmental Body
(g) "To the best knowledge of SRC" means the actual knowledge
of Xxxxx X. Xxxxx, Xxxxx XxXxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxx
Xxxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxx after engaging in a reasonable inquiry.
(h) "Year 2000 Compliant" shall mean, in regard to any product
or internal system, that such product or internal system can individually
continue to be used normally and to operate successfully (both in functionality
and performance in all material respects) over the transition into the twenty
first century when used in accordance with the documentation relating to such
product or internal system, including being able to, before, on and after
January 1, 2000 substantially conform to the following: (i) use logic pertaining
to dates that allow users to identify and/or use the century portion of any date
fields without special processing; and (ii) respond to all date elements and
date input so as to resolve any ambiguity as to century in a disclosed, defined
and pre-determined manner and provide date information in ways that are
unambiguous as to century, either by permitting or requiring the century to be
specified or where the data element is represented without a century, the
correct century is unambiguous for all manipulations involving that element.
5. Representations and Warranties of the Stockholders. Each Stockholder,
severally and not jointly, represents and warrants to Buyer, as of the Closing
Date, as follows:
5.1 Title to Stock; Encumbrances. Such Stockholder is the true, lawful
record and beneficial owner of the Shares set forth beside such Stockholder's
name on the Schedule of Stockholders and such Shares are being transferred and
sold to Buyer hereunder, with no restrictions on the voting rights or rights of
disposition pertaining to such Shares (excluding restrictions under applicable
federal and state securities laws). The Shares set forth beside such
Stockholder's name on the Schedule of Stockholders constitute all of the shares
of capital stock of SRC owned beneficially or of record by each such
Stockholder. As of the Closing such Stockholder will convey to Buyer good and
valid title to such Shares free and clear of any and all liens or other
Encumbrances. None of the Shares is subject to any voting trust or other
agreement or arrangement with respect to the voting thereof.
6. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to SRC and the Stockholders as follows:
6.1 Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority and is entitled to carry on
its respective business as now being conducted by it and to own, lease or
operate its respective properties as and in the places where such business is
now conducted and properties are now owned, leased or operated. Buyer is
qualified or licensed to do business in all jurisdictions in which the nature of
its business or properties requires such qualification, except where the failure
to so qualify would not have a material adverse effect on the business assets or
financial condition of Buyer.
6.2 Corporate Power; Authorization. Buyer has all requisite legal and
corporate power and authority to enter into the Agreement and to execute and
deliver the Notes (the "Transaction Documents") and to carry out and perform all
of its obligations under the terms of the Agreement and the Transaction
Documents. All corporate action on the part of Buyer and all action on the part
of its officers and directors necessary for the authorization, execution and
delivery of this Agreement and the Transaction Documents by Buyer and for the
performance of Buyer's obligations hereunder and thereunder has been taken, and
the Agreement and the Transaction Documents, when duly executed and delivered,
shall constitute the valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditor's rights and by rules of law
governing specific performance, injunctive relief or other equitable remedies.
6.3 Brokers. Other than Xxxxxx Xxxxx Xxxxx who will be providing a
fairness opinion to Buyer, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.
6.4 Consents. The execution and delivery of this Agreement and all
documents and certificates to be delivered hereunder by Buyer in connection with
the transactions contemplated hereby do not, and the performance and
consummation by Buyer of its obligations hereunder will not result in any
conflict with, breach or violation of or default, termination, forfeiture or
Encumbrance under any terms of provisions of Buyer's Certificate of
Incorporation or Bylaws, any statute, rule, regulation, judicial or governmental
decree, order or judgment or any material agreement, lease or other instrument
or other obligation, to which Buyer is a party or to which Buyer's assets are
subject and do not require any consent, approval, authorization or permit of or
filing with or notification to any Governmental Body, other than a filing under
the HSR Act, or except as disclosed in Schedule 6.4, require any consent or
approval of any third party, including any party to a material contract of
Buyer.
6.5 Litigation, Etc. Except as disclosed on Schedule 6.5, no action,
claim, suit, proceeding, or investigation of any nature is pending, or, to the
best of Buyer's knowledge, is threatened against Buyer that questions the
validity of the Agreement or the right of Buyer to enter into the Agreement.
There is no judgment, decree, injunction, rule or order of any court,
governmental department, commission agency, instrumentality or arbitrator or
other similar ruling outstanding against Buyer. No action claim, suit,
proceeding or investigation is pending or threatened by Buyer or any third party
with respect to Buyer.
7. Additional Covenants of the Parties.
7.1 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the sale of the Shares and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all consents (if any) required to be obtained (pursuant to any
applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the sale of the Shares and the other transactions contemplated
by this Agreement. SRC shall (upon request) promptly deliver to Buyer a copy of
each such filing made, each such notice given and each such consent obtained by
SRC.
7.2 Public Announcements. Unless otherwise required by law or disclosed
in any filing by Parent with the Securities and Exchange Commission, neither
SRC, any Stockholder or Buyer (or its Parent) shall (and no party shall permit
any of their respective representatives to) issue any press release or make any
public statement regarding this Agreement, or regarding any of the other
transactions contemplated by this Agreement, without in the case of the
Stockholders, the prior written consent of Buyer, and in the case of Buyer or
its Parent, the consent of Xxxxx X. Xxxxx, such consent not to be unreasonably
withheld or delayed and, unless required by law, no party shall disclose the
Purchase Price.
7.3 Best Efforts. All parties shall use their reasonable best efforts
to cause the conditions set forth in this Agreement to be satisfied on a timely
basis.
7.4 Noncompetition Agreement. At or prior to the Closing, Xxxxx X.
Xxxxx shall execute and deliver to SRC and Buyer a Noncompetition Agreement in
the form of Exhibit G.
7.5 Release. At the Closing, each of the Stockholders shall execute and
deliver to SRC a Release in the form of Exhibit D.
7.6 Stock Options. Following the Closing, Buyer shall grant to the key
managerial employees of SRC (the "Key Employees") listed on Exhibit H hereto,
either nonqualified options or incentive stock options to acquire shares of
Buyer's Common Stock (the "Options") in Buyer's sole discretion. The Options
will be granted to the Key Employees subject to substantially similar terms and
conditions as options granted to similarly situated employees of Buyer. The
exercise price for such options shall be set at the fair market value of Buyer's
(as the case may be) Common Stock on the date of grant and shall vest from the
date of grant equally over four years, on an annual basis.
7.7 Intentionally Left Blank.
8.Additional Agreements.
8.1 Payment of Taxes. SRC has paid any corporate level Taxes required
to be paid by SRC in respect of all periods on or prior to the Closing Date that
were due and payable on or prior to the Closing Date with the exception of the
federal BIG Tax and any corporate level state taxes accrued in the normal course
of SRC's business (without regard to the Election). Except for any corporate
level Taxes paid by SRC in accordance with the preceding sentence, the
Stockholders have paid, or (to the extent not yet due and payable) will pay, in
a timely fashion, all Taxes required to be paid that are properly includible in
their personal tax returns attributable to their ownership of Shares in respect
of all periods on or prior to the Closing Date. Such Taxes shall include,
without limitation, all Taxes for which the Stockholders are liable due to the
status of SRC as an S corporation for federal income tax purposes (and any
analogous provisions of state or local law) and, in particular, such Taxes
arising as a result of the Election (as defined in Section 8.2) other than the
Excluded Liability and any corporate level Taxes required to be paid in respect
to all periods on or prior to the Closing Date that are not yet due and payable
as of the Closing Date. The Stockholders shall reimburse Buyer or SRC within ten
(10) days of any payment by Buyer or SRC for the payment of, any and all such
Taxes of SRC or the Stockholders attributable to any taxable period ending on or
prior to the Closing Date, other than up to $630,000 attributable to any
built-in gain incurred under Section 1374 of the Code in connection with the
deemed sale of assets caused by the Election ("Excluded Liability") and other
than any Tax liability accrued on the Unaudited Interim Balance Sheet (such as
liabilities for employer taxes). Prior to the Closing, the parties shall agree
upon the amount of built-in-gain based upon the recommendations of the parties'
outside consultants and shall determine the amount of the Excluded Liability,
which shall not exceed $630,000.
8.2 Tax Election. Buyer and each Stockholder shall jointly make the
elections provided for by Sections 338(a) and 338(h)(10) of the Code and Treas.
Reg. ss. 1.338(h)(10)-1 (and any comparable election under state or local law)
with respect to the purchase of the Shares by Buyer (each, an "Election").
Immediately following the Closing, Buyer shall deliver a signed and completed
Form 8023 to the Stockholders and the Stockholders shall execute and deliver the
form to Buyer at the Closing. Also, Buyer and Stockholders shall cooperate with
each other to take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules, and other documents as may be
required) to effect and preserve a timely Election in accordance with the
provisions of Treas. Reg. ss. 1.338(h)(10)-1 (or any comparable provisions of
state or local tax law) or any successor provisions. Buyer and Seller shall
report the purchase by Buyer of the Shares pursuant to the Agreement consistent
with the Elections (and any comparable election under state or local tax laws)
and shall take no position inconsistent therewith in any tax return, or any
proceeding before any taxing authority or otherwise.
8.3 Tax Allocations. In connection with the Elections, immediately
after the Closing or within thirty (30) days of the Closing, the Buyer and
Stockholders shall act together in good faith to (i) determine and agree upon a
"Modified Aggregate Deemed Sales Price" of SRC (within the meaning of, and in
accordance with, Treas. Reg. ss. 1.338(h)(10)-1(f)) and (ii) determine and agree
upon the proper allocations (the "Allocations") of the "Modified Aggregate
Deemed Sales Price" among the respective assets of SRC (in accordance with
Section 338(b)(5) of the Code and Treasury regulations promulgated thereunder).
Buyer and the Stockholders shall (i) be bound by such determinations and such
Allocations for purposes of determining any taxes, (ii) prepare and file their
tax returns on a basis consistent with such determinations and such Allocations
and (iii) take no position inconsistent with such determinations and Allocations
on any applicable tax return, in any proceeding before any taxing authority or
otherwise. In the event that any such Allocation is disputed by any taxing
authority, the party receiving notice of the dispute shall promptly notify the
other party hereto concerning resolution of the dispute. Any liability for taxes
arising from the Elections (other than the Excluded Liability which shall be
payable by SRC) shall be borne by the Stockholders, jointly and severally.
8.4 Tax Matters.
(a) No later than 30 days prior to any applicable due date
(including extensions), the Stockholders shall timely prepare, or caused to be
prepared, and deliver to Buyer for its review and approval, which approval shall
not be unreasonably withheld, proposed federal and state income tax returns
(including tax return extensions, as necessary) of SRC for the taxable periods
of SRC ending on or prior to the Closing. Such proposed returns shall be
prepared consistent with the elections applicable to prior returns of SRC and no
new or different elections for tax purposes other than the Election shall be
made in connection with such returns. Upon Buyer's approval of such proposed
returns (and extensions), SRC shall timely file, or cause to be filed, the
approved returns and the Stockholders shall pay, or cause to be paid, when due
all income taxes, if any, other than the Excluded Liability, relating to such
returns. If the approved return includes any overpayment of taxes due to
overpayment of the Estimated Tax Payment, then, when SRC receives the refund or
otherwise obtains the benefit of the overpayment through an offset against Taxes
then payable, SRC will remit the overpayment to the Stockholders (pro rata). If
Buyer does not approve of any return as proposed by Stockholders, Buyer and the
Stockholders together with their respective tax advisors will attempt to resolve
any disputed issues within the 30 day review and approval period. If such
disputes cannot be resolved, then SRC shall timely prepare and file a request
for extension for such disputed returns, and the parties shall promptly select a
nationally recognized "Big Five" accounting firm (which is neither the
accountants to Buyer nor the Stockholders nor SRC) to resolve all disputed
matters. If the parties cannot agree on a Big Five accounting firm, each party
shall rank all eligible firms from most acceptable to least acceptable (with
most acceptable being designated 1, next most 2, and so on) and the firm having
the lowest combined numerical value shall be deemed the mutually selected firm,
whose resolution of disputed issues shall be final and binding upon all parties.
(b) The Buyer shall have the right to participate in and the
Stockholders shall have the right to control, at the Stockholders' own cost and
expense, any income tax audit or administrative or court proceeding relating to
income tax returns of SRC for periods prior to Closing. Notwithstanding the
foregoing, the Stockholders shall not be permitted to take any action in, or
settle any claim arising out of, such audit or proceeding without the prior
written consent of Buyer, which consent shall not be unreasonably withheld.
(c) After the Closing, the Stockholders and Buyer shall
provide each other with such cooperation and information relating to SRC as
either party reasonably may request in filing any federal or state or local Tax
return (or amended return), determining any tax liability, conducting or
defending any audit or other proceeding in respect of Taxes or effectuating the
terms of this Agreement.
9. Indemnification.
9.1 Survival of Representations, Etc.
(a) Subject to the indemnification limitations set forth in
Section 9.3, the representations and warranties made by SRC (including the
representations and warranties set forth in Section 4) shall survive the Closing
and shall expire on the first anniversary of the Closing Date; provided,
however, that if, at any time prior to the first anniversary of the Closing
Date, any Parent Indemnitee (defined below), acting in good faith, delivers to
any of the Stockholders a written notice alleging the existence of an inaccuracy
in or a breach of any of the representations and warranties made by SRC (and
setting forth in reasonable detail the basis for such Parent Indemnitee's belief
that such an inaccuracy or breach may exist) and asserting a claim for recovery
under this Section 9 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive the first anniversary of the Closing until
such time as such claim is fully and finally resolved, provided the Parent
Indemnitee pursues such resolution in good faith and with due diligence.
(b) The representations, warranties, covenants and obligations
of SRC and the Stockholders, and the rights and remedies that may be exercised
by the Parent Indemnitees, shall not be limited (subject to the indemnification
limitations set forth in Section 9.3) or otherwise affected by or as a result of
any information furnished to (other than the Disclosure Schedule), or any
investigation made by or knowledge of, any of the Parent Indemnitees or any of
their representatives.
9.2 Indemnification by Stockholders.
(a) Subject to the limitations set forth in Section 9, from
and after the Closing, the Stockholders, jointly and severally, shall hold
harmless and indemnify each of the Parent Indemnitees from and against any
Damages (regardless of whether such Damages relate to any third party claim)
arising out of: (i) any misrepresentation or breach of or default in connection
with any of the representations, warranties, covenants and agreements given or
made by SRC or the Stockholders in this Agreement, the Disclosure Schedules or
any exhibit or schedule to this Agreement; (ii) any noncompliance of SRC's
401(k) plan with ERISA or applicable law, including any liability arising from
revocation of a favorable determination by the Internal Revenue Service of
qualification under ss. 401(a) of the Code and cost of correction, including
without limitation, legal fees, consulting fees, accounting fees, interest,
penalties and additional contributions (except to the extent of any amounts
accrued on the Unaudited Interim Balance Sheet as Other Accrued Liabilities);
(iii) any alleged obligation of SRC or its Stockholders for investment banking
or other fees arising from the sale of the Shares other than the investment
banking fees payable to Granite Hill Advisors llc as disclosed on Schedule 4.27;
(iv) any Damages to SRC resulting from the failure to have the Deferred
Compensation Trust administered in accordance with the trust documents; (v) any
Legal Proceeding relating to any claim under clause "(i)", "(ii)", "(iii)" or
"(iv)" above (including any Legal Proceeding commenced by any Parent Indemnitee
for the purpose of enforcing any of its rights under this Section 9). Recovery
under this Section 9 shall be the exclusive remedy under this Agreement for any
claim for Damages arising out of any breach or default in connection with any of
the representations, warranties, covenants or agreements set forth in this
Agreement, the Disclosure Schedule or any exhibit or schedule to this Agreement;
unless such breach or default is the result of willful misconduct or fraud on
the part of the Stockholders.
(b) The Stockholders acknowledge and agree that if SRC
suffers, incurs or otherwise becomes subject to any Damages as a result of or in
connection with any inaccuracy in or breach of any representation, warranty,
covenant or obligation, then (without limiting any of the rights of SRC as an
Parent Indemnitee) Buyer shall also be deemed, by virtue of its ownership of the
stock of SRC, to have incurred Damages as a result of and in connection with
such inaccuracy or breach.
9.3 Threshold; Ceiling.
(a) Except as set forth in this Section 9.3 the Stockholders
shall not be required to make any indemnification payment pursuant to Section
9.2 for any inaccuracy in or breach of any of their representations, covenants
or obligations set forth herein until such time as the total amount of all
Damages that have been directly or indirectly suffered or incurred by any one or
more of the Parent Indemnities, or to which any one or more of the Parent
Indemnities has or have otherwise become subject, exceeds $400,000 in the
aggregate (excluding (i) any liability for Taxes payable pursuant to Section 8,
other than the Excluded Liability; and (ii) any liability under clauses (ii) and
(iv) of Section 9.2(a), or any Legal Proceeding relating thereto; (collectively,
the "Excluded Claims"), each of which shall be payable without any deductible).
If the total amount of such Damages exceeds $400,000, then the Parent
Indemnities shall be entitled to be indemnified against and compensated and
reimbursed only for the portion of such Damages exceeding $400,000. Any legal
fees incurred in defending any action, claim, or proceeding, brought or
threatened by those persons listed on Schedule 9.3 against SRC shall count
against the deductible, even though the claim itself is not subject to
indemnification. If any Damages are incurred due to a claim as set forth in
Section 9.2(a)(iii), the first $200,000 in Damages shall count against the
$400,000 deductible to the extent of any remaining deductible. The Stockholders
shall jointly and severally indemnify each of the Parent Indemnitees, pursuant
to Section 9.2(a)(iii) to the extent such Damages exceed $200,000 and the extent
of the portion of any of the first $200,000 in Damages that cannot be set off
against the deductible because of prior claims against the deductible.
(b) The indemnification liability of Stockholders under this
Section 9 shall not exceed $2,625,000 (excluding any interest payable pursuant
to Section 9.8).
9.4 No Contribution. Each Stockholder waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against SRC in connection with any indemnification obligation or
any other liability to which he may become subject under or in connection with
this Agreement.
9.5 Indemnification by Buyer. Subject to the limitations set forth in
Section 9, the Buyer will indemnify and hold harmless the Stockholders and their
heirs, executors and legal representatives from and against (i) any and all
Damages arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties, covenants and agreements
given or made by the Buyer in this Agreement, the Disclosure Schedules or any
exhibit or schedule to this Agreement and (ii) any claim by any person who was
an employee of SRC on the Closing Date against the Stockholders based solely
upon actions taken or not taken by Buyer or SRC following the Closing Date with
respect to such person's salary or benefits as an employee at SRC or any
affiliated company of Buyer or such person's employment following the Closing
Date (so long as any claim is not based upon any promise or commitment for
ongoing employment by SRC prior to the Closing Date or its Stockholders), so
long as the claim is not based upon a breach of promise disclosed in Section
4.18(o); provided however (i) any claim for indemnity shall be asserted prior to
the expiration of the survival period set forth in Section 9.1. Recovery under
Section 9.5 shall be the exclusive remedy under this Agreement for any claim for
monetary damages arising out of any breach or default in connection with any of
the representations, warranties, covenants or agreements set forth in this
Agreement, the Disclosure Schedules or any exhibit or schedule to this
Agreement; unless such breach or default is the result of willful misconduct or
fraud on the part of the Buyer.
9.6 Defense of Third Party Claims. In the event of the occurrence of
any event that any party asserts is an indemnifiable event pursuant to this
Section 9, the party claiming indemnification (the "Indemnified Party") shall
provide prompt notice to the party required to provide indemnification (the
"Indemnifying Party"), specifying in reasonable detail the facts and
circumstances with respect to such claim or Legal Proceeding and the basis for
which indemnification is available hereunder. If such claim or Legal Proceeding
involves the claim of any third party, the Indemnifying Party shall have the
right to control the defense or settlement (using counsel reasonably acceptable
to the Indemnified Party); provided, however, that (a) the Indemnified Party
shall be entitled to participate in the defense of such Legal Proceeding at its
own expense, (b) the Indemnifying Party shall obtain the prior written approval
of the Indemnified Party (which approval shall not be unreasonably withheld or
delayed) before entering into any settlement of such Legal Proceeding if,
pursuant to or as a result of such settlement, injunctive or other non-monetary
relief would be imposed against the Indemnified Party, and (c) the Indemnifying
Party shall not be entitled to control (but shall be entitled to participate at
its own expense in the defense of), and the Indemnified Party shall be entitled
to have sole control over, with respect to the defense or settlement of any
claim or Legal Proceeding to the extent such claim or Legal Proceeding seeks an
order, injunction or other equitable relief or a declaration against the
Indemnified Party which, if successful, would materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party or SRC or to the extent that such claim or Legal
Proceeding is also brought against the Indemnifying Party and the Indemnifying
Party and the Indemnified Party have conflicting interests in the claim or Legal
Proceeding, including different defenses, provided that the Indemnified Party
shall provide written notice to the Indemnifying Party of its election to assume
control over the defense of such claim pursuant to this Section 9.6.
Notwithstanding anything to the contrary in the foregoing, in no event shall the
Stockholders, their heirs, executors or legal representatives be entitled to
control the defense of any Legal Proceeding against the Parent Indemnitees
involving the claim of any Governmental Body with which any of the Parent
Indemnitees are conducting business at the time such Legal Proceeding is
brought; provided, however, that the Stockholders shall be entitled, at their
own expense, to participate (in a non-leading role) in such Legal Proceedings.
9.7 Definitions. For the purposes of this Section 9, the following
definitions shall apply:
(a) "Damages" shall include any loss, damage, injury,
liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee
(including reasonable attorneys' fees, consulting fees and accounting fees),
charge, cost (including costs of investigation) or expense of any nature,
regardless of whether in the case of a third party claim, the claim has any
merit so long as the Indemnified Party pursuing such third party claim in good
faith, net of the amount of any Damages recovered from any insurance policies
(less any increase in premiums or deductibles resulting from cancellation or
non-renewal of such policy due to the claim experience or any increases in
premiums or deductibles on such policy resulting from the claim experience). Any
Indemnified Party shall act in good faith and in a commercially reasonable
manner to minimize that amount of any Damages it may otherwise suffer (other
than pursuant to any third party claim covered by Section 9.6) to the extent
such minimization is within its actual control and will not materially interfere
with the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
(b) "Parent Indemnitees" shall mean the following: (a) Buyer;
(b) Buyer's current and future affiliates (including Parent and SRC); (c) the
respective Representatives of the persons or entities referred to in clauses
"(a)" and "(b)" above; and (d) the respective successors and assigns of the
persons or entities referred to in clauses "(a)," "(b)" and "(c)" above;
provided, however, that the Stockholders shall not be deemed to be "Parent
Indemnitees."
(c) "Legal Proceeding" shall mean any action, claim, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
(d) "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
9.8 Interest. Parent Indemnitee shall be entitled to receive interest
on any Damages incurred by Parent Indemnitee that are indemnifiable under this
Agreement from the date such Damages were incurred by Parent Indemnitee at a
rate of seven percent (7%) per annum.
9.9 Recovery of Damages from Notes. Any Parent Indemnitee that has
suffered, incurred or otherwise become subject to any Damages subject to
indemnification in accordance with the provisions of this Section 9, including
the limitations on indemnification set forth in Section 9.3, shall be entitled
to offset the aggregate amount of such Damages plus interest thereon computed as
set forth in Section 9.8 through an offset pro rata against principal payable on
all of the Notes (to the extent that Damages are offset first against principal
of the Notes, and then against any accrued and unpaid interest); provided that
the Parent Indemnitees comply with the following procedure:
(a) Prior to any offset, the Parent Indemnitee shall deliver
to the Stockholders' Agent a Claim Notice that shall: (i) state that Parent
Indemnitees has suffered or incurred Damages or reasonably believes in good
faith it will prospectively incur Damages, (ii) specify the amount of such
Damages and the date on which such Damages were suffered or incurred or are
expected to be incurred and (iii) specify in reasonable detail the facts alleged
as the basis for such Damages and the section or sections of this Agreement or
other document the violation or breach of which is alleged to have resulted in
or given rise to such Damages.
(b) If the Parent Indemnitee delivers a Claim Notice to the
Stockholders' Agent and the Stockholders' Agent agrees with the Claim or fails
to respond within 30 calendar days commencing on the delivery of the Claim
Notice, then Buyer may offset the claim against the Notes.
(c) If, during the 30 day period commencing on the date of
delivery of a Claim Notice, Buyer shall have received a written notice from or
on behalf of the Stockholders' Agent stating that the Stockholders in good faith
dispute the claim asserted in such Claim Notice, then Buyer shall not make any
offset against the Notes until: (i) Buyer and the Stockholders' Agent agree in
writing on the amount of Damages to be offset, or (ii) the disputed claim is
resolved through a final arbitration in accordance with this Agreement.
9.10 Stockholders' Agent. The Stockholders hereby irrevocably appoint
Xxxxx X. Xxxxx as their agent for purposes of this Section 9 (the "Stockholders'
Agent"), and Xxxxx X. Xxxxx hereby accepts his appointment as the Stockholders'
Agent. Buyer shall be entitled to deal exclusively with the Stockholders' Agent
on all matters relating to Section 9, and shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document executed or
purported to be executed on behalf of any Stockholder by the Stockholders'
Agent, and on any other action taken or purported to be taken on behalf of any
Stockholder by the Stockholders' Agent, as fully binding upon such Stockholder.
If the Stockholders' Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Stockholders, then the Stockholders
shall, within ten (10) business days after such death or disability, appoint a
successor agent and, promptly thereafter, shall notify Buyer of the identity of
such successor. Any such successor shall become the "Stockholders' Agent" for
purposes of this Section 9. If for any reason there is no Stockholders' Agent at
any time, all references herein to the Stockholders' Agent shall be deemed to
refer to the Stockholders. The Stockholders' Agent shall be entitled to make
such decisions as may be necessary under this Agreement without consulting with
any other Stockholder and shall incur no liability and shall be indemnified,
protected and held harmless by all such Stockholders (but not by SRC or Buyer)
from any and all liability, loss, cost, claim, expense or liability (other than
such liability as he may have as a Stockholder under this Agreement) for any
action taken by the Stockholders' Agent in good faith in the exercise of his
business judgment.
10. Miscellaneous.
10.1 Further Assurances. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.2 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Buyer and its Representatives with respect
to the SRC's business (and the furnishing of information to Buyer and its
Representatives in connection with such investigation and review), (b) the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule) and all agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement, (c) the preparation and submission of any filing
or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of any consent
required to be obtained in connection with any of such transactions, and (d) the
consummation of the transactions contemplated herein. SRC shall accrue all fees,
costs or expenses incurred by SRC in connection with this Agreement, except to
the extent any such fees have been paid at or before the Closing. Any
Stockholder who retains counsel or advisors (other than counsel to SRC) to
advise or represent such Stockholder in connection with such transaction shall
be responsible for paying such fees and shall not seek reimbursement from SRC or
Buyer. Notwithstanding anything to the contrary contained in this Section, the
Stockholders and Buyer shall each bear and pay 50% of all filing fees required
to be paid under the HSR Act, in connection with the transactions contemplated
hereby and, in accordance with Section 8.2, Buyer shall pay the fees of Buyer's
and SRC's consultants relating to the determination of any built in gains tax or
any BIG Tax Benefit, including the cost of any appraisal work commissioned
and/or authorized by Buyer.
10.3 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.4 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Buyer:
The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxx Xxxxxx, Esq., General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Godward llp
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to SRC:
System Resources Corporation
000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to any of the Stockholders:
To the addresses listed on Exhibit A
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and
Popco, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.5 Time of the Essence. Time is of the essence of this Agreement.
10.6 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.8 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the General Corporation Law of the State
of Delaware and for all other matters, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
10.9 Successors and Assigns. This Agreement shall be binding upon: SRC
and its successors and assigns (if any); the Stockholders and their respective
personal representatives, executors, administrators, estates, heirs, successors
and assigns (if any) and Buyer and its successors and assigns (if any).
10.10 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
10.11 Waiver.
(a) No failure on the part of any person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
(b) No person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.12 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.13 Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.14 Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any person other than the parties
hereto and their respective successors and assigns (if any).
10.15 Entire Agreement. This Agreement and the other agreements
referred to herein and the letter agreement dated of even date herewith set
forth the entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
10.16 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
Except as otherwise indicated, all references in this Agreement to "Sections"
and "Exhibits" are intended to refer to Sections of this Agreement and Exhibits
to this Agreement.
10.17 Negotiation of Disputes. Except as provided in Sections 2.3(d)
and 8.4, if a dispute arises between the parties relating to the interpretation
or performance of this Agreement or any other agreement or instrument that is an
exhibit to this Agreement or the grounds for the termination thereof, and the
parties cannot resolve the dispute within thirty days of a written request by
either party to the other, such dispute shall be referred to the Chief Financial
Officer of Buyer and the Stockholders' Agent for resolution. Such persons shall
hold a meeting to attempt in good faith to negotiate a resolution of the dispute
prior to pursuing other available remedies. If within 10 business days after
such meeting, the Chief Financial Officer of Buyer and the Stockholders' Agent
have not succeeded in negotiating a resolution of the dispute, such dispute
shall be submitted to arbitration as set forth in Section 10.18 below.
10.18 Arbitration. Except as provided in Sections 2.3(d) and 8.4,
disputes that have not been successfully resolved pursuant to Section 10.17
above shall be submitted to final and binding arbitration under the then current
commercial rules and regulations of JAMS Endispute ("JAMS") relating to
voluntary arbitration in San Diego, California. The arbitration shall be
conducted by three arbitrators, one selected by each party to the arbitration
and one selected by arbitrators appointed by the parties. If the arbitrators
cannot agree on a third arbitrator, the third arbitrator shall be selected in
accordance with the JAMS rules. If a party fails to designate an arbitrator
within the time limits set by the JAMS rules, the arbitrator selected by the
other party shall be the sole arbitrator. All arbitrators must be knowledgeable
in the subject matter at issue in the dispute. Each party shall initially bear
its own costs and legal fees associated with such arbitration and the parties
shall split the cost of the arbitrators. The prevailing party in any such
arbitration shall be entitled to recover from the other party the reasonable
attorneys' fees, costs and expenses incurred by such prevailing party in
connection with such arbitration. The decision of the arbitrator(s) shall be
final and may be sued on or enforced by the party in whose favor it runs in any
court of competent jurisdiction at the option of the successful party. The
rights and obligations of the parties to arbitrate any dispute relating to the
interpretation or performance of this Agreement or the grounds for the
termination thereof, shall survive the expiration or termination of this
Agreement for any reason. The arbitrator(s) shall be empowered to award specific
performance, injunctive relief and other equitable remedies as well as damages,
but shall not be empowered to award punitive or exemplary damages or award any
damages in excess of any limitations set forth in this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
[Signature Page to Stock Purchase Agreement]
In Witness Whereof, the parties hereto have fully executed this
Agreement, including Exhibits A through I and the Schedules attached hereto and
incorporated herein and made a part hereof, as of the date first written above.
Titan Technologies and Information Systems Corporation
By:
Print Name:
Title:
System Resources Corporation
By:
Print Name:
Title:
STOCKHOLDERS OF SYSTEM
RESOURCES CORPORATION:
Xxxxx X. Xxxxx
The Xxxxx X. Xxxxx 1998 Irrevocable Trust
(dated February 2, 1998)
By:
Print Name:
Title:
Exhibit A
SCHEDULE OF STOCKHOLDERS
Number
of Shares
Owned by Stockholder
Stockholder Name Stockholder (1) Net Cash Note Address
------------------------- ------------------ ----------------- --------------- -----------------
Xx. Xxxxx X. Xxxxx 6,615,000 $30,530,768 $1,850,350 00 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
The Xxxxx X. Xxxxx 1998 535,000 $2,469,232 $149,650 c/o Xxxxxx Xxxxx
Irrevocable Trust 00 Xxxxxxx Xxxxx
(dated February 2, 1998) Xxxxxxx, XX 00000
Totals: ================== =================
7,150,000 $33,000,000 $2,000,000
1 As of the Closing Date.
Exhibit B
Form of Promissory Note
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDER, SATISFACTORY TO BORROWER,
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
PROMISSORY NOTE
$149,650 June 9, 0000
Xxx Xxxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, TITAN TECHNOLOGIES AND INFORMATION SYSTEMS
CORPORATION, a Delaware corporation ("Borrower"), hereby promises to pay to the
order of THE XXXXX X. XXXXX 1998 IRREVOCABLE TRUST DATED FEBRUARY 2, 1998
("Holder"), in lawful money of the United States of America and in immediately
available funds, the principal sum of One Hundred Forty Nine Thousand Six
Hundred Fifty Dollars ($149,650.00) (the "Loan") together with accrued and
unpaid interest thereon, payable on the date and in the manner set forth below.
This Promissory Note is one of the Notes referred to in and is executed
and delivered in connection with that certain Stock Purchase Agreement dated
June 9, 1999, by and among Borrower, Holder, the other stockholders of System
Resources Corporation, a Delaware corporation ("System Resources Corporation")
(as the same may from time to time be amended, modified or supplemented, the
"Stock Purchase Agreement") and System Resources Corporation. All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings given to them in the Stock Purchase Agreement.
1. Repayment. The outstanding principal amount of the Loan and
all accrued and unpaid interest thereon shall be due and
payable on June 9, 2000 or upon acceleration of the Note in
accordance with the terms hereof ("Maturity Date"). The
principal amount of this Note is subject to further adjustment
as set forth in Section 2.3 of the Stock Purchase Agreement.
2. Interest Rate. Borrower further promises to pay interest on
the outstanding principal amount hereof (as adjusted in
accordance with the Stock Purchase Agreement) from the date
hereof until payment in full, which interest shall be payable
at the rate of seven percent (7%) per annum or the maximum
rate permissible by law (which under the laws of the State of
California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever
is less. Interest shall be calculated on the basis of a
365-day year for the actual number of days elapsed.
3. Place of Payment. All amounts payable hereunder shall be
payable by delivery of a check to the Stockholders' Agent
under the Stock Purchase Agreement.
4. Application of Payments. Payments on this Note shall be
applied first to accrued interest, and thereafter to the
outstanding principal balance hereof.
5. Offset. Borrower shall be entitled to offset certain
uncollected accounts receivable against the principal balance
of the Note in accordance with Section 2.4 of the Stock
Purchase Agreement and Borrower and any Titan Indemnitees (as
defined in the Stock Purchase Agreement) shall be entitled to
offset Damages against the outstanding principal balance of
the Note in accordance with the offset procedures set forth in
the Stock Purchase Agreement.
6. Default. The following shall constitute a default under this
Note (a "Default"): (i) Borrower's failure to pay in full the
amount due under this Note, including any accrued and unpaid
interest, on the date the same becomes due and payable or
within five (5) calendar days thereafter; (ii) the making of
an assignment by Borrower for the benefit of creditors or the
application or consent by Borrower to the appointment of a
trustee or receiver for its property; (iii) the appointment of
a trustee or receiver for Borrower, which trustee or receiver
is not discharged within sixty (60) days after such
appointment; or (iv) the institution of bankruptcy,
reorganization, insolvency or similar proceedings by or
against Borrower, which if instituted against it, is consented
to or not dismissed within sixty (60) days after such
institution. Upon the occurrence of Borrower's Default, all
unpaid principal and accrued interest shall, at the option of
Holder, be accelerated and become due and payable in full.
7. Prepayment. Borrower may prepay this Promissory Note at any
time either in whole or in part without penalty.
8. Waiver; Payment of Fees and Expenses. Borrower waives
presentment and demand for payment, notice of dishonor,
protest and notice of protest of this Note, and shall pay all
costs of collection when incurred, including, without
limitation, reasonable attorneys' fees, costs and other
expenses. The right to plead any and all statutes of
limitations as a defense to any demands hereunder is hereby
waived to the full extent permitted by law.
9. Governing Law. This Note shall be governed by, and construed
and enforced in accordance with, the laws of the State of
California, excluding conflict of laws principles that would
cause the application of laws of any other jurisdiction.
10. Successors and Assigns. The provisions of this Note shall
inure to the benefit of and be binding on any successor to
Borrower. This Note is not a negotiable instrument and Holder
shall not be entitled to assign the Note, except for estate or
tax planning purposes, without the prior written consent of
Borrower and in the case of any assignment, including an
assignment for estate or tax planning purposes, the agreement
by the assignee to become subject to the terms of this Note,
the offset provisions referenced herein and the offset
provisions referenced in the Stock Purchase Agreement.
11. Guaranty. This Note is guaranteed by The Titan Corporation
pursuant to a Guaranty dated of even date hereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
BORROWER: TITAN TECHNOLOGIES AND INFORMATION SYSTEMS CORPORATION
By:
Print Name:
Title:
[SIGNATURE PAGE TO PROMISSORY NOTE]
Exhibit C
FORM OF GUARANTEE
GUARANTEE
As an inducement to and in consideration of XXXXX X. XXXXX AND THE
XXXXX X. XXXXX 1998 IRREVOCABLE TRUST dated February 2, 1998 (each a "Creditor",
and collectively the "Creditors") granting credit under that certain Promissory
Note of even date herewith (the "Note") to TITAN TECHNOLOGIES AND INFORMATION
SYSTEMS CORPORATION, a Delaware corporation ("Debtor") of which the undersigned,
THE TITAN CORPORATION, a Delaware corporation ("Guarantor"), is the sole
stockholder, Guarantor, intending to be legally and equitably bound, does hereby
unconditionally and irrevocably guarantee to the Creditors, their respective
successors and assigns, prompt and full payment of all indebtedness of Debtor to
the Creditors (the "Guarantied Indebtedness") resulting from the Note arising
out of the purchase of capital stock of System Resources Corporation pursuant to
that certain Stock Purchase Agreement dated of even date herewith (the "Stock
Purchase Agreement") by and among System Resources Corporation, the Creditors
and Debtor, regardless of any invalidity, irregularity, unenforceability or lack
of genuineness of any document creating the Guarantied Indebtedness.
The liability of Guarantor shall be absolute and unconditional, and its
obligations hereunder shall not in any way be diminished, limited or otherwise
affected by (1) the liquidation or dissolution of Debtor; (2) any adverse change
in the condition (financial or otherwise) of Debtor; (3) the discharge or
release of Debtor for any reason, including, without limitation, as a result of
bankruptcy, receivership or similar proceedings; or (4) any waiver or indulgence
granted by the Creditors in the exercise of any of its rights and remedies
against or in respect of any failure in the performance by Debtor.
Guarantor hereby expressly waives notices of creation, advance,
increase, existence, extension, renewal, modification or assignment of, and of
any indulgence with respect to, the Guarantied Indebtedness. Guarantor hereby
expressly waives presentment, demand, notice of nonpayment, dishonor and
protest, notice of the amount of the Guarantied Indebtedness outstanding at any
time, notice of any change in financial condition of any person liable on the
Guarantied Indebtedness or any part thereof, all other notices respecting the
Guarantied Indebtedness and diligence and promptness in bringing suit against
Debtor on the Guarantied Indebtedness, or any part thereof. The maturity of the
Guarantied Indebtedness and any part thereof may be accelerated, increased,
extended or renewed one or more times by the Creditors in their discretion,
without notice to Guarantor. No notice to or demand on Guarantor in any case
shall, of itself, entitle Guarantor to any other or further notice or demand in
similar or other circumstances.
Guarantor hereby expressly waives any and all rights of subrogation,
reimbursement, indemnification, exoneration, contribution or any other claim
which Guarantor may now or hereafter have against Debtor or any other person
directly or contingently liable for the Guarantied Indebtedness, or against or
with respect to Debtor's property (including without limitation any property now
or hereafter securing the Guarantied Indebtedness), arising from the existence
or performance of this Guarantee. If Guarantor receives any amount in violation
of this paragraph and its obligations hereunder, whether matured or unmatured,
are not paid in full, such amount shall be deemed to have been paid to Guarantor
for the benefit of, and held in trust for the benefit of, the Creditors, and
shall forthwith be paid to the Creditors to be credited and applied to such
obligations.
The Creditors are not required to seek collection or take any action
against Debtor as a condition to the Guarantor's liability and obligation under
this Guarantee, and the Creditors need not institute suit or exhaust their
remedies against, any security deposit or collateral or any other guarantee
prior to enforcing this Guarantee against the Guarantor.
In the event that the Creditors are forced to retain attorneys,
collection agencies or other outside parties, to effect collection pursuant to
this Guarantee, Guarantor agrees to be liable, in addition to the Guarantied
Indebtedness, for the payment of reasonable attorneys' fees, collection fees and
all other costs incurred in effecting such collection.
Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority and is entitled to carry on its respective business as now
being conducted by it and to own, lease or operate its respective properties as
and in the places where such business is now conducted and properties are now
owned, leased or operated. Guarantor is qualified or licensed to do business in
all jurisdictions in which the nature of its business or properties requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the business assets or financial condition of
Guarantor.
Guarantor has all requisite legal and corporate power and authority to
enter into this Guarantee and to carry out and perform all of its obligations
under the terms of this Guarantee. All corporate action on the part of Guarantor
and all action on the part of its officers and directors necessary for the
authorization, execution and delivery of this Guarantee by Guarantor and for the
performance of Guarantor's obligations hereunder and thereunder has been taken,
and this Guarantee, when duly executed and delivered, shall constitute the valid
and binding obligation of Guarantor enforceable against Guarantor in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditor's rights and by rules of law governing
specific performance, injunctive relief or other equitable remedies.
The execution and delivery of this Guarantee by Guarantor does not, and
the performance and consummation by Guarantor of its obligations hereunder will
not result in any conflict with, breach or violation of provisions of
Guarantor's Certificate of Incorporation or Bylaws, any statute, rule,
regulation, judicial or governmental decree, order or judgment or any material
credit agreement, to which Guarantor is a party or to which Guarantor's assets
are subject and does not require any consent, approval, authorization or permit
of or filing with or notification to any governmental body or require any
consent or approval of any third party relating to any material credit agreement
of Guarantor.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of California. Guarantor irrevocably consents to the
jurisdiction of any state or federal court located in the state of California
and agrees that venue shall be laid in San Diego County, California.
IN WITNESS WHEREOF, Guarantor has executed this Guarantee as of the 9th
day of June, 1999.
THE TITAN CORPORATION
("Guarantor")
By:
Print Name:
Title:
CREDITORS hereby accept
this Guarantee from Guarantor:
XXXXX X. XXXXX
THE XXXXX X. XXXXX 1998 IRREVOCABLE TRUST
DATED FEBRUARY 2, 1998
By:
Print Name:
Title:
[SIGNATURE PAGE TO GUARANTEE]
Exhibit D
FORM OF RELEASE
GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and
delivered as of June 9, 1999, on behalf of the STOCKHOLDERS of System Resources
Corporation (the "Stockholders," as set forth on Exhibit A) (all of whom are
referred to collectively as the "Releasors," and each of whom is referred to
individually as a "Releasor") to and in favor of, and for the benefit of, SYSTEM
RESOURCES CORPORATION, a Delaware corporation ("SRC") and the other Releasees
(as defined in Section 2).
RECITALS
A. The Releasors have entered into a Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") with SRC and Titan Technologies
and Information Systems Corporation, a Delaware corporation ("Buyer"), relating
to the sale of all of the outstanding stock of SRC.
B. Buyer has required, as a condition to consummating the transactions
contemplated by the Stock Purchase Agreement, that the Releasors execute and
deliver this General Release.
C. All capitalized terms shall have the meanings set forth herein or in
the Stock Purchase Agreement.
AGREEMENT
For other valuable consideration (the receipt and sufficiency of which
are hereby acknowledged by the Releasors), the Releasors hereby covenant and
agree as follows:
1. RELEASE. Each Releasor, for itself and for each of such Releasor's Associated
Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with
respect to a Releasor, shall mean and include: (i) such Releasor's
predecessors, successors, executors, administrators, heirs and estate,
including, without limitation, all of the general and limited partners
and other beneficiaries of the Releasors as of the date of this
Agreement; (ii) such Releasor's past, present and future assigns,
agents and representatives; (iii) each entity that such Releasor has
the power to bind (by such Releasor's acts or signature) or over which
such Releasor directly or indirectly exercises control; and (iv) each
entity of which such Releasor owns, directly or indirectly, at least
50% of the outstanding equity, beneficial, proprietary, ownership or
voting interests.
(b) The term "Releasees" shall mean and include: (i) SRC; (ii)
each of the direct and indirect subsidiaries of SRC; (iii) each other
affiliate of SRC; and (iv) the successors and past, present and future
assigns, directors, officers, employees, agents, attorneys and
representatives of the respective entities identified or otherwise
referred to in clauses "(i)" through "(iii)" of this sentence, other
than the Releasors.
(c) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights,
obligations, liabilities, actions and causes of action of every kind
and nature, including: (i) any unknown, unsuspected or undisclosed
claim; (ii) any claim or right that may be asserted or exercised by a
Releasor in such Releasor's capacity as a Releasor, director, officer
or employee of SRC or in any other capacity; and (iii) any claim, right
or cause of action based upon any breach of any express, implied, oral
or written contract or agreement.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) any Releasor or any Associated Party of any
Releasor may have had in the past, may now have or may have in the
future against any of the Releasees, and (ii) has arisen or arises
directly or indirectly out of, or relates directly or indirectly to,
any circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or prior to the date of this General
Release excluding only (i) such Releasor's rights, if any, under the
Stock Purchase Agreement, Note, Guaranty, Non-Competition Agreement,
and/or Consulting Agreement; (ii) such Releasor's rights, if any, to
receive normal salary and benefits as employees of SRC, or as
consultants to SRC or Buyer, as well as all accrued benefits (provided
that such accrued benefits have been accrued on Duke's Unaudited
Interim Balance Sheet (as defined in the Stock Purchase Agreement) and
(iii) rights as lessors under those leases described in Section 3.2(n)
of the Stock Purchase Agreement, other than claims for past due lease
payments or defaults existing as of the date of this General Release.
3. CIVIL CODE ss.1542. Each Releasor (a) represents, warrants and acknowledges
that such Releasor has beeN fully advised by his attorney of the contents of
Section 1542 of the Civil Code of the State of California, and (b) hereby
expressly waives the benefits thereof and any rights such Releasor may have
thereunder. Section 1542 of the Civil Code of the State of California provides
as follows:
A general release does not extend to claims
which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor.
Each Releasor also hereby waives the benefits of, and any rights such Releasor
may have under, any statute or common law principle of similar effect in any
jurisdiction.
4. REPRESENTATIONS AND WARRANTIES. Each Releasor represents and warrants that:
(a) such Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any
direct or indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other person
or entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any Claim
against any of the Releasees;
(d) to the best of such Releasor's knowledge, no Associated
Party of such Releasor will in the future have any Claim against any
Releasee that arises directly or indirectly from or relates directly or
indirectly to any circumstance, agreement, activity, action, omission,
event or matter occurring or existing on or before the date of this
General Release;
(e) this General Release has been duly and validly executed
and delivered by such Releasor;
(f) this General Release is a valid and binding obligation of
such Releasor and such Releasor's Associated Parties, and is
enforceable against such Releasor and each of such Releasor's
Associated Parties in accordance with its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the
best of the knowledge of such Releasor, threatened against such
Releasor or any of such Releasor's Associated Parties that challenges
or would challenge the execution and delivery of this General Release
or the taking of any of the actions required to be taken by such
Releasor under this General Release;
(h) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach
of any agreement or other instrument to which such Releasor or any of
such Releasor's Associated Parties is a party or by which such Releasor
or any of such Releasor's Associated Parties is bound, or (ii) result
in a violation of any law, rule, regulation, treaty, ruling, directive,
order, arbitration award, judgment or decree to which such Releasor or
any of such Releasor's Associated Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Releasor or any of
such Releasor's Associated Parties in connection with the execution and
delivery of this General Release or the performance hereof.
5. MISCELLANEOUS.
(a) This General Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all
prior agreements and understandings among or between any of the
Releasors and Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part
thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to
be valid and enforceable to the fullest possible extent, (ii) the
invalidity or unenforceability of such provision or part thereof under
such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any
other circumstances or in any other jurisdiction, and (iii) such
invalidity or enforceability of such provision or part thereof shall
not affect the validity or enforceability of the remainder of such
provision or the validity or enforceability of any other provision of
this General Release. If any provision of this General Release or any
part of such provision is held to be unenforceable against any
Releasor, then the unenforceability of such provision or part thereof
against such Releasor shall not affect the enforceability thereof
against any other Releasor. Each provision of this General Release is
separable from every other provision of this General Release, and each
part of each provision of this General Release is separable from every
other part of such provision.
(c) This General Release shall be construed in accordance
with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of laws).
(d) This General Release may be executed in several
counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute one agreement.
(e) Each Releasor shall execute and/or cause to be delivered
to each Releasee such instruments and other documents, and shall take
such other actions, as such Releasee may reasonably request for the
purpose of carrying out or evidencing any of the actions contemplated
by this General Release.
(f) If any action or proceeding for the enforcement of any
provision hereof is initiated by any Releasor or Releasee, the
prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements to the extent actually incurred (in
addition to any other relief to which the prevailing party may be
entitled).
(g) This General Release shall be effective with respect to,
and shall be binding upon and enforceable against, each Releasor who
executes this General Release, regardless of whether any of the other
Releasors executes this General Release.
(h) Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(i) Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in
the construction or interpretation of this General Release.
(j) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
[THIS SPACE INTENTIONALY LEFT BLANK]
IN WITNESS WHEREOF, the Releasors have caused this General Release to
be executed as of the date first above written.
STOCKHOLDERS:
XXXXX X. XXXXX
THE XXXXX X. XXXXX 1998 IRREVOCABLE
TRUST DATED FEBRUARY 2, 1998
By:
Print Name:
Its:
[SIGNATURE PAGE TO GENERAL RELEASE]
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
Xxxxx X. Xxxxx
The Xxxxx X. Xxxxx 1998 Irrevocable Trust
Dated February 2, 1998
Exhibit E
OPINION OF STOCKHOLDERS' COUNSEL
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
000 Xxxxxxxxxxxx Xxxxxx, X.X. Telephone: 617/000-0000
Xxxxxxxxxx, X.X. 00000 Fax: 617/000-0000
Telephone: 202/000-0000 xxx.xxxxx.xxx
Fax: 202/000-0000
June 9, 1999
Titan Technologies and
Information Systems Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, Xxxxx. 00000-0000
Re: System Resources Corporation
Ladies and Gentlemen:
We have acted as special counsel to System Resources Corporation, a
Delaware corporation ("SRC"), and the Stockholders of SRC ("Stockholders"), in
connection with the Stock Purchase Agreement dated as of June 9, 1999 (the
"Agreement") by and among SRC, Titan Technologies and Information Systems
Corporation (the "Buyer"), and the Stockholders.
This opinion is delivered to you pursuant to Section 3.2 of the
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meanings given them in the Agreement.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined such documents and records of SRC, certificates
of public officials and other documents, and (iii) received such information
from officers or representatives of SRC as we have deemed necessary or
appropriate for the purposes of this opinion. We call your attention to the fact
that we have not represented SRC on a day-to-day basis with respect to various
contract and other matters. Specifically, we advise you that SRC has relied on
the advice of XxXxxxx & Xxxxx, LLP with respect to certain matters. Accordingly,
there may exist matters of a legal nature with respect to which we have not been
consulted or engaged.
We have examined the following documents and instruments (the
"Transaction Documents"):
(a) An executed copy of the Agreement;
(b) The form of Guaranty by The Titan Corporation (the "Parent") to the
Stockholders attached as an exhibit to the Agreement;
(c) The form of Promissory Note issued by the Buyer attached as an
exhibit to the Agreement;
(d) The form of General Release attached as an exhibit to the
Agreement;
(e) The form of Consulting Agreement with Xxxxx X. Xxxxx executed in
connection with the Agreement; and
(f) The form of Noncompetition and Confidentiality Agreement attached
as an exhibit to the Agreement.
We have also reviewed SRC's Certificate of Incorporation, as amended
(the "Certificate"), and By-laws (the "By-laws"); and a certificate of legal
existence and good standing with respect to SRC issued by the Delaware Secretary
of State dated May 11, 1999, and certificates of qualification to conduct
business set forth on Schedule "A" attached hereto.
We have assumed, without independently verifying such assumptions, the
genuineness of the signatures on all of the documents examined by us, the
authenticity of all documents furnished for our examination as originals, and
the conformity to original documents of all documents furnished to us as copies,
including documents transmitted by telecopier.
In rendering our opinion, we have assumed that the Buyer and Parent
have the power and authority and have taken the action necessary to execute and
deliver the relevant Transaction Documents; that no consent, approval,
authorization, declaration, registration or filing by or with any governmental
agency, authority, commission, board or bureau is required for such execution
and delivery by the Buyer and Parent in connection with the consummation by such
party of the transactions contemplated by the Transaction Documents other than a
filing under the Xxxx-Xxxxx Xxxxxx Antitrust Improvements Act of 1976, as
amended, and such other consents as have been obtained by the Buyer and Parent
prior to the date hereof; and that the Transaction Documents have been duly
executed and delivered by the Buyer and the Parent and constitute the legal,
valid, binding and enforceable obligations of the Buyer and the Parent.
In rendering this opinion as to factual matters, we have relied upon
the accuracy of statements made to us by officers and directors of SRC
(including for this purpose representations and warranties of SRC made in the
Agreement), and our review of such other documents and certificates of officers
or directors of SRC or of public officials as we have deemed necessary for the
purpose of giving this opinion. We have assumed that, as of the date hereof,
there have been no changes in respect of the matters set forth in such
certificates. We have not made any other independent factual investigation with
respect to the matters discussed herein. Further, we have not made any other
independent review or investigation of instruments, orders, judgments, or
decrees by which SRC or its properties may be bound, nor have we made any
independent investigations of proceedings, if any, pending or threatened against
SRC.
When an opinion set forth is given to "our knowledge", or with
reference to matters "of which we are aware" or "which are known to us", or
words of similar import, the relevant knowledge or awareness is limited to the
actual knowledge or awareness of the individual lawyers in the firm who have
participated directly in the specific transactions to which this opinion relates
and without any special or additional investigation undertaken for the purposes
of this opinion. In connection with the opinion expressed in Paragraphs 1 and 2
as to valid existence, corporate good standing and qualification to conduct
business, we have relied solely on legal existence and good standing
certificates relating to SRC as referenced above.
The opinions hereinafter expressed are subject to the following
qualifications:
a. the application and effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent or preferential transfer or conveyance or
other similar statutes, rules, regulations, court decisions or other laws
relating to or affecting the enforcement of creditors' rights and remedies;
b. the unavailability or limitations on the availability of a
particular right or remedy provided to the Buyer in the Transaction Documents,
whether in a proceeding in equity or at law, as a result of the application of
the principles of equity, as the availability of equitable rights and remedies
is subject to and within the sole discretion of the court in which any
proceeding for enforcement may be brought; and
c. the fact that provisions relating to indemnification, release or
waiver (including, without limitation, the waiver of certain defenses, the
waiver of stay and extension laws and other exemption and redemption rights)
contained in the Transaction Documents may be limited (i) by applicable laws,
statutes or the policies underlying such laws or statutes or (ii) by applicable
laws rendering unenforceable, in whole or in part, (a) the release of a party
from, the waiver of rights against a party for, or the indemnification of a
party against, liability for its own wrongful or negligent acts under certain
circumstances or (b) any waiver or release contrary to public policy.
Based upon and subject to the foregoing limitations and qualifications
and those set forth below, we are of the opinion that:
1. SRC has been duly incorporated and is a validly existing corporation
in corporate good standing under the laws of the state of Delaware. SRC has no
subsidiaries.
2. SRC has the requisite corporate power to own or lease its property
and assets and to conduct its business as it is currently being conducted and,
to the best of our knowledge, is qualified as a foreign corporation to do
business and is in good standing in each jurisdiction in the United States
listed on Schedule "A" attached hereto. To our knowledge, except for the
jurisdictions listed on Schedule "A," there is no other jurisdiction in which
the ownership of SRC's property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on SRC's assets, financial condition or operations (a "Material
Adverse Effect").
3. The Stock Purchase Agreement has been duly authorized, executed and
delivered by SRC and has been duly executed and delivered by the Stockholders
and constitutes a valid and binding agreement of SRC and the Stockholders,
respectively, enforceable against SRC and the Stockholders in accordance with
its terms.
4. Immediately prior to the Closing, the authorized capital stock of
SRC consisted of Fifteen Million (15,000,000) shares of Common Stock, no par
value, of which Seven Million One Hundred Fifty Thousand (7,150,000) shares of
Common Stock are and will be, immediately prior to the Closing, issued and
outstanding. The Shares have been duly authorized, validly issued, fully paid
and nonassessable. To the best of our knowledge, there are no outstanding
subscriptions, options, warrants, rights to convert, capital stock equivalents,
stock appreciation rights or other rights to purchase or otherwise acquire any
of SRC's capital stock or other securities, or rights under phantom stock plans
or similar plans or arrangements.
5. Upon delivery of the Shares to the Buyer and the payment of the
Purchase Price for the Shares by the Buyer to the Stockholders in accordance
with the terms of the Agreement, the Buyer will be the owner of all of the
Shares, free and clear of any adverse claim.
6. There are no stock transfer taxes due and imposed upon transfer of
the Shares by the Stockholders to the Buyer.
7. The execution and delivery of the Stock Purchase Agreement by SRC
and the Stockholders and the consummation of the transactions contemplated
thereby do not violate any provision of SRC's Certificate of Incorporation or
its Bylaws, do not constitute a default under the provisions of any material
agreement known to us to which the Stockholders (in their capacity as
stockholders) are a party or by which the Stockholders are bound (in their
capacity as stockholders) and, do not violate or contravene (a), to our
knowledge, any governmental statute, rule or regulation applicable to the
Stockholders or SRC, or (b) any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Stockholders or SRC
and of which we are aware, the violation or contravention of which would have a
Material Adverse Effect.
8. To our knowledge, there is no action, proceeding or investigation
pending or overtly threatened against the Stockholders or SRC before any court
or administrative agency that questions the validity of the Stock Purchase
Agreement or that would result, either individually or in the aggregate, in any
Material Adverse Effect.
9. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by the Stockholders or
SRC of the transactions contemplated by the Agreements have been made or
obtained.
We are counsel admitted to practice in the Commonwealth of
Massachusetts, and we express no opinion with respect to the laws of any other
jurisdiction, other than the federal law of the United States of America and the
General Corporation Law of the State of Delaware and the laws of the
Commonwealth of Massachusetts. No opinion is expressed herein with respect to
the qualification of the Note or the Guaranty under the securities or "blue sky"
laws of any state or foreign jurisdiction, nor is any opinion expressed herein
with respect to antitrust laws. We call your attention specifically to the fact
that we are not admitted to practice in the State of Delaware. We have based our
opinion with respect to Delaware law on our examination of appropriate
certificates from officers or officials of the State of Delaware, and of
applicable statutory provisions of Delaware corporate law, as set forth in
unofficial compilations, and have made no investigation of regulations, rules or
cases interpreting or applying those statutory provisions. This opinion is
limited to the present laws and to the facts as they presently exist. We assume
no obligation to revise or supplement this opinion should the present federal
laws of the United States, or the present laws of Massachusetts or Delaware, be
changed by legislative action, judicial decision, or otherwise. Further, we
express no opinion with respect to any government authority, license or permit
that may be required in connection with the operation of SRC after the date of
this opinion. We express no opinion as to the applicability or effect of laws
relating to choice-of-law or conflict-of-law matters.
We express no opinion as to any matter other than as expressly set
forth above, and no other opinion is intended to be implied nor may be inferred
herefrom. The opinions expressed above are given as of the date hereof, and we
undertake no obligation hereby and disclaim any obligation to advise you of any
change after the date hereof pertaining to any matter referred to herein.
This opinion is furnished for the benefit of and may be relied upon
only by the Buyer. This opinion may not be relied upon by any other entity or
Person without, in each instance, obtaining our prior written consent.
Very truly yours,
XXXXX XXXXX COHN, FERRIS,
GLOVSKY and POPEO, P.C.
Exhibit F
OPINION OF BUYER'S COUNSEL
Xxxxxx Godward LLP ATTORNEYS AT LAW
June 9, 1999
Xxxxxxx X. Xxxxxx
000 000-0000
xxxxxx@xxxxxx.xxx
To the Stockholders of
System Resources Corporation listed on
the Attached Schedule A
Dear Ladies and Gentlemen:
We have acted as counsel for The Titan Corporation, a Delaware corporation
("Titan"), and Titan Technologies and Information Systems Corporation, a
Delaware corporation ("Titan Technologies") and wholly-owned subsidiary of
Titan, in connection with the purchase of all the outstanding shares of System
Resources Corporation, a Delaware corporation ("SRC"), pursuant to a Stock
Purchase Agreement dated June 9, 1999, by and among Titan Technologies, SRC and
the stockholders of SRC (the "Purchase Agreement"). We are rendering this
opinion pursuant to Section 3.2(g) of the Purchase Agreement. Capitalized terms
used but not defined herein have the respective meanings given to them in the
Purchase Agreement or Guarantee (as defined below).
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Purchase Agreement, the Guarantee dated June 9, 1999 (the
"Guarantee") by Titan, as guarantor, in favor of the former stockholders of SRC,
as secured parties, the Noncompetition Agreement by and among Titan
Technologies, SRC and the stockholders of SRC (the "Noncompetition Agreement")
and the Promissory Notes dated June 9, 1999, in the aggregate principal amount
of $2,000,000 issued by Titan Technologies pursuant to the Purchase Agreement
(the "Notes") (the Purchase Agreement, Noncompetition Agreement and Notes are
collectively referred to herein as the "Agreements"), and originals or copies
certified to our satisfaction of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by Titan Technologies of the Agreements and by Titan of the Guarantee) where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to execute and deliver such
documents; that Titan and Titan Technologies have received all documents that
they were to receive under the Agreements; that the Agreements are binding upon
the parties thereto other than Titan Technologies; that the Guarantee is binding
upon the parties thereto other than Titan; that the Creditors are relying on the
Guarantee and would not grant credit under the related Promissory Notes in the
absence of the Guarantee; that Titan and Titan Technologies have filed any
required state franchise or income tax returns and have paid any required state
franchise or income taxes; and that there are no extrinsic agreements or
understandings among any of the parties to the Agreements that would modify or
interpret the terms of the Agreements or the respective rights or obligations of
the parties thereunder.
Our opinion in paragraph 3, below, is subject to and limited by the
qualification that, if Titan is deemed to be liable as a principal on the Notes,
it is likely that it will also be entitled to the rights and defenses otherwise
available to a principal with respect to the Notes.
We express no opinion with respect to the effect of (a) any modification to or
amendment of the Guarantied Indebtedness of Titan Technologies without Titan's
consent which materially increases such Guarantied Indebtedness; or (b) any
election of remedies by the Creditors following the failure to timely pay the
Guarantied Indebtedness or any other action by the Creditors that materially
prejudices Titan, if, in any such instance, such election or action occurs
without notice to Titan and without granting Titan an opportunity to cure any
default by Titan Technologies.
With regard to our opinion in paragraph 4 below with respect to any material
agreement known to us, we have relied solely upon (i) inquiries of officers of
Titan Technologies, (ii) a list supplied to us by Titan Technologies, a copy of
which is attached hereto as Exhibit A, of material agreements to which Titan
Technologies is a party, or by which it is bound, as the date hereof and (iii)
an examination of the items of the aforementioned list; we have made no further
investigations.
We have assumed that the Creditors will act in accordance with applicable law,
and, to the extent required by such applicable law, the Creditors will act
fairly, in good faith and in a commercially reasonable and prudent manner in
exercising its rights.
We express no opinion regarding any law or governmental rule or regulation
regarding maximum allowable interest rates.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion: (i) as to
compliance with, or the effects upon obligations arising under the Agreements
of, any law, rule or regulation relating to securities or to the sale or
issuance thereof; (ii) as to compliance with, or the effects upon obligations
arising under the Agreements of, any law, rule or regulation relating to
antitrust, trade regulation or unfair competition; or (iii) except as expressly
set forth below, as to the enforceability of any of the agreements attached as
exhibits to the Purchase Agreement.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. Each of Titan and Titan Technologies is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
2. Titan Technologies has the requisite corporate power and authority to
perform its obligations under the Agreements. Titan has the requisite corporate
power and authority to perform its obligations under the Guarantee. The
execution, delivery and performance of the Agreements by Titan Technologies have
been duly authorized by all necessary action on the part of Titan Technologies'
board of directors. The execution, delivery and performance of the Guarantee by
Titan have been duly authorized by all necessary action on the part of Titan's
board of directors. The Agreements have been duly and validly executed and
delivered by Titan Technologies. The Guarantee has been duly and validly
executed and delivered by Titan.
3. The Agreements constitute the legal, valid and binding obligations of
Titan Technologies, enforceable against Titan Technologies in accordance with
their terms, except as may be limited by, and subject to (a) general equity
principles and to limitations on the availability of equitable relief, including
specific performance; (b) the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, receivership, suretyship, dissolution,
moratorium, receivership or other similar laws relating to or affecting the
rights of creditors generally, including but not limited to those affecting the
rights of secured creditors; (c) limitations on a borrower's or guarantor's
ability to waive rights or benefits given by statute or otherwise, including,
without limitation, rights and benefits belonging to the primary obligor,
whether or not such primary obligor has itself waived such rights or benefits;
(d) limitations on the right of a lender to impose added charges for late
payments or defaults by the borrower, where it is determined that such charges
bear no reasonable relation to the damage suffered by the lender as a result of
such late payments or defaults or where the requirements of California Civil
Code Section 2954.5 are not met; (e) limitations on the enforceability of a
clause prohibiting or restricting prepayment of indebtedness or imposing
prepayment charges; (f) the effect of California Civil Code Section 1717 on the
recovery of attorneys' fees in contract actions; (g) limitations on the ability
of a secured creditor to enter, take possession of, or deal as owner with
respect to the collateral without judicial authorization; (h) limitations
imposed by California law on the appointment of receivers; (i) the effect of
California Civil Code Section 3433; (j) fraudulent conveyance laws; (k)
limitations created by or arising under statute or case law on the
enforceability of certain covenants and agreements where (1) the breach of such
covenants or provisions imposes restrictions or burdens upon the debtor,
including the acceleration of indebtedness due under debt instruments, and it
cannot be demonstrated that the enforcement of such restrictions or burdens is
reasonably necessary for the protection of the creditor or (2) the creditor's
enforcement of such covenants or provisions under the circumstances would
violate the creditor's implied covenant of good faith and fair dealing; (l)
limitations imposed by public policy on indemnification; (m) applicable laws
limiting rights to indemnity; (n) defenses available to guarantors generally;
(o) limitations on corporate distributions imposed by Sections 500 et. seq. of
the General Corporation Law of the State of California; and (o) any other
limitations which, in the event of a default by Titan Technologies in its
obligations under the Agreements or a default by Titan in its obligations under
the Guarantee, would act as a limitation on the rights of lender, each in
accordance with California law ("Enforceability Exceptions"). The Guarantee
constitutes the legal, valid and binding obligations of Titan, enforceable
against Titan in accordance with its terms, except as may be limited by, and
subject to the Enforceability Exceptions.
4. The execution and delivery of the Purchase Agreement by Titan
Technologies and the consummation of the transactions contemplated thereby do
not violate any provision of Titan Technologies' Certificate of Incorporation or
its Bylaws, do not constitute a default under the provisions of any material
agreement known to us to which Titan Technologies is a party or by which Titan
Technologies is bound and, do not violate or contravene (a) any governmental
statute, rule or regulation applicable to Titan Technologies, or (b) any order,
writ, judgment, injunction, decree, determination or award which has been
entered against Titan Technologies and of which we are aware, the violation or
contravention of which would have a material adverse effect on the assets,
financial condition or operations (a "Material Adverse Effect") of Titan
Technologies.
5. To our knowledge, there is no action, proceeding or investigation
pending or overtly threatened against Titan Technologies or Titan before any
court or administrative agency that questions the validity of the Purchase
Agreement or the Guarantee or that might result, either individually or in the
aggregate, in any Material Adverse Effect on Titan Technologies and Titan, taken
as a whole.
6. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory or governmental body in the
United States required for the consummation by Titan Technologies and Titan of
the transactions contemplated by the Agreements have been made or obtained.
This opinion letter and the opinions expressed herein are intended for your
benefit and are not to be made available to or be relied upon by any other
person, firm or entity without our prior written consent.
Very truly yours,
XXXXXX GODWARD LLP
Xxxxxxx X. Xxxxxx
Exhibit G
FORM OF NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made as of June
9th, 1999, by and among TITAN TECHNOLOGIES AND INFORMATION SYSTEMS CORPORATION
Delaware corporation ("Buyer"), SYSTEM RESOURCES CORPORATION (the "Company") and
XXXXX X. XXXXX residing at 00 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000
("Seller").
RECITALS
Concurrently with the execution and delivery of this Agreement, Buyer
is purchasing from Seller all of the outstanding shares (the "Shares") of common
stock, par value $.01 per share, of the Company owned by Seller pursuant to the
terms and conditions of a Stock Purchase Agreement dated of even date herewith
(the "Stock Purchase Agreement").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
Capitalized terms not expressly defined in this Agreement
shall have the meanings ascribed to them in the Stock Purchase Agreement.
2. ACKNOWLEDGMENTS BY SELLER.
Seller acknowledges that (a) Seller has occupied a position of
trust and confidence with the Company prior to the date hereof and has become
familiar with the following, any and all of which constitute confidential
information of the Company (collectively the "Confidential Information"): (i)
any and all trade secrets concerning the business and affairs of the Company,
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current and planned research and development, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans,
computer software and programs (including object code and source code), computer
software and database technologies, systems, structures and architectures (and
related processes, formulae, compositions, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and information of
the Company and any other information, however documented, of the Company that
is a trade secret within the meaning of the Uniform Trade Secret Act as adopted
in Massachusetts, and further provided that any such Confidential Information
under this Section 2(a) shall not include any information that is generally
known within Duke's industry or which becomes known to the public through no
fault of Seller; (ii) any and all information concerning the business and
affairs of the Company (which includes historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials, however documented; and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole or in
part, on any information included in the foregoing, (b) the business of the
Company is national in scope, (c) its services are marketed throughout the
United States, (d) the Company competes with other businesses that are or could
be located in any part of the United States, (e) Buyer has required that Seller
make the covenants set forth in Sections 3 and 4 of this Agreement as a
condition to the Buyer's purchase of the Shares owned by Seller and (f) the
provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to
protect and preserve the Company's business, and (g) the Company would be
irreparably damaged if Seller were to breach the covenants set forth in Sections
3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION.
Seller acknowledges and agrees that all Confidential
Information known or obtained by Seller, whether before or after the date
hereof, is the property of the Company. Therefore, Seller agrees that Seller
will not, at any time, disclose to any unauthorized Persons or use for his own
account or for the benefit of any third party any Confidential Information,
whether Seller has such information in Seller's memory or embodied in writing or
other physical form, without Buyer's written consent, unless and to the extent
that the Confidential Information is or becomes generally known to and available
for use by the public other than as a result of Seller's fault or the fault of
any other Person bound by a duty of confidentiality to Buyer or the Company.
Seller agrees to deliver to Buyer at the time of execution of this Agreement,
and at any other time Buyer may request, all documents, memoranda, notes, plans,
records, reports, and other documentation, models, components, devices, or
computer software, whether embodied in a disk or in other form (and all copies
of all of the foregoing), relating to the businesses, operations, or affairs of
the Company and any other Confidential Information that Seller may then possess
or have under Seller's control. Notwithstanding the foregoing, Seller may retain
copies of financial information necessary for the purpose of filing income tax
returns or substantiating prior income tax returns filed on behalf of Seller.
4. NONCOMPETITION.
As an inducement for Buyer to enter into the Stock Purchase
Agreement and as additional consideration for the consideration to be paid to
Seller under the Stock Purchase Agreement, Seller agrees that:
(a) For a period of two years after the Closing:
(i) Seller will not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing or control of, be employed by,
associated with, or in any manner connected with, lend Seller's name or any
similar name to, lend Seller's credit to, or render services or advice to, any
business whose activities directly compete in whole or in part with the
activities of the Company in the government sector, whether federal, state,
municipal or otherwise, or with existing commercial customers by providing the
services historically provided by the Company to such customers, as of the date
of this Agreement, anywhere within the United States; provided, however, that
Seller may purchase or otherwise acquire up to (but not more than) one percent
of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934. Seller agrees that
this covenant is reasonable with respect to its duration, geographical area, and
scope.
(ii) Seller will not, directly or indirectly, either
for himself or any other Person, (A) induce or attempt to induce any employee of
the Company to leave the employ of the Company, (B) in any way interfere with
the relationship between the Company and any employee of the Company, (C)
employ, or otherwise engage as an employee, independent contractor, or
otherwise, any employee of the Company who is employed by Buyer, Buyer's Parent
or the Company at the time of contact by Seller for such employment or other
engagement, or (D) induce or attempt to induce any customer, supplier, licensee,
or business relation of the Company to cease doing business with the Company, or
in any way interfere with the relationship between any customer, supplier,
licensee, or business relation of the Company.
(iii) Seller will not, directly or indirectly, either
for himself or any other Person, solicit the business of any Person known to
Seller to be a customer of the Company for the purpose of engaging in any
business with respect to any program in which the Company has contracts or has
submitted bids as of the date of this Agreement, and any new defense or
government programs that require the same or similar services as are provided by
the Company on the date of this Agreement, anywhere in the United States whether
or not Seller had personal contact with such Person;
(b) In the event of a breach by Seller of any covenant set
forth in Subsection 4(a) of this Agreement, the term of such covenant will be
extended by the period of the duration of such breach;
(c) Seller will, for a period of two years after the Closing,
within ten days after accepting any employment, advise Buyer of the identity of
any employer of Seller. Buyer or the Company may serve notice upon each such
employer that Seller is bound by this Agreement and furnish each such employer
with a copy of this Agreement or relevant portions thereof.
5. REMEDIES.
If Seller breaches the covenants set forth in Sections 3 or 4
of this Agreement, Buyer and the Company will be entitled to the following
remedies:
(a) Damages from Seller; and
(b) In addition to its right to damages and any other rights
it may have, to obtain injunctive or other equitable relief to restrain any
breach or threatened breach or otherwise to specifically enforce the provisions
of Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Buyer and the Company and would be an
inadequate remedy for such breach.
(c) The rights and remedies of the parties to this Agreement
are cumulative and not alternative.
6. SUCCESSORS AND ASSIGNS.
This Agreement will be binding upon Buyer, the Company and
Seller and will inure to the benefit of Buyer and the Company and their
affiliates, successors and assigns and Seller and Seller's assigns, heirs and
legal representatives.
7. WAIVER.
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement will operate
as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
8. GOVERNING LAW.
This Agreement will be governed by the laws of the State of
California without regard to conflicts of laws principles.
9. JURISDICTION; SERVICE OF PROCESS.
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of California, County of San Diego,
or, if it has or can acquire jurisdiction, in the United States District Court
for the Southern District of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein. In
addition, Buyer may, at its option, bring any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
against Seller in the courts of the Commonwealth of Massachusetts, or, if it has
or can acquire jurisdiction, in the United States District Court for the
Commonwealth of Massachusetts, and Seller hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
10. SEVERABILITY.
Whenever possible each provision and term of this Agreement
will be interpreted in a manner to be effective and valid but if any provision
or term of this Agreement is held to be prohibited by or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of this
Agreement. If any of the covenants set forth in Section 4 of this Agreement are
held to be unreasonable, arbitrary, or against public policy, such covenants
will be considered divisible with respect to scope, time, and geographic area,
and in such lesser scope, time and geographic area, will be effective, binding
and enforceable against Seller.
11. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
12. SECTION HEADINGS, CONSTRUCTION.
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
13. NOTICES.
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
if to Buyer:
The Titan Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxx Xxxxxx, Esq., General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company:
System Resources Corporation
000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Seller:
Xxxxx X. Xxxxx
00 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popco, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
14. ENTIRE AGREEMENT.
This Agreement, the Stock Purchase Agreement and the exhibits
attached thereto constitute the entire agreement between the parties with
respect to the subject matter of this Agreement and supersede all prior written
and oral agreements and understandings between Buyer and Seller with respect to
the subject matter of this Agreement. This Agreement may not be amended except
by a written agreement executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as an instrument under seal as of the date first above written.
BUYER: TITAN TECHNOLOGIES AND INFORMATION
SYSTEMS CORPORATION
By:
Print Name:
Title:
SELLER:
XXXXX X. XXXXX
COMPANY: SYSTEM RESOURCES CORPORATION
By:
Print Name:
Title:
[Signature Page to Noncompetition Agreement]
Exhibit H
SCHEDULE OF KEY EMPLOYEES
Exhibit I
LEASE AMENDMENTS
LEASE MODIFICATION AGREEMENT
THIS LEASE MODIFICATION AGREEMENT ("Amendment") dated June ____, 1999,
by and between MNM SERVICES, Inc., a Massachusetts corporation ("Lessor") and
SYSTEM RESOURCES CORPORATION, a Delaware corporation ("Lessee") (collectively,
the "Parties").
WITNESSETH
WHEREAS, the parties entered into a Lease Agreement dated May 31, 1996
(the "Lease") for those certain premises designated in said lease consisting of
Unit 409 at 0000 Xxxxxxx Xxxxx located in Arlington, Virginia (hereinafter
referred to as the "Lease");
WHEREAS, the Parties acknowledge that Lessee will become the wholly
owned subsidiary of Titan Technologies and Information Systems Corporation
("Buyer") in connection with a Stock Purchase Agreement dated June ___, 1999
(the "Agreement") by and among Buyer, Lessee, and the stockholders of Lessee, as
defined in the Agreement; and
WHEREAS, Lessor and Lessee mutually intend and desire to amend the
Lease on and subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. The following new Section 16 of the Lease is hereby added to the Lease:
16. Assignment.
The Lessee shall not assign or sublet the whole or any part of
the leased premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld. Lessor may
withhold its consent if in its reasonable discretion the
proposed assignee is not creditworthy and Lessor is being
asked to release the Lessee from all further liability under
the Lease. Lessee shall remain liable to Lessor for the
payment of rent and for the full performance of the covenants
and conditions of this Lease regardless in the event of any
subletting of the premises by Lessee unless Lessor agrees in
writing to release Lessee in order to trigger a release of
funds under Section 2 of the Indemnity Side Letter of even
date attached hereto as Exhibit A ("Exhibit A"). Lessor may
not condition its consent to any assignment or sublease on the
payment of any fees or upon any modifications to the Lease.
2. The following new Section 17 is hereby added to the Lease:
17. Termination Option.
Lessor shall have the right to terminate this Lease
by giving Lessee six (6) months written notice to Lessee of
Lessor's intent to terminate the Lease ("Lessor Termination
Option"). Notwithstanding the foregoing, if the Lessee has
sublet any portion of the premises, or has assigned its
interest in the Lease in each instance in accordance with the
provisions of Section 1 of this Amendment, the Lessor shall
not have the right to exercise the Lessor Termination Option
as to any assigned or sublet premises. Lessor retains the
right to exercise the Lessor Termination Option prior to the
approval or acceptance of any proposed sublease or assignment.
The Lessee shall have the right to terminate this
Lease by giving four (4) months written notice to Lessor of
Lessee's intent to terminate the Lease ("Lessee Termination
Option"); provided, however, that Lessee shall have the right
to exercise the Lessee Termination Option only if either of
the conditions set forth in the first two sentences of Section
4(c) of Exhibit A occurs.
3. As amended hereby, the Lease is ratified and confirmed and declared to be in
full force and effect. Unless otherwise defined herein, all defined terms shall
have the meaning set forth in the Agreement and the Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Lease
Modification Agreement as an instrument under seal as of the date first above
written.
LESSOR: XXXXX X. XXXXX
-----------------------------------
LESEE: SYSTEM RESOURCES CORPORATION,
a Delaware corporation
By:
Print Name:
Title:
LEASE MODIFICATION AGREEMENT
THIS LEASE MODIFICATION AGREEMENT ("Amendment") dated June ____, 1999,
by and between MNM SERVICES, Inc., a Massachusetts corporation ("Lessor") and
SYSTEM RESOURCES CORPORATION, a Delaware corporation ("Lessee") (collectively,
the "Parties").
WITNESSETH
WHEREAS, the parties entered into a Lease Agreement dated July 16, 1996
(the "Lease") for those certain premises designated in said lease consisting of
Xxxx 000X xx xxx Xxxxxx Xxxx Xxxxxx Xxxxx & Tennis Resort located in Hilton
Head, South Carolina (hereinafter referred to as the "Lease");
WHEREAS, the Parties acknowledge that Lessee will become the wholly
owned subsidiary of Titan Technologies and Information Systems Corporation
("Buyer") in connection with a Stock Purchase Agreement dated June ___, 1999
(the "Agreement") by and among Buyer, Lessee, and the stockholders of Lessee, as
defined in the Agreement; and
WHEREAS, Lessor and Lessee mutually intend and desire to amend the
Lease on and subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. The following new Section 16 of the Lease is hereby added to the Lease:
16. Assignment.
The Lessee shall not assign or sublet the whole or any part of
the leased premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld. Lessor may
withhold its consent if in its reasonable discretion the
proposed assignee is not creditworthy and Lessor is being
asked to release the Lessee from all further liability under
the Lease. Lessee shall remain liable to Lessor for the
payment of rent and for the full performance of the covenants
and conditions of this Lease regardless in the event of any
subletting of the premises by Lessee unless Lessor agrees in
writing to release Lessee in order to trigger a release of
funds under Section 2 of the Indemnity Side Letter of even
date attached hereto as Exhibit A ("Exhibit A"). Lessor may
not condition its consent to any assignment or sublease on the
payment of any fees or upon any modifications to the Lease.
2. The following new Section 17 is hereby added to the Lease:
17. Termination Option.
Lessor shall have the right to terminate this Lease
by giving Lessee six (6) months written notice to Lessee of
Lessor's intent to terminate the Lease ("Lessor Termination
Option"). Notwithstanding the foregoing, if the Lessee has
sublet any portion of the premises, or has assigned its
interest in the Lease in each instance in accordance with the
provisions of Section 1 of this Amendment, the Lessor shall
not have the right to exercise the Lessor Termination Option
as to any assigned or sublet premises. Lessor retains the
right to exercise the Lessor Termination Option prior to the
approval or acceptance of any proposed sublease or assignment.
The Lessee shall have the right to terminate this
Lease by giving four (4) months written notice to Lessor of
Lessee's intent to terminate the Lease ("Lessee Termination
Option"); provided, however, that Lessee shall have the right
to exercise the Lessee Termination Option only if either of
the conditions set forth in the first two sentences of Section
4(c) of Exhibit A occurs.
3. As amended hereby, the Lease is ratified and confirmed and declared to be in
full force and effect. Unless otherwise defined herein, all defined terms shall
have the meaning set forth in the Agreement and the Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Lease
Modification Agreement as an instrument under seal as of the date first above
written.
LESSOR: XXXXX X. XXXXX
-----------------------------------
LESEE: SYSTEM RESOURCES CORPORATION,
a Delaware corporation
By:
Print Name:
Title:
LEASE MODIFICATION AGREEMENT
NO. 2
THIS LEASE MODIFICATION AGREEMENT NO. 2 ("Second Amendment") dated June
____, 1999, by and between MNM SERVICES, INC., a Massachusetts corporation
("Lessor") and SYSTEM RESOURCES CORPORATION, a Delaware corporation ("Lessee")
(collectively, the "Parties").
WITNESSETH
WHEREAS, the parties entered into a Lease Agreement dated October 1,
1996 (the "Lease") for those certain premises designated in said lease
consisting of 4,182 square feet on the first floor within 000 Xxxxxxx Xxxx
located in Burlington, Massachusetts (hereinafter referred to as the "Lease");
WHEREAS, the Parties acknowledge that Lessee will become the wholly
owned subsidiary of Titan Technologies and Information Systems Corporation
("Buyer") in connection with a Stock Purchase Agreement dated June ___, 1999
(the "Agreement") by and among Buyer, Lessee, and the stockholders of Lessee, as
defined in the Agreement; and
WHEREAS, Lessor and Lessee mutually intend and desire to amend the
Lease on and subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. Section 13 of the Lease ("Assignment"), shall be deleted in its entirety
and replaced with the following language:
The Lessee shall not assign or sublet the whole or any part of
the leased premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld. Lessor may
withhold its consent if in its reasonable discretion the
proposed assignee is not creditworthy and Lessor is being
asked to release the Lessee from all further liability under
the Lease. Lessee shall remain liable to Lessor for the
payment of rent and for the full performance of the covenants
and conditions of this Lease regardless in the event of any
subletting of the premises by Lessee unless Lessor agrees in
writing to release Lessee in order to trigger a release of
funds under Section 2 of the Indemnity Side Letter of even
date attached hereto as Exhibit A ("Exhibit A"). Lessor may
not condition its consent to any assignment or sublease on the
payment of any fees or upon any modifications to the Lease.
2. The following new Section 35 is hereby added to the Lease and Section 35
is renumbered as Section 36:
35. Termination Option.
Lessor shall have the right to terminate this Lease
by giving Lessee six (6) months written notice to Lessee of
Lessor's intent to terminate the Lease ("Lessor Termination
Option"). Notwithstanding the foregoing, if the Lessee has
sublet any portion of the premises, or has assigned its
interest in the Lease in each instance in accordance with the
provisions of Section 1 of this Second Amendment, the Lessor
shall not have the right to exercise the Lessor Termination
Option as to any assigned or sublet premises. Lessor retains
the right to exercise the Lessor Termination Option prior to
the approval or acceptance of any proposed sublease or
assignment.
The Lessee shall have the right to terminate this
Lease by giving four (4) months written notice to Lessor of
Lessee's intent to terminate the Lease ("Lessee Termination
Option"); provided, however, that Lessee shall have the right
to exercise the Lessee Termination Option only if either of
the conditions set forth in the first two sentences of Section
4(c) of Exhibit A occurs.
3. As amended hereby, the Lease is ratified and confirmed and declared to
be in full force and effect. Unless otherwise defined herein, all defined terms
shall have the meaning set forth in the Agreement and the Lease.
[THIS SPACE INTENTIONALY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Lease
Modification Agreement No. 2 as an instrument under seal as of the date first
above written.
LESSOR: MNM SERVICES, INC.,
a Massachusetts corporation
By:
Print Name:
Title:
LESEE: SYSTEM RESOURCES CORPORATION,
a Delaware corporation
By:
Print Name:
Title:
LEASE MODIFICATION AGREEMENT
NO. 2
THIS LEASE MODIFICATION AGREEMENT NO. 2 ("Second Amendment") dated June
____, 1999, by and between MNM SERVICES, INC., a Massachusetts corporation
("Lessor") and SYSTEM RESOURCES CORPORATION, a Delaware corporation ("Lessee")
(collectively, the "Parties").
WITNESSETH
WHEREAS, the parties entered into a Lease Agreement dated October 1,
1996 (the "Lease") for those certain premises designated in said lease
consisting of 5,286 square feet on the first floor within 000 Xxxxxxx Xxxx
located in Burlington, Massachusetts (hereinafter referred to as the "Lease");
WHEREAS, the Parties acknowledge that Lessee will become the wholly
owned subsidiary of Titan Technologies and Information Systems Corporation
("Buyer") in connection with a Stock Purchase Agreement dated June ___, 1999
(the "Agreement") by and among Buyer, Lessee, and the stockholders of Lessee, as
defined in the Agreement; and
WHEREAS, Lessor and Lessee mutually intend and desire to amend the
Lease on and subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. Section 13 of the Lease ("Assignment"), shall be deleted in its entirety
and replaced with the following language:
The Lessee shall not assign or sublet the whole or any part of
the leased premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld. Lessor may
withhold its consent if in its reasonable discretion the
proposed assignee is not creditworthy and Lessor is being
asked to release the Lessee from all further liability under
the Lease. Lessee shall remain liable to Lessor for the
payment of rent and for the full performance of the covenants
and conditions of this Lease regardless in the event of any
subletting of the premises by Lessee unless Lessor agrees in
writing to release Lessee in order to trigger a release of
funds under Section 2 of the Indemnity Side Letter of even
date attached hereto as Exhibit A ("Exhibit A"). Lessor may
not condition its consent to any assignment or sublease on the
payment of any fees or upon any modifications to the Lease.
2. The following new Section 35 is hereby added to the Lease and Section 35
is renumbered as Section 36:
35. Termination Option.
Lessor shall have the right to terminate this Lease
by giving Lessee six (6) months written notice to Lessee of
Lessor's intent to terminate the Lease ("Lessor Termination
Option"). Notwithstanding the foregoing, if the Lessee has
sublet any portion of the premises, or has assigned its
interest in the Lease in each instance in accordance with the
provisions of Section 1 of this Second Amendment, the Lessor
shall not have the right to exercise the Lessor Termination
Option as to any assigned or sublet premises. Lessor retains
the right to exercise the Lessor Termination Option prior to
the approval or acceptance of any proposed sublease or
assignment.
The Lessee shall have the right to terminate this
Lease by giving four (4) months written notice to Lessor of
Lessee's intent to terminate the Lease ("Lessee Termination
Option"); provided, however, that Lessee shall have the right
to exercise the Lessee Termination Option only if either of
the conditions set forth in the first two sentences of Section
4(c) of Exhibit A occurs.
3. As amended hereby, the Lease is ratified and confirmed and declared to
be in full force and effect. Unless otherwise defined herein, all defined terms
shall have the meaning set forth in the Agreement and the Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Lease
Modification Agreement No. 2 as an instrument under seal as of the date first
above written.
LESSOR: MNM SERVICES, INC.,
a Massachusetts corporation
By:
Print Name:
Title:
LESEE: SYSTEM RESOURCES CORPORATION,
a Delaware corporation
By:
Print Name:
Title:
LEASE MODIFICATION AGREEMENT
NO. 2
THIS LEASE MODIFICATION AGREEMENT NO. 2 ("Second Amendment") dated June
____, 1999, by and between MNM SERVICES, INC., a Massachusetts corporation
("Lessor") and SYSTEM RESOURCES CORPORATION, a Delaware corporation ("Lessee")
(collectively, the "Parties").
WITNESSETH
WHEREAS, the parties entered into a Lease Agreement dated October 1,
1996 (the "Lease") for those certain premises designated in said lease
consisting of 12,663 square feet on the second floor within 000 Xxxxxxx Xxxx
located in Burlington, Massachusetts (hereinafter referred to as the "Lease");
WHEREAS, the Parties acknowledge that Lessee will become the wholly
owned subsidiary of Titan Technologies and Information Systems Corporation
("Buyer") in connection with a Stock Purchase Agreement dated June ___, 1999
(the "Agreement") by and among Buyer, Lessee, and the stockholders of Lessee, as
defined in the Agreement; and
WHEREAS, Lessor and Lessee mutually intend and desire to amend the
Lease on and subject to the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. Section 13 of the Lease ("Assignment"), shall be deleted in its entirety
and replaced with the following language:
The Lessee shall not assign or sublet the whole or any part of
the leased premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld. Lessor may
withhold its consent if in its reasonable discretion the
proposed assignee is not creditworthy and Lessor is being
asked to release the Lessee from all further liability under
the Lease. Lessee shall remain liable to Lessor for the
payment of rent and for the full performance of the covenants
and conditions of this Lease regardless in the event of any
subletting of the premises by Lessee unless Lessor agrees in
writing to release Lessee in order to trigger a release of
funds under Section 2 of the Indemnity Side Letter of even
date attached hereto as Exhibit A ("Exhibit A"). Lessor may
not condition its consent to any assignment or sublease on the
payment of any fees or upon any modifications to the Lease.
2. The following new Section 35 is hereby added to the Lease and Section 35
is renumbered Section 36:
35. Termination Option.
Lessor shall have the right to terminate this Lease
by giving Lessee six (6) months written notice to Lessee of
Lessor's intent to terminate the Lease ("Lessor Termination
Option"). Notwithstanding the foregoing, if the Lessee has
sublet any portion of the premises, or has assigned its
interest in the Lease in each instance in accordance with the
provisions of Section 1 of this Second Amendment, the Lessor
shall not have the right to exercise the Lessor Termination
Option as to any assigned or sublet premises. Lessor retains
the right to exercise the Lessor Termination Option prior to
the approval or acceptance of any proposed sublease or
assignment.
The Lessee shall have the right to terminate this
Lease by giving four (4) months written notice to Lessor of
Lessee's intent to terminate the Lease ("Lessee Termination
Option"); provided, however, that Lessee shall have the right
to exercise the Lessee Termination Option only if either of
the conditions set forth in the first two sentences of Section
4(c) of Exhibit A occurs.
3. As amended hereby, the Lease is ratified and confirmed and declared to
be in full force and effect. Unless otherwise defined herein, all defined terms
shall have the meaning set forth in the Agreement and the Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Lease
Modification Agreement No. 2 as an instrument under seal as of the date first
above written.
LESSOR: MNM SERVICES, INC.,
a Massachusetts corporation
By:
Print Name:
Title:
LESEE: SYSTEM RESOURCES CORPORATION,
a Delaware corporation
By:
Print Name:
Title:
STOCK PURCHASE AGREEMENT
among
TITAN TECHNOLOGIES AND INFORMATION SYSTEMS CORPORATION,
SYSTEM RESOURCES CORPORATION
and
THE STOCKHOLDERS OF
SYSTEM RESOURCES CORPORATION
June 9, 1999
Table Of Contents
Page
1. Purchase and Sale of Stock...............................................................................1
2. Purchase Price...........................................................................................1
2.1 Purchase Price..................................................................................1
2.2 Allocation of Purchase Price....................................................................2
2.3 Adjustments to Purchase Price...................................................................2
2.4 Offsets to Notes................................................................................5
2.5 Excess Accounts Receivable......................................................................5
3. The Closing; Delivery....................................................................................6
3.1 The Closing.....................................................................................6
3.2 Delivery and Satisfaction of Conditions at Closing..............................................6
4. Representations and Warranties of SRC....................................................................7
4.1 Organization and Standing.......................................................................7
4.2 No Subsidiaries.................................................................................7
4.3 Authorization...................................................................................7
4.4 Title to Stock; Encumbrances....................................................................8
4.5 No Breach, Etc..................................................................................8
4.6 Capitalization..................................................................................8
4.7 Taxes...........................................................................................9
4.8 Financial Statements...........................................................................10
4.9 No Undisclosed Liabilities.....................................................................10
4.10 Absence of Certain Changes.....................................................................10
4.11 Title to Assets................................................................................12
4.12 Bank Accounts; Receivables.....................................................................12
4.13 Equipment......................................................................................12
4.14 Litigation, Etc................................................................................12
4.15 Intellectual Property..........................................................................13
4.16 Contracts......................................................................................13
4.17 Security Matters...............................................................................18
4.18 Employee and Labor Matters; Benefit Plans......................................................18
4.19 Compliance with Laws...........................................................................21
4.20 Governmental Authorizations....................................................................21
4.21 Related Persons................................................................................21
4.22 Insurance......................................................................................22
4.23 Real Property; Owned or Leased.................................................................22
4.24 Environmental Matters..........................................................................22
4.25 Corporate Records..............................................................................23
4.26 Full Disclosure................................................................................23
4.27 Brokers........................................................................................23
4.28 Disallowable Expense Items.....................................................................23
4.29 Year 2000 Compliance...........................................................................24
4.30 Certain Definitions............................................................................24
5. Representations and Warranties of the Stockholders......................................................25
5.1 Title to Stock; Encumbrances...................................................................25
6. Representations and Warranties of Buyer.................................................................25
6.1 Organization and Standing......................................................................25
6.2 Corporate Power; Authorization.................................................................25
6.3 Brokers........................................................................................26
6.4 Consents.......................................................................................26
6.5 Litigation, Etc................................................................................26
7. Additional Covenants of the Parties.....................................................................26
7.1 Filings and Consents...........................................................................26
7.2 Public Announcements...........................................................................27
7.3 Best Efforts...................................................................................27
7.4 Noncompetition Agreement.......................................................................27
7.5 Release........................................................................................27
7.6 Stock Options..................................................................................27
7.7 401(k) Plan....................................................................................27
8. Additional Agreements...................................................................................27
8.1 Payment of Taxes...............................................................................27
8.2 Tax Election...................................................................................28
8.3 Tax Allocations................................................................................28
8.4 Tax Matters....................................................................................29
9. Indemnification.........................................................................................29
9.1 Survival of Representations, Etc...............................................................29
9.2 Indemnification by Stockholders................................................................30
9.3 Threshold; Ceiling.............................................................................31
9.4 No Contribution................................................................................31
9.5 Indemnification by Buyer.......................................................................31
9.6 Defense of Third Party Claims..................................................................32
9.7 Definitions....................................................................................32
9.8 Interest.......................................................................................33
9.9 Recovery of Damages from Notes.................................................................33
9.10 Stockholders' Agent............................................................................34
10. Miscellaneous...........................................................................................34
10.1 Further Assurances.............................................................................34
10.2 Fees and Expenses..............................................................................34
10.3 Attorneys' Fees................................................................................35
10.4 Notices........................................................................................35
10.5 Time of the Essence............................................................................36
10.6 Headings.......................................................................................36
10.7 Counterparts...................................................................................36
10.8 Governing Law..................................................................................36
10.9 Successors and Assigns.........................................................................36
10.10 Remedies Cumulative; Specific Performance......................................................36
10.11 Waiver.........................................................................................37
10.12 Amendments.....................................................................................37
10.13 Severability...................................................................................37
10.14 Parties in Interest............................................................................37
10.15 Entire Agreement...............................................................................37
10.16 Construction...................................................................................37
10.17 Negotiation of Disputes........................................................................38
10.18 Arbitration....................................................................................38
Exhibits
Exhibit A - Schedule of Stockholders
Exhibit B - Form of Promissory Note
Exhibit C - Form of Guarantee
Exhibit D - Form of Release
Exhibit E - Opinion of Stockholders' Counsel
Exhibit F - Opinion of Buyer's Counsel
Exhibit G - Form of Noncompetition Agreement
Exhibit H - Schedule of Key Employees
Exhibit I Lease Amendments
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