Exhibit 10.40
STANDSTILL AGREEMENT
between
GOVERNMENT TECHNOLOGY SERVICES, INC.
and
XXXXXXX X. XXXX, XX.
Dated as of July 29, 1998
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (this "Agreement"), dated as of July
29, 1998, is entered into between Government Technology Services, Inc., a
Delaware corporation ("GTSI"), and Xxxxxxx X. Xxxx, Xx. (the
"Stockholder").
W I T N E S S E T H:
WHEREAS, the Stockholder and BTG, Inc., a Virginia corporation
("BTG"), are parties to a Stock Purchase Agreement dated as of July 29,
1998 (the "Purchase Agreement"), pursuant to which the Stockholder is to
acquire from BTG 1,100,000 shares (the "Shares") of GTSI common stock, par
value $.005 per share (the "Common Stock");
WHEREAS, pursuant to Section 2.02 of the Standstill Agreement
between GTSI and BTG dated as of February 12, 1998, the sale of the Shares
by BTG to the Stockholder is subject to, among other things, the prior
written consent of GTSI; and
WHEREAS, GTSI's willingness to consent to such sale is dependent
upon the execution of this Standstill Agreement between GTSI and the
Stockholder.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 For purposes of this Agreement, the following
terms shall have the following meanings.
"13D Group" shall mean any group of Persons formed for the purpose of
acquiring, holding, voting or disposing of Voting Securities which would be
required under Section 13 of the Exchange Act and the rules and regulations
thereunder to file a statement with the SEC on Schedule 13D or Schedule 13G
as a "person" within the meaning of Section 13(d)(3) of the Exchange Act if
such group shall have Beneficial Ownership representing more than 5% of the
total combined voting power of all Voting Securities then outstanding.
"Beneficial Ownership" shall mean ownership of Voting Securities by a
Person, whether the interest in Voting Securities is held directly or
indirectly (including by nominee), and shall include interests that would
be treated as owned through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"BTG" shall mean BTG, Inc., a Virginia corporation.
"Business Day" shall mean a day that is not a Saturday, a Sunday or a
day on which banking institutions in the State of New York are not required
to be open. Unless specifically stated as a Business Day, all days
referred to herein shall mean calendar days.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the Recitals to
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Shares" shall mean the 139,700 shares of Common Stock
Beneficially Owned by the Stockholder or the Stockholder Group immediately
prior to the Stockholder's acquisition of the Shares pursuant to the
Purchase Agreement.
"GTSI Board" shall mean the board of directors of GTSI.
"Market Price" for any Voting Securities as of any date shall refer to
the average of the closing per share prices of Common Stock on the Nasdaq
National Market (or any national market on which the Common Stock may then
be traded) for the 10 consecutive trading days prior to such date.
"Person" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Sections 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Exchange Act.
"Purchase Agreement" shall have the meaning set forth in the Recitals
to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall have the meaning set forth in the Recitals to this
Agreement.
"The Stockholder" shall mean Xxxxxxx X. Xxxx, Xx.
"The Stockholder Group" shall have the meaning set forth in Section
3.01.
"Transfer" shall mean any issuance, sale, transfer, gift, assignment,
devise or other disposition, as well as any other event that causes any
Person to acquire Beneficial Ownership or constructive ownership, or any
agreement to take any such actions or cause any such events, of Voting
Securities or the right to vote or receive dividends on Voting Securities,
including (a) a change in the capital structure of GTSI, (b) a change in
the relationship between two or more Persons which causes a change in
ownership of Voting Securities by application of Section 544 of the Code,
as modified by Section 856(h), (c) the granting or exercise of any option
or warrant (or any disposition of any option or warrant), pledge, security
interest, or similar right to acquire Voting Securities, (d) any
disposition of any securities or rights convertible into or exchangeable
for Voting Securities or any interest in Voting Securities or any exercise
of any such conversion or exchange right and (e) Transfers of interests in
other entities that result in changes in Beneficial Ownership or
constructive ownership of Voting Securities; in each case, whether
voluntary or involuntary, whether owned of record, constructively owned or
Beneficially Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
"Voting Securities" shall mean the outstanding securities of GTSI
entitled to vote generally for the election of directors, including the
Common Stock, or securities convertible into, or entitling the holder
thereof to acquire, such voting securities.
ARTICLE II
CERTAIN REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
To induce GTSI to consent to the sale of the Shares by BTG to the
Stockholder, the Stockholder represents and warrants to GTSI that the
statements contained in this Article II are correct and complete as of the
date of this Agreement:
SECTION 2.01 Acquisition of the Shares.
a. The Stockholder is purchasing the Shares solely for
investment purposes, with no present intention of distributing or reselling
any of the Shares or any interest therein. The Stockholder acknowledges
that the Shares have not been registered under the Securities Act.
b. The Stockholder is aware of the applicable limitations under
the Securities Act relating to a subsequent sale, transfer, pledge,
mortgage, hypothecation, gift, assignment or other encumbrance of the
Shares. The Stockholder further acknowledges that such Shares must be held
indefinitely unless subsequently registered under the Securities Act and
applicable state securities laws or an exemption from such registration is
available.
c. The Stockholder has received adequate access to financial
and other information concerning GTSI and the Shares and has had the
opportunity to ask questions of and receive answers from GTSI concerning
such Shares and to obtain therefrom any additional information necessary to
make an informed decision regarding the acquisition of such stock. The
Stockholder has received copies of each report, registration statement and
definitive proxy statement filed by GTSI with the Securities and Exchange
Commission since March 31, 1997.
d. The Stockholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits
and risks of the acquisition of the Shares. The investment in the Shares is
suitable for the Stockholder upon the basis of the facts regarding the
Stockholder's financial situation and needs. The Stockholder is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
e. The Stockholder realizes that GTSI is relying on the
validity of his representations and agreements contained herein in
consenting to the sale of the Shares by BTG to the Stockholder without
registration under the Securities Act.
SECTION 2.02 Ownership of Common Stock. Except for the
Existing Shares, neither the Stockholder nor any other member of the
Stockholder Group Beneficially Owns any Common Stock or has the right to
acquire under any circumstance, other than pursuant to the Purchase
Agreement, any Common Stock.
ARTICLE III
CERTAIN RIGHTS, COVENANTS AND
AGREEMENTS OF THE STOCKHOLDER
SECTION 3.01 Restrictions on Certain Actions by the
Stockholder. The Stockholder agrees that for so long as this Agreement
shall remain in effect it shall not, nor shall it cause any of its
affiliates (as such term is defined in Rule 12b-2 of the General Rules and
Regulations promulgated under the Exchange Act) (the Stockholder, together
with such affiliates, the "the Stockholder Group"), directly or indirectly,
without the prior written consent of GTSI duly authorized by a majority of
the members of the GTSI Board, to:
a. acquire, directly or indirectly, by purchase or otherwise, any
Beneficial Ownership, except by way of stock dividends or other
distributions or offerings made available by GTSI to holders of Voting
Securities generally, if after such acquisition members of the Stockholder
Group would Beneficially Own in the aggregate more than 12.68% of the total
combined voting power of the Voting Securities outstanding immediately
following any such acquisition; provided that the Stockholder Group may
acquire in open market transactions Beneficial Ownership in the aggregate
of an additional 200,000 shares of Common Stock over and above the Existing
Shares without the prior consent of GTSI and such additional shares shall
not be counted in determining whether or not the foregoing 12.68%
limitation has been exceeded;
b. deposit any Voting Securities in a voting trust or subject them
to any arrangement or agreement with respect to the voting thereof;
c. "solicit" proxies with respect to Voting Securities under any
circumstance or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A of the General Rules and Regulations
promulgated under the Exchange Act) in opposition to the recommendation of
a majority of the directors of GTSI with respect to any matter;
d. initiate, propose or otherwise solicit stockholders of GTSI for
the approval of one or more stockholder proposals relating to GTSI at any
time, or induce or attempt to induce any other Person to initiate any
stockholder proposal with respect to GTSI;
e. join a partnership, limited partnership, syndicate or other
group, or otherwise act in concert with any other Person, for the purpose
of acquiring, holding, voting or disposing of Voting Securities, or
otherwise become a "person" within the meaning of Section 13(d)(3) of the
Exchange Act (in each case, other than solely with members of the the
Stockholder Group); or
f. make any proposal to the GTSI Board or otherwise with respect to
the acquisition of any Beneficial Ownership by any member of the the
Stockholder Group or with respect to a merger or consolidation with, or a
sale of a substantial portion of GTSI's assets to, any member of the the
Stockholder Group, if such proposal would be of a kind such that public
disclosure thereof might reasonably be required under applicable law (each
such proposal, an "Acquisition Proposal").
SECTION 3.02 Restrictions on Transfers of Common Stock. The
Stockholder agrees that, for so long as this Agreement shall remain in
effect, he shall not, nor shall he permit any member of the Stockholder
Group to, directly or indirectly, without the prior written consent of GTSI
duly authorized by a majority of the members of the GTSI Board, Transfer
any Voting Securities, other than:
a. pursuant to Rule 144 ("Rule 144") of the General Rules and
Regulations promulgated under the Securities Act (without giving effect to
subsection (k) of Rule 144);
b. pursuant to any tender or exchange offer;
c. pursuant to any bona fide public offering of Voting Securities
(including any sale made pursuant to Rule 144), provided that, in cases
other than public offerings of Voting Securities underwritten by one or
more underwriters selected by GTSI, no sales of Voting Securities shall be
made to any Person or related group of Persons (other than the
aforementioned underwriter or underwriters) who is known by any member of
the Stockholder Group to be acquiring in such public offering more than 2%
of the total combined voting power of all Voting Securities then
outstanding;
d. as a result of any pledge or hypothecation to a bona fide
financial institution to secure a bona fide loan, or the foreclosure of any
lien or encumbrance which may be placed upon any Voting Securities (whether
voluntarily or involuntarily); provided that, with respect to permitted
Transfers of Voting Securities by the Stockholder pursuant to this
paragraph (d), any buyer or transferee of such Voting Securities shall as a
precondition to the consummation of the proposed Transfer be required to
execute in writing an agreement to be bound by the terms hereof, which
agreement to be bound shall be in form and substance reasonably
satisfactory to GTSI; or
e. to members of the Stockholder's immediate family or any trusts
for their benefit;
provided that, with respect to permitted Transfers of Voting Securities by
the Stockholder pursuant to this paragraph (e), any transferee of such
Voting Securities shall as a precondition to the consummation of the
proposed Transfer be required to execute in writing an agreement to be
bound by the terms hereof, which agreement to be bound shall be in form and
substance reasonably satisfactory to GTSI.
SECTION 3.03 Procedures Regarding Beneficial Ownership
Limitations.
a. GTSI shall not knowingly give effect on GTSI's books to any
purported acquisition, directly or indirectly, by purchase or otherwise, of
any Beneficial Ownership, except by way of stock dividends or other
distributions or offerings made available by GTSI to holders of Voting
Securities generally, if such acquisition is prohibited by Section 3.01(a)
and if GTSI has actual knowledge thereof.
b. GTSI shall give its transfer agent stop-transfer instructions
with respect to any proposed acquisition, directly or indirectly, by
purchase or otherwise, of any Beneficial Ownership, except by way of stock
dividends or other distributions or offerings made available by GTSI to
holders of Voting Securities generally, if such acquisition is prohibited
by Section 3.01(a) and if GTSI has actual knowledge thereof.
SECTION 3.04 Stock Legends.
a. The certificate evidencing the Shares to be issued to the
Stockholder pursuant to the Purchase Agreement shall bear the following
legends:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
EXCEPT UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER WILL
NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF A STANDSTILL AGREEMENT DATED JULY 29, 1998 BY AND
BETWEEN THE CORPORATION AND XXXXXXX X. XXXX, XX. AND MAY NOT BE
TRANSFERRED OR VOTED IN CONNECTION WITH THE ELECTION OF DIRECTORS
EXCEPT IN COMPLIANCE THEREWITH.
b. Upon receipt of an opinion of legal counsel satisfactory to GTSI
that the Shares no longer constitutes "restricted securities" under Rule
144 of the Securities Act, the foregoing legend is no longer required under
applicable securities laws, or the Shares are otherwise freely tradable
without registration under the Securities Act, GTSI shall, upon the request
of the holder of such Shares and the submission of the certificate
evidencing such Shares, issue a substitute certificate without the first
paragraph of the foregoing restrictive legend thereon.
c. Upon receipt of an opinion of legal counsel satisfactory to GTSI
that the Shares are no longer subject to the Standstill Agreement, GTSI
shall, upon the request of the holder of such Shares and the submission of
the certificate evidencing such Shares, issue a substitute certificate
without the second paragraph of the foregoing restrictive legend thereon.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 Term and Termination. This Agreement shall
continue in effect until the second anniversary of the date of this
Agreement; provided that (a) this Agreement shall terminate on the first
anniversary of the date of this Agreement if prior to such first
anniversary X. Xxxxx Xxxxx shall cease to be the Chairman of the Board or
Chief Executive Officer of GTSI for any reason other than his death or
disability; and (b) if, after the first anniversary but prior to the second
anniversary of the date of this Agreement, Xx. Xxxxx shall cease to be the
Chairman of the Board or Chief Executive Officer of GTSI for any reason
other than his death or disability, this Agreement shall terminate as of
the date Xx. Xxxxx ceases to be Chairman of the Board or Chief Executive
Officer of GTSI.
SECTION 4.02 Further Assurances; Required Filings. Each of the
parties shall, without further consideration, use reasonable efforts to
execute and deliver to the other such additional documents and take such
other action as the other may reasonably request to carry out the intent of
this Agreement and the transactions contemplated hereby, including the
preparation of any disclosure document that the Stockholder may employ in
connection with any permitted disposition of Voting Securities hereunder if
the plan of distribution relating to such disposition shall reasonably
require the preparation of such a document.
SECTION 4.03 Amendment and Waiver. This Agreement may not be
modified, amended, altered or supplemented except by a written agreement
signed by GTSI and the Stockholder which shall be authorized by all
necessary corporate or other action of each party. Each party may waive
any condition to the obligations of such party hereunder.
SECTION 4.04 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the
successors, heirs and assigns of the parties hereto. Except as otherwise
provided herein, this Agreement shall not be assignable.
SECTION 4.05 Notice. Any notice required or permitted
hereunder shall be given in writing and shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
To GTSI:
X. Xxxxx Young
President and Chief Executive Officer
Government Technology Services, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
telecopier: (000) 000-0000
With a copy to:
Xxxxxx X. XxXxxxxx
Arent Fox Xxxxxx Xxxxxxx & Xxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
telecopier: (000) 000-0000
To the Stockholder:
Xxxxxxx X. Xxxx, Xx.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
telecopier: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxxxx
Solomon, Ward, Seidenwurm & Xxxxx
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
telecopier: (000) 000-0000
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex or ordinary mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the
intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
SECTION 4.06 Interpretation of Agreement. Any reference in
this Agreement to an Article or a Section is a reference to an article
hereof or a section hereof, respectively, and to a subsection, a paragraph,
or a clause is, unless otherwise stated, a reference to a subsection, a
paragraph or a clause of the Section or subsection in which the reference
appears. The words "hereof," "herein," "hereto," "hereunder" and the like
mean and refer to this Agreement as a whole and not merely to the specific
Article, Section, subsection, paragraph or clause in which the respective
word appears. References to statutes or regulations are to be construed as
including all statutory and regulatory provisions consolidating, amending
or replacing the statute or regulation referred to. The captions and
headings used in this Agreement are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 4.07 Severability. If any term or provision of this
Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 4.08 Entire Agreement. This Agreement contains the
entire understanding of the parties with respect to the subject matter
herein. There are no restrictions, agreements, promises, warranties,
covenants or undertakings other than those expressly set forth herein with
respect to any matter. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
SECTION 4.09 Exercise of Rights. No failure or delay on the
part of either party in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All
rights or remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 4.10 Governing Law. This Agreement shall be governed by
and interpreted in accordance with the internal laws of the Commonwealth of
Virginia.
SECTION 4.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
SECTION 4.12 Equitable Remedies. The parties agree that
irreparable damage would occur if any of the provisions of this Agreement
were not performed by the Stockholder in accordance with their specific
terms or were otherwise breached. Accordingly, it is agreed that GTSI
shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which GTSI is entitled at law
or in equity. The Stockholder agrees that he will not assert as a defense
against a claim for specific performance that GTSI has an adequate remedy
at law.
SECTION 4.13 Jurisdiction. Each of the parties consents to the
exclusive jurisdiction of the federal courts of the Eastern District of
Virginia for any legal action, suit or proceeding arising out of or in
connection with this Agreement, and agrees that any such action, suit, or
proceeding may be brought only in such courts. If such forum is not
available, each of the parties consents to the exclusive jurisdiction of
the Circuit Court of Fairfax County, Virginia, for any such action, suit or
proceeding. Each of the parties further waives any objection to the laying
of venue for any suit, action or proceeding in such courts. Each of the
parties agrees to accept and acknowledge service of any and all process
that may be served in any suit, action or proceeding. Each of the parties
agrees that any service of process upon it mailed by registered or
certified mail, return receipt requested to such party at the address
provided in Section 5.05 shall be deemed in every respect effective service
of process upon such party in any such suit, action or proceeding. Each of
the parties agrees to waive any right it might have to a trial by jury in
any such suit, action or proceeding.
SECTION 4.14 Expenses. Each party shall pay all costs and
expenses that he or it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs
and necessary disbursements in addition to any other relief to which such
party may be entitled.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
GOVERNMENT TECHNOLOGY SERVICES, INC.
By:
--------------------------------------
Name: X. Xxxxx Xxxxx
Title: President and Chief Executive Officer
THE STOCKHOLDER
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Name: Xxxxxxx X. Xxxx, Xx.
