Exhibit 10.3
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT, dated as of __________, 2002 (this
Agreement), is made by and between CT Holdings, Inc., a Delaware corporation
(Parent), and Citadel Security Software Inc., a Delaware corporation (Spinco).
WITNESSETH:
WHEREAS, Parent and Spinco are parties to an Agreement and Plan of Distribution,
dated as of __________, 2002 (the Distribution Agreement), pursuant to which
Parent will transfer certain assets to Spinco and have Spinco assume certain
liabilities of Parent;
WHEREAS, in connection with the transactions contemplated by the Distribution
Agreement, Parent and Spinco wish to enter into this Agreement for purposes of
continuity and transition; and
WHEREAS, Spinco desires to cause Parent to provide the Services set forth on
Schedule A to Spinco, and Parent is willing to provide such Services, and Parent
desires to cause Spinco to provide the Services set forth on Schedule B to
Parent, and Spinco is willing to provide such Services, all on the terms and
conditions set forth below;
NOW, THEREFORE, the parties hereto, in consideration of the premises and the
mutual covenants contained herein, agree as follows:
SECTION 1. SPECIFIC DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement, as used in this
Agreement, the following terms have the respective meanings set forth below:
Applicable Rate shall mean the rate of interest per annum announced from time to
time by Bank One Texas, N.A. as its prime lending rate plus 4% per annum.
Bankruptcy Event with respect to a party shall mean the filing of an involuntary
petition in bankruptcy or similar proceeding against such party seeking its
reorganization, liquidation or the appointment of a receiver, trustee or
liquidator for it or for all or substantially all of its assets, whereupon such
petition shall not be dismissed within sixty (60) days after the filing thereof,
or if such party shall (i) apply for or consent in writing to the appointment of
a receiver, trustee or liquidator of all or substantially all of its assets,
(ii) file a voluntary petition or admit in writing its inability to pay its
debts as they become due, (iii) make a general assignment for the benefit of
creditors, (iv) file a petition or an answer seeking reorganization or an
arrangement with its creditors or take advantage of any insolvency law with
respect to itself as debtor, or (v) file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization,
insolvency proceedings or any similar proceedings.
Change in Control shall have the meaning given to that term in that certain
Indemnity Agreement entered into between Parent and certain of its key
management.
Loss shall mean all losses, liabilities, damages, claims, demands, judgments or
settlements of any nature or kind, known or unknown, fixed, accrued, absolute or
contingent, liquidated or unliquidated, including all reasonable costs and
expenses (legal, accounting or otherwise as such costs are incurred) relating
thereto.
Parent Services shall mean those transitional services to be provided by Parent
to Spinco set forth on Schedule A hereto to assist Spinco in operating Spinco's
business.
Person shall mean any natural person, corporation, business trust, limited
liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
Services shall mean, collectively, the Parent Services and the Spinco Services.
Spinco Services shall mean those transitional services to be provided by Spinco
to Parent set forth on Schedule B hereto to assist Parent in operating Parent's
business.
SECTION 2. SERVICES.
Section 2.1 Services. (a) Parent shall provide to Spinco each Parent Service for
the term set forth opposite the description of such Parent Service in Schedule
A. Additional services may be provided to Spinco by Parent if such arrangement
is agreed to in writing and executed by Parent and Spinco.
(b) Spinco shall provide to Parent each Spinco Service for the term set forth
opposite the description of such Spinco Service in Schedule B. Additional
services may be provided by Spinco to Parent if such arrangement is agreed in
writing and executed by Parent and Spinco.
Section 2.2 Standard of Service. In performing the Services, Parent and Spinco
shall provide substantially the same level of service and use substantially the
same degree of care as their respective personnel provided and used in providing
such Services prior to the date hereof, subject in each case to any provisions
set forth on Schedule A or Schedule B with respect to each such Service.
SECTION 3. LICENSES AND PERMITS.
Each party warrants and covenants that all duties and obligations (including
with respect to Parent, all Parent Services and with respect to Spinco, all
Spinco Services) to be performed hereunder shall be performed in compliance with
all material applicable federal, state, provincial and local laws, rules and
regulations. Each party shall obtain and maintain all material permits,
approvals and licenses necessary or appropriate to perform its duties and
obligations (including with respect to Parent, the Parent Services and with
respect to Spinco, the Spinco Services) hereunder and shall at all times comply
with the terms and conditions of such permits, approvals and licenses.
SECTION 4. PAYMENT.
Section 4.1 Service Fees. (a) In consideration for the provision of each of the
Parent Services, Spinco shall pay to Parent the fee set forth for such Parent
Service on Schedule A.
(b) In consideration for the provision of each of the Spinco Services, Parent
shall pay to Spinco the fee set forth for such Spinco Service on Schedule B.
Section 4.2 Costs and Expenses. (a) In addition to the fees payable in
accordance with Section 4.1(a), Spinco shall reimburse Parent for all reasonable
and necessary out-of-pocket costs and expenses (including postage and other
delivery costs, telephone, telecopy and similar expenses) incurred by Parent
with respect to third parties in connection with the provision of Parent
Services to Spinco pursuant to the terms of this Agreement or paid by Parent on
behalf of Spinco.
(b) In addition to the fees payable in accordance with Section 4.1(b), Parent
shall reimburse Spinco for all reasonable and necessary out-of-pocket costs and
expenses (including postage and other delivery costs, telephone, telecopy and
similar expenses) incurred by Spinco with respect to third parties in connection
with the provision of Spinco Services to Parent pursuant to the terms of this
Agreement or paid by Spinco on behalf of Parent.
Section 4.3 Invoices. (a) Parent will invoice Spinco in U.S. dollars: (i) as of
the last day of each calendar month for any fees payable by Spinco in accordance
with Section 4.1(a) for Parent Services listed on Schedule A provided pursuant
to the terms of this Agreement during such month; (ii) as of the last day of
each calendar month for any amounts payable by Spinco in accordance with Section
4.2(a) for any out-of-pocket costs and expenses incurred during the immediately
preceding month to the extent Parent has received an invoice from such third
party; and (iii) as of the last day of each calendar month for any taxes
(excluding income taxes) payable with respect to the provision of Parent
Services to Spinco during such month. Parent shall deliver or cause to be
delivered to Spinco each such invoice within thirty (30) days following the last
day of the calendar month to which such invoice
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relates. Spinco shall pay each such invoice received by electronic funds
transfer within thirty (30) days of the date on which such invoice was received.
(b) Spinco will invoice Parent in U.S. dollars: (i) as of the last day of each
calendar month for any fees payable by Parent in accordance with Section 4.1(b)
for Spinco Services listed on Schedule B provided pursuant to the terms of this
Agreement during such month; (ii) as of the last day of each calendar month for
any amounts payable by Parent in accordance with Section 4.2(b) for any
out-of-pocket costs and expenses incurred during the immediately preceding month
to the extent Spinco has received an invoice from such third party; and (iii) as
of the last day of each calendar month for any taxes (excluding income taxes)
payable with respect to the provision of Spinco Services to Parent during such
month. Spinco shall deliver or cause to be delivered to Parent each such invoice
within thirty (30) days following the last day of the calendar month to which
such invoice relates. Parent shall pay each such invoice received by electronic
funds transfer within thirty (30) days of the date on which such invoice was
received.
Section 4.4 Late Payment. Any amount not paid when due shall be subject to a
late payment fee computed daily at a rate equal to the Applicable Rate.
Notwithstanding the foregoing, in the event a party disputes the accuracy of any
invoice, a party shall pay the undisputed portion of such invoice a provided
herein, and the parties hereto will promptly meet and seek to resolve the
disputed amount of the invoice. Each party agrees to pay the other party's
reasonable attorneys' fees and other costs incurred in collection of any amounts
owed to such other party hereunder and not paid when due. Notwithstanding
anything to the contrary contained herein, in the event either party fails to
make a payment when due hereunder, and such failure continues for a period of
thirty (30) days following delivery of written notice to such non-paying party
of such failure, the other party shall have the right to cease provision of
Services to such non-paying party until such overdue payment (and any applicable
late payment fee accrued with respect thereto) is paid in full. Such right of
the party providing Services shall not in any manner limit or prejudice any of
such party's other rights or remedies in the event of the non-paying party's
failure to make payments when due hereunder, including any rights or remedies
pursuant to Section 7.
Section 4.5 Fees, Etc. Upon Termination of Services. In the event of a
termination of Services pursuant to Section 7.1, with respect to the calendar
month in which such Services cease to be provided, the recipient of such
Services shall be obligated to pay a pro rata share of the fee for such Service
set forth on Schedule A or Schedule B, as applicable, equal to the product of
(x) the fee set forth on Schedule A or Schedule B, as applicable, multiplied by
(y) a fraction, the numerator of which is the number of days in the calendar
month in which such Services cease to be provided preceding and including the
last date on which such Services are provided, and the denominator of which is
30.
SECTION 5. INDEMNIFICATION.
Section 5.1 Indemnification by Principal. (a) Spinco agrees to indemnify, defend
and hold Parent harmless from and against any Loss to which Parent may become
subject arising out of, by reason of or otherwise in connection with the
provision hereunder by Parent of Parent Services, other than Losses resulting
from Parent's gross negligence, willful misconduct or material breach of its
obligations pursuant to this Agreement. Notwithstanding any provision in this
Agreement to the contrary, Spinco shall not be liable under this Section 5.1 for
any consequential, special or punitive damages (including lost profits), except
to the extent that such consequential, special or punitive damages relate to a
Loss resulting from a Third-Party Claim (as defined in the Distribution
Agreement).
(b) Parent agrees to indemnify, defend and hold Spinco harmless from and against
any Loss to which Spinco may become subject arising out of, by reason of or
otherwise in connection with the provision hereunder by Spinco of Spinco
Services, other than Losses resulting from Spinco's gross negligence, willful
misconduct or material breach of its obligations pursuant to this Agreement.
Notwithstanding any provision in this Agreement to the contrary, Parent shall
not be liable under this Section 5.1 for any consequential, special or punitive
damages (including lost profits), except to the extent that such consequential,
special or punitive damages relate to a Loss resulting from a Third-Party Claim
(as defined in the Distribution Agreement).
Section 5.2 Indemnification by Provider. (a) Parent agrees to indemnify, defend
and hold Spinco harmless from and against any Loss to which Spinco may become
subject arising out of, by reason of or otherwise in connection
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with the provision hereunder by Parent of Parent Services to Spinco where such
Losses resulted from Parent's gross negligence, willful misconduct or material
breach of its obligations pursuant to this Agreement.
(b) Spinco agrees to indemnify, defend and hold Parent harmless from and against
any Loss to which Parent may become subject arising out of, by reason of or
otherwise in connection with the provision hereunder by Spinco of Spinco
Services to Parent where such Losses resulted from Spinco's gross negligence,
willful misconduct or material breach of its obligations pursuant to this
Agreement.
Section 5.3 Procedures for Indemnification. Any indemnification claims made
hereunder shall be made in accordance with Article III of the Distribution
Agreement.
SECTION 6. CONFIDENTIALITY.
Each party shall keep confidential the Schedules to this Agreement and all
information received from the other party regarding the Services, including any
information received with respect to Parent or Spinco, and to use such
information only for the purposes set forth in this Agreement unless otherwise
agreed to in writing by the party from which such information was received. In
the event a party is required by any court or legislative or administrative body
(by oral questions, interrogatories, requests for information or documents,
subpoena, civil investigation demand or similar process) to disclose any
confidential information provided pursuant to this Agreement, the party shall
provide the other party with prompt notice of such requirement in order to
afford the other party an opportunity to seek an appropriate protective order or
other remedy. However, if the other party is unable to obtain or does not seek
such protective order and the party required to disclose the confidential
information is, in the opinion of its counsel, legally compelled to disclose
such confidential information, disclosure of such information may be made
without liability under this Agreement. The covenants in this Section 6 shall
survive any termination of this Agreement indefinitely with respect to
information qualifying as a trade secret under applicable law and for a period
of three (3) years from the date such termination becomes effective with respect
to all other information.
SECTION 7. TERM.
Section 7.1 Duration. (a) Subject to Sections 6, 7.2, 7.3 and 7.4, the term of
this Agreement shall commence on the date hereof and shall continue in full
force and effect with respect to each Service until the earlier of (i) the first
anniversary of the Distribution Date (as defined in the Distribution Agreement)
or (ii) the termination of such Service in accordance with Section 7.1(b).
(b) Each party acknowledges that the purpose of this Agreement is for Parent to
provide the Parent Services to Spinco on an interim basis until Spinco can
perform the Parent Services for itself, and for Spinco to provide the Spinco
Services to Parent on an interim basis until Parent can perform the Spinco
Services for itself. Accordingly, each of Parent and Spinco shall use its
commercially reasonable efforts to make or obtain such approvals, permits and
licenses and implement such systems, as shall be necessary for it to provide the
appropriate Services for itself as promptly as practicable. As Spinco becomes
self-sufficient or engages other sources to provide any Parent Service, Spinco
shall be entitled to release Parent from providing any or all of the Parent
Services hereunder by delivering a written notice thereof to Parent at least
thirty (30) days prior to the effective date of release of such Parent
Service(s). At the end of such thirty (30) day period (or such shorter period as
may be agreed by the parties), Parent shall discontinue the provision of the
Parent Services specified in such notice and any such Parent Services shall be
excluded from this Agreement, and Schedule A shall be deemed to be amended
accordingly. As Parent becomes self-sufficient or engages other sources to
provide any Spinco Service, Parent shall be entitled to release Spinco from
providing any or all of the Spinco Services hereunder by delivering a written
notice thereof to Spinco at least thirty (30) days. At the end of such thirty
(30) day period (or such shorter period as may be agreed by the parties), Spinco
shall discontinue the provision of the Spinco Services specified in such notice
and any such Spinco Services shall be excluded from this Agreement, and Schedule
B shall be deemed to be amended accordingly.
Section 7.2 Early Termination by Parent. Parent may terminate this Agreement by
giving written notice to Spinco under the following circumstances:
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(a) if Spinco shall default in the performance of any of its material
obligations under, or breach any of its warranties set forth in, this Agreement,
and such default or breach shall continue and not be remedied for a period of
thirty (30) days after Parent has given written notice to Spinco specifying such
default or breach and requiring it to be remedied;
(b) if a Bankruptcy Event has occurred with respect to Spinco; or
(c) upon the occurrence of a Change in Control of Spinco.
Section 7.3 Early Termination by Spinco. Spinco may terminate this Agreement by
giving written notice to Parent under the following circumstances:
(a) if Parent shall default in the performance of any of its material
obligations under, or breach any of its warranties set forth in, this Agreement
and such default or breach shall continue and not be remedied for a period of
thirty (30) days after Spinco has given written notice to Parent specifying such
default or breach and requiring it to be remedied;
(b) if a Bankruptcy Event has occurred with respect to Parent; or
(c) upon the occurrence of a Change in Control of Parent.
Section 7.4 Force Majeure. In the event the performance by Spinco or Parent of
their respective duties or obligations hereunder is interrupted or interfered
with by reason of any cause beyond its reasonable control, including fire,
storm, flood, earthquake, explosion, war, strike or labor disruption, rebellion,
insurrection, quarantine, act of God, boycott, embargo, shortage or
unavailability of supplies, riot, or governmental law, regulation or edict
(collectively, the Force Majeure Events), the party affected by such Force
Majeure Event shall not be deemed to be in default of this Agreement by reason
of its nonperformance due to such Force Majeure Event, but shall give prompt
written notice to the other party of the Force Majeure Event. The party affected
by the Force Majeure Event shall cooperate with the other party in obtaining, at
the other party's sole expense, an alternative source for the affected Services,
and the other party shall be released from any payment obligation to the party
affected by the Force Majeure Event with respect to such Services during the
period of such Force Majeure Event. Additionally, upon and during the occurrence
of a Force Majeure Event, at the sole option of the party receiving the Services
affected by the Force Majeure Event, the term of this Agreement shall be tolled
with respect to any Services that are not being provided by a third party.
Section 7.5 Consequences on Termination. In the event this Agreement expires or
is terminated in accordance with this Section 7, then (a) all Services to be
provided will promptly cease, (b) each of Parent and Spinco shall promptly
return all confidential information received from the other party in connection
with this Agreement (including the return of all information received with
respect to the Services of Parent or Spinco, as the case may be), without
retaining a copy thereof, and (c) each of Parent and Spinco shall honor all
credits and make any accrued and unpaid payment to the other party as required
pursuant to the terms of this Agreement, and no rights already accrued hereunder
shall be affected.
SECTION 8. RECORDS.
Each of the parties shall create and, for a period of six (6) years after the
termination or expiration of this Agreement, maintain full and accurate books in
connection with the provision of the Services, and all other records relevant to
this Agreement, and upon reasonable notice from the other party shall make
available for inspection and copy by such other party's agents such records
during reasonable business hours.
SECTION 9. DISPUTE RESOLUTION.
SECTION 9.1 Dispute Resolution under Distribution Agreement. Any dispute arising
out of or relating to the performance, breach or interpretation of this
Agreement shall be handled in accordance with Article V of the Distribution
Agreement.
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SECTION 9.2 Continuity of Service and Performance. Unless otherwise agreed
herein or in writing, the parties will continue to provide Services and honor
all other commitments under this Agreement and each Ancillary Agreement (as
defined in the Distribution Agreement) during the course of dispute resolution
pursuant to the provisions of this Section 9 with respect to all matters not
subject to such dispute, controversy or claim.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing, shall
reference this Agreement and shall be hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and will be deemed given on the date on which
such notice is received:
To Parent:
CT Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To SpinCo:
Citadel Security Software Inc.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SECTION 11. MISCELLANEOUS.
SECTION 11.1 Waivers, Modifications, Amendments. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Spinco, on the one hand, and Parent,
on the other hand, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and in addition to other or further
remedies provided by law or equity.
SECTION 11.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF DELAWARE.
SECTION 11.3 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person,
corporation, partnership or other entity or any circumstance, is invalid and
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, corporations, partnerships or other entities or circumstances shall not
be affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any jurisdiction.
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SECTION 11.4 Reference; Interpretation. References in this Agreement to any
gender include references to all genders, and references to the singular include
references to the plural and vice versa. The words include, includes and
including when used in this Agreement shall be deemed to be followed by the
phrase without limitation. Unless the context otherwise requires, references in
this Agreement to Sections and Schedules shall be deemed references to Sections
of, and Schedules to, this Agreement. Unless the context otherwise requires, the
words hereof, hereby and herein and words of similar meaning when used in this
Agreement refer to this Agreement in its entirety and not to any particular
Section or provision of this Agreement. This Agreement shall not be construed
against either party as the principal drafter hereof.
SECTION 11.5 Entire Agreement. This Agreement (including all Schedules hereto)
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters.
SECTION 11.6 Assignment. Neither Parent nor Spinco may, directly or indirectly,
assign or subcontract, or attempt to assign or subcontract, any of its rights or
obligations hereunder, in whole or in part, by operation of law or otherwise,
except with the prior written consent of the other party; it being understood
that such consent shall not be unreasonably withheld if Parent or Spinco assigns
or subcontracts the Agreement to one of its Affiliates (as defined in the
Distribution Agreement) with the financial and other resources and expertise to
perform all of the obligations of such party hereunder. Any attempted assignment
or delegation not in compliance with the forgoing shall be null and void and of
no effect. Nothing contained herein shall prevent a party from providing
Services through or with the assistance of third parties whom such party
regularly used to provide such Services prior to the date hereof.
SECTION 11.7 Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors and permitted assigns, if any, and except
as provided herein, shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, if any.
SECTION 11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
SECTION 11.9 No Agency or Partnership. Nothing in this Agreement will create, or
will be deemed to create, a partnership or the relationship of principal and
agent or of employer and employee between the parties.
SECTION 11.10 Provisions Unaffected. Nothing contained in this Agreement shall
affect the rights and obligations of Parent and Spinco pursuant to the
Distribution Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
behalf of the parties as of the date first herein above written.
CT HOLDINGS, INC.
By _____________________________
Name: _____________________________
Title: _____________________________
CITADEL SECURITY SOFTWARE INC.
By _____________________________
Name: _____________________________
Title: _____________________________
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