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Stock Exchange And Stock Purchase Agreement

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Sectors: Services
Governing Law: California , View California State Laws
Effective Date: December 07, 1999
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STOCK EXCHANGE AND STOCK PURCHASE AGREEMENT


among:


CAYENTA.COM, INC.,
a Delaware corporation


CAYENTA OPERATING COMPANY.,
a Delaware corporation


THE TITAN CORPORATION,
a Delaware corporation


ASSIST CORNERSTONE TECHNOLOGIES, INC.,
a Utah corporation


and


SELLING SHAREHOLDERS


Dated as of December 7, 1999


================================================================================


TABLE OF CONTENTS


PAGE


1.1 Exchange of Shares................................................1


1.2 No Fractional Shares..............................................2


1.3 Cayenta Shares....................................................2


1.4 Appraisal Rights..................................................2


1.5 Closing...........................................................3


2. SALE AND PURCHASE OF SHARES.............................................3


2.1 Sale and Purchase of Shares.......................................3


2.2 Purchase Price....................................................3


2.3 Post-Closing Adjustment...........................................5


3. REPRESENTATIONS AND WARRANTIES OF ASSIST AND SELLING SHAREHOLDERS.......6


3.1 Due Organization; No Subsidiaries; Etc............................6


3.2 Certificate of Incorporation and Bylaws; Records..................7


3.3 Capitalization, Etc...............................................7


3.4 Financial Statements..............................................9


3.5 Absence of Changes................................................9


3.6 Title to Assets..................................................11


3.7 Bank Accounts....................................................12


3.8 Receivables; Major Customers.....................................12


3.9 Inventory........................................................12


3.10 Equipment, Etc...................................................13


3.11 Real Property....................................................13


3.12 Proprietary Assets...............................................13


3.13 Contracts........................................................15


3.14 Liabilities; Major Suppliers.....................................16


3.15 Compliance With Legal Requirements...............................17


3.16 Governmental Authorizations......................................18


3.17 Tax Matters......................................................19


3.18 Employee and Labor Matters.......................................20


3.19 Benefit Plans; ERISA.............................................21


3.20 Environmental Matters............................................23


3.21 Sale of Products; Performance of Services........................24


i.


TABLE OF CONTENTS


Continued


PAGE


3.22 Insurance........................................................25


3.23 Related Party Transactions.......................................26


3.24 Certain Payments, Etc............................................27


3.25 Proceedings; Orders..............................................27


3.26 Authority; Binding Nature of Agreements..........................28


3.27 Non-Contravention; Consents......................................29


3.28 Year 2000 Compliance.............................................30


(a) Brokers....................................................30


3.29 Full Disclosure..................................................30


3.30 No Other Representations or Warranties...........................31


4. REPRESENTATIONS AND WARRANTIES OF CAYENTA AND CAYENTA SUB..............31


4.1 Due Organization.................................................31


4.2 Authority; Binding Nature of Agreements..........................31


4.3 Non-Contravention; Consents......................................31


4.4 Capitalization, Etc..............................................32


4.5 Financial Statements.............................................33


4.6 No Adverse Change................................................33


(a) 34


4.8 Brokers..........................................................34


4.9 No Other Representations or Warranties...........................34


5. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.............34


5.1 Selling Shareholder Bears Economic Risk..........................34


5.2 Acquisition for Own Account......................................35


5.3 Selling Shareholder Can Protect Its Interest.....................35


5.4 Accredited Investor..............................................35


5.5 Company Information..............................................35


5.6 Rule 144.........................................................35


5.7 Residence........................................................35


5.8 Selling Shareholder..............................................36


6. PRE-CLOSING COVENANTS OF ASSIST AND SELLING SHAREHOLDERS...............36


ii.


TABLE OF CONTENTS


Continued


PAGE


6.1 Access and Investigation.........................................36


6.2 Operation of Business............................................37


6.3 Filings and Consents.............................................38


6.4 Notification; Updates to Disclosure Schedule.....................39


6.5 Payment of Indebtedness by Related Parties.......................40


6.6 No Negotiation...................................................40


6.7 Best Efforts.....................................................40


6.8 Confidentiality..................................................40


7. PRE-CLOSING COVENANTS OF CAYENTA AND CAYENTA SUB.......................41


8. CONDITIONS PRECEDENT TO CAYENTA'S OR CAYENTA SUB'S OBLIGATION TO CLOSE.41


8.1 Satisfactory Completion of Pre-Acquisition Review................41


8.2 Accuracy of Representations......................................41


8.3 Performance of Obligations.......................................42


8.4 Approval of Cayenta's Board of Directors; Consents...............42


8.5 No Material Adverse Change.......................................42


8.6 Regulation D.....................................................42


8.7 Cash Out of Options..............................................42


8.8 Section 351 Plan.................................................42


8.9 Closing Documents................................................42


8.10 No Proceedings...................................................43


8.11 No Claim Regarding Stock Ownership or Sale Proceeds..............43


8.12 No Prohibition...................................................43


8.13 Confidential Information and Invention Assignment Agreements.....44


9. CONDITIONS PRECEDENT TO ASSIST'S AND SELLING SHAREHOLDERS'
OBLIGATION TO CLOSE ...................................................44


9.1 Accuracy of Representations......................................44


9.2 Cayenta's Performance............................................44


9.3 Closing Documents................................................44


10. TERMINATION............................................................45


10.1 Termination Events...............................................45


iii.


TABLE OF CONTENTS


Continued


PAGE


10.2 Termination Procedures...........................................45


10.3 Effect of Termination............................................45


11. INDEMNIFICATION, ETC...................................................46


11.1 Survival of Representations and Covenants........................46


11.2 Indemnification by Selling Shareholders..........................46


11.3 Threshold........................................................47


11.4 Right to Require Cure of Breach..................................48


11.5 No Contribution..................................................48


11.6 Interest.........................................................48


11.7 Setoff/ Limited Recourse.........................................48


11.8 Defense of Third Party Claims....................................49


11.9 Exercise of Remedies by Indemnitees Other Than Cayenta
and Cayenta Sub..................................................49


11.10 Indemnification by Cayenta and Cayenta Sub.......................49


12. MISCELLANEOUS PROVISIONS...............................................50


12.1 Selling Shareholders' Agent......................................50


12.2 Further Assurances...............................................51


12.3 Retirement of Debt...............................................51


12.4 Stock Options....................................................52


12.5 Fees and Expenses................................................52


(i) 53


12.6 Attorneys' Fees..................................................53


12.7 Notices..........................................................53


12.8 Publicity........................................................54


12.9 Time of the Essence..............................................55


12.10 Headings.........................................................55


12.11 Counterparts.....................................................55


12.12 Governing Law; Venue.............................................55


12.13 Successors and Assigns...........................................56


12.14 Remedies Cumulative; Specific Performance........................56


12.15 Waiver...........................................................56


iv.


TABLE OF CONTENTS


Continued


PAGE


12.16 Amendments.......................................................57


12.17 Severability.....................................................57


12.18 Parties in Interest..............................................57


12.19 Entire Agreement.................................................57


12.20 Construction.....................................................57


12.21 Negotiation of Disputes..........................................57


12.22 Ernst & Young LLP Consent........................................58


12.23 Titan as Signing Party...........................................58


12.24 Assist's Legal Counsel...........................................58


12.25 Directors' and Officers' Insurance...............................58


EXHIBITS


Exhibit A: Certain Definitions Exhibit B: Amended and Restated Certificate of Incorporation Exhibit C: Investor Rights Agreement Exhibit D: Selling Shareholders Address List Exhibit E: Section 351 Plan Exhibit F: General Release Exhibit G: Opinion Letter Exhibit H: List of Key Employees


v.


STOCK EXCHANGE AND STOCK PURCHASE AGREEMENT


THIS STOCK EXCHANGE AND STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of December 7, 1999, by and among CAYENTA.COM, INC., a Delaware corporation ("Cayenta"), CAYENTA OPERATING COMPANY, a Delaware corporation ("Cayenta Sub"), THE TITAN CORPORATION, a Delaware corporation ("Titan"), ASSIST CORNERSTONE TECHNOLOGIES, INC., a Utah corporation ("Assist" or the "Company"), and the following parties (the "Selling Shareholders"): SCOTT E. PYNES, JERRY L. MCMILLAN, KENNETH R. SAWYER, ANDREAS SEEMULLER, HENRY J. EYRING, VERN R. CHRISTENSEN, GREGORY C. ESTY, BATCHELDER & PARTNERS, INC., E. SCOTT ANDERSON, GUY M. CAMERON, MARNIE NUTTALL-MARTINEZ, RANDALL CROCKER, PAUL SCHWEET, STUART CLIFTON, MARK S. HOWLETT, C. BURTON STOHL, MARLON R. BERRETT AND PACIFIC MEZZANINE FUND, LP. Certain capitalized terms used in this Agreement are defined on Exhibit A.


RECITALS


A. The Selling Shareholders own or will own as of the Closing 9,723,455 shares of the Common Stock of Assist (the "Shares"), which will constitute all of the outstanding common stock of Assist as of the Closing.


B. The Selling Shareholders wish to exchange with Cayenta a total of 2,015,838 of the Shares for a total of 516,458 shares of Class A common stock of Cayenta (the "Exchange") pursuant to Cayenta's plan adopted pursuant to Section 351 of the Code (the "351 Plan") and pursuant to the terms set forth in this Agreement (which are a part of the 351 Plan).


C. Concurrently with the Closing of the Exchange, Titan and the other stockholders of Cayenta Sub will exchange all of the outstanding shares of capital stock of Cayenta Sub for shares of capital stock of Cayenta in accordance with the 351 Plan.


D. Concurrently with the Closing of the Exchange, the Selling Shareholders wish to sell to Cayenta Sub a total of 7,707,617 of the Shares pursuant to the terms set forth in this Agreement.


AGREEMENT


The parties to this Agreement agree as follows:


1. EXCHANGE OF SHARES TRANSACTION


1.1 Exchange of Shares. At the Closing, the Selling Shareholders shall exchange, assign, transfer and deliver to Cayenta a total of 2,015,838 of the Shares (the "Exchanged Shares") to Cayenta, and Cayenta shall exchange and deliver to the Selling Shareholders a total of 516,458 shares of Class A common stock, $.001 par value, of Cayenta (the "Cayenta Shares"), on the terms and subject to the conditions set forth in this Agreement. Each of the Selling Shareholders will exchange with Cayenta 20.7% of the total Shares owned by such Selling Shareholder.


1.


1.2 No Fractional Shares. No fractional shares of Cayenta common stock shall be issued in the exchange with Cayenta, and no certificates for any such fractional shares shall be issued. In lieu of such fractional shares, any Selling Shareholder who would otherwise be entitled to receive a fraction of a share of Cayenta common stock (after aggregating all fractional shares of Cayenta Shares issuable to such holder) shall be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by $6.58.


1.3 Cayenta Shares. The Cayenta Shares shall have the voting and other rights set forth in the form of Amended and Restated Certificate of Incorporation attached as Exhibit B. Each Cayenta Share shall be entitled to the appraisal rights set forth in Section 1.4 and the co-sale, participation and registration rights set forth in the Investor Rights Agreement attached as Exhibit C hereto. In addition, each Cayenta Share shall be subject to the restrictions on transfer and right of first refusal set forth in the Investor Rights Agreement.


1.4 Appraisal Rights. In the event that the Class A common stock of Cayenta (or any class of common stock of Cayenta for which the Class A common stock held by the Selling Shareholders are exchanged) is not traded on a national securities exchange or Nasdaq Stock Market within four years from the Closing Date, then the Selling Shareholders holding at least 50% of the Cayenta Shares may require Cayenta to engage a nationally recognized investment banking firm to determine the Fair Market Value of the Cayenta Class A Common Stock upon terms usual for engagements of this type. The "Fair Market Value" shall mean the fair market value of the business of Cayenta as determined by such investment banking firm utilizing and weighing in its sole discretion applicable generally accepted enterprise valuation methodologies which may include the market multiple approach, earnings approach, net asset value approach and discounted cash flow approach based upon the financial statements of Cayenta and projections prepared by Cayenta using reasonable assumptions and without reflecting any minority or restricted stock discounts. To the extent consistent with generally accepted enterprise valuation methodologies, the investment banking firm may consider the consideration that Cayenta would receive upon the exercise of outstanding options or warrants included in the fully diluted capitalization of Cayenta (on a discounted or other appropriate basis). The "Fair Market Value per Share" shall be determined based upon the fully diluted capitalization of Cayenta. If the Agent does not agree with the investment banking firm's determination of the Fair Market Value per Share, then the Agent may engage, at the Selling Shareholders' expense, a second nationally recognized investment banking firm to determine the Fair Market Value per Share of the Class A common stock of Cayenta upon terms usual for engagements of this type. If the two investment banking firms cannot agree upon a Fair Market Value per Share within 45 days after the engagement of the second investment banking firm, then the two investment banking firms shall designate a third investment banking firm to determine a Fair Market Value per Share within the range of the Fair Market Value per Share determinations of the other two investment banking firms. The third investment banking firm's determination shall be final and binding on Cayenta and the Selling Shareholders. For a period of 90 days after the final determination of the Fair Market Value per Share (the "Put Period"), each of the Selling Shareholders who continue to hold Cayenta Shares shall have a right to put the Cayenta Shares to Titan for purchase at the Fair Market Value per Share (the "Put Right"). If the Put Right is not exercised within the Put Period, then Titan shall have the right for a period of 90 days following the final day of the Put Period to call the Cayenta Shares from any or all of the Selling


2.


Shareholders (the "Call Right") at the Fair Market Value per Share. The closing of each exercise of Put Right or the Call Right shall occur within 30 days after the exercise of the applicable Put Right by each Selling Shareholder or the Call Right by Titan. Titan may pay the purchase price in cash or in freely tradable shares of common stock of Titan so long as Titan common stock is then traded on the New York Stock Exchange or the Nasdaq Stock Market. If Titan elects to use common stock of Titan, the number of shares of Titan common stock given for each share of the Cayenta Shares sold will be determined by dividing the Fair Market Value per Share by the average closing price of a share of Titan common stock on the New York Stock Exchange (or its principal exchange or market, if not the New York Stock Exchange) for the 20 trading days ending immediately prior to the closing date for the put or the call transaction as reported in the Wall Street Journal.


1.5 Closing. The closing of the Exchange and the closing of the purchase and sale of the Purchased Shares (as defined in Section 2.1) in accordance with Section 1.5 (the "Closing") shall take place at the offices of Cooley Godward, LLP, 4365 Executive Drive, Suite 1100, San Diego, CA 92121 at 10:00 a.m. (California time) on the later of December 13, 1999 or the date two business days following the satisfaction of all conditions to the Closing (or at such other place or time as Cayenta and the Agent may jointly designate). For purposes of this Agreement: "Scheduled Closing Time" shall mean the time and date as of which the Closing is required to take place pursuant to this Section 1.5; and "Closing Date" shall mean to the time and date as of which the Closing actually takes place. At the Closing, the Selling Shareholders shall deliver to Cayenta the stock certificates representing the Exchanged Shares, duly endorsed (or accompanied by duly executed stock powers) and Cayenta shall deliver to each Selling Shareholder stock certificates for the Cayenta Shares issuable to each such Selling Shareholder.


2. SALE AND PURCHASE OF SHARES.


2.1 Sale and Purchase of Shares. At the Closing, the Selling Shareholders shall sell, assign, transfer and deliver a total of 7,707,617 Shares (the "Purchased Shares") to Cayenta Sub, and Cayenta Sub shall purchase the Purchased Shares from the Selling Shareholders, on the terms and subject to the conditions set forth in this Agreement. Each of the Selling Shareholders will sell to Cayenta Sub 79.3% of the total Shares owned by such Selling Shareholder. At the Closing, the Selling Shareholders shall deliver to Cayenta the stock certificates representing the Purchased Shares, duly endorsed (or accompanied by duly executed stock powers), and Cayenta shall deliver the First Installment of the Purchase Price to the Agent.


2.2 Purchase Price.


(a) For purposes of this Agreement:


(i) The "Applicable Fraction" shall mean the fraction determined by dividing one by 7,707,617, which is the total number of Purchased Shares.


(ii) "Debt" means all debt of Assist, including without limitation, bank indebtedness, related party debt, redeemable nonconvertible preferred stock, subordinated debt, intercompany debt, the redemption price of the Series A preferred stock, including accrued but unpaid dividends on Series A preferred stock and the redemption price of the Series B preferred


3.


stock, and capital leases, but excluding trade payables and other current liabilities incurred or made in the ordinary course of business and consistent with past practices (e.g. payroll and commissions). The current portion of any principal or interest on any indebtedness shall constitute Debt regardless of whether it is classified as a current liability under GAAP. "Net Debt" means Debt as of the Closing Date minus $3,100,000.00.


(iii) The "First Installment" shall be the Purchase Price less $3,000,000.00.


(iv) The "Second Installment" shall be the Purchase Price less (a) the First Installment, (b) $1,300,000.00 and (c) any setoffs made in accordance with Section 11.7 of this Agreement, with interest on the Second Installment at the rate of 8% per annum accruing from the Closing Date to the payment date of the Second Installment.


(v) The "Third Installment" shall be the Purchase Price less (a) the First Installment, (b) the Second Installment and (c) any setoffs made in accordance with Section 11.7 of this Agreement, with interest on the Third Installment at the rate of 8% per annum accruing from the Closing Date to the payment date of the Third Installment.


(vi) The "Purchase Price" shall be $13,000,000.00 less (without duplication) (a) each dollar of Net Debt as of the Closing Date, (b) each dollar of negative Working Capital as of the Closing Date, (c) each dollar of Transaction Expenses as defined in Section 12.5 and (d) each dollar paid by Assist for the termination of outstanding options or warrants to acquire Assist common stock. The Purchase Price shall be increased by an amount equal to (x) the aggregate cash received by Assist in connection with the exercise of vested options or warrants to acquire Assist common stock and (y) the aggregate amount of any Debt (excluding any Net Debt) cancelled in connection with the exercise of any warrants to acquire Assist capital stock. The Purchase Price shall be calculated at the Closing using an estimate of the Working Capital as of the Closing Date. The final determination of the Purchase Price shall be determined based upon the post-closing audit conducted in accordance with Section 2.3.


(b) The Purchase Price shall be payable by Cayenta Sub as follows:


(i) The First Installment shall be deliverable as of the Closing against delivery of the stock certificates at the Closing in accordance with Section 2.3. The First Installment shall be paid to the Agent for distribution to the Selling Shareholders. Each Selling Shareholder will receive the Applicable Fraction of the First Installment for each of the Purchased Shares owned by such Selling Shareholder.


(ii) The Second Installment shall be paid on the second business day following the completion of the audit and the determination of any adjustments to the Purchase Price pursuant to Section 2.3. Each Selling Shareholder will receive the Applicable Fraction of the Second Installment for each of the Purchased Shares owned by such Selling Shareholder. The Second Installment shall be paid to the Agent for distribution to the Selling Shareholders. Cayenta Sub's obligation to make the payment contemplated by this Section 2.2(b)(ii) shall be subject to any right of setoff that Cayenta Sub may be entitled to exercise (pursuant to Section 11.7). In addition, if Cayenta Sub shall have made in good faith any claim for


4.


indemnification against any of the Selling Shareholders pursuant to this Agreement and such claim shall not have been setoff in accordance with Section 11.7, then Cayenta Sub may withhold a good faith estimate of such claim (and the associated
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