AGREEMENT AND PLAN OF MERGER
dated as of
September 5, 2000
by and among
FEDERAL DATA CORPORATION,
NORTHROP GRUMMAN CORPORATION,
SPLICE ACQUISITION CORP.
and
TC GROUP, L.L.C.
TABLE OF CONTENTS
ARTICLE 1 THE MERGER...........................................................3
Section 1.1 Conversion of FDC Shares and Options................3
Section 1.2 Payment and Exchange of Certificates................5
Section 1.3 Effective Time of Merger; Closing Date..............8
Section 1.4 Holder Allocable Expenses...........................8
Section 1.5 Treatment of FDC Debt...............................9
Section 1.6 Closing Balance Sheet..............................10
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF FDC...............................12
Section 2.1 Corporate Organization of FDC......................13
Section 2.2 Subsidiaries.......................................13
Section 2.3 Capitalization of FDC..............................13
Section 2.4 Capitalization of Subsidiaries of FDC..............14
Section 2.5 Due Authorization..................................15
Section 2.6 No Conflict........................................15
Section 2.7 Company SEC Documents and Financial Statements.....16
Section 2.8 Litigation and Proceedings.........................17
Section 2.9 Brokers' Fees......................................17
Section 2.10 State Takeover Statutes; Approvals.................18
Section 2.11 Absence of Certain Change of Events................18
Section 2.12 Tax Matters........................................18
Section 2.13 Government Contracts...............................19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR..........................20
Section 3.1 Corporate Organization.............................20
Section 3.2 Due Authorization..................................21
Section 3.3 No Conflict........................................21
Section 3.4 Litigation and Proceedings.........................22
Section 3.5 Governmental Authorities; Consents................22
Section 3.6 Financial Ability..................................23
Section 3.7 Brokers' Fees......................................23
Section 3.8 No Additional Representations and Warranties.......23
ARTICLE 4 COVENANTS OF FDC....................................................24
Section 4.1 Conduct of Business................................24
Section 4.2 Inspection.........................................26
Section 4.3 HSR Act and Foreign Antitrust Approvals............26
Section 4.4 No Solicitations...................................27
Section 4.5 Parachute Payments.................................27
ARTICLE 5 COVENANTS OF ACQUIROR AND SURVIVING CORPORATION.....................28
Section 5.1 Indemnification and Insurance......................28
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Section 5.2 HSR Act and Foreign Antitrust Approvals............29
Section 5.3 Certain Employee Matters...........................30
ARTICLE 6 JOINT COVENANTS.....................................................31
Section 6.1 Confidentiality....................................31
Section 6.2 Support of Transaction.............................33
ARTICLE 7 CLOSING 33..........................................................33
Section 7.1 Filing.............................................33
Section 7.2 Closing............................................34
ARTICLE 8 CONDITIONS TO OBLIGATIONS...........................................34
Section 8.1 Conditions to Obligations of Acquiror, Merger
Sub and FDC........................................34
Section 8.2 Conditions to Obligations of Acquiror and
Merger Sub.........................................35
Section 8.3 Conditions to the Obligations of FDC...............36
ARTICLE 9 TERMINATION.........................................................36
Section 9.1 Termination........................................36
Section 9.2 Effect of Termination..............................38
ARTICLE 10 INDEMNIFICATION....................................................38
Section 10.1 Indemnity Escrow Amount............................38
Section 10.2 Right to Indemnification...........................39
Section 10.3 Conduct of Proceedings.............................40
Section 10.4 Limits and Conditions of Indemnification; Cap......41
ARTICLE 11 CERTAIN DEFINITIONS................................................42
ARTICLE 12 HOLDER REPRESENTATIVE..............................................51
Section 12.1 Designation and Replacement of Holder
Representative.....................................51
Section 12.2 Authority and Rights of Holder Representative;
Limitations on Liability...........................51
ARTICLE 13 MISCELLANEOUS......................................................53
Section 13.1 Waiver.............................................53
Section 13.2 Notices............................................53
Section 13.3 Assignment.........................................55
Section 13.4 Rights of Third Parties............................55
Section 13.5 Expenses...........................................55
Section 13.6 Construction.......................................56
Section 13.7 Captions; Counterparts.............................56
Section 13.8 Entire Agreement...................................56
Section 13.9 Amendments.........................................57
Section 13.10 Publicity..........................................57
Section 13.11 Survival...........................................57
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ANNEXES
Annex A - Certificate of Merger
Annex B - Financial Statements
Annex C - Indemnification Escrow Agreement
iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of September 5, 2000 (this
"Agreement"), is entered into by and among Northrop Grumman Corporation, a
Delaware corporation ("Acquiror"), Splice Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"), Federal
Data Corporation, a Delaware corporation ("FDC"), and TC Group, L.L.C., a
Delaware limited liability company ("TC Group"), solely in its capacity as the
initial Holder Representative hereunder.
PLAN OF MERGER
A. Acquiror, Merger Sub and FDC (Merger Sub and FDC sometimes being
referred to herein as the "Constituent Corporations") are hereby adopting a plan
of merger, providing for the merger of Merger Sub with and into FDC, with FDC
being the surviving corporation. This merger (the "Merger") will be consummated
in accordance with this Agreement and evidenced by a Certificate of Merger
between Merger Sub and FDC in substantially the form of Annex A hereto (the
"Certificate of Merger"), such Merger to be consummated as of the Effective Time
of the Merger (as defined below).
B. Upon consummation of the Merger, the separate corporate existence of
Merger Sub shall cease and FDC, as the surviving corporation in the Merger
(hereinafter referred to for the periods at and after the Effective Time of the
Merger as the "Surviving Corporation"), shall continue its corporate existence
under the Delaware General Corporation Law (the "DGCL") as a wholly-owned
Subsidiary of Acquiror.
C. At and after the Effective Time of the Merger, the Surviving
Corporation shall thereupon and thereafter possess all of the rights,
privileges, powers and franchises, of a public as well as a private nature, of
the Constituent Corporations, and shall become subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all rights,
privileges, powers and franchises of each Constituent Corporation, and all
property, real, personal and mixed, and all debts due to each such Constituent
Corporation, on whatever account, and all choses in action belonging to each
such corporation, shall become vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall become thereafter the property of the Surviving Corporation as
they are of the Constituent Corporations; and the title to any real property
vested by deed or otherwise or any other interest in real estate vested by any
instrument or otherwise in either of such Constituent Corporations shall not
revert or become in any way impaired by reason of the Merger; but all Liens upon
any property of either Constituent Corporation shall there upon attach to the
Surviving Corporation and shall be enforceable against it to the same extent as
if said debts, liabilities and duties had been incurred or contracted by it; all
of the foregoing in accordance with the applicable provisions of the DGCL.
D. At the Effective Time of the Merger, the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read substantially the same as the Certificate of Incorporation of
Merger Sub; provided, however, Article I of the Certificate of Incorporation of
the Surviving Corporation shall be amended to provide that the name of the
Surviving Corporation is "Federal Data Corporation." At the Effective Time of
the Merger the Bylaws of the Surviving Corporation shall be amended and restated
to be the same as the Bylaws
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of the Merger Sub, and at the Effective Time of the Merger the directors and
officers of the Surviving Corporation shall be the directors and officers of
Merger Sub immediately prior to the Effective Time of the Merger.
E. For certain limited purposes, and subject to the terms set forth
herein, the Holder Representative shall serve as a representative of the holders
of FDC Shares and Options (as each is defined below).
F. Certain capitalized terms used herein have the meanings ascribed to
such terms in Article 11 hereof.
AGREEMENT
In order to consummate the Merger, and in consideration of the mutual
agreements hereinafter contained, the parties agree as follows:
Article 1
THE MERGER
Section 1.1 Conversion of FDC Shares and Options.
(a) At the Effective Time of the Merger, each share (a "FDC Share")
of common stock, par value $.01 per share, of FDC (the "FDC Common Stock") that
is then issued and outstanding (other than shares, if any, held in the treasury
of FDC, which treasury shares shall be canceled as part of the Merger, and other
than shares held by Persons who object to the Merger and comply with the
provisions of the DGCL concerning the rights of holders of FDC Common Stock to
dissent from the Merger and require appraisal of their FDC Common Stock
("Dissenting Shareholders"), which shares of Dissenting Shareholders will not
constitute "FDC Shares" hereunder and shall hereinafter be referred to as
"Dissenting Shares") and each unexercised option to purchase FDC Common Stock
from FDC (whether or not vested) that is
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then outstanding (the "Options"), shall thereupon be converted into, and become
the right to receive, the applicable portion of the Merger Consideration, as
determined pursuant to Section 1.1(d).
(b) At the Effective Time of the Merger, each share of common stock,
par value $1.00 per share, of Merger Sub shall be converted into one share of
common stock, par value $0.01 per share, of the Surviving Corporation.
(c) The "Merger Consideration" shall consist of an amount in cash
equal to (i) Three Hundred Two Million Dollars ($302,000,000), minus (ii) FDC
Debt, minus (iii) the amount of Holder Allocable Expenses paid by Acquiror to
the Holder Representative at the Closing in accordance with Section 1.4, minus
(iv) the aggregate amount of retirement payments paid by FDC to certain
Employees at Closing (the "Retirement Payments"), minus (v) the aggregate amount
of bonuses paid by FDC to certain Employees at Closing on account of the
transactions contemplated by this Agreement (the "Deal Bonuses"). Schedule
1.1(c) lists FDC's and/or the Holder Representative's best estimates, as of the
date of this Agreement, of the FDC Debt, the Retirement Payments, the Deal
Bonuses and the Holder Allocable Expenses that will be paid at Closing.
(d) The Merger Consideration shall be allocated among the holders of
the FDC Shares and the Options as set forth below in this subsection 1.1(d).
Each holder of FDC Shares shall be entitled to receive, in respect of the FDC
Shares held by such holder, a portion of the Merger Consideration equal to (x)
the Cash Per Fully-Diluted Share (as defined below), multiplied by (y) the
number of FDC Shares held by such holder as of the Effective Time of the Merger
(but not including any FDC Shares issuable upon the exercise of any Options then
held
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by such holder). Each holder of Options as of the Effective Time of the Merger
shall be entitled to receive, in respect of the Options held by such holder, a
portion of the Merger Consideration equal to (i) the Cash Per Fully-Diluted
Share, multiplied by the aggregate number of FDC Shares issuable upon exercise
in full of all Options held by such holder as of the Effective Time of the
Merger, minus (ii) the aggregate cash exercise price payable upon exercise of
all Options then held by such holder. The "Cash Per Fully-Diluted Share" shall
mean (i) the sum of (A) the Merger Consideration, plus (B) the Aggregate Option
Exercise Price (defined below), divided by (ii) the Aggregate Fully-Diluted FDC
Shares. The "Aggregate Fully-Diluted FDC Shares" shall be the sum of all FDC
Shares outstanding as of the Effective Time of the Merger, plus the FDC Shares
issuable upon the exercise in full of all Options outstanding as of the
Effective Time of the Merger, plus the Dissenting Shares, if any. The "Aggregate
Option Exercise Price" shall mean the sum of the cash exercise prices payable
upon exercise in full of all Options outstanding as of the Effective Time of the
Merger.
Section 1.2 Payment and Exchange of Certificates.
(a) On the Closing Date, FDC shall provide written notice to
Acquiror of its best estimate of the amount of FDC Debt as of the Closing, the
Retirement Payments and the Deal Bonuses (collectively and together with the
estimate of the Holder Allocable Expenses provided to Acquiror pursuant to
Section 1.4, the "Closing Adjustments").
(b) Immediately prior to the Effective Time of the Merger, Acquiror
will pay to an exchange agent (the "Exchange Agent") selected by FDC and
reasonably acceptable to Acquiror, by wire transfer of immediately available
funds, an amount (the "Funding Amount") equal to (i) the Merger Consideration,
minus (ii) the product of (x) the number of shares of FDC Common Stock held by
all Dissenting Shareholders and (y) the Cash Per Fully-Diluted FDC
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Share, minus, if applicable, (iii) the Tax-Effected Deduction Dispute Amount (as
defined below), minus, (iv) the Indemnification Escrow Amount (as defined
below).
(c) If Acquiror maintains that a Section 2.12 Material Breach (as
defined below) will exist at or as of Closing (a "Compensation Deduction
Dispute"), it shall notify FDC in writing of the basis for such contention in
reasonable detail no later than three (3) business days after receipt of the
Shareholder Vote Certification, but in no event shall Acquiror be required to
deliver such notification earlier than five (5) Business Days prior to Closing,
together with the amount of the Deal Bonuses, the Retirement Payments and the
Option Amounts it maintains are not deductible for federal income tax purposes
contrary to the representation in the first sentence of Section 2.12 (the
"Disputed Compensation Deduction Amount"). The parties will use their mutual
good-faith efforts to resolve the Compensation Deduction Dispute prior to
Closing. If the parties remain in disagreement at Closing with respect to
whether a Section 2.12 Material Breach existed at or as of Closing, then
Acquiror shall deposit in escrow with the Indemnification Escrow Agent the
Disputed Compensation Deduction Amount times 38 percent (the "Tax-Effected
Deduction Dispute Amount"), and the parties will arbitrate the Compensation
Deduction Dispute in accordance with the expedited procedures of the commercial
arbitration rules of the American Arbitration Association in Washington, D.C.,
and the Tax-Effected Deduction Dispute Amount shall be disbursed in accordance
with the final ruling of such arbitration. A "Section 2.12 Material Breach"
shall mean a breach of the first sentence of Section 2.12 hereof which involves
a Tax-Effected Deduction Dispute Amount in excess of $150,000.
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(d) Upon (i) payment by Acquiror to the Exchange Agent of the
Funding Amount, (ii) payment by Acquiror to the Holder Representative of the
Holder Allocable Expenses pursuant to Section 1.4 hereof, (iii) payment by
Acquiror to the Indemnification Escrow Agent of the Indemnification Escrow
Amount, and, in the event any Compensation Deduction Dispute between the parties
remains unsolved at Closing, (iv) payment by Acquiror to the Indemnification
Escrow Agent of the Tax-Effected Deduction Dispute Amount, Acquiror shall be
deemed to have satisfied its obligations to make payments in respect of the
Merger Consideration other than (A) Acquiror's obligation to make payments
required by Section 1.5 hereof and (B) the obligation of Acquiror or the
Surviving Corporation to make payments to Dissenting Shareholders, if any,
following the Effective Time of the Merger.
(e) At Closing, Acquiror shall contribute to FDC the amount of cash
equal to the sum of the Retirement Payments and Deal Bonuses and FDC shall pay
the Retirement Payments and Deal Bonuses to the applicable Employees.
(f) From and after the Effective Time of the Merger, each holder of
an outstanding certificate or certificates for FDC Shares (collectively, the
"Certificates"), upon surrender of such Certificates to the Exchange Agent, and
each holder of Options, upon delivery of a Holder Acknowledgment to the Exchange
Agent, shall be entitled to receive from Acquiror (or from the Exchange Agent on
Acquiror's behalf), in exchange therefor, such holder's applicable portion of
the Merger Consideration (determined, at any given point in time, as the Merger
Consideration then paid and/or payable pursuant to this Article 1, provided,
however, that any payment with respect to Options held by any employees or
former employees of FDC or any of its Subsidiaries ("Employee Options") shall be
reduced by the amount of any taxes
7
required to be withheld under applicable law with respect to such payments and
amounts so withheld shall be paid by the Exchange Agent to the Surviving
Corporation for disbursement to the applicable taxing authority. Pending such
surrender and exchange (or, in the case of a holder of Options, upon such
delivery of a Holder Acknowledgment), a holder's certificate or certificates for
FDC Shares and/or agreements with respect to Options shall be deemed for all
purposes to evidence solely the portion of the Merger Consideration into which
such FDC Shares and/or Options shall have been converted by the Merger.
Section 1.3 Effective Time of Merger; Closing Date. As soon as practicable
following the satisfaction (or, to the extent permitted, the waiver) of all
conditions to the Merger set forth in this Agreement, and provided that this
Agreement has not been terminated pursuant to the provisions hereof, Merger Sub
and FDC shall cause the Certificate of Merger to be executed and filed with the
Secretary of State of Delaware as provided in Section 251 of the DGCL. For
purposes of this Agreement, the "Effective Time of the Merger" shall mean the
time at which the Certificate of Merger has been duly filed in the office of the
Secretary of State of Delaware and has become effective in accordance with the
DGCL; and the term "Closing Date" shall mean the date on which the Effective
Time of the Merger occurs.
Section 1.4 Holder Allocable Expenses. On or prior to the Closing Date, the
Holder Representative will provide to Acquiror an estimate (which estimate shall
include such reserves as the Holder Representative determines in good faith to
be appropriate for any Holder Allocable Expenses that are not then known or
determinable) of all fees and expenses that may be incurred by the Holder
Representative on behalf of FDC and/or the holders of the FDC Shares and Options
in connection with the preparation, negotiation and execution of this Agreement
and the
8
consummation of the transactions contemplated hereby, including, without
limitation, the following: (i) the fees and disbursements of outside counsel to
FDC and/or the Holder Representative incurred in connection with the
transactions contemplated hereby, (ii) the fees and expenses of any other agents
or advisors employed by FDC and/or the Holder Representative in connection with
the Merger, (iii) the expenses of the Holder Representative incurred in such
capacity, (iv) one-half of the fees and expenses of Price Waterhouse Coopers,
LLP in connection with the review of the Closing Balance Sheet and (v)fees and
expenses, if any, in connection with the redemption of the FDC Debt (the "Holder
Allocable Expenses"). On the Closing Date, Acquiror shall pay to the Holder
Representative cash in the amount of such estimated Holder Allocable Expenses
and the Holder Representative shall use such cash to pay the Holder Allocable
Expenses, when, as and to the extent payable. In no event will Acquiror or the
Holder Representative be responsible for payment of Holder Allocable Expenses in
excess of the cash amounts paid to the Holder Representative by Acquiror under
this Section 1.4. Any cash paid to the Holder Representative pursuant to this
Section 1.4 in excess of the amount of Holder Allocable Expenses shall be
distributed (when, in the judgment of the Holder Representative, such cash is no
longer required to be reserved) to the holders of FDC Shares and Options (pro
rata, in accordance with their respective entitlements to the Merger
Consideration).
Section 1.5 Treatment of FDC Debt.
(a) Senior Subordinated Notes.
(i) At the Closing, the Surviving Corporation shall mail or
cause to be mailed a notice of redemption of all outstanding
Senior Subordinated Notes to all holders of Senior
Subordinated Notes, in accordance with Section 3.03 of the
Indenture and Senior Subordinated Notes, stating among other
things, the
9
Redemption Date (as such term is defined in the Indenture),
which shall be the date that is 30 days after the Closing Date
(or such earlier date with the consent of the Paying Agent (as
such term is defined in the Indenture)), and the Redemption
Price (as such term is defined in the Indenture) and the
amount of accrued and unpaid interest, if any, up to and
including the Redemption Date.
(ii) At the Closing, Acquiror shall deposit with the Paying
Agent, by wire transfer of immediately available funds, an
amount (the "Redemption Amount") which, when added to any
interest to be earned thereon through the Redemption Date,
shall be sufficient to pay the Redemption Price, plus accrued
and unpaid interest, up to and including the Redemption Date,
on the Senior Subordinated Notes.
(b) In addition to the requirements of Section 1.5(a), at the
Closing, Acquiror shall cause the Surviving Corporation to redeem or cause to be
redeemed all remaining portions comprising FDC Debt outstanding as of the
Closing Date, including any and all accrued and unpaid interest and any other
amounts owing with respect thereto.
(c) At Closing, FDC shall deliver to Acquiror payoff letters
executed by the creditors or their agents indicating the balance due as of the
Closing Date for the Senior Subordinated Notes, Revolving Line of Credit
Facility and the Seller Subordinated Notes.
Section 1.6 Closing Balance Sheet.
(a) No later than five (5) Business Days prior to the Closing Date,
FDC shall prepare and deliver to Acquiror its good faith estimate of a
consolidated balance sheet of FDC and its consolidated Subsidiaries for the
Closing Date (the "Preliminary Closing Balance Sheet"). At Closing, FDC shall
prepare and deliver to Acquiror its good faith estimate of a consolidated
10
balance sheet of FDC and its consolidated Subsidiaries as of the Closing Date
(the "Estimated Closing Balance Sheet"). As soon as reasonably practicable
following the Closing Date, and in any event within sixty (60) calendar days
thereof, the Holder Representative shall prepare and deliver to Acquiror an
unaudited consolidated balance sheet as of the Closing of FDC and its
consolidated Subsidiaries (the "Closing Balance Sheet"). The Closing Balance
Sheet shall be reviewed by Price Waterhouse Coopers, LLP in accordance with
procedures agreed upon by Acquiror and the Holder Representative. The fees and
expenses of Price Waterhouse Coopers, LLP shall be paid one-half by Acquiror and
one-half as a Holder Allocable Expense pursuant to Section 1.4 hereof.
(b) In connection with the preparation of the Closing Balance Sheet,
the Holder Representative shall prepare and deliver to Acquiror the written
determination of the amounts of FDC Debt, the Retirement Payments, the Deal
Bonuses and the Holder Allocable Expenses paid by FDC or its Subsidiaries and/or
payable by the Surviving Corporation or its consolidated Subsidiaries (excluding
any obligations undertaken or incurred by or at the direction of Acquiror, its
Affiliates or its agents), as the case may be (collectively, the "Final
Adjustments"). Price Waterhouse Coopers, LLP shall review the Final Adjustments
in accordance with procedures agreed upon by Acquiror and the Holder
Representative. If the portion of the Final Adjustments that consists of the
principal amount of the FDC Debt (the "Final Principal Amount") is greater than
the portion of the Closing Adjustments that consists of the principal amount of
FDC Debt (the "Closing Principal Amount"), the Acquiror shall be entitled to
receive the excess of the Final Principal Amount over the Closing Principal
Amount. If the Final Principal Amount is less than the Closing Principal Amount,
the Holder
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Representative shall be entitled to receive the excess of the Closing Principal
Amount over the Final Principal Amount. If the Final Adjustments other than the
Final Principal Amount (the "Final Other Amounts") are greater than the Closing
Adjustments other than the Closing Principal Amount (the "Closing Other
Amounts"), the Acquiror shall be entitled to the excess of the Final Other
Amounts over the Closing Other Amounts, multiplied by sixty-two percent (62%).
If the Final Other Amounts are less than the Closing Other Amounts, the Holder
Representative shall be entitled to the excess of the Closing Other Amounts over
the Final Other Amounts, multiplied by sixty-two percent (62%). On the date the
Closing Balance Sheet is delivered to Acquiror, the parties shall calculate the
payments required under this Section 1.6(b) and determine which of the Acquiror
or the Holder Representative is entitled to be paid on a net basis. If the
Acquiror is to be paid on a net basis, it shall be entitled to receive such net
amount from (and up to the amount of) the Indemnification Escrow Amount,
including any interest earned thereon, less any amounts paid pursuant to Article
10. If the Holder Representative is entitled to be paid on a net basis, the
Acquiror shall, within three (3) Business Days of the delivery of the Closing
Balance Sheet, pay the Holder Representative such net amount by wire transfer of
immediately available funds for distribution to the holders of FDC Shares and
Options (pro rata, in accordance with their respective entitlements to the
Merger Consideration).
Article 2
REPRESENTATIONS AND WARRANTIES OF FDC
FDC represents and warrants to Acquiror and Merger Sub, as of the date
of this Agreement and except as otherwise set forth in the disclosure schedules
attached hereto (the "Disclosure Schedules") or the FDC SEC Documents, as
follows:
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Section 2.1 Corporate Organization of FDC. FDC has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Delaware and has the corporate power and authority to own or lease its
properties and to conduct its business as it is now being conducted. The copies
of the Certificate of Incorporation and Bylaws of FDC previously made available
by FDC to Acquiror are true, correct and complete as in effect on the date of
this Agreement.
Section 2.2 Subsidiaries. Set forth on Schedule 2.2 is a complete and
accurate list of all Subsidiaries of FDC. Each Subsidiary of FDC has been duly
formed and is validly existing under the laws of the jurisdiction of its
formation and has the corporate power and authority to own or lease its
properties and to conduct its business as it is now being conducted.
Section 2.3 Capitalization of FDC.
(a) The authorized capital stock of FDC consists solely of 8,000,000
shares of FDC Common Stock, of which 2,932,196 shares are issued and 2,917,996
shares are outstanding as of the date hereof, and 14,200 shares of which are
held as treasury shares as of the date hereof. As of the date hereof, 435,250
shares of FDC Common Stock are reserved for issuance upon exercise of
outstanding options. Except as set forth in the preceding sentence, there are no
other shares of capital stock of FDC reserved for issuance. All of the issued
and outstanding shares of FDC Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable.
(b) Except as set forth on Schedule 2.3, FDC has not entered into or
granted (i) any outstanding options (whether vested or unvested), warrants,
rights or other securities convertible into or exchangeable or exercisable for
shares of FDC's capital stock, (ii) any other
13
commitments or agreements providing for the issuance of additional shares, the
sale of treasury shares, or for the repurchase or redemption of shares of FDC's
capital stock, (iii) any agreements which obligate FDC to issue, purchase,
redeem or otherwise acquire any of its capital stock, or (iv) any other
interests in the ownership or appreciation of capital stock of FDC or any of its
Subsidiaries. FDC has no liability for, or obligation with respect to, any
dividends or distributions declared or accumulated but unpaid with respect to
any shares of the capital stock of FDC or any of its Subsidiaries.
Section 2.4 Capitalization of Subsidiaries of FDC. The outstanding shares
of capital stock of each Subsidiary of FDC have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth on Schedule
2.4, (i) each Subsidiary of FDC is wholly-owned of record and beneficially by
FDC or another wholly-owned Subsidiary of FDC and (ii) the ownership interests
of FDC in each such Subsidiary are owned of record and beneficially by FDC (or
another Subsidiary of FDC), free and clear of any Liens other than Permitted
Liens. Except as set forth on Schedule 2.4, there are no outstanding options
(whether vested or unvested), warrants, rights or other securities exercisable
or exchangeable for any capital stock of any Subsidiary of FDC, any other
commitments or agreements providing for the issuance of additional shares, the
sale of treasury shares, or for the repurchase, redemption or other
reacquisition of shares of any such Subsidiary's capital stock, or any
agreements which may obligate any such Subsidiary to issue, purchase, redeem or
otherwise acquire any of its capital stock.
14
Section 2.5 Due Authorization.
(a) FDC has all requisite corporate power and authority to execute
and deliver this Agreement and to perform all obligations to be performed by it
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors and stockholders of FDC, and no other
corporate proceeding on the part of FDC is necessary to authorize this
Agreement. This Agreement has been duly and validly executed and delivered by
FDC and constitutes a valid and binding obligation of FDC, enforceable against
FDC in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
(b) The affirmative vote of the holders of a majority of the shares
of FDC Common Stock is the only vote or approval of the holders of any class or
series of the capital stock of FDC necessary (under applicable law or otherwise)
to approve this Agreement and the Merger.
Section 2.6 No Conflict. Except as set forth in Schedule 2.6, the execution
and delivery of this Agreement by FDC and the consummation of the transactions
contemplated do not and will not violate any provision of, or result in the
breach of, any applicable law, rule or regulation of any governmental body, the
Certificate of Incorporation, Bylaws or other organizational documents of FDC or
any of its Subsidiaries, or any agreement, indenture or other instrument to
which FDC or any of its Subsidiaries is a party or by which FDC or any of its
Subsidiaries may be bound, or of an order, judgment or decree applicable to any
of them, or
15
terminate or result in the termination of any such agreement, indenture or
instrument, or result in the creation of any Lien upon any of the properties or
assets of FDC or its Subsidiaries, or constitute an event which, after notice or
lapse of time or both, would result in any such violation, breach, acceleration,
termination or creation of a Lien or result in a violation or revocation of any
required license, permit or approval from any governmental body or other third
party, except to the extent that the occurrence of the foregoing would not have
a Material Adverse Effect on (i) the business, operations or financial condition
of FDC and its Subsidiaries, taken as a whole or (ii) the ability of FDC to
enter into and perform its obligations under this Agreement.
Section 2.7 Company SEC Documents and Financial Statements.
(a) Since January 1, 1997, FDC has timely filed all reports,
registration statements, proxy statements, forms and other documents required to
be filed with the SEC (as such documents have since the time of their filing
been amended or supplemented, the "FDC SEC Documents"). As of their respective
dates, (i) each of the FDC SEC Documents (including any financial statements
filed as a part thereof or incorporated by reference therein) complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the SEC thereunder
applicable to such FDC SEC Documents, and (ii) none of the FDC SEC Documents
contained at the time they were filed any untrue statement of a material fact or
omitted at the time they were filed to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Attached hereto as Annex B is an unaudited consolidated balance
sheet of FDC and its Subsidiaries at June 30, 2000 (including certain
explanatory notes thereto, the
16
"Reference Balance Sheet") and an unaudited consolidated statement of operations
of FDC and its Subsidiaries for the period ended June 30, 2000 (including
certain explanatory notes thereto, the "Income Statement" and together with the
Reference Balance Sheet, the "Financial Statements"). The Financial Statements
have been derived from FDC's financial statements, and prepared in accordance
with the principles set forth in the notes thereto and in conformity with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto or as permitted by the
SEC rules and regulations applicable to unaudited financial statements). The
Financial Statements fairly present in all material respects (on the basis
indicated in the notes thereto) the consolidated financial position of FDC and
its Subsidiaries at the date thereof, and the consolidated results of operations
of FDC and its Subsidiaries for the six month period then ended.
Section 2.8 Litigation and Proceedings.
There are no lawsuits, actions, suits, claims or other proceedings at
law or in equity, or, to the knowledge of FDC, investigations, before or by any
court or Governmental Authority or before any arbitrator pending or, to the
knowledge of FDC, threatened, against FDC or its Subsidiaries which, if
determined adversely, would materially impair the ability of FDC to enter into
and perform its obligations under this Agreement. There is no unsatisfied
judgment or any open injunction binding upon FDC which would materially impair
the ability of FDC to enter into and perform its obligations under this
Agreement.
Section 2.9 Brokers' Fees. Except for fees described on Schedule 2.9 (which
are to be paid as a Holder Allocable Expense), no broker, finder, investment
banker or other Person is entitled to any brokerage fee, finders' fee or other
commission in connection with the
17
transactions contemplated by this Agreement based upon arrangements made by FDC
or any of its Subsidiaries or Affiliates.
Section 2.10 State Takeover Statutes; Approvals.
The Merger and the transactions contemplated hereby do not violate
Section 203 of the DCGL and, to the knowledge of FDC, no other state takeover
statute is applicable to the Merger or the other transactions contemplated
hereby.
Section 2.11 Absence of Certain Change of Events.
Except for liabilities incurred in connection with this Agreement or
the transactions contemplated hereby, except in connection with the payment of
FDC Debt, the Retirement Payments, Deal Bonuses and Option Amounts, and except
as set forth on Schedule 2.11, since June 30, 2000 each of FDC and its
Subsidiaries has conducted its business only in the ordinary course and
consistent with past practice and since such date has not taken any of the
actions described in Section 4.1, subsections (a) through (o).
Section 2.12 Tax Matters.
Deductions from income of FDC or any of its Subsidiaries for the Deal
Bonuses, the Retirement Payments and the Option Amounts will not be disallowed
for federal income tax purposes by reason of Section 280G or Section 162(m) of
the Code, or by the fact that any of the Options upon issuance were styled as
incentive stock options within the meaning of Section 422 of the Code. As of the
date of this Agreement and assuming Closing occurs on October 4, 2000 and
assuming the Redemption Date is thirty (30) days after Closing, FDC's best
estimate is that (i) the following items will be payable at Closing by FDC (or
by Acquiror under the terms hereof, as the case may be) in the following
amounts:
(a) Deal Bonuses $6,864,318
18
(b) Retirement Payments $1,900,000
(c) Redemption Premium $7,567,666
(d) Accrued Interest $3,497,875
(ii) the Option Amounts at Closing will be $9,940,943; and (iii) the amount at
Closing of the unamortized deferred financing fees incurred in connection with a
portion of the FDC Debt will be $4,570,241.
Section 2.13 Government Contracts.
Except as set forth on Schedule 2.13, since January 1, 1997:(i) neither
FDC nor any of its Subsidiaries or principals has been convicted of, had a civil
judgment rendered against them for, or received written notice of any claim,
suit or investigation asserting or alleging: (a) the commission of fraud or a
criminal offense in connection with obtaining, attempting to obtain, or
performing a Federal, state, or local contract or subcontract; (b) violation of
Federal or state antitrust statutes relating to the submission of offers; or (c)
violation of a Federal or state statute relating to the commission of
embezzlement, theft, forgery, bribery, falsification or destruction of records,
making false statements, tax evasion, or receiving stolen property; (ii) neither
FDC nor any of its Subsidiaries has been debarred, suspended, or proposed for
debarment related to the award of contracts by the United States government or
any agency or department thereof; (iii) no show cause notices, notices of
termination for default or convenience, or cure notices have been issued against
FDC or any of its Subsidiaries with respect to any contract with the United
States government or any agency or department thereof ("FDC Prime Government
Contract") or subcontract under any FDC Prime Government Contract (collectively
"FDC Government Contracts"), except for any such cure notices with respect to
which cure has been made; (iv)
19
neither FDC nor its Subsidiaries has received any notice, whether written or
oral, of intent not to exercise an option or intent to issue a termination for
convenience, a termination for default, a cure notice or a show cause notice
relating to an FDC Government Contract, except for any such cure notices with
respect to which cure has been made; (v) neither FDC nor its Subsidiaries has
received written notice of intent to disallow any material direct cost incurred
by FDC or its Subsidiaries under any FDC Government Contract; and (vi) to the
knowledge of FDC, no payment has been made by FDC or any of its Subsidiaries, or
by any Person acting on its or their behalf, to any Person in connection with
any FDC Government Contract in violation of applicable procurement laws or
regulations or in violation of (or requiring disclosure pursuant to) the Foreign
Corrupt Practices Act. Except as disclosed in Schedule 2.13, neither FDC nor its
Subsidiaries have received written notice that its cost accounting and
procurement systems with respect to FDC Government Contracts are not in
compliance with applicable United States laws and regulations.
Article 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to FDC as of the date of this
Agreement as follows:
Section 3.1 Corporate Organization. Each of Acquiror and Merger Sub has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware, and has the corporate power and
authority to own or lease its properties and to conduct its business as it is
now being conducted. Acquiror is duly licensed or qualified and in good standing
as a foreign corporation in all jurisdictions in which its ownership of property
or the character of its activities is such as to require it to be so licensed or
qualified, except where
20
failure to be so licensed or qualified would not materially impair the ability
of Acquiror or Merger Sub to enter into this Agreement or consummate the
transactions contemplated hereby.
Section 3.2 Due Authorization. Each of Acquiror and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform all obligations to be performed by it hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board of Directors of Acquiror and Merger Sub and approved by the stockholder of
Merger Sub, and no other corporate proceeding on the part of Acquiror or Merger
Sub is necessary to authorize this Agreement. This Agreement has been duly and
validly executed and delivered by each of Acquiror and Merger Sub and this
Agreement constitutes a valid and binding obligation of Acquiror and Merger Sub,
enforceable against Acquiror and Merger Sub in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity.
Section 3.3 No Conflict. Except as set forth in Schedule 3.3, the execution
and delivery of this Agreement by Acquiror and Merger Sub and the consummation
of the transactions contemplated hereby does not and will not violate any
provision of, or result in the breach of any applicable law, rule or regulation
of any governmental body, the Certificate of Incorporation, Bylaws, as amended,
or other organizational documents of Acquiror and Merger Sub, or any agreement,
indenture or other instrument to which Acquiror or Merger Sub is a party or by
which Acquiror or Merger Sub may be bound, or of any order, judgment or decree
applicable to Acquiror or Merger Sub, or terminate or result in the termination
of any such
21
agreement, indenture or instrument, or result in the creation of any Lien upon
any of the properties or assets of Acquiror or Merger Sub or constitute an event
which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a Lien, except to
the extent that the occurrence of the foregoing would not materially impair the
ability of Acquiror and Merger Sub to enter into and perform their obligations
under this Agreement.
Section 3.4 Litigation and Proceedings. There are no lawsuits, actions,
suits, claims or other proceedings at law or in equity, or, to the knowledge of
Acquiror, investigations, before or by any court or Governmental Authority or
before any arbitrator pending or, to the knowledge of Acquiror, threatened,
against Acquiror or Merger Sub which, if determined adversely, would materially
impair the ability of Acquiror or Merger Sub to enter into and perform its
obligations under this Agreement. There is no unsatisfied judgment or any open
injunction binding upon Acquiror or Merger Sub which would materially impair the
ability of Acquiror or Merger Sub to enter into and perform its obligations
under this Agreement.
Section 3.5 Governmental Authorities; Consents. Assuming the truth and
completeness of the representations and warranties of FDC contained in this
Agreement, no consent, approval or authorization of, or designation, declaration
or filing with, any Governmental Authority or other third party is required on
the part of Acquiror or Merger Sub with respect to Acquiror or Merger Sub's
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) applicable requirements of the HSR Act or
any similar foreign law, (ii) any novations or consents required in connection
with Government Contracts or subcontracts thereunder, (iii) any filings required
under the DOD
22
Industrial Security Manual for Safeguarding Classified Information, (iv) any
filings required under U.S. Export Control Laws, and (v) as otherwise disclosed
in Schedule 3.5.
Section 3.6 Financial Ability. Acquiror and Merger Sub have the financial
resources necessary to consummate the transactions contemplated by this
Agreement, including, without limitation, the ability to pay the Merger
Consideration at Closing.
Section 3.7 Brokers' Fees. Acquiror shall pay any brokerage fee, finders'
fee or other commission in connection with the transactions contemplated by this
Agreement to any broker, finder, investment banker or other Person arising out
of arrangements made by Acquiror or any of its Subsidiaries or Affiliates.
Section 3.8 No Additional Representations and Warranties. Acquiror
acknowledges that, except as provided in Article 2 of this Agreement, neither
FDC, nor any of its Affiliates, nor any of their respective directors, officers,
employees, shareholders, partners, members or representatives, has made, or is
making, any representation or warranty whatsoever to Acquiror or Merger Sub or
their Affiliates. Except as set forth in Article 2 hereof, no party shall be
liable for the accuracy or completeness of any information provided to Acquiror,
Merger Sub or their Affiliates. Without limiting the foregoing, Acquiror
acknowledges that it, together with its advisors, is not relying on any implied
warranties (whether of merchantability, fitness for a particular purpose or
otherwise) or upon any representation or warranty whatsoever as to the prospects
(financial or otherwise) or the future viability or likelihood of success of the
business of FDC and its Subsidiaries as conducted after the Closing, as
contained in any materials provided by FDC, or any of its Affiliates or any of
their respective directors, officers, employees,
23
shareholders, partners, members or representatives, except as expressly provided
in Article 2 of this Agreement.
ARTICLE 4
COVENANTS OF FDC
Section 4.1 Conduct of Business. From the date hereof through the Closing,
FDC and each of its Subsidiaries shall, except as otherwise contemplated by this
Agreement or as consented to by Acquiror in writing (which consent will not be
unreasonably withheld, conditioned or delayed), operate its business in the
ordinary course and substantially in accordance with past practice. Without
limiting the generality of the foregoing, unless consented to by Acquiror in
writing (which consent shall not be unreasonably withheld, conditioned or
delayed), FDC shall not, and FDC shall cause each of its Subsidiaries not to,
except as contemplated by this Agreement and except in connection with the
payment of FDC Debt, the Retirement Payments, Deal Bonuses and Option Amounts:
(a) change or amend the Certificate of Incorporation, Bylaws or
other organizational documents of FDC or any of its Subsidiaries, except as
otherwise required by law;
(b) enter into, extend, materially modify, terminate or renew any
Contract, except in the ordinary course of business;
(c) sell, assign, transfer, convey, lease or otherwise dispose of
any material assets or properties, except in the ordinary course of business;
(d) except as required by law or consistent with past practices, (i)
grant any severance or termination pay which will become due and payable on or
after the Closing Date;
24
(ii)make any change in the key management of FDC or its Subsidiaries, (iii) make
any change in the salary, bonus or other compensation or benefits payable to key
management of FDC or its Subsidiaries; or (iv) except in the ordinary course of
business, adopt, enter into or amend any Employee Plan;
(e) acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire any
material assets or business of any corporation, partnership, association or
other business organization or division thereof;
(f) make any material loans or advances to any partnership, firm or
corporation, or, except for expenses incurred in the ordinary course of
business, any individual;
(g) make any material income tax election;
(h) declare, set aside or pay any dividend or other distribution in
respect of any of its capital stock, other than dividends and distribution by
any Subsidiary of FDC to FDC;
(i) issue, deliver or sell, or authorize the issuance, delivery or
sale of any shares of its capital stock of any class or other equity interests
(other than the issuance of FDC Common Stock upon the exercise of Options
outstanding on the date hereof);
(j) redeem, repurchase or otherwise acquire any of its securities;
(k) other than (x) ordinary course working capital borrowings and
(y) other incurrences of indebtedness which, in the aggregate, do not exceed
$1,000,000, incur any indebtedness for borrowed money;
(l) make any capital expenditures, except for capital expenditures
not exceeding $2,000,000 in the aggregate; provided, however, FDC shall give
Acquiror notice of any capital expenditure exceeding $1,000,000;
25
(m) change the accounting methods or practices followed by FDC or
its Subsidiaries, except as required by concurrent changes in GAAP or by law;
(n) enter into any agreement to indemnify any Person, except in the
ordinary course of business; or
(o) enter into any agreement, or otherwise become obligated, to do
any action prohibited hereunder.
Section 4.2 Inspection. Subject to confidentiality obligations and similar
restrictions that may be applicable to information furnished to FDC by
third-parties (including restrictions on the disclosure of government-classified
information), FDC shall, and shall cause its Subsidiaries to, afford to Acquiror
and its accountants, counsel and other representatives reasonable access, during
normal business hours, to all of their respective properties, books, contracts,
commitments, tax returns, records and financial and operating data and other
information concerning FDC and its Subsidiaries as Acquiror may reasonably
request. FDC shall provide to Acquiror, at least two (2) business days before
the intended filing date, when practicable, all documents to be filed with the
SEC from the date hereof until Closing.
Section 4.3 HSR Act and Foreign Antitrust Approvals.
(a) In connection with the transactions contemplated by this
Agreement, FDC (and, to the extent required, its Affiliates) shall (i) comply
promptly with the notification and reporting requirements of the HSR Act and use
its commercially reasonable efforts to obtain early termination of the waiting
period under the HSR Act, and (ii) make such other filings with any similar
foreign Governmental Authorities as may be required under any applicable similar
foreign law. FDC shall substantially comply with any additional requests for
information,
26
including requests for production of documents and production of witnesses for
interviews or depositions, by any Antitrust Authority.
(b) FDC shall exercise its commercially reasonable efforts to
prevent the entry in any Action brought by an Antitrust Authority or any other
Person of any governmental order which would prohibit, make unlawful or delay
the consummation of the transactions contemplated by this Agreement, provided,
however, this Section 4.3 shall not require FDC or any of its Affiliates to
commence or participate in any litigation or to divest or restructure any assets
or businesses.
Section 4.4 No Solicitations. From the date hereof through the Closing, FDC
or any of its Subsidiaries shall not, and will cause its officers, directors,
investment bankers, attorneys, accountants, consultants or other agents not to,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any material nonpublic information to, any Person or group of Persons
(other than Acquiror, Merger Sub or any of their respective Affiliates)
concerning any merger, sale of material assets or similar transaction.
Section 4.5 Parachute Payments.
Prior to Closing, FDC shall cause a vote of its shareholders to be held
to consider whether to approve any "parachute payments" within the meaning of
Section 280G of the Code which are to be made at Closing in connection with the
Merger. If the holders of greater than seventy-five percent (75%) of the voting
power of all outstanding stock of FDC approve the right of the proposed
recipients of "parachute payments" to receive such payments, then FDC shall so
certify in writing to Acquiror no later than five (5) Business Days prior to
Closing (such certification, the "Shareholder Vote Certification").
27
ARTICLE 5
COVENANTS OF ACQUIROR AND SURVIVING CORPORATION
Section 5.1 Indemnification and Insurance.
(a) From and after the Effective Time of the Merger, the Surviving
Corporation will indemnify and hold harmless each present and former director
and officer of FDC or any of its Subsidiaries against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time of the Merger, whether asserted or claimed prior
to, at or after the Effective Time of the Merger, to the fullest extent that FDC
or its Subsidiaries, as the case may be, would have been permitted under
Delaware law and its charter or by-laws in effect on the date hereof to
indemnify such person (including the advancing of expenses as incurred to the
fullest extent permitted under applicable law, provided the person to whom such
expenses are advanced provides an undertaking to the Surviving Corporation to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification); provided, further, that any determination required
to be made with respect to whether an officer's or director's conduct complies
with the standards set forth under Delaware law and the charter and by-laws of
FDC or its applicable Subsidiary shall be made by independent counsel selected
by the Surviving Corporation.
(b) For six (6) years from the Effective Time of the Merger, the
Surviving Corporation shall maintain in effect directors' and officers'
liability insurance covering those Persons who are currently covered by FDC's
directors' and officers' liability insurance policy,
28
on terms not less favorable than the terms of such current insurance coverage;
provided, however, that if any claim is asserted or made within such six-year
period, such insurance shall provide for continued coverage in respect of such
claim until the final disposition thereof; provided further, that the Surviving
Corporation shall only be required to provide such insurance for a premium cost
up to and including 200% of current premiums paid by FDC, then thereafter, the
Surviving Corporation shall provide insurance on commercially reasonable terms
for a cost up to and including 200% of current premiums paid by FDC. Acquiror
acknowledges that the Holder Representative may, at its sole option, provide
liability insurance to FDC's directors and officers if at any time the
directors' and officers' liability insurance provided to FDC's directors and
officers by Acquiror is less favorable than the terms of such current insurance
coverage and the Acquiror shall use commercially reasonable efforts to cooperate
with the Holder Representative to secure any additional insurance paid by the
Holder Representative.
Section 5.2 HSR Act and Foreign Antitrust Approvals.
(a) In connection with the transactions contemplated by this
Agreement, Acquiror (and, to the extent required, its Affiliates) shall (i)
comply promptly with the notification and reporting requirements of the HSR Act
and use its commercially reasonable efforts to obtain early termination of the
waiting period under the HSR Act and (ii) make such other filings with any
foreign Governmental Authorities as may be required under any applicable similar
foreign law. Acquiror shall substantially comply with any additional requests
for information, including requests for production of documents and production
of witnesses for interviews or depositions, by any Antitrust Authorities.
(b) Acquiror shall exercise its commercially reasonable efforts to
prevent the entry in any Action brought by an Antitrust Authority or any other
Person of any governmental
29
order which would prohibit, make unlawful or delay the consummation of the
transactions contemplated by this Agreement, provided, however, this Section 5.2
shall not require Acquiror or any of its Affiliates to commence or participate
in any litigation or to divest or restructure any assets or businesses.
(c) Acquiror shall cooperate in good faith with the Antitrust
Authorities and take commercially reasonable efforts to complete lawfully the
transactions contemplated by this Agreement.
Section 5.3 Certain Employee Matters.
(a) The parties acknowledge that the consummation of the Merger will
not affect the status of any Employee employed by FDC or any of its Subsidiaries
as of the Closing Date and the Surviving Corporation and each of its
Subsidiaries shall honor all obligations to the Employees under Employee Plans
and Contracts of FDC and its Subsidiaries. For a period of one year following
the Closing, the Surviving Corporation shall, or shall cause one of its
Subsidiaries to, provide each of the Employees with compensation and benefits
that in the aggregate are no less favorable than the compensation and benefits
(including wages, salaries, bonuses and the benefits and compensation provided
under the Employee Plans, but excluding for this purpose any stock option, stock
purchase plans, Retirement Payments or Deal Bonuses) provided as of the
Effective Time of the Merger to such Employees; provided, however, that the
foregoing sentence shall be deemed to be satisfied with respect to health and
disability benefit plans provided to the Employees if each Employee is offered
by Acquiror health and disability benefit plans that, in the aggregate, are
comparable to the health and disability benefit plans offered to all similarly
situated Employees. Acquiror agrees that to the extent service is relevant for
purposes of eligibility or vesting under any employee benefit plan for which any
Employee is
30
or becomes eligible, such plan will credit each Employee for service with FDC
and its Subsidiaries, Affiliates and predecessors prior to the Effective Time of
the Merger to the extent such service was recognized by FDC or any of its
Subsidiaries or Affiliates.
(b) As of the Effective Time of the Merger and thereafter, the
Surviving Corporation and its Subsidiaries will provide continuation coverage
under one or more group health plans maintained by Acquiror or one of its
Subsidiaries or FDC or one of its Subsidiaries to each qualified beneficiary
with respect to any group health plan maintained or previously maintained by FDC
or one of its Subsidiaries whose qualifying event occurs prior to, on or after
the Effective Time of the Merger, in accordance with COBRA. The Surviving
Corporation and its Subsidiaries shall retain, and shall be responsible and
liable for paying, performing and discharging, all obligations to provide
continuation coverage to any qualified beneficiary in accordance with COBRA (and
any liabilities relating thereto). For purposes of this subsection 5.3(b), (i)
"COBRA" shall mean Section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA, as such provisions are amended from time to time, and the rules and the
regulations promulgated thereunder, (ii) "group health plan," "qualified
beneficiary" and "qualifying event" shall have their respective meanings under
COBRA, and (iii) an "Affiliate" of any Person shall mean any entity which, at
any relevant time on or after the Closing Date, is required to be treated as a
single employer with such Person, in accordance with Section 414(b), (c), (m) or
(o) of the Code.
ARTICLE 6
JOINT COVENANTS
Section 6.1 Confidentiality.
31
(a) Use of Evaluation Materials. Except for any governmental filings
required in order to complete the transactions contemplated herein, and except
as Acquiror and FDC may otherwise agree in writing, each party hereto shall keep
the Evaluation Materials confidential, and, except as required by applicable
law, no party shall disclose any Evaluation Materials or any information
contained therein to any Person; provided, however, that any such information
may be disclosed to those of such party's directors, officers, employees, agents
and representatives who need to know such information for the purpose of
evaluating the transactions contemplated hereby (it being understood that such
directors, officers, employees, agents and representatives shall be informed by
such party of the confidential nature of such information and shall be directed
by such party, and shall each agree, to treat such information confidentially in
accordance with this Section 6.1(a)). Without limiting the generality of the
foregoing, in the event that the transactions contemplated hereby are not
consummated, neither party hereto nor its directors, officers, employees, agents
or representatives shall use any of the Evaluation Materials furnished to it by
another party hereto for any purpose.
(b) Compelled Disclosure. In the event that any party hereto or any
of its representatives receives a request or is required (by applicable law,
regulation or legal process) to disclose all or any part of the information
contained in the Evaluation Materials, such party or its representatives, as the
case may be, shall (i) promptly notify the disclosing party of the existence,
terms and circumstances surrounding such request, (ii) consult with the
disclosing party on the advisability of taking legally available steps to resist
or narrow such request and (iii) assist the disclosing party in seeking a
protective order or other appropriate remedy. In the event that such protective
order or other remedy is not obtained or the disclosing party waives compliance
with
32
the provisions hereof, (i) such party or its representatives, as the case may
be, may disclose only that portion of the Evaluation Materials which such party
is advised by legal counsel is legally required to be disclosed and shall
exercise reasonable efforts to assist the disclosing party in obtaining
assurance that confidential treatment will be accorded such and (ii) such party
shall not be liable for such disclosure unless such disclosure was caused by or
resulted from a previous disclosure by such party or its representatives not
permitted by this Section 6.1.
Section 6.2 Support of Transaction. Acquiror and FDC, and their respective
Subsidiaries, shall each (i) use its commercially reasonable efforts to
assemble, prepare and file any information (and, as needed, to supplement such
information) as may be reasonably necessary to obtain as promptly as practicable
all governmental and regulatory consents required to be obtained in connection
with the transactions contemplated hereby, (ii) use its commercially reasonable
efforts to obtain all material consents and approvals of third parties that any
of Acquiror, FDC, or their respective Affiliates are required to obtain in order
to consummate the Merger, and (iii) take such other action as may reasonably be
necessary or as another party may reasonably request to satisfy the conditions
of Article 8 or otherwise to comply with this Agreement.
ARTICLE 7
CLOSING
Section 7.1 Filing. As soon as all of the conditions set forth in Article 8
of this Agreement have either been fulfilled or waived, and if this Agreement
has not theretofore been terminated pursuant to its terms, Acquiror, Merger Sub
and FDC shall forthwith file and record all relevant documents with the
appropriate government officials to effectuate the Merger.
33
Section 7.2 Closing. The Closing shall take place the offices of Northrop
Grumman Corporation, 0000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000
at 10:00 a.m. or such other location as the parties may designate five (5)
Business Days after the date on which all conditions set forth in Section 8.1
shall have been satisfied. The term "Closing," when used in this Agreement,
means such time as all steps required to consummate the Merger have occurred and
the Merger has become effective.
ARTICLE 8
CONDITIONS TO OBLIGATIONS
Section 8.1 Conditions to Obligations of Acquiror, Merger Sub and FDC. The
obligations of Acquiror, Merger Sub and FDC to consummate, or cause to be
consummated, the Merger are subject to the prior or simultaneous satisfaction of
the following conditions:
(a) All waiting periods under the HSR Act applicable to the Merger
shall have expired or been terminated.
(b) All other material consents, authorizations or approvals of
Governmental Authorities required to be procured by Acquiror, Merger Sub or FDC
in connection with the Merger shall have been procured, it being understood,
however, that (i) any novations or consents required in connection with the
Government Contracts or in connection with United States government security
clearances and (ii) any other consents, authorizations, or approvals, the
absence of which would not have a Material Adverse Effect need not be obtained
prior to Closing.
34
(c) There shall not be in force any order or decree, statute, rule
or regulation nor shall there be on file any complaint by a Governmental
Authority seeking an order or decree, restraining, enjoining or prohibiting the
consummation of the Merger.
Section 8.2 Conditions to Obligations of Acquiror and Merger Sub. The
obligations of Acquiror and Merger Sub to consummate, or cause to be
consummated, the transactions contemplated by this Agreement are subject to the
prior or simultaneous satisfaction of the following additional conditions, any
one or more of which may be waived in writing by Acquiror and Merger Sub:
(a) The representations and warranties of FDC contained in this
Agreement other than in Section 2.12 shall be true and correct in all material
respects as of the Closing Date, as if made anew at and as of that time, except
to the extent (i) that such representations and warranties speak as of another
date, in which case they shall be true and correct as of such date, (ii) that
any exceptions to the foregoing which do not constitute a Quantifiable Exception
(as defined below) would not have a Material Adverse Effect, and (iii) that any
exceptions to the foregoing which constitute a Quantifiable Exception would not
result in lost profits, including lost profits resulting from incurred
liabilities, to FDC of more than Ten Million Dollars ($10,000,000).
"Quantifiable Exception" means any breach of such representation and warranty of
FDC contained in Sections 2.7, 2.9, 2.11 or 2.13 of this Agreement which is
reasonably quantifiable in terms of a dollar amount of lost profits resulting
directly from such breach.
(b) The covenants and agreements of FDC to be performed as of or
prior to the Closing other than in Section 4.5 shall have been performed in all
material respects.
35
(c) FDC shall have delivered to Acquiror a certificate signed by an
officer of FDC, dated as of the Closing Date, certifying that, to the best of
the knowledge and belief of such officer, the conditions specified in
subsections 8.2(a) and 8.2(b) have been fulfilled.
Section 8.3 Conditions to the Obligations of FDC. The obligation of FDC to
consummate the transactions contemplated by this Agreement is subject to the
prior or simultaneous satisfaction of the following additional conditions, any
one or more of which may be waived in writing by FDC:
(a) The representations and warranties of Acquiror contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date, as if made anew at and as of that time, except to the extent that any
exceptions to the foregoing would not materially impair the ability of Acquiror
or Merger Sub to perform their respective obligations under this Agreement.
(b) The covenants and agreements of Acquiror and Merger Sub to be
performed as of or prior to the Closing shall have been performed in all
material respects.
(c) Acquiror shall have delivered to FDC a certificate signed by an
officer of Acquiror, dated as of the Closing Date, certifying that, to the best
of the knowledge and belief of such officer, the conditions specified in
subsections 8.3(a) and 8.3(b) have been fulfilled.
ARTICLE 9
TERMINATION
Section 9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
36
(a) By mutual written consent of the parties authorized by their
respective Boards of Directors, at any time prior to the Closing.
(b) Prior to the Closing, by written notice to FDC from Acquiror,
authorized by the Board of Directors of Acquiror, if (i) there is a material
breach of any representation, warranty, covenant or agreement of FDC set forth
in this Agreement, such that the condition specified in Section 8.2(a) of
Section 8.2(b) hereof would not be satisfied at the Closing (a "Terminating FDC
Breach"), except that, if such Terminating FDC Breach is curable by FDC through
the exercise of its reasonable best efforts, then, for a period of up to 30
days, but only as long as FDC continues to use its reasonable best efforts to
cure such Terminating FDC Breach (the "FDC Cure Period"), such termination shall
not be effective, and such termination shall become effective only if the
Terminating FDC Breach is not cured within the FDC Cure Period, (ii) the Closing
has not occurred on or before December 29, 2000, other than as a result of a
Terminating Acquiror Breach, provided, however, that such date may be extended
by either party for up to thirty (30) days, or (iii) consummation of the Merger
is permanently enjoined, prohibited or otherwise restrained by the terms of a
final, non-appealable order or judgment of a court of competent jurisdiction.
(c) Prior to the Closing, by written notice to Acquiror from FDC,
authorized by the Board of Directors of FDC, if (i) there is a material breach
of any representation, warranty, covenant or agreement of Acquiror or Merger Sub
set forth in this Agreement, such that the condition specified in Section 8.3(a)
or Section 8.3(b) hereof would not be satisfied at the Closing (a "Terminating
Acquiror Breach"), except that, if such Terminating Acquiror Breach is curable
by Acquiror through the exercise of its reasonable best efforts, then, for a
period of up to
37
30 days, but only as long as Acquiror continues to exercise such reasonable best
efforts to cure such Terminating Acquiror Breach (the "Acquiror Cure Period"),
such termination shall not be effective, and such termination shall become
effective only if the Terminating Acquiror Breach is not cured within the
Acquiror Cure Period, (ii) the Closing has not occurred on or before December
29, 2000, other than as a result of a Terminating FDC Breach, provided, however,
that such date may be extended by either party for up to thirty (30) days, or
(iii) consummation of the Merger is permanently enjoined, prohibited or
otherwise restrained by the terms of a final, non-appealable order or judgment
of a court of competent jurisdiction.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 9.1, except as otherwise provided for in Article 9
hereof, this Agreement shall forthwith become void and have no further effect,
without any liability on the part of any party hereto or its respective
Affiliates, officers, directors, employees, representatives or stockholders.
Nothing in this Section 9.2 shall be deemed to release any party from any
liability for any willful breach by such party of the terms and provisions of
this Agreement occurring prior to such termination. In the event of such
termination, the non-breaching party will be entitled to recover fees and
expenses, including reasonable attorneys' fees, in any action brought against
the breaching party. Notwithstanding the foregoing, the provisions of Sections
2.9, 3.7, 6.1, this Section 9.2 and Article 13 hereof shall survive any
termination of this Agreement.
ARTICLE 10 INDEMNIFICATION
Section 10.1 Indemnity Escrow Amount.
On the Closing Date, a portion of the Merger Consideration equal to
$2,000,000 (the "Indemnification Escrow Amount") shall be paid by Acquiror to an
escrow account with All First Bank (the "Indemnification Escrow Agent") in
accordance with an escrow agreement
38
among, Acquiror, FDC, and the Indemnification Escrow Agent in the form attached
hereto as Annex C (the "Indemnification Escrow Agreement"). All funds deposited
with the Indemnification Escrow Agent shall be held and disbursed in accordance
with the terms of the Indemnification Escrow Agreement. No party seeking
indemnification (the "Indemnified Party") shall be entitled to indemnification
pursuant to this Article 10 unless the Indemnified Party shall have provided the
party providing indemnification (the "Indemnifying Party") with written notice
thereof within the time period for survival of such representation or warranty,
as set forth in Section 13.11 hereof.
Section 10.2 Right to Indemnification.
(a) Subject to the other provisions of this Article 10, from and
after the Closing until the expiration of the survival period in Section 13.11
hereof, Acquiror and Merger Sub (following the Closing) and their respective
officers, directors, affiliates, shareholders, representatives and agents
(collectively, the "Acquiror Indemnified Parties") shall be entitled to
indemnification, solely out of the proceeds of the Indemnification Escrow
Amount, from and against and in respect of any and all losses, costs,
liabilities, claims, obligations, diminution in value and expenses (including,
without limitation, the reasonable costs and expenses of investigation and
reasonable attorney's fees and expenses in connection with any or all such
investigations or any and all Actions, or threatened Actions), net of any tax
benefits or insurance recoveries actually received by the Indemnified Party
(collectively, "Damages"), incurred or suffered arising from a breach of Section
2.11 of this Agreement.
(b) Following the Effective Time of the Merger, the rights of the
Acquiror Indemnified Parties to indemnification under this Agreement shall be
the sole and exclusive remedy for any and all losses, costs, liabilities,
claims, obligations, diminution in value or
39
expenses relating to or arising from this Agreement, including without
limitation any post-Closing adjustments to the consideration paid by Acquiror.
(c) Notwithstanding anything in this Article 10, the rights of the
parties with respect to the Tax-Effected Deduction Dispute Amount shall be
governed by the procedures of Section 1.2(c) of this Agreement and the
applicable sections relating to the Tax-Effected Deduction Dispute Amount of the
Indemnification Escrow Agreement. No recourse shall be available or made against
the Tax-Effected Deduction Dispute Amount with regard to any matters other than
claims of a Section 2.12 Material Breach, and no recourse shall be available or
made against the Indemnification Escrow Amount with respect to claims of any
Section 2.12 Material Breach.
Section 10.3 Conduct of Proceedings.
(a) In the event that any claims or demand in respect of which any
Indemnified Party would be entitled to indemnification hereunder is asserted
against such Indemnified Party by a third party, the Indemnified Party shall
with reasonable promptness notify the Indemnifying Party and the Holder
Representative of such claim or demand, specifying the nature of and specific
basis for such claims or demand and the amount or the estimated amount thereof
to the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim and demand, the "Claim Notice"), provided, however, that
failure to provide timely notice shall not affect the indemnification hereunder
except to the extent the Indemnifying Party shall have been prejudiced as a
result of such failure (except that the Indemnifying Party shall not be liable
for any losses incurred during the period in which the Indemnified Party failed
to give such notice.
40
(b) The Indemnifying Party shall have thirty (30) days from the
personal delivery or mailing of the Claim Notice (the "Notice Period") to notify
the Indemnified Party hereunder with respect to such claim or demand whether or
not it desires to defend the Indemnfied Party against such claim or demand. In
the event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand and except as hereinafter provided, the Indemnifying Party shall have
the right (but not the obligation) to defend by all appropriate proceedings
(including the right to employ counsel reasonably acceptable to the Indemnified
Party), which proceedings shall be promptly settled or prosecuted by it to a
final conclusion. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement it may do so at its sole cost and
expense. If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in contesting any claim or
demand which the Indemnifying Party elects to contest, or, if appropriate and
related to the claim in question, in making any counterclaim against any Person.
No claim may be settled without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
Section 10.4 Limits and Conditions of Indemnification; Cap.
Notwithstanding any other provision hereof, to the extent any Acquiror
Indemnified Party is entitled to indemnification pursuant to this Article 10,
(i) such Acquiror Indemnified Party shall be entitled to reimbursement of the
Damages for which it is entitled to indemnification only out of the then
remaining balance of the Indemnification Escrow Amount, (ii) the aggregate
amount of all Damages for which all Acquiror Indemnified Parties shall be
entitled to indemnification shall not exceed the Indemnification Escrow Amount,
including any interest earned thereon and less any amounts paid to Acquiror
pursuant to Section 1.6(b), and (iii) no
41
Acquiror Indemnified Party shall have any recourse against the Holder
Representative or the holders of FDC Common Stock for indemnification pursuant
to this Article 10 or otherwise. Notwithstanding anything to the contrary
otherwise contained in this Agreement, the indemnification obligations under
this Agreement shall expire upon termination of the survival period in Section
13.11 hereof; provided, however, that such indemnification obligations with
respect to any claims for indemnification asserted in writing delivered to the
Indemnifying Party prior to the expiration of such survival period, shall
survive the expiration of such survival period until such claim for
indemnification is either resolved or satisfied.
ARTICLE 11
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Acquiror Cure Period" has the meaning specified in Section 9.1(c).
"Acquiror" has the meaning specified in the Preamble hereto.
"Acquiror Indemnified Parties" has the meaning specified in Section
10.2.
"Action" means any claim, action, suit, audit, assessment, arbitration
or inquiry, or any proceeding or investigation, by or before any Governmental
Authority.
"Affiliate" means, with respect to any specified Person, any Person
that, directly or indirectly, controls, is controlled by, or is under common
control with, such specified Person, through one or more intermediaries or
otherwise.
"Aggregate Fully-Diluted FDC Shares" has the meaning specified in
Section 1.1(d).
"Aggregate Option Exercise Price" has the meaning specified in
Section 1.1(d).
"Agreement" has the meaning specified in the Preamble hereto.
42
"Antitrust Authorities means the Antitrust Division of the United States
Department of Justice, the United States Federal Trade Commission and the
antitrust or competition law authorities of any other jurisdiction (whether
United States, foreign or multinational).
"Assigned Lease Obligations" means the nonrecourse obligations under
FDC's lease assignment facility.
"Benefit Arrangement" means any employment, compensation, bonus,
severance or the benefit arrangement, policy or plan of FDC or any of its
Subsidiaries (not including Contracts with individual employees or obligations
arising solely by statute, regulation or common law) that is applicable to the
Employees and is not a Welfare Plan, Pension Plan or Multiemployer Plan.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"Cash Per Fully-Diluted Share" has the meaning specified in Section
1.1(d).
"Certificate of Merger" has the meaning specified in the Section
entitled "Plan of Merger."
"Certificates" has the meaning specified in Section 1.2(f).
"Claim Notice" has the meaning specified in Section 10.3(a).
"Closing Adjustments" has the meaning specified in Section 1.2(a).
"Closing Balance Sheet" shall have the meaning set forth in Section 1.6.
"Closing Date" has the meaning specified in Section 1.3.
"Closing Other Amounts" has the meaning specified in Section 1.6(b).
"Closing Principal Amounts" has the meaning specified in Section 1.6(b).
43
"Closing" has the meaning specified in Section 7.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation Deduction Dispute" has the meaning specified in Section
1.2(c).
"Confidentiality Agreement" has the meaning specified in Section 13.8.
"Constituent Corporations" shall have the meaning specified in the
Section entitled "Plan of Merger."
"Contracts" means any contracts (including, without limitation,
Government Contracts), agreements, subcontracts, leases and purchase orders.
"Damages" has the meaning specified in Section 10.2.
"Deal Bonuses" shall have the meaning specified in Section 1.1(c).
"DGCL" has the meaning specified in the Section entitled "Plan of
Merger."
"Disclosure Schedule" has the meaning specified in Article 2.
"Disputed Compensation Deduction Amount" has the meaning specified in
Section 1.2(c).
"Dissenting Shareholders" shall have the meaning specified in Section
1.1(a).
"Dissenting Shares" shall have the meaning specified in Section 1.1(a).
"Effective Time of the Merger" has the meaning specified in Section 1.3.
"Employee" means any of the Employees.
"Employees" means all employees of FDC and its Subsidiaries.
"Employee Options" has the meaning specified in Section 1.2(f).
"Employee Plans" means all Pension Plans, Multiemployer Plans, Benefit
Arrangements and Welfare Plans.
44
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with FDC as defined
in Section 414(b), (c), (m) or (o) of the Code.
"Estimated Closing Balance Sheet" shall have the meaning set forth in
Section 1.6.
"Evaluation Materials" means this Agreement (together with the Schedules
and Annexes hereto) and, as to any party hereto, means all other non-public
information furnished to such party by another party hereto (the "disclosing
party") in connection with the transactions contemplated hereby relating to the
disclosing party or the disclosing party's Affiliates, whether furnished orally
or in writing or gathered by inspection, together with analyses, compilations,
studies or other documents prepared by any party, or by such party's agents,
representatives (including attorneys, accountants and financial advisors) or
employees, which contain o otherwise reflect such information, provided that the
term Evaluation Materials shall not include information that (i) is or becomes
generally available to the public other than as a result of a disclosure in
violation of the terms hereof or the Confidentiality Agreement, (ii) was or
becomes available to a party hereto on a non-confidential basis from a source
other than any other party hereto or their representatives and affiliates,
provided that such source is not prohibited from disclosing such information by
a contractual, legal or fiduciary obligation to any party hereto or any of their
respective representatives, or (iii) has been or is independently developed by
the party to which such information was furnished and not derived from the
Evaluation Materials.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
45
"Exchange Agent" has the meaning specified in Section 1.2(b).
"FDC Common Stock" means the common stock, par value $0.01 per share,
of FDC.
"FDC Cure Period" has the meaning specified in Section 9.1(b).
"FDC Debt" means the Funded Debt of FDC and its consolidated
Subsidiaries, including the current portion thereof, as of the Effective Time of
the Merger, as determined in accordance with GAAP and using the same accounting
principles, policies, practices and methodologies used in the preparation of the
Reference Balance Sheet; provided, however, that the amount of the Senior
Subordinated Notes then outstanding shall be deemed to be the Redemption Amount.
"FDC Government Contracts" has the meaning specified in Section 2.13.
"FDC Prime Government Contract" has the meaning specified in Section
2.13.
"FDC SEC Documents" has the meaning specified in Section 2.7(a).
"FDC Share" has the meaning specified in Section 1.1(a).
"FDC" has the meaning specified in the Preamble hereto.
"Final Adjustments" has the meaning specified in Section 1.6(b).
"Final Other Amounts" has the meaning specified in Section 1.6(b).
"Final Principal Amounts" has the meaning specified in Section 1.6(b).
"Financial Statements" has the meaning specified in Section 2.7(b).
"Floor Planning Obligations" means the obligations under FDC's floor
planning facility, which are reflected as accounts payable on FDC's financial
statements.
"Funded Debt" of any Person means all obligations of such Person for
borrowed money, including the Revolving Line of Credit Facility and Seller
Subordinated Notes, including all
46
interest accrued thereon; provided that, for the avoidance of doubt, Funded Debt
does not include either (i) the Assigned Lease Obligations or (ii) the Floor
Planning Obligations.
"Funding Amount" shall have the meaning specified in Section 1.2(b).
"GAAP" has the meaning specified in Section 2.7(b).
"Government Contract" means (i) any Contract with the United States
Government or any foreign government or any department or agency of any such
government (a "Prime Government Contract") and any (ii) subcontract under any
Prime Government Contract.
"Governmental Authority" means any federal, state, municipal, local or
foreign government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
court, tribunal, arbitrator or arbitral body.
"Holder Acknowledgement" means an agreement or certificate signed by a
holder of Options acknowledging cancellation of all Options held by such holder
in exchange for the applicable portion of the Merger Consideration as set forth
in this Agreement.
"Holder Allocable Expenses" has the meaning specified in Section 1.4.
"Holder Representative" has the meaning specified in Section 12.1.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Statement" has the meaning specified in Section 2.7(b).
"Indemnification Escrow Agent" has the meaning specified in Section
10.1.
"Indemnification Escrow Agreement" has the meaning specified in Section
10.1.
"Indemnification Escrow Amount" has the meaning specified in Section
10.1.
47
"Indemnified Party" has the meaning specified in Section 10.1.
"Indemnifying Party" has the meaning specified in Section 10.1.
"Indenture" means that certain Indenture dated as of July 15, 1997, for
up to $175,000,000 10 1/8% Senior Subordinated Notes, among FDC (as Issuer), the
Subsidiary Guarantors (defined therein) and Norwest Bank, Minnesota, National
Association (as Trustee).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
encumbrance, security interest or other lien of any kind.
"Majority Holders" has the meaning specified in Section 12.1.
"Material Adverse Effect" means a material adverse effect on the
business, results of operations or financial condition of FDC andits
consolidated Subsidiaries, taken as a whole.
"Merger" has the meaning specified in the Section entitled "Plan
of Merger."
"Merger Consideration" has the meaning specified in Section 1.1(c).
"Merger Sub" has the meaning specified in the Preamble hereto.
"Multiemployer Plan" means a "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA, to which FDC or an ERISA Affiliate contributes or
is required to contribute with respect to Employees.
"Notice Period" has the meaning specified in Section 10.3(b).
"Options" has the meaning specified in Section 1.1(a).
"Option Amounts" means the aggregate amount of the Merger Consideration
to be received by holders of Options pursuant to Section 1.2(f).
"Pension Plan" means any Employee Plan constituting an "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan).
48
"Permitted Liens" means (i) mechanics, materialmen's and similar Liens
with respect to any amounts not yet due and payable or which are being contested
in good faith through appropriate proceedings, (ii) Liens for taxes not yet due
and payable or which are being contested in good faith through appropriate
proceedings, (iii) Liens arising in connection with the sale of foreign
receivables, (iv) Liens on goods in transit incurred pursuant to documentary
letters of credit, (v) Liens securing rental payments under capital lease
agreements, (vi) Liens arising in favor of the United States Government as a
result of progress payment clauses contained in any Government Contract, (vii)
encumbrances and restrictions on real property (including easements, covenants,
rights of way and similar restrictions of record) that do not materially
interfere with the present uses of such real property and (viii) other Liens
arising in the ordinary course of business consistent with past practices and
not incurred in connection with the borrowing of money.
"Person" means any individual, firm, corporation, partnership, limited
liability company, incorporated or unincorporated association, joint venture,
joint stock company, governmental agency or instrumentality or other entity of
any kind.
"Preliminary Closing Balance Sheet" shall have the meaning set forth in
Section 1.6.
"Quantifiable Exception" shall have the meaning set forth in Section
8.2(a).
"Redemption Amount" has the meaning specified in Section 1.5(a).
"Redemption Premium" has the meaning specified in Section 1.01 of the
Indenture for the "Applicable Premium."
"Reference Balance Sheet" has the meaning specified in Section 2.7(b).
"Retirement Payments" shall have the meaning specified in Section
1.1(c).
49
"Revolving Line of Credit Facility" means FDC's $75,000,000 revolving
line of credit with Banker's Trust Company, as agent.
"SEC" means the United States Securities and Exchange Commission.
"Section 2.12 Material Breach" shall have the meaning specified in
Section 1.2(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Subordinated Notes" means loan agreements between FDC, as
debtor, and various third persons with a principal amount of $8,960,000, in the
aggregate.
"Senior Subordinated Notes" means 10 1/8 % Senior Subordinated Notes due
2005, issued by FDC pursuant to the Indenture.
"Shareholder Vote Certification" shall have the meaning set forth
in Section 4.5.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the equity securities or
equity interests is owned, directly or indirectly, by such Person.
"Surviving Corporation" has the meaning specified in the Section
entitled "Plan of Merger."
"Tax-Effected Adjustment Amount" has the meaning specified in Section
1.6(b).
"Tax-Effected Deduction Dispute Amount" has the meaning specified in
Section 1.2(c).
"TC Group" has the meaning specified in the Preamble hereto.
"Terminating Acquiror Breach" has the meaning specified in Section
9.1(c).
"Terminating FDC Breach" has the meaning specified in Section 9.1(b).
"Welfare Plan" means a Employee Plan that constitutes an "employee
welfare benefit plan" as defined in Section 3(1) of ERISA.
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ARTICLE 12
HOLDER REPRESENTATIVE
Section 12.1 Designation and Replacement of Holder Representative. The
parties have agreed that it is desirable to designate a representative to act on
behalf of holders of the FDC Shares and Options for certain limited purposes, as
specified herein (the "Holder Representative"). The parties have designated TC
Group as the initial Holder Representative, and approval of this Agreement by
the holders of FDC Shares and Options shall constitute ratification and approval
of such designation. The Holder Representative may resign at any time, and the
Holder Representative may be removed by the vote of Persons which collectively
owned more than 50% of the Aggregate Fully-Diluted FDC Shares at the Effective
Time of the Merger ("Majority Holders"). In the event that a Holder
Representative has resigned or been removed, a new Holder Representative shall
be appointed by a vote of Majority Holders, such appointment to become effective
upon the written acceptance thereof by the new Holder Representative.
Section 12.2 Authority and Rights of Holder Representative; Limitations on
Liability. The Holder Representative shall have such powers and authority as are
necessary to carry out the functions assigned to it under this Agreement;
provided, however, that the Holder Representative will have no obligation to act
on behalf of the holders of FDC Shares and Options, except as expressly provided
herein. Without limiting the generality of the foregoing, the Holder
Representative shall have full power, authority and discretion to estimate and
determine the amounts of Holder Allocable Expenses and to pay such Holder
Allocable Expenses in accordance with Section 1.4 hereof. The Holder
Representative will have no liability to Acquiror, FDC or the holders of FDC
Shares and Options with respect to actions
51
taken or omitted to be taken in its capacity as Holder Representative, except
with respect to the Holder Representative's gross negligence or willful
misconduct. The Holder Representative will at all times be entitled to rely on
any directions received from the Majority Holders; provided, however, that the
Holder Representative shall not be required to follow any such direction, and
shall be under no obligation to take any action in its capacity as Holder
Representative, unless the Holder Representative is holding funds delivered to
it under Section 1.4 of this Agreement and/or has been provided with other
funds, security or indemnities which, in the sole determination of the Holder
Representative, are sufficient to protect the Holder Representative against the
costs, expenses and liabilities which may be incurred by the Holder
Representative in responding to such direction or taking such action. The Holder
Representative shall be entitled to engage such counsel, experts and other
agents and consultants as it shall deem necessary in connection with exercising
its powers and performing its function hereunder and (in the absence of bad
faith on the part of the Holder Representative) shall be entitled to
conclusively rely on the opinions and advice of such Persons. The Holder
Representative shall be entitled to reimbursement, from funds paid to it under
Section 1.4 of this Agreement and/or otherwise received by it in its capacity as
Holder Representative pursuant to or in connection with this Agreement, for all
reasonable expenses, disbursements and advances (including fees and
disbursements of its counsel, experts and other agents and consultants) incurred
by the Holder Representative in such capacity, and for indemnification against
any loss, liability or expenses arising out of actions taken or omitted to be
taken in its capacity as Holder Representative (except for those arising out of
the Holder Representative's gross negligence or willful misconduct), including
the costs and expenses of investigation and defense of claims.
52
Article 13
MISCELLANEOUS
Section 13.1 Waiver. Any party to this Agreement may, at any time prior to
the Closing, by action taken by its Board of Directors, or officers thereunto
duly authorized, waive any of the terms or conditions of this Agreement or agree
to an amendment or modification to this Agreement by an agreement in writing
executed in the same manner (but not necessarily by the same Persons) as this
Agreement.
Section 13.2 Notices. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) on the first Business Day following the date of
dispatch if delivered by a nationally-recognized next-day courier service, or
(iii) delivered by telecopy and promptly confirmed by delivery in person or by
courier as aforesaid, in each case, addressed as follows:
(a) If to Acquiror or Merger Sub, to:
Northrop Grumman Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with copies to:
Howrey Xxxxx Xxxxxx & White, LLP
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
53
(b) If to FDC, to:
Federal Data Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
with copies to:
TC Group, L.L.C.
c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxx. X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxx Xxxx
Telecopy No.: (000) 000-0000
and
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
(c) If to the Holder Representative, to:
TC Group, L.L.C.
c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxx. X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxx Xxxx
Telecopy No.: (000) 000-0000
and
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
54
or to such other address or addresses as any party may from time to time
designate as to itself in writing by like notice. All such notices and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5:00 p.m. in the place of receipt and such day is a
Business Day. Otherwise, any such notice or communication shall be deemed not to
have been received until the next succeeding Business Day.
Section 13.3 Assignment. No party hereto shall assign this Agreement or any
part hereof without the prior written consent of the other parties. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
Section 13.4 Rights of Third Parties. Except for the provisions of Section
5.1, nothing expressed or implied in this Agreement is intended or shall be
construed to confer upon or give any Person, other than the parties hereto, any
right or remedies under or by reason of any provision of this Agreement.
Section 13.5 Expenses. Each party hereto, other than the Holder
Representative (whose expenses shall be paid out of funds paid to the Holder
Representative under Section 1.4 in the event the transactions contemplated
hereby are consummated), shall bear its own expenses incurred in connection with
this Agreement and the transactions herein contemplated whether or not such
transactions shall be consummated, including, without limitation, all fees of
its legal counsel, financial advisors and accountants. In the event the
transactions contemplated hereby are not consummated each party hereto shall pay
its own costs and expenses including, without limitation, all fees of its legal
counsel, financial advisors and accountants, provided that, in the event that
the transactions contemplated hereby are not consummated, FDC shall reimburse
the
55
Holder Representative for all costs and expenses incurred by the Holder
Representative in connection with the transactions contemplated hereby.
Section 13.6 Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or Annexes refer to the Sections, Articles and
Annexes to this Agreement. As used herein, the phrase "to the knowledge" of FDC
shall mean the actual knowledge of the executive officers of FDC set forth on
Schedule 13.6 hereto.
Section 13.7 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 13.8 Entire Agreement. This Agreement (together with the Schedules
and Annexes to this Agreement) and that certain Confidentiality Agreement dated
as of March 29, 2000 between Acquiror and First Union Securities, Inc. (the
"Confidentiality Agreement") constitute the entire agreement among the parties
and supersede any other agreements, whether written or oral, that may have been
made or entered into by or among any of the parties hereto or any of their
respective Affiliates relating to the transactions contemplated hereby. No
representations, warranties, covenants, understandings, agreements, oral or
otherwise, relating to the transactions contemplated by this Agreement exist
between the parties except as expressly set forth in this Agreement and the
Confidentiality Agreement.
56
Section 13.9 Amendments. This Agreement may be amended or modified in whole
or in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
Section 13.10 Publicity. All press releases or other public communications
of any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Acquiror and FDC which approval shall
not be unreasonably withheld by any party; provided, however, that, nothing
herein shall prevent any party from publishing such press releases or other
public communications as such party may consider necessary in order to satisfy
such party's legal or contractual obligations after such consultation with the
other parties hereto as is reasonable under the circumstances.
Section 13.11 Survival.
The representations and warranties of the parties to this Agreement
shall not survive the Effective Time of the Merger, except for the
representations and warranties made by FDC under Section 2.11 which shall
survive for a period of ninety (90) calendar days from the Closing Date.
57
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be duly executed as of the date first above written.
FEDERAL DATA CORPORATION.
By:/s/ Xxxxxx X. Xxxxx
-----------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
NORTHROP GRUMMAN CORPORATION
By:/s/ Xxxxxx Xxxxx
-----------------------
Name: Xxxxxx Xxxxx
Title: Corporate VP, and Treasurer
SPLICE ACQUISITION CORP.
By:/s/ Xxxxxx Xxxxx
-----------------------
Name: Xxxxxx Xxxxx
Title: President and Treasurer
TC GROUP, L.L.C.
By: TCG HOLDINGS, L.L.C.
Its Managing Member
By:/s/ Xxxxx Xxxx
-----------------------
Name: Xxxxx Xxxx
Title: Managing Director
58
ANNEX A
CERTIFICATE OF MERGER
OF
SPLICE ACQUISITION CORP.
INTO
FEDERAL DATA CORPORATION
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the names and states of incorporation of each of
the constituent corporations of the merger is as follows:
NAME STATE OF INCORPORATION
Splice Acquisition Corp. Delaware
Federal Data Corporation Delaware
SECOND: That an agreement and plan of merger between the
parties to the merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with the
requirements of subsection (c) of Section 251 of the General Corporation Law of
the State of Delaware.
THIRD: The name of the surviving corporation of the merger
is Federal Data Corporation, a Delaware corporation.
FOURTH: That the certificate of incorporation of Splice
Acquisition Corp., a Delaware corporation, shall be the certificate of
incorporation of the surviving corporation
following the merger, amended to change the name of the corporation to
"Federal Data Corporation," a Delaware corporation.
FIFTH: That the executed agreement of merger is on file at
an office of the surviving corporation. The address of said office is 0000
Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000.
SIXTH: That a copy of the agreement of merger will be
furnished on request and without cost to any stockholder of either constituent
corporation.
Dated: , 2000
FEDERAL DATA CORPORATION
By:
------------------------
Name:
Title:
ATTEST:
By:
--------------------
Name:
Title:
ANNEX B
FINANCIAL STATEMENTS
Federal Data Corporation
Consolidated Balance Sheet
(In thousands, except share data)
December 31, June 30,
1999 2000
------------ -----------
Assets (Unaudited)
Cash and cash equivalents $4,095 $1,298
Accounts receivable 129,774 130,564
Net investment in sales-type leases 5,672 4,281
Inventory 6,020 9,590
Other assets 3,317 4,740
------------ -----------
Total current assets 148,878 150,473
Net investment in sales-type leases 2,714 2,433
Leased and other property and equipment 6,071 6,837
Goodwill and intangibles 57,718 54,378
Other assets 10,783 10,339
------------ -----------
Total assets $226,164 $224,460
------------ -----------
Liabilities and stockholders' deficit
Accounts payable and other liabilities $95,667 $89,250
Recourse notes payable 2,000 -
Nonrecourse obligations under capital leases 1,691 730
------------ -----------
Total current liabilities 99,358 89,980
Recourse notes payable 131,000 142,940
Other liabilities 2,058 1,789
------------ -----------
Total liabilities 232,416 234,709
------------ -----------
Stockholders' deficit
Common stock, $.01 par value: 8,000,000 shares authorized;
2,932,196 shares issued and 2,917,996 outstanding in 1999 and 2000 29 29
Capital in excess of par value 43,968 44,070
Accumulated deficit (50,249) (54,348)
------------ -----------
Total stockholders' deficit (6,252) (10,249)
------------ -----------
Commitments and contingencies
Total liabilities and stockholders' deficit $226,164 $224,460
------------ -----------
See notes to consolidated financial statements
Federal Data Corporation
Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1999 2000 1999 2000
--------- -------- -------- --------
Revenue
Product sales $109,017 $101,148 $171,667 $181,892
Professional and support services 42,901 44,270 83,015 81,253
Interest and other 287 412 734 1,070
--------- -------- -------- --------
Total revenue 152,205 145,830 255,416 264,215
--------- -------- -------- --------
Expenses
Cost of sales and services 136,337 130,644 226,255 235,990
Selling, general and administrative 10,837 11,210 22,336 22,402
Goodwill and intangibles 2,329 1,614 5,125 3,348
Interest 4,018 4,094 7,884 8,017
--------- -------- -------- --------
Total expenses 153,521 147,562 261,600 269,757
--------- -------- -------- --------
Loss before income tax benefit (1,316) (1,732) (6,184) (5,542)
Income tax benefit (45) (316) (1,315) (1,443)
--------- -------- -------- --------
Net loss ($1,271) ($1,416) ($4,869) ($4,099)
--------- -------- -------- --------
See notes to consolidated financial statements
Federal Data Corporation
Notes to Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Federal Data Corporation and its wholly-owned subsidiaries
(collectively, the Company) and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the annual financial statements, prepared
in accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all necessary adjustments and reclassifications (all of which
are of a normal, recurring nature) that are necessary for fair presentation for
the periods presented. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest annual report
to the Securities and Exchange Commission on Form 10-K 405 for the year ended
December 31, 1999.
The results of operations for the three months and six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the full
fiscal year ending December 31, 2000.
All of the Company's direct and indirect wholly-owned subsidiaries have fully
and unconditionally guaranteed, on a joint and several basis, the Company's
obligations under its Senior Subordinated Notes. The Company is a holding
company with no assets or operations other than its investments in its
subsidiaries. The separate financial statements of the subsidiary guarantors are
not presented because the Company's management believes that such financial
statements are not material to investors.
--------------------------------------------------------------------------------
Note 2 - Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101 (SAB 101), "Revenue Recognition in Financial Statements" which
summarizes certain of the staff's views on revenue recognition. The Company's
revenue recognition policies have been and continue to be in accordance with SAB
101.
--------------------------------------------------------------------------------
Note 3 - Reclassification
Certain amounts have been reclassified in the prior period to conform to the
current period presentations. These reclassifications had no effect on net loss
or retained earnings as previously reported.
--------------------------------------------------------------------------------
Note 4 - Stockholders' Equity
In December 1995, FDC Holdings, Inc. merged with and into the Company with the
Company continuing as the surviving corporation. In accordance with the merger
agreement, the Company was to replace options previously outstanding at the
merger date with options in the surviving corporation that provide substantially
the same economic benefit to the option holder as the benefits provided prior to
the merger. To fulfill this obligation, in March 1999, the Company issued fully
vested options to purchase 40,425 shares of the Company's common stock at an
exercise price of $2.00 per share. These options expire ten years from the date
of grant. Accordingly, the Company recorded non-cash compensation of $1,011 and
a related increase in capital in excess of par value based on the difference
between the exercise price of the stock options and the then current fair market
value.
During the six months ended June 30, 2000, the Company issued options to
purchase 43,000 shares of the Company's common stock at an exercise price of
$27.00 per share.
ANNEX C
INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT ("AGREEMENT") IS ENTERED
INTO THIS 5TH day, of September, 2000, by and among Northrop Grumman
Corporation, a Delaware corporation ("Acquiror"), TC Group, L.L.C., a Delaware
limited liability company ("TC Group"), solely in its capacity as the initial
Holder Representative (TC Group being sometimes referred to herein in such
capacity as the "Holder Representative"), and All First Bank, as escrow agent
("Escrow Agent").
RECITALS
WHEREAS, Acquiror, Splice Acquisition Corp., a Delaware
corporation ("Merger Sub"), Federal Data Corporation, a Delaware corporation
("FDC"), and TC Group, solely in its capacity as the initial Holder
REPRESENTATIVE, HAVE ENTERED INTO THAT CERTAIN AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 5TH , 2000 (the "Merger Agreement," capitalized terms used
herein and not otherwise defined having the meanings associated to then in the
Merger Agreement), which provides for, among other things, the merger of Merger
Sub with and into FDC, with FDC being the surviving corporation; and
WHEREAS, pursuant to the terms of the Merger Agreement, Merger
Consideration in the amount of the Indemnification Escrow Amount and, if
applicable, the Tax-Effected Deduction Dispute Amount that would otherwise have
been paid by Acquiror to the Exchange Agent for distribution to the holder
(individually, a "Holder" and collectively, the "Holders") of FDC Shares and
Options in connection with the Merger is to be paid by Acquiror to the Escrow
Agent and held in escrow by the Escrow Agent for the sole purpose of funding
Acquiror's claims for indemnification pursuant to Section 1.2(c), Section 1.6(b)
and Article 10 of the Merger Agreement; and
WHEREAS, pursuant to the terms of the Merger Agreement, TC
Group has been appointed as the initial Holder Representative to act as the
representative of the Holders having an interest in the Indemnification Escrow
Deposit.
NOW, THEREFORE, in consideration of the premises and the
mutual obligations and covenants set forth herein, the parties hereto agree as
follows:
1. Receipt of Indemnification Escrow Deposit. By its signature below,
Escrow Agent acknowledges receipt of funds from Acquiror in the amount
of the Indemnification Escrow Amount totaling Two Million Dollars ($2,000,000)
(the "Indemnification Escrow Deposit") together with any Tax-Effected Deduction
Dispute Amount deposited pursuant to Section 1.2(c) of the Merger Agreement (the
"Deduction Dispute Escrow Deposit" and together with the Indemnification Escrow
Deposit, the "Deposits").
2. Investment of Deposits. The Deposits shall be invested by Escrow
Agent, as directed pursuant to the joint written instruction of Acquiror and
the Holder Representative, in
interest bearing bank accounts or certificates of deposit of federally insured
financial institutions or in treasury bills or such other investments as are
mutually acceptable to the Holder Representative and Acquiror in specified
accounts (the "Accounts"). All interest earned on the Deposits shall become
part of the respective Deposits.
3. Release of Indemnification Escrow Deposit.
(a) On each occasion on which Acquiror determines in good
faith that it is entitled, pursuant to Section 1.6(b) or Section 10.2 of the
Merger Agreement, to payment of a claim for indemnification pursuant to Section
1.6(b) or Article 10 of the Merger Agreement, Acquiror may deliver to the Holder
Representative and the Escrow Agent a written request (a "Draw-Down Request")
for the payment of such amount. The Draw-Down Request shall set forth the amount
requested and, in reasonable detail, the specific basis for the determination
that Acquiror is entitled to the payment of such amount.
(b) Within thirty (30) days after receipt by the Holder
Representative and the Escrow Agent of a Draw-Down Request, the Holder
Representative may deliver to Acquiror and the Escrow Agent a written
objection to all or any part of the Draw-Down Request (the "Objection").
(c) If the Holder Representative fails to deliver an Objection by
the end of the thirtieth (30th) day following the receipt by the Holder
Representative of a Draw-Down Request, the Escrow Agent shall pay to
Acquiror out of the Indemnification Escrow Amount an amount equal to the amount
requested in the Draw-Down Request (up to a maximum of the amount of the
Indemnification Escrow Deposit). Any such payment shall be made on or before
the fifth (5th) Business Day following the expiration of such thirty (30) day
period. The Escrow Agent shall continue to hold any amounts remaining in the
Indemnification Escrow Account following the payment of any Draw-Down Request
in accordance with the terms of this Agreement.
(d) If the Holder Representative delivers a timely Objection with
respect to all or any portion of a Draw-Down Request, the Escrow Agent shall not
disburse, and shall continue to hold in the Indemnification Escrow Account,
the amount requested in the Draw-Down Request or the disputed portion thereof,
as the case may be, pending receipt of either (i) payment instructions signed
by Acquiror and the Holder Representative, specifying the agreement of the
parities as to the action to be taken by the Escrow Agent in respect of such
Draw-Down Request (the "Payment Instructions") or (ii) a notice from either
the Acquiror or the Holder Representative stating that such Draw-Down Request
has been submitted to arbitration for determination and that a determination
with respect to such matters has been rendered (an "Arbitration Notice")
which is accompanied by a copy of a final, non-appealable order of such
arbitration (an "Order"), pursuant to which such arbitration has determined
whether and to what extent Acquiror is entitled to the amount requested in the
Draw-Down Request. Upon receipt of Payment Instructions or an Arbitration
Notice, as applicable, the Escrow Agent shall thereafter act in accordance
with Section 3(e) or 3(f) below, as applicable. The parties hereby agree
to arbitrate any unresolved dispute with respect to the Indemnification
Escrow Amount in
2
accordance with the expedited procedures of the commercial arbitration rules
of the American Arbitration Association in Washington, D.C., and the
Indemnification Escrow Amount shall be disbursed in accordance with the final
ruling of such arbitration.
(e) Upon receipt by the Escrow Agent of Payment Instructions, if
such Payment Instructions indicate that Acquiror is entitled to payment in
respect of all or any portion of the Draw-Down Request, then the Escrow Agent
shall release from the Indemnification Escrow Account and pay to Acquiror the
amount indicated in such Payment Instructions (up to a maximum of the
Indemnification Escrow Deposit). Such payment shall be made on or before the
fifth (5th) Business Day following the date on which such Payment Instructions
are received by the Escrow Agent. If such Payment Instruction indicate that
Acquiror is not entitled to all or any portion of the amount claimed in such
Draw-Down Request (a "Discharge Notice"), then the Escrow Agent shall
continue to hold such amount in the Indemnification Escrow Account in
accordance with the terms of this Agreement until such amounts are to be
disbursed (i) to the Holder Representative pursuant to Section 3(h), (ii) to
the Acquiror in respect of another Draw-Down Request pursuant to Section
3(c), 3(e) or 3(f) or (iii) to any Person pursuant to Section 3(i).
(f) If the Escrow Agent has received an Arbitration Notice and
on Order with respect to any Draw-Down Request, then the Escrow Agent shall
release from the Indemnification Escrow Account and pay to Acquiror an amount
equal to the amount due Acquiror, as indicated in such Order. Such payment will
be made on or before the fifth (5th) Business Day following the date on
which the Escrow Agent received such Order. If such Order indicates that
Acquiror is not entitled to all or any portion of the amount claimed in
the Draw-Down Request (a "Determination Discharge"), then the Escrow Agent
shall continue to hold the amount which Acquiror was determined not to be
entitled in accordance with the terms of this Agreement until such amounts are
to be disbursed (i) to the Holder Representative pursuant to Section 3(h),
(ii) to the Acquiror in respect of another Draw-Down Request pursuant to
Section 3(c), 3(e) or 3(f) or (iii) to any Person pursuant to Section 3(i).
(g) As promptly as practicable following the disbursement of any
funds from the Indemnification Escrow Account, the Escrow Agent shall send a
written statement to each of the Holder Representative and Acquiror stating
the amount of the disbursement and the amount remaining in the Indemnification
Escrow Amount.
(h) On the date which is ninety (90) days after the Closing
Date (the "Termination Date"), subject to the provisions of the following
sentence, the Escrow Agent shall promptly pay to the Holder Representative
from the Indemnification Escrow Account by wire transfer to an account
designated in writing by the Holder Representative, an amount equal to the
balance of the Indemnification Escrow Account on the Termination Date (the
"Indemnification Escrow Disbursement"). If, however, the Escrow Agent shall
have received on or before the Termination Date one or more Draw-Down Requests
which has not been paid in accordance with Section 3(c) as of the Termination
Date and as to which, on the Termination Date, the Escrow Agent has neither
received and fully acted upon Payment Instructions nor an Order, nor received
a Discharge Notice or a Determination Discharge (any such Draw-Down Request
being referred
3
to as an "Outstanding Claim"), the Escrow Agent shall retain and continue
to hold in accordance with the terms hereof an amount equal to the amount
requested in all such Outstanding Claims (the "Retained Amount") but shall
pay to the Holder Representative an amount equal to the excess, if any, of the
Indemnification Escrow Disbursement over the Retained Amount; and, thereafter,
the Escrow Agent shall release from the Indemnification Escrow Account all
or portions of the Retained Amount as and when it receives Payment Instructions,
Discharge Notices or Determination Discharges, as applicable, related to the
Outstanding Claims or, to the extent applicable, in accordance with Section
3(c). Following the Termination Date, in the event that the Retained Amount
at anytime exceeds the amount of all Outstanding Claims which have not been
paid or which are not subject to a Discharge Notice or Determination Discharge,
the Escrow Agent shall pay to the Holder Representative, with five (5)
Business Days of the Holder Representative's written request for such payment,
an amount equal to such excess. Notwithstanding any provision hereof to the
contrary, following the Termination Date, the Retained Amount will not be
released in payment of any claim or Draw-Down Request delivered to the
Escrow Agent and the Holder Representative after the Termination Date, and
the Retained Amount will only be disbursed (i) to the Holder Representative
in accordance with this Section 3(h) or Section 3(i) hereof or (ii) to Acquiror
in payment of an Outstanding Claim in accordance with Section 3(c), 3(e)or 3(f).
(i) If at any time, the Escrow Agent shall receive joint
written instructions executed by Acquiror and the Holder Representative
("Joint Written Instructions"), then within five (5) Business Days after receipt
of such Joint Written Instructions, the Escrow Agent shall release the
Indemnification Escrow Deposit in accordance with such Joint Written
Instructions. The parties will cooperate in good faith in executing such Joint
Written Instructions wherever reasonably necessary to ensure distributions
of escrowed funds to the party entitled thereto under the terms of the Merger
Agreement.
4. Release of Deduction Dispute Escrow Deposit. If the Escrow
Agent has received either (i) a final ruling of arbitration in accordance
with the procedures set forth in Section 1.2(c) of the Merger Agreement
or (ii) Joint Written Instructions, then within five (5) Business Days
after receipt of such final ruling or Joint Written Instructions, the
Escrow Agent shall release the Deduction Dispute Escrow Deposit in accordance
with such final ruling or Joint Written Instructions. The parties will cooperate
in good faith in executing such Joint Written Instructions wherever reasonably
necessary to ensure distributions of escrowed funds to the party entitled
thereto under the terms of the Merger Agreement.
5. Taxpayer Identification Numbers. For tax purposes, all
interest and other income on the Deposits shall be the income of the party to
whom the interest and other income is released. The parties hereto shall
ile tax returns and information returns and the Escrow Agent shall file Forms
1099 consistent with such treatment. The parties acknowledge that payment of
any interest or other income earned on the Deposits will be subject to back-up
withholding penalties unless a properly completed Internal Revenue
Service Form W-8 or W-9 certification is submitted to the Escrow Agent by
the party or parties entitled to receive such payment. Any Form W-8 or W-9
certification shall be submitted to the Escrow Agent on or before the date
hereof.
4
6. Duties of the Escrow Agent.
(a) Duties in General.
(1) The Escrow Agent undertakes to perform only such duties as
are expressly set forth herein (and required by applicable law), which the
parties agree are ministerial in nature. If in doubt as to its duties and
responsibilities hereunder, the Escrow Agent may consult with counsel of its
choice and shall be protected in any action taken or omitted in connection
with the advice or opinion of such counsel.
(2) If the Escrow Agent becomes involve in litigation with
respect to this Agreement for any reason, it is hereby authorized to deposit the
Indemnification Escrow Deposit with the clerk of such court in which such
litigation is pending, or to interplead all interested parties in any court of
competent jurisdiction and to deposit with the clerk of such court the
Indemnification Escrow Deposit. Upon the happening of either of the above,
the Escrow Agent shall be fully relieved and discharged of any further duties
hereunder.
(3) If the Escrow Agent should at any time be confronted
with inconsistent claims or demands by the parties hereto, the Escrow Agent
shall have the right to interplead such parties in any state or federal court
located in the State of New York (or if such court does not have jurisdiction,
any other court of competent jurisdiction), to deposit the Indemnification
Escrow Deposit with the clerk of such court, and to request that such court
determine the respective rights of the parties with respect to this Agreement,
and upon doing so, the Escrow Agent automatically shall be released from any
obligations or liability as a consequence of any claims or demands hereunder.
(b) Exculpation. Except for the Escrow Agent's own willful
misconduct, bad faith or gross negligence: (i) the Escrow Agent shall have no
liability of any kind whatsoever for its performance of any duties imposed upon
the Escrow Agent under this Agreement or for any of its acts or omissions
hereunder; (ii) the Escrow Agent shall not be responsible for any of the acts
or omissions of the parties hereto; (iii) the Escrow Agent shall not be liable
to anyone for damages, losses or expenses arising out of this Agreement; and
(iv) the Escrow Agent may rely and /or act upon any written instrument,
document or request believed by the Escrow Agent in good faith to be genuine
and to be executed and delivered by the proper person, and may assume in good
faith the authenticity, validity and effectiveness thereof and shall not be
obligated to make any investigation or determination as to the truth and
accuracy of any information contained therein.
(c) No Additional Duties. The Escrow Agent shall have no duties
except those that are expressly set forth herein, and it shall not be bound by
any notice of a claim or demand hereunder, or any waiver, modification,
amendment, termination or rescission of this Agreement, unless received
by it in writing.
(d) Miscellaneous. The Escrow Agent may execute any of its
powers or responsibilities hereunder and exercise any rights hereunder, either
directly or by or through its agents or attorneys. The Escrow Agent shall not be
responsible for and shall not be under a duty
5
to examine or pass upon the validity, binding effect, execution or sufficiency
of this Agreement or of any agreement amendatory or supplemental hereto.
7. Indemnification of the Escrow Agent. In consideration of its
acceptance of the appointment as Escrow Agent, Acquiror and the Holder
Representative, severally and not jointly, each agree to indemnify and hold
the Escrow Agent harmless as to fifty percent (50%) of any loss, liability or
expense incurred without gross negligence, bad faith or willful misconduct by
the Escrow Agent to any person by reason of its having accepted the same or
in carrying out any of the terms hereof. Acquiror and the Holder Representative,
severally and not jointly, each agree to reimburse the Escrow Agent on request
for fifty percent (50%) of its reasonable attorneys' fees and other reasonable
costs and expenses incurred by it in connection with carrying out its duties
hereunder.
8. Resignation of the Escrow Agent. The Escrow Agent, and any successor
Escrow Agent, may resign at any time as Escrow Agent hereunder by giving at
least fifteen (15) Business Days written notice to the parties. Upon such
resignation and the appointment of a successor Escrow Agent, the resigning
Escrow Agent shall be absolved from any duties as Escrow Agent hereunder. Upon
their receipt of notice of resignation from the Escrow Agent, Acquiror
and the Holder Representative shall use their reasonable best efforts jointly
to designate a successor Escrow Agent. If the parties do not agree upon a
successor Escrow Agent within fifteen (15) Business Days after the receipt by
the parties of the Escrow Agent's resignation notice, the Escrow Agent may
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief and any such resulting appointment
shall be binding upon all parties hereto. By mutual agreement, the parties
shall have the right at any time upon not less that seven (7) Business Days
written notice to terminate their appointment of the Escrow Agent, or any
successor Escrow Agent, as Escrow Agent hereunder. Notwithstanding anything
to the contrary in the foregoing, the Escrow Agent or any successor Escrow Agent
shall continue to act as Escrow Agent until a successor is appointed and
qualified to act as Escrow Agent.
9. Notices. All notices and other communications required or permitted
pursuant to this Agreement shall be in writing and be deemed to have been duly
given when delivered personally (which shall include delivery by Federal
Express or other nationally recognized, reputable overnight courier service that
issues a receipt or other confirmation of delivery) to the party for whom such
communication is intended, or three (3) business after the date mailed by
certified mail, return receipt requested, postage prepaid, as follows:
If to Acquiror:
Northrop Grumman Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
6
with copies to:
Howrey Xxxxx Xxxxxx & White, LLP
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
If to Holder Representative:
TC Group, L.L.C.
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxx 000 Xxxxx
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
with a copy to:
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxx 00000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
If to Escrow Agent:
All First Bank
Capital Markets Group
000 00XX Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx
or to such other address as such party shall specify by written notice to other
parties hereto. Any notice sent to Escrow Agent shall also be sent to the other
parties to this Agreement.
7
10. Assignment. Acquiror and the Holder Representative may assign rights
under this Agreement to the same extent they are permitted to assign their
rights and obligations under the Merger Agreement.
11. Miscellaneous. This Agreement, and with respect to Acquiror and the
Holder Representative, the Merger Agreement, embody the entire agreement
and understanding of the parties concerning the Indemnification Escrow Deposit,
and, in the event of any inconsistency between this Agreement and the
Merger Agreement, this Agreement shall control. In the event this Agreement
may be amended only by a writing signed by the party against whom the
enforcement charge is sought. The headings in this Agreement are intended
solely for convenience or reference and shall be given no effect in the
construction or interpretation of this Agreement. This Agreement shall be
governed by and construed in accordance with laws of the State of New York,
except the choice of law rules utilized in that state. This Agreement shall
bind and inure to the benefit of the parties hereto and their respective,
heirs, personal representatives, successors and permitted assigns.
8
To evidence their agreement, the parties have caused this
Agreement to be executed on the date first written above.
NORTHROP GRUMMAN CORPORATION
BY:
----------------------
NAME:
TITLE:
TC GROUP, L.L.C.
By: TCG Holdings, L.L.C.
Its Managing Member
BY:
----------------------
Name: Xxxxx Xxxx
Title: Managing Director
ALL FIRST BANK
BY:
----------------------
Name: Xxxx X. Xxxx
Title: Vice President
