EXHIBIT 10.12
CONSORTIUM AGREEMENT
THIS CONSORTIUM AGREEMENT (this "Agreement"), dated as of June 24, 1998, by
and between the following parties:
XXXXXXXX XXXXXXX CORPORATION, an Ohio corporation ("MK"), and
BNFL USA GROUP INC., a Delaware corporation ("BNFL-USA")
WITNESSETH
WHEREAS:
1. MK and BNFL-USA wish to form a consortium for the purpose of acquiring
the Energy Systems business (the "ESBU Business") and the Government
Operations business (the "GESCO Business") of CBS Corporation ("CBS")
2. MK and BNFL-USA have entered into this Agreement for the purpose of
setting forth the basis on which they will purchase the ESBU and GESCO
Businesses, and the basis on which ownership, control and risk will be
shared after the acquisition
3. MK and BNFL-USA intend to take certain actions and enter into certain
other agreements as contemplated by this Agreement
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, the parties agree as follows:
1. Formation of Additional Companies.
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1.1 Organization. Promptly after the date of this Agreement the parties
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will organize the following corporations or limited liability
companies (individually a "Company" and collectively the "Companies")
under the names set forth below (or if such names are not available
under such other names as the parties may agree):
(a) Westinghouse Government and Nuclear Holdings, LLC, a Delaware
limited liability company ("Wesco")
(b) Westinghouse Strategic Services, Inc., a Delaware corporation
("GESCO II")
(c) Westinghouse Government Services, LLC, a Delaware limited
liability company ("GESCO I")
(d) Westinghouse Energy Systems, LLC, a Delaware limited liability
company ("ESBU")
(e) If a separate entity is required in order to hold the assets of
the Electro-Mechanical Division as contemplated by Section 4.4, an
additional Delaware limited liability company with a name to be
selected by the parties ("GESCO III")
(f) Such other entities as the parties deem necessary or desirable.
1.2 Operating Agreements. The ownership, management, operation, financing
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and other attributes of the Companies will be set forth in the
respective articles of incorporation, by-laws, limited liability
company agreements and related documents to be entered into with
respect to each of the Companies (the "Organizational Documents") and
other necessary documents which will be consistent with the provisions
of this Agreement.
2. Wesco.
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2.1 Members. MK and BNFL-USA, or their respective wholly owned
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subsidiaries, will be the members in Wesco and their respective
membership interests in Wesco will be:
MK -- 60%
BNFL-USA -- 40%
2.2 Management.
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(a) Management by Managers. Wesco will be managed by a board of
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directors or managers (the "Board") and by officers appointed by
the Board.
(b) Board. Wesco will have a Board of five directors, three of whom
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will be appointed by MK and two by BNFL-USA. With effect from the
GESCO Closing Date or the ESBU Closing Date (as defined in Section
7.2), whichever occurs first, the Board will consist of the chief
executive officers of MK and British Nuclear Fuels plc (the parent
company of BNFL-USA) and three US citizens who are not affiliated
with either MK or BNFL-USA, two of whom will be selected by MK
with the remaining one selected by BNFL-USA. MK and BNFL-USA will
jointly select a Chairman from the non-affiliated directors. Each
director will serve for a one-year term, and will be eligible for
re-appointment in accordance with this paragraph (b), provided
that MK and BNFL-USA shall have the right to replace their
respective appointees at any time in accordance with the
procedures set out above in this paragraph (b).
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(c) Officers. The Board will appoint a President and other officers
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as desired from time to time. With effect from the ESBU Closing
Date or the GESCO Closing Date, whichever occurs first, the
President initially will be Xxxxxxx X. Xxxxx. The officers will
have the authority, responsibilities and duties as are customary
for officers holding similar positions with respect to businesses
conducted in corporate form and such additional authority,
responsibilities and duties as the Board may delegate from time to
time.
2.3 ESBU. As the sole owner of ESBU, Wesco will exercise control over
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ESBU to the extent provided in Section 5. Among other things, the
following issues and actions will require action or review by the Wesco
Board:
(a) National Security Issues
(b) Export of technology developed using US public funds
(c) Receive reports from the Presidents of GESCO I and ESBU
(d) Approval of the ESBU Charter (attached as Exhibit A) and any
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changes thereto (requires unanimous action)
(e) Review actions of the ESBU Manager to ensure compliance with the
ESBU Charter.
2.4 Term. The parties will not dissolve Wesco earlier than the third
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anniversary of the closing under the Asset Purchase Agreements
described in Section 7.
2.5 Membership Interests. The members' interests in Wesco may be divided
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into more than one series in a manner that is consistent with the
provisions of Section 11.
3. GESCO II.
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3.1 Organization. MK will organize GESCO II as a Delaware corporation
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which is a wholly-owned subsidiary of MK.
3.2 Management. The members of the board of directors and the officers of
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GESCO II will have appropriate security clearances and will be
selected in accordance with procedures that are satisfactory to the US
Department of Defense. BNFL-USA will have no right of any kind
whatsoever to influence or control in any manner the management or
operations of GESCO II. Notwithstanding anything to the contrary in
this Agreement, from and after the GESCO Closing Date MK will have
sole and absolute control over all assets contemplated to be acquired
by GESCO II.
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4. GESCO I.
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4.1 Members. The members and their membership interests in GESCO I will
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be:
Wesco -- 83-1/3%
BNFL-USA -- 16-2/3%
4.2 Management.
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(a) Management by Managers. GESCO I will be managed by a board of
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directors or managers (the "Board") selected by the members, and
by officers appointed by the Board.
(b) Board. With effect from the GESCO Closing Date, GESCO I will have
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a Board of six directors consisting of two individuals selected by
MK, two individuals selected by BNFL-USA, a Chairman to be
selected jointly by MK and BNFL-USA (who initially will be Xxxxxxx
X. Xxxxx) and one individual who will be selected by the remaining
directors and who satisfies the requirements to be the chairman of
a US Government Security Committee (the "Sixth Director"). Each of
the directors shall be a US citizen. Each director will serve for
a one-year term, and will be eligible for re-appointment in
accordance with this paragraph (b), provided that MK and BNFL-USA
shall have the right to replace their respective appointees at any
time and MK and BNFL-USA, acting jointly, shall have the power to
replace the Chairman and to require the remaining directors to
replace the Sixth Director.
(c) Officers. The Board will appoint a President and other officers
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as desired from time to time. The officers will have the
authority, responsibilities and duties as are customary for
officers holding similar positions with respect to businesses
conducted in corporate form and such additional authority,
responsibilities and duties as the Board may delegate from time to
time.
4.3 Bidding. GESCO I will be the preferred vehicle for rebidding its
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existing contracts. With respect to other contracts that fall within
the scope of the GESCO I Operations, it is the objective of the
parties to maintain and grow the value of GESCO I, consistent with the
interests of MK and BNFL-USA, and to maximize the competitive
positioning of GESCO I bids. However, if MK and BNFL-USA do not agree
that it would be advantageous to bid a specific contract through GESCO
I, MK and BNFL-USA are both free to bid that contract directly or in
concert with a different partner or partners and GESCO I will not bid.
4.4 Electro-Mechanical Division. The Electro-Mechanical Division (the
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"EMD") (which is currently included within GESCO I) may or may not be
permitted to be held in GESCO I. If the EMD is not permitted to be
held in GESCO I, then a separate entity ("GESCO III") may be organized
to hold the EMD. The
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ownership, management, operation, financing and other attributes of
the EMD shall be the same in all material respects as for GESCO I. If
ownership of the EMD in GESCO III is not acceptable to the US
government, the parties will agree on a mutually agreeable ownership
structure acceptable to the US government; provided that in any event
MK and BNFL-USA shall provide an equal portion of the purchase price
for, and shall share equally in the economic risks and rewards of, the
EMD.
5. ESBU.
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5.1 Members. Wesco shall be the sole member of ESBU.
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5.2 Management.
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(a) Management by Managers. Subject to the provisions of paragraphs
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(d) and (e) below, ESBU will be managed by a board of directors or
managers (the "Board") appointed by Wesco as provided in paragraph
(b) and by officers appointed by the Board.
(b) Board. ESBU will have a Board of five directors consisting of
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three individuals selected by MK and two individuals selected by
BNFL-USA. With effect from the ESBU Closing Date, of MK's three
directors, two will be selected by MK from a list of US citizens
(including, initially, Xxxxxxx X. Xxxxx) who have been recommended
by BNFL-USA. Each director will serve for a one-year term, and
will be eligible for re-appointment in accordance with this
paragraph (b), provided that MK and BNFL-USA shall have the right
to replace their respective appointees at any time in accordance
with the procedures set out above.
(c) Officers. The Board will appoint a President and other officers
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as required from time to time. With effect from the ESBU Closing
Date, the President will initially be Xxxxxxx X. Xxxxx. Subject to
the provisions of paragraphs (d) and (e) below, the officers will
have the authority, responsibilities and duties as are customary
for officers holding similar positions with respect to businesses
conducted in corporate form and such additional authority,
responsibilities and duties as the Board may delegate from time to
time.
(d) Management Agreement. With effect from the ESBU Closing Date,
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ESBU will enter into a management agreement with BNFL-USA, or one
of its wholly-owned US subsidiaries, (the "Manager") under which
the Manager will provide overall management of ESBU as further
provided in Section 9.
(e) ESBU Charter. The parties will cause the Board to adopt the ESBU
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Charter in substantially the form attached as Exhibit A (the "ESBU
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Charter"). The operations of ESBU will be governed by the ESBU
Charter. The ESBU
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Charter provides for oversight of ESBU by the Wesco Board as
described in Section 2.3.
6. Savannah River M&O Contract.
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MK and BNFL-USA will hold the Savannah River M&O Contract (defined in
Section 7.2(a)(iv)) in an entity acceptable to the US government, which
will have ownership and control arrangements acceptable to the US
government (which the parties currently believe will require the Savannah
River M&O Contract to be performed by an organization wholly owned by MK).
The ownership and control of such entity will also be mutually acceptable
to MK and BNFL-USA; provided that in any event MK and BNFL-USA shall
provide an equal amount of the purchase price for, and shall share equally
in the economic risks and rewards of, the Savannah River M&O Contract.
Appropriate protections will be provided to ensure that funds are not
distributed to MK via contract or any other mechanism that would frustrate
or avoid BNFL-USA's participation in the economic rewards of the Savannah
River M&O Contract.
7. Acquisition of ESBU and GESCO Businesses.
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7.1 Asset Purchase Agreements. MK and BNFL-USA will cause Wesco to enter
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into the following agreements and will each guarantee Wesco's
obligations under such agreements:
(a) ESBU Agreement. An Asset Purchase Agreement, dated on or about
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the date of this Agreement, between Wesco and CBS (the "ESBU
Purchase Agreement") providing for the purchase by Wesco or one or
more of its assignees of the ESBU Business, including the purchase
of certain assets and the assumption of certain liabilities of CBS
and its affiliates all as set out in the ESBU Purchase Agreement.
(b) GESCO Agreement. An Asset Purchase Agreement, dated on or about
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the date of this Agreement, between Wesco and CBS (the "GESCO
Purchase Agreement") providing for the purchase by Wesco or one or
more of its assignees of the GESCO Business, including the
purchase of certain assets and the assumption of certain
liabilities of CBS and its affiliates all as set out in the GESCO
Purchase Agreement.
7.2 Assignment of Rights under Asset Purchase Agreements.
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(a) Division of GESCO Operations. The parties acknowledge that
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effective as of the closing date under the GESCO Purchase
Agreement the GESCO Business is to be divided into two (or, under
certain circumstances, more) components as follows:
(i) GESCO I. All assets, properties, rights, obligations and
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liabilities included in the GESCO Business commonly referred
to by the parties as "GESCO I" including those that arise
from, relate to, or
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are used in connection with the Safe Sites, the EMD, WIPP,
Safety Management Solutions and West Valley contracts and
operations (the "GESCO I Operations"); provided that (A)
the Government Technical Services Division (the "GTSD")
will be transferred to ESBU, and (B) the EMD may be
transferred to GESCO III pursuant to clause (iii) below and
will in any event be held in accordance with the provisions
of Section 4.4).
(ii) GESCO II. All assets, properties, rights, obligations and
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liabilities included in the GESCO Business commonly
referred to by the parties as "GESCO II" including those
that arise from, relate to, or are used in connection with
the Xxxxxx, PAD, MAO and Anniston contracts and operations
(the "GESCO II Operations").
(iii) GESCO III. Subject to the provisions of Section 4.4,
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if the EMD is required to be held separately from GESCO I,
all assets, rights and obligations included in the GESCO
Business that are commonly referred to by the parties as
the Electro-Mechanical Division (the "EMD Operations").
(iv) Savannah River. All assets, properties, rights,
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obligations and liabilities included in the GESCO Business
commonly referred to by the parties as the Savannah River
Management and Operations Contract ("Savannah River M&O
Contract").
(b) GESCO Purchase Agreement. No later than the closing date under
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the GESCO Purchase Agreement (the "GESCO Closing Date")
(i) Wesco will assign to GESCO I all Wesco's rights and
obligations under the GESCO Purchase Agreement that relate
to the GESCO I Operations and (to the extent permitted
under the GESCO Purchase Agreement) the parties will cause
GESCO I to assume all such rights and obligations,
including the obligation to pay an appropriate portion of
the Purchase Price, to accept the assignment and transfer
to it of all the Acquired Assets, and to assume the Assumed
Liabilities (each as defined in GESCO Purchase Agreement)
that constitute part of the GESCO I Operations.
(ii) Wesco will assign to GESCO II all Wesco's rights and
obligations under the GESCO Purchase Agreement that relate
to the GESCO II Operations and (to the extent permitted
under the GESCO Purchase Agreement) the parties will cause
GESCO II to assume all such rights and obligations,
including the obligation to pay an appropriate portion of
the Purchase Price, to accept the assignment and transfer
to it of all the Acquired Assets, and to assume the Assumed
Liabilities (each as defined in GESCO Purchase Agreement )
that constitute part of the GESCO II Operations.
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(iii) If GESCO III is created (see Section 4.4) Wesco will assign
to GESCO III all Wesco's rights and obligations under the
GESCO Purchase Agreement that relate to the EMD Operations
and (to the extent permitted under the GESCO Purchase
Agreement) the parties will cause GESCO III to assume all
such rights and obligations, including the obligation to
pay an appropriate portion of the Purchase Price, to accept
the assignment and transfer to it of all the Acquired
Assets, and to assume the Assumed Liabilities (each as
defined in GESCO Purchase Agreement ) that constitute part
of the EMD Operations.
(iv) Wesco will assign to an entity acceptable to the US
government and to be agreed by MK and BNFL-USA all Wesco's
rights and obligations under the GESCO Purchase Agreement
that relate to the Savannah River M&O Contract and (to the
extent permitted under the GESCO Purchase Agreement) the
parties will cause such entity to assume all such rights
and obligations, including the obligation to pay an
appropriate portion of the Purchase Price, to accept the
assignment and transfer to it of all the Acquired Assets,
and to assume the Assumed Liabilities (each as defined in
GESCO Purchase Agreement ) that constitute part of the
Savannah River M&O Contract.
(c) ESBU Purchase Agreement. No later than the closing date under the
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ESBU Asset Purchase Agreement (the "ESBU Closing Date") Wesco will
assign to ESBU all Wesco's rights and obligations under the ESBU
Purchase Agreement, all Wesco's rights and obligations under the
GESCO Purchase Agreement with respect to the GTSD, and all
personel being taken and all technology being acquired from the
Science and Technology Center and (to the extent permitted under
the ESBU Purchase Agreement and the GESCO Purchase Agreement) the
parties will cause ESBU to assume all such rights and obligations,
including
(i) the obligation to pay the Purchase Price and to accept the
assignment and transfer to it of all the Acquired Assets, and
to assume the Assumed Liabilities (each as defined in ESBU
Purchase Agreement) and
(ii) with respect to the GTSD, the obligation to pay an
appropriate portion of the Purchase Price, and to accept the
assignment and transfer to it of that portion of the Acquired
Assets and to assume that portion of the Assumed Liabilities
(each as defined in the GESCO Purchase Agreement) that
constitute or relate to the GTSD.
(d) Allocation of Certain Rights. All of the rights, duties and
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obligations of Wesco under the ESBU Purchase Agreement and the
GESCO Purchase
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that are not specifically allocated in this Agreement (e.g., the
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cap and basket on the indemnification provided by CBS) will be
shared equitably among the Companies in a manner that is
consistent with this Agreement.
(e) Closing Dates. MK and BNFL-USA anticipate that the closings under
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the ESBU Purchase Agreement and the GESCO Purchase Agreement will
occur simultaneously. However, the parties may by mutual agreement
permit the closings to occur at different times.
7.3 Contribution of Purchase Price to GESCO II, GESCO I and ESBU.
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(a) Subject to the provisions of paragraph (b), no later than the day
before the GESCO Closing Date and the ESBU Closing Date,
respectively, MK will provide funds to GESCO II, and MK and BNFL-
USA will provide funds to Wesco, and through it to ESBU and GESCO
I, to enable them to pay the purchase price under the GESCO
Purchase Agreement and the ESBU Purchase Agreement, as described
in Exhibit B.
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(b) All of the contributions contemplated by paragraph (a), and all
other contributions to be made to the Companies under Section 8 or
otherwise, are expressly conditioned on the expiration of any and
all applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act relating to the formation of the
Companies and to the acquisition of the ESBU Business or the GESCO
Business.
7.4 Other Actions. The parties will take all such other actions and will
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cause their respective affiliates to take such other actions to cause
GESCO II, GESCO I and ESBU (and GESCO III, if necessary) to perform
all obligations to be performed by them under the GESCO Purchase
Agreement or the ESBU Purchase Agreement, as the case may be.
8. Additional Contributions. The obligations of the parties to make
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additional contributions to any of the Companies to meet the needs of the
Companies for funding are as follows:
8.1 Wesco. Subject to the provisions of Exhibit C with respect to ESBU,
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to the extent that funds are required for the operations of Wesco
(including contributions to be made by Wesco to GESCO I or ESBU in
accordance with Sections 8.2 and 8.4), MK and BNFL-USA will make
contributions in proportion to their respective membership interests
as set forth in Section 2.1.
8.2 GESCO I and GESCO III. Any contributions required to be made to GESCO
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I (or GESCO III, if applicable) must be unanimously approved by the
Board of GESCO I (or GESCO III, if applicable) and will be made in
proportion to the respective membership interests of Wesco and BNFL-
USA, as set forth in Section 4.1.
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8.3 GESCO II. MK shall be solely responsible for the cash and other
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funding requirements of GESCO II.
8.4 ESBU. Any additional contributions to ESBU will be made in accordance
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with the provisions of Exhibit C.
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9. Management of ESBU Business.
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The ESBU Business will be managed directly by BNFL-USA, or one of its
affiliates, (the "Manager") pursuant to a management agreement (the "ESBU
Management Agreement") which will embody the following principles:
(a) The Manager will have authority to manage the ESBU Business in
accordance with the ESBU Charter. Annual business plans, financial
plans and capital budgets will be prepared by the Manager and approved
by the ESBU Board.
(b) Consistent with the ESBU Charter and the provisions of Section 2.3
Wesco and the Board of ESBU will take all necessary action to ensure
that the Manager manages the ESBU Operations in accordance with
applicable laws concerning the protection of US national security and
technology.
(c) As part of its powers and duties under the ESBU Management Agreement
the Manager will
(i) subject to the provisions of Section 8.4, advance to ESBU 90% of
all ESBU's cash requirements to fund its operations and to meet
its liabilities, and
(ii) be entitled to receive as compensation for management services
and as reimbursement for such advances 90% of all cash in excess
of that currently required in the business.
(d) The powers and duties of the Manager will be structured so as to permit
the Manager to engage in ordinary cash management activities without
being required to make payments to BNFL-USA.
10. Financial Arrangements.
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10.1 Replacement of Letters of Credit etc. The parties acknowledge that
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CBS and certain of its affiliates are presently obligated under
certain letters of credit, performance bonds and similar obligations
issued in connection with the ESBU Business and the GESCO Business
(the "Outstanding Letters of Credit and Bonds") and that the
Purchasers are obligated under the ESBU Purchase Agreement and the
GESCO Purchase Agreement to replace the Outstanding Letters of Credit
and Bonds with substitute financial arrangements at closing. The
responsibility of the parties to accomplish this will be allocated as
follows:
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(a) ESBU. BNFL-USA will replace each of the Outstanding Letters of
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Credit and Bonds that secure or support obligations that arise
from the ESBU Operations with substitute financial arrangements on
or before the ESBU Closing Date and will provide such credit
support, including guarantees from BNFL-USA or its affiliates, as
may be necessary to put such substitute financial arrangements
into effect.
(b) GESCO II. MK will replace each of the Outstanding Letters of
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Credit and Bonds that secure or support obligations that arise
from the GESCO II Business with substitute financial arrangements
on or before the GESCO Closing Date and will provide such credit
support, including guarantees from MK or its affiliates, as may be
necessary to put such substitute financial arrangements into
effect.
(c) GESCO I and GESCO III. MK and BNFL-USA will jointly replace each
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of the Outstanding Letters of Credit and Bonds that secure or
support obligations that arise from the GESCO I or the GESCO III
Business with substitute financial arrangements on or before the
GESCO Closing Date and will provide such credit support, including
guarantees from MK and BNFL-USA or their respective affiliates, as
may be necessary to put such substitute financial arrangements
into effect; provided that the costs and liabilities of such
actions and arrangements shall be shared between MK and BNFL-USA
on a 50:50 basis.
10.2 Support for Additional Financing. If any of ESBU, GESCO I, GESCO II
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or GESCO III wishes to incur any indebtedness from any third party and
in order to obtain such financing a guarantee or other form of credit
support is required then the responsibilities of the parties to
provide such guarantees or other support are as follows.
(a) ESBU. BNFL-USA shall be responsible for providing guarantees or
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other credit support for ESBU.
(b) GESCO II. MK shall be responsible for providing guarantees or
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other credit support for GESCO II.
(c) GESCO I and GESCO III. MK and BNFL-USA shall be jointly
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responsible for providing guarantees or other credit support for
GESCO I and GESCO III and any costs and liabilities of such
actions and arrangements shall be shared between MK and BNFL-USA
on a 50:50 basis.
11. MK's Financial Interest in ESBU.
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11.1 Special Membership Interest in Wesco. The membership interests in
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Wesco are divided into two series (the Series A Interests and the
Series B Interests) each of which will be owned by MK and BNFL-USA in
the same 60:40 proportion. The
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Series A Interests will represent all assets, liabilities and rights
of Wesco that relate to or are derived from its ownership interest in
GESCO I and, if formed, GESCO III. The Series B Interests will
represent all assets, liabilities and rights of Wesco that relate to
or are derived from its ownership interest in ESBU.
11.2 Put/Call. At any time after the third anniversary of the ESBU Closing
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Date, MK may require BNFL-USA to purchase MK's Series B Interest, and
BNFL-USA may require MK to sell its Series B Interest. The sale price
of MK's Series B interest will be the amount necessary to provide MK
with a pre-tax 11 1/2% internal rate of return on its financial
investment in its Series B Interest (taking into account all cash
distributions and contributions).
12. BNFL-USA's Contract with GESCO II.
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12.1 Nature of Right. MK will own 100% of the outstanding shares of GESCO
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II. BNFL-USA will have a contractual right (the "BNFL Right") to
receive payments from GESCO II in an amount such that taking the
payments to BNFL-USA together with distributions from GESCO II to MK,
BNFL-USA will receive 8% of such amounts. Such payments will continue
until terminated as provided in Section 12.2. As reflected in Section
3.2 above, BNFL-USA will have no right to influence or control the
management or operations of GESCO II in any manner.
12.2 Termination of Right. The BNFL Right may be terminated in either of
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the two following ways:
(a) At any time after the third anniversary of the GESCO Closing Date
BNFL-USA may require GESCO II to make a payment (the "Termination
Payment") to BNFL-USA or GESCO II may elect to make a Termination
Payment to BNFL-USA in accordance with the following.
(i) The Termination Payment will be an amount necessary to
provide BNFL-USA with a pre-tax 11 1/2% internal rate of
return on its Deemed Payment, after taking into account all
payments received by BNFL-USA with respect to the BNFL Right.
(ii) BNFL-USA's "Deemed Payment" shall be an amount equal to 8% of
the portion of the purchase price paid on the GESCO Closing
Date under the GESCO Purchase Agreement that MK and BNFL-USA
agree is to be allocated to the GESCO II Business.
(b) If at any time before either BNFL-USA or MK exercise its rights
under Section 12.2(a), XX xxxxx the GESCO II Business, MK will
pay, or will cause GESCO II to pay, to BNFL-USA an amount (the
"Sale Payment") such that BNFL-USA will receive 8% of the value of
GESCO II established by such sale.
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The BNFL Right will terminate upon the payment of the Termination
Payment or the Sale Payment.
12.3 Miscellaneous.
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(a) MK will guarantee payment GESCO II of its obligations under the
BNFL Right.
(b) The BNFL Right will include appropriate protections to ensure that
funds are not distributed from GESCO II to MK via any contract or
other mechanism in a manner that would frustrate or avoid BNFL-
USA's rights to receive payments with respect to the BNFL Right.
(c) The BNFL Right will be structured so as to permit MK to engage in
ordinary cash management activities without being required to make
payments to BNFL-USA.
13. Protection of National Security and US Technology.
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13.1 The parties will take all necessary actions to comply with applicable
laws concerning the protection of US national security. Among other
things, these actions will include, where necessary, electing as
directors or appointing as managers persons with appropriate security
clearances and forming government security committees.
13.2 The parties will take all necessary actions to comply with applicable
laws concerning the protection of US technology, including procedures
to ensure that the licensing and sale of AP600 technology will be
subject to appropriate review and control by US citizens.
14. Indemnification.
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14.1 Background. The parties acknowledge and agree that
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(a) It is their intention to segregate the ESBU Business, the GESCO I
Business, the GESCO II Business and, if necessary, the GESCO III
Business by allocating them to the Companies as outlined in
Section 7.
(b) It is their intention that MK's exposure to liabilities arising
from the ESBU Operations or the GESCO I Operations, and BNFL-USA's
exposure to liabilities arising from the GESCO I Operations or the
GESCO II Operations be limited as set forth herein.
(c) In order to preserve the allocation of liabilities reflected by
such actions, the parties agree that each of the parties and the
Companies and their respective affiliates will be entitled to
indemnification as set forth below.
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14.2 First and Second Tier Entities. For the purposes of this Section 14
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(a) MK and BNFL-USA and, if applicable, their parent companies are
referred to as "First Tier Entities" and
(b) ESBU, GESCO I, GESCO II and, if created, GESCO III, and their
respective subsidiaries, are referred to as "Second Tier
Entities".
14.3 Indemnification. With respect to any liability or claim that arises
---------------
from the business or operations of any Second Tier Entity (or any
predecessor):
(a) GESCO II. In the case of any liability of any kind or nature
--------
whatsoever (including liabilities existing on the GESCO Closing
Date) that arises from the business or operations of GESCO II,
GESCO II will indemnify and defend British Nuclear Fuels plc
("BNFL"), BNFL-USA, their affiliates, Wesco and any other Second
Tier Entities and their affiliates and hold them harmless against
any loss or expense arising from such liability or claim
(including reasonable attorneys' fees but excluding consequential
damages) ("Losses"). If the assets of GESCO II are insufficient to
perform the required indemnification and defense, MK will
indemnify, defend and hold harmless BNFL, BNFL-USA, and their
affiliates, and Wesco and any other Second Tier Entities and their
affiliates.
(b) ESBU. In the case of any liability of any kind or nature
----
whatsoever (including liabilities existing on the ESBU Closing
Date) that arises from the business or operations of ESBU, ESBU
will indemnify and defend Xxxxxxxx Xxxxxxx Corporation, a Delaware
corporation ("MK-Delaware"), MK, their affiliates, Wesco and any
other Second Tier Entities and their affiliates and hold them
harmless against any Losses. If the assets of ESBU are
insufficient to perform the required indemnification and defense,
BNFL-USA will indemnify, defend and hold harmless MK-Delaware, MK,
and their affiliates, and Wesco and any other Second Tier Entities
and their affiliates.
(c) GESCO I and GESCO III. In the case of any liability of any kind
---------------------
or nature whatsoever (including liabilities existing on the GESCO
Closing Date) arising from the business or operations of GESCO I
or, if created, GESCO III, GESCO I or GESCO III, as the case may
be, will indemnify and defend MK-Delaware, MK, their affiliates,
BNFL, BNFL-USA and their affiliates, Wesco and each of the other
Second Tier Entities and its affiliates and hold them harmless
against any Losses; provided that there shall be excluded from
indemnification any Loss that is reflected in a reduction in the
value of any equity interest in GESCO I or GESCO III held by MK,
BNFL-USA or their affiliates. If the assets of GESCO I or GESCO
III, as the case may be, are insufficient to perform the required
indemnification and defense, BNFL-USA and MK will make appropriate
payments to each other and their respective affiliates such that
MK and its
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affiliates, on the one hand, and BNFL-USA and its affiliates, on
the other hand, (taking into account their economic participation
in the Second Tier Entities) share any Losses on a 50:50 basis.
14.4 Limitations. The provisions of this Section 14 shall be perpetual.
-----------
14.5 Notice and Cooperation. Any party that has, or believes that it may
----------------------
have, a claim for indemnification or other right to payment under this
Section 14 will give prompt written notice to the other party and
other relevant parties of the event or circumstances giving rise to
such claim. The parties will cooperate with each other and their
affiliates in the investigation and defense of any liability or claim
that may be the subject of this Section 14. Any disputes will be
resolved as provided in Section 16.
15. Technology Sharing Arrangements.
-------------------------------
15.1 The parties acknowledge that
(a) The parties and their affiliates will enter into one or more
technology sharing arrangements with CBS and certain of its
affiliates, and certain third parties, in connection with the
transactions contemplated by the Asset Purchase Agreements (the
"CBS Technology Sharing Agreements"),
(b) In order for ESBU, GESCO, GESCO II and GESCO III to obtain the
benefit of the technology that is to be transferred, licensed or
shared under the CBS Technology Sharing Agreements, it will be
necessary for them to enter into appropriate arrangements for the
further sharing or licensing of such technology through sublicense
arrangements which will require the prior approval of CBS (which
may not be unreasonably withheld).
(c) The parties and their affiliates will enter into appropriate
cross-licensing agreements with respect to intellectual property
created by GESCO I, GESCO II, GESCO III and ESBU (and any of their
subsidiaries) provided that (i) the cost of such licenses will be
the cost of producing the intellectual property, and (ii) any
GESCO II cross-licenses will be, and other cross-licenses may be,
subject to appropriate limitations to protect US national
security.
15.2 MK and BNFL-USA will, and will cause their affiliates, including the
Companies to enter appropriate agreements to carry out the purpose of
this Section 15.
16. Dispute Resolution.
------------------
16.1 All disputes with respect to any matters that are the subject of this
Agreement will, in the first instance, be referred to the Chief
Executive Officers ("CEO's") of MK-Delaware and BNFL as
representatives of their respective companies.
15
16.2 If the dispute cannot be resolved by the CEO's, it will next be
referred to an independent mediator agreed to by the parties.
16.3 If the dispute remains unresolved after mediation, it will then be
subject to binding arbitration under the rules of the International
Chamber of Commerce at a mutually agreeable venue. If MK and BNFL-USA
are unable to agree on a venue, the arbitration will take place at a
neutral site other than the United States or the United Kingdom.
17. Termination. This Agreement will terminate automatically upon the
-----------
termination, for any reason, of the ESBU Purchase Agreement or the GESCO
Purchase Agreement.
18. Confidential Information.
------------------------
18.1 The parties acknowledge that in order to carry out the purposes of
this Agreement it will be necessary for them to disclose to the other
party, and to its affiliates, confidential and proprietary information
of the disclosing party or its affiliates.
18.2 Each party will take reasonable actions to identify to the other party
any information that is confidential or proprietary, which will
include marking or identifying such information (in whatever form it
may be embodied) as "Confidential". All such information is referred
to as "Confidential Information".
18.3 Each party will treat the other party's Confidential Information as
confidential, will not disclose it to any other person (other than
those of its and its affiliates' officers, directors and
representatives who need to know such information for the purpose of
carrying out the transactions contemplated by the Agreement) or use it
for any purpose other than carrying out the transactions contemplated
by this Agreement.
18.4 The restrictions imposed under this Section 18 shall remain in effect
(a) with respect to any Confidential Information that constitutes a
"trade secret" (as defined under the laws of the State of New
York) of the disclosing party so long as it remains a trade
secret.
(b) with respect to other Confidential Information, so long as the
parties jointly own interests in any of the GESCO Business or the
ESBU Business, whether through their respective investments in
Wesco or otherwise and until the third anniversary of the date on
which any such joint ownership is terminated.
18.5 The restrictions imposed under this Section 18 shall not apply to any
Confidential Information that
(a) at the time of disclosure is available in the public domain or is
known to the receiving party without breach of any obligation of
confidentiality,
16
(b) is subsequently disclosed by a third party to the receiving party
without any obligation of confidentiality, or
(c) is independently developed by the receiving party without breach
of any obligation of confidentiality.
19. Miscellaneous.
-------------
19.1 Cooperation Prior to Closing. During the period between execution of
----------------------------
this Agreement and the ESBU and GESCO Closing Dates, MK and BNFL-USA
will consult regularly with respect to matters arising under the ESBU
Purchase Agreement and/or the GESCO Purchase Agreement. Initiating
formal disputes, challenges or allegations of breach against CBS under
such agreements will require the agreement of MK and BNFL-USA.
19.2 Integration. This Agreement contains the entire understanding of the
-----------
parties with respect to the subject matter hereof, and supersedes all
prior understandings and agreements between them or their affiliates
with respect to such subject matter. The parties expect that this
Agreement will be superseded in whole or in part by one or more other
written agreements between them (the "Subsequent Agreements"). Each
Subsequent Agreement shall make specific reference to this Agreement
and the provisions, if any, of this Agreement that are to be
superseded by such Subsequent Agreement.
19.3 Governing Law. This Agreement is governed by and shall be construed
-------------
in accordance with the law of the State of New York, without regard to
the principles of conflicts of laws.
19.4 Assignment. No party shall have the right to assign all or any part
----------
of its rights or obligations under this Agreement without the written
consent of the other party. This Agreement shall be binding upon and
enure to the benefit of the parties and their respective permitted
successors and assigns.
19.5 No Third Party Beneficiaries. Except for the Companies, this
----------------------------
Agreement is not intended to create any rights in any person that is
not a party to this Agreement.
19.6 No Partnership. The parties do not intend to create, and this
--------------
Agreement shall not be deemed to create, a partnership or agency
relationship or any fiduciary duties between MK and BNFL-USA.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers or agents, all as of
the day and year first above written.
XX XXXXXXXX XXXXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Exec. Vice President
BNFL-USA BNFL USA GROUP INC.
By: /s/ X. X. Xxxxxx
------------------------------------
Name: X. X. Xxxxxx
Title:
GUARANTEES
In consideration of the execution and delivery of this Agreement by MK, British
Nuclear Fuels plc, a public limited company organized under the laws of England,
hereby unconditionally and irrevocably guarantees to MK-Delaware and MK the due
and punctual payment and performance by BNFL-USA of all of its obligations under
the Consortium Agreement (including without limitation its indemnification
obligations under Section 14), the GESCO Purchase Agreement and the ESBU
Purchase Agreement.
Dated: June 24, 1998 BRITISH NUCLEAR FUELS plc
--
/s/ R.A.N. Chiese
By: __________________________
Name: R.A.N. Chiese
Title:Group Finance Director
In consideration of the execution and delivery of this Agreement by BNFL-USA,
Xxxxxxxx Xxxxxxx Corporation, a Delaware corporation, hereby unconditionally and
irrevocably guarantees to BNFL and BNFL-USA the due and punctual payment and
performance by MK of all of its obligations under the Consortium Agreement
(including without limitation its indemnification obligations under Section 14),
the GESCO Purchase Agreement and the ESBU Purchase Agreement.
Dated: June 24, 1998 XXXXXXXX XXXXXXX CORPORATION
--
/s/ Xxxxxxx X. Xxxxx
By: __________________________
Name: Xxxxxxx X. Xxxxx
Title:Exec. Vice President
EXHIBITS
The registrant agrees to provide the Securities and Exchange Commission,
upon request, with copies of the Exhibits hereto.
