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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
AS PURCHASER,
XXXX COMMUNICATIONS RESEARCH, INC.
AND THE
SELLERS NAMED HEREIN
Dated as of November 20, 1996
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TABLE OF CONTENTS
Section Page
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ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares.......................................... 2
ARTICLE II
PURCHASE PRICE
2.1 Amount of Purchase Price............................................. 2
2.2 Payment of the Purchase Price........................................ 2
2.3 Post-Closing Adjustment of Purchase Price............................ 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
3.1 Organization and Good Standing....................................... 7
3.2 Authorization of Agreement........................................... 7
3.3 Consents of Third Parties; Non-Contravention......................... 7
3.4 Ownership and Transfer of Shares..................................... 8
3.5 Taxes................................................................ 8
3.6 Litigation........................................................... 9
3.7 Affiliate Contracts.................................................. 9
3.8 Financial Advisors................................................... 10
3.9 Information Supplied; No Misrepresentation........................... 10
3.10 Certain Tax Matters.................................................. 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Good Standing....................................... 11
4.2 Authorization of Agreement........................................... 11
4.3 Subsidiaries......................................................... 11
4.4 Capitalization....................................................... 12
4.5 Charters and By-Laws................................................. 13
4.6 Consents of Third Parties; Non-Contravention......................... 13
4.7 Financial Statements................................................. 14
4.8 No Undisclosed Liabilities........................................... 15
4.9 Absence of Certain Changes........................................... 15
4.10 Taxes................................................................ 17
4.11 Intangible Property.................................................. 19
4.12 Material Contracts................................................... 22
4.13 Employee Benefits.................................................... 24
4.14 Labor................................................................ 26
4.15 Litigation........................................................... 26
4.16 Compliance with Laws................................................. 27
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Section Page
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4.17 Environmental Matters................................................ 27
4.18 Real Property........................................................ 28
4.19 Title to Property.................................................... 29
4.20 Insurance............................................................ 29
4.21 Intercompany Accounts................................................ 29
4.22 Information Supplied; No Misrepresentation........................... 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Organization and Good Standing....................................... 30
5.2 SEC Reports; Financial Statements.................................... 30
5.3 Absence of Changes................................................... 31
5.4 No Disposition of Stock or Assets.................................... 31
5.5 Authorization of Agreement........................................... 31
5.6 Consents of Third Parties; Non-Contravention......................... 32
5.7 Litigation........................................................... 33
5.8 Financing............................................................ 33
5.9 Investment Representation and Acknowledgment......................... 34
5.10 Investment Company Act............................................... 34
5.11 Financial Advisors................................................... 35
5.12 Information Supplied; No Misrepresentation........................... 35
ARTICLE VI
FURTHER AGREEMENTS OF THE PARTIES
6.1 Access to Information; Board Observer;
Confidentiality...................................................... 35
6.2 Conduct of the Business Pending the Closing.......................... 39
6.3 Non-Solicitation; Non-Competition.................................... 46
6.4 Reasonable Commercial Efforts........................................ 49
6.5 Further Assurances................................................... 49
6.6 Preservation of Records.............................................. 49
6.7 Publicity............................................................ 50
6.8 Financial Statements and Information................................. 50
6.9 Notice Regarding Regulatory Proceedings.............................. 52
6.10 Employee Matters..................................................... 53
6.11 Indemnification; Directors and Officers
Insurance............................................................ 55
6.12 Affiliate Contracts.................................................. 57
6.13 Financial Advisors................................................... 57
6.14 Permitted Transactions............................................... 57
6.15 Purchaser Guarantee.................................................. 58
6.16 Third-Party Indebtedness............................................. 58
6.17 Resignations......................................................... 58
6.18 Certain Agreements................................................... 59
6.19 Fixed Price Contracts................................................ 59
6.20 Formatives........................................................... 60
6.21 Location of Corporate Headquarters................................... 62
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Section Page
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser..................... 62
7.2 Conditions Precedent to Obligations of Each Seller................... 64
ARTICLE VIII
CLOSING; DOCUMENTS TO BE DELIVERED AT THE CLOSING
8.1 Closing Date......................................................... 66
8.2 Documents to Be Delivered by Sellers and/or the
Company.............................................................. 67
8.3 Documents to Be Delivered by Purchaser............................... 67
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination of Agreement............................................. 67
9.2 Survival After Termination........................................... 69
ARTICLE X
SURVIVAL; GENERAL INDEMNIFICATION
10.1 Survival............................................................. 71
10.2 Indemnification by Purchaser......................................... 72
10.3 Indemnification by Sellers........................................... 72
10.4 Indemnification Procedures........................................... 75
10.5 Characterization of Indemnification and Other
Payments............................................................. 81
10.6 Computation of Losses Subject to Indemnification..................... 81
10.7 No Right of Contribution Against Company............................. 82
ARTICLE XI
TAX MATTERS
11.1 Preparation of Tax Returns; Payment of Taxes......................... 82
11.2 Transfer Taxes....................................................... 82
11.3 Tax Indemnification.................................................. 83
11.4 Formative Projects................................................... 88
ARTICLE XII
MISCELLANEOUS
12.1 Certain Definitions; Rules of Construction........................... 89
12.2 Expenses.............................................................101
12.3 Specific Performance.................................................101
12.4 Effect of Seller Mergers, Consolidations, Etc........................102
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Section Page
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12.5 Sellers' Representative...............................................102
12.6 GOVERNING LAW.........................................................103
12.7 Arbitration...........................................................103
12.8 Entire Agreement; Amendments and Waivers..............................104
12.9 Table of Contents and Headings........................................104
12.10 Notices...............................................................104
12.11 Severability..........................................................106
12.12 Binding Effect; Assignment............................................106
12.13 Disclosure Schedules..................................................106
12.14 Counterparts..........................................................107
EXHIBIT A - Form of Amended Master Agreement
EXHIBIT B - Interim Period Net Income Principles of Calculation
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 20, 1996 (this
"Agreement"), by and among Ameritech Services, Inc., a Delaware corporation
("Ameritech"), Xxxx Atlantic NSI Holdings, Inc., a Delaware corporation ("Xxxx
Atlantic"), BellSouth Telecommunications, Inc., a Georgia corporation
("BellSouth"), Pacific Xxxx, a California corporation ("Pacific Xxxx"),
Southwestern Xxxx Telephone Company, a Missouri corporation ("Southwestern
Xxxx"), Telesector Resources Group, Inc., a Delaware corporation ("Telesector")
and U S WEST Communications, Inc., a Colorado corporation ("U S WEST" and,
collectively with Ameritech, Xxxx Atlantic, BellSouth, Pacific Xxxx,
Southwestern Xxxx and Telesector, "Sellers" and, individually, a "Seller"),
Xxxx Communications Research, Inc., a Delaware corporation (the "Company"), and
Science Applications International Corporation, a Delaware corporation
("Purchaser").
W I T N E S S E T H :
WHEREAS, each Seller is the owner of one (1) share of common
stock, without par value (each, a "Share" and, collectively, the "Shares"), of
the Company, which Shares constitute all of the issued and outstanding shares
of capital stock of the Company;
WHEREAS, the Company and its Subsidiaries are engaged in the
business of providing software development, engineering and consulting
services, advanced research and development, technical training and other
related services to the telecommunications industry (excluding the Excluded
Businesses (as defined in Section 12.1(b)), the "Business");
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser
desires to purchase from Sellers, the Shares, for the purchase price and upon
the terms and conditions hereinafter set forth; and
WHEREAS, certain terms used in this Agreement are defined in
Section 12.1 hereof;
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter contained,
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and for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Upon and subject to the
terms and conditions of this Agreement, on the Closing Date, Sellers shall
sell, assign, transfer and deliver to Purchaser, and Purchaser shall purchase
from Sellers, the Shares.
ARTICLE II
PURCHASE PRICE
2.1 Amount of Purchase Price. The aggregate purchase
price for the Shares shall be (a) $646 million minus (b) Net Third Party
Indebtedness and minus (c) the Formative Refund Amount (the "Base Purchase
Price"), subject to adjustment as set forth in Sections 2.2 and 2.3 hereof (as
adjusted, the "Purchase Price"). The Purchase Price shall be payable as
provided in Sections 2.2 and 2.3 hereof.
2.2 Payment of the Purchase Price. On the Closing Date,
Purchaser shall pay to each Seller an amount (in the aggregate for all Sellers,
the "Estimated Purchase Price") equal to (a) one-seventh (1/7) of the Base
Purchase Price plus or minus, as the case may be, (b) one-seventh (1/7) of an
amount equal to Sellers' good faith estimate (based upon the Company's results
of operations during the Interim Period through the latest date as of which the
Company has delivered financial statements to Purchaser pursuant to Section
6.1(a)(i)) of the Positive Adjustment Amount or the Negative Adjustment Amount,
by wire transfer of immediately available funds pursuant to each Seller's
respective written instructions. Sellers' Representative shall deliver to
Purchaser not less than 15 business days prior to the Closing Date (i) a notice
setting forth Sellers' good faith estimate of the amount of the Positive
Adjustment Amount or the Negative Adjustment Amount, if any and (ii) all
supporting documentation reasonably necessary for Purchaser to evaluate the
accuracy and reasonableness of such estimate. Notwithstanding the foregoing,
the portion of the Purchase Price payable on the Closing Date shall be more or
less than the Base Purchase Price only if Purchaser,
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after review of the notice and documentation delivered by Sellers'
Representative pursuant to the immediately preceding sentence and consultation
between the Purchaser and Sellers' Representative, agrees (such agreement not
to be unreasonably withheld) with Sellers' estimate of the Positive Adjustment
Amount or the Negative Adjustment Amount, if any. If Purchaser does not agree
with Sellers' estimate of such amount (and Sellers' Representative and
Purchaser are not able to agree on a different amount), the Estimated Purchase
Price to be paid on the Closing Date shall be equal to the Base Purchase Price.
2.3 Post-Closing Adjustment of Purchase Price.
(a) Subject to the provisions of paragraph (10)(c) of Exhibit
B hereto, as soon as practicable (and in any event within 90 days) following
the Closing Date, the Company shall prepare and deliver to Sellers and
Purchaser an audited consolidated income statement of the Company and its
Subsidiaries for the Interim Period (the "Interim Period Income Statement") and
a statement of (i) the Interim Period Net Income and (ii) the amount, if any,
by which the sum of Interim Period Net Income and Interim Period Capital
Contributions exceeds the Interim Period Dividends (the "Positive Adjustment
Amount") or the amount, if any, by which the Interim Period Dividends exceed
the sum of Interim Period Net Income and Interim Period Capital Contributions
(the "Negative Adjustment Amount" and, together with the Positive Adjustment
Amount, the "Adjustment Amount"). The Interim Period Income Statement shall be
audited by Coopers & Xxxxxxx L.L.P. ("C&L"), and C&L also shall certify that
the Interim Period Income Statement and the statements of Interim Period Net
Income and the Adjustment Amount have been prepared in accordance with this
Agreement. The reasonable fees and expenses of C&L shall be paid 50% by the
Company and 50% by Purchaser. Except as otherwise expressly provided in the
definition of Interim Period Net Income, the Interim Period Income Statement
shall be prepared in accordance with (x) the books and records of the Company
and its Subsidiaries and (y) the principles and procedures used in the
preparation of the audited consolidated income statement of the Company and its
Subsidiaries for the year ended December 31, 1995.
(b) Sellers and Purchaser shall have a period of thirty
(30) business days after delivery of the Interim Period Income Statement to
present in writing to Purchaser or Sellers' Representative, as the case may be
(in each
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case, with a copy to C&L) any objections Sellers or Purchaser may have to any
of the matters set forth therein or to the calculation of the Interim Period
Net Income or the Adjustment Amount delivered therewith, which written notice
shall specify those items and, except to the extent not reasonably practicable
without additional due diligence, the dollar amounts with which Sellers or
Purchaser disagree and the basis for such disagreement, and Sellers or
Purchaser, as the case may be, shall be deemed to have agreed with all other
items and amounts contained in the Interim Period Income Statement and
calculations of Interim Period Net Income and the Adjustment Amount delivered
pursuant to Section 2.3(a) and not so objected to. The objections, if any,
shall be set forth in a single written notice signed by Sellers' Representative
or Purchaser and delivered to Purchaser or Sellers' Representative (in each
case, with a copy to C&L) within the specified thirty (30) business day period.
During such thirty (30) business day period, Purchaser and the Company shall
(i) provide Sellers' authorized representatives (including Sellers'
Representative) during normal business hours with full access to the books,
records, facilities and employees and representatives of the Company to the
extent reasonably required to permit Sellers to verify the accuracy of the
Adjustment Amount, and (ii) cooperate fully and cause their respective
employees and representatives to cooperate fully with Sellers' authorized
representatives (including Sellers' Representative) to the extent reasonably
required to permit Sellers to verify the accuracy of the Adjustment Amount,
including the provision on a timely basis of all information, work papers,
schedules and other documents used in preparing the Interim Period Income
Statement and the statement of Interim Period Net Income. If no such
objections are presented within such thirty (30) business day period, the
Interim Period Income Statement and the calculations of the Interim Period Net
Income and the Adjustment Amount shall be deemed to be accepted and approved by
Sellers and Purchaser and a supplemental closing (herein called the
"Supplemental Closing") shall be held on the fifth (5th) business day following
the expiration of such thirty (30) business day period, or on such other date
as may be mutually agreed upon in writing by Purchaser and the Sellers'
Representative.
(c) If Sellers' Representative or Purchaser shall present
in writing any objections within the aforesaid thirty (30) business day period
in accordance with Section 2.3(b), then Purchaser and Sellers' Representative
shall use
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their reasonable good faith efforts to resolve all such objections within
twenty (20) business days after receipt of such objections. If Purchaser and
Sellers' Representative are able to resolve the disputed matters within such
twenty (20) business day period, the Interim Period Net Income and the
Adjustment Amount as revised in accordance with such agreement by Purchaser and
Sellers' Representative shall be final and binding on each of the parties
hereto and the Supplemental Closing shall then take place five (5) business
days following the date of such agreement by Purchaser and Sellers'
Representative, or on such other date as may mutually be agreed upon in writing
by Purchaser and Sellers' Representative. If Purchaser and Sellers'
Representative are unable to resolve all such disputed matters within such
twenty (20) business day period, then the specific matters in dispute shall be
submitted to Deloitte & Touche LLP (provided such firm does not have any
material relationship with any of the parties hereto) or, if such firm declines
to act in such capacity or has any such material relationship, such other firm
of independent certified public accountants of national standing mutually
acceptable to Purchaser and Sellers' Representative (in either case, the "Final
Arbiter"), which firm shall make a final and binding determination as to such
matter or matters within thirty (30) business days of the submission of the
disputed matters to the Final Arbiter. The Final Arbiter shall send its
written determination to Purchaser and Sellers' Representative, together with a
confirmation of the original Interim Period Net Income and Adjustment Amount
or, if necessary, a revised Interim Period Net Income and Adjustment Amount
based upon such determination, whereupon the confirmed or revised Interim
Period Net Income and Adjustment Amount shall be binding on the parties hereto
(absent manifest error). The Supplemental Closing shall then take place five
(5) business days following the receipt of such documents by Purchaser and
Sellers' Representative, or on such other date as may be mutually agreed upon
in writing by Purchaser and Sellers' Representative.
(d) The parties hereto agree to cooperate with each other
and each other's authorized representatives and with the Final Arbiter in order
that any and all matters in dispute shall be resolved and that final
determination of the Interim Period Net Income and the Adjustment Amount shall
be made as soon as practicable.
(e) At the Supplemental Closing, Purchaser shall pay to
each Seller an amount equal to one-seventh (1/7) of
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the amount, if any, by which the Purchase Price exceeds the Estimated Purchase
Price, or each Seller shall pay to Purchaser an amount equal to one-seventh
(1/7) of the amount, if any, by which the Purchase Price is less than the
Estimated Purchase Price (or the Base Purchase Price if, pursuant to the last
sentence of Section 2.2, the portion of the Purchase Price paid on the Closing
Date was the Base Purchase Price). Any amount payable pursuant to this Section
2.3(e) shall bear interest from and including the Closing Date to but excluding
the date of payment at a rate per annum equal to the rate announced from time
to time by Xxxxxx Guaranty Trust Company of New York (or such other bank as may
be agreed by Purchaser and Sellers' Representative) as its prime rate in effect
from time to time during the period from the Closing Date to the date of the
Supplemental Closing. Such interest shall be payable on the date of the
Supplemental Closing and shall accrue daily on the basis of a year of 365 days
and the actual number of days for which due. Any payment required to be paid
hereunder shall be made by wire transfer in U.S. dollars in immediately
available funds to an account specified by each Seller or Purchaser, as the
case may be, on or prior to the date of the Supplemental Closing.
(f) All fees and expenses (other than the fees and
expenses of C&L, which shall be borne in accordance with Section 2.3(a))
incurred in connection with the determination of the Purchase Price shall be
borne by the party or parties that incurred such fees and expenses, except that
the fees and expenses hereunder of the Final Arbiter shall be paid (i) by
Purchaser if the Adjustment Amount (as determined by the Final Arbiter) results
in a Purchase Price higher than the Purchase Price determined using the
Adjustment Amount (as determined pursuant to Section 2.3(a)), (ii) one-seventh
(1/7) by each Seller if the Adjustment Amount (as determined by the Final
Arbiter) results in a Purchase Price lower than the Purchase Price determined
using the Adjustment Amount (as determined pursuant to Section 2.3(a)) and
(iii) otherwise, one-half by Purchaser and one-fourteenth (1/14) by each
Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Except as provided in Section 3.10, each Seller, severally and
not jointly, represents and warrants as follows:
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3.1 Organization and Good Standing. Such Seller is a
corporation validly existing and in good standing under the laws of the state
of its incorporation.
3.2 Authorization of Agreement. Such Seller has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument or certificate contemplated by
this Agreement to be executed by such Seller in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
as to each Seller, such Seller's "Seller Documents"), and to perform its
obligations hereunder and thereunder. The execution, delivery and performance
by such Seller of this Agreement and the Seller Documents have been duly
authorized by all necessary corporate action on the part of such Seller. This
Agreement has been, and at or prior to the Closing each Seller Document will
be, duly and validly executed and delivered by such Seller and (assuming the
due authorization, execution and delivery by the other parties hereto and
thereto), this Agreement constitutes, and each Seller Document when so executed
and delivered will constitute, legal, valid and binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
3.3 Consents of Third Parties; Non-Contravention.
(a) No consent, waiver, approval or authorization of
(collectively, "Consents"), or declaration or filing with, or notification to,
any Governmental Body (to the Knowledge of such Seller) or other Person which
has not been previously obtained, made or filed is required on the part of such
Seller or any Affiliate of such Seller (or by the Company solely by reason of
such Seller's ownership and proposed sale of its Share) in connection with the
execution, delivery and performance by such Seller of this Agreement or the
Seller Documents, or the consummation by such Seller of the transactions
contemplated hereby and thereby, except (i) for compliance with the applicable
requirements of the HSR Act; (ii) as set forth in Section 3.3(a) of the
Sellers' Disclosure Schedule (only insofar as the same pertains to such Seller
and its Affiliates); or
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(iii) where any failure to obtain any such Consent, or to make such
declaration, filing or notification would not, individually or in the
aggregate, have a Material Adverse Effect or materially impair or delay the
ability of such Seller to consummate the transactions contemplated hereby.
(b) Except as set forth in Section 3.3(b) of the Sellers'
Disclosure Schedule (only insofar as the same pertains to such Seller), the
execution, delivery and performance by such Seller of this Agreement and each
of the Seller Documents, and the consummation by such Seller of the
transactions contemplated hereby and thereby, do not and will not (i) violate
any provision of the certificate or articles of incorporation or by-laws (or
comparable organizational documents) of such Seller; (ii) subject to obtaining
the Consents referred to in Section 3.3(a) of the Sellers' Disclosure Schedule
(only insofar as the same pertains to such Seller and its Affiliates), conflict
with, or result in the breach of, or constitute a default under, or result in
the termination, cancellation or acceleration of any right or obligation of
such Seller under, any lease, agreement, commitment or other instrument to
which such Seller is a party or by which such Seller or any of its properties
is bound; (iii) subject to obtaining the Consents set forth in Section 3.3(a)
of the Sellers' Disclosure Schedule (only insofar as the same pertains to such
Seller and its Affiliates) and assuming compliance with the applicable
requirements of the HSR Act, violate, or result in a breach of or constitute a
default under, any Law applicable to such Seller or any Affiliate of such
Seller; or (iv) result in the creation of any Lien upon the Share owned by such
Seller, other than, in the cases of clauses (ii) and (iii), any violation,
conflict, breach, termination, default, cancellation or acceleration which,
individually or in the aggregate, would not have a Material Adverse Effect or
materially impair or delay the ability of such Seller to consummate the
transactions contemplated hereby.
3.4 Ownership and Transfer of Shares. Such Seller
is the record and beneficial owner of one (1) Share, free and clear of all
Liens. Upon transfer of such Share to Purchaser at the Closing, Purchaser will
receive valid title to such Share, free and clear of any Lien.
3.5 Taxes. Such Seller is not a foreign person within
the meaning of Section 1445 of the Code.
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3.6 Litigation. As of the date hereof, except as set forth
in Section 3.6 of the Sellers' Disclosure Schedule (only insofar as the same
pertains to such Seller and its Affiliates), there are no Legal Proceedings
pending against such Seller or any of its Affiliates or, to the Knowledge of
such Seller, threatened against such Seller or any such Affiliate, in any such
case that question or challenge the validity of this Agreement or any action
taken or to be taken by such Seller or any such Affiliate in connection with
the consummation of the transactions contemplated by this Agreement. Except as
disclosed in Section 3.6 of the Sellers' Disclosure Schedule (only insofar as
the same pertains to such Seller and its Affiliates), neither such Seller nor
any of its Affiliates is subject to any outstanding Order which (i) has had
since December 31, 1995 or would have, individually or in the aggregate, a
Material Adverse Effect or (ii) would materially impair or delay the ability of
such Seller to consummate the transactions contemplated hereby.
3.7 Affiliate Contracts. Except as set forth in Section 3.7
of the Sellers' Disclosure Schedule (only insofar as the same pertains to such
Seller and its Affiliates):
(a) each of the Affiliate Contracts to which such Seller
or any Affiliate of such Seller is a party is valid and enforceable against
such Seller or such Affiliate in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);
(b) there is no material default under any Affiliate
Contract to which such Seller or any Affiliate of such Seller is a party by
such Seller or such Affiliate or, to the Knowledge of such Seller, by any other
party thereto, and no event has occurred that with the giving of notice or
lapse of time or both would constitute a material default thereunder by such
Seller or such Affiliate or, to the Knowledge of such Seller, any such other
party; and
(c) neither the Company nor any of its Subsidiaries has
given notice (which remains outstanding) to such Seller or any Affiliate of
such Seller of or made a claim against such Seller or such Affiliate with
respect to any
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material breach or default which remains uncured under any such Affiliate
Contract.
3.8 Financial Advisors. No Person has acted directly or
indirectly as a broker, finder or financial advisor for such Seller in
connection with the transactions contemplated by this Agreement, except that
Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx") and Xxxxxx Brothers Inc.
("Xxxxxx Brothers" and, together with Xxxxxx Xxxxxxx, "Sellers' Advisors") have
acted as financial advisors on behalf of all Sellers, and no Person other than
Sellers' Advisors is entitled to any fee or commission or like payment in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of such Seller or by such Seller on behalf of the Company.
3.9 Information Supplied; No Misrepresentation. To the
Knowledge of such Seller, none of the information supplied or to be supplied by
such Seller or any Affiliate of such Seller specifically for inclusion or
incorporation by reference in any declaration or filing with, or notification
to, any Governmental Body in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading.
3.10 Certain Tax Matters. Each of Pacific Xxxx and
Telesector, severally and not jointly, represents and warrants that, based
solely on investigations undertaken by such Seller at the request of Purchaser
(the extent and findings of which previously have been disclosed to and
discussed with Purchaser) and without further inquiry, to the actual knowledge
of the persons who conducted such investigations, such Seller has not claimed
any deduction for federal income tax purposes with respect to any Unbilled
Formative Project Revenues for any taxable year ended prior to the date of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
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4.1 Organization and Good Standing. The Company is a
corporation validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority, and all
material governmental licenses, permits, consents and approvals required, to
own, lease and operate its properties and to carry on its business as now
conducted. The Company is duly qualified or authorized to do business as a
foreign corporation and in good standing under the laws of each jurisdiction in
which the conduct of its business or the ownership of its properties requires
such qualification or authorization, except where any failure to so qualify or
be in good standing has not had since December 31, 1995, or would not have,
individually or in the aggregate, a Material Adverse Effect.
4.2 Authorization of Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument or certificate contemplated by
this Agreement to be executed by the Company in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
the "Company Documents"), and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Company of this
Agreement and the Company Documents have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been, and at
or prior to the Closing each Company Document will be, duly and validly
executed and delivered by the Company and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto), this Agreement
constitutes, and each Company Document when so executed and delivered will
constitute, legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.3 Subsidiaries.
(a) Section 4.3(a) of the Company Disclosure Schedule
sets forth the name of each Subsidiary and, with respect to each such
Subsidiary, the jurisdiction in which it is incorporated, each class and number
of shares of its
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authorized capital stock or other ownership interests (collectively, "capital
stock"), the number of shares or other units of each class issued and
outstanding and the record owner(s) of such shares or other units.
(b) Each Subsidiary is a corporation validly existing and
in good standing under the laws of its jurisdiction of organization and has all
requisite corporate or other power and authority, and all material governmental
licenses, permits, consents and approvals required, to own, lease and operate
its properties and to carry on its business as now conducted. Each Subsidiary
is duly qualified or authorized to do business as a foreign organization and in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where any failure to so qualify or be in good standing
has not had since December 31, 1995, or would not have, individually or in the
aggregate, a Material Adverse Effect.
(c) Except as set forth in Section 4.3(c) of the Company
Disclosure Schedule and except for the Company's Subsidiaries listed in Section
4.3(a) of the Company Disclosure Schedule, neither the Company nor any of the
Subsidiaries (i) owns beneficially or of record any shares or other units of
capital stock or any other security of any other Person or (ii) has any other
equity investment in any other Person.
(d) The outstanding shares or other units of capital
stock of each Subsidiary were duly authorized for issuance and are validly
issued, fully paid and non-assessable and are owned by the Company free and
clear of all Liens.
(e) There are no agreements, arrangements or
understandings with respect to the voting, sale or transfer of shares of the
capital stock of any Subsidiary to which the Company or any Subsidiary is a
party.
4.4 Capitalization.
(a) The authorized, issued and outstanding capital stock
of the Company consists of the Shares. All of the Shares were duly authorized
for issuance and are validly issued, fully paid and non-assessable. The
issuance of such Shares was not subject to any preemptive or similar rights.
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(b) There are no outstanding options or rights of any
kind to which the Company or any Subsidiary is a party to acquire any
securities of any class, or any securities convertible into any securities of
any class, of the Company or any of the Subsidiaries, nor are there any
agreements, arrangements, understandings or obligations of the Company or any
Subsidiary to issue any such options, rights or securities.
(c) There are no outstanding agreements, arrangements,
understandings or obligations of the Company or any of the Subsidiaries to
repurchase, redeem or otherwise acquire any securities of the Company or any of
the Subsidiaries.
4.5 Charters and By-Laws. Copies of the certificate of
incorporation and by-laws (or comparable organizational documents) of the
Company and each of the Subsidiaries have been delivered or otherwise made
available to Purchaser prior to the date of this Agreement and such copies are
complete and correct as of the date of this Agreement.
4.6 Consents of Third Parties; Non-Contravention.
(a) No Consent of, or declaration or filing with, or
notification to, any Governmental Body (to the Knowledge of the Company) or
other Person which has not been previously obtained, made or filed is required
on the part of the Company in connection with the execution, delivery and
performance by the Company of this Agreement or the Company Documents, or the
consummation by the Company of the transactions contemplated hereby or thereby
except (i) as set forth in Section 4.6(a) of the Company Disclosure Schedule;
or (ii) where any failure to obtain such Consent, or to make such declaration,
filing or notification, would not, individually or in the aggregate, have a
Material Adverse Effect or materially impair or delay the ability of the
Company to consummate the transactions contemplated hereby to be effected by
the Company; it being understood that nothing in this Section 4.6(a) is
intended to address the subject matter of the representations of Sellers
contained in Section 3.3(a) hereof.
(b) Except as set forth in Section 4.6(b) of the Company
Disclosure Schedule, the execution, delivery and performance by Sellers and the
Company, as the case may be, of this Agreement, each of the Seller Documents
and each of
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the Company Documents, and the consummation by Sellers and the Company of the
transactions contemplated hereby and thereby, do not and will not (i) violate
any provision of the certificate of incorporation or by-laws (or comparable
organizational documents) of the Company or any Subsidiary; (ii) subject to
obtaining the Consents referred to in Section 4.6(a) of the Company Disclosure
Schedule, conflict with, or result in the breach of, or constitute a default
under, or result in the termination, cancellation or acceleration of any right
or obligation of the Company under, any lease, agreement, commitment or other
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties is bound; (iii)
assuming compliance with the matters set forth in Section 4.6(a) hereof,
violate, or result in a breach of or constitute a default under, any Law
applicable to the Company or any Subsidiary; or (iv) result in the creation of
any Lien (other than any Lien created or consented to in writing by Purchaser)
upon any properties or assets of the Company or any Subsidiary, other than, in
the cases of clauses (ii), (iii) and (iv), any violation, conflict, breach,
termination, default, cancellation, acceleration or Lien which, individually or
in the aggregate, would not have a Material Adverse Effect or materially impair
or delay the ability of the Company or Sellers to consummate the transactions
contemplated hereby.
4.7 Financial Statements. The audited consolidated
balance sheets of the Company and its Subsidiaries at December 31, 1995, 1994
and 1993 and the audited consolidated statements of income and cash flows of
the Company for the fiscal years ended December 31, 1995, December 31, 1994 and
December 31, 1993, each of which has been accompanied by the report of C&L
(collectively, the "Financial Statements"), were prepared in accordance with
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto and except as set forth in Section 4.7 of the Company Disclosure
Schedule). The unaudited consolidated balance sheet of the Company and its
Subsidiaries at June 30, 1996 (the "Balance Sheet Date") and the unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for the six-month period then ended (the "Interim Financial
Statements" and, together with the Financial Statements, the "Company
Statements"), were, except as provided therein, and except as set forth in
Section 4.7 of the Company Disclosure Schedule and for the absence of footnotes
and schedules, prepared in accordance with GAAP applied on a basis consistent
with the Financial
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Statements. The Company Statements present fairly, in all material respects,
the consolidated financial position, and the consolidated results of operations
and cash flows of the Company and its Subsidiaries as at the dates and for the
periods indicated, subject, with respect to the Interim Financial Statements,
to normal year-end audit adjustments.
4.8 No Undisclosed Liabilities. None of the Company or
any of its Subsidiaries has or is subject to any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and whether due or
to become due or asserted or unasserted, including, without limitation, those
which would be required by GAAP to be reflected in, reserved against or
otherwise described in the consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto) except (i) as set forth in (A) (1)
the notes to the Company Statements as of and for the year ended December 31,
1995 or (2) the unaudited consolidated balance sheet of the Company and its
Subsidiaries at the Balance Sheet Date or (B) Section 4.8 of the Company
Disclosure Schedule, (ii) for liabilities and obligations incurred prior to the
Balance Sheet Date in the ordinary course of business consistent with past
practice which would not be required by GAAP to be reflected in, reserved
against or otherwise described in the consolidated balance sheet of the Company
and its Subsidiaries (including the notes thereto) and that would not,
individually or in the aggregate, have a Material Adverse Effect, (iii) for
liabilities and obligations incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice that would not,
individually or in the aggregate, have a Material Adverse Effect and (iv) for
other liabilities and obligations incurred since the Balance Sheet Date that
would not, individually or in the aggregate, have a Material Adverse Effect.
4.9 Absence of Certain Changes. (a) Except as set forth
in Section 4.9(a) of the Company Disclosure Schedule, the Company and its
Subsidiaries have conducted the Business in the ordinary course consistent with
past practice from December 31, 1995 to and including the date of this
Agreement and there has not been since December 31, 1995 and on or prior to the
date of this Agreement:
(i) any declaration, setting aside or payment of
any dividend or other distribution in respect of any capital stock of
the Company;
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(ii) any incurrence, assumption or guaranty by the
Company or any Subsidiary of any indebtedness for borrowed money other
than (A) in the ordinary course of business in amounts and on terms
consistent with past practice, (B) borrowings under existing lines of
credit in the ordinary course of business, (C) indebtedness of the
Company or any wholly-owned Subsidiary to the Company or any
wholly-owned Subsidiary, or (D) guarantees by the Company or any
wholly-owned Subsidiary of indebtedness of the Company or any wholly-
owned Subsidiary in the ordinary course of business in amounts and on
terms consistent with past practice; provided, that the aggregate
amount of indebtedness for borrowed money incurred, assumed or
guaranteed pursuant to clause (A), (B) and (D) did not exceed
$200,000,000 in the aggregate at any one time outstanding;
(iii) (A) any increase above normal and usual merit or
cost-of-living increases in the compensation payable or to become
payable by the Company or any Subsidiary to any of its respective
directors, officers, Key Employees or, other than in the ordinary
course of business consistent with past practice, other employees, (B)
any increase in the coverage or benefits available under any (or the
creation of any new) severance pay, termination pay, vacation pay,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any
of the directors or employees of the Company or any Subsidiary or
(iii) the entry into any employment, deferred compensation, severance,
consulting (in which a Person is acting as a consultant to the Company
or any Subsidiary) or similar agreement (or any amendment to any such
agreement existing on December 31, 1995 to which the Company or any
Subsidiary is a party) involving a director or employee of the Company
or a Subsidiary;
(iv) any creation or assumption by the Company or
any Subsidiary of any Lien (other than Liens specifically set forth in
any section of the Company Disclosure Schedule and Permitted
Encumbrances) on any of the properties or assets (whether tangible or
intangible) of the Company or any Subsidiaries;
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(v) any making of any loan or advance to, or capital
contributions to or investments in, any Person (other than loans,
advances, capital contributions and investments to or in wholly-owned
Subsidiaries);
(vi) any damage, destruction or other casualty or loss
(whether or not covered by insurance) affecting the Business or assets
of the Company or any Subsidiary which has had or would have,
individually or in the aggregate, a Material Adverse Effect; or
(vii) any amendment of any material term of any
outstanding security of the Company or any Subsidiary;
(viii) any material change in any method of accounting or
accounting practice by the Company or any Subsidiary;
(ix) any transaction or commitment made, or any contract
or agreement entered into, by the Company or any Subsidiary relating
to its assets or business (including the acquisition or disposition of
any assets) or any relinquishment by the Company or any Subsidiary of
any contract or other right, in either case material to the Company,
other than transactions and commitments entered into or made in the
ordinary course of business consistent with past practice and other
than the Permitted Transactions; or
(x) any commitment or agreement to do any of the
foregoing, except as otherwise permitted by this Agreement.
(b) Except as set forth in Section 4.9(b) of the Company
Disclosure Schedule, since December 31, 1995 there has not been any event or
change (other than as a result of or arising from (i) general economic
conditions or (ii) (other than insofar as this representation relates to events
or changes pertaining to or involving the Sellers or any of their Affiliates)
the identity of Purchaser (as opposed to the fact or terms of the transactions
contemplated hereby)) which has had, or, to the Knowledge of the Company, would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
4.10 Taxes. Except as set forth in Section 4.10 of the
Company Disclosure Schedule, (i) all material Tax
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Returns required to be filed by or on behalf of the Company or any Subsidiary
have been filed with the appropriate Taxing Authority in all jurisdictions in
which such Tax Returns are required to be filed (after giving effect to any
valid extensions of time in which to make such filings); (ii) as of the time of
filing, the Tax Returns described in clause (i) of this Section 4.10 were true,
complete and correct in all material respects; (iii) all Taxes shown as due and
payable on the Tax Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority; (iv) all federal
income Tax Returns filed with respect to Tax years of the Company and its
Subsidiaries through the Tax year ended December 31, 1993 have been examined
and closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired; (v) neither the Company nor any Subsidiary is delinquent in the
payment of any material Tax or has requested any extension of time within which
to file any material Tax Return and has not yet filed such Tax Return; (vi)
neither the Company nor any Subsidiary has granted any extension or waiver of
the statute of limitations period applicable to any material Tax Return, which
period (after giving effect to such extension or waiver) has not yet expired;
(vii) there is no material claim, audit, action, suit, proceeding, or
investigation now pending or, to the knowledge of the Company, threatened
against or with respect to the Company or any Subsidiary in respect of Taxes;
(viii) there are no requests for rulings or determinations in respect of any
Taxes pending between the Company or any Subsidiary and any Taxing Authority;
(ix) neither the Company nor any Subsidiary has entered into nor will it enter
into any agreement or consent pursuant to Section 341(f) of the Code; (x)
neither the Company nor any Subsidiary is currently under any contractual
obligation to pay any amounts of the type described in clause (iii) of the
definition of "Tax" and (xi) neither the Company nor any Subsidiary has agreed
to or is required to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state, local or foreign law by reason of a
change in method of accounting for a Pre-Closing Tax Period or has knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
method of accounting.
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4.11 Intangible Property.
(a) The Company and its Subsidiaries (i) own, or are
licensed or otherwise possess legally enforceable rights to use, all
Intellectual Property that is used in the Business as currently conducted by
the Company and its Subsidiaries and (ii) have taken all reasonable steps to
protect such Intellectual Property owned by the Company or its Subsidiaries; it
being understood and agreed that nothing in this Section 4.11(a) is intended to
address the subject matter of the Company's representations (including, without
limitation, with respect to the infringement of third parties' Intellectual
Property) set forth in Sections 4.11(e) and 4.11(h).
(b) Section 4.11(b) of the Company Disclosure Schedule
separately lists (i) all patents and all registered and unregistered
trademarks, trade names and service marks, registered copyrights, and where
applicable, applications for each of the foregoing, and maskworks owned by the
Company or a Subsidiary and, where applicable, including the jurisdictions in
which each such Intellectual Property right has been issued or registered or in
which any application for such issuance or registration has been filed, and the
number or other identifier used by such jurisdiction with respect to such
Intellectual Property right; (ii) all material licenses, sublicenses and other
agreements as to which the Company or any Subsidiary is a party and pursuant to
which any Person is authorized by the Company or any Subsidiary to use any
Intellectual Property owned by the Company or any Subsidiary; (iii) all
material licenses, sublicenses and other agreements as to which the Company or
any Subsidiary is a party and pursuant to which the Company or any Subsidiary
is authorized to use any Intellectual Property owned by a third party ("Third
Party Intellectual Property") which is incorporated in, is, or forms a part of
any products or services of the Company or any Subsidiary that are material to
their respective businesses; and (iv) all material licenses pursuant to which
the Company or any Subsidiary is authorized to use software owned or licensed
by a third party.
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is, nor will it be
as a result of the execution and delivery of this Agreement and the Company
Documents, the performance of its obligations hereunder and thereunder or the
consummation of the transactions contemplated hereby
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and thereby, in breach of any license, sublicense or other agreement to which
it is a party relating to Intellectual Property, Third Party Intellectual
Property or software owned or licensed by a third party, which breach would,
individually or in the aggregate, be material to the Company and its
Subsidiaries taken as a whole.
(d) Except in connection with the agreements with third
parties listed in Section 4.11(d) of the Company Disclosure Schedule, the
Company has not granted any right to create, use, display, reproduce, modify,
distribute, market or exploit products or services containing or embodying any
Intellectual Property which is material to the Company and its Subsidiaries
taken as a whole.
(e) Except as set forth in Section 4.11(e) of the Company
Disclosure Schedule, the Company has not received any notice and has no
Knowledge to the effect that the design, manufacture, marketing, licensing and
sale of the products of the Company and of its Subsidiaries infringes,
misappropriates or unlawfully uses or discloses any Third Party Intellectual
Property, except where such infringement, misappropriation or unlawful use or
disclosure would not, individually or in the aggregate, be material to the
Company and its Subsidiaries taken as a whole.
(f) It is the policy of the Company and its Subsidiaries
to require, and the Company and its Subsidiaries have secured, valid written
agreements from all of their respective current and former employees,
consultants and independent contractors restricting the use and disclosure of
the Intellectual Property owned by the Company or its Subsidiaries, as the case
may be, and providing, in the case of employees, for assignment to the Company
or its Subsidiaries from all such employees who contribute or have contributed
to the creation and development of Intellectual Property of the rights to such
contributions. A true, correct and complete copy of the form of nondisclosure
and confidentiality agreement currently used by the Company and its
Subsidiaries for such employees has been provided to Purchaser. To the
Knowledge of the Company, all use, disclosure or appropriation of confidential
information comprised of or embodied in Intellectual Property owned by the
Company or any Subsidiary, by or to a third party, has been pursuant to the
terms of a written confidentiality agreement executed with such third party,
except where the failure of such to be the case could not, individually or in
the aggregate, reasonably be expected to be material to the
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Company and its Subsidiaries taken as a whole. To the Company's Knowledge, all
use, disclosure or appropriation of confidential information comprised of or
embodied in Intellectual Property not owned by the Company or any Subsidiary
has been pursuant to the terms of a written agreement between the Company or
its Subsidiary and the owner of such Intellectual Property, or is otherwise
lawful, except where the failure of such to be the case would not, individually
or in the aggregate, be material to the Company and its Subsidiaries taken as a
whole.
(g) Subject to the disclosures made in Section 4.11(h) of
the Company Disclosure Schedule, all of the material and registered trademarks,
tradenames, service marks and copyrights are valid and subsisting, all patents
owned by the Company or any Subsidiary are subsisting and, to the Knowledge of
the Company (without independent investigation), all patents owned by the
Company or any Subsidiary are valid.
(h) Except as set forth in Section 4.11(h) of the Company
Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries has
received a pending written or, to the Knowledge of the Company, oral assertion
or claim challenging the validity of the Company's Intellectual Property listed
in Section 4.11(b) of the Company Disclosure Schedule which, individually or in
the aggregate, would be material to the Company and its Subsidiaries taken as a
whole, (ii) neither the Company nor any Subsidiary has received any written or
oral notice or has any Knowledge to the effect that the conduct of the Business
as heretofore and currently conducted conflicts in any way with any Third Party
Intellectual Property that, individually or in the aggregate, would be material
to the Company and its Subsidiaries taken as a whole, (iii) to the Knowledge of
the Company, there are no infringements, misappropriations or unlawful uses of
any proprietary rights or other Intellectual Property owned by or licensed by
or to the Company or any Subsidiary which, individually or in the aggregate,
would be material to the Company and its Subsidiaries taken as a whole, and
(iv) without limiting the foregoing, neither the Company nor any Subsidiary (x)
is a party to any pending Legal Proceeding which involves a claim of
infringement, misappropriation or unlawful use of (A) any Third Party
Intellectual Property or (B) any Intellectual Property owned by the Company or
any Subsidiary or (y) since January 1, 1995, has brought any Legal Proceeding
for infringement, misappropriation or unlawful use of Intellectual Property or
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breach of any license, sublicense or agreement involving Intellectual Property
against any third party.
(i) With respect to patent applications filed and patents
issued based on inventions or improvements of employees made or conceived in
the course of their employment by the Company, it is the policy and routine
practice of the Company to require such patents or applications to be assigned
to the Company and to record the assignments thereof in the United States
Patent and Trademark Office.
4.12 Material Contracts.
(a) The Company has delivered or otherwise made available
to Purchaser prior to the date hereof true, correct and complete copies of all
contracts and agreements (and all amendments, modifications and supplements
thereto and all side letters to which the Company or any Subsidiary is a party
affecting the obligations of any party thereunder) to which the Company or any
of its Subsidiaries is a party or by which any of their respective properties
or assets are bound that are in effect on the date of this Agreement and are
material to the business, properties or assets of the Company and its
Subsidiaries taken as a whole, including, without limitation: (i) all
employment, consulting (in which an individual is acting as a consultant to the
Company or any of its Subsidiaries under an agreement having a term of at least
one year or requiring payments by the Company and its Subsidiaries greater than
$250,000 per annum), severance, golden parachute or indemnification contracts
(other than indemnification contracts, agreements or provisions (not relating
to individuals) in the context of the Company's and its Subsidiaries'
commercial contracts entered into in the ordinary course of their respective
businesses) (including, without limitation, any contract to which the Company
is a party involving employees of the Company or any of its Subsidiaries); (ii)
all material license agreements (including, without limitation, the license
agreement pertaining to the Company's use of the names "Xxxx" and "Bellcore"
and the "Xxxx" logo); (iii) all partnership, joint venture or similar
agreements; (iv) all agreements currently in effect relating to the
acquisition, sale or lease of properties or assets of the Company or any of its
Subsidiaries (by merger, purchase or sale of assets or stock or otherwise)
requiring payments to or by the Company or any Subsidiary of at least $500,000
in any 12-month period; (v) all leases of real property to which the
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Company or any of its Subsidiaries is a party, and all assignments relating
thereto; (vi) all contracts or agreements with any Governmental Body; (vii) the
Master Agreements for Software and Services (the "Master Agreements"), each
dated effective as of the Ownership Change (as defined therein), as amended to
date, between the Company and each Seller and all Work Statements (as defined
therein) executed as of the date hereof; (viii) all other material contracts
and agreements (including, without limitation, those relating to single owner
proprietary work) between the Company or any Subsidiary and any Seller or any
Affiliate of any Seller (together with the Master Agreements and the Work
Statements, "Affiliate Contracts"); (ix) all contracts and agreements imposing
any restriction on the right or ability of the Company or any Subsidiary to
compete with any other Person and (x) all commitments and agreements to enter
into any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 6.2 hereof, the "Contracts"). All
contracts and agreements (and all amendments, modifications and supplements
thereto and all side letters) to which the Company is a party of the type
referred to in, or otherwise within the scope of, this Section 4.12(a) are
listed in Section 4.12(a) of the Company Disclosure Schedule.
(b) Except as set forth in Section 4.12(b) of the Company
Disclosure Schedule:
(i) each of the Contracts to which the Company or
any Subsidiary is a party is valid and enforceable against the Company and its
Subsidiaries in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity);
(ii) there is no default under any Contract either
by the Company or any of its Subsidiaries or, to the Knowledge of the Company,
by any other party thereto, and no event has occurred that with the giving of
notice or the lapse of time or both would constitute a default thereunder by
the Company or any of its Subsidiaries or, to the Knowledge of the Company, any
other party, in any such case in which such default or event has had since
December 31,
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1995, or would have, individually or in the aggregate, a Material Adverse
Effect; and
(iii) no party to any such Contract has given notice
to the Company or any Subsidiary of or made a claim against the Company or any
Subsidiary with respect to any breach or default thereunder, in any such case
in which such breach or default has had since December 31, 1995, or would have,
individually or in the aggregate, a Material Adverse Effect.
4.13 Employee Benefits. (a) Section 4.13(a) of the Company
Disclosure Schedule identifies each Employee Plan. The Company has furnished
or made available to Purchaser copies of the Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto, together with
the most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) and the most recent actuarial valuation report prepared in connection
with any Employee Plan. No Employee Plan is a Multiemployer Plan, and no
Employee Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code, except as otherwise disclosed in Section 4.13(a) of the
Company Disclosure Schedule.
(b) Section 4.13(b) of the Company Disclosure Schedule
identifies each Title IV Plan. No events, conditions or circumstances have
occurred or currently exist which would reasonably be expected to subject the
Company, its Subsidiaries or any ERISA Affiliate to liabilities under Title IV
of ERISA (other than the payment of premiums to the PBGC).
(c) The Company, its Subsidiaries and its ERISA
Affiliates have satisfied all contribution requirements under Section 412 of
the Code, to the extent applicable to any qualified pension plan maintained by
the Company, its Subsidiaries or any ERISA Affiliates.
(d) No transaction prohibited by Section 406 of ERISA or
Section 4975 of the Code has occurred with respect to any employee benefit plan
or arrangement that is covered by Title I of ERISA, which transaction has
caused or will cause the Company or any Subsidiary to incur any material
liability under ERISA, the Code or otherwise, excluding transactions effected
pursuant to and in compliance with a statutory or administrative exemption.
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(e) As of December 31, 1995, the fair market value of the
assets held under the qualified defined benefit plans maintained by the Company
and its Subsidiaries (the "DB Plans"), was $1,159,711,230, and the projected
benefit obligations (within the meaning of FAS 87) under such DB Plans as of
January 1, 1996, were $959,766,247. The fair market value of the assets of the
DB Plans on July 31, 1996 was $1,156,625,927, and since December 31, 1995 there
has been no material adverse change in the benefit liabilities under such plans
other than arising as a result of benefit accruals, retirements and salary
increases, all of which have occurred in the ordinary course consistent with
past practice.
(f) Each Employee Plan which is intended to qualify under
Section 401(a) or Section 501(a) of the Code has received a favorable
determination letter from the Internal Revenue Service regarding its qualified
status and to the Knowledge of the Company nothing has occurred that would
reasonably be expected to adversely affect such status. There is no pending
audit or, to the Knowledge of the Company, investigation with respect to any
Employee Plan by the Internal Revenue Service, the Department of Labor or the
PBGC.
(g) Section 4.13(g) of the Company Disclosure Schedule
identifies each Benefit Arrangement. The Company has furnished or made
available to Purchaser copies or descriptions of each Benefit Arrangement (and,
if applicable, related trust agreements) and all amendments thereto. Each
Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations and has been maintained in good standing with
applicable regulatory authorities.
(h) Except as disclosed in Section 4.15 of the Company
Disclosure Schedule, there are no Legal Proceedings (other than routine claims
for benefits) pending or to the Knowledge of the Company threatened with
respect to any Employee Plan or Benefit Arrangement or against the assets of
any Employee Plan or Benefit Arrangement.
(i) Except as disclosed in Section 4.13(i) of the Company
Disclosure Schedule, no Employee Plan or Benefit Arrangement provides for the
payment of any benefit or increases any benefit solely as a result of the
transactions
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contemplated by this Agreement or a sale of the Company or its assets.
(j) Except as disclosed on Section 4.13(j) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
announced plan or legally binding commitment to create any new material
Employee Plan or Benefit Arrangement, or to amend or modify in any material
respect or to terminate any existing Employee Plan or Benefit Arrangement.
(k) The factual data underlying the reports provided by
the Company to Purchaser regarding FAS 106 and FAS 112 are complete and
accurate in all material respects.
4.14 Labor. (a) Neither the Company nor any Subsidiary is
party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company or
any Subsidiary.
(b) Subject to the disclosures of alleged violations
described in Section 4.15 of the Company Disclosure Schedule, (i) the Company
and its Subsidiaries are in compliance with all currently applicable Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice, the failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect and (ii)
there are no material controversies pending or, to the Knowledge of the
Company, threatened, between the Company or any Subsidiary and any of their
employees or former employees. There is no unfair labor practice complaint
pending or, to the Knowledge of the Company, threatened against the Company or
any Subsidiary before the National Labor Relations Board. There are no
strikes, slowdowns, work stoppages, lockouts, union organizational campaigns or
other protected concerted activity under the National Labor Relations Act or,
to the Knowledge of the Company, threats thereof, by or with respect to any
employees of the Company or any Subsidiary.
4.15 Litigation. As of the date hereof, except as set forth
in Section 4.15 of the Company Disclosure Schedule, there are no Legal
Proceedings pending or, to the Knowledge of the Company, threatened against the
Company that question or challenge any action taken or to be taken by the
Company or any Subsidiary in connection with the
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consummation of the transactions contemplated hereby. Section 4.15 of the
Company Disclosure Schedule sets forth a true and correct list of all Legal
Proceedings pending or, to the Knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any properties or assets of the
Company or any Subsidiary, at law or in equity, which, individually or in the
aggregate, if determined or resolved adversely to the Company or any Subsidiary
in accordance with plaintiff's demands, would have a Material Adverse Effect.
Except as set forth in Section 4.15 of the Company Disclosure Schedule, none of
the Company or any of the Subsidiaries is subject to any outstanding Order
applicable to the Company or any of its Subsidiaries which (i) has had since
December 31, 1995 or would have, individually or in the aggregate, a Material
Adverse Effect or (ii) would materially impair or delay the ability of Sellers
to consummate the transactions contemplated hereby; it being understood that
the representation of the Company set forth in this sentence does not address
any Order that is addressed in the representation of Sellers set forth in the
last sentence of Section 3.6.
4.16 Compliance with Laws. Except as set forth in Section
4.16 of the Company Disclosure Schedule, the Company and its Subsidiaries are
in compliance with all Laws applicable to the Company or any of its
Subsidiaries, except where the failure so to comply, individually or in the
aggregate, would not have a Material Adverse Effect; it being understood that
nothing in this representation is intended to address any compliance issue that
is the subject of any other representation or warranty set forth herein.
4.17 Environmental Matters. Except as disclosed in Section
4.17 of the Company Disclosure Schedule, (i) the operations of the Company and
its Subsidiaries are in compliance with applicable Environmental Laws, except
where the failure so to comply, individually or in the aggregate, would not
have a Material Adverse Effect, (ii) neither the Company nor its Subsidiaries
is subject to any action, claim, suit, proceeding, or, to the Knowledge of the
Company, investigation alleging the violation of or liability under any
Environmental Law, which proceeding would result in a Material Adverse Effect,
(iii) neither the Company nor its Subsidiaries has received any notice, demand,
request for information, summons or Order from any Person relating to actual or
potential liability under any Environmental Law which would, individually or in
the aggregate, result in a Material Adverse Effect, (iv) no property now or
previously
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owned, leased or operated by the Company or any of its Subsidiaries (or any
predecessor thereof) nor any property to which the Company or any Subsidiary
(or any predecessor thereof) has, directly or indirectly, transported or
arranged for the transportation of any hazardous substances is listed or
proposed for listing on the National Priority List issued by the United States
Environmental Protection Agency pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), or CERCLIS (as defined in
CERCLA) or on any similar federal, state or local list of sites requiring
investigation or clean-up, except where the result of being so listed has not
had since December 31, 1995 or would not have, individually or in the
aggregate, a Material Adverse Effect, (v) no hazardous substance, waste or
material (as defined in or regulated under any Environmental Law, and including
without limitation asbestos, asbestos-containing materials, petroleum, its
derivatives, by-products and other hydrocarbons) has been disposed of, spilled
or released at, on, under or from any property now owned, leased or operated by
the Company or any Subsidiary (or any predecessor thereof) or by the Company or
its Subsidiaries (or any predecessor thereof) at any other property, including
any property now or previously owned, leased or operated by the Company or any
of its Subsidiaries (or any predecessor thereof), except where such disposal,
spill or release has not had and could not reasonably be expected to have a
material adverse effect on human health or the environment and has not been
required and could not reasonably be expected to be required to undergo
investigation or cleanup under any applicable Environmental Laws, and (vi)
neither the Company nor any Subsidiary has any contractual obligation with a
third party or governmental authority pursuant to which it has agreed to pay
for, provide indemnification to or perform remedial or investigative activities
with respect to any matters relating to any Environmental Law.
4.18 Real Property. (a) Section 4.18(a) of the Company
Disclosure Schedule describes all real property owned ("Owned Properties") or
leased ("Leased Properties") by the Company or any Subsidiary.
(b) Except as set forth in Section 4.18(b) of the Company
Disclosure Schedule, the Company or a Subsidiary has good title to each Owned
Property, free and clear of all Liens (other than Permitted Encumbrances).
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(c) Except as set forth in Section 4.18(c) of the Company
Disclosure Schedule, the Company or a Subsidiary has a valid and subsisting
leasehold estate in each of the Leased Properties, free and clear of all Liens
(other than Permitted Encumbrances).
4.19 Title to Property. The Company or its Subsidiaries
has good title to all of the tangible assets and properties (excluding those
assets and properties which are licensed or leased by the Company or its
Subsidiaries), and a valid and subsisting leasehold interest in all of the
tangible assets and properties leased by it, used in the conduct of the
Business, or reflected on the most recent balance sheet included in the Company
Statements or acquired after the Balance Sheet Date, in each instance free and
clear of all Liens (other than Permitted Encumbrances).
4.20 Insurance. (a) Section 4.20(a) of the Company
Disclosure Schedule sets forth a list of the policies of fire, casualty,
liability, workmen's compensation and other forms of insurance maintained by
the Company and its Subsidiaries to insure their respective businesses,
operations, employees and the use and operation of their respective assets and
properties (the "Insurance Policies").
(b) All premiums under each Insurance Policy have been
duly paid to date and each Insurance Policy is in full force and effect in
accordance with its terms and, except as set forth in Section 4.20(b) of the
Company Disclosure Schedule, will not terminate or lapse by reason of the
transactions contemplated hereby.
4.21 Intercompany Accounts. Section 4.21 of the Company
Disclosure Schedule contains a complete list of all intercompany balances as of
August 31, 1996 between the Company and any Subsidiary, on the one hand, and
any Seller and any Affiliate of any Seller, on the other hand.
4.22 Information Supplied; No Misrepresentation. To the
Knowledge of the Company, none of the information supplied or to be supplied by
the Company specifically for inclusion or incorporation by reference in any
declaration or filing with, or notification to, any Governmental Body in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the
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statements therein, in light of the circumstances under which they are made,
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants as follows:
5.1 Organization and Good Standing. Purchaser is a
corporation validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted.
5.2 SEC Reports; Financial Statements. Purchaser has
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1993 and prior to the date hereof, each of which has complied in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each as in effect on the dates such
forms, reports and documents were filed. Purchaser has heretofore delivered or
made available to the Company, in the form filed with the Securities and
Exchange Commission (the "SEC") (including any amendments thereto), (i) its
Annual Reports on Form 10-K for each of the fiscal years ended December 31,
1993, 1994 and 1995, (ii) all definitive proxy statements relating to
Purchaser's meetings of shareholders (whether annual or special) held since
January 1, 1993 and prior to the date hereof and (iii) all other reports or
registration statements filed by Purchaser with the SEC since January 1, 1993
and prior to the date hereof (the "Purchaser SEC Reports"). None of such
forms, reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Purchaser included in the Purchaser SEC Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and present
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fairly, in all material respects, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Purchaser and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and
changes in financial position for the periods then ended (subject, in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments).
5.3 Absence of Changes. Except as publicly disclosed by
Purchaser in the Purchaser SEC Reports, since December 31, 1995, there has not
been (a) a Purchaser Change of Control or (b) any event or change (other than
as a result of or arising from general economic conditions) which has had, or,
to the Knowledge of Purchaser, would reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
results of operations or financial condition of Purchaser and its subsidiaries
taken as a whole and which would reasonably be expected to have, directly or
indirectly, a Material Adverse Effect after the Closing.
5.4 No Disposition of Stock or Assets. There are no
agreements, arrangements or understandings (written or otherwise) to which
Purchaser or any of its Affiliates is a party or by which Purchaser or any of
its Affiliates is bound (a) relating to or contemplating, directly or
indirectly, a Purchaser Change of Control or (b) requiring such Person to
issue, sell, transfer or otherwise dispose of any shares of Purchaser's capital
stock (other than the issuance of Purchaser's capital stock to employees of
Purchaser or any of its Affiliates or pursuant to any employee stock ownership
or other employee benefit plan maintained by Purchaser or any Affiliate of
Purchaser and agreements, arrangements or understandings with prospective
employees to issue Purchaser's capital stock to them upon their becoming
employees of Purchaser or any of its Affiliates) or, following the Closing,
shares of the Company's capital stock or any significant portion of the
Company's assets, and no such Person has any plan or intention to effect any
such issuance, sale, transfer or other disposition.
5.5 Authorization of Agreement. Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, instrument or certificate contemplated by
this Agreement to be executed by Purchaser in connection with the consummation
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37
of the transactions contemplated by this Agreement (collectively, the
"Purchaser Documents"), and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by Purchaser of this
Agreement and the Purchaser Documents have been duly authorized by all
necessary corporate action on behalf of Purchaser. This Agreement has been,
and at or prior to the Closing each Purchaser Document will be, duly and
validly executed and delivered by Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Purchaser Document when so executed and
delivered will constitute, legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.6 Consents of Third Parties; Non-Contravention.
(a) No Consent of, or declaration or filing with, or
notification to, any Governmental Body (in the case of any Consent,
declaration, filing or notification arising solely by reason of the identity of
the Company or the nature of the Business, to the Knowledge of Purchaser) which
has not been previously obtained, made or filed is required on the part of
Purchaser in connection with the execution, delivery and performance by
Purchaser of this Agreement or the Purchaser Documents, or the consummation by
Purchaser of the transactions contemplated hereby or thereby except (i) for
compliance with the applicable requirements of the HSR Act; (ii) as set forth
in Section 5.6(a) of the Purchaser Disclosure Schedule; or (iii) where any
failure to obtain such Consent or to make such declaration, filing or
notification would not, individually or in the aggregate, materially impair or
delay the ability of Purchaser to consummate the transactions contemplated
hereby to be effected by the Purchaser; it being understood that nothing in
this Section 5.6(a) is intended to address the subject matter of (i) the
representations of Sellers contained in Section 3.3(a) or (ii) the
representations of the Company contained in Section 4.6(a).
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(b) Except as set forth in Section 5.6(b) of the Purchaser
Disclosure Schedule, the execution, delivery and performance by Purchaser of
this Agreement and each of the Purchaser Documents, and the consummation by
Purchaser of the transactions contemplated hereby and thereby, do not and will
not (i) violate any provision of the certificate of incorporation or by-laws
(or comparable organizational documents) of Purchaser; (ii) subject to
obtaining the Consents referred to in Section 5.6(a) of the Purchaser
Disclosure Schedule, conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration of
any right or obligation of Purchaser under, any lease, agreement, commitment or
other instrument to which Purchaser is a party or by which Purchaser or any of
its properties is bound; or (iii) assuming compliance with the matters set
forth in Section 5.6(a) hereof, violate, or result in a breach of or constitute
a default under, any Law applicable to Purchaser, other than in the cases of
clauses (ii) and (iii) any violation, conflict, breach, termination, default,
cancellation or acceleration, which would not, individually or in the
aggregate, materially impair or delay the ability of Purchaser to consummate
the transactions contemplated hereby.
5.7 Litigation. As of the date hereof, there are no
Legal Proceedings pending or, to the Knowledge of Purchaser, threatened against
Purchaser that question or challenge the validity of this Agreement or any
action taken or to be taken by Purchaser in connection with the consummation of
the transactions contemplated hereby or that would impair or delay the ability
of Purchaser to consummate the transactions contemplated hereby.
5.8 Financing. Purchaser has discussed the transactions
contemplated hereby with its current and prospective financing sources and,
based on such discussions, Purchaser reasonably believes that it will be able
to obtain sufficient funds from such financing sources or otherwise (the
"Financing") to effect the Closing and all other transactions contemplated by
this Agreement on a timely basis (it being acknowledged and agreed that it
shall not be a condition to Purchaser's obligation to effect the Closing that
Purchaser shall have obtained the Financing).
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5.9 Investment Representation and Acknowledgment.
(a) Purchaser is acquiring the Shares for its own account,
for investment purposes only and not with a view to the resale or distribution
(as such term is used in Section 2(11) of the Securities Act) thereof.
Purchaser understands and acknowledges that the Shares have not been registered
under the Securities Act and cannot be sold, transferred, pledged, hypothecated
or otherwise disposed of unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(b) Purchaser possesses such knowledge and experience in
financial and business matters so that it is capable of evaluating the merits
and risks of its investment hereunder. Purchaser acknowledges that it has
conducted its own investigation of the business and affairs of the Company and
the Subsidiaries and it has received all the information that it requested
from, and has had an opportunity to ask questions of and receive answers from
officers and representatives of, Sellers and the Company concerning the Company
and the Subsidiaries.
(c) Notwithstanding anything to the contrary contained in
this Agreement, none of Sellers or the Company shall be deemed to have made to
Purchaser, and Purchaser is not relying upon, any representation or warranty
other than as expressly made by Sellers or the Company in this Agreement.
Without limiting the generality of the foregoing, Purchaser is not relying upon
any representation or warranty to Purchaser with respect to: (i) any
projections, forecasts, estimates or budgets heretofore delivered, described or
made available to Purchaser of future revenues, expenses or expenditures,
future results of operations (or any component thereof), future cash flows or
future financial condition (or any component thereof) or the future business
and operations of the Company or (ii) any other information or documents made
available to Purchaser or its counsel, accountants or advisors with respect to
the Company or its business, assets, liabilities, results of operations,
condition (financial or otherwise) or prospects, except, in the case of clauses
(i) and (ii), as expressly contained in this Agreement.
5.10 Investment Company Act. Purchaser is not, nor is
Purchaser directly nor indirectly controlled by any Person that is, an
investment company within the meaning of the Investment Company Act of 1940, as
amended (an
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"Investment Company"), and, immediately following the consummation of the
transactions contemplated by this Agreement, Purchaser will not be, nor will
Purchaser be directly or indirectly controlled by any Person that will be, an
Investment Company.
5.11 Financial Advisors. No Person has acted directly or
indirectly as a broker, finder or financial advisor for Purchaser in connection
with the transactions contemplated by this Agreement except for Lazard Freres &
Co. LLC ("Purchaser's Advisor") and no Person other than Purchaser's Advisor is
entitled to any fee or commission or like payment in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf of
Purchaser.
5.12 Information Supplied; No Misrepresentation. To the
Knowledge of Purchaser, none of the information supplied or to be supplied by
Purchaser specifically for inclusion or incorporation by reference in any
declaration or filing with, or notification to, any Governmental Body in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE VI
FURTHER AGREEMENTS OF THE PARTIES
6.1 Access to Information; Board Observer;
Confidentiality.
(a) Sellers and the Company agree that, prior to the
Closing Date, Purchaser shall be entitled, through its authorized officers,
employees and representatives (including, without limitation, its legal
counsel, financial advisors, consultants and accountants), to make such
reasonable investigation of the properties, business and operations of the
Company and the Subsidiaries and such examination of the books, records and
financial condition of the Company and the Subsidiaries as it reasonably
requests and to make extracts and copies to the extent necessary of such books
and records; provided, however, that (i) the Company shall not be obligated to
provide Purchaser with any information the provision of which may be prohibited
by Law or con-
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tractual obligation and (ii) all requests for information, to visit facilities
or to interview officers or employees of the Company shall be directed to and
coordinated with Xxxxxx X. Xxxxxxxx, Senior Vice President and Chief Financial
Officer of the Company; provided further that, with respect to information
which the Company is prohibited from providing to Purchaser as a result of any
contractual obligation, the Company shall use its reasonable best efforts to
obtain the permission of any relevant Person to the extent necessary to permit
the provision of such information to Purchaser. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and Sellers and the Company shall cooperate
reasonably therein (including, without limitation, by instructing their
respective officers, employees, legal counsel, financial advisors and other
representatives to cooperate reasonably in connection with Purchaser's
investigation).
(b) Prior to the Closing Date, Purchaser shall be entitled to
(i) designate a representative (which representative shall be a corporate
officer or director of Purchaser reasonably acceptable to the Majority Sellers)
(the "Observer") to (A) attend and participate on its behalf (without any right
to vote and whose presence shall not count in any determination of the
existence of a quorum) in all annual, regularly scheduled and special meetings
of the Board of Directors of the Company, (B) receive and have access to the
same information and materials which are made available and/or disseminated to
directors of the Company and (C) upon reasonable advance notice, make
presentations to the Board of Directors at any such meeting with respect to
matters pertaining to the Business, (ii) receive regularly prepared management
reports and (iii) upon reasonable request to any of the Company's Chief
Executive Officer or Chief Financial Officer and during ordinary business
hours, routinely consult with the Company's Chief Executive Officer, Chief
Financial Officer, General Counsel and any senior executive of the Company with
principal responsibility for software systems, professional services, applied
research and customer solutions, it being understood that, to the extent
permitted by Law and not otherwise inappropriate under the circumstances (as
reasonably determined by the Company's Chief Financial Officer and General
Counsel), the parties will endeavor promptly to establish procedures such that
Purchaser shall be kept reasonably informed with respect to all significant
business matters concerning the Company (including, without
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limitation, the entry into and evaluation of material fixed price contracts and
undertaking Formative and R&I projects) and, to the extent reasonably
practicable and not otherwise inappropriate under the circumstances (as
reasonably determined by the Company's Chief Financial Officer and General
Counsel), Purchaser shall be afforded a reasonable opportunity to review and
comment on such matters. Notwithstanding anything to the contrary above, the
Board of Directors may, in its sole discretion, determine that an issue to be
discussed at a meeting of the Board of Directors, or the provision of certain
materials pursuant to clause (B) above, would involve a conflict of interest
for Purchaser or otherwise would be inappropriate under the circumstances and
exclude Purchaser's representative from attending such meeting or participating
in a portion thereof or omit or deny Purchaser access to such materials. In
addition, Purchaser will be afforded a reasonable opportunity to review and
comment upon the Company's proposed 1997 annual budget and all proposed
material amendments and modifications thereto (as approved by the Company's
Board of Directors, the "1997 Budget"), and to discuss Purchaser's comments and
questions with respect thereto with management and the Board of Directors of
the Company (it being understood and agreed that, prior to the Closing, nothing
contained in the Agreement shall give Purchaser any right to approve the 1997
Budget or any amendment or modification thereto). Except to the extent
objected to in writing (with reasonable specificity) by Purchaser in good faith
prior to approval thereof by the Board of Directors, Purchaser shall be deemed
to have approved the 1997 Budget (it being understood and agreed that (i)
subject to the provisions of Section 6.2 and prior to the Closing, Purchaser's
objection as to any aspect of the 1997 Budget or any amendment or modification
thereto shall not in any way limit the Company's operations and (ii) any
objection by Purchaser as to any aspect of the 1997 Budget based on Purchaser's
determination, in its reasonable judgment, that it does not have sufficient
information as to such aspect of the 1997 Budget (as a general matter or for
purposes of Section 6.2 hereof) shall be deemed to have been made in good
faith).
(c) All information (whether in written, oral or other form
and whether or not displaying proprietary or restrictive markings) furnished
(whether before or after the date hereof) by the Company or its directors,
officers, employees or affiliates (including, without limitation, Sellers) or
their respective representatives (including, without limitation, financial
advisors (including, without
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43
limitation, Sellers' Advisors), attorneys and accountants) (collectively, the
"Company's Representatives") or agents to Purchaser or Purchaser's directors,
officers, employees, affiliates, representatives (including, without
limitation, financial advisors (including, without limitation, Purchaser's
Advisor), attorneys and accountants) or agents or Purchaser's potential sources
of financing for the transactions contemplated hereby (collectively,
"Purchaser's Representatives") and all analyses, compilations, forecasts,
studies or other documents prepared by Purchaser or Purchaser's Representatives
in connection with this Agreement or the transactions contemplated hereby
(including, without limitation, in connection with Purchaser's or Purchaser's
Representatives' review of the Company) which contain or reflect any such
information is hereinafter referred to as the "Information". The term
Information shall not, however, include information which (i) is or becomes
publicly available, other than as a result of a disclosure by Purchaser or
Purchaser's Representatives or (ii) is, as of the date hereof, available to
Purchaser or Purchaser's Representatives or becomes available to Purchaser, in
each case on a nonconfidential basis and without restriction on use or
disclosure from a source (other than the Company or the Company's
Representatives) which, to the best of Purchaser's Knowledge, is not prohibited
from using or disclosing such information to Purchaser or Purchaser's
Representatives by a legal, contractual or fiduciary obligation to the Company
or any of the Company's Representatives.
(d) Purchaser and Purchaser's Representatives (i) will
keep the Information confidential and will not (except as required by
applicable Law, regulation or legal process, and only after compliance with
Section 6.1(e) below), without the prior written consent of the Company,
directly or indirectly disclose any Information in any manner whatsoever or
reproduce any Information, in any form, in whole or in part, and (ii) will not
use any Information other than in connection with the consummation of the
transactions contemplated hereby; provided, however, that Purchaser may reveal
the Information only to those of Purchaser's Representatives who (A) need to
know the Information for the purpose of consummating the transactions
contemplated hereby, (B) are informed by Purchaser of the confidential nature
of and the obligations relating to the Information and (C) agree to comply with
the obligations and restrictions of this Section 6.1(d). Purchaser further
agrees that, except as required by applicable Law or legal
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process and after compliance with paragraph (e) below, neither Purchaser nor
any of Purchaser's Representatives will use any Information in any litigation
or legislative or regulatory proceeding. Purchaser will cause Purchaser's
Representatives to comply with the terms of this Section 6.1, and Purchaser
will be responsible for any breach of this Section 6.1 by any of Purchaser's
Representatives.
(e) If Purchaser or any of Purchaser's Representatives
are requested pursuant to, or required by, applicable Law or legal process to
disclose any of the Information, Purchaser will notify the Company (Attention:
General Counsel) promptly prior to any such disclosure so that a protective
order or other appropriate remedy may be sought or, in the sole discretion of
the Company, compliance with the applicable terms of this Section 6.1 may be
waived. In the event that no such protective order or other remedy is
obtained, or that compliance with the applicable terms of this Section 6.1 is
waived as provided above, Purchaser and Purchaser's Representatives will
furnish only that portion of the Information which Purchaser is advised by
counsel is legally required and will exercise all reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the
Information.
(f) If this Agreement is terminated prior to the Closing
pursuant to Section 9.1 hereof, Purchaser (i) shall at Purchaser's option (A)
promptly destroy all copies of the Information in tangible form in Purchaser's
and Purchaser's Representatives' possession and confirm such destruction to
Company in writing or (B) promptly return and cause Purchaser's Representatives
to return to the Company, at Purchaser's expense, all copies of the Information
in tangible form, and thereafter the Information shall be subject to the
provisions of the Confidentiality Agreement, dated March 5, 1996, between
Xxxxxx Xxxxxxx, on behalf of the Company, and Purchaser (the "Confidentiality
Agreement") and (ii) shall not use or disclose the Information contained in
such books and records for any purpose or make such Information available to
any other entity or Person.
6.2 Conduct of the Business Pending the Closing. Except
as otherwise contemplated by this Agreement, as contemplated by or in
accordance with the Company's 1997 Budget (except to the extent such budget is
objected to by Purchaser pursuant to Section 6.1(b)), as set forth in Section
6.2 of the Company Disclosure Schedule or for the Permitted Transactions, or
with the prior written consent of
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Purchaser, which consent shall not be unreasonably withheld or delayed, from
the date hereof until the Closing Date:
(a) the Company shall, and shall cause each Subsidiary to:
(i) conduct the Business only in the ordinary
course consistent with past practice (including, notwithstanding anything to
the contrary in clause (A) of Section 6.2(a)(ii), to the extent appropriate in
the exercise of sound business judgment in light of the Company's performance
from time to time, to continue to implement and augment cost reduction measures
for the Company and its Subsidiaries); and
(ii) use reasonable commercial efforts to (A)
preserve the present business operations, organization (including, without
limitation, management and the sales force) and goodwill of the Business (it
being understood and agreed that the Company shall not be restricted from
adjusting and managing the size of its operations (and related staff and
numbers of consultants and independent contractors) in the ordinary course of
business and in accordance with business needs and conditions) and (B) preserve
the present relationships with Persons having material business dealings with
the Company and the Subsidiaries relating to the Business; and
(iii) file all Tax Returns required to be filed when
due in accordance with all applicable Laws (taking into account any permitted
extensions), and all such Tax Returns shall be true, complete and correct in
all material respects; and shall as soon as reasonably practicable file an
amended federal income Tax Return for the 1994 taxable year in the form
provided to Purchaser prior to the date hereof reflecting a decrease in taxable
income of at least $34,000,000 arising from the reversal of the inclusion of
Unbilled Formative Project Revenues for such year; and
(b) the Company shall not, and shall not cause or permit
any Subsidiary to:
(i) declare, set aside, make or pay any dividend
or other distribution in respect of any capital stock of the Company or
repurchase, redeem or otherwise acquire any outstanding shares of the capital
stock or other securities of, or other ownership interests in, the Company
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or effect any recapitalization, split or like change in the capitalization of
the Company;
(ii) transfer, authorize for issuance, issue, sell
or dispose of any shares of capital stock or other securities of the Company or
any Subsidiary or grant options or other rights to purchase or otherwise
acquire shares of the Company's or any Subsidiary's capital stock or other
securities;
(iii) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries;
(iv) incur, assume or guarantee any indebtedness
for borrowed money, other than (A) in the ordinary course of its business in
amounts and on terms consistent with past practice, (B) borrowings under
existing lines of credit in the ordinary course of business, (C) indebtedness
of the Company or any wholly-owned Subsidiary to the Company or any
wholly-owned Subsidiary, or (D) guarantees by the Company or any wholly-owned
Subsidiary of permitted indebtedness of the Company or any wholly-owned
Subsidiary in the ordinary course of business consistent with past practice;
provided that, except to the extent necessary to enable the Company to incur
those MediaVantage Formative Costs and Approved R&I Costs contemplated by
Section 6.20(c), the aggregate principal amount of indebtedness for borrowed
money incurred, assumed or guaranteed pursuant to clauses (A), (B) and (D) may
not exceed $225,000,000 in the aggregate at any one time outstanding;
(v) amend the certificate of incorporation or
by-laws of the Company or any Subsidiary or the terms of any security of the
Company or any Subsidiary;
(vi) increase the compensation (other than normal
and usual (but not more frequent than annual) merit or cost-of- living
increases in the ordinary course of business) or benefits payable or to become
payable to any director, officer or Key Employee of the Company;
(vii) (A) subject to clause (vi) above, other than
as may reasonably be deemed necessary by the Company's management on a case by
case basis in order to retain key employees, increase (by reference to
individual compensation) the compensation payable or to become payable
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by the Company or any Subsidiary to any of its respective employees, other than
normal and usual merit or cost-of-living increases; (B) subject to clause (vi)
above, materially increase the coverage or benefits available under any (or
create any new) severance pay, termination pay, vacation pay, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for, or with any of the directors or employees
of the Company or any Subsidiary; or (C) enter into any employment, consulting
(other than an agreement in which an individual is acting as a consultant to
the Company or any of its Subsidiaries having a term or expected term of less
than one year that is in the ordinary course of business and consistent with
past practice), deferred compensation, severance (other than severance
agreements with new employees entered into in the ordinary course of business
and consistent in amount and other terms with past practices), golden parachute
or similar agreement or individuals' indemnification contracts (of the type
referred to in Section 4.12(a)(i)) (or amend any such existing agreement with
an individual to which the Company or a Subsidiary is a party) involving an
employee or director of the Company or a Subsidiary (other than employment or
consulting agreements with employees of the Company or any Subsidiary (other
than any director or officer of the Company or any Subsidiary) providing for
salary and bonus that is less than $200,000 per annum and other than employment
and consulting agreements terminable by the Company or a Subsidiary at will
without penalty);
(viii) suffer to exist any Lien (other than Liens
set forth in any section of the Company Disclosure Schedule and other than
Permitted Encumbrances) on any of the material properties or assets (whether
tangible or intangible) of the Company or any Subsidiary, other than the
Excluded Assets;
(ix) (A) acquire (except for (1) purchases of
inventory and supplies in the ordinary course of business, (2) the renewal of
leases and (3) capital expenditures (x) during the period August 1, 1996
through December 31, 1996 not exceeding $45 million in the aggregate and (y)
during 1997 not exceeding $70 million in the aggregate) any properties or
assets with an aggregate value in excess of $10 million or (B) except for the
transfer of the Excluded Assets pursuant to the Permitted Transactions and
sales, licenses and dispositions of products and services for fair
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consideration in the ordinary course of business consistent with past practice
and the sale for fair consideration of excess or obsolete assets, sell, assign,
transfer, convey, lease, license or otherwise dispose of any of the properties
or assets of the Company or any Subsidiary where the amount payable to the
Company and its Subsidiaries exceeds $2,000,000 in the aggregate (it being
understood that any such sales within the foregoing $2,000,000 limitation shall
be for fair consideration and shall be consistent with prudent business
practice);
(x) pay, discharge, settle or satisfy any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than any such payment, discharge,
settlement or satisfaction (A) subject to clause (D) herein, in the ordinary
course of business consistent with past practice, (B) subject to clause (D)
herein, in accordance with their respective terms, (C) in accordance with
Orders, (D) in the case of settlements, in amounts not in excess of amounts
reserved therefor on the consolidated balance sheet included in the Interim
Financial Statements and provided that such settlement does not involve any
admission of liability on the part of the Company or any material restriction
on any material aspect of the Business, or (E) as permitted by clause (xiii)
below;
(xi) other than as required by GAAP or by Law,
make any material alteration with respect to accounting policies, procedures
and practices;
(xii) except as set forth in Section 6.2(b)(xii) of
the Company Disclosure Schedule, enter into (A) any material contract,
agreement, license or arrangement (including contracts, agreements, licenses or
similar arrangements for goods, services or Intellectual Property) with any
Seller or any Affiliate of any Seller (or a modification or amendment of a
contract, agreement, license or arrangement with any Seller or Affiliate of any
Seller which would be material to the Company), other than contracts,
agreements, licenses or arrangements (1) with Sellers or their Affiliates that
are, in all material respects, on substantially the same terms, in the
aggregate, as contracts, agreements, licenses or arrangements with other
Sellers or their Affiliates in existence on the date hereof with respect to the
same or substantially the same products or services or (2) that are on terms
that are, in all material respects, no less favorable, in the aggregate,
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to the Company than could be obtained in arm's-length negotiations with an
unaffiliated third party (including, for purposes of this clause (2), all
contracts, agreements, licenses and arrangements for single owner proprietary
work), (B) any agreement, license, contract or arrangement with any Seller or
any of its Affiliates (or a modification or amendment of a contract, agreement,
license or arrangement with any Seller or Affiliate of any Seller) (other than
the Master Agreement) that is intended to set forth or govern the terms of more
than one contract, agreement or arrangement, (C) except as permitted by clause
(A)(1) or (2) above, any contract, agreement, license or arrangement (including
contracts, agreements, licenses or similar arrangements for goods, services or
Intellectual Property) with any Seller or any Affiliate of any Seller (or a
modification or amendment of a contract, agreement, license or arrangement with
any Seller or Affiliate of any Seller which would be material to the Company)
requiring payments to or by the Company or any Subsidiary of more than
$2,000,000 in the aggregate over the term of such contract or agreement or (D)
enter into any material contract, agreement or similar arrangement with any
Seller or any Affiliate of any Seller (or a modification or amendment of any
such contract, agreement, license or arrangement) pursuant to which the Company
or any Subsidiary licenses or otherwise grants to any Seller or any Affiliate
of any Seller any rights in respect of any Intellectual Property of the Company
or any of its Subsidiaries unless the terms of such license or grant of rights
are no less favorable, in any material respect, to the Company than those of
the license of Licensed Technical Information or Restricted Licensed Technical
Information (each as defined in the Amended Master Agreement), as the case may
be, by the Company set forth in the Amended Master Agreement;
(xiii) compromise or settle, or enter into any
agreement which has the effect of compromising or settling, any Legal
Proceeding listed in (or which, if such Legal Proceeding had been pending or
threatened as of the date of this Agreement, would have been required to be
listed in) Section 4.15 of the Company Disclosure Schedule, except as provided
in Section 6.2(b)(x)(D) and except that the Company may compromise or settle,
or enter into any agreement which has the effect of compromising or settling,
any Legal Proceeding provided that the amount of such settlement does not
exceed $250,000 individually (or in the aggregate with respect to Legal
Proceedings arising out of the same event or transaction) and provided that
such compromise or
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settlement does not involve any admission of liability on the part of the
Company or any material restriction on any material aspect of the Business;
(xiv) enter into any labor or collective bargaining
agreement or, through negotiation or otherwise, make any material commitment or
incur any material liability to any labor organization with respect to the
Company or the Subsidiaries;
(xv) make any loan or advance (other than in the
ordinary course of business consistent with past practice in amounts not
exceeding $10,000 individually and $100,000 in the aggregate at any one time
outstanding) or capital contribution to, or invest in, any Person (other than
loans, advances, capital contributions or investments to or in wholly-owned
Subsidiaries of the Company);
(xvi) amend in any material respect any Contract
(other than any Affiliate Contract), other than in the ordinary course of
business consistent with past practice;
(xvii) enter into (whether through the entry into of
a new contract or agreement or the modification or amendment of an existing
contract or agreement) any (A) fixed price contract or arrangement pursuant to
which the payments to be made by the Company's or a Subsidiary's customer under
such contract or arrangement or the modification, respectively, exceed (1) in
the case of software systems theretofore developed or committed to be developed
for another customer, $25 million in the aggregate over the term thereof, (2)
in the case of software systems where more than 30% but less than 70% of the
software included therein is customized, $12.5 million in the aggregate over
the term thereof and (3) in all other cases, $10 million in the aggregate over
the term thereof with respect to contracts or arrangements for software, and $5
million in the aggregate over the term thereof with respect to contracts or
arrangements for professional services, (B) any contract or arrangement with
respect to the provision of goods or services by the Company or any Subsidiary
to the United States federal government or any agency thereof requiring
payments to be made to the Company or any Subsidiary of more than $1 million
over the term of such contract or arrangement or the modification,
respectively, (C) any contract or arrangement that imposes any restriction on
the ability of the Company or any
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Subsidiary to compete with any other Person or (D) any partnership, joint
venture or similar agreement; provided, however, that clause (A) of this
Section 6.2(b)(xvii) shall not apply to any contract between the Company and
any Seller or any Affiliate thereof that relates solely to the sale or
licensing of Formatives (it being understood that such clause will apply to any
such contract to the extent relating to the installation or maintenance of
Formatives);
(xviii) surrender any right to claim or receive a
Formative Refund (as defined in Section 11.4(a)) and shall not include in
income (for Tax purposes) any amounts in respect of Unbilled Formative Project
Revenues, and each Seller agrees not to deduct such amounts (for Tax purposes);
(xix) unless required by applicable Law, make or
change any material Tax election, change any annual Tax accounting period,
change any method of Tax accounting, enter into any material closing agreement
or settle any material Tax claim or assessment (it being understood that the
filing of any Tax Return or amended Tax Return or claim for refund with respect
to Formative Refunds or Unbilled Formative Project Revenues will not be
considered a change of method of Tax accounting for this purpose); or
(xx) commit or agree to do anything prohibited by
this Section 6.2(b), except as otherwise permitted by this Agreement.
6.3 Non-Solicitation; Non-Competition. (a) Each Seller
hereby agrees, severally and not jointly, that neither such Seller nor any of
its Affiliates (other than those Affiliates set forth in Section 6.3 of the
Sellers' Disclosure Schedule, as to which this Section 6.3(a) shall be
inapplicable) shall, during the three (3) year period following the Closing
Date, directly or indirectly, solicit or hire any technical or Customer
Solutions employee of the Company or any of its Subsidiaries for employment by
such Seller or any such Affiliate; provided, however, that nothing herein shall
preclude any Seller or any such Affiliate from soliciting for employment or
hiring any such employee (i) whose employment with the Company or any of its
Subsidiaries has been involuntarily terminated by the Company or any of its
Subsidiaries or is terminated as a result of an employment termination offer
from the Company or any of its Subsidiaries or (ii) by mutual agreement of
Purchaser and all Sellers. For purposes of the foregoing, it is agreed that
"technical" employees of the Company or
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any of its Subsidiaries include, without limitation, employees involved in the
Company's "software systems" operations.
(b) Each Seller hereby agrees with Purchaser, severally
and not jointly, that neither such Seller nor any of its Affiliates (other than
those Affiliates set forth in Section 6.3 of the Sellers' Disclosure Schedule,
as to which this Section 6.3(b) shall be inapplicable) shall, during the period
commencing on the date hereof and ending on the earlier to occur of (x) the
later of (1) the third anniversary of the date hereof and (2) the second
anniversary of the Closing Date (in no event may such later date be later than
December 31, 1999), and (y) the occurrence of a Change of Control (as defined
in the Amended Master Agreement to which such Seller is a party):
(i) market or license to any Person, other than to an
Affiliate of such Seller, as required by applicable Law or licenses of
Bellcore Patents or Licensed Technical Information (each as defined in
the Amended Master Agreement) to Third Parties or Minority Affiliates
(each as defined in the Amended Master Agreement) for the purposes,
and subject to the applicable restrictions, set forth in Sections
4.1(a)(ii) and 4.2(b)(i) of the Amended Master Agreement, any
operation support system (as further described, a "Competing System")
that replicates the overall functionality of any operation support
system of the Company listed in Exhibit B to the Master Agreement (a
"Company System"); provided that nothing in this Section 6.3(b) shall
(1) prevent any Seller or any of its Affiliates from marketing or
licensing any Competing System which is intended to interface and/or
interoperate with one or more Company Systems so long as (A) the
Competing System does not incorporate a material amount of proprietary
code from a Company System and (B) any licensee of such Competing
System intending, to the Sellers' Knowledge, to use the same so as to
interface and/or interoperate with one or more Company Systems, holds
a then-current license or sublicense from the Company for the
applicable Company System, (2) prevent any Seller or any of its
Affiliates from marketing or licensing Competing Systems in connection
with projects (including, without limitation, through partnerships,
joint ventures or similar arrangements) involving the creation of
telecommunications network infrastructure and the
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provision of related services, to the extent that the marketing or
licensing of such Competing System is incidental to such project and
considered in good faith by such Seller or such Affiliate to be
beneficial in securing work on or involvement in such project, (3)
apply to the activities and systems (and extensions and modifications
thereof) of Sellers and their Affiliates described in Section
6.3(b)(i) of the Sellers' Disclosure Schedule (only insofar as the
same pertains to such Seller and its Affiliates), or (4) prohibit the
acquisition (by merger of otherwise) of the securities or assets of
any Person engaged in any action prohibited by this Section 6.3(b) and
continuing such activity; or
(ii) with respect to any Company System, engage any
third party vendor to provide software Maintenance (as defined in the
Amended Master Agreement) services if such vendor also is engaged to
provide similar software Maintenance services for another Seller or an
Affiliate of another Seller with respect to such Company System;
provided, that (A) the foregoing shall be inapplicable in respect of
any Company System as to which the Company is in material breach of
its Maintenance obligations (as provided in Section 12.0 of the Master
Agreement), (B) no merger or other transaction of the type described
in Section 12.4 hereof (whether occurring prior to, on or after the
Closing Date) or activities in furtherance thereof shall cause a
violation of this Section 6.3(b)(ii) and (C) the use of third party
vendors in a "staff supplementation" manner in the ordinary course of
business consistent with past practice shall not cause a violation of
this Section 6.3(b)(ii).
For avoidance of doubt, as used in Section 6.3(b)(i), the term "required by
applicable Law" shall include, without limitation, such licensing as reasonably
necessary to meet requirements for "unbundling", "resale", "interconnection" or
similar requirements imposed by the FCC or any other federal, state or local
authority or agency.
(c) It is the intention of the parties that if any of the
restrictions or covenants contained herein is held to cover a geographic area
or to be for a length of time which is not permitted by applicable Law, or in
any way construed to be too broad or to any extent invalid, such provision
shall not be construed to be null, void and of no
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effect, but to the extent such provision would be valid or enforceable under
applicable Law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
provided herein) as shall be valid and enforceable under such applicable Law.
6.4 Reasonable Commercial Efforts. Each Seller, the
Company and Purchaser will cooperate and use their respective reasonable
commercial efforts to fulfill the conditions precedent to the parties'
obligations hereunder, including but not limited to (i) using reasonable
commercial efforts to secure (and, in the case of Sellers, to cause their
respective Affiliates to secure) as promptly as practicable all consents,
approvals, waivers and authorizations (collectively, "Required Consents")
required in connection with the transactions contemplated hereby, (ii) providing
to the other parties (and, in the case of Sellers, to their respective
Affiliates, as necessary) such information as may be necessary in connection
with obtaining such Required Consents (including, without limitation, updating
and/or correcting (if necessary) information previously provided), (iii) making
available such officers or other employees of such party (and, in the case of
Sellers, their respective Affiliates) as may be necessary or reasonably
desirable to participate in any regulatory proceedings required to obtain such
Required Consents and (iv) in the case of Purchaser, seeking to obtain the
Financing on a timely basis. Each Seller and Purchaser will reasonably promptly
file documentary materials required by the HSR Act and promptly file any
additional information requested as soon as practicable after receipt of request
therefor.
6.5 Further Assurances. At any time after the Closing
Date, each Seller and Purchaser shall promptly execute, acknowledge and deliver
any other assurances or documents reasonably requested by Purchaser or any
Seller, as the case may be, and necessary or appropriate for it to satisfy its
respective obligations hereunder or obtain the benefits contemplated hereby.
6.6 Preservation of Records. Purchaser and the Company
each shall preserve and keep the tax and other material records held by it
relating to the Business and the Company and the Subsidiaries for a period of
five (5) years from the Closing Date or such longer period as may be
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required by applicable Law and shall make such records and personnel available
to each Seller and Sellers' Representative as may be reasonably required by any
such Seller or Sellers' Representative in connection with, among other things,
any Legal Proceedings against or governmental investigations of any Seller or
any of its Affiliates or in order to enable Sellers to comply with their
respective obligations under this Agreement. If the Company wishes to destroy
such records after that time, the Company shall first give at least 90 but not
more than 120 days prior written notice to Sellers and each Seller shall have
the right, at its option and expense, upon prior written notice given to the
Company within 90 days after the date of the initial notice, to take possession
of the records within 180 days after the date of the initial notice. If more
than one Seller so desires to take possession of such records, all such Sellers
shall enter into mutually satisfactory arrangements relating to obtaining,
holding and access to such records.
6.7 Publicity. No Seller nor the Company or Purchaser or
their respective Affiliates shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other parties hereto, which
approval will not be unreasonably withheld or delayed, unless such release or
announcement otherwise is required by applicable Law or by the applicable rules
of any stock exchange on which such Seller, Purchaser or their respective
Affiliates lists securities; provided, however, that any disclosure made by any
Seller, the Company, Purchaser or any of their respective Affiliates in any
legislative or regulatory proceeding in connection with the transactions
contemplated by this Agreement shall not be deemed to be a "public
announcement" for purposes of this Section 6.7. Prior to making any public
disclosure required by applicable Law or the rules and regulations of any such
stock exchange, the disclosing party or parties shall, to the extent
practicable under the circumstances, give the other parties a copy of the
proposed disclosure and reasonable opportunity to comment thereon.
6.8 Financial Statements and Information. From and after the
date hereof and until the Closing Date, (a) the Company shall (i) deliver to
Purchaser:
(A) within 30 days after the end of each of the first two
months of each Fiscal Quarter,
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(i) a copy of the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of the
end of such month and the related consolidated
statements of income and cash flows for that portion
of the Fiscal Year ending as of the end of such
month, and (ii) a copy of the unaudited consolidated
statements of income of the Company and its
Subsidiaries for such month, all prepared in
accordance with GAAP (except as noted therein and
subject to normal year-end adjustments);
(B) within 45 days after the end of each Fiscal Quarter,
(i) a copy of the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of the
close of such Fiscal Quarter and the related
consolidated statements of income and cash flows for
that portion of the Fiscal Year ending as of the
close of such quarter, and (ii) a copy of the
unaudited consolidated statements of income of the
Company and its Subsidiaries for such quarter, all
prepared in accordance with GAAP (except as noted
therein and subject to normal year-end adjustments);
(C) within 90 days after the close of each Fiscal Year, a
copy of the annual audited consolidated financial
statements of the Company and its Subsidiaries,
consisting of a consolidated balance sheet and
consolidated statements of income and retained
earnings and cash flows, which financial statements
shall be prepared in accordance with GAAP, certified
by C&L, or any other firm of independent certified
public accountants of recognized national standing
selected by the Company and reasonably acceptable to
Purchaser; and
(D) such other information concerning the business,
condition (financial or otherwise) or operations of
the Company as Purchaser may from time to time
reasonably request; and
(ii) notify Purchaser promptly in writing if (A) there is
commenced or, to the Knowledge of the Company, threatened against the Company,
any Subsidiary or their respective properties or assets any Legal Proceeding
that
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questions or challenges the validity of this Agreement or seeks to restrain,
enjoin, prohibit or make illegal any action taken or to be taken by the Company
or any Subsidiary in connection with the consummation of the transactions
contemplated by this Agreement;
(b) each Seller shall notify Purchaser promptly in
writing if there is commenced or, to the Knowledge of such Seller, threatened
against such Seller or any of its Affiliates, any Legal Proceeding that
questions or challenges the validity of this Agreement or seeks to restrain,
enjoin, prohibit or make illegal any action taken or to be taken by such Seller
or any of its Affiliates in connection with the consummation of the
transactions contemplated by this Agreement; and
(c) Purchaser shall notify Sellers' Representative and
the Company promptly in writing if there is commenced or, to the Knowledge of
Purchaser, threatened against Purchaser or any of its Affiliates any Legal
Proceeding that questions or challenges the validity of this Agreement or seeks
to restrain, enjoin, prohibit or make illegal any action taken or to be taken
by Purchaser or any of its Affiliates in connection with the consummation of
the transactions contemplated by this Agreement.
6.9 Notice Regarding Regulatory Proceedings.
(a) The Company, each Seller (severally and not jointly)
and Purchaser shall notify the other parties hereto of the status of any pending
filing with any Governmental Body required pursuant to Sections 3.3(a), 4.6(a)
or 5.6(a) hereof promptly upon (i) receipt of any material notice or other
material communication from such Governmental Body relating to, or (ii) upon any
material change in the status of, any such filing and at such other times as the
other party may reasonably request, such notice to specify in reasonable detail
the nature of such communication or change or the status of such filing, as
applicable.
(b) The Company, each Seller (severally and not jointly)
and Purchaser shall notify the other parties hereto promptly upon the receipt of
any notice from any Governmental Body to the effect that such Governmental Body
has determined that a Consent that is not listed in Section 3.3(a) of the
Seller's Disclosure Schedule, Section 4.6(a) of the Company Disclosure Schedule
or Section 5.6(a) of the Purchaser Disclosure Schedule, as applicable, is or may
be
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required it being acknowledged and agreed by the parties hereto that subject to
the provisions of Sections 10.2(i), 10.3(a)(i) and 10.3(b)(i), the failure of
any such Seller, the Company or (to the extent of the Knowledge limitation set
forth in Section 5.6(a)) Purchaser to have listed any such Consent in the
applicable Disclosure Schedule on the date hereof shall not constitute a breach
as of the date hereof of the representations set forth in Section 3.3(a),
4.6(a) or 5.6(a), respectively, unless, on the date hereof, such Seller, the
Company or Purchaser, as applicable, had Knowledge that such Consent was
required).
6.10 Employee Matters.
(a) Purchaser shall and shall cause its subsidiaries
(including the Company):
(i) to honor and provide for payment of benefits
under all Company Benefit Plans in accordance with
their terms;
(ii) until the earlier of December 31, 1999 and the
second anniversary of the Closing Date (the "Benefits
Maintenance Period"), with respect to employees who
had been employees of the Company or any of its
Subsidiaries on the Closing Date (other than employees
of the Excluded Businesses) ("Transferred Employees"),
considered as a group, to provide employee benefits
and compensation which are substantially comparable
(as determined based on the reasonably expected value
of such benefits and compensation at the time of
award), in the aggregate, to the employee benefits and
compensation provided by the Company and its
Subsidiaries under the Group Benefit Plans and
compensation arrangements in effect, or adopted and
announced to employees, as of the Closing Date;
provided, that:
(A) bonuses awarded to the Transferred Employees after
the Closing Date may, at Purchaser's discretion, be
more dependent on the attainment of reasonable
performance targets by such Transferred Employees,
their respective business units, the Company or
Purchaser than was the case prior to the Closing
Date; and
(B) after the Closing Date, stock and other
equity-related interests in Purchaser may, at
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Purchaser's discretion, form a more significant
portion of the compensation (including bonuses)
payable to Transferred Employees than was the case
prior to the Closing Date; and
(iii) notwithstanding (ii) above, to continue without
any adverse change, for the Benefits Maintenance Period:
(A) the Company's and participating Subsidiary
Termination Allowance Plan; provided, that neither
(x) the relocation of any employee to a workplace
less than 35 straight-line miles from his or her
former workplace, nor (y) the refusal by any employee
to accept a position within his or her area of
expertise and no more than one salary grade below his
or her former position, shall give rise to such
employee's right to termination benefits under such
Plan; and
(B) the Company and all Subsidiary retiree medical,
dental and life insurance plans in effect or as
amended and announced to employees, as of the Closing
Date (the "Retiree Welfare Plans"); provided that
nothing herein shall limit Purchaser's ability to
institute, after the end of the Benefits Maintenance
Period, a cap on the benefits provided under such
plans.
(b) Purchaser will honor the terms of and will maintain
in effect for the calendar year in which the Closing Date occurs, the Officer
Short Term Incentive Award Plan and the Success Sharing Plan.
(c) If Transferred Employees are included in any benefit
plan, including without limitation, provision for vacation, of Purchaser or its
subsidiaries, the Transferred Employees shall receive credit as employees of
the Company and its Subsidiaries for service prior to the Closing Date with the
Company and its Subsidiaries to the same extent such service was counted under
similar Employee Plans or Benefit Arrangements for purposes of determining
eligibility to participate, vesting, eligibility for retirement and, with
respect to vacation, disability and severance, benefit accrual. If Transferred
Employees or their dependents are
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included in any medical, dental or health plan other than the plan or plans
they participated in on the Closing Date (a "Successor Plan") any such
Successor Plan shall not include pre-existing condition exclusions, except to
the extent such exclusions were applicable under the applicable Employee Plan
on the Closing Date.
(d) Except as otherwise specifically set forth above,
nothing contained herein shall be construed as requiring Purchaser to continue
any specific Employee Plan or Benefit Arrangement, or to continue the
employment of any specific person, provided however that any such changes as
Purchaser or its subsidiaries may make to any such Employee Plan or Benefit
Arrangement are permitted by the terms of the applicable Employee Plan or
Benefit Arrangement and under applicable Law.
(e) Purchaser acknowledges that it has been advised by
the Company that, following the Closing, the Company and, to the extent
applicable, Purchaser and its subsidiaries may be required to comply with the
provisions of Section 559 of the Deficit Reduction Act of 1984 dealing with the
transfer of telecommunications employees.
(f) The Company will cooperate with all reasonable and
lawful requests of Purchaser in establishing a plan or arrangement to provide
employees of the Company with equity or equity-related interests in Purchaser,
including, without limitation, by using reasonable commercial efforts, upon
Purchaser's request, to facilitate reasonable and lawful communications by
Purchaser, prior to the Closing Date, with employees of the Company concerning
such a plan or arrangement.
6.11 Indemnification; Directors and Officers
Insurance.
(a) Purchaser agrees that all rights to indemnification
or exculpation existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries (as such) as provided in their
respective charters or bylaws (or other similar governing instruments) in
effect as of the date hereof or, except as provided in Section 6.18, pursuant
to any indemnification contract listed in Section 4.12(a)(i) of the Company
Disclosure Schedule with respect to matters occurring prior to the Closing Date
shall survive the Closing and shall continue in full force and effect for a
period of not less than the
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statute of limitations applicable to such matters, and Purchaser agrees to
cause the Company and its Subsidiaries to comply fully with its obligations
hereunder and thereunder. To the maximum extent permitted by applicable Law,
such indemnification shall be mandatory rather than permissive and the Company
shall (and Purchaser shall cause the Company to) advance expenses in connection
with such indemnification to the fullest extent permitted under applicable Law,
provided that the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is not
entitled to indemnification.
(b) For a period of six years after the Closing,
Purchaser shall cause to be maintained an extension of coverage of the
Company's policies of directors and officers liability insurance maintained by
the Company for the benefit of those persons who are covered by such policies
at the time of the Closing with respect to matters occurring prior to the
Closing Date; provided, however, that Purchaser shall not be required to cause
to be maintained such liability insurance policies to the extent the annual
cost of maintaining such policies exceeds 150% of the premiums paid by the
Company in respect of such insurance for the year ended December 31, 1996.
(c) In the event Purchaser or the Company or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of Purchaser or the
Company shall assume the obligations set forth in this Section 6.11.
(d) Notwithstanding any provision of this Section 6.11 to
the contrary, none of the Company, the Purchaser or any Affiliate of either
shall be obligated to Sellers pursuant to this Agreement to indemnify, or
maintain insurance for the benefit of, any director, officer, employee or agent
of the Company or any Subsidiary in respect of any claim brought against any
such Person by any Seller or any Affiliate of any Seller with respect to matters
occurring prior to the Closing Date. Except to the extent that (i) any such
person would not be entitled to indemnification under Delaware law with respect
to the matter at issue by reason of the fact that such person
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failed to meet the applicable standard of conduct under Section 145(a) of the
Delaware General Corporation Law or (ii) the matter at issue is covered under
insurance policies of the Purchaser or the Company with third parties, all such
claims are hereby waived by each Seller (on its own behalf and on behalf of its
Affiliates).
6.12 Affiliate Contracts. (a) From and after the date
hereof and until the Closing Date, the Company and each Seller shall deliver to
Purchaser, promptly following execution thereof, fully executed copies of each
Affiliate Contract entered into (or amended) by the Company and any Seller or an
Affiliate during such period, it being understood that Affiliate Contracts may
be entered into or amended only as permitted by Section 6.2.
(b) Prior to or concurrently with the Closing, each Seller
and the Company will enter into an Amended Master Agreement; provided, however,
that each Seller and the Company agree, for the benefit of Purchaser, that
Section 5 of the Amended Master Agreements shall be effective as of the date
hereof.
6.13 Financial Advisors.
(a) The fees and expenses of Sellers' Advisors shall be
paid by Sellers in accordance with Sellers' agreements with such firms.
(b) The fees and expenses of Purchaser's Advisor shall be
paid by Purchaser in accordance with Purchaser's agreement with such firm.
6.14 Permitted Transactions. Prior to the Closing, the
Company will use its reasonable commercial efforts to transfer and convey all of
the Company's right, title and interest in and to the assets set forth in
Section 6.14 of the Company Disclosure Schedule (the "Excluded Assets") to (a)
in the case of those Excluded Assets that pertain to the NTA (which shall not be
transferred by the Company prior to the earlier of the Closing Date and January
1, 1997), Sellers (or an Affiliate of any Seller designated by any such Seller),
(b) in the case of those Excluded Assets that pertain to the ISCP (which shall
not be transferred by the Company prior to the earlier of the Closing Date and
January 1, 1997) (it being acknowledged that Bellcore holds such assets for the
benefit of certain of the Sellers), to the ISCP Alliance or (c) in the case of
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the "Xxxx" and "Xxxx Symbol" trademarks outside of the United States, to one or
more of the Sellers or their designees (collectively, the "Permitted
Transactions"). Notwithstanding anything to the contrary in this Agreement,
Purchaser expressly understands and agrees that neither the Excluded Assets nor
the Excluded Businesses will be included in the Business at the time of
consummation of the transactions contemplated by this Agreement, and Purchaser
will have no interest therein. In addition, it is understood that (i) the
rights and obligations of the Company described in the Amended ISCP Alliance
Detail Summary, dated March 20, 1996, a copy of which has been delivered to
Purchaser (the "ISCP Summary") will be incorporated in definitive agreements
between the Company and the ISCP Alliance and/or its members (such agreements
to be substantially on the terms set forth in the ISCP Summary) (the "ISCP
Agreements") and (ii) if and to the extent there is a conflict between the
provisions of the ISCP Agreements pertaining to the use by the ISCP Alliance or
its members of Bellcore Patents (as defined in the Amended Master Agreement)
related to the ISCP software and Licensed Technical Information (as defined in
the Amended Master Agreement) included in the ISCP software and the provisions
of the first sentence of Section 4.5 of the Amended Master Agreement, the
relevant provisions of the ISCP Agreements shall control.
6.15 Purchaser Guarantee. Effective from and after the
Closing, Purchaser irrevocably guarantees for the benefit of Sellers and their
applicable Affiliates, the Company's post-Closing obligations under (i) the
Amended Master Agreements, (ii) all other contracts and agreements between the
Company or any of its Subsidiaries and any Seller or any Affiliate of any
Seller in effect as of the Closing and (iii) all Work Statements entered into
after the Closing pursuant to the Amended Master Agreements.
6.16 Third-Party Indebtedness. At the Closing, Purchaser
shall, or shall cause the Company to, repay or refinance all Third-Party
Indebtedness outstanding immediately prior to the Closing, to the extent such
Third- Party Indebtedness is required in accordance with its terms to be repaid
or satisfied at the time or as a consequence of the consummation of the
transactions contemplated by this Agreement.
6.17 Resignations. Prior to or simultaneously with the
Closing, Sellers shall deliver to Purchaser the resignations, effective as of
the Closing, of all directors
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of the Company and all directors (if any) of its Subsidiaries who are not
officers of the Company.
6.18 Certain Agreements. Prior to or simultaneously with
the Closing, Sellers shall assume, and the Company shall be released from, all
obligations of the Company under the agreements described in items 2, 3, 4, 5
and 6 of Section 4.12(a)(i) of the Company Disclosure Schedule and items 14 and
15 of Section 4.12(a) of the Company Disclosure Schedule.
6.19 Fixed Price Contracts. (a) The Company shall (i) as
promptly as practicable after the date hereof, use its reasonable commercial
efforts to establish and implement a fixed price contract management review
process (which shall include, without limitation, the establishment and
implementation of procedures (including the augmentation and formalization of
procedures currently in effect) in connection with the bidding, pricing and
monitoring of such contracts and the establishment of "estimates to complete"
with respect to such contracts, (ii) afford Purchaser, to the extent permitted
by Law, a reasonable opportunity to review and comment on the establishment and
implementation of such procedures and (iii) consider in good faith Purchaser's
comments on, and suggestions with respect to, such procedures. It is the
intention of the parties hereto that Purchaser will provide Sellers with a
proposal with respect to such process and procedures, it being understood that
the Company shall not be obligated to adopt or implement any particular process
or procedures (including those proposed by Purchaser), but rather that the
Company shall be obligated to use its reasonable commercial efforts to establish
and implement a process and procedures that are consistent with sound business
practices (considered with reference to those processes and procedures adopted
by other leading companies which enter into material fixed price contracts in
the ordinary course of business). Notwith-standing the foregoing, but subject
to the provisions of paragraph (3) of Exhibit B hereto, it is further understood
that the guidelines adopted by the Company with respect to those contracts that
shall be subject to such review procedures shall be substantially comparable to
those of Purchaser (a true and correct copy of which has been provided by
Purchaser to Sellers and the Company).
(b) With respect to the costs and expenses incurred in
connection with the establishment and implementation of the review process
described in Section
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6.19(a), (i) Purchaser shall pay all out-of-pocket costs (including, without
limitation, all licensing, software and training costs (which training shall be
provided by Purchaser or third parties as determined by Purchaser with the
Company's approval (such approval not to be unreasonably withheld)) incurred by
Purchaser or the Company (provided the process and procedures adopted are
substantially similar (including, without limitation, the use of substantially
identical (except as otherwise determined by Purchaser) software) to those of
Purchaser or otherwise have been approved by Purchaser (such approval not to be
unreasonably withheld)), and (ii) all internal and overhead costs shall be paid
by the party incurring such costs.
6.20 Formatives. (a) From the date hereof until the Closing
Date, (i) no Seller shall exercise its buy-in rights under the Service
Agreement (as such term is defined in the Amended Master Agreement) with
respect to a Formative Project, and (ii) except as otherwise consented to in
writing by Purchaser (which consent shall not be unreasonably withheld),
Sellers shall not act jointly to license any Formative; provided, that no
merger or other transaction of the type described in Section 12.4 hereof
(whether occurring prior to, on or after the Closing Date) or activities in
furtherance thereof shall cause a violation of this Section 6.20(a).
(b) From the date hereof through December 31, 1996, the
Company shall, subject to the Net Risk Cap, continue to make Formative and
other research and investment expenditures in accordance with the Company's
1996 Business Plan.
(c) From January 1, 1997 until the earlier of (i) the Closing
Date, and (ii) December 31, 1997 (the "Formative/R&I Period"), the Company
shall incur (A) Formative development costs with respect to technologies and
products included in or relating to the MediaVantage and Wireless (i.e.,
Airboss and MobiSoft) product lines ("MediaVantage/Wireless Formative Costs")
in the aggregate amount of $38 million and (B) R&I development costs ("R&I
Costs") in the aggregate amount of $32 million, in each case assuming 12 months
of expenditures (and, accordingly, pro rated to the extent the Formative/R&I
Period is less than 12 months); provided, however, that (i) such MediaVantage/
Wireless Formative Costs incurred during the Formative/R&I Period may not
exceed $38 million (on a fully distributed cost basis) without the consent of
the Board of Directors of
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the Company, (ii) such R&I Costs incurred during the Formative/R&I Period may
not exceed $32 million (on a fully distributed cost basis) without the consent
of the Board of Directors of the Company, (iii) MediaVantage/Wireless Formative
Costs and R&I Costs shall be incurred substantially on a pro rata basis during
the course of 1997, except to the extent the Board of Directors of the Company
determines in good faith that non-pro rata expenditures are necessary for the
Company to achieve its objectives for Media/Wireless Formative and R&I
projects, (iv) the Company may, in the ordinary course of business, continually
evaluate the performance (including, without limitation, from the perspectives
of revenues and costs) of its MediaVantage and Wireless Formative and R&I
activities (in light of the objectives of such activities) and may determine to
modify its expenditures for MediaVantage and Wireless projects in furtherance
of developing products and technologies which the Company believes in good
faith better serve such objectives, to shift such expenditures to additional
R&I activities, or to shift R&I expenditures to Formatives (it being understood
that the Company will consult with Purchaser with respect to such performance
and consider in good faith Purchaser's input with respect thereto) and (v) it
is understood that, although the Company shall be obligated to incur
MediaVantage/Wireless Formative Costs and R&I Costs in the aggregate amounts
set forth above, in accordance with past practice, the Company shall not
undertake specific Formative or R&I activities without the approval of the
Board of Directors of the Company. It is further understood that (i) no
customer-specified customization, enhancement (other than non-exclusive
enhancements), upgrade, modification, installation, deployment, maintenance or
training costs incurred pursuant to a work statement, work order or other
contract or agreement shall be subject to the limitations set forth in this
Section 6.20(c) or included in the calculation of MediaVantage/Wireless
Formative Costs or R&I Costs and (ii) except as provided in the definition of
R&I (i.e., with respect to products not involving Multi-Owner Projects), no
research and investment costs incurred pursuant to a work statement, work order
or other contract or agreement shall be subject to the limitations set forth in
this Section 6.20(c) or included in the calculation of R&I Costs. If the
provisions of paragraph (10) of Exhibit B are then applicable, following the
Closing and prior to December 31, 1997, the Company shall not (and Purchaser
shall not cause or permit the Company to) change in any respect adverse to
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Sellers its practices with respect to the recognition of Formative/R&I
Revenues.
6.21 Location of Corporate Headquarters. It is the present
intention of Purchaser that the corporate headquarters of the Company will
remain in New Jersey.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by
Purchaser in whole or in part to the extent permitted by applicable Laws):
(a) the representations and warranties of each Seller and
the Company to Purchaser contained herein shall be true and correct at and as
of the Closing Date with the same effect as though those representations and
warranties had been made again at and as of that date (with the truthfulness
and correctness of such representations and warranties to be determined without
giving effect to any materiality qualifications or exceptions contained in such
representations and warranties), except (i) to the extent that certain of such
representations and warranties have been made as of or through a specified date
(which representations and warranties shall continue on the Closing Date to
have been true and correct as of or through the specified date); (ii) for
changes in representations and warranties specifically permitted by this
Agreement (including, without limitation, changes resulting from any one or
more of the Permitted Transactions); and (iii) where the failure or failures of
such representations and warranties to be so true and correct have not had and
would not have, individually or in the aggregate, a Material Adverse Effect;
(b) each Seller and the Company shall have performed and
complied in all material respects with all obligations and covenants required
by this Agreement to be performed or complied with by such Seller or the
Company on or prior to the Closing Date;
(c) Purchaser shall have been furnished with certificates
(dated the Closing Date and in form and sub-
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stance reasonably satisfactory to Purchaser) of each Seller (executed, on
behalf of each Seller, by an executive officer of such Seller), and of the
Company (executed, on behalf of the Company, by the Chief Executive Officer or
Chief Financial Officer of the Company), certifying as to the fulfillment of
the conditions specified in Sections 7.1(a) and 7.1(b) hereof applicable to
such Seller or the Company, as the case may be;
(d) there shall not have occurred since December 31, 1995
any event or change (other than as a result of or arising from (i) general
economic conditions, (ii) the matters described in Items 1(i) and 2 of Section
4.9(b) of the Company Disclosure Schedule or (iii) (other than insofar as this
condition relates to events or changes pertaining to or involving Sellers or
any of their Affiliates) the identity of Purchaser (as opposed to the fact or
terms of the transactions contemplated hereby)) which has had or would have,
individually or in the aggregate, a Material Adverse Effect;
(e) the waiting period under the HSR Act shall have
expired or been earlier terminated;
(f) no Law shall have been enacted, and no Order of any
Governmental Body shall be in effect, which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby;
(g) (i) the Consents of Governmental Bodies (A) listed in
Section 7.1(g) of the Purchaser Disclosure Schedule and required to have been
obtained by Purchaser in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
shall have been obtained and (B) required to be obtained by Sellers and the
Company shall have been obtained, except where the failure of Sellers or the
Company to obtain such Consents would not have, individually or in the
aggregate, a Material Adverse Effect; and (ii) none of the Consents obtained by
Purchaser, Sellers or the Company shall impose any requirements on the conduct
of the Business that would have a Material Adverse Effect;
(h) each Seller shall have entered into an Amended Master
Agreement, and such agreements shall, as of the Closing, be in full force and
effect;
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(i) no material (in the good faith judgment of Purchaser)
Legal Proceedings shall have been instituted or threatened by any Governmental
Body against the Company, any Subsidiary or the Purchaser seeking to restrain
or prohibit the consummation of the transactions contemplated by this
Agreement;
(j) Purchaser shall have received a separate
certification signed by each Seller under the penalties of perjury to the
effect that such Seller is not a "foreign person" as defined in Section 1445 of
the Code; and
(k) Purchaser shall have received, in respect of any
operations conducted in, and in respect of each facility or real property
owned, leased or operated by the Company or any of its Subsidiaries which is
located in, the State of New Jersey, evidence of (A) full compliance by the
Company with, or (B) the nonapplicability of the requirements of, the New
Jersey Industrial Site Recovery Act, as amended, and any rules or regulations
promulgated thereunder. Such evidence shall be in a form reasonably
satisfactory to Purchaser and shall not impose any obligations or liabilities
upon Purchaser, the Company or any Subsidiary.
7.2 Conditions Precedent to Obligations of Each Seller.
The obligation of each Seller to consummate the transactions contemplated by
this Agreement is subject to the fulfillment, prior to or on the Closing Date,
of each of the following conditions (any or all of which may be waived by the
Majority Sellers in whole or in part to the extent permitted by applicable Law,
except that (x) the conditions set forth in Sections 7.2(a) and (b) may not be
waived without the consent of any Seller(s) that is (are) materially adversely
affected by any breach by Purchaser of its representations, warranties or
covenants to a greater extent than all Sellers are so affected, (y) the
conditions set forth in Sections 7.2(f), (g), (h) and (insofar as the same
pertains to the NTA) (i) may be waived by a Seller only with respect to such
Seller and the condition set forth in Section 7.2(i) (insofar as the same
pertains to the ISCP) may be waived only by those Sellers that are, or whose
Affiliates are, or are to be, members of the ISCP Alliance and (z) the
conditions set forth in Section 7.2(h), (k) and (n) may only be waived by all
Sellers):
(a) the representations and warranties of Purchaser to
Sellers contained herein shall be true and correct in all material respects at
and as of the Closing
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Date with the same effect as though those representations and warranties had
been made again at and as of that date, except to the extent that certain of
such representations and warranties have been made as of or through a specified
date (which representations and warranties shall continue on the Closing Date
to have been true and correct in all material respects as of or through the
specified date);
(b) Purchaser shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date;
(c) Sellers shall have been furnished with a certificate
(dated the Closing Date and in form and substance reasonably satisfactory to
Sellers) of Purchaser (executed by an executive officer of Purchaser)
certifying as to the fulfillment of the conditions specified in Sections 7.2(a)
and 7.2(b);
(d) the waiting period under the HSR Act shall have
expired or been earlier terminated;
(e) no Law shall have been enacted, and no Order of any
Governmental Body shall be in effect, which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby;
(f) all material (in the good faith judgment of such
Seller) Consents of any Governmental Body required to be obtained by such Seller
or an Affiliate of such Seller in connection with the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, shall have been obtained and shall no longer be subject to
reconsideration by the applicable Governmental Body;
(g) no material (in the good faith judgment of such
Seller) Legal Proceeding shall have been instituted or threatened by any
Governmental Body against such Seller or an Affiliate of such Seller seeking to
restrain or prohibit the consummation by such Seller of the transactions
contemplated by this Agreement;
(h) the Amended Master Agreements shall, as of the
Closing, be in full force and effect with respect to each other Seller;
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(i) the Permitted Transactions shall have been
consummated;
(j) Purchaser shall have complied with its obligations
under Section 6.16 hereof in respect of Third Party Indebtedness;
(k) each other Seller is transferring its Share to
Purchaser at the Closing;
(l) there shall not have occurred a Purchaser Change of Control; and
(m) there shall not have occurred since December 31, 1995
any event or change (other than as a result of or arising from general economic
conditions), which has had or would have, individually or in the aggregate, a
material adverse effect on the business, results of operations or financial
condition of Purchaser and its subsidiaries taken as a whole and which would
have, directly or indirectly, a Material Adverse Effect after the Closing.
Notwithstanding the foregoing, Purchaser and each Seller acknowledge and agree
that the failure of any Seller to consummate the transactions contemplated by
this Agreement as a result of the fact that one or more of the conditions set
forth in Sections 7.2(h), (i) and (k) are not satisfied by the Outside Date,
shall constitute a willful breach of this Agreement by such Seller for purposes
of Section 9.2(a), provided that, other than with respect to any Seller that
shall have caused such condition not to have been satisfied (a "Breaching
Seller"), the remedy of specific performance provided for in Section 12.3 is
not an appropriate remedy and, accordingly, is unavailable for such breach as
to any Seller other than the Breaching Seller.
ARTICLE VIII
CLOSING; DOCUMENTS TO BE DELIVERED AT THE CLOSING
8.1 Closing Date. The closing of the sale and purchase
of the Shares provided for in Section 1.1 hereof (the "Closing") shall take
place at 9:00 a.m. (New York City time) at the offices of Weil, Gotshal &
Xxxxxx LLP, New York, New York (or at such other time and/or place as the
Majority Sellers and Purchaser may designate in writing) on the fifth business
day following the date on which each of the conditions specified in Article VII
hereof has been
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fulfilled (or waived by the party or parties entitled to waive that condition);
provided, however, that if pursuant to the foregoing provisions of this
sentence the Closing would take place on or after the 21st calendar day of a
month, the Closing shall take place on the final business day of such month
(except as may otherwise be agreed in writing by the Majority Sellers and
Purchaser). The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date". At the Closing, the parties shall execute and
deliver the documents referred to in Sections 8.2 and 8.3 hereof.
8.2 Documents to Be Delivered by Sellers and/or the
Company. At the Closing, Sellers and/or the Company, as applicable, shall
deliver, or cause to be delivered, to Purchaser the following:
(a) stock certificates representing all the Shares, duly
endorsed in blank or accompanied by stock transfer powers (with such Shares to
be delivered free and clear of all Liens); and
(b) the certificates referred to in Section 7.1(c) and
(j) hereof.
8.3 Documents to Be Delivered by Purchaser. At the
Closing, Purchaser shall deliver to Sellers the following:
(a) the Estimated Purchase Price in immediately available
fund wire transfers referred to in Section 2.2 hereof; and
(b) the certificate referred to in Section 7.2(c) hereof.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination of Agreement. This Agreement may be
terminated prior to the Closing as follows:
(a) by mutual written consent of the Majority Sellers and
Purchaser;
(b) by the Majority Sellers or Purchaser (i) if the
Closing shall not have occurred prior to the earlier of
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January 31, 1998 and the date that is the last day of the 14th month after the
date of the first filing by a Seller or an Affiliate of a Seller subsequent to
the date hereof of an application or petition to obtain a Required Consent from
a state Governmental Body (as such earlier date may be mutually extended by the
Majority Sellers and Purchaser, the "Outside Date"); provided that (A) if
Sellers are the terminating party, no Seller is, and (B) if Purchaser is the
terminating party, Purchaser is not, in material breach of its obligations
under this Agreement; or (ii) if there shall have been enacted any Law, or
there shall be in effect a final nonappealable Order of any Governmental Body,
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the applicable parties
hereto shall promptly appeal, and shall diligently pursue, any adverse
determination which is not nonappealable;
(c) by the Majority Sellers if, as a result of action or
inaction by Purchaser, the Closing shall not have occurred on or prior to the
date that is five (5) business days following the date on which all of the
conditions to Closing set forth in Article VII hereof are satisfied or waived;
(d) by Purchaser if, as a result of any action or
inaction by any Seller, the Closing shall not have occurred on or prior to the
date that is five (5) business days following the date on which all of the
conditions to Closing set forth in Article VII hereof are satisfied or waived;
(e) by the Majority Sellers if (i) there shall have been
a material breach of any representation or warranty on the part of Purchaser
set forth in this Agreement, or if any representation or warranty of Purchaser
shall have become untrue in any material respect, in either case such that the
condition set forth in Section 7.2(a) would be incapable of being satisfied by
the Outside Date, or (ii) there shall have been a breach by Purchaser of any of
its covenants or agreements hereunder materially adversely affecting (or
materially delaying) the consummation of the transactions contemplated hereby,
and Purchaser has not cured such breach within twenty (20) business days after
notice by Sellers' Representative or the Majority Sellers thereof; or
(f) by Purchaser if (i) there shall have been a material
breach of any representation or warranty on the
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part of the Company or any Seller set forth in this Agreement, or if any
representation or warranty of the Company or any Seller shall have become
untrue in any material respect, in either case such that the condition set
forth in Section 7.1(a) would be incapable of being satisfied by the Outside
Date or (ii) there shall have been a breach by the Company or any Seller of its
covenants or agreements hereunder such that the condition set forth in Section
7.1(b) would be incapable of being satisfied or otherwise having a Material
Adverse Effect on the Company or materially adversely affecting (or materially
delaying) the consummation of the transactions contemplated hereby, and the
Company or such Seller, as the case may be, have not cured such breach within
twenty (20) business days after notice by Purchaser thereof.
Upon the occurrence of any of the events specified in this Section 9.1 (other
than Section 9.1(a) hereof), written notice of such event shall promptly be
given to the other parties to this Agreement, whereupon this Agreement shall
terminate as hereinabove provided.
9.2 Survival After Termination.
(a) If this Agreement is terminated in accordance with
Section 9.1 hereof and the transactions contemplated hereby are not
consummated, this Agreement shall become null and void and of no further force
and effect except (i) for this Section 9.2, (ii) for the provisions of Sections
6.1(f), 6.7, 6.13, 12.2, 12.3, 12.5, 12.7 and 12.10 hereof and (iii) the
Confidentiality Agreement shall remain in full force and effect. If this
Agreement is terminated as permitted by Section 9.1, such termination shall be
without liability of any party (or any stockholder, partner, director, officer,
employee, agent, consultant or representative of such party) to any other party
to this Agreement, provided that if such termination shall result from the
willful or negligent failure of any party to fulfill a condition to the
performance of the obligations of any party, willful or negligent failure to
perform a covenant of this Agreement or willful or negligent breach by any
party hereto of any representation or warranty or agreement contained herein,
such party shall be fully liable for any and all Losses incurred or suffered by
any other party as a result of such failure or breach.
(b) If this Agreement shall be terminated by Purchaser
pursuant to Section 9.1(b) solely as a result of
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the failure of any Seller or an Affiliate of any Seller to have obtained a
Consent of a Governmental Body (such that the condition set forth in Section
7.1(g) or 7.2(f) shall not have been fulfilled), each Seller shall reimburse
Purchaser for one-seventh (1/7) of all actual and reasonable out-of-pocket (but
not overhead) expenses (including, without limitation, reasonable fees and
expenses of counsel and independent accountants and the reasonable expenses
(but not transaction or similar fees) of financial advisors) incurred by
Purchaser from and after March 5, 1996 through the date of such termination
(collectively, "Purchaser Expenses") that are specifically related to the
negotiation, execution and delivery of this Agreement and the transactions
contemplated by this Agreement, but not to exceed $2,000,000 in the aggregate
for all Sellers, upon the delivery to Sellers' Representative of documentation
reasonably satisfactory to Sellers' Representative setting forth in reasonable
detail the nature and amount of such fees and expenses. Notwithstanding the
foregoing, Purchaser shall not be entitled to receive reimbursement of
Purchaser Expenses if (i) the basis for a Governmental Body's failure to
provide a Consent relates in whole or in part to the identity of Purchaser
(including Purchaser's qualifications to own the Company) or (ii) prior to any
Outside Date, the Majority Sellers have requested in writing that Purchaser
extend the Outside Date (to a date not later than 12 months after the original
Outside Date) and Purchaser does not so agree to any such extension.
(c) Without limiting the provisions of Section 9.2(a), if
this Agreement is terminated pursuant to Section 9.1(c) or Section 9.1(e)
(other than as a result of the representation set forth in clause (b) of
Section 5.3 becoming untrue after the date hereof) and during the period from
January 1, 1997 through the termination date the Company incurs R&I Costs (on a
fully distributed cost basis) in excess of an amount (which shall not be less
than zero) equal to (i) the greater of (x) Formative/R&I Revenues recognized
during that period and (y) Allocable Formative/R&I Revenues in respect of such
period minus (ii) MediaVantage/Wireless Formative Costs (not to exceed $38
million, on a fully distributed cost basis) incurred during such period,
Purchaser shall pay such excess amount (but in no event more than the lesser of
$32 million and the R&I Costs incurred during such period) to the Company. As
soon as practicable following the termination date, the Company shall prepare
and deliver to Sellers and Purchaser a statement setting forth the R&I Costs
and
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MediaVantage/Wireless Formative Costs incurred by the Company from January 1,
1997 through such termination date and the Formative/R&I Revenues recognized by
the Company during such period. The provisions of Section 2.3 of this
Agreement shall apply mutatis mutandi to the calculation of such amounts and
the amount, if any, required to be paid by Purchaser to the Company under this
Section 9.2(c), except that the statements so delivered by the Company shall
not be required to have been audited.
ARTICLE X
SURVIVAL; GENERAL INDEMNIFICATION
10.1 Survival. (i) The representations and warranties of
Sellers contained in Sections 3.2, 3.4 and 3.8, of the Company contained in
Sections 4.2 and 4.4, and of Purchaser contained in Sections 5.5 and 5.11 of
this Agreement shall survive the Closing indefinitely, (ii) the representation
and warranty of Pacific Xxxx and Telesector contained in Section 3.10 shall not
survive the Closing; (iii) the representations and warranties of the Company
set forth in Sections 4.10 and 4.13 shall survive until the expiration of the
applicable statute of limitations (giving effect to any waiver, mitigation or
extension thereof), (iv) the representations and warranties of the Company set
forth in Section 4.17 shall survive for four (4) years after the Closing Date
and (v) all other representations and warranties of the parties hereto set
forth herein shall survive the Closing for a period (the "General Survival
Period") which is equal to the longer of 12 months following the Closing or 30
days after delivery by the Company's independent public accountants of the
audited financial statements of the Company for the fiscal year in which the
Closing occurs. No covenant or agreement of any party hereto shall survive the
Closing, except that (i) Section 6.2 shall survive for the General Survival
Period, (ii) Sections 6.20(a) and 6.20(c) shall survive the Closing for three
(3) months after the Closing Date and (iii) any covenant or agreement that, by
its terms or context, is intended to survive the Closing, shall survive the
Closing for the period specified therein or contemplated thereby (each covenant
or agreement which survives the Closing, a "Surviving Covenant").
Notwithstanding anything herein to the contrary, any covenant,
agreement, representation or warranty in
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respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding paragraph
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been duly given in accordance with this Agreement to the
party against whom such indemnity may be sought prior to such time.
10.2 Indemnification by Purchaser. Except with respect to
Taxes, which shall be governed exclusively by the provisions of Article XI,
effective as of the Closing Date, Purchaser hereby agrees that it shall
indemnify, defend and hold harmless each Seller, their respective Affiliates
and, if applicable, their respective directors, officers, shareholders,
partners, attorneys, accountants, agents and employees and their heirs,
successors and assigns (the "Seller Indemnified Parties") from, against and in
respect of any damages, claims, losses, charges, actions, suits, judgments,
proceedings, deficiencies, Taxes, interest, penalties, and reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees), removal
costs, remediation costs, closure costs, fines, penalties and expenses of
investigation and ongoing monitoring) (collectively, "Losses") imposed on,
sustained, incurred or suffered by or asserted against any of the Seller
Indemnified Parties, directly or indirectly, relating to or arising out of:
(i) any breach of any representation and warranty
made by Purchaser in this Agreement (it being understood by the parties that,
with respect to the representation and warranty of Purchaser pertaining to
Consents of Governmental Bodies contained in Section 5.6(a), such
representation and warranty shall be read without any qualification as to
Knowledge set forth therein);
(ii) the breach of any Surviving Covenant of
Purchaser contained in this Agreement.
10.3 Indemnification by Sellers.
Except with respect to Taxes, which shall be governed
exclusively by the provisions of Article XI:
(a) Effective as of the Closing Date, each Seller hereby
agrees that it shall severally, but not jointly, indemnify, defend and hold
harmless Purchaser, its Affiliates including, without limitation, the Company
and
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its Subsidiaries and, if applicable, their respective directors, officers,
shareholders, partners, attorneys, accountants, agents and employees (other
than the Transferred Employees) and their heirs, successors and assigns (the
"Purchaser Indemnified Parties" and, collectively with the Seller Indemnified
Parties, the "Indemnified Parties") from, against and in respect of any Losses
imposed on, sustained, incurred or suffered by or asserted against any of the
Purchaser Indemnified Parties, directly or indirectly, relating to or arising
out of:
(i) any breach of any representation and warranty (other
than the representation and warranty contained in Section 3.10) made by such
Seller in this Agreement (it being understood by the parties that with respect
to the representation and warranty of such Seller pertaining to Consents of
Governmental Bodies contained in Section 3.3(a), such representation and
warranty shall be read without any qualification as to Knowledge set forth
therein); and
(ii) the breach of any Surviving Covenant of such
Seller contained in this Agreement;
(iii) the litigation matter identified in item 16 of
Section 4.15 of the Company Disclosure Schedule; and
(iv) subject to Section 10.3(d), the presence or
Release (as defined in CERCLA) of Hazardous Materials into the environment at,
on, under or from the Xxxxxxx Facility prior to the Closing Date, to the extent
the resulting concentrations of Hazardous Materials at, on or under the soil,
subsurface strata, groundwater, surface water or any other part of the
environment exceed those allowed by applicable Environmental Laws; provided,
however, that for purposes of this Section 10.3(a)(iv), the term "Environmental
Laws" shall not give effect to any change to any Environmental Law adopted after
the Closing Date or any new Environmental Law adopted after the Closing Date, in
either case which would have the effect of imposing more stringent cleanup
criterion than would be applicable under applicable Environmental Laws as in
effect on the Closing Date.
(b) Effective as of the Closing Date, each Seller hereby
agrees that it shall severally, but not jointly, indemnify, defend and hold
harmless the Purchaser Indemnified Parties from and against one-seventh (1/7) of
any
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Losses imposed on, sustained, incurred or suffered by or asserted against the
Purchaser Indemnified Parties, directly or indirectly, relating to or arising
out of:
(i) the breach of any representation and
warranty made by the Company in this Agreement (determined, except in respect of
(A) Sections 4.7, 4.8(ii), 4.8(iii) and 4.9(b) and (B) representations and
warranties relating to the "material" impairment or delay of a party's ability
to consummate the transactions contemplated hereby, without regard to any
materiality qualification or exception included in any representation or
warranty giving rise to the claim for indemnity hereunder) (it being understood
by the parties that with respect to the representation and warranty of the
Company pertaining to Consents of Governmental Bodies contained in Section
4.6(a), such representation and warranty shall be read without any qualification
as to Knowledge set forth therein); and
(ii) the breach of any covenant or agreement
of (A) the Company contained in Section 6.2, 6.20(a) or 6.20(c) of this
Agreement or (B) Sellers contained in Section 6.13(a) of this Agreement.
(c) Notwithstanding anything contained herein to the contrary,
Sellers shall be liable to the Purchaser Indemnified Parties for Losses under
Sections 10.3(a)(i) and 10.3(b)(i) in respect of breaches of any Seller's or the
Company's representations and warranties if and only if the Losses therefrom
exceed an aggregate amount equal to the excess of $8,000,000 over the Purchaser
Environmental Costs (the "Seller Threshold"), and then only for all such Losses
in excess of the Seller Threshold, provided that (i) Sellers shall be liable to
Purchaser Indemnified Parties for Losses under Sections 10.3(a)(i), 10.3(a)(iv)
and 10.3(b)(i) only up to an aggregate amount (taking into account the
indemnification payments made by all Sellers hereunder with respect to matters
contained in Section 10.3) equal to the Purchase Price, and (ii) for purposes of
calculating Losses under Sections 10.3(a)(i) and 10.3(b)(i) Sellers shall not be
liable to the Purchaser Indemnified Parties for any Loss in respect of such
breaches if the aggregate amount of such Loss relating to a single claim (or
group of claims relating to the same event or transaction) does not exceed
$50,000.
(d) Notwithstanding anything contained herein to the contrary:
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(i) in no event shall Sellers' obligation to indemnify the
Purchaser Indemnified Parties under Section 10.3(a)(iv) of this
Agreement extend, with respect to the real property known as the
Xxxxxxx Facility, to Corrective Action that seeks to meet or
otherwise address cleanup criteria applicable to real property
other than criteria applicable to real property used for purposes
substantially consistent with those purposes for which the
Xxxxxxx Facility was used by the Company prior to the Closing,
and specifically shall not include any obligation to indemnify
for or undertake Corrective Action to meet or satisfy cleanup
criteria applicable to real property designated for residential
or commercial use (other than commercial uses similar to the uses
of the Xxxxxxx Facility by the Company prior to the Closing and
unless and to the extent necessary due to the migration of
Hazardous Materials away from the Xxxxxxx Facility); and
(ii) with respect to the costs and expenses incurred in
connection with any remedial, removal or other clean-up activity
(excluding any costs or expenses incurred with respect to any
investiga- tory activities) that would, but for this Section
10.3(d)(ii), be indemnifiable by Sellers hereunder (collectively,
"Remediation Costs"), (i) Purchaser and Sellers shall each bear
fifty percent of the first $1,000,000 of such Remediation Costs,
(ii) Sellers shall bear the next $500,000 of such Remediation
Costs, (iii) Purchaser shall bear the next $500,000 of such
Remediation Costs in excess of $1,500,000, and (iv) Sellers shall
bear all Remediation Costs in excess of $2,000,000 (the amount so
paid by Purchaser pursuant to clauses (i) and (iii) above being
referred to herein collectively as the "Purchaser Environmental
Costs"); provided, however, that this Section 10.3(d)(ii) shall
not apply to Losses under Section 10.3(a)(iv) arising as a result
of claims asserted by third parties (other than claims asserted
by any Governmental Body), it being understood that Sellers shall
indemnify the Purchaser Indemnified Parties with respect to 100%
of such Losses.
10.4 Indemnification Procedures. (a) Except as otherwise provided
in Section 10.4(g), all claims for indemnification by any Indemnified Party
pursuant to Section
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10.2 or 10.3(a) with respect to third-party claims shall be asserted and
resolved as set forth in this Section 10.4(a). In the event that any written
claim or demand for which Purchaser or any Seller (as the case may be, an
"Indemnifying Party") would be liable to any Indemnified Party pursuant to
Section 10.2 or 10.3(a) hereof (in the case of Section 10.3(a), without regard
to whether the Seller Threshold has been exceeded) is asserted against or sought
to be collected from any Indemnified Party by a third party, such Indemnified
Party shall promptly, but in no event more than 15 days following such
Indemnified Party's receipt of such claim or demand, notify in writing the
Indemnifying Party of such claim 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 or demand) (the "10.4(a) Claim
Notice"); provided that any failure to so deliver the 10.4(a) Claim Notice to
any Indemnifying Party shall not relieve the Indemnifying Party of any of its
obligations hereunder unless (and then only to the extent) that such
Indemnifying Party is adversely affected by such failure. The Indemnifying Party
shall have 90 days from the personal delivery or mailing of the 10.4(a) Claim
Notice (the "10.4(a) Notice Period") to notify the Indemnified Party (a) whether
or not the Indemnifying Party disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such claim or demand and (b)
whether or not it desires to defend the Indemnified Party against such claim or
demand. All costs and expenses incurred by the Indemnifying Party in defending
such claim or demand shall be a liability of, and shall be paid by, the
Indemnifying Party; provided, however, that the amount of such costs and
expenses that shall be a liability of any Seller hereunder shall be subject to
the limitations set forth in Section 10.3(c). Except as hereinafter provided, in
the event that the Indemnifying Party notifies the Indemnified Party within the
10.4(a) Notice Period that it desires to defend the Indemnified Party against
such claim or demand, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to participate
in (but not control) any such defense, it may do so at its sole cost and
expense. The Indemnified Party shall not settle a claim or demand without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party, settle, compromise or offer to settle
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or compromise any such claim or demand on a basis which would result in the
imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the Indemnified Party or any subsidiary or
Affiliate thereof. To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third-party claim or demand, the
Indemnified Party will give the Indemnifying Party and its counsel reasonable
access to, during normal business hours, the relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the Indemnified Party. The Indemnified Party shall cooperate reasonably in the
defense of all such claims.
(b) Without limiting the provisions of Section 12.10, with
respect to all claims for indemnification by a Purchaser Indemnified Party
pursuant to Section 10.3(b) other than third party claims, all notices with
respect thereto shall be delivered to the Sellers' Representative and each
Seller, and each Seller hereby acknowledges and agrees that the Sellers'
Representative shall have the power and authority to resolve any disputes with
respect to such claim on behalf of all Sellers, and that any such resolution
shall be binding upon all Sellers.
(c) All claims for indemnification by any Purchaser Indemnified
Party pursuant to Section 10.3(b) with respect to third-party claims shall be
asserted and resolved as set forth in this Section 10.4(c). In the event that
any written claim or demand for which Sellers would be liable to any Indemnified
Party pursuant to Section 10.3(b) hereof (without regard to whether the Seller
Threshold has been exceeded) is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall promptly,
but in no event more than 15 days following such Indemnified Party's receipt of
such claim or demand, notify in writing Sellers' Representative and each Seller
of such claim 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 or demand) (the "10.4(c) Claim Notice"); provided that any failure
to so deliver the 10.4(c) Claim Notice to Sellers' Representative or any Seller
shall not relieve any Seller of any of its obligations hereunder unless (and
then only to the extent) that Sellers are adversely affected by such failure.
Sellers' Representative shall have 90 days from the personal delivery or mailing
of the 10.4(c) Claim Notice (the "10.4(c) Notice Period") to notify the
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Indemnified Party (a) whether or not Sellers dispute the liability of Sellers to
the Indemnified Party hereunder with respect to such claim or demand and (b)
whether or not Sellers desire that Sellers' Representative (or its designee)
defend the Indemnified Party against such claim or demand. All costs and
expenses incurred by Sellers' Representative or Sellers in defending such claim
or demand shall be a liability of, and shall be paid by, Sellers; provided,
however, that the amount of such costs and expenses that shall be a liability of
Sellers hereunder shall be subject to the limitations set forth in Section
10.3(c). Except as hereinafter provided, in the event that Sellers'
Representative notifies the Indemnified Party within the 10.4(c) Notice Period
that Sellers desire to defend the Indemnified Party against such claim or
demand, Sellers' Representative (or its designee) shall have the right to defend
the Indemnified Party by appropriate proceedings and shall have the sole power
to direct and control such defense. If any Indemnified Party desires to
participate in (but not control) any such defense, it may do so at its sole cost
and expense. The Indemnified Party shall not settle a claim or demand without
the consent of the Sellers' Representative, which consent shall not be
unreasonably withheld. Neither Sellers' Representative nor Sellers shall,
without the prior written consent of the Indemnified Party, settle, compromise
or offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the Indemnified Party or any
subsidiary or Affiliate thereof. To the extent Sellers' Representative (or its
designee) shall direct, control or participate in the defense or settlement of
any third-party claim or demand, the Indemnified Party will give Sellers'
Representative (or such designee, as the case may be) and its counsel reasonable
access to, during normal business hours, the relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the Company, Purchaser and, if other than Purchaser, the Indemnified Party. The
Company, Purchaser and, if other than Purchaser, the Indemnified Party shall
cooperate reasonably in the defense of all such claims. Each Seller hereby
acknowledges and agrees that Sellers' Representative has the power and authority
to act for, represent and bind such Seller with respect to the actions required
or expressly permitted to be taken by Sellers' Representative pursuant to this
Section 10.4(c).
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(d) With respect to claim between the parties or by a Seller
Indemnified Party or a Purchaser Indemnified Party for which indemnification
will be sought (other than claims referred to in Section 10.4(a) or 10.4(b)) (a
"Non- Third Party Claim"), the party claiming indemnification ("Claimant")
shall, within fifteen days of its discovery of such claim, give notice to the
party from which indemnification is sought ("Indemnitor") of its Non-Third Party
Claim, specifying in reasonable detail the factual basis for such claim and, to
the extent known, the amount of such claim. Notwithstanding the foregoing, the
failure by the Claimant to provide notice of any Non-Third Party Claim within
the period specified, or any delay in providing such notice, shall not affect or
impair the obligations of Indemnitor hereunder, except and only to the extent
that Indemnitor has been adversely affected by such failure or delay.
(e) Following receipt of notice from the Claimant of a Non-Third
Party Claim, the Indemnitor shall have sixty (60) days to make any investigation
of the Non-Third Party Claim that the Indemnitor deems necessary or desirable.
For the purposes of this investigation, the Claimant agrees to make available to
the Indemnitor and its authorized representatives the information relied upon by
the Claimant to substantiate such Non-Third Party Claim, as well as any other
information the Indemnitor reasonably requests to effect its investigation. If
the Claimant and the Indemnitor cannot agree as to the validity and amount of
such claim within the 60-day period (or any mutually agreed upon extension
thereof), the Claimant may seek appropriate legal remedy.
(f) Purchaser acknowledges that from and after the Closing Date
the indemnification provisions contained in this Article X constitute
Purchaser's sole remedy with respect to any of the matters referred to herein.
(g) Notwithstanding anything to the contrary in this Agreement,
the following procedures shall apply with respect to a claim by Purchaser
pursuant to Section 10.3(a)(iv):
(1) Purchaser shall, within 15 days of discovery of such a
claim, give written notice to the Sellers' Representative that specifies
in reasonable detail the factual and legal basis of such claim, and to
the extent known, the potential costs. Notwith-
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standing the foregoing, the failure by Purchaser to provide notice to
the Sellers' Representative within the specified time, or delay in
providing notice, shall not affect or impair any obligations of Sellers
hereunder, unless (and then only to the extent) that Sellers have been
adversely affected by such failure or delay and provided that Purchaser
shall not voluntarily incur any Losses without providing the Sellers'
Representative with notice and an opportunity to participate in
designing and implementing any Corrective Action (as defined below),
unless, in light of the circumstances, such notice or participation is
not reasonably possible.
(2) Purchaser shall cooperate with the Sellers'
Representative in designing and implementing any investigative,
remedial, removal or other cleanup activity ("Corrective Action"), which
cooperation shall include, but not be limited to, providing the Sellers'
Representative (i) a reasonable opportunity to review and comment on
proposed Corrective Action plans and any material correspondence or
documentation to be filed with a governmental agency (which comments
shall be considered by Purchaser in good faith) and (ii) the opportunity
to be present and participate at any meetings with governmental
agencies. Purchaser shall undertake any Corrective Action in a
reasonable and cost-effective manner, taking into account the use of the
Xxxxxxx Facility. In the event of any disagreement as to any material
Corrective Action proposed by Purchaser (including the manner in which
such Corrective Action is proposed to be taken), Purchaser and the
Sellers' Representative shall retain a nationally recognized
environmental consulting firm reasonably satisfactory to the parties to
resolve such disagreement. The fees and expenses of such consulting firm
shall be paid one-half by Purchaser and one-half by Sellers.
(3) Notwithstanding anything to the contrary in this
Agreement, Losses shall not include and, following the Closing,
Purchaser and the Company shall bear, any investigatory costs undertaken
to identify a condition covered by Section 10.3(a)(iv), but shall
include all subsequent Corrective Action costs.
(4) The obligation of Sellers to indemnify Purchaser under
Section 10.3(a)(iv) of this Agreement
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with respect to Non-Third Party Claims shall expire upon the earliest to
occur of (a) the fourth anniversary of the Closing Date, (b) such time,
if any, as Purchaser no longer continues to own both (i) a majority of
the total voting power of all classes of capital stock then outstanding
of the Company normally entitled to vote in the election of directors
and (ii) substantially all of the assets of the Company, or (c) such
time, if any, as neither Purchaser nor the Company continues to own the
Xxxxxxx Facility (it being understood that the obligation of Sellers to
indemnify Purchaser under Section 10.3(a)(iv) of this Agreement with
respect to claims asserted by third parties shall survive indefinitely);
provided, however, that such indemnity shall continue in respect of any
claim made by Purchaser under Section 10.3(a)(iv) prior to such
expiration.
(5) With respect to any matter for which Purchaser may
seek indemnification against Sellers pursuant to Section 10.3(a)(iv),
Purchaser agrees to use its commercially reasonable efforts to enforce
(or to cause the Company to enforce) all rights, if any, of the Company
against AT&T Corp. ("AT&T") for the payment of all or any portion of
such indemnifiable Losses, including its rights under that certain Plan
of Reorganization, dated December 16, 1982, between the United States of
America, as plaintiff, and Western Electric Company, Inc. and AT&T, as
defendants.
10.5 Characterization of Indemnification and Other Payments. All
amounts paid by Purchaser or any Seller, as the case may be, under Article II
and this Article X and Article XI shall be treated as adjustments to the
Purchase Price for all Tax purposes.
10.6 Computation of Losses Subject to Indemnification. The amount
of any Loss for which indemnification is provided under this Article X shall be
computed net of any insurance proceeds due to the Company or any wholly-owned
Subsidiary payable by any Person (other than the Company or any wholly-owned
Subsidiary) or Tax benefits actually realized as a result of such Loss by the
Indemnified Party in connection with such Loss and, to avoid double-counting,
after giving effect to any reserves on the books of the Company as of the
Closing Date in respect of any matter if and to the extent such reserve reduced
Interim Period Net Income. To the extent any such Tax benefit is not actually
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realized when a Loss occurs, while under no obligation to compromise, Purchaser
and the Sellers' Representative shall attempt in good faith to agree upon the
present value of the Tax benefit reasonably expected to be realized.
10.7 No Right of Contribution Against Company. No Seller shall
have any rights of contribution against the Company with respect to any amounts
that it is required to pay to any Purchaser Indemnified Party pursuant to this
Article X.
ARTICLE XI
TAX MATTERS
11.1 Preparation of Tax Returns; Payment of Taxes.
(a) The Company shall file all Tax Returns of the Company or any
Subsidiary required to be filed (taking into account any extensions) on or prior
to the Closing Date and shall pay any and all Taxes shown as due on such Tax
Returns.
(b) Purchaser shall be responsible for preparing or causing to be
prepared all Tax Returns required to be filed by or on behalf of the Company and
any Subsidiary after the Closing Date. All such Tax Returns for a Pre- Closing
Tax Period (or otherwise with respect to any Tax for which indemnity may be
sought under Section 11.3) shall be prepared in a manner consistent with prior
practice unless otherwise required by applicable tax laws. If any Tax shown as
due on any such Tax Returns relates to a Pre-Closing Tax Period, Purchaser shall
provide Sellers' Representative with copies of each such Tax Return at least 20
days prior to the due date for filing such Tax Return, and Sellers'
Representative shall have the right to review and approve such Tax Returns. The
failure of Sellers' Representative to object to any such Tax Return within 15
days after receipt thereof shall be deemed to constitute approval thereof.
Purchaser and Sellers' Representative shall attempt in good faith mutually to
resolve any disagreements regarding such Tax Returns prior to the due date for
filing thereof. Purchaser shall file or cause to be filed, and pay or cause to
be paid any amount shown as due on, all such Tax Returns.
11.2 Transfer Taxes. Purchaser shall be liable for and shall pay
when due (and shall indemnify and hold
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harmless Sellers against) one-half of all sales, use, stamp, documentary,
filing, recording, transfer or similar fees or Taxes levied by any taxing
authority or governmental agency in connection with the transactions
contemplated by this Agreement, and each Seller shall be liable for and shall
pay when due (and shall indemnify and hold harmless Purchaser against)
one-fourteenth (1/14) of any such Taxes. Purchaser hereby agrees to file (or
cause to be filed) all necessary documents (including, but not limited to, all
Tax Returns) with respect to all such amounts in a timely manner, and if
required by applicable Law, Sellers hereby agree to join in the filing of such
Tax Returns.
11.3 Tax Indemnification. (a) Except as otherwise provided in
this Section 11.3(a), Section 11.4 or Section 11.1(b), each Seller hereby agrees
that it shall severally, but not jointly, indemnify, defend and hold harmless
the Purchaser Indemnified Parties from, against and in respect of one-seventh
(1/7) of any (x) Tax of the Company or any Subsidiary related to a Pre-Closing
Tax Period or assessed as the result of (1) a sale, exchange or other
disposition of property which occurs prior to the Closing, or (2) the transfer
or conveyance of any Excluded Assets pursuant to Section 6.14, (y) without
duplication, Tax of the Company or any Subsidiary resulting from a breach of the
provisions of Section 4.10 (determined without regard to any materiality
qualification or exception therein), and (z) out-of-pocket liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (x) or (y) ((x), (y) and (z) being referred to herein as
a "Tax Loss"). Notwithstanding anything contained herein to the contrary,
Sellers shall be liable to the Purchaser Indemnified Parties for Tax Losses
under (x) (other than (x)(2)) and (y) if and only if such Tax Losses exceed
$14,642,629 (the "Tax Threshold"), and then only for all such Tax Losses in
excess of the Tax Threshold.
(b) For purposes of this Section 11.3, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Tax period that
commences before but ends after the Closing Date, the portion of such Tax
related to the portion of such Tax period ending on and including the Closing
Date shall (x) in the case of any Taxes other than gross receipts, sales or use
Taxes and Taxes based upon or related to income, be deemed to be the amount of
such Tax
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for the entire Tax period multiplied by a fraction the numerator of which is the
number of days in the Tax period ending on and including the Closing Date and
the denominator of which is the number of days in the entire Tax period, and (y)
in the case of any Tax based upon or related to income or any gross receipts,
sales or use Tax, be deemed equal to the amount which would be payable if the
relevant Tax period ended on and included the Closing Date; provided, that
exemptions, allowances and deductions that are calculated on an annual basis
(including but not limited to depreciation and amortization deductions) shall be
allocated between the period ending on the Closing Date and the period after the
Closing Date in proportion to the number of days in each such period. The
portion of any credits relating to a Tax period that begins before and ends
after the Closing Date shall be determined as though the relevant Tax period
ended on and included the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company.
(c) Any payment pursuant to this Section 11.3 shall be made not
later than 30 days after the later of (i) receipt by Sellers' Representative of
written notice from Purchaser stating that any Tax Loss has been paid and the
amount thereof and of the indemnity payment requested or (ii) a final
determination (within the meaning of Section 1313 of the Code or similar
provision of state or local law) with respect to a Tax Loss being contested
hereunder.
(d) Purchaser promptly shall notify the Sellers' Representative,
in writing, of any Tax Loss or the receipt by Purchaser or the Company or any
Subsidiary of notice of any audits, proposed assessments, claims, suits, actions
or proceedings of or against the Company or any Subsidiary in respect of any
Pre-Closing Tax Period (specifying with reasonable particularity the basis
therefor) and will provide Sellers' Representative (or its designee) with such
information with respect thereto as may be reasonably requested. Purchaser shall
assume sole control over the defense of any such Tax audit or administrative or
court proceeding; provided, however that (i) the Sellers' Representative (or its
designee) and its counsel may, at Sellers' expense, participate in any such
audit or proceeding, (ii) in conducting the defense, Purchaser shall at all
times act as if any potential Tax Loss were for its own account and shall act in
good faith to minimize such Tax Loss, (iii) except as provided in the next
sentence,
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Purchaser shall not agree to any settlement or compromise with respect to any
item giving rise to a Tax Loss covered by this Section 11.3 (determined without
regard to the application of the Tax Threshold) without the prior consent of the
Sellers' Representative (which consent (a) will not be unreasonably withheld,
and (b) will be deemed to have been given if not affirmatively denied in
writing, giving reasons, within 15 days of the request therefor) and (iv) in the
context of any audit or settlement Purchaser shall not discriminate against any
item giving rise to a Tax Loss described in this Section 11.3 (determined
without regard to the application of the Tax Threshold) as compared to any other
proposed adjustments. Notwithstanding anything to the contrary herein, Purchaser
shall have the right to settle any item giving rise to a Tax Loss without the
consent of the Sellers' Representative, upon written notice to the Sellers'
Representative that the Sellers are relieved of their indemnification obligation
with respect thereto, or if applicable, that such settlement will not be
credited as paid by Purchaser for purposes of the Tax Threshold. If the Sellers'
Representative affirmatively withholds its consent to a proposed settlement
under this Section 11.3(d), Purchaser may (a) continue to conduct the defense
with respect to such item or (b) allow the Sellers' Representative to assume
control thereof, at Sellers' cost, in which case the proposed settlement amount
shall be the maximum amount for which Sellers shall avoid an indemnity
obligation as a result of the application of the Tax Threshold (and the maximum
amount credited as paid by Purchaser for purposes of the Tax Threshold) with
respect to such item. Purchaser shall be required to appeal any adverse judicial
determination relating to Taxes for any Pre-Closing Tax Period upon the written
request of the Sellers' Representative within 30 days of such adverse
determination, which request includes an opinion of nationally recognized tax
counsel to the effect that the Company is more likely than not to prevail on
such appeal. For the avoidance of doubt, Purchaser shall have the sole and
exclusive control of and the Sellers' Representative shall have no participation
or consent rights with respect to any audit or proceeding to the extent such
audit or proceeding is related to Unbilled Formative Project Revenues.
Notwithstanding the foregoing, for Pre-Closing Tax Periods that commence after
December 31, 1996, Sellers' Representative shall have sole and exclusive control
of any portion of any Tax audit or administrative or court proceeding relating
to any Tax resulting from the transfer or conveyance of any Excluded Asset
pursuant to Section
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6.14; provided, however, that Purchaser and its counsel may, at Purchaser's
expense, participate in any such audit or proceeding but shall have no consent
or control rights with respect thereto (unless Purchaser, on behalf of the
Purchaser Indemnified Parties, waives in writing its rights of indemnification
with respect to such Tax).
(e) No investigation by Purchaser or any of its Affiliates at or
prior to the Closing Date shall relieve any Seller of any liability hereunder.
(f) Any claim of the Company or any Subsidiary or any of the
other Purchaser Indemnified Parties under this Section may be made and enforced
by Purchaser on their behalf.
(g) Notwithstanding anything in this Agreement to the contrary,
the provisions of this Section 11.3 and Section 11.4 and the representations in
Section 4.10 shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
(h) No Seller shall have any rights of contribution against the
Company or any Subsidiary with respect to any amounts that it is required to pay
any Purchaser Indemnified Party pursuant to this Section 11.3 or Section 11.4.
(i) Except as otherwise provided in Section 11.4, if the Sellers'
indemnification obligations under this Section 11.3 (determined without regard
to the application of the Tax Threshold) arises in respect of an adjustment
which makes allowable any deductions, losses or tax credits or decreases income,
gains or recapture of tax credits (the "Changes") reflected on any Tax Return of
Purchaser or the Company or any Subsidiary for any taxable period ending after
the Closing Date (treating, for this purpose, any taxable period that begins
before and ends after the Closing Date as two taxable periods, the first of
which shall be deemed to end on the Closing Date), (1) with respect to items for
which the Sellers pay an indemnity pursuant to this Section 11.3 Purchaser
promptly shall pay to each Seller one-seventh (1/7) of the net income tax
benefit (the income tax, for this purpose, shall include the alternative minimum
tax) actually realized by Purchaser or the Company or any Subsidiary as a result
of such Changes (and to the extent any such net income tax benefit is not
actually
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realized when a Change occurs, while under no obligation to compromise,
Purchaser and the Sellers' Representative shall attempt in good faith to agree
upon the present value of the net income tax benefit reasonably expected to be
realized) and (2) with respect to items for which the Sellers are not obligated
to pay an indemnity pursuant to this Section 11.3 due to the impact of the Tax
Threshold, the Tax Threshold shall be increased to the extent of the amounts
that would have been payable by the Purchaser under clause (1) of this Section
11.3(i) had such clause applied. In addition, Sellers' indemnification
obligation under this Section 11.3 shall be computed net of any Tax benefits
actually realized by the Company in a Pre-Closing Tax Period.
(j) Purchaser and the Company shall make available to Sellers, as
reasonably requested and at Sellers' sole cost and expense, all information,
records or documents in their possession relating to Tax items and liabilities
of any of the Sellers for all taxable periods ending on, prior to or including
the Closing Date (and, during normal business hours, employees of Purchaser and
the Company having knowledge about such Tax items and liabilities) and shall
preserve all such information, records and documents until the expiration of any
applicable Tax statute of limitations or extensions thereof; provided, however,
that if a proceeding has been instituted for which the information, records or
documents is required prior to the expiration of the applicable statute of
limitations, such information, records or documents shall be retained until
there is a final determination with respect to such proceeding.
(k) Except in connection with an audit or other proceeding to
which Section 11.3(d) applies, Purchaser shall not file or cause the Company or
any Subsidiary to file any amended Tax Return in respect of any taxable period
of the Company or such Subsidiary ending prior to or on the Closing Date without
the prior written consent of Sellers' Representative.
(l) (i) Upon reasonable request of Sellers' Representative,
Purchaser shall claim or cause the Company or any Subsidiary to claim (by means
of filing an amended Tax Return or otherwise) a refund of Taxes of the Company
or any Subsidiary attributable to any period ending prior to or on or including
the Closing Date. Each Seller shall pay one-seventh (1/7) of the reasonable
out-of-pocket costs and
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expenses incurred by Purchaser in connection with such refund claim.
(ii) Except as otherwise provided in Section 11.4, to the extent
any determination of Tax liability of the Company or any Subsidiary, whether as
the result of an audit or examination, a claim for refund, the filing of an
amended Tax Return or otherwise other than as a result of the carryback of a
loss, deduction or credit attributable to a period after the Closing Date,
results in any refund of Taxes paid attributable to any Pre-Closing Tax Period,
any such refund shall belong to Sellers. Purchaser or the Company, as the case
may be, promptly shall pay one-seventh (1/7) of any such refund, and the
interest actually received thereon, to each Seller upon receipt thereof.
11.4 Formative Projects. Notwithstanding anything in Section 11.3 to the
contrary (other than the application of the Tax Threshold):
(a) Any federal, state or local income tax refund received by the
Company in respect of its 1993, 1994 or 1995 taxable years, to the extent
attributable to the income tax treatment of any Unbilled Formative Project
Revenues (a "Formative Refund"), shall be and remain the property of the
Company, and the Purchaser and the Company shall have no obligation to pay any
portion of such refund to Sellers.
(b) If the Company shall receive a Formative Refund and, following the
Closing Date, a federal, state or local income tax deficiency is assessed
against the Company with respect to its 1993, 1994 or 1995 taxable years in
respect of the income tax treatment of any Unbilled Formative Project Revenues
that gave rise to a Formative Refund, Purchaser shall pay (or cause the Company
to pay) such assessment (but not in excess of the amount of any Formative
Refunds previously received by the Company), and Sellers shall have no
obligation to indemnify Purchaser Indemnified Parties for any such previously
received amount; provided, that each Seller, severally but not jointly, shall
indemnify the Purchaser Indemnified Parties from and against, and shall pay,
one-seventh (1/7) of any interest and penalties required to be paid to the
taxing authority in respect of such assessment (net of the amount of interest
actually received by the Company in connection with any Formative Refunds).
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(c) Purchaser shall pay (or cause the Company to pay) any federal, state
or local income tax deficiency concerning the 1996 taxable year of the Company
or any subsequent taxable year of the Company (or portion thereof) ending prior
to or on the Closing Date that relates to the income tax treatment of any
Unbilled Formative Project Revenues, and Sellers shall have no obligation to
indemnify Purchaser Indemnified Parties for any such amount; provided, that each
Seller, severally but not jointly, shall indemnify the Purchaser and the Company
from and against, and shall pay, one-seventh (1/7) of any interest and penalties
required to be paid to the taxing authority in respect of such deficiency (net
of the amount of interest actually received by the Company in connection with
any Formative Refunds).
(d) If a claim for a Formative Refund is disallowed by the applicable
taxing authority or a deficiency is assessed against the Company in respect of
the income tax treatment of any Unbilled Formative Project Revenues, and an
effect of such disallowance or assessment is to increase deductions, losses or
tax credits or decrease income or gains in any taxable period of Purchaser or
the Company (whether ending prior to, on or after the Closing Date), any income
tax benefit arising from such increase or decrease shall be and remain the
property of the Company, and the Purchaser and the Company shall have no
obligation to compensate Sellers for any such tax benefit.
(e) Notwithstanding any other provision of this Agreement to the
contrary, Sellers make no representation or warranty as to the amount or
validity of Formative Refunds that may be received and retained by the Company.
The Sellers shall have no financial responsibility to Purchaser or the Company
with respect to Formative Refunds except as expressly set forth in this Section
11.4.
ARTICLE 1.
MISCELLANEOUS
12.1 Certain Definitions; Rules of Construction.
(a). The following defined terms have the respective meanings provided
in the section of this Agreement set forth opposite such term:
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Defined Term Section
------------ -------
Adjustment Amount 2.3(a)
Affiliate Contracts 4.12(a)
Balance Sheet Date 4.7
Base Purchase Price 2.1
Breaching Seller 7.2
C&L 2.3(a)
Capital Stock 4.3
CERCLA 4.17
Changes 11.3
Claimant 10.4(a)
Closing 8.1
Closing Date 8.1
Company Documents 4.2
Company Statement 4.7
Company System 6.3
Company's Representatives 6.1(c)
Competing System 6.3(b)
Confidentiality Agreement 6.1(f)
Consents 3.3(a)
Contracts 4.12(a)
DB Plans 4.13(e)
Estimated Purchase Price 2.2
Exchange Act 5.2
Excluded Assets 6.14
Final Arbiter 2.3(d)
Financial Statements 4.7
Financing 5.8
Formative Refund 11.4
Formative Refund Amount 2.1
Formative/R&I Period 6.20(c)
General Survival Period 10.1(i)
Indemnified Parties 10.3(a)
Information 6.1(c)
Insurance Policies 4.20
Investment Company 5.10
Interim Financial Statements 4.7
Interim Period Income Statement 2.3(a)
Indemnifying Party 10.4
Indemnitor 10.4
Leased Properties 4.18
Losses 10.2
Master Agreement 4.12(a)
MediaVantage/Wireless Formative Costs 6.20(c)
Negative Adjustment Amount 2.3(a)
Net Third Party Indebtedness 2.1
1997 Budget 6.1
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Non-Third Party Claim 10.4(d)
Observer 6.1
Outside Date 9.1(b)
Owned Properties 4.18
Permitted Transaction 6.14
Positive Adjustment Amount 2.3(a)
Purchase Price 2.1
Purchaser Documents 5.2
Purchaser Environmental Costs 10.3(d)(ii)
Purchaser Guarantor 6.15
Purchaser Indemnified Parties 10.3(a)
Purchaser SEC Reports 5.2
Purchaser's Advisor 5.11
Purchaser's Representatives 6.1(c)
R&I Costs 6.20(c)
Required Consents 6.4
Securities Act 5.2
SEC 5.2
Seller Documents 3.2
Seller Indemnified Parties 10.2
Sellers' Advisors 3.8
Sellers Representative 12.5
Service Agreement 6.20(a)
Supplemental Closing 2.3(c)
Surviving Covenant 10.1(i)
Tax Loss 11.3
Tax Threshold 11.3(a)
10.4(c) Claim Notice 10.4
10.4(c) Notice Period 10.4
Third Party Intellectual Property 4.11(b)
Transferred Employees 6.10(a)(ii)
(b) Additional Definitions.
"Affiliate" has the meaning specified by Rule 12b-2 under the Securities
Exchange Act of 1934, as amended; provided, however, that in no event shall the
Company or any Subsidiary be deemed an "Affiliate" of any Seller or, prior to
the Closing, of Purchaser.
"Allocable Formative/R&I Revenues" means, for any period during 1997, an
amount equal to the product of (x) Formative/R&I Revenues recognized by the
Company during 1997 (including, if applicable, following the Closing Date) and
(y) a fraction, the numerator of which shall be the number of days in such
period and the denominator of which shall be 365.
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"Amended Master Agreement" means, in the case of any Seller, an Amended
and Restated Master Agreement for Software and Services, to be dated on or prior
to the Closing Date, between the Company and such Seller, incorporating (i) the
changes to the Master Agreement to which such Seller is a party reflected in the
form of Amended Master Agreement attached hereto as Exhibit A (which does not
include any Exhibits or Attachments).
"Benefit Arrangement" means any employment, severance or similar
contract or arrangement or any plan, policy, fund, program or contract or
arrangement providing for compensation, bonus, profit-sharing, stock option, or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, worker's compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance or other benefits) that (i) is not an Employee Plan, (ii) is entered
into, maintained, administered or contributed to, as the case may be, by the
Company or any Subsidiary and (iii) covers any employee or former employee of
the Company or any Subsidiary.
"Business Plan" means the business plan of the Company, dated February
1996, a copy of which has previously been delivered to Purchaser.
"Chester Facility" means the facilities, structures and real property
located at 000 Xxxxx Xxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Benefit Plans" mean all Employee Plans and Benefit
Arrangements.
"Company Disclosure Schedule" means the Disclosure Schedule delivered by
the Company to Purchaser on the date hereof.
"DGCL" means the Delaware General Corporation Law as in effect from time
to time.
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"Environmental Law" means any applicable law, statute, ordinance,
regulation, order or similar requirement of any Governmental Body or other
requirement of law regulating, relating to or imposing liability or standards of
conduct concerning protection of human health or the environment, but not
including any of the foregoing concerning primarily product safety or worker
health or safety (including the Occupational Health and Safety Act and similar
state or local laws, rules or regulations).
"Employee Plan" means any "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by the Company or any Subsidiary and
(iii) covers any employee or former employee of the Company or any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Excluded Businesses" means the businesses to be conducted by the NTA
and the ISCP Alliance.
"Fiscal Quarter" shall mean each fiscal quarter of the Company ending
March 31, June 30 and September 30.
"Fiscal Year" shall mean each fiscal year of the Company ending December
31.
"Formatives" shall have the meaning ascribed to such term in the Amended
Master Agreement.
"Formative Project" means a Project designated as such in accordance
with Section 3.8 of the Shareholders' Agreement (as such term is defined in the
Amended Master Agreement).
"Formative Refund Amount" means the sum of (a) any federal, state and
local tax refunds actually received as of June 30, 1996 as a result of amending
any prior tax returns to reflect the nonrecognition of Unbilled Formative
Project Revenues plus (b) any reductions in federal, state and local tax
payments resulting from the nonrecognition of Unbilled Formative Project
Revenues for 1996 which have been realized
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as of such date. The parties agree that the Formative Refund Amount as of June
30, 1996 was $3,232,236.
"Formative/R&I Revenues" means, for any period, the sum of (a) all
right-to-use (RTU) fees recognized by the Company in respect of Formatives and
R&I during such period and (b) the excess (which may be a negative number) of
(i) all revenues recognized by the Company in respect of Formatives and R&I
during such period (but only for customer-specified customizations, enhancements
(other than non-exclusive enhancements), upgrades, modifications, installation,
deployment or maintenance, and training with respect thereto) over (ii) all
costs (on a fully distributed cost basis) incurred by the Company during such
period in respect of customer-specified customizations, enhancements (other than
non-exclusive enhancements), upgrades, modifications, installation, deployment
or maintenance, and training with respect thereto, in connection with Formatives
or R&I.
"GAAP" means generally accepted accounting principles.
"Governmental Body" means any government or govern mental or regulatory
body thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court
(public or private).
"Group Benefit Plans" means all Employee Plans and Benefit Arrangements,
other than those agreements and arrangements with individual employees.
"Hazardous Materials" means any pollutant, contaminant or waste and any
hazardous or toxic substance, waste or material regulated under any
Environmental Law, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, asbestos or asbestos-containing material and
waste, and creosote, pentachlorophenol and copper chromated arsenate and other
wood-treating materials or constituents or derivatives of any of the foregoing;
provided, however, that "Hazardous Materials" shall not include any asbestos or
asbestos-containing materials existing, as of the Closing, in or as a component
of any of the buildings located on the Xxxxxxx Facility.
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean any patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret or know-how.
"Interim Period" means the period beginning July 1, 1996 and ending at
the close of business on the Closing Date.
"Interim Period Capital Contributions" means the aggregate amount
contributed by Sellers to the capital of the Company (and not taken into account
in computing Interim Period Net Income) during the Interim Period.
"Interim Period Dividends" means the aggregate amount of dividends paid
by the Company to Sellers during the Interim Period (excluding any distribution
or transfer of Excluded Assets to Sellers or their designee).
"Interim Period Net Income" means the net income of the Company and its
Subsidiaries for the Interim Period calculated in accordance with GAAP applied
consistently with the principles and procedures used to prepare the consolidated
audited financial statements of the Company and its Subsidiaries for the year
ended December 31, 1995; provided that, notwithstanding the foregoing and to the
extent applicable, Interim Period Net Income shall be calculated in accordance
with the principles and procedures set forth in Exhibit B to this Agreement.
"ISCP" means the Integrated Service Control Point.
"ISCP Alliance" means that certain alliance to be formed on or prior to
the Closing Date by and among certain of the Sellers and, should the Company
elect within six months after the Closing Date to join the alliance, the
Company, to own certain intellectual property in and manage the on-going
development, financing and marketing of the ISCP software.
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"Key Employee" means any employee of the Company or any of its
Subsidiaries at "J" level (within the meaning of such classification on the date
hereof) or above.
"Knowledge of Seller, the Company or Purchaser," "Known to Seller, the
Company or Purchaser" or "Known by Seller, the Company or Purchaser" or, insofar
as it refers to any Seller, the Company or Purchaser, "Knowledge" means only
matters as to which (i) in the case of any Seller, the employee of such Seller
who is a member of the Company's Board of Directors and other senior managers of
such Seller who have principal responsibility on behalf of such Seller for
matters relating to the Company, (ii) in the case of the Company, any executive
officer or senior manager of the Company, or (iii) in the case of the Purchaser,
any executive officer or senior manager of Purchaser, has actual knowledge, and
matters which are not actually known but should have been known by any such
executive officer, senior manager or employee of such Seller, the Company or
Purchaser, as the case may be, based upon a reasonable investigation and inquiry
with respect to the correctness and validity of the representation, warranty or
other matter so qualified by knowledge.
"Law" means any federal, state, local or foreign statute, code,
ordinance, rule or regulation or any Order of any Governmental Body.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits or proceedings (public or private).
"Lien" means any lien, encumbrance, mortgage, deed of trust, security
interest, easement, transfer restriction, option or other restriction or
third-party right. For purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset.
"Majority Sellers" means Sellers holding at least five (5) of the
Shares.
"Material Adverse Effect" means any material adverse change in, or
effect on, the Business or the results of operations or financial condition of
the Company and its
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Subsidiaries taken as a whole, excluding any such change or effect relating to
the Excluded Assets or the Excluded Businesses.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"Net Risk" means the difference between (a) the cumulative development
costs of all Formative Projects and (b) the cumulative revenues recognized from
such Formative Projects.
"Net Risk Cap" means the maximum amount of the Net Risk, which the
parties hereby agree is $152.9 million.
"Net Third Party Indebtedness" means (a) the outstanding principal
balance of Third Party Indebtedness as of the close of business on June 30, 1996
plus (b) the accrued and unpaid interest on the outstanding principal amount of
Third Party Indebtedness as of the close of business on such date minus (c) the
prepaid interest of the Company and its Subsidiaries as of the close of business
on such date minus (d) the unrestricted cash of the Company and its Subsidiaries
as of the close of business on such date. The parties agree that Net Third Party
Indebtedness as of June 30, 1996 was $154,752,722.
"NTA" means National Telecommunications Alliance, Inc., a corporation to
be formed on or prior to the Closing Date by and among the Sellers or their
Affiliates to carry out certain network reliability and interoperability
functions and to provide a single point of contact for the coordination of
National Security and Emergency Preparedness requirements.
"Order" means any material order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award by a Governmental Body of competent
jurisdiction.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means (i) Liens existing as of the date of this
Agreement on any assets or properties of the Company and/or any Subsidiary
relating to any indebtedness for borrowed money of the Company and/or any
Subsidiary; (ii) all defects, exceptions, restrictions,
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easements, rights of way and encumbrances that are not, individually or in the
aggregate, material to the business, operations or financial condition of the
Business taken as a whole; (iii) statutory liens for current taxes, assessments
or other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings, provided
an appropriate reserve is established therefor; (iv) mechanics', carriers',
workers', repairers' and similar Liens arising or incurred in the ordinary
course of business that are not, individually or in the aggregate, material to
the business, operations or financial condition of the Business taken as a
whole; (v) zoning, entitlement and other land use and environmental regulations
by Governmental Bodies that are not, individually or in the aggregate, material
to the business, operations or financial condition of the Business taken as a
whole; (vi) such other imperfections in title, charges, easements, restrictions
and encumbrances which do not materially interfere with the present operation of
the Business; and (vii) licenses of intellectual property granted by the Company
or any Subsidiary disclosed to Purchaser.
"Person" means any individual, corporation, part nership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Pre-Closing Tax Period" means any Tax period (i) ending on or before
the Closing Date and (ii) with respect to a Tax period that commences before but
ends after the Closing Date, the portion of such period up to and including the
Closing Date.
"Purchaser Change of Control" means any of the following events: (i) any
"person" (as such term is used in Section 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 30% of the total voting power of all
classes of capital stock then outstanding of Purchaser normally entitled to vote
in elections of directors ("Voting Stock"); (ii) Purchaser consolidates with or
merges into another corporation or entity, or conveys, transfers or leases all
or substantially all of its assets
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to any person, or any corporation or entity consolidates with or merges into
Purchaser, in either event pursuant to a transaction in which the outstanding
Voting Stock of Purchaser is changed into or exchanged for cash, securities or
other property; or (iii) during the Interim Period, individuals who at the
beginning of the Interim Period constituted the Board of Directors of Purchaser
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of Purchaser was approved by a vote
of 66 2/3% of the directors then still in office who were either directors at
such time or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Purchaser then in office. Notwithstanding the foregoing, no
transaction referred to in the preceding sentence shall constitute a "Purchaser
Change of Control" if such transaction involves only Purchaser or any of its
wholly-owned Subsidiaries as of September 1, 1996, on the one hand, and
employees (as a group) or any one or more employee stock ownership plans or
employee benefit plans of Purchaser or any of such Subsidiaries, on the other
hand.
"Purchaser Disclosure Schedule" means the Disclosure Schedule
delivered by Purchaser to Sellers on the date hereof.
"R&I" means new product development (e.g., local number
portability, unbundling products and major system enhancements, in each case
which may not have been included in the Business Plan and are not entered into
as Multi-Owner Projects (as defined in the Service Agreement)), which is
intended, in the good faith judgment of the management of the Company, (i) to
produce a return on investment and/or revenue from product customizations,
upgrades, modifications, installation, deployment and maintenance, and training
with respect thereto and/or (ii) to permit the Company to maintain and further
its position as a technological leader in the telecommunications industry.
"Sellers' Disclosure Schedule" means the Disclosure Schedule
delivered by Sellers to Purchaser on the date hereof.
"Subsidiary" means any Person of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or
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indirectly by the Company; provided, however, that none of the Excluded Assets
shall be included in the definition of Subsidiary.
"Tax" means (i) any tax imposed under Subtitle A of the Code and
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Company or any Subsidiary, payroll,
employment, excise, severance, stamp, capital stock, occupation, property,
environmental or windfall profit tax, premium, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority (a "Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) liability of the Company
or any Subsidiary for the payment of any amounts of the type described in (i) as
a result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any Tax sharing agreement or arrangement for any
Pre-Closing Tax Period, and (iii) liability of the Company or any Subsidiary for
the payment of any amounts as a result of being party to any agreement or with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person.
"Tax Returns" means all statements, reports, forms and returns
required to be filed with respect to Taxes.
"Third-Party Indebtedness" means, as of any date, the aggregate
principal amount of, and all accrued and unpaid interest on, all indebtedness
for borrowed money of the Company and its Subsidiaries (other than any such
indebtedness owed by the Company to any wholly-owned Subsidiary or by any
Subsidiary to the Company or another wholly-owned Subsidiary).
"Title IV Plan" means an Employee Plan subject to Title IV of
ERISA other than any Multiemployer Plan.
"Unbilled Formative Project Revenues" has the meaning provided in
the Company Statements.
"Work Statements" has the meaning set forth in the Master
Agreements and the Amended Work Statements.
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(c) Rules of Construction.
(i) Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
(ii) Whenever there appears in this Agreement an adjective or
series of adjectives (e.g., the word "material") which precedes a noun which is
followed by one or more other nouns which are joined in a series by the
conjunction "and," "or" or "and/or," such adjective or series of adjectives
shall be deemed to apply to each noun in such series of nouns. As used in the
Agreement, unless the context otherwise requires, the word "or" is not exclusive
and shall mean "and/or."
(iii) The words "hereof", "herein" and "hereunder" and words
of similar import, when used in this Agreement, shall refer to this Agreement as
a whole and to any particular provision of this Agreement.
(iv) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(v) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
12.2 Expenses. Except as otherwise expressly provided in this
Agreement and regardless of whether the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne by the
party incurring such expenses.
12.3 Specific Performance. Purchaser and each Seller acknowledge
and agree that a remedy at law for any breach, or threatened breach, of this
Agreement (including, without limitation, the provisions of Sections 6.1(c),
6.1(d), 6.1(e), 6.1(f), 6.3(a) and 6.3(b)) will be inadequate and, accordingly,
Purchaser and each Seller covenant and agree that each party hereto shall, in
addition to any others rights and remedies which such party may have,
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be entitled to equitable relief, including injunctive relief, and to the remedy
of specific performance with respect of any such breach, as may be available
from any court of competent jurisdiction. Such right to obtain equitable relief
may be exercised, at the option of each party, concurrently with, prior to,
after, or in lieu of, the exercise of any other rights or remedies which such
party may have as a result of any such breach or threatened breach.
12.4 Effect of Seller Mergers, Consolidations, Etc. If, prior to,
on or after the Closing Date, any Seller shall have acquired all of the equity
interests of, or all or substantially all of the assets of, any other Seller
(whether by merger or otherwise), or if any two Sellers shall otherwise have
merged, then, for all purposes of this Agreement (including, without limitation,
the allocation among the Sellers of the Purchase Price and of the Sellers'
indemnification obligations hereunder and counting the number of Shares held for
purposes of determining whether the Majority Sellers have approved or consented
to any matter) the surviving entity of such acquisition or merger shall be
entitled to the rights of, and shall be liable for the obligations of, both
Sellers party to such transactions.
12.5 Sellers' Representative. Not less than 10 days prior to the
Closing Date, Sellers, by written notice given by all Sellers to Purchaser,
shall designate a Person or Persons (collectively, "Sellers' Representative") to
act for and represent Sellers with respect to all matters with respect to which
this Agreement specifies that Sellers' Representative shall so act, as well as
matters which require notice to be given to Sellers under this Agreement. Such
notice by Seller shall specify the address and facsimile number of Sellers'
Representative. Sellers may designate a substitute Sellers' Representative by
written notice delivered by the Majority Sellers to Purchaser identifying such
substitute representative. Upon delivery of such notice, the authority of the
previously designated Sellers' Representative shall immediately cease for all
purposes of this Agreement, and the new representative designated in such notice
shall be Sellers' Representative for all purposes of this Agreement.
Each Seller hereby acknowledges and agrees that (i) the Sellers'
Representative and the Majority Sellers, as the case may be, have the power and
authority to act for, represent and bind each Seller with respect to any action
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required or expressly permitted to be taken by Sellers' Representative or the
Majority Sellers, as the case may be, in connection with this Agreement, (ii)
Purchaser may deal exclusively with the Sellers' Representative or the Majority
Sellers, as the case may be, in connection with any such action and (iii) any
action so taken by Sellers' Representative or the Majority Sellers, as the case
may be, shall be binding upon Sellers without any further action on the part of
Purchaser or Sellers.
12.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICTS OF LAW.
12.7 Arbitration. Any dispute, claim or controversy arising out
of or in relation to this Agreement, or the interpretation or breach thereof,
other than any claim for equitable relief (including injunctive relief) arising
pursuant to Section 6.1 or Section 6.3 of this Agreement, shall be settled by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association. Any party may commence arbitration hereunder by delivering notice
to the other party or parties to the dispute, claim or controversy. The
arbitration panel shall consist of three arbitrators. Within ten (10) days after
delivery of the notice of commencement of arbitration referred to above, the
Purchaser and the Seller involved in such dispute, claim or controversy (or, if
more than one Seller is so involved, the Sellers' Representative on behalf of
such Sellers) shall each appoint one arbitrator, and the two arbitrators so
appointed shall within 10 days of their appointment designate a third arbitrator
within ten days of their appointment. If the arbitrators designated by the
parties to the arbitration are unable or fail to agree upon the third
arbitrator, the third arbitrator shall be designated by the American Arbitration
Association under its rules. The arbitrators will be bound by the substantive
law of the State of New York, but will not be bound by the laws of evidence and
procedure customary in courts of law. The arbitrators shall be required to
submit a written statement of their findings and conclusions. The award of the
arbitrators shall be final, binding and conclusive on the parties; provided
that, where a remedy for breach is prescribed hereunder or limitations on
remedies are prescribed, the arbitrators shall be bound by such restrictions.
Judgment upon the award may be entered in any court having jurisdiction thereof.
The arbitration proceedings
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shall be conducted in New York, New York. Unless otherwise determined by the
arbitrator (which determination shall be final and binding on the Purchaser and
the Sellers), each party shall pay its own expenses of arbitration and the
expenses of the arbitrators shall be shared equally by the Purchaser, on the one
hand, and the Sellers involved in such arbitration, on the other hand.
12.8 Entire Agreement; Amendments and Waivers. This Agreement
(including the Disclosure Schedules) represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, provided
that, except as otherwise modified hereby, the Confidentiality Agreement shall
remain in full force and effect. Except as otherwise provided herein, this
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. Except as otherwise provided
herein, no action (other than a waiver), taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. Except as
otherwise expressly provided herein, no failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
12.9 Table of Contents and Headings. The table of contents and
article and section headings of this Agreement are for reference purposes only
and are to be given no effect in the construction or interpretation of this
Agreement.
12.10 Notices. All notices and other communications under this
Agreement shall be in writing and shall be
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deemed given when delivered personally, on the fifth business day after mailed
by certified mail, return receipt requested, the next business day after
delivery to a recognized overnight courier or when sent by facsimile to the
parties (and shall also be transmitted by facsimile to the Persons receiving
copies thereof) at the following addresses (or to such other address as a party
may have specified by notice given to the other party pursuant to this
provision):
If to the Company:
Xxxx Communications Research, Inc.
Xxxxxx Corporate Center
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: N. Xxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to any Seller, to such Seller at its address set forth on
Annex I hereto:
With copies to Sellers' Representative at its address specified
pursuant to Section 12.5 and to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Purchaser, to:
Science Applications International
Corporation
0000 Xxxx Xxxxxx
Xx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
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Science Applications International Corporation
00000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
12.11 Severability. Without limiting the provisions of Section
6.3(d), if any provision of this Agreement is invalid or unenforceable, the
balance of this Agreement shall remain in full force and effect and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
12.12 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Except in respect of directors, officers, employees and
agents of the Company and its Subsidiaries in respect of the provisions of
Section 6.11 and except as provided in Section 6.15, nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not a party to this Agreement. Except as provided in Section
12.4, no assignment of this Agreement or of any rights or obligations hereunder
may be made by any Seller or Purchaser (by operation of Law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void. Upon any such permitted
assignment, the references in this Agreement to Purchaser or Seller, as the case
may be, shall also apply to any such assignee unless the context otherwise
requires.
12.13 Disclosure Schedules. The Disclosure Schedules, dated the
date hereof, delivered by Sellers and the Company to Purchaser, and by Purchaser
to Sellers, are incorporated into this Agreement by reference and made a part
hereof. The inclusion of any information in any of the Disclosure Schedules is
qualified in its entirety by reference to specific provisions of this Agreement,
and is
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not intended to constitute, and shall not be construed as, an admission that the
information contained therein is material in respect to any Seller, the Company
and its Business or Purchaser, as the case may be. Matters reflected in any
Disclosure Schedule are not necessarily limited to the matters required by this
Agreement to be disclosed in such Disclosure Schedule. Such additional matters
are set forth for informational purposes and do not necessarily include other
matters of a similar nature.
12.14 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first written above.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
By: /s/ J. R. BEYSTER
----------------------------------------------
Name: J. R. Beyster
Title: Chairman of the Board and
Chief Executive Officer
XXXX COMMUNICATIONS RESEARCH, INC.
By: /s/ XXXXXX X. XXXXXXXXX
----------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
SELLERS:
AMERITECH SERVICES, INC.
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
XXXX ATLANTIC NSI HOLDINGS, INC.
By: /s/ XXXX X. XXXXX
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President
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BELLSOUTH TELECOMMUNICATIONS, INC.
By: /s/ XXXX X. XXXXXXXX
----------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President & Chief
Executive Officer
PACIFIC XXXX
By: /s/ XXXXX XXXXXX
----------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman, President &
Chief Executive Officer
SOUTHWESTERN XXXX TELEPHONE COMPANY
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President-General Manager
(Arkansas)
TELESECTOR RESOURCES GROUP, INC.
By: /s/ XXXXXX XXXXXX
----------------------------------------------
Name: Xxxxxx Xxxxxx
Title: Executive Vice President (Acting)
U S WEST COMMUNICATIONS, INC.
By: /s/ XXX XXXXXXXXXX
----------------------------------------------
Name: Xxx Xxxxxxxxxx
Title: Vice President
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