EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER
by and among
MFS Acquisition Corp.,
Able Telcom Holding Corp.,
MFS Network Technologies, Inc.
and
MFS Communications Company, Inc.
AGREEMENT AND PLAN OF MERGER, dated as of April 26,1998, by and among MFS
Acquisition Corp., a Delaware corporation ("Buyer"), Able Telcom Holding Corp.,
a Florida corporation ("Parent"), MFS Network Technologies, Inc., a Delaware
corporation ("Seller"), and MFS Communications Company, Inc., a Delaware
corporation ("MFS").
WITNESSETH:
WHEREAS, on or before the date immediately preceding the Closing Date,
Seller will adopt, in substantially the form attached hereto as Exhibit 1ar the
Plan of Complete Liquidation pursuant to which Seller will distribute,
immediately prior to the merger of Seller with and into Buyer (the "Merger"),
all of the Other Assets (as defined herein) and all of the capital stock of all
of the Distributed Subsidiaries (as defined herein) to MFS (the "Liquidating
Distribution"); and
WHEREAS, Parent and MFS wish to provide for the terms and conditions upon
which the Merger of Seller with and into Buyer will be consummated;
WHEREAS, for income tax purposes, (i) the Merger is intended and expected
to be treated as a taxable sale by Seller of all of its assets (other than the
Distributed Assets, as defined herein) to Buyer in exchange for the Merger
Consideration (as defined herein) and an assumption by Buyer of all of Seller's
liabilities (except as specifically provided herein), and (ii) the distributions
by Seller to MFS, its sole shareholder, of the Distributed Assets and the Merger
Consideration are intended and expected to be treated as liquidating
distributions made pursuant to a complete liquidation (the "Complete
Liquidation") of Seller qualifying under Sections 332 and 337 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the Parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The Parties to this Agreement (as defined herein)
hereby agree that, in addition to other terms defined in this Agreement, the
terms set forth below in this Section 1 shall have the following meanings
ascribed to them, and that variants and derivatives of such terms shall have
correlative meanings:
a. "Adjusted Stockholder's Equity" is as defined in Section 3g.
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b. "AFFILIATE," when used with respect to an entity, is a Person or
entity directly or indirectly through one or more intermediaries
Controlling, Controlled by or under common Control with that entity.
c. "AGREEMENT" is this Agreement and Plan of Merger, including all
attached exhibits.
d. "ASSUMPTION AND INDEMNITY AGREEMENT" is the Assumption and Indemnity
Agreement in form as attached hereto as Exhibit 1d.
e. "BENEFIT ARRANGEMENTS" are as defined in Section 6k.
f "BEST OF MFS' KNOWLEDGE" (and similar phrases respecting the knowledge
of MFS) shall mean, as of the relevant date, such matter is within the
actual knowledge of one or more of those persons listed on Exhibit 1f,
without duty of inquiry by any of them.
g. "BONDS" is as defined in Section 1 of the Assumption and Indemnity
Agreement.
h. "CLOSING" is the consummation of the Merger.
i. "CLOSING BALANCE SHEET" means the balance sheet of Seller as of March
31, 1998 used to calculate Adjusted Stockholder's Equity, as adjusted
by MFS and Parent in accordance with the terms of Section 3.
j. "CLOSING DATE" is as defined in Section 12.
k. "CLOSING PERIOD" is the period which commences on the date of this
Agreement and which ends on the earlier of the Termination Date or the
Closing Date.
l. "CODE" is the United States Internal Revenue Code of 1986, as amended,
and all applicable regulations thereunder.
m. "CONTRACTS" is as defined in Section 1 of the Assumption and Indemnity
Agreement.
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n. "CONTROL" (including the terms "Controlling," "Controlled by," or
"under common Control with") is the power to direct or cause the
direction of the management, policies, or affairs of a Person or an
entity.
o. "CONTROLLED SUBSIDIARIES" means MFS Transportation Systems, Inc., a
Delaware corporation, MFS TransTech, Inc., a Delaware corporation, and
MFS Network Technologies of District of Columbia, Inc, a Delaware
corporation.
p. "DEPOSIT" is, collectively, the amounts actually paid by Parent
pursuant to Section 8d.
q. "DISTRIBUTED ASSETS" are, collectively, the Other Assets and the stock
of the Distributed Subsidiaries.
r. "DISTRIBUTED SUBSIDIARIES" are all corporations wholly or partially,
directly or indirectly, owned by Seller, except the Retained
Subsidiaries.
s. "EMPLOYEE PLANS" are as defined in Section 6k.
t. "EMPLOYEE PC PURCHASE PLAN BALANCE" is the balance if any of the
reserve attributable to employees of Seller under MFS' home computer
allowance program.
u. "EQUITY SHORTFALL" is as defined in Section 3k.
v. "ESTIMATED ADJUSTED STOCKHOLDER'S EQUITY" is as defined in Section 3b.
w. "ESTIMATED MERGER CONSIDERATION" is as defined in Section 3a.
x. "ESTIMATED NET ADVANCE ADJUSTMENT" is as defined in Section 3c.
y. "EVENT OF MFS INDEMNIFICATION" is as defined in Section 14.
z. "EVENT OF PARENT INDEMNIFICATION" is as defined in Section 14.
aa. "HSR ACT" is the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
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ab. "INDEMNIFICATION NOTICE" is as define in Section 14.
ac. "LICENSE AGREEMENT" is the License Agreement in form as attached
hereto as Exhibit 1ac.
ad. "LOSSES" is as defined in Section 14.
ae. "MASTER SERVICES AGREEMENT" is the Master Services Agreement in form
as attached hereto as Exhibit 1ae.
af. "MATERIAL ADVERSE EFFECT" means a change, development, or occurrence
which has had, or may reasonably be expected to have, a material
adverse effect on the revenue, expenses, or financial condition of
Seller and the Retained Subsidiaries taken as a whole.
ag. "MERGER CONSIDERATION" is as defined in Section 3f.
ah. "MFS CONDITIONS" is as defined in Section 10.
ai. "MFS UNDERTAKINGS" is as defined in Section 14.
aj. "NET ADVANCE ADJUSTMENT" is as defined in Section 3d.
ak. "NT BUSINESS" means Seller's transportation system business, internal
network construction business, third-party network construction
business, security systems business, and all other businesses carried
on by Seller and the Retained Subsidiaries as of the date hereof.
al. "OTHER ASSETS" means all of Seller's assets other than (i) the
Retained Assets (as defined herein), (ii) the stock of the Retained
Subsidiaries (as defined herein) and (iii) the stock of the
Distributed Subsidiaries.
am. "PARENT CONDITIONS" is as defined in Section 9.
an. "PARENT UNDERTAKINGS" is as defined in Section 14.
ao. "PARTIES" are the signatory parties to this Agreement.
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ap. "PERMITTED EQUITY SHORTFALL" is as defined in Section 3k.
aq. "PERSON" is any individual, corporation, association, partnership,
limited liability company, joint venture, organization, business,
trust or any other entity or organization, including a government or
any subdivision or agency thereof. Person shall include each Party to
this Agreement.
ar. "PLAN OF LIQUIDATION" is the Plan of Complete Liquidation that will be
adopted by Seller and approved by MFS, its sole stockholder, in
substantially the form as attached hereto as Exhibit 1ar, as amended,
modified, or otherwise supplemented from time to time.
as. "REFERENCE BALANCE SHEET" is the Reference Balance Sheet of Seller as
of March 31, 1998 attached hereto as Exhibit las.
at. "RETAINED ASSETS" means all of Seller's right, title and interest in,
to and under the assets and properties, of every kind and description,
wherever located, real, personal or mixed, tangible or intangible,
owned, held or used in the conduct of the NT Business by Seller other
than the stock of the Retained Subsidiaries.
au. "RETAINED SUBSIDIARIES" are the following corporations, wholly or
partially, directly or indirectly, owned by Seller:
i. MFS Transportation Systems Inc., a Delaware corporation;
ii. MFS TransTech, Inc., a Delaware corporation;
iii. Kanas Telecom, Inc., an Alaska corporation;
iv. SIRIT Technologies, Inc., a Canada corporation; and
v. MFS Network Technologies of District of Columbia, Inc.
av "SATISFACTORY RELEASE" as to any Bond and any obligations or
liabilities of WorldCom and the Subsidiaries respecting such Bond, is
the receipt by WorldCom of (i) written releases, in form and content
reasonably satisfactory to WorldCom, whereby all of the parties to
whom WorldCom and the Subsidiaries are obligated or otherwise liable
respecting such Bond unconditionally, irrevocably, and fully release
WorldCom and the Subsidiaries from any obligation or liabilities
respecting such Bond, or (ii) other evidence reasonable satisfactory
to WorldCom that such Bond and any obligations or liabilities of
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WorldCom and the Subsidiaries respecting the Bonds have expired in
accordance with their terms.
aw. "SHARES" are all issued and outstanding shares of capital stock of
Seller.
ax. "STOCK PLEDGE AGREEMENT" is the Stock Pledge Agreement in form as
attached hereto as Exhibit 1ax.
ay. "SURETY ADJUSTMENT" is the amount representing the payments, premiums,
or costs of placement relating to the bonding of Seller's work on that
project commonly known as the New Jersey Consortium Project paid or to
be paid by MFS or its Affiliates after March 31, 1998, which amount
will be deemed to be (i) the amount of such payments, premiums and
costs if actually paid by MFS on or prior to the Closing Date, (ii)
$600,000, if such payments, premiums or costs are not paid by MFS on
or prior to the Closing Date but remain payable by it thereafter, or
(ii) $0, if such payments, premiums or costs are not paid by MFS on or
prior to the Closing Date and do not remain payable by MFS thereafter
by reason of a release of its obligation to make such payment.
az. "TAX ADJUSTMENT" is as defined in Section 3e.
ba. "TAX ASSURANCE" is as defined in Section 7.
bb. "TRANSACTION" is, collectively, the principal transactions described
in this Agreement.
bc. "WORLDCOM" is WorldCom Inc., a Georgia corporation.
bd. "WORLDCOM GUARANTEE" is the WorldCom Guarantee in form as attached
hereto as Exhibit lbd.
2. THE TRANSACTION. Subject to each and all of the terms, conditions,
provisions and limitations set forth in this Agreement:
a. no later than the date immediately preceding the Closing Date, the
Board of Directors of Seller will adopt, and MFS as the sole
shareholder of
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Seller will approve, the Plan of Liquidation; the Plan of Liquidation
will provide that the Complete Liquidation of Seller will occur
pursuant to the Merger;
b. before the Closing, the Board of Directors of Seller and MFS, as sole
shareholder of Seller, will approve the Merger contemplated by this
Agreement and the consummation of the transactions contemplated hereby
upon the terms and subject to the conditions set forth herein;
c. immediately prior to consummating the merger, and pursuant to the Plan
of Liquidation, Seller will distribute to MFS the Distributed Assets
as a distribution pursuant to the Plan of Liquidation;
d. immediately after the Liquidating Distribution and in fulfillment of
the Plan of Liquidation, in accordance with Delaware corporate law,
Seller will merge with and into Buyer on the Closing Date and at the
Closing in accordance with this Agreement and the separate existence
of Seller shall cease; Buyer shall continue as the surviving
corporation; upon consummation of the Merger, each share of Seller
stock held by MFS shall automatically be canceled and converted into
the right to receive a pro rata share of the Merger Consideration in
United States dollars; and
e. on the Closing Date, at the Closing, each Party will execute the
agreements and take all of the actions described herein to be
performed by such Party at the Closing, including those described in
Section 13.
3. CALCULATION OF MERGER CONSIDERATION.
a. ESTIMATED MERGER CONSIDERATION. The "Estimated Merger Consideration"
shall mean the sum of (i) the Estimated Adjusted Stockholder's Equity,
(ii) the Estimated Net Advance Adjustment, (iii) the Surety Adjustment
and (iv) $10,000,000.
b. ESTIMATED ADJUSTED STOCKHOLDER'S EQUITY. The "Estimated Adjusted
Stockholder's Equity" shall mean $94,205,006, the Adjusted
Stockholder's Equity as identified on the Reference Balance Sheet.
c. ESTIMATED NET ADVANCE ADJUSTMENT. The "Estimated Net Advance
Adjustment" shall mean MFS' written estimate of the Net Advance
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Adjustment as delivered to Parent not less than two business days
prior to the Closing Date.
d. NET ADVANCE ADJUSTMENT. The "Net Advance Adjustment" shall mean the
difference obtained (which may be positive or negative) when (i) the
amount of any payments (or account sweeps) by Seller to MFS or MFS'
Affiliates from April 1, 1998 through and including the Closing Date
is subtracted from (ii) the amount of any advances by MFS or MFS'
Affiliates to Seller from April 1, 1998 through and including the
Closing Date, it being agreed for such purposes that (x) the tax
Adjustment shall be deemed to be such an advance, whether or not MFS
shall have paid the related taxes as of the Closing Date and (y) any
payments, premiums, or costs of placement relating to the bonding of
Seller's work on that project commonly known as the New Jersey
Consortium Project paid by MFS or its Affiliates after March 31, 1998
shall not be treated as advances, in all such cases determined in
accordance with U.S. generally-accepted accounting principles,
consistently applied with Seller's historical financial statements.
e. TAX ADJUSTMENT. The "Tax Adjustment" shall mean the product of (i) the
amount of all income, gains and earnings of Seller and the Controlled
Subsidiaries for the period from April 1, 1998 through and including
the Closing Date (excluding any gain resulting from the sale of
Seller's assets pursuant to the Merger) multiplied by (ii) 40 percent,
all as determined in accordance with U.S. generally-accepted
accounting principles, consistently applied with Seller's historical
financial statements,
f. MERGER CONSIDERATION. The "Merger Consideration" shall mean the sum
of (i) the Adjusted Stockholder's Equity, (ii) the Net Advance
Adjustment, (iii) the Surety Adjustment and (iv) $10,000,000, as such
sum may be adjusted pursuant to Section 3k.
g. ADJUSTED STOCKHOLDER'S EQUITY. The "Adjusted Stockholder's Equity"
shall mean MFS' stockholder's equity in Seller as of March 31, 1998,
adjusted as follows, in all such cases determined as of March 31, 1998
in accordance with U.S. generally-accepted accounting principles,
consistently applied with Seller's historical financial statements,
and
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otherwise in accordance with the methodology used in the Reference
Balance Sheet and Section 3k:
i. minus the Employee PC Purchase Plan Balance;
ii. minus accounts receivable owed to Seller in which the relevant
due date is more than 120 days on or prior to March 31, 1998,
other than (A) retainage agreed to between Seller and the account
debtor, and (B) accounts receivable owed to Seller by any MFS or
any Affiliate of MFS;
iii. minus all accounts receivable owed to Seller by MFS or any
Affiliate of MFS;
iv. minus all "costs and earnings in excess of xxxxxxxx on
uncompleted contracts" respecting MFS or any Affiliate of MFS;
v. plus all accounts payable owed to MFS or any Affiliate of MFS by
Seller; and
vi. plus the cumulative amount of all loans or advances by MFS or
any Affiliate of MFS to Seller or any Retained Subsidiary.
h. Within 30 days after the Closing Date, Parent shall deliver to MFS
Parent's written calculations of the Adjusted Stockholder's Equity and
the Net Advance Adjustment. In the event Parent fails to timely
deliver the relevant calculation, the Estimated Adjusted Stockholder's
Equity shall be deemed to be the Adjusted Stockholder's Equity and the
Estimated Net Advance Adjustment (or if MFS shall have delivered to
Parent a revised Estimated Net Advance Adjustment within three
business days following the Closing Date, then such revised amount)
shall be deemed to be the Net Advance Adjustment.
i. If Parent timely delivers the calculations contemplated by Section 3h,
Parents calculations shall be deemed to be accepted by MFS unless,
within 30 days after delivery thereof to MFS, MFS delivers to Parent a
written notice of objection. In the event of delivery of such notice
of objection, Parent and MFS shall cause Coopers & Xxxxxxx LLC to
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determine the Adjusted Stockholder's Equity and/or the Net Advance
Adjustment, as the case may be, which determination shall be final and
binding upon the Parties. Parent and MFS shall fully cooperate with
and provide all relevant information to such accountants. The direct
costs of such accountants (but not the indirect or internal costs of
either Parent or MFS) shall be borne equally by Parent and MFS, unless
such accountants approve in full the calculations of one of the
Parties, in which case the other Party shall bear in full such direct
costs.
j. Parent and MFS agree that they will, and agree to cause their
respective accountants and employees to, cooperate and assist in the
preparation of the calculations of Adjusted Stockholder's Equity and
the Net Advance Adjustment hereunder, including without limitation,
the making available of books, records, accounts, data, workpapers,
and personnel.
k. Notwithstanding the forgoing provisions of this Section 3, (A) the
Adjusted Stockholder's Equity shall be deemed to equal the Estimated
Adjusted Stockholder's Equity unless the excess of the Estimated
Adjusted Stockholder's Equity over the Adjusted Stockholder's Equity
(the "Equity Shortfall") is more than the greater of $1,000,000 and
the net income after taxes of Seller and the Controlled Subsidiaries
during the period from April 1, 1998 through and including the Closing
Date (such greater amount, the "Permitted Equity Shortfall") and (B)
the Merger Consideration shall not exceed the Estimated Merger
Consideration by more than $5,000,000.
4. PAYMENT OF MERGER CONSIDERATION.
a. ESTIMATED MERGER CONSIDERATION. At the Closing, Parent shall pay MFS
in United States Dollars, in immediately available funds, the excess
of the Estimated Merger Consideration over the aggregate amount of all
payments actually received by the Escrow Agent from Parent pursuant to
Section 8d to be held as the Deposit.
b. MERGER CONSIDERATION. After the Closing, and within two business days
after the determination of the Adjusted Stockholder's Equity and the
Net Advance Adjustment pursuant to Section 3 which results in a
determination that the Merger Consideration is different from the
Estimated Merger Consideration,
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i. Parent shall pay MFS the difference between the Estimated Merger
Consideration and the Merger Consideration, if the former is less
than the latter, plus interest thereon at the rate of nine
percent per annum accruing from and after the Closing Date until
paid; or
ii. MFS shall refund to Parent the difference between the Estimated
Merger Consideration and the Merger Consideration if the former
is more than the latter, plus interest thereon at the rate of
nine percent per annum accruing from and after the closing Date
until paid.
C. SURETY ADJUSTMENT. In the event that the amount representing the
payments, premiums, or costs of placement relating to the bonding of
Seller's work on that project commonly known as the New Jersey
Consortium Project paid or to be paid by MFS or its Affiliates after
March 31, 1998 actually paid by MFS following the Closing Date is
other than $600,000, Parent will promptly pay to MFS the amount of any
excess and MFS will promptly pay to Parent the amount of any
shortfall.
d. METHOD AND TIMING OF PAYMENTS. In the case of any payments to be made
under Section 4b or 4c, such payment shall be made in United States
Dollars, in immediately available funds, and shall be tendered to the
remittee at the place designated for delivery of notices provided for
in this Agreement. Payments not tendered when due shall bear interest
at the rate of eighteen percent from and after the due date until
paid.
e. EFFECT OF PAYMENT ON INTERCOMPANY ACCOUNTS. Payments pursuant to this
Section 4 shall be deemed to settle all intercompany receivables,
payables and advances of the nature identified in the calculation of
Adjusted Stockholder's Equity pursuant to Section 3g.
5. REPRESENTATIONS AND WARRANTIES BY BUYER AND PARENT. Buyer and Parent,
acknowledging that MFS is hereby, and in consummating the Closing will be,
relying thereon, do hereby jointly and severely represent and warrant to MFS as
follows, both as of the date hereof and as of the Closing Date:
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a. ORGANIZATIONAL MATTERS. Each of Parent and Buyer:
i. is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation; and
ii. has the requisite power and authority to carry on its business,
to enter into this Agreement and to perform its obligations
hereunder.
b. VALID EXECUTION AND CORPORATE AUTHORITY. Each of Parent and Buyer has
full power and authority to execute, deliver and perform this
Agreement and all other agreements to be executed or affirmed at the
Closing, to perform its obligations hereunder (including under the
Option (as defined herein)) and to consummate the Closing. No
corporate or shareholder proceedings (which have not already occurred)
by Parent or Buyer are necessary to approve or authorize this
Agreement, performance hereunder (including under the Option), or the
Closing, including for purposes of Section 607.0901 of the Florida
1989 Business Corporation Law. This Agreement is, and each of the
agreements to be executed or affirmed by Parent or Buyer at the
Closing will be (when executed), the valid and binding agreement of
Parent and Buyer, enforceable against Parent and Buyer in accordance
with the terms thereof, and any and all shares of Parent Common Stock
(as defined herein) issued upon exercise of the Option shall be
validly issued, fully paid and nonassessable.
C. NONCONTRAVENTION. the execution, delivery and performance by Parent
and Buyer of this Agreement and the consummation of the Transaction
contemplated hereby (including under the Option) do not and will not
(i) conflict with, or result in a breach of, any of the provisions of
the articles of incorporation or bylaws of Parent and Buyer, or (ii)
require any consent under or contravene any material law, rule or
regulation of any state, jurisdiction or political subdivision or of
the United States, or of any applicable foreign jurisdiction, or
contravene any order, writ, injunction, decree, or determination of
any court or other authority having jurisdiction over Parent or Buyer,
except in the case of clause (ii) for the expiration or termination of
the waiting period under the HSR Act and for all such cases that have
not had and could not reasonably be expected to result in,
individually or in the aggregate, a material adverse
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effect on Parent's and Buyer's ability to perform their obligations
under this Agreement and the other agreements contemplated hereby.
d. FINANCING. All of the information that Parent has provided to MFS as
to the manner in which it will obtain the necessary financing to
perform its obligations under this Agreement, including without
limitation the obtaining of releases of guarantee, indemnification and
reimbursement obligations in respect of the Bonds, is complete and
accurate and Parent has provided, or will upon receipt provide, any
and all commitment letters received by it in connection with such
financing.
e. NO BROKER. No broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission payable by MFS or Seller
in connection with this Agreement or the Transaction based upon any
written or oral agreements made by or on behalf of Parent or Buyer.
f. ACKNOWLEDGMENT AS TO SELLER CONTRACTS. Parent acknowledges that
neither MFS nor any of its employees or representatives have
undertaken any review of any agreement, contract, or other instrument
affecting Seller or any Retained Subsidiary in connection with this
Agreement or the Transaction and that no representation, express or
implied, is given by MFS or Seller as to the effect of the Transaction
or the failure to obtain any required consents on any such agreement,
contract or other instrument.
6. REPRESENTATIONS AND WARRANTIES BY MFS. MFS, acknowledging that Parent
and Buyer are hereby, and in consummating the Closing will be, relying thereon,
does hereby represent and warrant to Parent and Buyer as follows, both as of the
date hereof and as of the Closing Date:
a. CORPORATE EXISTENCE AND POWER. MFS, Seller and each of the Retained
Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation
and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on
its business as now conducted. Seller and each of the Retained
Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification
is necessary, except for those
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jurisdictions where failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect.
b. VALID EXECUTION AND CORPORATE AUTHORITY. Each of MFS and Seller has
full power and authority to execute, deliver and perform this
Agreement and all other agreements to be executed or affirmed at the
Closing or during the Closing Period, to perform its obligations
hereunder and to consummate the Closing. No corporate or shareholder
proceedings (other than those they have agreed to implement pursuant
to Section 2b) by MFS or Seller are necessary to approve or authorize
this Agreement, performance hereunder, or the Closing. This Agreement
is, and each of the agreements to be executed or affirmed by MFS and
Seller at the Closing or during the Closing Period will be (when
executed), the valid and binding agreement of MFS and Seller,
enforceable against MFS and Seller in accordance with the terms
thereof
c. NONCONTRAVENTION. To the Best of MFS' Knowledge, the execution,
delivery and performance by MFS and Seller of this Agreement and the
Liquidation Distribution and the consummation of the Transaction
contemplated hereby do not and will not (i) conflict with, or result
in a breach of, any of the provisions of its articles of incorporation
or by-laws of MFS and Seller, or (ii) require any consent under or
contravene any material law, rule or regulation of any state,
jurisdiction or political subdivision or of the United States, or of
any applicable foreign jurisdiction, or contravene any order, writ,
injunction, decree, or determination of any court or other authority
having jurisdiction over MFS, Seller or any Retained Subsidiary,
except in the case of clause (ii) for the expiration or termination of
the waiting period under the HSR Act and for all such cases that have
not had and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.
d. ABSENCE OF CERTAIN CHANGES. Since March 31, 1998, to the Best of MFS'
Knowledge, Seller and the Retained Subsidiaries and their respective
businesses has been conducted in the ordinary course consistent with
past practices and, except for transactions contemplated by this
Agreement and the Plan of Liquidation, there has not been:
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i. any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to result in
a Material Adverse Effect;
ii. any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of
Seller or of any Retained Subsidiary not owned directly or
indirectly by Seller, or any repurchase, redemption or other
acquisition by Seller or any Retained Subsidiary of any
outstanding shares of capital stock or other securities of, or
other ownership interests in, Seller or any Retained Subsidiary
or any agreement to take any such action;
iii. any change in the certificate of incorporation or by-laws of
Seller or any Retained Subsidiary;
iv. any material mortgage, pledge or subjection to lien, charge or
any other encumbrance of any of the assets, tangible or
intangible, of Seller or any Retained Subsidiary, other than in
the ordinary course of business;
v. any sale, assignment or transfer of any of material amount of the
Retained Assets or stock of any of the Retained Subsidiaries, or
cancellation of any debts or claims relating to the business of
Seller, except in each case in the ordinary course of business;
vi. any waiver of any rights of substantial value to Seller or any
Retained Subsidiary, whether or not in the ordinary course of
business; or
vii. any agreement by Seller or any Retained Subsidiary to do any of
the foregoing.
e. FINANCIAL STATEMENTS: NO UNDISCLOSED MATERIAL LIABILITIES. To the Best
of MFS' Knowledge, the Reference Balance Sheet and the other financial
statements of Seller provided to Parent have been prepared in
accordance with U.S. generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial
position
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of Seller as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit adjustments).
To the Best of MFS' Knowledge, there are no liabilities of Seller or
any Retained Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a material liability,
other than:
i. liabilities to be provided for in the calculation of the Adjusted
Stockholder's Equity;
ii. liabilities incurred in the ordinary course of business since
March 31, 1998;
iii. liabilities relating to the Bonds;
iv. other undisclosed liabilities which, individually or in the
aggregate, are not material to Seller and the Retained
Subsidiaries taken as a whole.
f. INTERCOMPANY ACCOUNTS. Except as set forth on Exhibit 6f, to the Best
of MFS' Knowledge, since March 31, 1998, there has not been any
accrual of liability by Seller or any Retained Subsidiary to MFS or
any of its Affiliates or other transaction between Seller or any
Retained Subsidiary and MFS and any of its Affiliates, except in the
ordinary course of business of Seller and the Retained Subsidiaries
consistent with past practice.
g. INTELLECTUAL PROPERTY. To the Best of MFS' Knowledge, the intellectual
property used in whole or in part in, or required for the carrying on
of, the business of Seller and the Retained Subsidiaries in the manner
heretofore carried on are listed on Exhibit 6g and are owned by, or
validly licensed to, Seller and the Retained Subsidiaries as indicated
on such Exhibit. Except as otherwise disclosed on Exhibit 6g, to the
Best of MFS' Knowledge, Seller and the Retained Subsidiaries (i) have
the exclusive right to use such intellectual property, (ii) are the
owners of records of such intellectual property, (iii) have not
commenced or threatened to commence any suits, action or proceeding
against any
17
Person in connection with the use of such intellectual property, and
(iv) have not conveyed, assigned or encumbered any of such
intellectual property. Except as set forth on Exhibit 6g, to the Best
of MFS' Knowledge, all registrations and filings necessary to preserve
the rights of Seller and the Retained Subsidiaries in such
intellectual property have been made and are in good standing. Except
as set forth on Exhibit 6g, to the Best of MFS' Knowledge, the conduct
of the business of Seller and the Retained Subsidiaries does not
infringe upon the intellectual property of any other Person. Except as
set forth on Exhibit 6g, to the Best of MFS' Knowledge, Seller's and
the Retained Subsidiaries' intellectual property constitute all of the
material intellectual property rights used in connection with their
businesses and are adequate to conduct such businesses as currently
conducted.
h. LITIGATION. Except as set forth on Exhibit 6h, to the Best of MFS'
Knowledge, there are no actions, suits or proceedings, at law or in
equity, by any Person (including, without limitation, Seller and the
Retained Subsidiaries), nor any arbitration, administrative or other
proceeding by or before or any investigation by any governmental
entity pending, or threatened against or affecting Seller or any of
the Retained Subsidiaries, their businesses or any of their business
assets, and, to the Best of MFS' Knowledge, no valid basis for any
such action, suit, proceeding, arbitration or investigation by or
against Seller or any of the Retained Subsidiaries. Except as
described on Exhibit 6h, to the Best of MFS' Knowledge, neither Seller
nor any of the Retained Subsidiaries is subject to any judgment, order
or decree entered in any lawsuit or proceeding nor has Seller or any
of the Retained Subsidiaries settled any claim prior to being
prosecuted in respect of it. Except as disclosed in Exhibit 6h, to the
Best of MFS' Knowledge, neither Seller nor any of the Retained
Subsidiaries is a plaintiff or complainant in any action, suit or
proceeding.
i. COMPLIANCE WITH LAWS AND COURT ORDERS. To the Best of MFS' Knowledge,
neither Seller nor any Retained Subsidiary is in violation of, and has
not since December 31, 1996 violated, and is not under investigation
with respect to, and has not been threatened to be charged with or
given notice of any violation of, any applicable law, rule,
regulation, judgment, injunction, order or decree, except for
violations
18
that have not had and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.
x. XXXXX AND CONTRACTS. To the Best of MFS' Knowledge, there are no
outstanding claims, notices of potential claims or notices of
inadequate performance under any of the Bonds.
k. EMPLOYEE BENEFIT PLANS.
i. To the Best of MFS' Knowledge, Exhibit 6k identifies each
employee plan respecting Seller and the Retained Subsidiaries. To
the Best of MFS' Knowledge, MFS has furnished or made available
to Parent copies of such Employee Plans and all related
agreements and insurance contracts which implement each such
Employee Plan (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof
together with the three most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) and the most recent
actuarial valuation report prepared in connection with any such
Employee Plan. To the Best of MFS' Knowledge, Exhibit 6k
identifies each such Employee Plan which is maintained in
connection with any trust described in Section 501(c)(9) of the
Code.
ii. Except as set forth on Exhibit 6k, to the Best of MFS' Knowledge,
no Employee Plan is a plan subject to Title IV (a "Title IV
Plan") of the Employee Retirement Security Act of 1974, as
amended ("ERISA"), or is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA (a "Multiemployer Plan") and
neither MFS, nor any entity (an "ERISA Affiliate") that together
with MFS is or was at such time deemed a "single employer" within
the meaning of Section 4001 (b)(1) of ERISA, has at any time (or
at such time as such ERISA affiliation existed) sponsored,
maintained or contributed to or been under any obligation to
sponsor, maintain or contribute to a Title IV Plan or
Multiemployer Plan.
iii. Except as set forth on Exhibit 6k, to the Best of MFS' Knowledge,
no transaction prohibited by Section 406 of ERISA or
19
Section 4975 of the Code has occurred with respect to any
Employee Plan or arrangement which is covered by Title 1 of
ERISA, which transaction has caused or will cause any of Seller
or any of the Retained Subsidiaries to incur any liability under
ERISA, the Code or otherwise, excluding transactions effected
pursuant to and in compliance with a statutory or administrative
exemption.
iv. Except as set forth on Exhibit 6k, to the Best of MFS's
Knowledge, each Employee Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so
qualified during the period since its adoption and each trust
created under any such Plan is exempt from tax under Section 501
(a) of the Code and has been so exempt since its creation. To the
Best of MFS' Knowledge, MFS has provided Parent with the most
recent determination letter of the Internal Revenue Service
relating to each such Employee Plan. Except as set forth on
Exhibit 6k, to the Best of MFS' Knowledge, each Employee Plan has
been maintained in substantial compliance with its terms and with
the requirements prescribed by any and all applicable statutes,
orders, rules and regulations, including but not limited to ERISA
and the Code.
v. To the Best of MFS' Knowledge, Exhibit 6k identifies each benefit
arrangement (the "Benefit Arrangements") respecting Seller and
the Retained Subsidiaries. To the Best of MFS' Knowledge, MFS has
furnished or made available to Parent copies or descriptions of
each Benefit Arrangement (and, if applicable, related trust
agreements) and all amendments thereto and written
interpretations thereof Except as set forth on Exhibit 6k, to the
Best of MFS' Knowledge, each Benefit Arrangement has been
maintained in substantial compliance with its terms and with
requirements prescribed by any and all applicable statutes,
orders, rules and regulations and has been maintained in good
standing with applicable regulatory authorities.
vi. Except as set forth on Exhibit 6k, to the Best of MFS' Knowledge,
neither Seller nor any Retained Subsidiary has any current or
projected liability in respect of post-employment or post-
20
retirement health or medical or life insurance benefits for
retired, former or current employees of Seller or any Retained
Subsidiary, except as required to avoid excise tax under Section
4980B of the Code.
vii. Except as set forth on Exhibit 6k, to the Best of MFS' Knowledge,
all contributions and payments accrued under each Employee Plan
and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include
proportional accruals for the period ending on the Closing Date,
will be discharged and paid on or prior to the Closing Date
except to the extent reflected as a liability in the calculation
of the Adjusted Stockholder's Equity or to the extent the
liability for such contribution or payment is retained by MFS,
pursuant to a separate written agreement by MFS. Except as set
forth on Exhibit 6k, to the Best of MFS' Knowledge, there has
been no amendment to, written interpretation of or announcement
(whether or not written) by MFS or any of its Affiliates or
Seller or any Retained Subsidiary relating to, or change in
employee participation or coverage under, any Employee Plan or
Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the
level of the expense incurred in respect thereof for the most
recent fiscal year ended prior to the date hereof.
viii. Except as set forth on Exhibit 6k, to the Best of MFS'
Knowledge, each Employee Plan or Benefit Arrangement which is a
"group health plan" (as defined in Code Section 5000(b)(1)) has
been operated in compliance with the group health plan
continuation coverage requirements of Section 4990B of the Code
and Sections 601-608 of ERISA, Title XXII of the Public Health
Service Act and the provisions of the Social Security Act, to the
extent such requirements are applicable. Except as set forth on
Exhibit 6k, to the Best of MFS' Knowledge, each Employee Plan or
Benefit Arrangement that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance with the
secondary payor requirements of Section 1862(b)(1) of such Act.
21
l. CORPORATE RECORDS. To the Best of MFS' Knowledge, the certificate of
incorporation, minute books, stock records, and all other records of
Seller and Retained Subsidiaries delivered to Parent and its
representatives at the Closing will be true, correct and complete and
contain a copy of Seller's and each Retained Subsidiary's certificate
of incorporation (as amended and restated), or similarly required
document in its respective jurisdictions and by-laws.
m. GOVERNMENT CLAIMS. To the Best of MFS' Knowledge, no statement of
facts exists or has existed which would constitute valid grounds for
the assertion of a material claim by any governmental entity against
MFS, Seller or any Retained Subsidiary relating to the business, the
business assets or operations of Seller and the Retained Subsidiaries,
for any of the following: (1) defective pricing; (2) cost account
standards noncompliance; (3) unallowable cost as defined in Federal
Acquisition Regulation Part 31, including those which may be included
in indirect cost claims for prior years that have not yet been finally
agreed to by the customer, (4) fraud, and (5) all other basis for
monetary claims relating to the performance or administration of
government contracts or subcontracts.
n. INTERCOMPANY ARRANGEMENTS. Except as set forth on Exhibit 6n, neither
MFS nor any Affiliate of MFS has any interest in any property (whether
real, personal or mixed and whether tangible or intangible), used in
or pertaining to the business of Seller or the Retained Subsidiaries.
Exhibit 6n lists all agreements and arrangements between Seller or any
of the Retained Subsidiaries, on the other hand, and MFS or any of its
Affiliates on the other hand (the "Intercompany Agreements"). Except
for these Intercompany Agreements listed on Exhibit 6n (which will be
terminated effective as the Closing Date), MFS and its Affiliates, as
applicable, have performed all of the obligations required to be
performed by them and there exists no default or event, occurrence,
condition or act (including the consummation of the Transaction)
which, with the giving of notice, the lapse of time or the happening
of any event or condition under the control or direction of MFS or the
applicable Affiliate, would become a default or event of default under
any Intercompany Agreement.
22
o. NO BROKER. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission payable by Parent or
Buyer in connection with this Agreement or the Transaction based upon
any written or oral agreements made by or on behalf of MFS or Seller.
p. SHARES. Seller is authorized to issue 1,000 shares of common stock.
There are 1,000 shares of common stock issued and outstanding, all of
which are issued to MFS, and all of which constitute the Shares. To
the Best of MFS' Knowledge, Exhibit 6p sets forth as to each of the
Retained Subsidiaries the numbers of shares of its capital stock
authorized, issued to Seller or issued to Persons other than Seller.
To the Best of MFS' Knowledge, there are no other shares issued or
outstanding. To the Best of MFS' Knowledge, all of the currently
issued and outstanding shares of capital stock of Seller or the
Retained Subsidiaries have been validly issued, fully paid and
nonassessable and have not been issued in violation of any law or
Seller's or Retained Subsidiary's certificate of incorporation or
by-laws. To the Best of MFS' Knowledge, there are no shares of capital
stock reserved for issuance, or any outstanding subscriptions,
options, warrants, conversion or other rights or other agreements
granting to any person, firm or corporation any interest or right to
acquire at any time, or upon the happening of any stated event, any
shares of capital stock or any other equity securities of Seller or
the Retained Subsidiaries or any interest convertible into capital
stock, or other agreements or commitments by which Seller or any of
the Retained Subsidiaries obligated to issue additional shares
of capital stock or securities convertible into capital stock or
evidencing the right to subscribe for any share of capital stock or
any stock appreciation or similar rights or requiring Seller or any of
the Retained Subsidiaries to repurchase, reacquire or redeem any of
its outstanding capital stock.
q. EQUIPMENT. To the Best of MFS' Knowledge, all of the equipment of
Seller and the Retained Subsidiaries that is materially important to
the conduct of Seller's business is in good and operable condition,
ordinary wear and tear excepted.
r. TITLE TO ASSETS. To the Best of MFS' Knowledge, Seller and the
Retained Subsidiaries have good title to all of the assets, whether
real, personal, mixed, tangible, and/or intangible, that are
materially important to the conduct of Seller's business. To the Best
of MFS' Knowledge, all
23
such assets are free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements,
rights-of-way, covenants, conditions, or restrictions, except for (i)
those disclosed in Xxxxxxx 0x, (xx) the lien of current taxes not yet
due and payable, (iii) any statutory landlord liens and any title
deficiencies which would have been prevented by compliance with
applicable bulk sale laws, and (iv) possible minor matters that, in
the aggregate, are not substantial in amount and do not materially
detract from or interfere with the present use of any of these assets,
nor materially impair business operations.
s. NONE RESTRICTIVE AGREEMENTS. To the Best of MFS' Knowledge, neither
Seller nor any Retained Subsidiary is a party to, or its property is
bound by, any noncompetition or similar agreement that is materially
adverse or restrictive to its business.
7. COVENANTS BY MFS. MFS hereby covenants to and agrees with Parent as
follows:
a. NECESSARY ACTIONS. During the Closing Period, MFS shall take every
action reasonably required of MFS to satisfy the Parent Conditions,
and shall exert its best efforts to cause the Closing to be
consummated.
b. REPRESENTATIONS AND COVENANTS. During the Closing Period, MFS shall
use its best efforts to cause the representations and warranties made
by MSF herein to remain true and correct in all respects, and to cause
all of MFS' covenants and agreements to be performed and observed.
c. LIQUIDATING DISTRIBUTION. Immediately prior to consummating the
Merger, MFS will cause Seller to distribute to MFS all of the
Distributed Assets in the Liquidating Distribution pursuant to the
Plan of Liquidation, whereupon Seller's only assets shall be the
Retained Assets and the stock of the Retained Subsidiaries.
d. TAX ASSURANCE. On or before the Closing Date, MFS will obtain an
opinion of tax counsel to Seller and MFS substantially in form as
attached hereto as Exhibit 7d (herein called the "Tax Assurance"), to
the effect that for U.S. federal income tax purposes (i) the Merger
will be treated as the taxable sale by Seller of all of its assets
(other than the
24
Distributed Assets) to Parent in exchange for the Merger Consideration
and the assumption by Buyer of the liabilities of Seller, (ii) no gain
or loss will be recognized by Seller on the distribution to MFS of the
Distributed Assets and the Merger Consideration pursuant to the Plan
of Liquidation and (iii) no gain or loss will be recognized by MFS on
the receipt by MFS of the Distributed Assets and the Merger
Consideration pursuant to the Plan of Liquidation. The issuance of the
Tax Assurance shall be conditioned on the receipt by such tax counsel
of representation letters from each of the Parties, in each case, in
form and substance reasonably satisfactory to such tax counsel, and
each such representation letter shall be dated on or before the date
of such Tax Assurance and shall not have been withdrawn or modified in
any material respect.
e. ORDINARY COURSE. During the Closing Period, MFS will not, and will
not cause Setter to, take or agree to take any of the actions (other
than those actions contemplated by this Agreement) specified in
Section 6d or any of the following other actions:
i. adjust, split, combine or reclassify any capital stock of Seller
or any of the Retained Subsidiaries or issue or authorize or
agree or commit to issue or authorize the issuance of any other
securities in respect of or in substitution for capital stock of
Seller or any of the retained Subsidiaries, or sell, lease,
mortgage or otherwise dispose of or otherwise encumber any
assets, rights or shares of capital stock of Seller or any of the
Retained Subsidiaries;
ii. make any material investment, either by purchase of stock or
securities, contributions to capital, asset transfers, or
purchases of assets, in any Person or otherwise acquire direct or
indirect control over any Person;
iii. (A) grant any material increase in compensation or benefits to
the employees, officers or directors of Seller or the Retained
Subsidiaries in their capacities as such, except in accordance
with past practice previously or as required by law, (B) pay any
severance or termination pay or any bonus other than pursuant to
written policies or written contracts, or (C) enter into or amend
any severance or change in control contracts with officers,
employees, partners or directors of any of Seller or the Retained
25
Subsidiaries (or where Seller or the Retained Subsidiaries have
any liability for such payments); or
iv. incur indebtedness for borrowed money outside the ordinary course
of business; or
v. modify, amend, terminate or extend any Contract or any other
contract that is material to its operations.
f. ACCESS FOR DUE DILIGENCE. During the Closing Period, MFS shall (i)
permit Parent and its employees, agents, counsel, accountants or other
representatives, without undue interference to the ordinary conduct of
Seller's business, to have reasonable access during normal business
hours and upon reasonable notice to (A) the premises of Seller and
each Retained Subsidiary, (B) Seller's assets and, in particular to
any information, including all books and records whether retained by
MFS, Seller or a Retained Subsidiary or otherwise (but excluding the
portions of any federal income tax returns and state and local
unitary, combined, consolidated or other tax returns or records which
do not relate solely to Seller and/or the Retained Subsidiaries), (C)
all contracts, and (D) the senior management of Seller and each
Retained Subsidiary; and (ii) furnish to Parent or its employees,
agents, counsel, accountants or other representatives such financial
and operating data and other information with respect to Seller and
each Retained Subsidiary as Parent shall from time to time reasonably
request in writing.
g. NOTICE OF UNTRUE REPRESENTATION OR WARRANTY. MFS shall promptly notify
Parent upon any representation or warranty made by it contained in
this Agreement becoming untrue or incorrect during the Closing Period.
During the Closing Period, Seller agrees to give written notice
promptly to Parent upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of the
Retained Subsidiaries which is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect. Any such notification
shall set out particulars of the untrue or incorrect representation or
warranty and details of any actions being taken by MFS to rectify that
state of affairs.
26
h. CONFIDENTIALITY. During the Closing Period and after the Closing, MFS
will keep confidential all information relating to Seller and each
Retained Subsidiary unless such information is or becomes generally
available to the public other than as a result of a disclosure in
violation of this Agreement or such information is required to be
disclosed pursuant to applicable law. In the event that MFS is
requested in any proceeding to disclose any such confidential
information, MFS will, except to the extent prohibited by applicable
law, give Parent prompt notice of such request so that Parent may seek
an appropriate protective order. If, in the absence of a protective
order, MFS is nonetheless compelled to disclose such confidential
information, Sellers may disclose such information without liability
hereunder.
i. RELEASES. MFS agrees to obtain prior to the Closing Date releases of
Seller and the Retained Subsidiaries from all guaranties which any of
them have entered into to guaranty any debt or other obligation of MFS
or any of its Affiliates.
j. RESIGNATIONS. On or before the Closing Date, MFS will deliver to
Parent the resignations or removals of all of the officers and
directors of Seller and each Retained Subsidiary who will be officers,
directors or employees of MFS or any of its Affiliates after the
Closing Date, from their positions with Seller or any Retained
Subsidiary.
k. BOOKS AND RECORDS. MFS covenants and agrees that for six years
following the Closing Date it will retain, and provide to Parent as
and when requested by Parent, any original accounting books and
records relating solely to Seller and its business that are not
available at the facilities of Seller on the Closing Date.
l. CERTIFICATE OF MERGER. MFS will cause Seller to execute and deliver
for filing with the Secretary of State of the State of Delaware in
accordance with the Delaware General Corporation Law (the "DGCL") a
certificate of merger providing for the Merger (the "Certificate of
Merger").
m. PLAN OF LIQUIDATION. MFS will cause Seller to adopt the Plan of
Liquidation no later than the date immediately preceding the Closing
Date; the Plan of Liquidation may be amended, modified or supplemented
from time to time as MFS and Seller shall mutually determine.
27
8. COVENANTS BY PARENT. Parent hereby covenants to and agrees with MFS as
follows:
a. NECESSARY ACTIONS. During the Closing Period, Parent shall take every
action reasonably required of Parent to satisfy the MFS Conditions,
and shall exert its best efforts to cause the Closing to be
consummated.
b. REPRESENTATIONS AND COVENANTS. During the Closing Period, Parent shall
use its best efforts to cause the representations and warranties made
by Parent herein to remain true and correct in all respects, and to
cause all of Parent's covenants and agreements to be performed and
observed.
c. CERTIFICATE OF MERGER. Parent will cause Buyer to execute and
deliver for filing with the Secretary of State of the State of
Delaware in accordance with the DGCL the Certificate of Merger.
d. DEPOSIT. Not later than the close of business on April 27, 1998,
Parent will cause to be deposited with the Escrow Agent under the
Escrow Agreement (each as defined in Section 11) an aggregate of
$5,000,000 in cash, such amount to be held as the Deposit and to be
disposed of as provided for in Section 11. In the event that Parent
shall exercise its extension option pursuant to the proviso to Section
1lb, not later than the close of business on May 31, 1998, Parent
will cause to be deposited with the Escrow Agent under the Escrow
Agreement an aggregate of an additional $5,000,000 in cash, such
amount to be added to the Deposit and to be disposed as provided for
in Section 11.
e. EXTENSION FEES. In the event that Parent shall exercise its extension
option pursuant to the proviso to Section 11b, it shall pay an
extension fee in cash to MFS on the earlier to occur of June 30, 1998
or the Closing and, if the Closing does not occur on or prior to June
30, 1998, it shall pay a second extension fee in cash to MFS on the
earlier to occur of July 31, 1998 or the Closing. The amount of the
first extension fee shall be equal to $1,000,000 if the payment is
made on June 30, 1998 or, if paid earlier, the amount determined by
multiplying the number of actual days elapsed from May 31, 1998
through and including the date of payment times $1,000,000/30. The
amount of the second extension
28
fee shall be equal to $1,000,000 if the payment is made on July
3l, 1998 or, if paid earlier, the amount determined by multiplying the
number of actual days elapsed from June 30, 1998 through and including
the date of payment times $1,000,000/31.
9. PARENT CONDITIONS TO CLOSING. The obligation of Parent to effect the
Closing shall be subject and conditioned upon the fact that, on the Closing
Date, each and every one of the following (herein called the "Parent
Conditions") shall have occurred or shall be true:
a. MFS AND SELLER REPRESENTATIONS AND WARRANTIES. The representations and
warranties of MFS and Seller contained herein shall have been true and
correct in all material respects when made.
b. MFS' AND SELLER'S PERFORMANCE. MFS and seller shall have performed in
all material respects its covenants, agreements and obligations set
forth in this Agreement required to be performed during the Closing
Period or on the Closing Date, including without limitation the
execution and delivery of the agreements and other documents
contemplated to be delivered by MFS pursuant to Section 13.
c. NO INJUNCTION. No preliminary or permanent injunction which prohibits
the consummation of the Transaction shall have been issued by any
federal or state court and remain in effect.
d. TAX ASSURANCE. MFS shall have received the Tax Assurance and shall
have delivered a copy thereof to Parent.
e. HSR ACT. The waiting period under the HSR Act shall have expired or
been terminated.
Parent may, in its sole and absolute discretion, waive any Parent Condition only
by a written, express waiver delivered to MFS which refers to this Section 9 and
to the Parent Conditions so waived.
10. MFS CONDITIONS TO CLOSING. The obligation of MFS to effect the Closing
shall be subject and conditioned upon the fact that on the Closing Date, each
29
and every one of the following (herein called "MFS Conditions",) shall have
occurred or shall be true:
a. PARENT REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Buyer contained herein shall have been true
and correct in all material respects when made.
b. PARENT AND BUYER PERFORMANCE. Parent and Buyer shall have performed in
all material respects its covenants, agreements and obligations set
forth in this Agreement required to be performed during the Closing
Period or on the Closing Date, including without limitation the
execution and delivery of the agreements and other documents
contemplated TO be delivered by Parent or Buyer pursuant to Section
13, the timely making of all payments into the Deposit required under
Section 8(d) and the timely payment of all extension fees pursuant to
Section 8(e).
c. NO INJUNCTION. No preliminary or permanent injunction which prohibits
the consummation of the Transaction shall have been issued by any
federal or state court and remain in effect.
d. TAX ASSURANCE. MFS shall have received the Tax Assurance
substantially in the form as attached hereto as Exhibit 7d.
e. HSR ACT. The waiting period under the HSR Act shall have expired or
been terminated.
MFS may, in its sole and absolute discretion, waive any MFS condition only by a
written, express waiver delivered to parent which refers to this Section 10 and
to the MFS Condition so waived.
11. TERMINATION. This Agreement may be terminated at any time prior to the
Closing, without any Party having any liability to any other Party as follows:
a. MUTUAL ACTION. MFS and Parent may so terminate this Agreement by
mutual, written agreement; or
30
b. BY EITHER PARTY. Each, Party may terminate this Agreement upon
delivery of written notice to the other Party if the closing does not
occur on or prior to May 31, 1998, unless the waiting period under the
HSR Act shall not have expired or been terminated on or prior to such
date, in which event, if the Closing does not occur on or prior to
June 30, 1998; PROVIDED that Parent shall have the option to extend
the Closing Period until on or prior to July 31, 1998 if it shall have
timely made the payments into the Deposit contemplated by Section 8(d)
and shall pay as and when due the extension fees contemplated by
Section 8(e).
Notwithstanding the foregoing, in the event all of the Parent Conditions
have been satisfied (or waived by Parent), but Parent fails or refuses to
close and consummate the Transaction on the date required under Section 13,
then MFS, at its election any time thereafter, may terminate this Agreement
and MFS and Parent shall promptly authorize and direct MFS' attorneys to
tender and remit to MFS the Deposit. Parent and MFS expressly agree that
payment to MFS of the Deposit is a fair and accurate liquidation and
measure of the damages which will be suffered by MFS in the event Parent so
fails to close and consummate the Transaction (which damages would be
difficult to calculate), and that such payment is not punitive. In the
event the Transaction does not close for any reason other than Parent's
failure or refusal to close and consummate the Transaction after all of
Parents Conditions have been satisfied (or waived by Parent), then upon
termination of this Agreement by Parent pursuant to Section 11b, MFS and
Parent shall promptly authorize and direct MFS' attorneys, Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, to tender and remit the Deposit to Parent. MFS
and Parent agree that the Deposit will be held and disposed of in
accordance with the Escrow Agreement entered into as of the date hereof
(the "Escrow Agreement") among MFS, Parent and Skadden, Arps, State,
Xxxxxxx & Xxxx LLP, as Escrow Agent (the "Escrow Agent"). If either Party
terminates this Agreement pursuant to this Section 11, all obligations of
the Parties shall terminate without any liability of either Party to the
other Party (except for any liability of any party then in breach);
provided, however, that the confidentiality provisions contained in Section
7h, the extension fees provided for in Section 8(e), this Section 11, the
Option provided for in Section 17 and the various provisions in Section 18
shall survive any such termination.
12. CLOSING DATE. The "Closing Date" is hereby defined as the day on which
the Merger occurs pursuant to Section 13.
31
13. CLOSING. Provided the MFS Conditions and the Parent Conditions have
then been satisfied or waived by the Party that is the beneficiary thereof, MFS
and Parent hereby agree to consummate the Closing of the Transaction at 10:00 AM
EDT on the third business day following expiration or termination of the
applicable waiting period under the HSR Act or, if Parent property exercises its
extension option pursuant to the proviso to Section 11(b), at 10:00 AM EDT on
the business day not later than July 31, 1998 that Parent selects and provides
to MFS written notice of at least three business days prior to such date. The
Closing will be held at the offices of MFS' attorneys in New York, New York, at
which the Parties shall cause the following to occur:
a. MERGER. MFS and Parent shall cause Seller to be merged with and into
Buyer with Buyer as the surviving corporation and Buyer's certificate
of incorporation and by-laws in accordance with all applicable
requirements of, and to have the effect contemplated by, the DGCL.
b. MERGER CONSIDERATION. Parent shall make the payment required by
Section 4a.
c. DEPOSIT. MFS and Parent shall authorize and direct its attorneys to
release the Deposit to MFS, whereby such release shall be treated as a
partial payment by Parent of the Merger Consideration in such amount.
d. EXTENSION FEES. Parent shall pay to MFS the extension fee, if any, due
on such date pursuant to Section 8e.
e. ASSUMPTION AND INDEMNITY AGREEMENT. In the event that Parent shall not
deliver Satisfactory Releases in respect of all of the Bonds, Buyer
and Parent shall execute and deliver to MFS the Assumption and
Indemnity Agreement.
f. STOCK PLEDGE AGREEMENT. In the event that Parent shall be required to
deliver the Assumption and Indemnity Agreement, Parent shall execute
and deliver to MFS the Stock Pledge Agreement, and shall
contemporaneously deliver to MFS the shares pledged thereunder,
together with stock powers relating thereto, endorsed in blank.
g. MASTER SERVICES AGREEMENT. Parent and MFS shall execute and deliver,
and MFS shall cause certain of its Affiliates to execute and deliver,
the Master Services Agreement
32
h. LICENSE AGREEMENT. Parent and MFS will execute License Agreement.
i. WORLDCOM GUARANTEE. MFS shall cause to be executed and delivered to
Parent the WorldCom Guarantee.
j. OTHER DOCUMENTS AND ACTIONS. Each of the Parties shall undertake such
other actions, and execute (or cause to be executed) such other
documents or instruments, as shall be necessary to accomplish and
effect the Transaction.
14. GENERAL INDEMNIFICATION PROVISIONS.
a. GENERAL. The representations, warranties, covenants and agreements of
MFS set forth in this Agreement, other than those set forth in Section
15 (herein called "MFS Undertakings"), shall survive the Closing and
shall not be affected, modified, diminished or released by the
Closing, except as provided in this Section. The representations,
warranties, covenants and agreements of Parent set forth in this
Agreement (herein called the "Parent Undertakings"), shall survive the
Closing and shall not be affected, modified, diminished or released by
the Closing, except as provided in this Section.
b. DEFINITIONS. The Parties hereby define the following terms:
i. "EVENT OF MFS INDEMNIFICATION" is the breach, failure, or default
of any representation, warranty, agreement or covenant of MFS set
forth in this Agreement, other than those set forth in Section 15
or 16 (including any MFS Undertaking), or in any certificate or
other writing delivered in connection herewith, or any facts or
circumstances constituting such breach, failure, or default.
ii. "EVENT OF PARENT INDEMNIFICATION" is the breach, failure of
default of any representation, warranty, agreement or covenant of
Parent set forth in this Agreement, other than those set forth in
Section 16 (including any Parent Undertaking), or in any
33
certificate or other writing delivered in connection herewith or
therewith, or any facts or circumstances constituting such
breach, failure or default.
iii. "LOSSES" are any and all losses, damages, expenses (including
reasonable attorneys' and accountants' fees and disbursements as
incurred) and assessments sustained, suffered or incurred by any
Parent or MFS, as the case may be, arising from or in connection
with any Event of MFS Indemnification or Event of Parent
Indemnification, respectively, whether or not involving any claim
by a third party.
iv. "DETERMINATION DATE" is the first anniversary of the Closing
Date.
c. PARENT INDEMNIFICATION. Parent shall indemnify and hold harmless MFS,
its Affiliates and their respective officers and directors
(collectively, the "MFS Indemnified Group"), from and against, and
shall pay and reimburse the MFS Indemnified Group forthwith upon
written demand for, any and all of the MFS Indemnified Group Losses
arising from or in connection with any Event of Parent
Indemnification. However, notwithstanding the preceding sentence,
Parent shall have no such obligation to so indemnify, hold harmless,
pay or reimburse respecting any specific Parent Undertaking, unless
MFS shall, on or prior to the Determination Date, detiver to Parent a
written notice (herein called an "Indemnification Notice") which:
i. refers to this Section 14c, and
ii. states that MFS intends to make a claim respecting a
therein specified Parent Undertaking under the preceding
sentence, and the amount thereof to the extent then known.
d. MFS INDEMNIFICATION. MFS shall indemnify and hold harmless Parent, its
Affiliates and their respective officers and directors (collectively,
the "Parent Indemnified Group"), from and against, and shall pay and
reimburse the Parent Indemnified Group forthwith upon written demand
for, any and all the Parent Indemnified Group's Losses arising from or
in connection with any Event of MFS Indemnification. However,
34
Notwithstanding the preceding sentence, MFS shall have no such
obligation to so indemnify, hold harmless, pay or reimburse respecting
any specific MFS Undertaking, unless Parent shall, on or prior to the
Determination Date, deliver to MFS a written notice (also herein
called an "Indemnification Notice") which:
i. refers to this Section 14d, and
ii. states that Parent intends to make a claim respecting a
therein-specified MFS Undertaking under the preceding sentence,
and the amount thereof to the extent then known.
e. LIMITATIONS. Notwithstanding any other provisions of this Agreement:
i. Parent will have no liability for indemnification under this
Section until the aggregate of all claims by the MFS Indemnified
Group exceeds $500,000; and
ii. MFS will have no liability for indemnification under this Section
until the aggregate of all claims by the Parent Indemnified Group
exceeds $500,000; and
iii. the limitations provided for in this Section 14e shall not affect
the indemnity obligations of Parent pursuant to the Assumption
and Indemnity Agreement or the Stock Pledge Agreement.
f. COOPERATION. MFS and Parent shall cooperate in the resolution of
claims that are made by third parties.
15. SPECIAL PROVISIONS RESPECTING TAXES.
a. TAX DEFINITIONS. For purposes of this Section 15, the following terms
have the following meanings:
i. "Buyer Indemnitee" means Buyer, any of its Affiliates and,
effective upon the Closing, the Controlled Subsidiaries.
35
ii. "COMBINED STATE TAX" means any income or franchise Tax payable
to any state or local taxing jurisdiction in which Seller or any
Controlled Subsidiary joins with MFS or an Affiliate of MFS
(other than Seller or the Controlled Subsidiaries) to file a
consolidated, combined or unitary Return with respect to such
income or franchise Tax.
iii. "FEDERAL TAX" means any tax imposed under subtitle A of the
Code.
iv. "MFS GROUP" means (i) with respect to Federal Taxes, each
affiliated group of corporations (as defined in Section 1504(a)
of the Code) of which MFS is or was a member, and (ii) with
respect to Combined State Taxes, the consolidated, combined or
unitary group of which MFS or any of its Affiliates is or was a
member, but excluding Seller or the Controlled Subsidiaries.
v. "MFS INDEMNITEE" means MFS and any of its Affiliates.
vi. "POST-CLOSING TAX PERIOD" means any Tax period beginning after
March 31, 1998 and, with respect to any Tax period beginning
before and ending after March 31, 1998, the portion of such Tax
period that begins on April 1, 1998.
vii. "PRE-CLOSING TAX PERIOD" means any Tax period ending on or
before March 31, 1998 and, with respect to any Tax period
beginning before and ending after March 31, 1998, the portion of
such Tax period that ends on March 31, 1998.
viii. "RETURN" OR "RETURNS" has the meaning set forth in Section
15(b).
ix. "SECTION 338(H)(10) ELECTION" means a timely election described
in Section 338(h)(10) of the Code with respect to the sale of
the stock of the Controlled Subsidiaries to Buyer pursuant to
this Agreement. Section 338(h)(10) Election shall include any
corresponding election under any other relevant Tax laws, if an
election is made under Section 338(h)(1O) of the Code.
36
x. "SECTION 338 FORMS" means all returns, documents, statements and
other forms that are required to be submitted to any Taxing
Authority in connection with a Section 338(h)(10)
Election.
xi. "STRADDLE TAX PERIOD" means any Tax period beginning before and
ending after March 31, 1998.
xii. "STRADDLE PERIOD TAXES" means Taxes imposed with respect to a
Straddle Tax Period.
xiii. "TAX" means (i) any Federal Tax and any state, local or foreign
tax, including, without limitation, 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 Seller or any Controlled
Subsidiary, payroll, employment social security, unemployment,
excise, severance, stamp, occupation, premium, property,
intangibles, capital stock, disability, license, environmental
or windfall profit tax, or other custom, duty, levy,
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
responsible for the imposition of any such tax (a "Taxing
Authority"); (ii) any liability of Seller or any Controlled
Subsidiary for the payment of any amounts of the type described
in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any
agreement, or arrangement whereby liability of Seller or any
Controlled Subsidiary for payment of such amounts was determined
or taken into account with reference to the liability of any
other person for any Pre-Closing Tax Period; and (iii) except to
the extent described in clause (i) above of this definition,
liability of Seller or any Controlled Subsidiary for the payment
of any amounts as a result of being party to any Tax Sharing
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.
37
xiv. "TAXING AUTHORITY" has the meaning set forth in Section
15(a)(xiii).
xv. "TAX BENEFIT" means the value, when actually received, of any
deduction, loss, credit or refund (other than a Returnable
Refund or Credit) to Buyer, an Affiliate of Buyer (including,
effective upon the Closing, the Controlled Subsidiaries), or
MFS, as the case may be.
xvi. "TAX INDEMNIFICATION PERIOD" means (a) with respect to any Tax
described in clause (i) or (ii) of the definition of "Tax," any
Pre-Closing Tax Period of Seller or any Controlled Subsidiary
and (b) with respect to any Tax described in clause (iii) of
the definition of "Tax", the survival period of the obligation
under the applicable contract or arrangement.
xvii. "TAX SHARING AGREEMENTS" means all existing Tax sharing
agreements or arrangements (whether or not written) binding
Seller or any Controlled Subsidiary, (including any agreements
or arrangements which afford any other person the benefit of
any Tax asset of Seller or any Controlled Subsidiary, afford
Seller or any Controlled Subsidiary the benefit of any Tax
asset of any other person or require or permit the transfer or
assignment of income, revenues, receipts, or gains).
xviii. "TRANSFER TAXES" has the meaning set forth in Section 15c(vii).
xix. "TRUST FUND TAXES" mean (i) all accrued and recorded
liabilities on the Closing Balance Sheet for sales and use
Taxes of Seller and any Controlled Subsidiary and (ii) the
amount of all payroll Taxes withheld or accrued and recorded on
the Closing Balance Sheet, including FUTA and the employer and
employee portions of FICA and Medicare Taxes, which relate to
any payrolls of Seller or any Controlled Subsidiary paid on or
before March 31, 1998 for which the related payroll Taxes have
not been remitted to the appropriate Taxing Authorities as of
March 31, 1998.
b. TAX REPRESENTATION. MFS represents and warrants to Buyer as of the
date hereof and as of the Closing Date that, to the Best of MFS'
38
Knowledge, except asset forth on Ehibit 5b-l or accrued and recorded
on the Reference Balance Sheet, and except when the failure to pay
Taxes or to file Returns as required below would not have a material
adverse effect; (i) all Tax returns, statements, reports and forms
(including, without limitation, estimated tax or information returns
and reports) required to be filed with any taxing Authority
(collectively, the "Returns") with respect to any Pre-Closing Tax
Period by or on behalf of Seller or any Controlled Subsidiary, have to
the extent required to be filed on or before the date hereof, been
filed when due in accordance with all applicable laws; (ii) as of the
time of filing, such Returns correctly reflected in all material
respects the income, business, assets, operations, activities and
status of Seller, its Controlled Subsidiaries and any other
information relating to Seller and its Controlled Subsidiaries
required to be shown therein; (iii) all Taxes shown as due and payable
on such Returns have been timely paid or withheld and remitted to the
appropriate Taxing Authority; (iv) neither Seller nor any Controlled
Subsidiary is delinquent in the payment of any Tax; (v) there is no
claim, audit, action, suit, proceeding, or investigation now pending
or threatened against or with respect to the MFS Group, Seller or any
Controlled Subsidiary in respect of any Tax that could have a material
adverse effect; (vi) there are no requests for filings or
determinations in respect of any Tax pending between Seller or any
Controlled Subsidiary and any Taxing Authority; (vii) none of the
property owned or used by Seller or any Controlled Subsidiary is
subject to a lease, other than a "true" lease for Federal Tax
purposes; (viii) none of the property owned by Seller or any
Controlled Subsidiary is "tax-exempt use property" within the meaning
of Section 168(h) of the Code; (ix) there are no liens for Taxes upon
the assets of Seller or any Controlled Subsidiary except liens for
current Taxes not yet due and payable, (x) MFS is not subject to
withholding under Section 1445 of the Code with respect to the Merger;
and (xi) Exhibit 15b-2 contains a list of all jurisdictions (whether
domestic or foreign) in which an income Tax Return is required to be
filed by or on behalf of Seller or any Controlled Subsidiary for the
1996 and/or 1997 taxable years.
c. COVENANTS.
i. MFS and Buyer shall prepare Exhibit 15c, which shall allocate
the Merger Consideration and the amount of the liabilities
39
assumed by Buyer (the "Total Consideration") among the Retained
Assets and stock of the Retained Subsidiaries transferred to
Buyer pursuant to Section 2 of this Agreement in accordance with
Section 1060 of the Code and Treasury Regulations promulgated
thereunder. MFS and Buyer shall complete Exhibit 15c at least 20
days prior to the earliest of the date Form 8594 is required to
be filed or the date any similar forms are required to be filed
under state or local tax law. In the event that Parent and MFS
are unable to mutually agree upon the allocation of the Total
Consideration among the Retained Assets and the stock of the
Retained Subsidiaries for purposes of completing Exhibit 15c,
such allocation shall be made (and Exhibit 15c shall be
completed), based upon the fair market value of the Retained
Assets and stock of the Retained Subsidiaries as determined by
an appraisal conducted by a nationally recognized accounting
firm as Buyer and Seller shall mutually agree upon (the
"Appraiser"). Parent and MFS shall share equally in all fees and
expenses of the appraisal conducted by the Appraiser. MFS and
Buyer shall each report the transactions contemplated under this
Agreement and any related agreements for all Tax and other
purposes (including Section 1060 of the Code) consistent with
the information set forth on Exhibit 15c. MFS and Buyer shall
timely file Form 8594 (and any similar forms required under
state or local tax law) in accordance with the requirements of
Section 1060 of the Code (or state or local tax law, as the case
may be) and this Section 15c(i).
ii. With respect to the purchase and sale of the stock of the
Controlled Subsidiaries hereunder, MFS (and Seller) and
Buyer shall jointly make the Section 338(h)(1O) Election with
respect to the Controlled Subsidiaries in accordance with
applicable Tax laws and as set forth herein. Buyer and MFS shall
report the purchase and sale under this Agreement consistent
with such Section 338(h)(10) Election; Buyer and MFS shall not
take a position or an action contrary thereto.
(a) Buyer and MFS shall be responsible for the preparation and
timely filing of all Section 338 Forms in accordance with
applicable Tax laws and the terms of this Agree-
40
ment. Upon request from MFS, Buyer shall execute and deliver
to MFS such documents or forms as are reasonably requested
and are required by any Tax laws in order to properly
complete the Section 338 Forms, at least twenty (20) days
prior to the date such Section 338 Forms are required to be
filed. Buyer shall provide MFS with such information as MFS
reasonably requests in order to prepare the Section 338
Forms within thirty (30) days of MFS' request for such
information or such shorter period as is necessary to comply
with applicable Tax laws.
(b) Prior to the Closing Date, Buyer and Seller shall prepare
and agree upon (i) an estimate concerning the computation of
the Modified Aggregate Deemed Sale Price (as defined under
applicable Treasury Regulations) of the assets of the
Controlled Subsidiaries in accordance with Exhibit 15c and
the terms hereof and (ii) the allocation of such Modified
Aggregate Deemed Sale Price among such assets. After the
Closing Date, but in no event later than sixty days after
the Closing Date, Buyer and Seller shall prepare and agree
upon a final allocation. In the event that Buyer and Seller
are unable to mutually agree upon a final allocation, such
final allocation shall be based upon the fair market value
of the assets of the Controlled Subsidiaries as determined
by an appraisal conducted the Appraiser. Parent and Seller
shall share equally in all fees and expenses of the
appraisal conducted by the Appraiser. All values contained
in the final allocation shall be consistently reported for
Tax purposes by Buyer and MFS in accordance with the
procedures reflected herein.
iii. For all income Tax purposes, the Parties shall treat the
transactions contemplated by this Agreement as (i) a taxable
sale by Seller of all its assets (other than the Distributed
Assets) to Buyer in exchange for the Merger Consideration and
an assumption by Buyer of the liabilities of Seller, and (ii)
liquidating distributions by Seller to MFS of the Distributed
Assets and the Merger
41
Consideration pursuant to a complete liquidation of Seller
which qualifies under Sections 332 and 337 of the Code. The
Parties shall, and shall cause their Affiliates to report all
such transactions consistently with such treatment and the Tax
Assurance.
iv. MFS shall include Seller and the Controlled Subsidiaries in its
United States consolidated federal income Tax return and in any
Combined State Tax return for all tax periods that end prior to
or that include the Closing Date for which Returns have not yet
been filed, including without limitation, the reporting of, and
paying any Tax attributable to, the Merger or this Agreement.
v. All Returns with respect to Pre-Closing. Tax Periods not
required to be filed on or before the date hereof (i) will be
filed by MFS when due in accordance with all applicable laws,
and (ii) as of the time of filing, will correctly reflect in
all material respects the facts regarding the income, business,
assets, operations, activities and status of Seller, the
Controlled Subsidiaries and any other information relating to
Seller and its Controlled Subsidiaries required to be shown
therein.
vi. The Reference Balance Sheet does not reflect, and the Closing
Balance Sheet will not reflect, (i) any accrued or recorded
income Tax liabilities of Seller or any Controlled Subsidiary
or (ii) any accrued or recorded Transfer Tax (as defined in
Section 15c(vii)) liabilities. Subject to the preceding
sentence, all Tax liabilities accrued and recorded on the
Reference Balance Sheet or the Closing Balance Sheet have been
or will be properly estimated in accordance with applicable law
as applied in a manner consistent with past practice of MFS and
Seller.
vii. All transfer, documentary, sales, use, stamp, registration,
value added, transfer gains, excise and other such similar
Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement or the Merger, (including any
real property gains and/or transfer Tax and any similar Tax)
(collectively, "Transfer Taxes") shall be borne equally by MFS
and Parent and the parties will, at their equal expense, file
all Returns and other documentation with respect to all such
Taxes and fees, and, if
42
required by applicable law, Buyer will, and will cause its
Affiliates to, join in the execution of any such Returns and
other documentation.
viii. Notwithstanding any other provision of this Agreement, except
to the extent previously paid by Buyer pursuant to Section
3(a)(vii), each of Parent and Buyer agree to indemnify each MFS
Indemnitee and agree to hold each MFS Indemnitee harmless from
any Taxes imposed with respect to the NT Business and the
Controlled Subsidiaries for all Post-Closing Tax Periods, but
excluding any income Taxes imposed with respect to Seller's
gain on the sale of its assets pursuant to the Merger. Upon
payment by an MFS Indemnitee of any such Taxes, Buyer and
Parent shall discharge their obligation to indemnify such MFS
Indemnitee in accordance with the terms of Section 15f.
d. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. After the Closing
Date, neither Seller nor any Controlled Subsidiary shall have any
further rights or liabilities under any Tax Sharing Agreement existing
on or before the Closing Date.
e. COOPERATION ON TAX MATTERS.
i. Buyer and MFS shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the
preparation and filing of Returns (including any report
required pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder), the conduct of any audit,
litigation or other proceeding with respect to Taxes and the
determination of any Taxes imposed in connection with the
transactions contemplated hereunder. Such cooperation shall
include (i) the retention and (upon the other party's request)
the provision of records and information which are reasonably
relevant to the preparation of any such Return or the conduct
of any such audit, litigation or other proceeding and (ii)
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. Seller (and effective upon the Closing,
Buyer) and
43
MFS agree (i) to retain all books and records with respect to
Tax matters pertinent to Seller and/or the Controlled
Subsidiaries relating to any tax period that ends prior to or
includes the Closing Date, (ii) to abide by all record
retention agreements entered into with any Taxing Authority,
and (iii) to give the other party reasonable written notice
prior to destroying or discarding any such books and records
and, if the other party so requests, Seller (and effective upon
the Closing, Buyer) or MFS, as the case may be, shall allow the
other party to take possession of such books and records.
ii. Buyer and MFS further agree, upon request of the other party,
to use all reasonable efforts to obtain any certificate or
other document from any governmental authority or customer of
Seller or any Controlled Subsidiary or any other person as may
be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including but not limited to any Tax that
could be imposed with respect to the transactions contemplated
hereunder).
iii. From time to time after the Closing, Buyer, at its expense,
shall deliver to MFS all information (including memorandum
Returns, schedules, statements and supporting documentation)
when and as MFS may reasonably request, with respect to the
operations of Seller and the Controlled Subsidiaries for the
preparation of (a) the United States consolidated Federal Tax
returns of MFS and (b) any state or local Tax returns to be
filed on a consolidated, combined or unitary basis that include
Seller and/or any Controlled Subsidiary for any tax period that
ends prior to or includes the Closing Date.
f. TAX INDEMNIFICATION.
i. MFS agrees to indemnify each Buyer Indemnitee against, and
agrees to hold each Buyer Indemnitee harmless from (without
duplication of any item) (w) all Taxes of Seller or any
Controlled Subsidiary with respect to the relevant Tax
Indemnification Period, excluding (i) Trust Fund Taxes and (ii)
all Taxes accrued and recorded on the Closing Balance Sheet,
(x) all Taxes to be
44
borne by MFS as specified in Section 15c(vii), (y) all income
Taxes of Seller imposed with respect to Seller's gain on the
sale of its assets pursuant to the Merger, and (z) all
liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attomeys' 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 clauses (w),
(x) or (y), including those incurred in the contest in good
faith in appropriate proceedings relating to the imposition,
assessment or assertion of any such Tax, and any transferee
liability of Buyer in respect of any such Tax (the sum of
clauses (w), (x), (y) and (z) being referred to herein as a
"Buyer Loss"); provided, however, that Parent shall pay to MFS
any actual reduction in any Tax of Buyer or any of its
Affiliates resulting from any Tax Benefit to Buyer or any
Affiliate of Buyer with respect to such Buyer Loss or the item
or items giving rise to the Buyer Loss. Each of Parent and
Buyer agree to indemnify each MFS Indemnitee and agree to hold
each MFS Indemnitee harmless from (without duplication of any
item), (vv) all Taxes of Parent, Buyer, any of their
Affiliates, Seller and the Controlled Subsidiaries with respect
to a Post-Closing Tax Period excluding (1) all income Taxes of
Seller imposed with respect to Seller's gain on the sale of its
assets pursuant to the Merger and (2) all Taxes to be borne by
MFS pursuant to Section 15c(vii)), (ww) all Trust Fund Taxes,
(xx) all Taxes to be borne by Buyer pursuant to Section
15c(vii) of this Agreement, (yy) all Taxes accrued and recorded
on the Closing Balance Sheet, and (zz) all liabilities, costs,
expenses (including, without limitation, reasonable expenses of
investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgements arising out of
or incident to the imposition, assessment or assertion of any
Tax described in (vv), (ww), (xx) or (yy) including those
incurred in the contest in good faith in appropriate
proceedings relating to the imposition, assessment or assertion
of any such Tax (the sum of (vv), (ww), (xx), (yy) and (zz)
being referred to herein as "MFS Loss"); provided, however,
that MFS shall pay to Buyer any actual reduction in any Tax of
MFS or any of its Affiliates resulting from any Tax Benefit to
45
MFS or any Affiliate of MFS with respect to such MFS Loss or
the item or items giving rise to the MFS Loss.
ii. For purposes of Section 15, the following rules shall apply to
determine the amount of Straddle Period Taxes that relate to a
Pre-Closing Tax Period or a Post-Closing Tax Period (unless
such Straddle Period Taxes are allocated between Buyer and MFS
pursuant to another Section of this Section 15 in which case
such other Section shall apply instead of this Section
15f(ii)). In the case of any Straddle Period Tax imposed on a
periodic basis that is based upon or related to shareholders'
equity, income, gross receipts, gross income, franchise,
profits or sales and use, the amount of such Straddle Period
Tax that relates to the relevant Pre-Closing Tax Period shall
be the amount that would be payable if the relevant Straddle
Tax Period ended on March 31, 1998. In the case of any other
Straddle Period Tax imposed on a periodic basis, the amount of
such Straddle Period Tax that relates to the relevant
Pre-Closing Tax Period shall be the amount of such Straddle
Period Tax for the entire Straddle Tax Period multiplied by a
fraction the numerator of which is the number of days in the
portion of the Straddle Tax Period that ends on March 31, 1998
and the denominator of which is the total number of days in the
Straddle Tax Period. Any Straddle Period Taxes that are not
deemed to relate to a Pre-Closing Tax Period pursuant to this
Section 15f(iii) shall be deemed to relate to a Post-Closing
Period. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with
prior practice of Seller and the Controlled Subsidiaries.
iii. Upon payment by any Buyer Indemnitee of any Buyer Loss (and the
provision of written proof thereof), MFS shall discharge its
obligation to indemnify such Buyer Indemnitee against such
Buyer Loss by paying to Buyer an amount equal to the amount of
such Buyer Loss. Upon payment by any MFS Indemnitee of any MFS
Loss (and the provision of written proof thereof), Buyer shall
discharge its obligation to indemnify the MFS Indemnitee
against such MFS Loss by paying to MFS an amount equal to such
MFS Loss.
46
iv. Any payment pursuant to this Section 15f shall be made not
later than 15 days after receipt by MFS or Buyer (as the case
may be) of written notice from the other party stating that an
indemnified Loss has been paid by a Buyer Indemnitee or MFS
Indemnitee (as the case may be), the amount thereof and the
indemnity payment requested. For income Tax purposes, MFS and
Buyer agree to treat, and to cause their respective Affiliates
to treat, all indemnification payments made under this Section
15f as adjustments to the Merger Consideration.
v. Each party agrees to give prompt written notice to the other of
any indemnified Loss or the assertion of any claim, or the
commencement of any audit, examination, suit, action or
proceeding in respect of which indemnification may be sought
under this Section 15f of which such party is aware (specifying
with reasonable particularity the basis therefor) and will give
the other party such information with respect thereto as the
other party may reasonably request; provided, that the failure
to timely provide such notice shall reduce the other party's
indemnity obligation to the extent that such failure prejudices
the other party.
vi. MFS shall have full responsibility and discretion for the
handling of any Tax controversy involving Seller or any of the
Controlled Subsidiaries that relates to any tax period of
Seller or the Controlled Subsidiaries ending upon or before
consummation of the merger, including an audit, a protest to
the Appeals Division of the Internal Revenue Service, or
comparable Taxing Authority, and litigation in the Tax Court or
any other court of competent jurisdiction ("Tax Controversy");
PROVIDED, HOWEVER, that with respect to any such Tax
Controversy that could give rise to an indemnification
obligation of Parent and Buyer under Section 15c(viii), (i) MFS
shall reasonably keep Buyer advised and shall reasonably
consult with Buyer with respect to such Tax Controversy and
(ii) MFS shall not settle such Tax Controversy without Buyer's
consent, which shall not be unreasonably withheld (provided
however, that in no event shall either of the requirements set
forth in (i) or (ii) be construed to require MFS (or any
47
of its affiliates) to extend an statute of limitations or
otherwise keep any Tax audit or period open). Buyer shall have
full responsibility and discretion for the handling of any Tax
Controversy involving Seller or any of the Controlled
Subsidiaries that relates to any tax period of Seller or the
Controlled Subsidiaries that begins before and ends after the
consummation of the Merger; PROVIDED, HOWEVER, that with
respect to any such Tax Controversy that could give rise to an
indemnification obligation of MFS under this Agreement, (i)
Buyer shall reasonably keep MFS advised and shall reasonably
consult with MFS with respect to such Tax Controversy and (ii)
Buyer shall not settle such Tax Controversy without MFS'
consent, which shall not be unreasonably withheld. MFS and
Buyer shall also jointly control the defense of any claim that
relates to the parties' allocation of the purchase price. Buyer
shall promptly furnish MFS with a copy of any correspondence
received from any Taxing Authority by Buyer or any Affiliate of
Buyer with respect to any Tax period for which Buyer may be
entitled to indemnification under Section 15f.
vii. No investigation by Buyer or any of its Affiliates at or prior
to the Closing Date shall relieve MFS of any liability
hereunder.
viii. Any claim of any Buyer Indemnitee (other than Buyer) under this
Section 15f may be made and enforced by Buyer on behalf of such
Buyer Indemnitee. Any claim of any MFS Indemnitee (other than
MFS) under this Section 15f may be made and enforced by MFS on
behalf of such MFS Indemnitee.
g. TAX REFUNDS. Buyer shall, within 15 days of receipt of any Tax refund
or credit by or on behalf of Buyer or any Affiliate thereof or
successor thereto (other than a refund or credit with respect to Taxes
paid by Buyer or any Affiliate thereof or successor thereto on or
after the Closing Date and not indemnified by MFS pursuant to Section
15f(i)) for or attributable to any Tax with respect to which Buyer
would be entitled to indemnification under Section 15f, pay such Tax
refund or credit (a "Returnable Refund or Credit") to MFS (including
any interest and additions thereon), provided, that MFS shall pay to
Buyer an amount representing all or part of any Returnable Refund or
Credit (including
48
any interest and additions thereon) with respect to which Buyer
has made a payment to MFS under this Section 15g within 15 days
of the receipt by MFS of written notice from Buyer that Buyer
or any Affiliate thereof or successor thereto was subsequently
required to return such amount of the Returnable Refund or
Credit to the relevant Taxing Authority. If the amount of any
Returnable Refund or Credit is applied against any other
liability of Buyer or any Affiliate or successor thereto for
Taxes for any Post-Closing Period, Buyer shall, within 15 days
of the date of notice of such application, pay to MFS an amount
equal to the Returnable Refund or Credit (including any
interest or addition thereon). Buyer shall deliver with payment
to MFS a copy of any written explanation of the facts
surrounding the Returnable Refund or Credit and a copy of any
related notice or statement received from any Tax Authority.
h. STRADDLE PERIOD TAXES.
i. Parent shall pay, or cause to be paid, all income, alternative
or add-on minimum tax, gross income, gross receipts, franchise,
profits, or other similar tax, assessment or charge other than
U.S. federal income tax or Combined State Tax ("Income Taxes")
imposed on Seller or the Controlled Subsidiaries for any
Straddle Tax Period. Upon timely notice from Buyer, MFS shall
pay to Buyer prior to the date any payment for Income Taxes as
described in this Section 15h is due to a Taxing Authority, an
amount equal to the excess of (A) the amount of Income Taxes
actually payable that relate to the Pre-Closing Tax Period
(determined as if the Straddle Tax Period had ended on March
31, 1998) over (B) the amount of estimated Income Taxes paid
prior to March 31, 1998 or otherwise accrued and recorded on
the Closing Balance Sheet with respect to Taxing Authorities
for which there is a Straddle Tax Period. In the event that the
amount determined under clause (B) of the preceding sentence
exceeds the amount determined under clause (A) of such
sentence, Parent shall pay the amount of such excess to MFS on
the date on which the applicable Return for such Straddle Tax
Period is filed. To the extent there is a refund or credit by a
Taxing Authority of any Income Taxes attributable to Income
Taxes of a Straddle Tax Period, such refund or credit shall be
for
49
the account of the party that bears responsibility for such
Income Taxes pursuant to this Section 15h. Within 15 days of
receipt, each party shall cause any refund or credit to which
the other party is entitled under this Section 15h, but which
is received or credited to such party or any of such party's
Affiliates, at any time after the Closing Date, to be paid to
the other party in immediately available funds (or, if the
amount of the credit or refund is applied against any other
liability of the party, within 15 days of the date of notice of
such application).
ii. State and local real and personal property Taxes excluding any
interest, additions to Tax or penalties imposed with respect
thereto ("Property Taxes'), due and payable with respect to a
Straddle Tax Period (taking into account whether such Property
Taxes are payable in advance or in arrears), that are imposed
by any Taxing Authority with respect to the Retained Assets,
the stock of the Retained Subsidiaries or the assets and
properties of the Controlled Subsidiaries shall be apportioned
between (i) the period beginning on the first day of the
relevant Straddle Tax Period and ending on March 31, 1998 (the
"Pre-Closing Period"), and (ii) the period beginning on April
1, 1998 and ending on the last day of the relevant Straddle Tax
Period (the "Post Closing Period"). In performing such
apportionment, all Property Taxes shall be prorated on the
assumption that an equal amount of Property Tax applies to each
day of the relevant Straddle Tax Period, regardless of how
installment payments are billed or made. MFS shall be liable
for all Property Taxes apportioned to the Pre-Closing Period.
Parent shall be liable for all Property Taxes apportioned to
the Post-closing Period.
(1) Any supplemental Property Taxes relating to Post-Closing
Tax Periods which arise out of a revaluation of a property
or asset of Seller or a Controlled Subsidiary which would
not have occurred except for the change in ownership of
such property or asset pursuant to this Agreement shall be
borne by Parent.
(2) At the Closing, Parent shall pay to MFS the amount of any
Property Taxes for which Parent is liable under
50
Section 15h(ii); provided, however, that the amount of any such
payment shall not exceed the amount of Property Taxes
apportioned to the Post-closing Period that have been paid to
the appropriate Taxing Authorities by MFS, Seller or their
respective Affiliates prior to March 31,1998. Parent shall pay,
and shall indemnify MFS and its Affiliates from and against,
all Property Taxes (including any interest, penalties or
additions to Tax imposed by any Taxing Authority as a result of
late payment) which become due and payable after March 31,
1998; provided, however, that MFS shall reimburse and indemnify
Buyer for the amount of any such Property Taxes (excluding any
interest, penalties or additions to Tax imposed by any Taxing
Authority as a result of late payment not attributable to
action or inaction of MFS) for which MFS is liable under
Section 15h(ii) (except to the extent such Property Taxes were
accrued and recorded on the Closing Balance Sheet) within 15
days after Buyer provides MFS with a copy of the final Property
Tax xxxx.
iii. Parent shall have full responsibility for and shall timely pay
to the appropriate Taxing Authorities all Trust Fund Taxes
reflected on the Closing Balance Sheet.
iv. Notwithstanding any other provision of this Agreement, Parent
shall have full responsibility for and shall timely pay to the
appropriate Taxing Authorities all accrued and recorded Tax
liabilities set forth on the Closing Balance Sheet.
i. TAX ADMINISTRATION. MFS shall prepare and file, or cause to be
prepared and filed, (i) all United States consolidated Federal Tax
returns of the MFS Group, (ii) all state or local Tax returns of MFS
or an Affiliate of MFS filed on a consolidated, combined or unitary
basis that include Seller and/or a Controlled Subsidiary and (iii) and
all separate Returns of Seller and the Controlled Subsidiaries that
are required to be filed on or before the Closing Date. Buyer shall
prepare and file (i) all separate Returns of Seller and the Controlled
Subsidiaries for Pre-Closing Tax Periods that are required to be filed
after the Closing Date
51
and (ii) all Returns for Straddle Tax Periods that are due after the
Closing Date solely with respect to (A) Seller (or the Retained Assets
or the stock of the Retained Subsidiaries)) and/or (B) one or more of
the Controlled Subsidiaries. For any Return described in the preceding
sentence (other than Returns with respect to Trust Fund Taxes), Buyer
shall provide MFS with a pro forma Return not later than 30 days prior
to the due date (including all extensions thereto) for such Return.
Such pro forma Return shall be subject to MFS' approval before the
applicable Return is filed with any Taxing Authority. Buyer shall
provide MFS with a copy of all filed Returns (including Returns with
respect to Trust Fund Taxes) that Buyer is required to prepare and
file pursuant to this Section 15i.
j. CERTAIN DISPUTES. Disputes arising under this Section 15 and not
resolved by mutual agreement as stated herein shall be resolved by
Xxxxxx Xxxxxxxx (the "Accounting Referee"). The Accounting Referee
shall resolve any disputed items within 30 days of having the item
referred to it pursuant to such procedures as it may require. The
costs, fees and expenses of the Accounting Referee shall be borne
equally by Parent and MFS.
k. SURVIVAL. Notwithstanding anything in this Agreement to the contrary,
the provisions of this Section 15 shall survive for the full period
of all applicable underlying statutes of limitations (giving effect to
any waiver, mitigation or extension thereof).
16. POST-CLOSING.
a. INDIVIDUAL ACCOUNT PLANS. MFS shall retain all obligations and
liabilities for, and Buyer shall have no obligation or liability in
respect of, the MFS 401(k) Plan, the MFS 40l(a) Plan, and the MFS
Communications Company, Inc. Employee Stock Bonus Plan.
Notwithstanding the foregoing, during a transition period of six
months following the Closing Date or such shorter period that Parent
shall advise MFS in writing, MFS will continue to provide at Parent's
expense for employees of the NT Business the non-stock based health
and welfare insurance and other benefits that are provided to such
employees immediately prior to the Merger. No assets of either such
Plan shall be transferred to Buyer
52
or its Affiliates or to any plan or arrangement sponsored or
maintained by Buyer or its Affiliates.
b. SHARING OF BENEFITS-RELATED INFORMATION. Parent and MFS will cooperate
in providing at their own expense employee-related and plan related
data to facilitate accomplishment of the provisions of this Agreement.
x. XXXX FEE REFUNDS. In the event that WorldCom or Seller is refunded any
portion of a fee paid by it in connection with the issuance of the
Bonds by reason of such Bond being released and replaced with a bond
obtained by Parent it will promptly remit to Parent the amount so
refunded.
17. PARENT STOCK OPTION
x. XXXXX AND EXERCISE PRICE. Parent hereby grants to MFS an option (the
"Option") to purchase 2,000,000 newly issued shares of Parent's common
stock (the "Parent Common Stock"). The Option may be exercised by MFS
in whole or in part and from time to time by delivery of a notice to
Parent complying with Section 18d during the period commencing with
the earlier to occur of the Merger or the termination of this
Agreement pursuant to Section 11 and continuing through 5:00 PM,
Eastern time, on the date six months following the first day of such
period. The Option may not be transferred other than to an affiliate
of MFS without Parent's written consent.
b. METHOD OF EXERCISE. At its election, MFS may exercise some or all of
the Option for a cash exercise price of $7.00 per share (subject to
adjustment for stock splits or combinations and similar events) and
may exercise some or all of the Option on a "cashless" basis pursuant
to which MFS receives shares of Parent Common Stock with a "market
value" equal to the aggregate "spread" for the shares as to which the
Option is being exercised; PROVIDED, that MFS shall exercise the
Option on a "cashless" basis rather than for cash to the extent
necessary to ensure that the actual number of shares of Parent Common
Stock issued to it shall not exceed 1,817,941, which is the maximum
number of shares of Parent Common Stock that Parent represents and
warrants may be issued by it to MFS without obtaining shareholder
approval under
53
NASDAQ's shareholder approval policy. For such purposes, the" market
value" per share will equal the average of the closing "bid" and
"asked" prices for Parent's common stock as reported by NASDAQ over
the ten trading day period preceding the date of exercise and the
"spread" per share will equal the excess, if any, of the "market
value" over $7.00 (subject to adjustment for stock splits or
combinations and similar events).
c. REGISTRATION. Parent will promptly after the date of this Agreement
file with the Securities and Exchange Commission a registration
statement to register on a "shelf" basis the resale by MFS of any
shares of Parent Common Stock purchased by it pursuant to the Option
until they could be sold by MFS on an unrestricted basis under Rule
144 without regard to volume limitations (the "Registration Term").
Parent will use its best efforts to have such registration statement
declared effective by the SEC as promptly as possible and to maintain
the effectiveness of such registration statement throughout the
Registration Term.
d. BOARD REPRESENTATION. In the event that MFS exercises the Option in
whole or in part and whether for cash or on a "cashless" exercise
basis, it shall be entitled to designate Xxxxxxxxx X. Xxxxxxxxx or, if
he shall be unable to serve, another individual reasonably acceptable
to Parent as a representative of MFS to serve on Parent's Board of
Directors for so long as MFS retains shares of Parent Common Stock
purchased pursuant to the Option aggregating at least 5% of Parent's
then-outstanding shares of Parent Common Stock.
18. MISCELLANEOUS. The parties agree as follows:
a. AMENDMENT. This Agreement may not be amended except by an instrument
in writing which refers to this Section and which is executed by all
Parties.
b. EXTENSION. During the Closing Period, either MFS (on the one hand) or
Parent (on the other hand), may extend the time for the performance of
any of the obligations or other acts of the other Party or waive
compliance with any of the agreements or conditions contained herein;
however, any such extension or waiver shall be valid only if set forth
in
54
a written instrument which refers to this Section and is executed by
the waiving or extending Party.
c. TIME OF ESSENCE. Time is of the essence for purposes of this
Agreement.
d. NOTICES. All notices, deliveries and other communications hereunder to
Parties shall be in writing addressed to the Parties at the following
addresses, and shall be deemed delivered on the date of personal
delivery or on the third business day after being mailed by certified
mail, or on the next business day after delivery to a commercial
delivery overnight service as the case may be:
If to MFS: MFS Communications Company, Inc.
00000 Xxxxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxx
with copies to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 and
Attention: Xxxxxxx Xxxx, Esq., and
Fraser, Stryker, Vaughn, Meusey, Olson,
Xxxxx & Xxxxx, P.C.
000 Xxxxxx Xxxxx
000 Xxxxx 00xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
If to Parent: Able Telcom Holding Corp.
0000 Xxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx
with a copy to: Gunster, Yoakley, Xxxxxx-Xxxxx
& Xxxxxxx, P.A.
Xxxxxxxx Point
777 Flagler Dr., Suite 000 Xxxx
00
Xxxx Xxxx Xxxxx, Xxxxxxx. 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
e. COSTS. Each Party shall pay its own costs, none of which shall be
charged to, or paid by Seller, except that MFS and Parent shall share
equally the filing fee payable in connection with compliance with the
HSR Act.
f. CONFIDENTIALITY. The Parties hereby agree not to disclose, and to keep
confidential, the specific terms of this Agreement (including the
Merger Consideration), except as may be required by law or as may be
(but only to the extent) necessary to satisfy the Parent Conditions or
the MFS Conditions.
9. PRESS RELEASES. During the Closing Period, neither MFS nor Parent
shall issue any press release without the prior approval of the other,
which approval will not be unreasonably withheld.
h. OTHER PROVISIONS. This Agreement:
i. constitutes the entire agreement, and supersedes all other
prior written or oral agreements and understandings, between
the Parties respecting the Transaction, or otherwise respecting
the sale or acquisition of the Shares or Seller;
ii. is not intended to, and shall not, confer any benefits to any
Person which is not a signatory Party hereto;
iii. has been executed and delivered by all Parties in the State of
Delaware and the United States of America;
iv. shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware
and the United States of America, without regard to the
principles of conflict of laws thereof, and
v. may only be enforced in the courts of the State of Delaware, or
the United States District Court for the District of Delaware,
the
56
jurisdiction of which courts each Party hereby irrevocably
subjects itself to.
i. HEADINGS AND EXHIBITS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All exhibits attached to
this Agreement are by this reference incorporated in this Agreement.
j. COUNTERPARTS. This Agreement may be executed in counterparts which
together shall constitute a single agreement. In addition, this
Agreement may be executed by facsimile signature which, when so
delivered, shall immediately be followed by overnight delivery of
the original signature.
k. FURTHER ASSURANCES. From time to time after the Closing Date, each
Party shall, at the request of the other Party, execute and deliver
such additional conveyances, transfers and other assurances as may be
reasonably required to effect the merger of Seller with and into Buyer
and carry out the intent of this Agreement.
l. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
m. SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the remaining terms and
provision here of or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares
that any term or provision hereof is invalid or unenforceable, the
Parties agree that the court making the termination of invalidity or
unenforceability shall have the power to reduce the scope, duration,
or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provisions with a
term or provisions that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment
may be appealed.
57
n. ENFORCEMENT COSTS. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees,
court costs and all expenses if not taxable as court costs (including,
without limitation, all such fees, costs and expenses incident to
appeals), incurred in that action or proceeding, in addition to any
other relief to which such party or parties may be entitled.
o. POSSIBLE STRUCTURE CHANGE. Parent and Buyer agree that, if MFS
proposes to alter the Transaction from the Merger to a transfer of
assets and liabilities from Seller to Parent or a subsidiary of
Parent, Parent will cooperate with MFS in negotiating the necessary
amendments to this Agreement to accomplish such proposal consistent
with the requirement that the Transaction as altered does not
materially alter to the detriment of Parent the benefits and costs of
the Transaction as provided for in this Agreement as executed.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed and delivered as of the date first above written.
58
MFS Network Technologies, Inc. MSF Acquisition Corp.
By:/s/ XXXX SIDGMONE By: /s/ XXXXXXX X. XXXXXX
---------------------------- -------------------------
Name: Xxxx Sidgmone Name: Xxxxxxx X. Xxxxxx
-------------------------- -----------------------
Title: Chief Operations Officer Title: President
------------------------- ----------------------
MFS Communications Company, Inc. Able Telcom Holding Corp.
By:/s/ XXXX SIDGMONE By: /s/ XXXXXX XXXXXX
---------------------------- -------------------------
Name: Xxxx Sidgmone Name: Xxxxxx Xxxxxx
-------------------------- -----------------------
Title: Chief Operations Officer Title: Chairman
------------------------- ----------------------
LIST OF OMITTED SCHEDULES
-------------------------
EXHIBIT EXHIBIT TITLE
------- -------------
1d ASSUMPTION AND INDEMNITY AGREEMENT
A MFS NETWORK TECHNOLOGIES,INC.
FORECASTED PERFORMANCE/PAYMENT BOND BACKLOG
B GENERAL AGREEMENT OF INDEMNITY AND FOR SECURITY
C AGREEMENT OF INDEMNITY
D CONTINUING AGREEMENT OF INDEMNITY-CONTRACTOR'S FORM
E4 MASTER SURETY AGREEMENT
F GUARANTY AGREEMENT
1ac LICENSE AGREEMENT
SCHEDULE A LICENSED TRADEMARKS
G LABOR POLICIES
H SUBCONTRACT TERMS & CONDITIONS
I PROFESSIONAL SERVICES AGREEMENT
J NT INVOICE
1AR ACTION TAKEN BY UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
ANNEX A PLAN OF COMPLETE LIQUIDATION OF MFS NETWORK
TECHNOLOGIES,INC.
ANNEX B TRANSFER AGREEMENT
1as MFS NETWORK TECHNOLOGIES,INC.
PROFORMA BALANCE SHEET
1ax STOCK PLEDGE AGREEMENT
6h LITIGATION
6k NETWORK TECHNOLOGIES DUE DILIGENCE
6n OPEN "ENGINEER,PROCURE, AND CONSTRUCTION"
CONTRACTS BETWEEN MFSNT AND MFS/WNS
6p NUMBER OF SHARES
7d ATTORNEY'S LETTER
15b-2 MFS NETWORK TECHNOLOGIES,INC. AND SUBSIDIARIES
STATE INCOME/FRANCHISE TAX FILING REQUIREMENTS
ESCROW AGREEMENT
THE COMPANY WILL PROVIDE COPIES OF ANY OMITTED EXHIBIT(S) TO THE COMMISSION
UPON REQUEST FROM THE COMMISSION FOR SAID EXHIBIT(S).
EXHIBIT lae
MASTER SERVICES AGREEMENT
BY AND BETWEEN
WORLDCOM NETWORK SERVICES, INC.
AND
MFS NETWORK TECHNOLOGIES, INC.
CONTRACT NO. C-6734
CONFIDENTIAL
TABLE OF CONTENTS
PAGE
ARTICLE 1. TERM ........................................................... 6
1.1 Term .................................................................. 6
1.2 Termination ........................................................... 6
1.3 Contact Year .......................................................... 6
ARTICLE 2. CONTRACTOR SERVICES ............................................ 6
2.1 Work .................................................................. 6
2.2 Work Orders ........................................................... 8
2.3 Other Work ............................................................ 9
2.4 Refusal of Work ....................................................... 10
ARTICLE 3. PERFORMANCE OF WORK ............................................ 11
3.1 Contractor's Forces ................................................... 11
3.2 Subcontractors ........................................................ 12
3.3 Contract Documents .................................................... 13
3.4 Materials ............................................................. 14
3.5 Permits and Fees ...................................................... 16
3.6 Progress and Procedure ................................................ 16
3.7 Changes ............................................................... 20
3.8 Commencement and Completion of Work ................................... 21
3.9 As-Built Drawings ..................................................... 22
3.10 Specifications and Standards ......................................... 22
3.11 Lien Waivers ......................................................... 23
3.12 Timing/Delays ........................................................ 23
3.13 Corrective Action Plan ............................................... 24
ARTICLE 4. PAYMENT AND COSTS ............................................ 24
4.1 Payment ............................................................... 24
4.2 Cost Control .......................................................... 30
4.3 Most Favored Nation ................................................... 30
4.4 Independent Contractor ................................................ 30
4.5 Accounting System ..................................................... 32
4.6 Progress Payment ...................................................... 33
4.7 Late Payment .......................................................... 34
4.8 Annual and Aggregate Project Sum ...................................... 35
4.9 Commitment Fulfilled .................................................. 35
4.10 Contractor's Fee Trueup .............................................. 36
CONFIDENTIAL
Page 1
ARTICLE 5. OWNER'S RESPONSIBILITIES ....................................... 37
5.1 Authorized Representative ............................................. 37
5.2 Provision of Data ..................................................... 37
5.3 Owner's Own Forces .................................................... 37
5.4 Prompt Reply .......................................................... 38
5.5 Failure to Provide Information ........................................ 38
ARTICLE 6. OWNER'S AND CONTRACTOR'S REPRESENTATIONS ....................... 38
6.1 Contractor Representations and Covenants .............................. 38
6.2 Owner Representations and Covenants ................................... 39
ARTICLE 7. INSURANCE AND BONDS ............................................ 39
7.1 Worker's Compensation and Employer's Liability ........................ 40
7.2 Builder's Risk ........................................................ 42
7.3 Errors and Omissions .................................................. 43
7.4 Railroad Protective ................................................... 43
7.5 Insurance Required of Subcontractors .................................. 43
7.6 Additional Insured .................................................... 44
7.7 Evidence of Coverage .................................................. 44
7.8 Bonds ................................................................. 45
ARTICLE 8. DEFAULT AND TERMINATION ........................................ 46
8.1 Default ............................................................... 46
8.2 Dispute Resolution/Arbitration ........................................ 49
ARTICLE 9. INDEMNIFICATION AND LIABILITY .................................. 51
9.1 Indemnification by Contractor ......................................... 51
9.2 Indemnification by Owner .............................................. 52
9.3 Notice of Claims ...................................................... 52
9.4 Limitation of Liability ............................................... 53
ARTICLE 10. WARRANTY ..................................................... 53
10.1 Warranty ............................................................. 53
10.2 Free From Defects .................................................... 54
10.3 No Other Warranties .................................................. 54
CONFIDENTIAL
Page 2
ARTICLE 11. HAZARDOUS MATERIALS AND CONCEALED
CONDITIONS .................................................... 54
11.1 Hazardous Materials .................................................. 54
11.2 Concealed Conditions ................................................. 55
ARTICLE 12. MISCELLANEOUS ................................................. 56
12.1 Title ................................................................ 56
12.2 Assignment ........................................................... 56
12.3 Severability ......................................................... 56
12.4 Waiver ............................................................... 56
12.5 Notices .............................................................. 56
12.6 Confidentiality ...................................................... 58
12.7 Counterparts ......................................................... 59
12.8 No Construction Against Drafter ...................................... 59
12.9 Course of Dealing .................................................... 60
12.10 Survival ............................................................ 60
12.11 Governing Law; Exclusive Jurisdiction ............................... 60
12.12 Entire Agreement .................................................... 60
EXHIBITS
EXHIBIT A - Current Projects .................................... A-1
EXHIBIT B - Work Orders ......................................... B-1
EXHIBIT C - Agreements for Other Work ........................... C-1
EXHIBIT D - Engineering Services Rate Schedule .................. D-1
EXHIBIT E - Change Order Form ................................... E-1
EXHIBIT F - Certificate Of Completion ........................... F-1
EXHIBIT G - Contractor's Labor Policies ......................... G-1
EXHIBIT H - Subcontract Terms & Conditions ...................... H-1
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EXHIBIT I - Professional Services Agreement ..................... I-1
EXHIBIT J - Invoice Form ........................................ J-2
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MASTER SERVICES AGREEMENT
Contract No. C-6734
THIS MASTER SERVICES AGREEMENT ("Agreement") is made as of this
_____________ day of_________________, 1998 by and between WORLDCOM NETWORK
SERVICES, INC., a Delaware, corporation with offices at 0000 X. Xxxxxxxx Xxxxxx,
Xxxxx, Xxxxxxxx, 00000, including its affiliates and subsidiaries as appropriate
throughout (collectively referred to herein as "OWNER") and MFS NETWORK
TECHNOLOGIES, INC., A Delaware corporation with offices at 0000 Xxxxxxxx Xxxxxx,
Xxxxx 0000, XXXXX, XX 00000, hereinafter called the "Contractor."
WITNESSETH:
WHEREAS, The Owner is engaged in the business of providing
telecommunications services and intends to obtain services for the design,
engineering, procurement, construction, operation, maintenance, relocation and
replacement of various telecommunications network projects within the United
States (each, a "Project", together, "Projects"); and
WHEREAS, Contractor is engaged in the business of providing design,
engineering, procurement, construction, maintenance, relocation and replacement
of telecommunications facilities and desires to design, engineer, procure,
construct, maintain, relocate and replace certain of the Owner's Projects; and
WHEREAS, Owner desires Contractor to perform such work as is deemed
necessary by Owner to design, engineer, procure, construct, maintain, relocate
and/or replace each Project as the same shall be agreed by and between Owner and
Contractor; and
WHEREAS, Owner and Contractor desire to establish the general terms and
conditions under which each Project will be performed and to establish the
responsibilities of each party hereto for each Project; and
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WHEREAS, Owner desires to engage Contractor for an agreed term and
commitment for Projects as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and other
considerations contained herein, the parties hereto agree as follows:
ARTICLE 1. TERM
1.1 TERM. The term of this Agreement shall be for a period of five (5)
years effective on the date of execution hereof (hereinafter the "Term").
1.2 TERMINATION. This Agreement may be terminated at any time upon the
mutual written agreement of the parties. This Agreement may also be terminated
pursuant to Article 8.
1.3 CONTRACT YEAR. A "Contract Year" shall be any twelve month period
beginning on the date of execution of the Agreement as first written above or
any anniversary date thereof.
ARTICLE 2. CONTRACTOR SERVICES
2.1 WORK. The Contractor agrees to provide, as required by Owner, all the
labor, equipment, materials and expertise and to do all things necessary for the
proper performance and completion of each Project (the "Work"). The Work, may,
as required by Owner include, but is, not limited to, Local Network Projects,
Long Haul Projects, Engineering Services and Other Work all as hereinafter
defined.
2.1.1 LOCAL NETWORK PROJECTS. Local Network Projects may, as required
by Owner, include but are not limited to, design, engineering, project
management, material procurement, inspection, acceptance testing and
construction of local telecommunications network infrastructure which may
consist of both inside and outside plant work, and initial building laterals to
provide intracity or intraexchange telecommunications service to customers
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within a local loop (hereinafter referred to as "Local Network Projects"). Local
Network Projects do not include construction of isolated laterals or points of
presence ("POPs").
2.1.2 LONG HAUL PROJECTS, may, as required by Owner, include but are not
limited to, design, engineering, project management, material procurement,
inspection, acceptance testing and construction of long distance
telecommunications networks which may consist of both inside and outside plant
work, terminal and regen/amplifier facility construction or expansion to provide
intercity, interexchange or interLATA telecommunications services (hereinafter
referred to as "Long Haul Projects").
2.1.3 ENGINEERING SERVICES. Engineering Services may, as required by Owner,
include but are not limited to, the design, engineering and procurement of
transmission facilities, spaces, nodes and central office equipment related to
Local Network Projects and other special engineering projects or research.
Central office equipment includes, but is not limited to, optical-electric
equipment, cross connect systems, voice and data switching systems, DC power
systems, cabling, racking and ancillary equipment ("Central Office Equipment").
Due to the unique nature of such Engineering Services, Owner and Contractor
agree that such services shall be performed at the actual direct salary, subject
to adjustments as set forth in Article 4, plus the labor burden factor set forth
in Exhibit D attached hereto and incorporated herein which shall include
applicable overhead and benefits. The parties agree that Contractor may, not
more often than annually, update the labor burden factor for Engineering
Services based upon changes in Contractor's actual costs for providing such
services, provided that Owner is given written notice and a written
justification of any change in such labor burden factor. The charges for
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Engineering Services set forth herein shall be considered Reimbursable Costs as
defined in Article 4 hereof.
2.1.4 CURRENT PROJECTS. Owner and. Contractor agree that all work or
projects being performed under a contract between Contractor and Owner as of the
date of this Agreement which work has been performed after the execution date of
this Agreement, including but not limited to those Projects set forth in Exhibit
A, shall be treated in accordance with the terms and conditions of this
Agreement. The parties agree That any commitments concerning volume of work or
annual payments in any such contracts shall immediately become void and of no
effect due to the Annual Project Sum and Aggregate Project Sum commitments
contained in Article 4 hereof.
2.2 WORK ORDERS. The Work shall be set forth in a detailed Work Order
(each, "Work Order" or, together "Work Orders"), for each individual Local
Network Project, Long Haul Project, or Engineering Services Project executed by
Owner (or Owner's affiliate or subsidiary as appropriate) and Contractor. Where
appropriate, Owner and Contractor will enter into a Work Order to develop a
description of Work to be performed, Project Staffing Plan, Project Budget and
Project Schedule for Project development. No Work Order shall be effective nor
shall Owner or Contractor incur any liability hereunder unless the Work Order is
executed by duly authorized representatives of each party hereto.
2.2.1 Each Work Order shall be substantially in the form of and shall
contain the information contained in the Sample Work Order attached hereto as
Exhibit B. At a minimum, each Work Order shall contain the Project name,
description of the Work to be performed, Project Staffing Plan (as hereafter
defined), Project budget, Project schedules and a list of work
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to be subcontracted. Upon execution of a Work Order it shall become a part of
and shall be governed by this Agreement. Each Work Order shall be labeled so
that, for example, the first executed Work Order may be Work Order No.
C-6734.001, the second Work Order shall be Work Order No. C-6734.002 and so on.
2.3 OTHER WORK. In addition to Local Network Projects, Long Haul Projects
and Engineering Services, Owner may enter into agreements with Contractor to
provide, among other things, all the labor, equipment, materials and expertise
and to do all things necessary for the proper performance and completion of
other Projects. Such other Projects may include but are not limited to the
engineering, procurement or construction of telecommunications networks or
facilities or services required for the maintenance, expansion or operation of
either Local Network Projects or Long Haul Projects or other Projects not
specifically defined in this Agreement, hereinafter collectively referred to as
"Other Work." The Contractor may from time to time bring projects to the
attention of Owner whereby Contractor acting on behalf of a third party
right-of-way or facility owner is offering for sale or lease telecommunications
facilities. Should Owner elect to enter into an agreement with Contractor for
such facilities such agreement shall not he subject to this agreement.
2.3.1 The details for all Other Work shall be set forth in an agreement
which shall be executed by Owner (or Owner's affiliate or subsidiary as
appropriate) and Contractor. No agreement for Other Work shall be effective nor
shall Owner or Contractor incur any liability hereunder unless the agreement is
executed by duly authorized representatives of each party hereto.
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2.3.2 Each agreement for Other Work shall become a part of and shall be
governed by this Agreement unless expressly stated in such agreement for Other
Work. In the event of a conflict between this Agreement and an agreement for
Other Work, the agreement for Other Work shall prevail. Notwithstanding the
foregoing, all payments made or due by Owner to Contractor pursuant to an
agreement for Other Work without regard to the terms of such agreement for Other
Work, shall become part of the Aggregate Project Sum as defined in Article 4.
Each agreement for Other Work shall be labeled in the same manner as Work
Orders.
2.3.3 Owner agrees that Contractor shall have the opportunity to bid on
all Local or Long Haul Projects not assigned to Contractor via a Work Order and
offered by Owner for bidding during the Term.
2.4 REFUSAL OF WORK.
2.4.1 During each Contract Year, Contractor shall accept and execute
all Work Orders offered to Contractor by Owner hereunder without regard to
quantity, schedule or cost throughout the Term until such time as the Annual
Project Sum reaches One-hundred Thirty Million Dollars ($130,000,000.00). If
Contractor refuses or fails to accept any Work Order prior to such time, the
value of the Work Order (including the applicable Contractor's Fee) shall be
added as a credit to the Aggregate Project Sum as if such Work Order had been
accepted and performed by Contractor pursuant to the terms of this Agreement.
For the purpose of determining whether such a credit is due, the Annual Project
Sum shall be as calculated at the time Contractor declines such Work Order.
2.4.2 The Owner agrees to award Contractor a minimum volume of
seventy-five percent (75%) of all outside plant work related to Owner's Local
Network Projects.
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2.4.3 In the event the Annual Project Sum for all Work Orders and
agreements for Other Work reaches One Hundred Thirty Million Dollars
($l30,000,000.00) in any year of the Term and Owner offers a Long Haul Project,
Engineering Services or Other Work to Contractor, Contractor may decline to
accept such additional Work, without penalty.
ARTICLE 3. PERFORMANCE OF WORK
3.1 CONTRACTOR'S FORCES. The Contractor shall perform project management,
supervisory functions, contract and document preparation, drafting, material
procurement, and all portions of the Work which are similar to those stated
herein with its own employees except as mutually agreed by Owner and Contractor.
3.1.1 Owner and Contractor acknowledge that as part of the
consideration given by Owner to Contractor hereunder, Owner is relying on and
expects to continue to rely upon the high level of experience, skill and
expertise existing in the personnel currently in Contractor's employ.
Contractor shall staff Key Positions only with qualified persons with prior
experience in the position to be filled. For purposes of this Agreement, "Key
Positions" are defined as Project Manager, Construction Manager, Business
Manager and Contract Manager. However, Contractor may propose and Owner may
reasonably approve the use of individuals having no prior experience in a Key
Position.
3.1.2 Contractor agrees to provide Owner with a detailed plan for the
staffing of each Project (hereinafter the "Project Staffing Plan") as part of
each Work Order. Each Project Staffing Plan shall identify the individuals who
will fill Key Positions and other positions which will be required for the
Project. Contractor shall provide Owner with relevant employee information upon
request. Contractor shall follow Owner's reasonable recommendations
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concerning the Project Staffing Plan for each Work Order. All unscheduled or
voluntary changes by Contractor in the staffing of Key Positions or other
Contractor employees on a Project shall be subject to the prior written approval
of Owner, which shall not be unreasonably withheld.
3.1.3 Owner shall have the right to request in writing that
Contractor remove any of its employees from any Project at any time provided
such request is reasonable, lawful and nondiscriminatory. Contractor shall
comply with such request immediately upon receipt of the written request from
Owner.
3.2 SUBCONTRACTORS. Unless specifically permitted in a Work Order or
agreement for Other Work, Owner and Contractor agree that Contractor shall
perform all actual construction for all Projects and Work performed hereunder
with unaffiliated third party contractors hereinafter referred to as
"Subcontractors".
3.2.1 As part of the Work performed under a Work Order or
agreement for Other Work, the Contractor shall develop, a list of qualified
bidders for each Project and establish bidding schedules. The Owner shall, upon
written notice to Contractor, have the right, in its sole discretion, to review,
approve, disapprove, add to or delete from the list of bidders. Unless otherwise
stated in a Work Order or agreement for Other Work, the Contractor shall obtain
competitive bids from a minimum of three (3) bidders for each phase or portion
of work for a Project or obtain a written waiver of this requirement before
proceeding with less than three bids.
3.2.2 Upon the prior written request of Owner, Owner shall have
the option to pre-approve all bidding documents, addenda and other documents
related to the bidding process at any time prior to Contractor's award of a
subcontract.
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3.2.3 The Contractor shall prepare a bid evaluation analyzing all
bids received for a Project and shall notify Owner regarding selection of the
successful bidder. The Contractor shall award the work to be subcontracted to
the lowest priced, qualified, responsive bidder unless written approval is
obtained from Owner approving an award on some other basis. The Owner shall have
the right, upon prior written notice to Contractor, to determine the successful
bidder for any Work subcontracted hereunder. In no event shall Contractor award
a contract to a bidder which exceeds the limits set forth in Section 3.7.1
unless approved in writing by Owner.
3.3 CONTRACT DOCUMENTS. The Contractor shall prepare all Subcontractor
related contracts for the Work (the "Contract Documents"). All Contract
Documents shall conform to all laws and requirements of any right-of-way
providers, permitting authorities and other requirements of the Work Order or
agreement for Other Work.
3.3.1 All Contract Documents shall include terms and conditions
attached hereto as Exhibit I (for Subcontractors) and Exhibit J (for
professional services). The content of such Contract Documents shall comply with
generally accepted industry standards. In no event shall any Contract Document
including but no limited to agreements with Subcontractors, expose Owner to any
premium payment for early completion of a Project by Subcontractor, costs for
Subcontractor errors, liquidated damages or other penalty payments of any kinds
without the prior written consent of Owner which may be withheld by Owner in its
sole discretion.
3.3.2 The Contractor shall report to Owner any error,
inconsistency or omission in the Contract Documents which may have a material
impact on any Project immediately upon discovery thereof.
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3.3.3 Upon written notice to Contractor by Owner prior to
execution of the Contract Documents, Owner shall have the right to approve any
and all Contract Documents. Contractor shall provide Owner with copies of the
documents upon such request and, Owner shall have five (5) business days from
receipt thereof to approve or disapprove said documents. Unless Owner gives
Contractor written notice to the contrary, failure of Owner to approve or
disapprove the Contract Documents within such five day period shall be deemed
approval. Owner shall not be responsible for the completeness, accuracy or
context of the Contract Documents except where such completeness, accuracy or
context is affected by changes to Contract documents directed, dictated or
otherwise made by Owner. Contractor shall use commercially reasonable efforts to
ensure that all disputes concerning errors, inconsistencies or omissions in the
Contract Documents shall be resolved in favor of Owner.
3.3.4 The Contractor shall maintain copies of all Contract
Documents at the site of each Project in good order and marked reasonably
current to record all changes made during the Work.
3.4 MATERIALS. The Contractor will buy on a competitive-bid basis from
the lowest priced, qualified, responsible provider, in accordance with the same
bidding procedure outlined in Section 3.2 hereof, all major items of
construction materials necessary for the Work. All anticipated purchases,
rentals or other contracts for material shall be described in the applicable
Work Order or agreement for Other Work and included in the appropriate budget
for each. Contractor its Subcontractors will only purchase and install materials
which conform to Owner's specifications which will be included in the Work
Order. For purposes of economy, Contractor may enter into volume purchase
agreements to purchase major material items, such as fiber optic
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cable, conduit, manholes, handholes, duct and innerduct, to be used in multiple
projects provided that such volume purchase agreements are competitively bid at
reasonable intervals during the Term but in no event less than every 18 months.
Any material deviation from Owner's specifications included in the Work Order
must be approved in writing by Owner.
3.4.1 Notwithstanding anything herein to the contrary, including
but not limited to Article 4 hereof, Contractor shall order major material items
limited to fiber optic cable, manholes, duct, innerduct, handholes, and conduit
only as described in and budgeted for in an applicable Work Order or agreement
for Other Work. Contractor shall count all quantities toward its own volume
purchasing agreements with suppliers as appropriate. Contractor shall reimburse
to Owner as a credit, any such volume discounts received by Contractor after
billing. Owner shall receive all supplier warranties and guarantees.
3.4.2 Owner hereby reserves the right to purchase or provide any
and all materials necessary for the Work if deemed necessary by Owner due to its
tax status, availability of surplus material already owned, ordered, or
purchased by Owner or the Contractor's inability to secure the materials by the
stated due date.
3.4.3 All materials purchases made hereunder, including payments
of Contractor's Fees shall be credited to the Aggregate Project Sum as defined
in Article 4. Notwithstanding the foregoing, the Contractor's fee shall be
reduced from 12% to 6% only for circumstances where the Owner reserves the right
to purchase material pursuant Subsection 3.4.2 above. This reduction in
Contractor's fee shall not apply anywhere else in this Agreement. Further,
materials moved from one Project to another Project will not be subject to a
second Contractor's Fee.
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3.4.4 Contractor shall properly inspect, receive and handle any
materials ordered pursuant to this Article. For Engineering Services Central
Office Equipment projects, Contractor will be responsible for all material
handling and inventory control, will use off-site facilities for warehousing
services prior to the installation start date as designated by Owner; and will
minimize the amount of materials stored on site during the implementation of the
Project.
3.5 PERMITS AND FEES. As required by Owner and specified in the Work
Order, the Contractor shall secure on Owner's behalf and the Owner shall pay
for, as Reimbursable Costs, all permits and governmental fees, licenses and
inspections necessary for the proper execution and completion of the Work which
are customarily secured after execution of the Work Order and which are legally
required.
3.5.1 Where the local law at the site of the building requires a
Certificate or Statement of Occupancy the Contractor shall obtain and pay for
this Certificate and deliver it to the Owner. Any costs for this Certificate
shall be treated as a Reimbursable Cost pursuant to Article 4 hereof.
3.5.2 Contractor shall not enter into or accept any license
agreement, joint-use agreement, ordinance, resolution, franchise, or other
agreement for the use of public or private right-of-way with any federal, state,
local, public or private entity for any Project without the written approval of
Owner it being agreed that Owner or its duly authorized representation shall
execute any such agreements. Contractor shall immediately notify Owner if, or
when, it discovers any such agreement is required.
3.6 PROGRESS AND PROCEDURE. The Contractor shall, unless otherwise
stated in a Work Order or agreement for Other Work, follow these procedures;
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3.6.1 The Contractor shall maintain current estimates or costs and
progress schedules. The Contractor shall furnish information regarding
availability of materials, when requested by the Owner, and furnish any
information to the Owner to assist in arriving at the most economical
construction.
3.6.2 The Contractor shall provide administrative, management, and
related services to coordinate scheduled activities and responsibilities of the
Subcontractors with each other and with those of the Contractor, owner, or
others involved in the Project to use commercially reasonable efforts to manage
each Project in accordance with the approved estimate for costs, the Project
schedule and the Contract Documents.
3.6.3 Utilizing the Project Schedule, the Contractor shall update
all schedules incorporating the activities of the Subcontractors and others on
the Project including activity sequences and durations, allocation of labor and
materials, processing of shop drawings, product data and samples, and delivery
of materials or equipment requiring long lead time and procurement. The Project
Schedule shall include the Owner's requirements and responsibilities showing
portions of the Project having priority. The Contractor shall update and reissue
each Project Schedule as required by Owner to show current conditions and
percentages of completion. The Contractor shall keep a daily log containing a
record of weather, each Subcontractor on the site, number of workers,
identification of equipment, Work accomplished, problems encountered, and other
similar relevant data as the Owner may require. If an update indicates that the
previously approved Project Schedule may not be met, the Contractor shall
immediately notify Owner and recommend corrective action. The Contractor shall
schedule and
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conduct meetings to discuss such matters as progress and scheduling with Owner
as set forth in the Work Order or as requested by Owner.
3.6.4 Consistent with the various bidding documents, Contract
Documents and utilizing information from the Subcontractors, the Contractor
shall coordinate the sequence of construction and assignment of space in areas
where the Subcontractors are performing work.
3.6.4.1 The Contractor shall at all times enforce strict
discipline and good order among its employees and shall not employ on any
Project any person not skilled in the task assigned to him or her. The
Contractor shall be responsible to maintain and observe and to require its
Subcontractors to maintain and observe, sound labor and safety practices and
shall require each Subcontractor to take all steps reasonably necessary to avoid
labor disputes or work stoppages. For Engineering Services Central Office
Equipment projects, Contractor agrees to use personnel and Subcontractors who
have been certified in certain high skill procedures under Owner's mandatory
training program. The expense of obtaining such certification is to be paid by
the Subcontractor for Subcontractor's forces and as a Reimbursable Cost for
Contractor's personnel. Owner shall make such training available at a nominal
cost.
3.6.4.2 The Contractor shall coordinate and supervise the
work performed by Subcontractors to the end that the work is carried out without
conflict between trades or jurisdictional disputes and so that no Subcontractor,
at any time, causes delay to the general progress of a Project. The Contractor
and all Subcontractors shall at all times afford each other Subcontractor, any
separate (Sub)contractor, and the Owner, every reasonable opportunity for the
installation of work and the storage of materials, and shall provide access to
and the use of necessary loading dock and hoist facilities, adequate storage
room and necessary utilities and
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other services. Wherever the work of a Subcontractor is dependent upon the work
of other Subcontractors, the Contractor shall require the Subcontractor to:
(a) coordinate his work with the dependent work;
(b) provide necessary dependent data and requirements;
(c) supply and/or install items to be built into dependent
work of others;
(d) make provisions for dependent work of others;
(e) examine dependent drawings and specifications;
(f) examine previously placed dependent work;
(g) check and verify dependent dimensions of previously
placed work;
(h) notify Contractor of previously placed dependent work or
dependent dimensions which are unsatisfactory or will prevent a satisfactory
installation of this Work; and
(i) not proceed with this Work until the unsatisfactory
dependent condition has been corrected.
3.6.4.3 The Contractor shall develop and implement
procedures for the review and processing of applications by Subcontractor for
progress and final payments.
3.6.4.4 Based on the Contractor's observations and
evaluations of each Subcontractor's application for payment, the Contractor
shall review, certify and pay the amounts due the respective Subcontractor.
3.6.5 The Contractor shall manage the performance of each of the
Subcontractors with all due diligence to ensure that the requirements of the
Contract Documents
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are met. The Contractor shall take appropriate action against Subcontractor(s)
when requirements of a Contract Document are not being fulfilled and shall take
commercially reasonable steps to assure compliance with the Contract Documents.
3.7 CHANGES. The Owner may, at any time, by written change order
("Change Order"), make changes in the drawings, specifications, schedule or
other aspects of a Project. The Contractor may also, through the course of
performance of Work, recommend changes to the design, schedule or budget for any
Project for approval by Owner. Contractor will utilize commercially reasonable
efforts to minimize the effect on costs and schedules in accommodating such
change. The purpose of a Change Order is to provide control in changes in Work,
Project configuration, budget and/or schedules on a formal basis. No changes
shall be made to any Project without an appropriate Change Order. All Change
Orders shall be in the form attached hereto as Exhibit E and executed by both
parties. The time and schedule for completion of the Project affected shall be
extended as reasonably required to complete the Work so changed. If the changes
desired change the Work contemplated including, but not limited to: (a) changes
in, substitutions for, additions to or deletions of any Work; (b) changes in the
specifications or drawings, (c) changes in the schedule or acceleration,
deceleration or suspension of performance of any Work; and (d) substantial
changes in the location, alignment, dimensions or design of items in the Work
and/or if the Owner requests the Contractor to perform added Work outside the
scope of such Project, then, prior to the performance of such additional Work an
equitable adjustment in the Project Schedule, Project Budget and Project
Staffing Plan will be negotiated by the parties for such Work and included in
the applicable Change Order.
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3.7.1 In the event the estimated costs of a Work Order or
agreement for Other Work exceed or are likely to exceed the total budget for the
Project or One Hundred Ten percent (110%) of the budget for any individual
budget line item, the Contractor will promptly notify Owner of such condition so
the appropriate action can be taken by Owner in response to the variance.
3.8 COMMENCEMENT AND COMPLETION OF WORK. The Contractor shall commence
Work on the commencement date reasonably set by Owner in the Work Order and
shall complete the Work and turn the Project over to the Owner (after final
inspection and testing) ready for acceptance by Owner no later than the date
specified for completion in the applicable Work Order, except as this date may
be changed pursuant to a Change Order or to delays beyond the reasonable control
of Contractor.
3.8.1 FINAL INSPECTION, TESTING AND ACCEPTANCE:
3.8.1.1 FINAL INSPECTION AND TESTING. Upon completion of
construction of any Project hereunder, Contractor shall conduct acceptance
testing, in accordance with the requirements of the Work Order, to demonstrate
that the Work has been performed in accordance with the specification of the
Work Order, including a review of all Contract Documents, drawings,
specifications and other related documents. Owner reserves the right to attend
and observe all final inspections and testing. After completion of acceptance
testing, Contractor shall forward to Owner one copy of all test results for
approval.
3.8.1.2 Upon completion of all Project requirements,
Contractor shall provide Owner with a Certificate of Completion that signifies
the Project is completed and shall assist the Owner with the final inspection of
the Project. Once the Owner has completed the final
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inspection and accepted the test results and as-builts, Owner shall signify its
final acceptance of the Project by approving a Certificate of Completion in the
form attached hereto as Exhibit F.
3.8.1.3 The Certificate of Completion shall identify all
currently known and outstanding liabilities, charges, claims made by
Subcontractors and potential financial obligations that have not been resolved
at the time of final completion.
3.8.1.4 Notwithstanding anything to the contrary in this
Agreement, acceptance of any Work performed by Contractor for Owner hereunder
shall not affect the warranties set forth in Section 10 hereof.
3.9 AS-BUILT DRAWINGS. Drawings showing all facilities and elements as
built by Contractor for Owner for a Project ("As-Builts") shall meet Owner
specifications as set forth in the Work Order and shall be prepared in a
computerized format acceptable to Owner. Contractor shall turn over within 30
calendar days after completion of testing, two (2) hard copies and one (1) soft
electronic copy of the entire set of As-Builts for each Project. For a period of
three (3) years after Notice of Acceptance, Contractor will also maintain a full
set of As-Builts in both hard copy and soft electronic copy in its files for
each Project. Final acceptance of any Project shall be subject to Owner's
acceptance of As-Builts from Contractor.
3.10 SPECIFICATIONS AND STANDARDS. All Work for any Work Order or
agreement for Other Work performed hereunder shall be performed in addition to
all requirements and specifications set forth in the Work Order or agreement for
Other Work, in accordance with the requirements and specifications of the
National Electric Code, the National Electric Safety Code (both as they
currently exist or are amended) and any other requirements imposed by any
governmental authority or agency having jurisdiction.
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3.11 LIEN WAIVERS. Unless otherwise prohibited by Law, Contractor will
waive all rights to place any lien and will require all Subcontractors to waive
all rights to place any lien against the equipment, materials, or other property
used in a Project and shall provide a written statement in the Contract
Documents evidencing such waivers to Owner prior to the commencement of any Work
hereunder. Any failure by Contractor to secure such waivers which are not
otherwise prohibited by law, without the written consent of Owner shall be
promptly corrected at Contractor's expense. Contractor may, at its option,
correct by bonding over its failure to receive such waivers.
3.12 TIMING/DELAYS.
3.12.1 Time shall be of the essence for Owner and Contractor in
the performance of Agreement.
3.12.2 It is specifically agreed that neither Contractor nor Owner
shall be held responsible or liable for any loss, damage, detention or delay
("Loss"), arising from causes beyond the control and without the fault or
negligence of the Contractor or Owner, including but not limited to acts of God,
acts of the public enemy, acts of another contractor in the performance of a
contract with the Owner which is not performed pursuant to a Work Order
hereunder, fires, floods, epidemics, quarantine restrictions, strikes, freight
embargoes, or unusually severe weather or delays of Subcontractors or suppliers.
Contractor shall not be held responsible or liable for any Loss resulting from
suspension of Work by or acts or neglect of Owner. In the event of such Loss,
Contractor or Owner shall promptly give written notice to the other party and
the time and/or cost for performance of each affected Project, shall be adjusted
by Change Order pursuant to Article 3, subsection 3.7 hereof.
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3.13 CORRECTIVE ACTION PLAN. If Contractor consistently fails to comply
with any non-material provision of the Agreement, any Work Order or any
agreement for Other Work Owner may, at its sole discretion and with sufficient
written description of the failure, direct that Contractor produce a corrective
action plan to remedy such failure within ten (10) days of receipt of such
request. In the event that such corrective action plan performed by Contractor
does not remedy such failure, Owner may escalate the issue in accordance with
the provisions of Article 8, Subsection 8.2 of this Agreement.
ARTICLE 4. PAYMENT AND COSTS
4.1 PAYMENT. The parties intend for this Agreement to be a "Cost Plus"
Agreement and that, except as otherwise provided herein, Contractor shall not be
obligated to incur any costs which will not be reimbursed by Owner as set forth
herein nor shall Contractor charge Owner any costs not directly related to a
Work Order. For each Work Order, the Owner shall pay the Contractor the Project
sum, which shall be comprised of the reimbursable costs ("Reimbursable Costs")
as defined below, and a fee ("Contractor's Fee"), which shall be 12% of the
total of the Reimbursable Costs for such Project,
4.1.1 REIMBURSABLE COSTS. The Reimbursable Costs shall be all
actual direct costs necessarily incurred and paid by the Contractor for Owner in
the proper performance of the Work for a Work Order. Such Reimbursable Costs
allowable under this Agreement shall be the costs and expenses which are
actually incurred by the Contractor in the performance of a Project pursuant to
a Work Order hereunder. Reimburseable Costs shall include but shall not be
limited to actual direct costs incurred by the Project office, Project staff,
and other items directly related to a specific Project performed hereunder,
including prorated costs for general liability,
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worker's compensation and other insurance coverage required for Owner's Work
which insurance is carried at a corporate level by Contractor. Failure to
mention any item of Reimbursable Costs herein shall not bear upon a
determination of its allowability. All Reimbursable Costs must be documented and
copies of invoices including a detailed summary of charges shall be sent to
Owner prior to the making of any payment by Owner therefor.
4.1.1.1 LABOR AND LABOR-RELATED ITEMS.
(a) LABOR COST. Labor cost shall be the actual direct cost
of Project staff, including salary or wages, benefits, payroll insurance and
payroll taxes. The positions included as Reimbursable Cost are limited to those
positions listed in the Project Staffing Plan. Other positions such as any
corporate office support staff and other corporate level supervisory personnel
are considered to be overhead to the Project and are, therefore, explicitly not
Reimbursable Cost. Vacation, personal day pay, holiday pay, sick leave pay,
bonus and rest and relaxation (R&R) pay shall be charged as incurred. Owner
shall have the right on an annual basis and at Owner's expense to an independent
audit of Project timesheets and payroll records to determine whether a
materially disproportionate amount of vacation pay, personal day pay, holiday
pay, sick leave pay, bonus and R&R pay is being charged to Owner's Projects. In
the event such an audit discloses such a disproportionate charge, Owner shall be
entitled to an equitable adjustment to charges for labor costs and associated
Contractor's fees. If the disproportionate charge is three percent (3%) or more
than what should be charged to Owner's projects hereunder then Contractor shall
reimburse Owner for the actual direct cost of such audit. Contractor agrees that
during its normally scheduled annual review process it shall determine the
average annual salary paid in the previous year for its field employees.
Contractor further agrees
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that the change in salary or wages over a Contract year shall not increase on a
percentage basis more than the percentage increase in the Consumer's Price Index
for all urban consumers (CPIU). In the event the Contractor desires to change
salary or wages of its Project Staff in excess of the CPIU percentage increase
for any Contract Year, then Contractor shall provide notice and justification
for such increase to Owner. Owner shall promptly review such information and
shall not unreasonably withhold consent to such request. Bonus amounts paid to
Contractor employees assigned to Owner's Projects will be consistent with Bonus
amounts paid to all of Contractor's employees in comparable positions.
(b) Cost of Living Adjustment ("COLA") applied to labor
costs where applicable will be consistent with Contractor's policy set forth in
Exhibit G.
(c) The cost of moving supervisory and administrative
employees who are assigned to the Work for a specific Project from their last
place of employment in accordance with the Contractor's current moving policy
which is attached hereto and incorporated herein as part of Exhibit G shall be a
Reimbursable Cost. Owner shall not pay relocation costs for the movement of any
Contractor employee from Owner's Project Site. However, Owner shall pay the
costs of demobilization for a Project if the project is canceled or
substantially reduced in scope prior to completion.
(d) Travel Expenses in connection with the following:
(i) Trips included in Contractor's current R&R policy
attached hereto and incorporated herein as part of Exhibit G;
(ii) Trips to various fabricating plants, Subcontractor
or material supplier locations to inspect their facilities and/or financial
condition in regard to the
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Work on a Project which Work is approved by Owner via a Work Order and trips to
various fabricating plants, Subcontractor or material supplier locations to
inspect the progress of the Work being prepared for a Project and to consult on
methods of fabrication, shipment, etc.;
(iii) Trips for Project Management Staff for training
purposes including training courses, Project Management Meetings to be held not
more often than once per calendar quarter not to exceed One Hundred Fifty
Thousand Dollars ($150,000.00) per Contract Year provided such training is
directly related to the improvement of the Project Management Staff's skills in
the performance of Work for Owner's Projects; and/or
(iv) Trips conducted as part of the relocation
provisions of Article 4.1.1.1(b) above.
(e) In order to reduce the number of personnel assigned to
the job site or to expedite the performance of the Work hereunder, Contractor
may, as agreed to and stated in the applicable Work Order, perform off-job site
engineering, drafting clerical and/or accounting work, in which case the costs
of such Work shall be charged to the Project based on actual labor costs marked
up by the percentages in Exhibit D, supported by time cards, expense reports,
and expense vouchers. These charges shall be considered Reimbursable Costs as
defined in Article 4.
4.1.1.2 MATERIALS AND MATERIAL-RELATED ITEMS
(f) The cost of all permanent materials, equipment and
supplies directly related to a Work Order. Credit shall be given the Owner for
all trade or quantity discounts obtained from vendors by Contractor for the
purchase of materials, equipment or supplies.
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(g) The actual cost of all temporary and other expendable
services, materials and supplies, including fuel, oil and grease, which are
normally consumed in performance of the Work. Any such expendable materials and
supplies for which the Contractor has been reimbursed by the Owner and which
remain after completion of the Work will be disposed of as directed by the
Owner.
(h) The cost of all necessary inspections, tests, loading,
handling, permits, transportation and insurance of whatever character or
description paid by the Contractor for materials and supplies used in the
construction of a Project.
(i) All materials, equipment and supplies shall be
delivered, handled, stored, installed, protected and disposed of in such a
manner to prevent damage in accordance with current practice in the industry, in
accordance with manufacturer's specifications and recommendations, in accordance
with the Work Order requirements and in accordance with all laws. The Contractor
will haul and store packaged materials and equipment in their original and
sealed containers, marked with the brand and manufacturer's name, until ready
for use, and haul and deliver such materials and equipment in ample time to
facilitate inspections and tests prior to installation. The "delivery" in
reference to any item specified or indicated means the unloading and storing
with proper protection at the Project site. Damaged materials or equipment will
be rejected and removed from the site by the Contractor.
4.1.1.4 EQUIPMENT AND EQUIPMENT RELATED ITEMS
(j) The cost of rental of all equipment including but not
limited to vehicles required for the Work. The cost of rental of equipment
charged to Owner for equipment owned by the Contractor for a Project shall be
consistent with the current market rate for renting
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or leasing similar items from nationally recognized third party rental
companies. The cost of rental of equipment charged to Owner for use by
Contractor from third parties shall be the actual rental rate charged. The
actual rental rate for the equipment shall be consistent with the current market
rates for renting or leasing similar items from a nationally recognized third
party rental company. As part of any Work Order or agreement for Other Work, the
Contractor shall prepare a utilization chart listing all equipment to be used on
the Project, together with the corresponding fully maintained (excluding
consumable items such as oil, grease and fuel) rental rates for such equipment,
and submit same to the Owner for its approval.
4.1.1.5 MISCELLANEOUS
(k) For any Contractor Project office supporting more than
one Project or in conjunction with a third party's project, direct actual costs
for such Project office shall be prorated to each Project or project based on a
methodology specified in the Work Order.
(l) The budgeted fees of any consultants engaged in a
professional capacity pursuant to a Work Order.
(m) Losses and expenses, not compensated by insurance or
otherwise and actual, direct costs associated with the recovery or collection of
such Losses and expenses, including but not limited to the deductible amount of
any insurance required by Article 7 sustained by the Contractor in connection
with the Work provided they have resulted from causes other than the fault or
negligence of the Contractor, its Subcontractors, agents or employees.
(n) All federal, state and local sales taxes, use taxes,
excise taxes, personal property taxes or special assessments, except taxes on
Contractor's income, in
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connection with the Work or materials to be performed pursuant to a Work Order
or agreement for Other Work.
(o) Such other items properly chargeable to the cost of the
Project to which Owner and Contractor have previously agreed to as part of an
executed Work Order.
4.2 COST CONTROL. The Contractor recognizes the relationship of trust
and confidence established between it and the Owner by this Agreement and agrees
to furnish its best skill and judgment and to cooperate with the Owner.
Contractor agrees to furnish efficient business administration and
superintendence, and to use commercially reasonable efforts to minimize expense
to the Owner, to keep upon the location for each Project at all times an
adequate supply of qualified workers as specified in the Project Staffing Plan,
tools, equipment and materials and to promote the progress of the work in the
most expeditious and economical manner consistent with the interests of the
Owner.
4.3 MOST FAVORED NATION. The cost basis for labor and associated cost
items and equipment rental rates charged to Owner under this Agreement or any
Work Order or agreement for Other Work (except for charges by Subcontractors or
other third parties not employees of Contractor) shall be no greater than the
lowest cost basis charged to other customers (including Contractor's
subsidiaries and affiliates) of Contractor.
4.4 INDEPENDENT CONTRACTOR. It is the intention of this Agreement that
the Contractor shall be and remain an independent contractor and nothing herein
is intended to be construed as inconsistent with that status. Contractor and
Owner, expressly intending that no employment, partnership, or joint venture
relationship is created by this Agreement, hereby agree as follows:
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(a) Contractor shall act at all times as an independent contractor
hereunder;
(b) Neither Contractor nor anyone employed by or acting for or on
behalf of Contractor shall ever be construed as an employee of Owner and Owner
shall not be liable for employment or withholding taxes respecting Contractor or
any employee of Contractor;
(c) Except as otherwise provided herein, Contractor shall determine
when, where and how Contractor shall perform the Work;
(d) Contractor shall take all steps to ensure that Contractor and
Contractor's employees are treated as independent contractors of Owner;
(e) Owner shall have the right to conduct inspections and reviews of,
and determine satisfactory performance of, the Contractor's services;
(f) Contractor shall provide Contractor's own materials, tools and
equipment in performing the services;
(g) Contractor shall, as an allocated cost, maintain workers
compensation insurance for Contractor and for all others employed by or acting
for or on behalf of Contractor only to the extent and in the amounts required by
law;
(h) Contractor shall be free to contract with, and provide
Contractor's services to, parties other than Owner during the term of this
Agreement, subject to the confidentiality restrictions delineated herein;
(i) Contractor shall not make any commitment or incur any charge or
expense in the name of Owner without the prior written approval of Owner; and
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(j) Contractor, for Contractor and for anyone claiming through
Contractor, waives any and all rights to any consideration, compensation or
benefits, except as provided for herein.
4.5 ACCOUNTING SYSTEM. The Contractor shall keep accurate and detailed
books of account for all Work performed for each Project open to the inspection
of the Owner at reasonable times and frequency during Contractors regular
business hours to verify all Reimbursable Costs, and Contractor's Fees due to
Contractor hereunder. Contractor shall make its books and records available at
Owner's election, to an independent certified public accountant reasonably
acceptable to Contractor for the purpose of auditing the Reimbursable Cost
including the labor burden factors as shown on Exhibit D, and Contractor's Fees.
Contractor shall keep such full and detailed accounts and Project costs as may
be necessary for proper financial management by the Contractor under this
Agreement in a manner and pursuant to methods which are reasonably satisfactory
to the Owner. Owner shall have the right to request other reports as are deemed
necessary by Owner and Contractor shall comply with such request. Owner shall be
responsible for and shall reimburse Contractor for any direct costs associated
with such requested reports. The Contractor shall also monitor the approved cost
estimate for each Project and shall show actual costs for activities in progress
and estimates for uncompleted tasks by way of comparison with such approved
estimate. In the event the results of any audit show Contractor's costs to be in
error to the material detriment of Owner, Contractor shall credit to Owner any
such differentials and Contractor shall also reimburse Owner for the costs of
the audit.
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Contractor shall at all times act in good faith and to the best advantage of the
Owner in the purchase of materials, in the employment of labor, and in all its
conduct and activities related to any work on Projects performed pursuant to
this Agreement.
4.6 PROGRESS PAYMENT. As soon as is possible after the first of each
month, the Contractor shall submit to the designated office of the Owner an
application for payment for the Work performed for each Project in the preceding
month less any retainage held for Contractor's Subcontractors. Contractor may,
subject to approval of Owner, submit an aggregate progress payment application
for Projects or a separate application for each Project, but in any event, costs
for each Project shall be separately stated.
4.6.1 Monthly payments to the Contractor for the Work performed to
such date will be made within thirty (30) days after receipt of each invoice by
the Owner. Such applications for payment shall be submitted, in a form
satisfactory to the Owner which form is attached hereto as Exhibit J and shall
be accompanied by documentation of all Reimbursable Costs including but not
limited to weekly payrolls and time sheets, showing the amounts paid to each
worker or employee, and allocation of each employee's time to the Project and
bills for materials delivered to each Project site and payments made or due to
Subcontractors. Contractor and Owner shall use commercially reasonable efforts
to resolve any disputed items within five (5) business days after the payment
due date. Any disputes not resolved within this time frame shall be handled in
accordance with Article 8, Subsection 8.2 hereof. Owner may withhold payment for
any disputed items until all such issues relating thereto are resolved, but
shall pay all undisputed amounts promptly in accordance with the provisions of
this Agreement. Owner shall act in good faith and not in an arbitrary or
capricious manner in disputing any amount. The basis
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for disputed amounts shall be documented to Contractor. As used in this Article
4, Subsection 4.6.1, "amount" shall be defined as a specific line item or items
in a relevant invoice, not the total amount of the invoice, unless all line
items in the invoice are reasonably disputed. Monthly payments to the Contractor
shall, in addition to payment for Reimbursable Costs for Work Performed, include
the Contractor's Fee to be paid to the Contractor for such Work performed in the
applicable month.
4.6.2 The contractor's application for payment shall constitute a
representation to the Owner, based on its determinations at the Project site,
that to the best of the Contractor's knowledge, information and belief, the Work
has progressed to the point indicated and the quality of the Work is in
accordance with the Work Order. The foregoing representations are subject to an
evaluation of the Work for conformance with the Work Order upon substantial
completion, the results of subsequent tests and inspections, to minor deviations
from the Work Order correctable prior to acceptance.
4.7 LATE PAYMENT. Any payment not made by Owner to Contractor within
forty-five (45) days after the date of invoice shall bear interest on a monthly
basis from the date due until the date paid at the rate of the sum of the prime
rate then current as published in the Wall Street Journal plus four percent (4%)
divided by twelve (12). Any payment not made by Owner to Contractor within
ninety (90) days after the date of the invoice shall bear interest on a monthly
basis beginning on the 90th day at rate of the sum of the prime rate then
current as published in the Wall Street Journal plus eight percent (8%) divided
by twelve (12) but in no event shall this amount be greater than the maximum
interest amount allowed by applicable laws. Payment shall be deemed made on the
date received by the Contractor. Owner shall also pay Contractor's actual
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costs incurred for collection of any late payment or fees due hereunder,
including reasonable attorneys fees. Interest or collection costs paid hereunder
shall not be applied to the Aggregate Project Sum. Any failure by Owner to make
payments when due within ninety (90) days of the date of invoice three (3) or
more times during each Contract Year may be an event of default pursuant Article
8 hereof.
4.8 ANNUAL AND AGGREGATE PROJECT SUM. Owner hereby agrees to execute
sufficient Work Orders and agreements for Other Work with Contractor under this
Agreement so that the Annual Project Sum shall total no less than Forty Million
Dollars ($40,000,000.00) per Contract Year and the Aggregate Project Sum shall
total no less than Three Hundred Twenty Five Million Dollars ($325,000,000.00)
during the Term. The Annual Project Sum shall be defined as the sum of all
payments paid or due by Owner to Contractor for Work actually performed by
Contractor hereunder including Reimbursable Costs and Contractor's Fees for each
Project (hereinafter "Aggregate Project Sum"). The Aggregate Project Sum shall
be defined as the cum of all payments paid or due by Owner to Contractor for
Work actually performed by Contractor hereunder including Reimburseable Costs
and Contractor's Fee for each Project (hereinafter "Aggregate Project Sum) for
all Work Orders and agreements for Other Work executed during the Term. Both the
Annual Project Sum and the Aggregate Project Sum shall include any Contractor's
Fee Trueup amounts as set forth in Subsection 4.10.
4.9 COMMITMENT FULFILLED. Owner and Contractor agree that Owner shall
have met the Annual Project Sum commitment when the total Annual Project Sum is
Forty Million Dollars ($40,000,000.00). Owner and Contractor agree that Owner
shall have met the Aggregate Project Sum Commitment when the total Aggregate
Project sum is Three Hundred Twenty Five Million Dollars
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($325,000,000.00) at the end of the Term. Further, the parties agree that Owner
shall have met all commitments hereunder when the total Aggregate Project Sum
reaches Five Hundred Million Dollars ($500,000,000.00) which may occur at any
time during the Term. Owner shall have the right to unilaterally terminate this
Agreement upon its payment of the Aggregate Project Sum to Contractor. Upon such
termination Owner shall have no further obligations to Contractor hereunder
except as otherwise provided herein. The parties agree that the Aggregate
Project Sum and the Annual Project Sum for the first Contract Year shall include
but are not limited to the amounts for Work performed by Contractor subsequent
to the date of this Agreement for Projects listed on Exhibit A, attached hereto
and incorporated herein.
4.10 CONTRACTOR'S FEE TRUEUP. In the event Owner fails to execute Work
Orders or commitments for Other Work sufficient to reach the Annual Project Sum
or the Aggregate Project Sum, upon expiration of the Contract Year or Term, as
appropriate, Owner shall pay Contractor, in addition to all other sums due by
Owner to Contractor hereunder the "Contractor's Fee Trueup," which shall be
computed as follows:
4.10.1 Revenue Shortfall=
a) Annual Project Sum commitment minus all amounts paid,
invoiced or otherwise due by Owner to Contractor for completed portions of Work
Orders and/or agreements for Other Work during a Contract Year; and/or
b) Aggregate Project Sum commitment minus all amounts paid,
invoiced or otherwise due by Owner to Contractor during the Term minus any
amounts for Work in progress at the end of the Term which Work is performed and
payment is made or due within twelve (12) months after the end of the Term.
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4.10.2
Revenue Shortfall = X
Contractor's Fee Trueup = 12X
4.10.3 The Contractor's Fee Trueup due for each Contract Year, if
any, shall be due within forty-five (45) days after the date of invoice and late
payments shall be treated in accordance with subsection 4.7 hereof. An estimated
final Contractor's Fee Trueup, if any, shall be due at the end of the Term
within forty-five (45) days after the date of invoice and late payments shall be
treated in accordance with subsection 4.7 hereof. The final Contractor's Fee
Trueup, if any, shall be invoiced twelve (12) months after the completion of the
Term and shall also be treated in accordance with subsection 4.7 hereof.
ARTICLE 5. OWNER'S RESPONSIBILITIES
5.1 AUTHORIZED REPRESENTATIVE. The Owner shall designate a
representative authorized to act on the Owner's behalf with respect to each
Project. The Owner, or such authorized representative, shall render decisions in
a timely manner pertaining to documents submitted by the Contractor in order to
avoid unreasonable delay in the orderly and sequential progress of the Work.
5.2 PROVISION OF DATA. Owner shall provide any and all relevant plans,
specifications, facts and other data to the Contractor as agreed to in the Work
Order promptly upon request of Contractor to enable the Contractor to complete
the work by the completion date specified in the Work Order.
5.3 OWNER'S OWN FORCES. The Owner reserves the right to perform
construction and operations related to a Project with Owner's own forces, and to
award Contracts in
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connection with the Project which are not part of the Contractors'
responsibilities pursuant to a Work Order. Owner will notify Contractor in
writing of such election. The Contractor shall notify the Owner if any such
independent action will interfere with the Contractor's responsibilities under
this Agreement and Owner agrees to cooperate with Contractor and all
Subcontractors.
5.4 PROMPT REPLY. Information or services under the Owner's control
shall be furnished by the Owner with reasonable promptness to avoid delay in the
orderly progress of the Contractor's services and the progress of the Work.
5.5 FAILURE TO PROVIDE INFORMATION. If Owner fails to provide in a
timely manner any information or services necessary to the progress of a Project
or makes an election under Article 5.3, Contractor shall be entitled to an
equitable adjustment, by way of a Change Order, in the budget and schedule for
such project.
ARTICLE 6. OWNER'S AND CONTRACTOR'S REPRESENTATIONS
6.1 CONTRACTOR REPRESENTATIONS AND COVENANTS. Contractor represents to
an covenants with Owner as follows:
(a) Contractor is duly organized and validly existing and Contractor
has the authority to execute this Agreement and has access to sufficient
personnel and expertise to perform its obligations hereunder; and
(b) Contractor will use its commercially reasonable efforts, in good
faith, to keep all required authorities in full force and effect during the Term
and to obtain any additional authorities, permissions or certifications which
may be required in connection with this Agreement.
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(c) There are no pending, or to Contractor's knowledge threatened,
claims, actions, suits, audits, investigations or proceedings by or against
Contractor which would have a material adverse effect on Contractor's
performance under or ability to comply with this agreement.
6.2 OWNER REPRESENTATIONS AND COVENANTS. Owner represents to and
covenants with Owner as follows:
(a) Owner is duly organized and validly existing and Owner has the
authority to execute this Agreement and perform its obligations hereunder;
(b) Owner will use its commercially reasonable efforts, in good faith,
to keep all required authorities in full force and effect during the Term and to
obtain any additional authorities, permissions or certifications which may be
required in connection with this Agreement; and
(c) There are no pending, or to Owner's knowledge, threatened, claims,
actions, suits, audits, investigations or proceedings by or against Owner which
would have a material adverse effect on Owner's performance under or ability to
comply with this Agreement.
ARTICLE 7. INSURANCE AND BONDS
Prior to commencement of any Work for any Project hereunder, Contractor
shall procure and maintain, with insurers reasonably acceptable to the Owner,
the following insurance protecting the Owner, Contractor and all other parties
required by the Owner against liability from damages because of injuries,
including death, to persons, and liability for damages to property arising from
Contractor's operations, including its employees, agents, Subcontractors and
suppliers operations, in connection with the performance of this Agreement. This
insurance shall be kept in good standing during the term of this Agreement.
Owner reserves the right to
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have an Owner controlled Insurance Program for all Work performed by Contractor
and Contractor agrees to cooperate reasonably with such efforts. Additional
insurance requirements, if any, required by third parties shall be set forth in
the applicable Work Order or Agreement for Other Work. The cost of insurance
(including co-insurance and deductables paid) shall be a Reimbursable Cost
hereunder and coverage for the Projects shall be provided as follows:
7.1 WORKER'S COMPENSATION AND EMPLOYER'S LIABILITY. Worker's
Compensation insurance complying with the laws of the state or states of
operation, whether or not such coverage is required by law, and Employer's
Liability insurance with limits of $1,000,000 each accident, including
occupational disease coverage with a limit of $1,000,000 each employee and
$1,000,000 disease policy limit. If work is to be performed in Nevada, North
Dakota, Ohio, Wyoming, Washington or West Virginia, Contractor will purchase
Worker's Compensation in the State Fund established in the respective States.
Stop Gap Coverage or Employers Overhead coverage will be purchased.
When any Work Order calls for water operations, Longshoreman's and
Harbor Worker's Compensation insurance, Xxxxx Act, and Maritime Coverage
providing for transportation, wages, maintenance and cure, with the limits of
$500,000 each employee, $500,000 more than one employee, shall be included. An
endorsement shall be attached evidencing that a claim "in rem" shall be treated
as a claim against the employer.
7.1.1 Commercial General Liability insurance with a combined
single limit for bodily injury and property damage of $2,000,000 each occurrence
and $4,000,000 annual aggregate. Annual aggregate shall apply on a per project
basis. Such policy shall include coverage for all operations of Contractor,
including products and completed operations coverage,
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blanket contractual liability and independent contractor coverage, and will be
endorsed to delete exclusion for work, construction or demolition within 50 feet
of railroad trackage. This policy shall include no modifications that reduce the
standard coverages provided under a Commercial Guaranty Liability policy form.
7.1.2 Business Automobile Liability insurance with a combined
single bodily injury and property damage single limit of $2,000,000 each
occurence. This policy shall include coverage for owned, non-owned, and hired
vehicles.
7.1.3 When vessel(s) or barge(s) are used by the Contractor for
the performance of Work, protection and indemnity, collision and towers
liability insurance if applicable, on such vessel(s) or barge(s) both owned and
non-owned, in a single limit of not less that $5,000,000 or the value of the
vessel(s) or barge(s), which ever is greater, shall be provided.
When vessel or barges are used, the Contractor will provide hull
insurance in amounts to the full value of the vessel(s) or barge(s) owned and/or
operated by or for the Contractor.
7.1.4 In the event Contractor conducts diving operations, with the
divers who are employees, agents or servants of Contractor, from Owner's
vessels, Contractor's vessels or any other marine equipment, they shall only do
so at the express written request of the Owner Representative. Contractor agrees
to indemnify and save Owner harmless from any liability, loss, cost or damage,
including cost of defense, arising from or connected with such diving
operations.
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Seaworthiness of Owner's vessel(s) used herein, for such diving operations is
acknowledged and agreed to by Contractor, and neither Contractor nor its
insurance carrier shall contest this.
7.1.5 When aircraft is used by the Contractor for performance of the
Work, the Contractor will provide Aircraft Liability insurance on both owned and
non-owned aircraft, including helicopters, with combined single limit of
$1,000,000 per scat for bodily injury and property damage, including passenger
legal liability.
When any aircraft is used by the Contractor for the performance of the
Work, Aircraft Hull insurance in amount to the full value of each aircraft will
be maintained by the Contractor on such aircraft owned and/or operated by or for
the Contractor.
7.1.6 Umbrella or Excess Liability Insurance applying in excess of
7.1.1 through 7.1.5 above subject to a limit of $5,000,000.
7.1.7 The maintenance of insurance by the Contractor and the limits of
coverage required shall in no way limit or affect the extent of the Contractor's
liability.
7.1.8 Limits required above may be obtained through various primary and
umbrella structures.
7.2 BUILDER'S RISK. As requested by Owner, Contractor shall procure and
maintain during the term of a Work Order or an agreement for Other Work, an all
risk builders' risk insurance policy protecting the Owner, Contractor and all
Subcontractors, as their interests may appear, from loss due to the Work or to
any equipment supplies or material including any such items directly provided by
Owner pursuant to Article 4 hereof going into the Work, while at the Project
site, or while in transit to or from the Project site. The limit of liability of
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this insurance shall be no less than the greater of the value of the Project
after the Work has been performed or the approved Project Budget estimate in the
applicable Work Order per occurence and shall contain a deductible of no more
than $500,000 per occurence. If coverage is requested by Owner, cost for
builder's risk insurance shall be a Reimbursable Cost.
7.3 ERRORS AND OMISSIONS. If requested in writing by Owner, Contractor
shall procure and maintain during the term of a Work Order or agreement for
Other Work insurance against the errors or omissions of Contractor or any of
Contractor's employees, agents or subcontractors performing Work hereunder with
limits satisfactory to Owner. If coverage is requested by Owner, cost of Errors
and Omission insurance shall be a Reimbursable Cost. If coverage is written on a
"claims made" basis, all renewals during the life of this Agreement will include
"prior acts coverage".
7.4 RAILROAD PROTECTIVE. If requested in writing by Owner, Contractor shall
procure and maintain during the term of a Work Order or agreement for Other
Work, Railroad Protective Insurance protecting Owner, Contractor and
Subcontractor and in such limits as specified in the applicable Work Order.
7.5 INSURANCE REQUIRED OF SUBCONTRACTORS. Except as may be waived or
modified by Owner in writing, the Contractor shall require all Subcontractors to
provide and maintain the insurance required above subject to all requirements
set forth in this Article 7, provided however, that Builder's Risk, Errors and
Omissions, Railroad Protective, Owners Contractors Protective Liability and
Contractors Pollution Liability insurance shall only be required of
Subcontractors if requested by Owner as part of the Work Order agreement for
Other Work or if required pursuant to Article 3, Subsection 3.5 hereof.
Contractor and Owner shall be listed as additional insureds
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on Subcontractor's policies. Owner's approval of any Subcontractor shall be
conditioned upon a Subcontractor having the required insurance coverage. Except
as may be waived or modified by Owner in writing, each Subcontractor shall also
require its Subcontractors, if any, to provide and maintain insurance as
required above.
7.6 ADDITIONAL INSURED. Owner shall be listed as an additional insured on
Contractor's and Subcontractor's policies. Contractor hereby waives its right,
and agrees to require its underwriter any and all Subcontractors to waive all
such rights, of subrogation against Owner, its officers, directors, agents, and
employees thereof, and corporate shareholders and officers, directors, agents
and employees thereof. Such waiver shall also extend to companies and other
legal entities that control, are controlled by, are subsidiaries of or are
affiliated with Company, and the respective officers, directors, agents,
employees and shareholders of such companies or entities. Contractor's insurance
is understood to be primary as respects the interest of additional insureds.
7.6.1 Owner or its Affiliates shall not insure nor be responsible for
any loss or damage to property of any kind owned or leased by Contractor or its
employees, servants, and agents. Any policy of insurance covering the Property
owned or leased by Contractor against loss by physical damage shall provide that
the underwriters have given their permission to waive their rights of
subrogation against Owner, its Affiliates and their Directors, officers, and
employees, as well as their subsidiaries and affiliates, including directors,
officers, and employees thereof.
7.7 EVIDENCE OF COVERAGE. Certificates of insurance or certified copies of
the insurance policies will be provided to the Owner prior to Contractor
beginning any Work under
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this Agreement. Such certificate shall contain a provision that the insurer will
give the Owner at least thirty (30) days prior written notice of any material
changes, reductions, non-renewal or canellation of the coverage. Contractor
shall obtain certificates from its Subcontractor(s) and deliver them to Owner,
if requested to do so. In the event of any failure by Contractor to comply with
the provisions of this paragraph, Owner may, at its option on notice to
Contractor, suspend the affected Work Orders or agreement for Other Work until
there is full compliance with this paragraph or contract for such insurance at
Contractor's expense.
7.8 BONDS. A payment bond from the Contractor shall be required for each
Work Order executed hereunder. The cost shall be a Reimbursable Cost of the
Project, and such bond shall be delivered to the Owner prior to the performance
of any Work. The amount of each bond shall be set by Owner but in no event shall
such amount exceed the amount of the Work Order. The Owner may waive this bond
requirement or, if a bond cannot be obtained for a Work Order, require a letter
of credit of other form of security as an alternative in its sole discretion for
any Work Order performed hereunder. In lieu of individual bonds for each
Project, Contractor and Owner may mutually agree to elect to provide Owner a
blanket payment bond in a face amount to be determined.
7.8.1 Unless and only if Owner waives in writing the requirement of
Article 7.9 for a bond, the Contractor will require payment bonds of all
Subcontractors. Upon Owner's request, copies of all such bonds shall be provided
to Owner for review. The costs of such bonds shall be included in the
Subcontractor's bid price and as such are a Reimbursable Cost. In the event that
Owner waives this requirement for a bond from a Subcontractor, Owner shall be
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responsible for any payment default of such unbonded Subcontractor which is not
otherwise cured by legal or equitable remedies.
ARTICLE 8. DEFAULT AND TERMINATION
8.1 DEFAULT. The following events shall constitute an Event of Default
hereunder.
8.1.1 CONTRACTOR DEFAULT. The Contractor shall be in default of the
Agreement
if:
8.1.1.1 Contractor becomes insolvent, is adjudged a bankrupt, or
makes a general assignment for the benefit of its creditors, or becomes a
subject of any proceeding (voluntary or involuntary) commenced under any statute
or law for the relief of debtors, or a receiver, trustee or liquidator of any of
the property or income of Contractor shall be appointed which judgment,
assignment, proceeding or receivership is not dismissed or discharged within
ninety (90) days of the date of notice thereof.
8.1.1.2 Contractor refuses or fails to prosecute the Work in
accordance with the Work Order, or this Agreement in any material respect; or
8.1.1.3 Contractor fails in any material respect to observe any
other terms, provisions, conditions, convenants, representations, warranties or
agreements in this Agreement, any Work Order or any agreement for Other Work to
be observed and performed on the part of the Contractor ("Material Default"). A
Material Default under subsections 8.1.1.2 and 8.1.1.3 may include but is not
limited to the following:
(a) Failure by Contractor to make proper payment to
Subcontractors or others for undisputed amounts due for services, materials or
labor (provided Owner shall have
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paid to Contractor any payments for such Work for which payment is demanded by
Subcontractor); or
(b) Failure by Contractor to comply with laws, ordinances,
rules and regulations or orders of any public authority having jurisdiction of
which Contractor has or should have knowledge after making reasonably diligent
inquiries and except as directed by Owner and which failure has a material
adverse effect on a Project; or
(c) Failure to use commercially reasonable efforts to
prosecute the work in compliance with the budget or scheduling requirements, set
forth in a Work Order or agreement for Other Work subject to any equitable
adjustments in budget or schedule as provided herein; or
(d) Failure to correct any incomplete or unacceptable items
during any final inspection and testing which failure has a materially adverse
effect on the Project.
8.1.2 OWNER'S REMEDIES. In the event of a default by Contractor
hereunder, if the failure is not corrected or good faith efforts are not being
made to correct within ten (10) calendar days after receipt of written notice
from Owner to Contractor, Owner may without prejudice to any other right or
remedy:
8.1.2.1 With or without terminating Work Order or agreement for
Other Work, take over and/or employ such workers as may be necessary to remedy
the noncompliance. Notwithstanding the foregoing, all costs expended by Owner
hereunder, including the value of the Contractor's Fee application thereto,
shall be applied to the Annual Project Sum and Aggregate Project Sum.
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8.1.2.2 Terminate the Work Order for the Project in default,
agreement for Other Work in default or this Agreement and all Projects hereunder
and have only the obligation to pay Contractor payments due for portions of Work
completed pursuant to the requirements set forth in the applicable Work Order or
agreements for Other Work up to the date of termination. In the event of a
termination of this Agreement, Contractor shall not be entitled to any
Contractor's Fee Trueup as set forth in Article 4.10 hereof; and/or
8.1.2.3 Make a claim against Contractor's or Subcontractor's bond
or other security.
8.1.3 OWNER DEFAULT. The Owner shall be in default of the
Agreement if:
8.1.3.1 Owner fails to make any payment due to Contractor
hereunder three (3) or more times during a Contract Year within ninety (90) days
after the date of invoice, unless such nonpayment is the subject of a good faith
dispute; or
8.1.3.2 Owner becomes insolvent, is adjudged a bankrupt, or
make a general assignment for the benefit of creditors, or becomes the subject
of any proceeding (voluntary or involuntary) commenced under any statute or law
for the relief of debtors, or a receiver, trustee or liquidator of any of the
property or income of Contractor shall be appointed, which judgment, assignment,
proceeding or receivership is not dismissed or discharged within ninety (90)
days of the date of notice thereof.
8.1.4 CONTRACTOR REMEDIES. In the event of a default by Owner
hereunder if failure is not corrected or good faith efforts are not being made
to correct within ten (10) calendar days after receipt of written notice from
Contractor to Owner, Contractor may without prejudice to any other right or
remedy:
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8.1.4.1 Terminate the applicable Work Order or agreement for
Other Work for default without terminating this Agreement in which case the
Owner shall be responsible for all payments due to Contractor as of the date of
termination of the affected Work Order or agreement for Other Work; or
8.1.4.2 Terminate this Agreement for default.
8.1.5 In the event of a termination of any Work Order, agreement
for Other Work or this Agreement for default, Contractor shall be entitled to
receive reimbursement of all costs including the entire minimum Contractor's Fee
Trueup expected to be paid pursuant to Article 4 hereof during the Term.
8.1.6 In no event shall Contractor suspend its performance for any
Work under any Work Order or agreement for Other Work prior to termination of
the applicable Work Order agreement for Other Work, or this Agreement as
applicable.
8.2 DISPUTE RESOLUTION/ARBITRATION
8.2.1 MANAGEMENT MEETINGS. Except with respect to payments of
undisputed amounts to Contractor by Owner, in the event of a dispute, claim or
other matter arising out of or relating to this Agreement or breach thereof, the
parties agree that in addition to the remedies available to each party as
outlined above, the parties may contemporaneously provide the other party with a
written notice outlining the nature of the dispute. Within five (5) business
days of the receipt of such notice the Contractor's Project Manager and Owner's
designee shall meet in a good faith effort to resolve the dispute. If the
dispute cannot be resolved at such meeting, the parties agree that within twenty
(20) business days of the initial meeting, a second meeting shall take place
with a Vice President or person with similar decision making authority
representing each of the Contractor and Owner. If the dispute remains unresolved
after such second meeting
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and the parties have used good faith efforts to otherwise resolve the dispute
then the parties shall participate in Arbitration as set forth below.
8.2.2 ARBITRATION. All claims, disputes and other matters in
question arising out of, or relating to, this Agreement or the breach thereof
which are not resolved pursuant to 8.2.1 above, shall be decided by arbitration
in accordance with the Construction Industry Arbitration Rules of the American
Arbitration Association then in effect unless the parties mutually agree in
writing otherwise. This Agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. This award rendered by the arbiters shall
be final, and judgment may be entered upon it in accordance with applicable law
in any court having jurisdiction thereof.
8.2.2.1 Notice of demand for Arbitration shall be filed in
writing with the other party to the Agreement and with the American Arbitration
Association. The demand for arbitration shall be made within a reasonable time
after the claim, dispute or other matter in question has arisen, and in no event
shall it be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matters in questions would be
barred by the application statute of limitations. The Contractor shall carry on
the Work and maintain the progress schedule during any arbitration proceedings,
(provided Owner is not otherwise in breach of this Agreement) and Owner shall
continue to pay any undisputed sums to Contractor.
8.2.2.2 The foregoing notwithstanding, either party may seek
injunctive relief from a court of competent jurisdiction which may be necessary
to protect its rights under this Agreement without being required to show any
actual damages or to post an injunction bond.
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ARTICLE 9. INDEMNIFICATION AND LIABILITY
9.1 INDEMNIFICATION BY CONTRACTOR. Contractor shall be liable for and
shall defend, indemnify and hold harmless the Owner and its officers, directors,
agents and employees from and against any and all claims, demands, causes of
action, losses, damages, costs and expenses (including reasonable attorney's
fees) of every kind and character arising in favor or any person including
Contractor, Owner's employees, Contractor's employees, Subcontractors or other
persons on account of personal injuries or death or damage to any property
(hereinafter "Claims") in any way incident to, arising out of, or claimed to
have arisen out of, occuring in, in connection with, or relating to the Services
performed by Contractor hereunder (including Claims in any way incident to,
arising out of, or claimed to have arisen out of, occuring in, in connection
with, or relating to the Services performed by any and all Subcontractors),
except if directly or indirectly due to Owner's or Owner's employees'
negligence. Owner shall have a direct right of action against Contractor in the
event Contractor fails to perform under this Article 9.1 and Owner may recover
all of the reasonable costs of such action, including reasonable attorney's
fees. Contractor shall obtain a written agreement from anyone (including
Subcontractors) retained or employed by Contractor which shall include this
indemnification in favor of Owner.
9.1.1 Contractor further agrees to indemnify and hold Owner
harmless against the payment of any and all penalties, interest, liens or
indebtedness or claims against Owner's property, or for work performed, or
materials furnished, or measured by the work performed, growing out of or
incident to Contractor's operations hereunder. Contractor agrees to reimburse
Owner and Owner's employees for each and every reasonable cost or charge,
including court
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costs, all expenses of litigation and reasonable attorney's fees, if any, which
Owner, its successors, assigns or employees, may incur in defending against or
prosecuting any such claims, demands, causes of action or suits brought pursuant
to Services performed under this Agreement.
9.1.2 Contractor shall release, indemnify, and hold the Owner
harmless from and against any and all claims arising from or relating to any
loss or damage to property of any kind owned or leased by Contractor or its
employees, servants, agents and Subcontractors unless directly or indirectly due
to Owner's or Owner's employee's negligence.
9.1.3 All obligations to assume, protect, defend, indemnify, and
save the Owner harmless shall extend to the Owner's officers, directors,
employees, agents, shareholders, and to companies and other legal entities that
control, are controlled by, are subsidiaries of, or are affiliated with Owner
and the respective officers, directors, agents, and employees of such companies
or entities and shall continue for so long as any of the named indemnities may
be subjected to claims or suits calling for such obligations, notwithstanding
the completion, acceptance or payment for the Work.
9.2 INDEMNIFICATION BY OWNER. Owner shall be liable for and shall
defend, indemnify and hold harmless the Contractor and its officers, directors,
agents and employees from and against any Claims to the extent they arise from
the negligence and/or willful misconduct of the Owner, its employees or agents.
9.3 NOTICE OF CLAIMS. Each party shall notify other promptly of written
Claims or demands of which the other party is responsible hereunder. The
indemnifying party shall have the right to defend the Claim with counsel of its
own choosing but no settlement or compromise of any Claim hereunder shall be
completed without the consent of the indemnified party.
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9.4 LIMITATION OF LIABILITY. In no event shall either party hereto be
liable for any consequential, incidental, special, indirect or remote damages
including, but not limited to, loss or use, lost revenues or profits (except for
Contractor's Fee Trueup payable under Article 4.10 hereof) or interest on
borrowed funds, arising out of or in connection with its performance of this
Agreement whether arising in contract, warranty, tort (including negligence) or
strict liability.
ARTICLE 10. WARRANTY
10.1 WARRANTY. Any equipment, materials, and services supplied by
Contractor, its agents, employers, suppliers, or Subcontractors, are warranted
by Contractor or its suppliers or Subcontractors as appropriate, to be of good
quality and workmanship and will be properly installed by Contractor or its
Subcontractors as appropriate. To the extent possible, Contractor shall also
assign to Owner all manufacturers, suppliers or Subcontractor's warranties for
any services, equipment and materials. All warranties made hereunder shall be
for a minimum period of one (1) year following Owner's acceptance of the Work
for such Project unless otherwise specified in a Work Order, provided however,
that any warranty for materials or services not provided directly by Contractor
shall be the warranty of the Subcontractor or supplier which Contractor shall
pass through to Owner. Where a Certificate of Occupancy is issued by Contractor
to Owner, the warranty period shall commence upon the date the Certificate of
Occupancy is issued for equipment, materials, or services which are directly
related to such Certificate of Occupancy. Contractor shall not be obligated to
continue these warranty obligations for any equipment (including software),
materials and/or services which have been improperly repaired or altered,
abused, misused or improperly handled by Owner unless such repair or alteration
was necessitated by an act or omission of Contractor, Subcontractor or their
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respective employees or agents. Notwithstanding the foregoing, all fiber optic
cable purchased by Contractor for Owner hereunder shall have a minimum three
(3) year warranty assignable to Owner unless otherwise agreed to in a Work
Order.
10.2 FREE FROM DEFECTS. The Contractor warrants to the Owner that all
materials and equipment furnished under this Agreement will be new unless
otherwise specified in an Work Order or agreement for Other work, free from
faults and defects and in conformance with the Work Order, agreement for Other
Work and/or this Agreement. All work not conforming to these requirements,
including substitutions not properly approved and authorized, may be considered
defective and must be cured by Contractor at Contractor's expense. If required
by the Owner, Contractor shall furnish satisfactory evidence as to the kind and
quality of materials and equipment furnished hereunder.
10.3 NO OTHER WARRANTIES. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
FOREGOING WARRANTIES AND THOSE CONTAINED IN ANY WORK ORDER OR AGREEMENT FOR
OTHER WORK CONSTITUTE THE ONLY WARRANTIES WITH RESPECT TO THE WORK PERFORMED
HEREUNDER, OR ANY STATEMENT OF WORK, THERE BEING NO OTHER WARRANTIES, EXPRESSED
OR IMPLIED, INCLUDING NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE 11 HAZARDOUS MATERIALS AND CONCEALED CONDITIONS
11.1 HAZARDOUS MATERIALS. In the event Contractor encounters toxic or
hazardous materials in performance of any Project, any resulting delays and
costs shall be considered to be beyond its control, without its fault and
outside the scope of such Project unless such encounter
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is due to the gross negligence or willful misconduct of Contractor, its
employees, officers or directors or Subcontractors. Such toxic or hazardous
materials shall be removed or otherwise dealt with by Owner or by the
appropriate government agency, organization or third party. Contractor shall
have no obligation, responsibility or liability with respect to such materials.
Notwithstanding the foregoing, Contractor agrees that it will be responsible for
the cleanup or any other cost, damage or liability arising from any toxic or
hazardous materials generated or used by Contractor, its employees or
Subcontractors in the course of its performance of any Work under this
Agreement. Contractor agrees in any event to cooperate fully with Owner and to
perform reasonable and customary investigations as to the existence of hazardous
materials prior to the performance of any Work hereunder.
11.2 CONCEALED CONDITIONS. The Contractor shall promptly, upon discovery,
and before any such conditions are disturbed, notify the Owner in writing of:
(1) subsurface or latent physical conditions at the site of Work differing
materially from those indicated in the Contract Documents, or (2) unknown
physical conditions at such site, of an unusual nature, differing materially
from those ordinarily encountered and generally recognized as inherent in work
of the character provided for in this Agreement. The Contractor shall, at
Owner's direction, promptly investigate the conditions, and if it finds that
such conditions do materially so differ and cause an increase or decrease in the
Contractor's cost of, or the time for, performance of any part of the Work under
the applicable Work Order an equitable adjustment of time shall be, made and the
Work Order modified accordingly. Owner and Contractor acknowledge that all costs
incurred in investigating the conditions and performing such Work are
Reimbursable Costs.
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ARTICLE 12 MISCELLANEOUS
12.1 TITLE. Title to all Work completed pursuant to a Work Order or
agreement for Other Work hereunder and to all materials and supplies on account
of which payment in full has been made by Owner shall be and vest in the name of
Owner.
12.2 ASSIGNMENT. Owner may not transfer, assign or otherwise delegate its
obligations under this Agreement without the express written consent of the
Contractor which consent shall not be reasonably withheld; provided, however,
that Owner may assign its rights, including the obligation of payment to
Contractor and Owner's rights under any Work Order or agreement for Other Work,
under this Agreement to its subsidiaries, affiliates or successors in interest
without prior written consent of Contractor. Contractor may not transfer, assign
or otherwise delegate its obligations under this Agreement without the express
written consent of Owner which may be withheld by Owner in its sole discretion.
Any assignment by any party hereunder shall not release the assigning party from
its obligations under this Agreement.
12.3 SEVERABILITY. If any provision of this Agreement is adjudicated to be
invalid or unenforceable, the remainder shall be valid and enforceable, and the
parties shall negotiate in good faith to recreate such provision in a valid and
enforceable form to provide for the intent of such provision.
12.4 WAIVER. Failure of Owner or Contractor at any time to require strict
performance of any provision of this Agreement shall not constitute a waiver of
that provision nor in any way limit enforcement of that provision.
12.5 NOTICES. Except as otherwise set forth herein, when any notice or
other communication is required or authorized to be given hereunder, such notice
shall, for all
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purposes, be in writing and either delivered personally to the addressee, by
telex or facsimile transmission followed by mailing, or mailed registered or
certified mail return receipt requested, or by express mail, postage prepaid and
shall be deemed given when so delivered personally, when such telex or facsimile
transmission is received or, if mailed, five (5) days after the date of mailing
to the address of the respective parties at the following addresses:
(i) if sent by Owner to Contractor, addressed as follows:
MFS Network Technologies, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: Vice President, Operations
With a copy to:
MFS Network Technologies, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx, 0000
Xxxxx, XX 00000
Attn: Vice President, Corporate and Legal Affairs
and
Able Telcom Holding Corp.
0000 Xxxxx Xxxxx
Xxxxx 0000
Xxxx Xxxx Xxxxx, XX 00000
Attn: President
(ii) If sent by Contractor to Owner, addressed as follows:
WorldCom Network Services, Inc.
Purchasing & Contracts, MD 1.1-131F
0000 X. Xxxxxxxx Xxxxxx
Xxxxx, XX 00000
Attn: Contract Administrator
With a copy to:
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WorldCom Network Services, Inc.
0000 X. Xxxxxxxx Xxxxxx
Xxxxx, XX
Attn: Vice President, Construction and Facilities
and
Worldcom, Inc.
Xxx Xxxxx Xxxx, Xxxxx 0000
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Counsel for Development
12.6 CONFIDENTIALITY.
12.6.1 Owner and Contractor agree to hold and will use their commercially
reasonable efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning this
Agreement and any Work or Project performed hereunder, except to the extent that
such information can be shown to have been (i) in the public domain through no
fault of the received party, or (ii) later lawfully acquired by the receiving
party from third parties without an obligation of confidentiality. The
obligation of Owner and Contractor to hold any such information in confidence
shall be satisfied if it exercises the same care with respect to such
information as it would take preserve the confidentiality of its own similar
information.
12.6.2 The drawings, specifications and other documents are
instruments of service through which the Work to be performed by the Contractor
is described. The Contractor may retain one record set. The Contractor shall not
own or claim a copyright or any other right in the drawings, specifications and
other documents. All copies of them, except the record set, shall be returned to
Owner on request upon completion of the Project. The drawings,
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specifications and other documents and copies thereof furnished to the
Contractor, are for use solely with respect to a Project. They are not to be
used by the Contractor on other projects without the specific written consent of
the Owner. The Contractor is granted a limited license to use and reproduce
applicable portions of the drawings, specifications and other documents prepared
for a Project appropriate to and for use in the performance of the Contractor's
services under this Agreement. All drawings, specifications and other documents
relating to the Project are owned by the Owner, including drawings,
specifications and other documents generated by Contractor for Owner or used to
perform work for Owner prior to the date of this Agreement
12.6.3 Subject to the confidentiality requirements stated herein,
neither party shall reference or use any part of this Agreement or the names of
the parties hereto in any press release, marketing, advertising or other sales
or promotional materials without the express written consent of the other party
which will not be unreasonably withheld or delayed.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 NO CONSTRUCTION AGAINST DRAFTER. The parties acknowledge that this
Agreement and all the terms and conditions contained herein have been fully
reviewed and negotiated by the parties and that each party has been represented
by Counsel. Having acknowledged the foregoing, the parties agree that any
principle of construction or rule of law that provides that, in the event of any
inconsistency or ambiguity, an agreement shall be construed against the drafter
of the agreement shall have no application to the terms and conditions of this
Agreement.
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12.9 COURSE OF DEALING. The parties acknowledge that due to the previous
relationship between Contractor and Owner, the sequence of previous acts and
conduct between Contractor and Owner related to the Work to be performed
pursuant to this Agreement and any Work Orders or agreements for Other Work
executed hereunder, is fairly to be regarded as establishing a common basis of
understanding for interpreting each party's expressions and other conduct as
further described in the Uniform Commercial Code.
12.10 SURVIVAL. The provisions of Articles 9, 10, 11 and 12 shall survive
the expiration or termination of the Agreement and Owner and Contractor each
agree to be bound thereto as appropriate.
12.11 GOVERNING LAW. The Agreement, and all the rights and duties of the
parties arising from or relating in any way to the subject matter of this
Agreement or the transaction(s) contemplated by it, shall be governed by,
construed, and enforced in accordance with the laws of the State of Delaware
(excluding any conflict of laws provisions).
12.12 ENTIRE AGREEMENT. This Agreement and all Exhibits an Schedules
attached hereto constitute the entire agreement between parties with respect to
the subject matter hereof. This Agreement shall be binding upon the parties
hereto and their permitted successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this instrument,
through their authorized officers, effective the date first above written.
OWNER
WORLDCOM NETWORK SERVICES, INC.
By:______________________________
Xxxx Xxxxxxxx
Title:____________________________
CONTRACTOR
MFS NETWORK TECHNOLOGIES, INC.
By:_______________________________
Title:____________________________
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MASTER SERVICE AGREEMENT
LIST OF OMITTED SCHEDULES
EXHIBIT EXHIBIT TITLE
------- -------------
A CURRENT PROJECTS
B WORK ORDERS
C AGREEMENTS FOR OTHER WORK
D ENGINEERING SERVICES RATE SCHEDULE
E CHANGE ORDER FORM
F CERTIFICATE OF COMPLETION
G CONTRACTOR'S LABOR POLICIES
H SUBCONTRACT TERMS & CONDITIONS
I PROFESSIONAL SERVICES AGREEMENT
J INVOICE FORM
THE COMPANY WILL PROVIDE COPIES OF ANY OMITTED EXHIBIT(S) TO THE COMMISSION
UPON REQUEST FROM THE COMMISSION FOR SAID EXHIBIT(S).
