<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 25, 1996
LORAL SPACE & COMMUNICATIONS LTD.
(Exact name of registrant as specified in its charter)
Islands of Bermuda 1-14180 13-3867424
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
600 Third Avenue, New York, New York 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 697-1105
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Item 5. Other Events.
On September 25, 1996, Loral Space & Communications Ltd.
("Loral") and AT&T Corp. ("AT&T") entered into a definitive Agreement for the
Purchase and Sale of Assets dated as of September 25, 1996 (the "Agreement")
between AT&T, as Seller, and Loral, as Buyer. Pursuant to the Agreement, Loral
agreed to buy the assets and operations of AT&T's Skynet Satellite Services
business for $712.5 million in cash, subject to adjustment in an amount equal
to the difference between $487 million and the amount of net assets delivered
to Loral at closing. Consummation of the transaction is subject to, among
other things, applicable regulatory reviews, including approval by the Federal
Communications Commission and expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. A copy
of each of the Agreement and the press release of Loral announcing the
transaction is filed as Exhibit 2.1 and Exhibit 99.1 hereto, respectively, and
incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
Exhibit 2.1 Agreement for the Purchase and Sale of Assets dated as of
September 25, 1996 by and between AT&T Corp., as Seller, and
Loral Space & Communications Ltd., as Buyer
Exhibit 99.1 Press Release of Loral Space & Communications Ltd. dated
September 25, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
LORAL SPACE & COMMUNICATIONS LTD.
(Registrant)
Date: September 27, 1996 By: /s/ Eric J. Zahler
Eric J. Zahler
Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Exhibit Description
Exhibit 2.1 Agreement for the Purchase and Sale of Assets dated as of
September 25, 1996 by and between AT&T Corp., as Seller, and
Loral Space & Communications Ltd., as Buyer
Exhibit 99.1 Press Release of Loral Space & Communications Ltd. dated
September 25, 1996
<PAGE>
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
by and between
AT&T Corp.
as Seller
and
Loral Space & Communications Ltd.
as Buyer
dated as of September 25, 1996
<PAGE>i
TABLE OF CONTENTS
Page
1. DEFINITIONS.............................................................1
1.1. DEFINED TERMS...............................................1
1.2. OTHER DEFINITIONS AND INTERPRETIVE MATTERS.................10
2. PURCHASE AND SALE OF ASSETS............................................11
2.1. PURCHASED ASSETS...........................................11
2.2. EXCLUDED ASSETS............................................14
2.3. CLOSING DATE...............................................15
2.4. PURCHASE PRICE.............................................15
2.5. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE..................15
2.6. ASSUMED LIABILITIES........................................17
2.7. EXCLUDED LIABILITIES.......................................18
2.8. CONSENT OF THIRD PARTIES; FURTHER ASSURANCES...............19
2.9. APPORTIONMENT AT CLOSING DATE; CUSTOMER BILLING............20
2.10. BULK SALES LAW............................................20
2.11. TRANSFER TAXES............................................21
2.12. PERTINENT RETAINED INFORMATION............................21
2.13. TRANSFER OF TITLE.........................................21
2.14. LICENSED PATENTS..........................................21
2.15. LICENSED SOFTWARE.........................................22
3. REPRESENTATIONS AND WARRANTIES OF SELLER...............................23
3.1. ORGANIZATION AND AUTHORITY.................................23
3.2. AUTHORIZATION; BINDING OBLIGATION..........................23
3.3. NO VIOLATIONS..............................................23
3.4. FINANCIAL STATEMENTS.......................................24
3.5. ABSENCE OF UNDISCLOSED LIABILITIES.........................24
3.6. ABSENCE OF CHANGES.........................................25
3.7. TITLE TO ASSETS............................................26
3.8. GOVERNMENTAL PERMITS.......................................27
3.9. COMPLIANCE WITH LAWS AND LITIGATION........................27
3.10. BUSINESS EMPLOYEES........................................28
3.11. BENEFIT PLANS.............................................29
3.12. CONTRACTS.................................................29
3.13. ENVIRONMENTAL MATTERS.....................................30
3.14. BROKERS...................................................30
3.15. PROPRIETARY INFORMATION...................................30
3.16. REAL ESTATE...............................................31
3.17. INSURANCE.................................................32
3.18. TAX-EXEMPT USE PROPERTY..................................33
3.19. SUFFICIENCY OF ASSETS.....................................33
3.20. ACCURACY OF INFORMATION...................................33
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4. REPRESENTATIONS AND WARRANTIES OF BUYER...............................33
4.1. ORGANIZATION AND AUTHORITY.................................33
4.2. AUTHORIZATION; BINDING OBLIGATIONS.........................34
4.3. NO VIOLATIONS..............................................34
4.4. BROKERS35
5. CERTAIN COVENANTS.....................................................35
5.1. INFORMATION................................................35
5.2. CONDUCT OF BUSINESS........................................36
5.3. TAX REPORTING AND ALLOCATION OF CONSIDERATION..............38
5.4. BUSINESS EMPLOYEES; COLLECTIVE BARGAINING AGREEMENTS.......39
5.5. OPERATING AGREEMENTS.......................................45
5.6. ANTITRUST AND COMMUNICATIONS ACT COMPLIANCE................45
5.7. NONCOMPETITION; NO SOLICITATION OR HIRE....................46
5.8. AT&T NAME..................................................48
5.9. ADDITIONAL INSURANCE.......................................48
5.10. EFFORTS TO SATISFY CERTAIN CLOSING CONDITIONS.............48
5.11. FINANCIAL STATEMENTS......................................48
5.12. TRANSITIONAL SERVICES; NONASSIGNABLE LICENSES.............49
5.13. PREFERRED SUPPLIER RELATIONSHIP...........................50
5.14. PROPRIETARY INFORMATION...................................50
6. CONFIDENTIAL NATURE OF INFORMATION....................................51
7. CLOSING...............................................................51
7.1. DOCUMENTS TO BE DELIVERED BY SELLER........................51
7.2. DOCUMENTS TO BE DELIVERED BY BUYER.........................52
7.3. CONTEMPORANEOUS EFFECTIVENESS..............................53
8. CONDITIONS PRECEDENT TO CLOSING.......................................53
8.1. GENERAL CONDITIONS.........................................53
8.2. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................54
8.3. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS...............56
9. STATUS OF AGREEMENT...................................................56
9.1. EFFECT OF BREACH...........................................56
9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................56
9.3. GENERAL AGREEMENT TO INDEMNIFY.............................57
9.4. GENERAL PROCEDURES FOR INDEMNIFICATION.....................58
9.5. PROCEDURES FOR INTELLECTUAL PROPERTY INDEMNIFICATION.......59
9.6. ENVIRONMENTAL MATTERS......................................61
9.7. ARBITRATION; CHOICE OF LAW.................................66
10. MISCELLANEOUS PROVISIONS.............................................68
10.1. NOTICES...................................................68
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10.2. EXPENSES..................................................69
10.3. ENTIRE AGREEMENT; MODIFICATION............................69
10.4. ASSIGNMENT; BINDING EFFECT; SEVERABILITY..................70
10.5. GOVERNING LAW.............................................70
10.6. EXECUTION IN COUNTERPARTS.................................70
10.7. PUBLIC ANNOUNCEMENT.......................................70
10.8. NO THIRD-PARTY BENEFICIARIES..............................70
11. TERMINATION AND WAIVER...............................................71
11.1. TERMINATION...............................................71
11.2. EFFECT OF TERMINATION.....................................71
11.3. WAIVER OF AGREEMENT.......................................72
11.4. AMENDMENT OF AGREEMENT....................................73
Schedules
Schedule 1.1A Satellite Control Facilities
Schedule 1.1A-1 Permitted Encumbrances
Schedule 1.1A-2 Permitted Realty Encumbrances
Schedule 1.1B Principal Equipment
Schedule 2.1(d) Inventory
Schedule 2.1(e) Material Contracts
Schedule 2.1(f) IP Licenses
Schedule 2.1(n) Process Management Software System
Schedule 2.2(e) Excluded Contracts
Schedule 2.4(b) Purchase Price Increases
Schedule 2.5(a) Opening Net Asset Statement
Schedule 3.3 Certain Violations
Schedule 3.6 Certain Changes
Schedule 3.7 Title to Assets
Schedule 3.8 Governmental Permits
Schedule 3.10 Business Employees
Schedule 3.11 Benefit Plans
Schedule 3.13 Environmental Permits
Schedule 3.15 Proprietary Information
Schedule 3.17 Insurance
Schedule 4.3 Buyer's Consents
Schedule 5.4(f)(ii) Certain Payments
Schedule 5.5 Certain Operating Agreement Terms
Schedule 5.7(c) Certain Employees
Exhibits
Exhibit A [Intentionally Omitted]
Exhibit B-1 Network and Computing Services
Transponder Capacity Agreement
Exhibit B-2 Tridom Technical Support Agreement
Exhibit B-3 Tridom Capacity Agreement
Exhibit C Form of Assignment and Assumption Agreement
Exhibit D [Intentionally Omitted]
Exhibit E Form of Bill of Sale
Exhibit F Form of California Grant Deed
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Exhibit G Form of Pennsylvania Special Warranty Deed
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AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS (this "Agreement")
is made as of September 25, 1996 by and between AT&T Corp., a New York
corporation ("Seller" or "AT&T"), and Loral Space & Communications Ltd., a
Bermuda company ("Buyer").
WHEREAS, Seller is, among other things, engaged through its Skynet
Satellite Services division in the provision of Satellite Services (as
hereinafter defined); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, certain assets and operations relating to the provision of
Satellite Services as more fully described herein, upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
1. Definitions
1.1. Defined Terms
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
"Acquired Employees" has the meaning set forth in Section 5.4.
"Adjusted Resale Amount" means the excess, if any, of (i) the fair
market value of the aggregate consideration paid or payable to Seller by a Third
Party in respect of a sale of the Business following a termination of this
Agreement over (ii) the net assets of the Business as of the closing date of
such sale (determined as contemplated in Section 2.5).
"Adjustment Amount" has the meaning set forth in Section 2.5.
"Affiliate" of a Person means any Person controlling, controlled by, or
under common control with, such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Allocation" has the meaning set forth in Section 5.3.
"Alternative" has the meaning set forth in Section 9.6.3.
"Arthur Andersen" means Arthur Andersen L.L.P.
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"Asset Acquisition Statement" has the meaning set forth in Section 5.3.
"Assumed Liabilities" means the liabilities and obligations of Seller
assumed by Buyer pursuant to the Assignment and Assumption Agreement and Section
2.6.
"Assignment and Assumption Agreement" has the meaning set forth in
Section 2.6.
"Benefit Plan" means, in respect of any present or former Business
Employee, each "employee benefit plan," as defined in Section 3(3) of ERISA
(including any "multiemployer plan" as defined in Section 3(37) of ERISA), and
each profit-sharing, bonus, stock option, stock purchase, stock ownership,
pension, retirement, severance, deferred compensation, excess benefit,
supplemental unemployment, postretirement medical or life insurance, welfare or
incentive plan, or sick leave, long-term disability, worker's compensation,
medical, hospitalization, life insurance, other insurance plan, or other
employee benefit plan, program or arrangement, qualified or nonqualified, funded
or unfunded, maintained or contributed to by Seller.
"Best Efforts" means that the obligated party is required to make a
diligent and good faith effort to accomplish the applicable objective using all
resources reasonably available to it. Such obligation, however, does not require
a substantial expenditure of funds or the incurrence of a substantial liability
on the part of the obligated party, nor does it require that the obligated party
act in a manner that would be contrary to normal commercial practices in order
to accomplish the objective. The fact that the objective is not actually
accomplished is no indication that the obligated party did not in fact utilize
its Best Efforts in attempting to accomplish the objective.
"Business" means the assets and business, including all associated
goodwill, of Seller's C Band and Ku Band satellite operations, as conducted by
Skynet Satellite Services.
"Business Day" means a day that is not a Saturday, a Sunday or a
statutory or civic holiday in the State of New York or any other day on which
the principal offices of either Seller or Buyer are closed or become closed
prior to 2:00 p.m. local time whether in accordance with established company
policy or as a result of unanticipated events, including adverse weather
conditions.
"Business Employees" means the employees of Seller employed in
connection with the Business (excluding temporary, leased and contract
personnel), each of whom has been identified pursuant to Section 3.10.
"Business Financial Statements" has the meaning set forth in Section
3.4.
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"Business Information" means any and all information that constitutes
Seller Proprietary Information, including, without limitation, trade secrets,
works of authorship, software, copyrightable subject matter, copyrights and
registrations, mask works, know-how and show-how, specifications, technical
manuals and data, libraries, blueprints, drawings, proprietary processes,
product information and development work-in-process, but does not include any
Patent, Mark or IP License.
"Business Records" has the meaning set forth in Section 2.1(h).
"Buyer's Appraisal" has the meaning set forth in Section 5.3.
"Buyer Pension Plan" has the meaning set forth in Section 5.4.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Closing" means the closing of the transactions described in Article 7.
"Closing Accountants' Report" has the meaning set forth in Section 5.4.
"Closing Date" means the date of the Closing as determined pursuant
to Section 2.3.
"Closing Net Asset Statement" has the meaning set forth in Section
2.5.
"Closing Net Asset Statement Report" has the meaning set forth in
Section 2.5.
"Code" means the Internal Revenue Code of 1986, as amended and as now
or hereafter construed, interpreted and applied by regulations, cases and
officially published rulings.
"Commission" or "FCC" means the United States Federal Communications
Commission.
"Communications Act" means the United States Communications Act of
1934, as amended to date.
"Contracts" has the meaning set forth in Section 2.1(e).
"Coopers & Lybrand" means Coopers & Lybrand L.L.P.
<PAGE>4
"Counsel for Buyer" means (i) with respect to matters of Bermuda law,
Appleby, Spurling & Kempe and (ii) with respect to all other matters, Eric J.
Zahler, Esq. or Avi Katz, Esq.
"Counsel for Seller" means Walter DeSocio, Esq.
"Encumbrance" means any security interest, mortgage, deed of trust,
lien, judgment, hypothecation, pledge, Tax lien, sewer rent, assessment,
mechanic's or materialman's lien, assignment, easement, servitude,
right-of-way, restriction, tenancy, encroachment or burden or any other right
or claim of others affecting the Purchased Assets and any restrictive covenant
or other agreement, restriction or limitation on the use of the Purchased
Assets.
"Environmental Conditions" means the presence of any Hazardous
Materials or Wastes on, in or under the Satellite Control Facilities or any
other real estate, if any, transferred or leased pursuant to this Agreement.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), 42 U.S.C. (beta)(beta) 9601 et seq.;
the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. (beta)(beta) 6901
et seq.; the Federal Water Pollution Control Act, 33 U.S.C. (beta)(beta) 1251
et seq.; the Clean Air Act, 42 U.S.C. (beta)(beta) 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. (beta)(beta) 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C., (beta)(beta) 2601-2629; the Safe Drinking
Water Act, 42 U.S.C. (beta)(beta) 300f-300j; and the California Safe Drinking
Water and Toxic Enforcement Act of 1986 (California Proposition 65, Cal.
Health and Safety Code (beta) 2500 et seq.), as amended from time to time; and
any state and local laws and ordinances that regulate in any way Hazardous
Materials or Wastes and the regulations implementing such statutes.
"Environmental Matters" means (i) the actual or threatened discharge,
spill, disposal, emission or other release of any Hazardous Materials or
Wastes or other pollutant or contaminant into the environment; (ii) the
location of fill, structures or other aspects of the Satellite Control
Facilities in environmentally sensitive areas; (iii) the generation, storage,
location, disposal or arranging for disposal of Hazardous Materials or Wastes;
or (iv) the violation or suspected violation of any applicable Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the properties and assets used in connection
with the Business excluded from the Purchased Assets by Section 2.2.
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"Excluded Employee Obligations" has the meaning set forth in Section
2.7(b).
"Excluded Liabilities" means the liabilities and obligations that are
not assumed by Buyer as provided in Section 2.7.
"FCC Licenses" means the licenses and authorizations issued by the
Commission for the provision of Satellite Services.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"Governmental Body" means any U.S. or foreign court, government
(federal, state or local), department, commission, board, agency, bureau,
official or other regulatory, administrative or governmental authority.
"Governmental Permits" has the meaning set forth in Section 3.8.
"Hazardous Materials or Wastes" means any toxic or hazardous
substance, material or waste which is or becomes subject to or regulated by
any local governmental authority or the United States Government, and
includes, but is not limited to, any hazardous substance pursuant to (beta)
311 of the Federal Water Pollution Control Act (33 U.S.C. (beta) 1321), any
hazardous waste pursuant to (beta) 1004 of the Federal Resource Conservation
and Control Act, 42 U.S.C. (beta) 6901, et seq., any hazardous substance
pursuant to (beta) 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (beta) 9601 et seq., any regulated
substance pursuant to Subchapter IX, Solid Waste Disposal Act, 42 U.S.C.
(beta) 6991, any regulated substance under the Toxic Substances Control Act,
15. U.S.C. (beta) 2601 et seq., any petroleum product or waste, or any
derivative therefrom, or any other substance which requires remediation under
any applicable law or regulation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" has the meaning set forth in Section 9.3.
"Indemnifying Party" has the meaning set forth in Section 9.4.
"Independent Accounting Firm" has the meaning set forth in Section
2.5.
"Infringement Claim" has the meaning set forth in Section 9.5.
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"Intellectual Property Licenses" and "IP Licenses" each means all
licenses, agreements and other arrangements, other than the Nonassignable IP
Licenses, under which Seller has the right to use any Third Party Proprietary
Information.
"Interim Period" has the meaning set forth in Section 7.
"Inventory" has the meaning set forth in Section 2.1(d).
"IRS" means the U.S. Internal Revenue Service.
"Joint Patents" means the patents and patent applications jointly
owned by Seller and a Third Party that are identified as the "Joint Patents"
in Schedule 3.15.
"Key Employee" means any Business Employee earning a base salary in
excess of $70,000 per annum.
"Losses" has the meaning set forth in Section 9.3(a).
"Management" has the meaning set forth in Section 9.6.
"Marks" means trademarks, service marks, trade names, emblems, logos,
insignia, the registrations therefor and the goodwill of the Business
associated therewith, that constitute Seller Proprietary Information, but
shall exclude the marks AT&T, AT&T's associated logo design or any compound
mark that incorporates the mark AT&T or AT&T's associated logo design.
"Material Adverse Effect" means any change or effect (or series of
related changes or effects) that has had, or is reasonably likely to result
in, a material adverse change in or effect on the condition (financial or
otherwise) of the Business taken as a whole or on the use of the Purchased
Assets taken as a whole; provided, however, that (i) events, circumstances or
conditions resulting from changes, developments or circumstances in worldwide,
national or local conditions (political, economic, regulatory or otherwise)
that adversely affect a broad group of industries generally, in each case
where such events, circumstances or conditions do not adversely affect the
Purchased Assets or the Business disproportionately; (ii) the effects of
competition or changes in prices of products or services; (iii) any failure
triggering price reduction pursuant to Section 2.4(c); and (iv) any launch
failure affecting Telstar 5 shall not constitute a Material Adverse Effect.
"Material Contracts" has the meaning set forth in Section 3.12.
"Message Toll Service" means ordinary switched long-distance service,
charged on a usage-sensitive basis.
"Net Assets" has the meaning set forth in Section 2.5.
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"Nonassignable Assets" has the meaning set forth in Section 2.8.
"Nonassignable IP Licenses" means licenses of Third Party Proprietary
Information to which Seller or an Affiliate of Seller is the licensee and that
are not assignable, by the terms of the existing license, to Buyer.
"Noncompetition Undertakings" has the meaning set forth in Section
5.7.
"Opening Net Asset Statement" means a special purpose statement of
net assets available for sale of Skynet Satellite Services, dated as of
December 31, 1995 and annexed hereto as Schedule 2.5(a).
"Operating Agreements" means the agreements specified in Section 5.5
as being attached hereto as Exhibits, together with the modifications thereto
called for by Section 5.5 to be entered into between Buyer and Seller and/or
its Affiliates at or prior to Closing.
"Patents" means (1) patents and patent applications, worldwide, that
claim, and (2) patentable subject matter concerning, inventions constituting
Seller Proprietary Information, including the Joint Patents.
"Permitted Encumbrances" means (i) the Encumbrances set forth on
Schedule 1.1A-1 and (ii) minor imperfections in title and minor encroachments,
if any, that, individually or in the aggregate, do not materially interfere
with the conduct of the Business or with the use of the individual Purchased
Assets and do not materially affect the value of the individual Purchased
Assets; provided that the Permitted Encumbrances shall not include the
Permitted Realty Encumbrances.
"Permitted Realty Encumbrances" means (i) the Encumbrances specified
on Schedule 1.1A-2, (ii) such state of facts as accurate surveys of the
Satellite Control Facilities would show; provided, that same do not interfere
in any material respect with the continued use of the affected Satellite
Control Facility in connection with the conduct of the Business, (iii) minor
imperfections of title and minor encroachments, if any, not material in amount
or scope that individually or in the aggregate, do not materially interfere
with the continued use of the affected Satellite Control Facility in
connection with the conduct of the Business or in any respect detract from
insurability of title to the affected Satellite Control Facility, and (iv)
liens for real estate taxes for 1996 that are not yet due and payable.
"Person" means any individual, corporation, partnership, firm,
association, joint venture, joint stock company, trust or
<PAGE>8
other entity, or any government or regulatory, administrative or political
subdivision or agency, department or instrumentality thereof.
"Personal Property" has the meaning set forth in Section 2.1(c).
"Pertinent Retained Information" has the meaning set forth in Section
2.2(b).
"Principal Equipment" means the following: (i) the Satellites; (ii)
all tracking, telemetry and command equipment located at the Satellite Control
Facilities; (iii) all testing, monitoring and demonstration equipment (to the
extent used primarily in connection with the Business) located at the
headquarters of the Business in Bedminster, NJ or research and development
facilities in Holmdel, NJ; and (iv) all items identified on Schedule 1.1B
hereto.
"Process Management System Software" has the meaning set forth in
Section 2.1(n).
"Projections" has the meaning set forth in Section 5.13.
"Proprietary Information" means information, in any form whatsoever,
tangible or intangible, either (1) owned by Seller ("Seller Proprietary
Information") or (2) owned by a Third Party and under which Seller enjoys a
license ("Third Party Proprietary Information"), which information is used or
held for use in connection with the Business.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchase Price" means the payment to be made by Buyer in
consideration for the Purchased Assets as provided in Section 2.4.
"Reference Amount" means $487,000,000.
"Release" means any actual or threatened releasing, spilling,
leaking, discharging, disposing of, pumping, pouring, emitting, emptying,
injecting, leaching, dumping or allowing to escape.
"Remedial Action" means actions required by Environmental Law to: (i)
clean up, remove, treat or in any other way address Hazardous Materials or
Wastes; and (ii) prevent the Release, or minimize the further Release, of
Hazardous Materials or Wastes.
"Resale Loss Amount" means the amount, if any, by which $225,500,000
exceeds the Adjusted Resale Amount.
<PAGE>9
"Resale Profit Amount" means the amount, if any, by which the
Adjusted Resale Amount exceeds $225,500,000.
"Satellites" means the Telstar 302, Telstar 303, Telstar 401 and
Telstar 402R satellites and, to the extent Seller has a contractual interest
in all or any components thereof, the Telstar 5 and Telstar 6 satellites.
"Satellite Control Facilities" means the real property and all
buildings, fixtures, structures and other improvements of any kind or nature
situated thereon, together with all easements, appurtenances, leases,
tenancies, options, rights-of-way and any other real property rights relating
thereto, owned by Seller and located at Hawley, Pennsylvania and Three Peaks,
California, each of the foregoing facilities as more fully described in
Schedule 1.1A.
"Satellite Services" means providing communications services using a
satellite or satellites, the operation of the Satellites' and other
satellites' transponders, the tracking, telemetry and command of the
Satellites, the coordination of radio signals to and from the Satellites and
other satellites and providing the tracking, telemetry and command services to
Third Parties.
"SEC" means the Securities and Exchange Commission.
"Seller Actuary" has the meaning set forth in Section 5.4.
"Seller Defined Contribution Plans" has the meaning set forth in
Section 5.4.
"Seller Pension Plans" has the meaning set forth in Section 5.4.
"Seller Retiree Welfare Plans" has the meaning set forth in Section
5.4.
"Taxes" shall mean any federal, state, local or foreign taxes,
including income, franchise, gross receipts, gross income, alternative or
add-on minimum, sales, use, ad valorem, tangible, intangible, transfer,
profits, license, capital stock, social security, workers' compensation,
unemployment compensation, utility, production, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, environmental,
windfall profit, real or personal property taxes, customs duties and other
taxes, governmental fees or like charges of any kind whatsoever, together with
any interest, penalties and additions to tax thereon.
"Tax Returns" shall mean returns, reports, information statements and
other documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination,
<PAGE>10
assessment or collection of any Tax and shall include any amended returns
filed or required to be filed as a result of examination adjustments made by
the Internal Revenue Service or other Tax authority.
"Termination Date" has the meaning set forth in Section 11.1.
"Third Party" means any Person not an Affiliate of the other
referenced Person or Persons.
"Third-Party Claim" has the meaning set forth in Section 9.4(b).
"Three Peaks Agreement" has the meaning set forth in Section 8.2(c).
"Title Commitment" means the preliminary title commitment or report
heretofore received by Buyer from the Title Insurance Company.
"Title Insurance Company" means Commonwealth Land Title Insurance
Company or Chicago Title Insurance Company, as applicable.
"Title Policies " has the meaning set forth in Section 7.1(e).
"Transfer Taxes" has the meaning set forth in Section 2.11.
1.2. Other Definitions and Interpretive Matters
Unless otherwise expressly provided, for purposes of this Agreement,
the following rules of interpretation shall apply:
Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Consent of Seller or Buyer. Any requirement herein to the effect that
the consent or approval of either Seller or Buyer is required as a condition
precedent to an act or the exercise of a right by the other that is qualified
by a statement that such consent or approval shall not be unreasonably
withheld shall be
<PAGE>11
deemed to include a further qualification that such consent shall not be
unreasonably delayed.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
Materiality. Any reference to "material" used in relation to the
Business or without express reference to Seller or Buyer, irrespective of the
context, shall mean material in relation to the Business taken as a whole; any
reference to "material" expressly in relation to Seller, irrespective of the
context, shall mean material in relation to the business operations of Seller,
taken as a whole, any reference to "material" expressly in relation to Buyer,
irrespective of the context, shall similarly mean material in relation to the
business operations of Buyer, taken as a whole; and any reference to "material"
in Section 5.2(g) shall mean material in relation to the individual Business
Employee whose benefits are being affected.
Schedules and Exhibits. The Schedules and Exhibits attached to this
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
2. Purchase and Sale of Assets
2.1. Purchased Assets
Upon the terms and subject to the conditions of this Agreement and in
reliance on the representations and warranties contained herein, on the Closing
Date, Seller shall sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase, acquire and accept from Seller, all of Seller's right,
title and interest in, to and under the Purchased Assets as the
<PAGE>12
same shall exist on the Closing Date. For purposes of this Agreement,
"Purchased Assets" shall mean all the assets, properties and rights set forth
or described in Sections 2.1(a) through 2.1(q), inclusive (except in each case
for the Excluded Assets), whether or not any of such assets, properties or
rights have any value for accounting purposes or are carried or reflected on
or specifically referred to in Seller's books or financial statements:
(a) the Satellite Control Facilities and all Personal
Property located at the Satellite Control Facilities;
(b) the Principal Equipment;
(c) all fixtures, machinery, equipment, test equipment,
computers, furniture and office equipment (the "Personal Property") wherever
located, used or held for use primarily in the conduct of the Business,
including, without limitation, desks, tables, chairs, file cabinets and other
storage devices, communicating equipment, personal computers and servers and
related network equipment, software and peripherals, and office supplies, but
excluding any tangible Personal Property (other than Proprietary Information
included on or within such tangible Personal Property) used exclusively by a
Business Employee listed on Schedule 5.7(c) who does not become an Acquired
Employee;
(d) all inventory, wherever located, including raw materials,
work in progress, recycled materials, finished products, inventoriable supplies,
and noncapital spare parts used or held for use primarily in the conduct of the
Business, a summary of which and the locations of which are set forth on
Schedule 2.1(d) (the "Inventory") and any rights of Seller to the warranties
received from suppliers, to the extent assignable, and any related claims,
credits, rights of recovery and setoff with respect to such Inventory;
(e) all of Seller's rights under Third-Party contracts,
agreements, leases, purchase orders, sales orders and instruments that will be
in effect on the Closing Date to which Seller or any of its Affiliates is a
party, including the Material Contracts identified on Schedule 2.1(e), (i) for
the lease of machinery and equipment, motor vehicles, or furniture and office
equipment primarily used or held for use in the conduct of the Business, (ii)
for the provision of goods or services used or held for use primarily in the
conduct of the Business, (iii) for the sale of goods or performance of services
by the Business, (iv) for the provision of Satellite Services, (v) for the lease
or sublease of satellites or transponders in connection with the Business, and
(vi) any such contracts, agreements, instruments and leases referred to in
clauses (i)-(v), inclusive, entered into between the date hereof and the
<PAGE>13
Closing Date by Seller other than this Agreement (collectively, the
"Contracts");
(f) the IP Licenses;
(g) except as set forth on Schedule 2.2(g), all customer
lists, electronic databases, computer software, manuals of operation or business
procedures, and other similar information to the extent the same is used or
needed for use in the operation of the Business;
(h) all written records of Seller, including records
maintained in machine-readable format including magnetic or optical storage
media, used or needed for use in the conduct of the Business, but in all cases
excluding Pertinent Retained Information other than as provided in Section 2.12
(the materials described in subsections (g) and (h) of this Section 2.1
hereinafter being referred to herein as "Business Records");
(i) the Marks;
(j) all the accounts, notes and finance receivables generated
by the Business and existing as of the close of business on the Closing Date to
the extent related to periods following the Closing, including all funds,
refunds, receivables, credits, offsets, or reimbursements, claims, debts,
obligations and such other rights, together with all accrued interest thereon
existing as of the close of business on the Closing Date;
(k) to the extent assignable, all Governmental Permits;
(l) all other assets (other than Excluded Assets) either
included in the Business Financial Statements or which would have been included
therein had their book values not been written down to zero, except to the
extent such assets have been disposed of on or after such date in the ordinary
course of business;
(m) any cash, bank deposits, marketable securities or similar
cash or cash equivalent items held by Seller with respect to the Business
(whether received before or after the Closing Date) belonging to, or held on
behalf of, customers of the Business;
(n) the Business Information, other than the Process
Management System software identified on Schedule 2.1(n) (the "Process
Management System Software");
(o) any Patent that is not used or held for use in connection
with any of the businesses of Seller (other than the Business), but excluding
the Joint Patents;
<PAGE>14
(p) all current assets not otherwise referred to in clauses
(a)-(m) above of the Business related to periods following the Closing Date;
and
(q) any other assets used or held for use primarily in the
Business.
The term "Purchased Assets" when used in this Article 2 with respect
to any date prior to the Closing Date shall be deemed to refer to the
properties and assets of Seller generally described as "Purchased Assets" as
the same shall exist at the Closing Date.
2.2. Excluded Assets
Notwithstanding the provisions of Section 2.1, it is hereby expressly
acknowledged and agreed that the Purchased Assets shall not include, and
Seller is not selling, transferring, assigning, conveying or delivering to
Buyer, and Buyer is not purchasing, acquiring or accepting from Seller, the
following (the properties and assets expressly excluded by this Section 2.2 or
otherwise excluded by the terms of Section 2.1 from the Purchased Assets being
referred to herein as the "Excluded Assets"):
(a) any of Seller's cash, bank deposits, marketable
securities or similar cash items existing as of the close of business on the
Closing Date except such items included in Section 2.1(m);
(b) subject to Seller's compliance with Section 2.12, (i)
any other books and records that Seller is required by law to retain, and (ii)
any books and records relating to Seller's treatment, storage, transportation,
disposal, recycling and handling of Hazardous Materials or Wastes (the
materials specified in this Section 2.2(b) being referred to as the "Pertinent
Retained Information");
(c) any claim, right or interest of Seller in or to any
refund, rebate, abatement or other recovery relating to Taxes applicable to
periods prior to the Closing Date, other than Taxes that constitute Assumed
Liabilities;
(d) all "AT&T" marked sales and marketing or packaging
materials, samples, prototypes, other similar AT&T-identified sales and
marketing or packaging materials and any marketing studies, except as
otherwise provided in Section 5.8;
(e) the contracts, agreements, leases and instruments
referred to on Schedule 2.2(e);
(f) all assets attributable or relating to any Benefit
Plan; and
<PAGE>15
(g) all tangible Personal Property (other than Proprietary
Information included on or within such tangible Personal Property) used
exclusively by a Business Employee listed on Schedule 5.7(c) who does not
become an Acquired Employee.
2.3. Closing Date
The Closing shall take place at the offices of Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022
at 10:00 a.m. within three Business Days after all the conditions specified in
Section 8.1 have been satisfied and all the conditions specified in Sections 8.2
and 8.3 have been satisfied or waived, or at such other place or time or on such
other date as Seller and Buyer may agree upon in writing (such date and time
being referred to herein as the "Closing Date").
2.4. Purchase Price
(a) In consideration of the sale, transfer, assignment,
conveyance and delivery by Seller of the Purchased Assets to Buyer, Buyer shall
pay to Seller at the Closing Seven Hundred Twelve Million Five Hundred Thousand
Dollars ($712,500,000), subject to adjustment as hereinafter provided (the
"Purchase Price"). The Purchase Price will be payable in cash by wire transfer
of immediately available funds to the account of Seller designated by Seller's
written instructions.
(b) If, and to the extent that, the Closing occurs after
January 31, 1997, the Purchase Price shall increase, on a weekly basis, at a
rate equal to Five Million Dollars ($5,000,000) per month, as set forth on
Schedule 2.4(b).
(c) If the Telstar 401 satellite experiences any failure of
arc-jet No. 3 and/or No. 4 prior to the Closing other than any failure whose
cause has been identified and corrected prior to the Closing, the Purchase Price
shall be reduced by Ten Million Dollars ($10,000,000).
2.5. Post-Closing Adjustment to Purchase Price
(a) Within forty five (45) calendar days after the Closing
Date, Seller shall deliver to Buyer the special purpose statement of net assets
relating to the Business as of the Closing Date (the "Closing Net Asset
Statement"), together with a draft written report of Coopers & Lybrand (the
"Closing Accountants' Report") to the effect that such Closing Net Asset
Statement has been prepared in such a manner that, apart from the matters set
forth in paragraph 3 of the Report of Independent Accountants from Coopers &
Lybrand included in the Business Financial Statements, no material modifications
are required for such statement to be in conformity with GAAP, applied on a
basis consistent with, and following the accounting principles, procedures,
policies and methods employed in preparing the
<PAGE>16
Opening Net Asset Statement. The Closing Net Asset Statement will not reflect
any asset that has not been paid for in full unless an accrual, payable or
other liability for all Assumed Liabilities with respect thereto is fully
reflected as a liability or a contra-asset on the Closing Net Asset Statement.
During the preparation of the Closing Net Asset Statement by Seller and the
period of any dispute with respect to the application of this Section 2.5,
Buyer shall provide Seller full access to the books, records, facilities and
employees of the Business, and shall cooperate with Seller to the extent
reasonably requested by Seller to prepare the Closing Net Asset Statement or
to investigate the basis for any dispute. The Closing Net Asset Statement and
such draft Closing Accountants' Report shall be examined by Buyer, who shall,
not later than forty five (45) calendar days after receipt thereof render a
report thereon (the "Closing Net Asset Statement Report"). During the
preparation of the Closing Net Asset Statement Report by Buyer and the period
of any dispute with respect to the application of this Section 2.5, Seller
shall provide to Buyer full access to the books, records, facilities and
employees of Seller and Seller's independent accountants, and shall cooperate
with Buyer to the extent reasonably requested by Buyer to prepare the Closing
Net Asset Statement Report or to investigate the basis of any dispute. The
Closing Net Asset Statement Report shall list those items, if any, set forth
in the Closing Net Asset Statement or the draft Closing Accountants' Report to
which Buyer takes exception and Buyer's proposed adjustment. If Buyer fails to
deliver to Seller the Closing Net Asset Statement Report within forty five
(45) calendar days following receipt of the Closing Net Asset Statement and
Closing Accountants' Report, Buyer shall be deemed to have accepted the
Closing Net Asset Statement and Closing Accountants' Report for the purposes
of any Purchase Price adjustment under Section 2.5(b). If Seller does not give
Buyer notice within thirty (30) calendar days following receipt of the Closing
Net Asset Statement Report, Seller shall be deemed to have accepted the
Closing Net Asset Statement and Closing Accountants' Report as adjusted by
Buyer for purposes of any Purchase Price adjustment under Section 2.5(b). If
Seller gives Buyer notice of objections to the Closing Net Asset Statement
Report and Closing Accountants' Report, and if Buyer and Seller are unable,
within fifteen (15) calendar days after receipt by Buyer of the notice by
Seller of objections, to resolve the disputed exceptions, such disputed
exceptions will be referred to Arthur Andersen or other firm of independent
certified public accountants ("Independent Accounting Firm") mutually
acceptable to Seller and Buyer. The Independent Accounting Firm shall, within
sixty (60) days following its selection, deliver to Seller and Buyer a written
report determining such disputed exceptions, and its determinations will be
conclusive and binding upon the parties thereto for the purposes of any
Purchase Price adjustment under Section 2.5(b). Thereafter, the final Closing
Net Asset Statement and a final, executed Closing Accountants' Report shall be
delivered to Buyer
<PAGE>17
and Seller in accordance with the determination of Arthur Andersen. The fees
and disbursements of the Independent Accounting Firm acting under this Section
2.5 shall be shared equally by Buyer and Seller.
(b) Purchase Price Adjustment. Within three (3) Business Days
following the preparation or computation and final determination, pursuant to
Section 2.5(a), of the Closing Net Asset Statement, and based upon such final
determination, Seller shall promptly pay to Buyer or Buyer shall promptly pay to
Seller, as the case may be, the "Adjustment Amount" (as defined in subsection
(c) below), in either case together with interest thereon from the Closing Date
to the date of payment calculated at the rate of 7% per annum.
(c) For purposes of this Agreement "Net Assets" means the
total net assets available for sale of the Business as set forth on the Closing
Net Asset Statement, adjusted as necessary to exclude any amounts related to an
Excluded Liability or an Excluded Asset and any amounts apportioned under
Section 2.9 of this Agreement. If the amount of the Net Assets reflected on the
Closing Net Asset Statement exceeds the Reference Amount, the Purchase Price
will be increased on a dollar-for-dollar basis by an amount equal to such
excess. If the Reference Amount exceeds the Net Assets reflected on the Closing
Net Asset Statement, the Purchase Price will be decreased on a dollar-for-dollar
basis by an amount equal to the excess. The net amount of such adjustment to the
Purchase Price referred to in the preceding two sentences shall herein be
referred to as the "Adjustment Amount".
2.6. Assumed Liabilities
On the Closing Date, Buyer shall execute and deliver to Seller an
assignment and assumption agreement in substantially the form set forth in
Exhibit C (the "Assignment and Assumption Agreement") pursuant to which Buyer
shall accept, assume and agree to pay, perform or otherwise discharge, in
accordance with the respective terms and subject to the respective conditions
thereof, all of the liabilities and obligations of Seller pursuant to and under
the Assumed Liabilities. "Assumed Liabilities" shall mean all liabilities and
obligations set forth in this Section 2.6, whether or not any such obligation
has a value for accounting purposes or is carried or reflected on or
specifically referred to in Seller's books or financial statements:
(a) All liabilities and obligations of Seller under the
Contracts with respect to periods following the Closing Date;
(b) All liabilities and obligations of Seller under the IP
Licenses with respect to periods following the Closing Date, to the extent
fairly allocable to the Business;
<PAGE>18
(c) All employment-related liabilities and obligations with
respect to the Acquired Employees for periods commencing on and after the
Closing Date, as provided in Section 5.4;
(d) All liabilities and obligations of Seller under the
Governmental Permits for periods following the Closing Date;
(e) All obligations underlying the Permitted Encumbrances
and Permitted Realty Encumbrances;
(f) Except as otherwise provided in Section 9.6, all other
liabilities and obligations of Seller reflected on the Closing Net Asset
Statement as finally determined in accordance with Section 2.5.
Except as otherwise provided for in Section 2(f), the term "Assumed
Liabilities" when used in this Article 2 with respect to any date prior to the
Closing Date shall be deemed to refer to the obligations, liabilities,
properties and assets of Seller generally described as "Assumed Liabilities"
as the same shall exist at the Closing Date.
2.7. Excluded Liabilities
Notwithstanding the provisions of Section 2.6, it is hereby expressly
acknowledged and agreed that the Assumed Liabilities shall not include, and
Buyer shall not assume or be obligated to pay, perform or otherwise assume or
discharge, the following liabilities or obligations of Seller or any of its
Affiliates (the "Excluded Liabilities"):
(a) any liabilities or obligations in respect of Excluded
Assets; or
(b) any liabilities or obligations to current or former
employees of Seller other than Acquired Employees, or any employment-related
liabilities for which Buyer is indemnified under Section 5.4 (an "Excluded
Employee Obligation"); or
(c) any liability which Buyer is indemnified for under
Section 9.6; or
(d) any liabilities or obligations related to or arising
out of the complaints of Kavouras, Inc. with respect to difficulties allegedly
encountered by it in connection with its use of satellite services provided by
Third Parties; or
(e) any liabilities related to (i) income taxes of Seller or
any of its Affiliates whether arising before or after the Closing Date, (ii)
Taxes relating to the Business pertaining to time periods ending on or prior
to the Closing Date, and (iii) except to the extent provided under Section
2.11, Taxes
<PAGE>19
attributable to the transfer of the Purchased Assets or to any other
transactions contemplated by this Agreement; or
(f) All obligations and liabilities of Seller and its
Affiliates in connection with the Participation Agreement, as amended,
specified as item 1 of Schedule 1.1A-1, and the transactions contemplated
thereby.
2.8. Consent of Third Parties; Further Assurances
(a) From time to time following the Closing, Seller shall
execute and deliver, or cause to be executed and delivered, to Buyer such
additional instruments of conveyance and transfer and take such other actions
as Buyer may reasonably request or as may be otherwise necessary to more
effectively convey or transfer to, and vest in, Buyer and put Buyer in
possession and operating control of any part of the Purchased Assets
including, without limitation, cooperating with and assisting Buyer in the
prosecution of any claims and in the collection or reduction to possession of
accounts receivable and all other Purchased Assets. Nothing contained herein
shall be construed to increase the warranties provided in the conveyance deeds
from Seller to Buyer for the Satellite Control Facilities, as said deeds are
more particularly described in Section 7.l.
(b) Nothing in this Agreement shall be construed as an
attempt or agreement to assign any Purchased Asset, including any license,
certificate, approval, authorization, agreement, contract, lease, or other
right which by its terms or by law is nonassignable without the consent of
third Persons unless and until such consent shall be given ("Nonassignable
Assets"). Seller agrees to cooperate with Buyer at its request in endeavoring
to obtain such consent promptly; provided, however, that such cooperation
shall not require Seller to remain secondarily liable with respect to any
Nonassignable Asset. To the extent permitted by applicable law, in the event
consents to the assignment thereof cannot be obtained, such Nonassignable
Assets shall be held, as and from the Closing Date, by Seller in trust for
Buyer and the covenants and obligations thereunder shall be performed by Buyer
in Seller's name and all benefits and obligations existing thereunder shall be
for Buyer's account. Seller shall take or cause to be taken such action in its
name or otherwise as Buyer may reasonably request so as to provide Buyer with
the benefits of the Nonassignable Assets and to effect collection of money or
other consideration to become due and payable under the Nonassignable Assets,
and Seller shall promptly pay over to Buyer all money or other consideration
received by it in respect to all Nonassignable Assets. As of and from the
Closing Date, Seller authorizes Buyer, to the extent permitted by applicable
law and the terms of the Nonassignable Assets, at Buyer's expense, to perform
all the obligations and receive all the benefits of Seller under the
Nonassignable Assets and
<PAGE>20
appoints Buyer its attorney-in-fact to act in its name on its behalf with
respect thereto.
(c) From and after the Closing Date, Buyer shall perform, at
its own expense, all of the liabilities and obligations of Seller under the
Assumed Liabilities.
2.9. Apportionment at Closing Date; Customer Billing
(a) Proration of Expenses Other Than Taxes. Without
prejudice to Section 2.2(c), at the Closing, the parties shall make without
duplication the usual and customary closing adjustments with respect to the
conveyance of real property at the Closing, including prepaid lease payments,
security deposits, rents, local improvements charges, assessments (special and
ordinary), sewer impost charges, utility charges, monthly maintenance charges,
rebates and royalties, deposits and prepaid expenses with any public utility
or any municipal, governmental or other public authority, and any other
ongoing charges and all such payments and charges shall be apportioned and
adjusted as of close of business on the Closing Date, and at the Closing the
net amount thereof shall be paid pro rata by Seller to Buyer or by Buyer to
Seller, as the case may be. Any such apportionment and adjustments shall be
subject to correction for any errors or omissions that subsequently may be
discovered, provided that the party discovering such error or omission
provides written notice of same to the other party not later than 180 days
after the Closing Date. Such other party shall, within 20 days after receipt
of such notice, reimburse the party delivering such notice for the full amount
of such error or omission.
(b) Proration of Real and Personal Property Taxes. Real and
personal property taxes and assessments on the Purchased Assets shall be
prorated between Buyer and Seller as of the Closing Date. All such prorations
shall be allocated so that items relating to time periods ending on or prior
to the Closing Date shall be allocated to Seller and items relating to time
periods beginning after the Closing Date shall be allocated to Buyer,
provided, however, that the parties shall allocate any real property tax in
accordance with Section 164(d) of the Code. The amount of all such prorations
shall be settled and paid on the Closing Date, provided that final payments
with respect to prorations that are not able to be calculated as of the
Closing Date shall be calculated and paid as soon as practicable thereafter.
2.10. Bulk Sales Law
Buyer hereby waives compliance with the requirements and provisions
of any "bulk-transfer" laws of any jurisdiction that may otherwise be
applicable with respect to the sale of any or all of the Purchased Assets to
Buyer.
<PAGE>21
2.11. Transfer Taxes
All transfer, documentary, sales, use, registration, value-added and
other similar taxes (including all applicable real estate transfer taxes) and
related fees (including any penalties, interest and additions to tax
("Transfer Taxes") incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by Buyer, other than Transfer
Taxes payable solely due to the fact that business activities of Seller render
inapplicable exemptions for casual, isolated or occasional sales or the like
that would otherwise be applicable, which Transfer Taxes will be paid by
Seller. Seller and Buyer shall cooperate in timely making all filings,
returns, reports and forms as may be required to comply with the provisions of
such Transfer Tax laws except as waived in accordance with Section 2.10 of
this Agreement. To the extent legally able to do so, Buyer shall deliver to
Seller exemption certificates satisfactory in form and substance to Seller
with respect to Transfer Taxes if such delivery would reduce the amount of
Transfer Taxes that would otherwise be imposed.
2.12. Pertinent Retained Information
To the extent permitted by applicable law, Seller shall deliver to
Buyer at or after the Closing, as Buyer shall request from time to time,
complete and correct copies of all Pertinent Retained Information, and shall
give Buyer such access to the originals thereto as Buyer shall from time to
time reasonably require.
2.13. Transfer of Title
At the time of the Closing, title to the orbiting Satellites shall be
transferred over regions outside the United States.
2.14. Licensed Patents
(a) Upon the terms and subject to the conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, effective on the Closing Date, Seller hereby grants to Buyer:
(i) a worldwide, irrevocable, non-exclusive
royalty free, fully paid up, nonassignable license under the Joint Patents to
make, have made, use, have used, offer to sell, sell or import products or
services; and
(ii) a worldwide, irrevocable, non-exclusive,
royalty free, fully paid up license under any Patents that are used or held
for use in connection with any of the businesses of Seller (other than the
Business), but excluding the Joint Patents, to make, have made, use, have
used, offer to sell, sell or import products or services, but only if and to
the extent
<PAGE>22
such license is necessary to permit Buyer to conduct the Business as currently
conducted and as planned by Seller to be conducted on the Closing Date;
(b) The license granted pursuant to Section 2.14(a)(i) shall
not include the right to grant any sublicense. The license granted pursuant to
Section 2.14(a)(ii) shall include the right to grant a sublicense (within the
scope of the license granted to Buyer) to vendors and suppliers of Buyer in
the ordinary course of conducting the Business. The license granted pursuant
to Section 2.14(a)(ii) shall further include the right to assign Buyer's
rights under the license, provided that Buyer first receives the written
consent of Seller, which consent shall not be unreasonably withheld.
(c) Seller shall retain its ownership interest in the
Patents described in Section 2.14(a)(i) and (ii) and shall be exclusively
entitled to control the enforcement thereof and the prosecution of any patent
applications which may constitute such Patents; provided that Seller shall, at
Buyer's request and expense, enforce Seller's and Buyer's rights with respect
to the Joint Patents. Nothing contained herein shall be deemed to grant any
licenses or rights under the Patents to any Third Parties.
(d) Upon Seller's written request (and at Seller's expense), Buyer
shall affix, in accordance with Section 287(a) of the Patent Act (35 U.S.C.
(beta) 287(a)), notice to any products sold by Buyer under the license
hereunder granted.
2.15. Licensed Software
(a) Upon the terms and subject to the conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, effective on the Closing Date, Seller hereby grants to Buyer a
worldwide, irrevocable, non-exclusive, royalty free, fully paid up license to
use, reproduce and prepare derivative works based on the Process Management
System Software, but only insofar as such use is, and such reproduction or
derivative works are made, in connection with the Business.
(b) The license granted hereunder shall not include the
right to distribute any copies of the Process Management System Software. The
license granted hereunder shall include the right to grant a sublicense
(within the scope of the license granted to Buyer) and the right to assign
Buyer's rights under the license, provided that Buyer first receives the
written consent of Seller, which consent shall not be unreasonably withheld.
(c) Seller shall retain its ownership interest in the Process
Management System Software and shall be exclusively entitled to control the
enforcement thereof. Nothing contained
<PAGE>23
herein shall be deemed to grant any license or rights under the Process
Management System Software to any Third Parties.
3. Representations and Warranties of Seller
Seller represents and warrants to Buyer that:
3.1. Organization and Authority
Seller is a corporation duly organized, validly existing and in good
standing, under the laws of the State of New York, has full corporate power to
execute and deliver this Agreement and the Operating Agreements, as currently
in effect, and to effect the transactions contemplated hereby and thereby and
has duly authorized the execution, delivery and performance of this Agreement
and the amendments to the Operating Agreements called for by Section 5.5 by
all necessary corporate action. Seller has all corporate power and authority
necessary to carry on the Business as now conducted and to own or lease and
operate the properties of Seller used or held for use in connection with the
Business as, and in the places where, the Business is now conducted. Without
limiting the foregoing, Seller is duly qualified to do business and is in good
standing in each jurisdiction in which its ownership of its business requires
such qualification.
3.2. Authorization; Binding Obligation
This Agreement has been duly executed and delivered by Seller and
this Agreement is, and the Operating Agreements, when duly executed and
delivered by Seller will be, valid and legally binding obligations of Seller,
enforceable against it in accordance with their terms, except to the extent
that enforcement of the rights and remedies created hereby and thereby may be
limited by bankruptcy and other similar laws of general application affecting
the rights and remedies of creditors and by general equity principles.
3.3. No Violations
Except as disclosed on Schedule 3.3:
(a) The execution, delivery and performance of this Agreement
and the Operating Agreements by Seller and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) result in a breach or
violation of any provision of Seller's certificate of incorporation or by-laws,
(ii) subject to the receipt of any consents of Third Parties described in clause
(iii) of Section 3.3(b), violate or result in a breach of or constitute an
occurrence of default (or an event that might, upon the passage of time or the
giving of notice, or both, constitute an occurrence of default) under any
provision of, result in the acceleration or cancellation of any obligation
under, or give rise to a right by any party to terminate or amend
<PAGE>24
its obligations under, any material agreement, instrument, order, judgment,
decree or other material arrangement or commitment to which Seller is a party
or by which it is bound and which relates to the Business or the Purchased
Assets, which violation, breach or default could be reasonably expected to
have a Material Adverse Effect on the Business, (iii) subject to the receipt
of any consents and approvals described in clauses (i) and (iii) of Section
3.3(b), violate any order, judgment, decree, rule or regulation of any court
or any Governmental Body having jurisdiction over Seller or any of the
Purchased Assets, and which violation could be reasonably expected to have a
Material Adverse Effect on the Business or on the performance by Seller of its
obligations under this Agreement, or (iv) result in the creation of any
Encumbrance (other than a Permitted Encumbrance or a Permitted Realty
Encumbrance).
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Person is required by Seller in
connection with the execution and delivery of this Agreement and the Operating
Agreements or the consummation of the transactions contemplated hereby or
thereby, except for (i) any filings required to be made under the HSR Act, (ii)
any consents required to be obtained from the FCC under the Communications Act
or the Commission's rules and (iii) consents of Third Parties that are required
to transfer or assign to Buyer any Material Contracts.
3.4. Financial Statements
Seller has previously delivered to Buyer an Offering
Memorandum containing certain financial information relative to the Business,
including Coopers & Lybrand's report on the special purpose financial
statements, dated April 26, 1996 (the "Business Financial Statements"). The
Business Financial Statements are current, accurate and complete as of the date
of such documents and have been compiled from, and are in accordance with, and
reflect the books and records of the Business. The Business Financial Statements
reflect allocations of expenses for certain common support functions performed
predominately outside of the Satellite Control Facilities, such as general and
administrative support. With the exception of the matters described in paragraph
3 of such report, such financial statements are in conformity with GAAP.
3.5. Absence of Undisclosed Liabilities
Seller does not have any indebtedness or liability, absolute or
contingent, known or unknown relating to the Business, that is not shown or
provided for on the Opening Net Asset Statement other than liabilities as shall
have been incurred or accrued in the ordinary course of business since December
31, 1995 and fully reflected on the Closing Net Asset Statement. Except as shown
on the Opening Net Asset Statement, Seller is not directly or
<PAGE>25
indirectly liable upon or with respect to (by discount, repurchase agreements
or otherwise), or obliged in any other way to provide funds in respect of, or
to guarantee or assume, any debt, obligation or dividend of any person in
connection with the Business, except endorsements in the ordinary course of
business in connection with the deposit, in banks or other financial
institutions, of items for collection.
3.6. Absence of Changes
(a) Since December 31, 1995, except as disclosed on Schedule
3.6, there has not been:
(i) any change (or series of changes) in the condition
(financial or otherwise), results of operations, assets, liabilities or earnings
of the Business, other than changes arising in the ordinary course of business,
none of which changes has had or reasonably could be expected to have a Material
Adverse Effect;
(ii) any material loss, damage, destruction or other
casualty to the Purchased Assets;
(iii) any change in any method of accounting or accounting
practice of the Business or Seller relating to the Business; or
(iv) any loss of the employment, services or benefits of
any Key Employee.
(b) Since December 31, 1995, Seller has operated the
Business in the ordinary course consistent with past practice and, except as
disclosed on Schedule 3.6, has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) relating to the operations of the
Business except in the ordinary course of business consistent with past
practice;
(ii) failed to discharge or satisfy any Encumbrance or pay
or satisfy any obligation or liability (whether absolute, accrued, contingent
or otherwise) arising from the operation of the Business, other than
liabilities being contested in good faith and for which adequate reserves have
been provided and Encumbrances arising in the ordinary course of business that
do not, individually or in the aggregate, interfere materially with the use,
operation, enjoyment or value of any of the Purchased Assets;
(iii) mortgaged, pledged or subjected to any Encumbrance any
of the Purchased Assets, except for mechanics' Encumbrances and Encumbrances
for Taxes not yet due and payable and Encumbrances arising in the ordinary
course of business that do not, individually or in the aggregate, interfere
materially
<PAGE>26
with the use, operation, enjoyment or value of any of the Purchased Assets;
(iv) sold or transferred any of the assets of the Business
material to the Business or canceled any debts or claims or waived any rights
material to the Business relating to the operations of the Business, except in
the ordinary course of business consistent with past practice;
(v) disposed of any patents, trademarks or copyrights or
any patent, trademark or copyright applications used in the operations of the
Business;
(vi) defaulted on any material obligation relating to the
operations of the Business;
(vii) entered into any transaction material to the Business,
except in the ordinary course of business consistent with past practice;
(viii) made any capital expenditure (other than with respect
to Telstar 5 or Telstar 6) in excess of $250,000, or additions to property or
equipment used in the operations of the Business other than ordinary repairs
and maintenance;
(ix) incurred any obligation or liability for the payment
of severance benefits to employees of the Business;
(x) made or promised to make any increase in any salaries,
rates of pay or other compensation or benefits of any Business Employees,
except for customary increases and progressions for employees not covered by
collective bargaining agreements, which increases and progressions were made
in the ordinary course of business or in accordance with applicable collective
bargaining agreements or changes in benefits generally provided to all of
Seller's hourly and/or salaried employees; or
(xi) entered into any agreement or made any commitment to
do any of the foregoing.
3.7. Title to Assets
Except as disclosed on Schedule 3.7: (a) except as provided below in
clause (c), Seller has good and marketable title to, or a leasehold interest
in, all the tangible Purchased Assets free and clear of any Encumbrance,
except for Permitted Encumbrances; (b) Seller has legal rights to all of the
intangible Purchased Assets free and clear of any Encumbrance, except for
Permitted Encumbrances, and the requirement to obtain the consents of Third
Parties described in Section 3.3(b)(iii); and (c) Seller has insurable title
in fee simple to all of the real property constituting the Satellite Control
Facilities free and clear of any Encumbrance, except for Permitted Realty
Encumbrances. For purposes of the foregoing clause (c), insurable title is
deemed
<PAGE>27
to be such title as Title Insurance Company will approve and insure at
standard rates, subject only to the Permitted Realty Encumbrances. Except as
disclosed on Schedule 3.7, Seller has good and marketable title to all
Personal Property constituting the Purchased Assets, subject to no Encumbrance
other than the Permitted Encumbrances, and any item of Personal Property
included in the Purchased Assets and presently and actively used in the
operation of the Business is in good operating condition and repair for the
purposes for which they are currently being used. Notwithstanding anything to
the contrary contained in this Agreement, Buyer shall have the continued
possession and use of the Satellite Control Facility located at Three Peaks,
California for a satellite tracking station and such other ancillary use in
connection with the Business.
3.8. Governmental Permits
Seller has obtained all of the necessary Governmental Permits to
operate the Business. Seller has made all material filings, certifications and
reports to the appropriate Governmental Bodies as required by law. Seller is
operating pursuant to the authority granted by the Governmental Permits and
will continue to lawfully operate until the Closing Date. There are no
material governmental permits and licenses, including FCC licenses,
certificates of inspection, approvals or other authorizations issued to Seller
with respect to the Business and necessary for the operation of the Business
or used by Seller to carry on the Business as now being conducted or to use
and occupy the Satellite Control Facilities as now being used (each, a
"Governmental Permit" and collectively, "Governmental Permits"). Schedule 3.8
sets forth a list of each Governmental Permit, the date and Governmental Body
from which such Governmental Permit was obtained, the date of renewal thereof
and the status thereof. All Governmental Permits included on Schedule 3.8,
except as noted therein, are in full force and effect and no proceeding is
pending or, to the knowledge of Seller, threatened, to revoke or limit any
such Governmental Permit. Schedule 3.8 sets forth a list of those Governmental
Permits (x) that are necessary for the conduct of the Business after the
Closing Date, and which are non-assignable, (y) that may only be assigned to
Buyer with the consent of a Governmental Body or Third Party, or (z) that will
terminate or which must otherwise be amended upon the consummation of the
transactions contemplated by this Agreement.
Seller has not received any notice that any Governmental Body intends
to cancel, terminate, or not renew any such license, franchise, permit, or
other governmental authorization.
3.9. Compliance With Laws and Litigation
To the best of Seller's knowledge, with respect to the Business,
Seller is in compliance in all material respects with all applicable laws,
rules, regulations, ordinances, decrees,
<PAGE>28
orders, judgments, payment of fees, permits and licenses of or from
Governmental Bodies, including those relating to the use and operation of the
Satellite Control Facilities. There are no actions, suits, proceedings or
governmental investigations pending or, to the best of Seller's knowledge,
threatened against it that could be reasonably expected to have a Material
Adverse Effect on the Business. Notwithstanding anything contained in this
Section 3.9 to the contrary, (a) no representation or warranty made by Seller
in this Section 3.9 shall apply to compliance by Seller with any applicable
Environmental Law, it being expressly understood and agreed that any and all
representations and warranties of Seller with respect to the compliance by
Seller with any applicable Environmental Law are set forth in Section 3.13 and
(b) no representation or warranty made by Seller in this Section 3.9 shall
apply to compliance by Seller with respect to any applicable building, zoning,
safety or fire laws, ordinances, resolutions or codes, it being expressly
understood and agreed that any and all representations and warranties of
Seller with respect to such matters are set forth in Section 3.16.
3.10. Business Employees
(a) Seller has delivered to Buyer a complete and accurate
list of all the Business Employees, dated as of September 18, 1996, showing
for each the position held, base salary and date of hire and designating those
Business Employees who are union-represented as of the date specified on such
list. Except as disclosed in Schedule 3.10, none of the Business Employees is
covered by any union, collective bargaining or similar agreements.
(b) Except as disclosed in Schedule 3.10: (i) no labor
organization has made a pending demand for recognition or certification with
respect to any Business Employee, and there are no representation or
certification proceedings presently pending or, to the knowledge of Seller,
threatened to be brought or filed with the National Labor Relations Board or
any other labor relations tribunal or authority which relates to any Business
Employee, (ii) there are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or other material labor disputes pending or, to the
knowledge of Seller, threatened against or involving the Business, (iii) there
are no material unfair labor practice charges, grievances or complaints
pending or, to the knowledge of Seller, threatened by or on behalf of any
Business Employee, (iv) there are no complaints, charges or claims pending or,
to the knowledge of Seller, threatened to be brought or filed with any public
authority or Governmental Body, arbitrator or court based on, arising out of,
in connection with, or otherwise relating to the employment of any Business
Employee.
<PAGE>29
3.11. Benefit Plans
(a) Schedule 3.11 accurately and completely lists each
Benefit Plan. None of the Benefit Plans is a "multiemployer plan," as such
term is defined in Section 3(37) of ERISA.
(b) Complete and accurate copies of the following documents,
with respect to each of the Benefit Plans, as applicable, have been delivered
to Buyer by Seller: (i) all provisions of the plan and related trust
documents, and amendments thereto, that relate to the Business Employees and
are reasonably necessary for Buyer to satisfy its obligations under Section
5.4, or to provide one or more additional employee benefits substantially
equivalent to those provided by Seller to Business Employees immediately prior
to the Closing Date (even though not legally obligated to do so), (ii) the
most recent IRS Form 5500 and (iii) summary plan descriptions.
(c) Except in the case of any liability expressly assumed by
Buyer as provided in Section 5.4, neither Seller nor any of its Affiliates has
incurred, or is reasonably likely to incur as a result of any event or condition
or the consummation of the transactions contemplated by this Agreement, any
liability under ERISA, the Code or other applicable law in respect of any
Benefit Plan for which Buyer could be liable.
(d) Except as otherwise provided by this Agreement, the
consummation of the transactions contemplated by this Agreement will not result
in any increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any compensation or benefits payable to or in
respect of any Business Employee.
3.12. Contracts
Schedule 2.1(e) contains a complete and accurate list of all
outstanding Contracts that would require over the full term thereof payments by
or to Seller of more than $500,000 ("Material Contracts"). Each of such Material
Contracts is valid, binding and enforceable against Seller and, to Seller's
knowledge, the other parties thereto, in accordance with its terms and is in
full force and effect. Except as set forth on Schedule 2.1(e), Seller has
received no notice that it is in default or breach of, or is otherwise
delinquent in performance under, any such Material Contracts, and Seller has
performed in all material respects all obligations required to be performed by
it under, and is not in default or delinquent in performance, status or any
other respect (claimed or actual) in connection with, any Material Contract, and
no event has occurred that, with due notice or lapse of time or both, would
constitute such default. To the best knowledge of Seller, no other party to any
Material Contract is in default in respect thereof, and no event has occurred
which, with notice or lapse of time, or both, would
<PAGE>30
constitute such a default. Seller has delivered to Buyer or its
representatives true and complete originals or copies of all Material
Contracts.
3.13. Environmental Matters
(a) Except as set forth on Schedule 3.13:
(i) All material environmental permits, certificates,
licenses, approvals, registrations and
authorizations required for operating the Business
("Environmental Permits") are listed on Schedule
3.13 and any that are not transferable are so
designated. Seller has not received any written
notice that, (i) any such Environmental Permits are
not in full force and effect and (ii) Seller is not
in compliance in all material respects with the
terms of such Environmental Permits.
(ii) To the best of Seller's knowledge, the operations
of the Business are in compliance in all material
respects with all applicable Environmental Laws.
(b) Seller has submitted to Buyer any and all environmental
assessment reports, documents or other papers that set forth its best
knowledge concerning Environmental Matters.
3.14. Brokers
No broker, investment banker, financial advisor or other Person,
other than Goldman, Sachs & Co., the fees and expenses of which will be paid
by Seller, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Seller.
3.15. Proprietary Information
(a) Schedule 3.15 sets forth a complete and correct listing of all
Proprietary Information. Except as described in Schedule 3.15, all Proprietary
Information listed therein is owned by Seller, free and clear of all
Encumbrances and is in good standing and is not known to be the subject of any
challenge. Except as described in Schedule 3.15, there are no unresolved
claims made and there has not been communicated to Seller the threat of any
claim that the holder of such Proprietary Information is in violation of any
Third Party's intellectual property rights, including infringement of any
service mark, patent, trademark, trade name, trademark or trade name
registration, copyright or copyright registration, or has misappropriated
trade secrets or know-how. Except as set forth in Schedule 3.15, Seller is
the owner of the patents, patent licenses, trade names, trademarks, service
marks, brand marks,
<PAGE>31
brand names, copyrights, know-how, formula and other proprietary and trade
secret rights used in the conduct of the Business as now conducted, and
without any known conflict with the rights of others, and Seller has not
knowingly forfeited or otherwise relinquished any such patent, patent license,
trade name, trademark, service mark, brand mark, brand name, copyright,
know-how, formula or other proprietary or trade secret right that is material
to the conduct of the Business as presently conducted. Except as set forth in
Schedule 3.15, Seller is not under any obligation to pay any royalties or
similar payments in connection with any license to any of its Affiliates. All
Proprietary Information owned by any Affiliate of Seller required or primarily
used in connection with the Business will, on the Closing Date, be included in
the Purchased Assets. Seller owns or has the right to use all computer
software, software systems and databases and all other information systems
included in the Purchased Assets.
(b) Seller's rights and powers with respect to the Joint Patents are
subject to certain restrictions and third party rights. Notwithstanding such
restrictions and third party rights, Seller has the right, without first
receiving the written consent of, or violating any agreement with, any such
third party, to grant non-exclusive licenses under the Joint Patents pursuant
to Sections 2.14 and 5.14 hereof.
3.16. Real Estate
(a) Schedule 1.1A sets forth the legal description of all
real property constituting the Satellite Control Facilities, which real
property is owned by Seller and constitutes all of the real property owned and
used in connection with the Business. Neither Seller nor any of its Affiliates
has a leasehold interest in real property used in connection with the
Business.
(b) Other than as expressly disclosed in this Agreement and
except with respect to Permitted Realty Encumbrances, Seller has not received
any written notice that, and does not otherwise have knowledge to the effect
that, the continued use or operation of the Satellite Control Facilities (as
currently used) violates or constitutes a nonconforming use under, any
applicable building, zoning, safety and other laws, ordinances, regulations,
codes, permits, licenses and certificates, easements or any restrictions and
conditions affecting title that, individually or in combination with any
others, materially and adversely affect the ability of Buyer to use the
affected Satellite Control Facility in the manner and scope in which it is now
being used and operated. Other than as expressly disclosed in this Agreement
and except with respect to Permitted Realty Encumbrances, there are no leases,
subleases, options or other agreements or arrangements, written or oral,
granting to any Person other than Buyer the right to purchase, cause the sale
of, lease, otherwise use or occupy or adversely affect Buyer's ability to
continue to use and occupy the Satellite Control
<PAGE>32
Facilities or any portion thereof (as currently used). Seller has not
received any written notice from any utility company or municipality of any
fact or condition that could result in the discontinuation of currently
available or otherwise necessary sewer, water, electric, gas, telephone or
other utilities or services for any Satellite Control Facility (as currently
used).
(c) Seller is not a "foreign person" within the meaning of
Section 1445 of the Code. Notwithstanding anything contained in this Section
3.16 to the contrary, no representation or warranty made by Seller in this
Section 3.16 shall apply to any environmental matters.
(d) As of the Closing Date, each Satellite Control Facility
will have ingress and egress to and from publicly dedicated streets either
directly or through validly existing easements.
(e) Seller (formerly known as American Telephone and
Telegraph Company) has no purchase option or other rights under that certain
Option Agreement, dated February 10, 1970 and recorded February 11, 1970 in
the Office of the County Recorder, Pike County, Pennsylvania in Volume 233 at
Page 328, such purchase option has expired by its terms and Seller has no
rights under said Option Agreement.
3.17. Insurance
Schedule 3.17 sets forth a list of all material current insurance
policies (other than title insurance policies) providing coverage for the
properties or operations of the Business, the type and amount of coverage, and
the expiration dates of the policies (and such information with respect to
product liability for the past three (3) years). Such current policies are
valid and enforceable in accordance with their terms, are in full force and
effect and insure against risk and liabilities to the extent and in the manner
reasonably deemed appropriate and sufficient by Seller. Seller has not
received notice from any insurance carrier: (i) threatening a suspension,
revocation, modification or cancellation of any insurance policy or a material
increase in any premium in connection therewith, or (ii) informing Seller that
any coverage listed on Schedule 3.17 will or may not be available in the
future on substantially the same terms as now in effect. Set forth on Schedule
3.17 is a list of the aggregate claims and all individual claims with respect
to product liability relating to the Business of Seller in the last two (2)
years. Except as set forth on Schedule 3.17, there is no claim by Seller,
pending under any of the policies listed in Schedule 3.17 hereto as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies. Seller has not been refused any insurance with respect to the
Satellite Control Facilities by any insurance carrier to which Seller has
applied for any such insurance or with which
<PAGE>33
Seller has maintained insurance during the preceding four years with the
reason for such refusal arising as a result of the operation of the Business.
3.18. Tax-Exempt Use Property
None of the Purchased Assets is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
3.19. Sufficiency of Assets
The Purchased Assets: (i) in the aggregate are sufficient and
adequate to conduct the Business in substantially the manner currently
conducted; and (ii) are suitable for the purposes for which they are currently
used. The Purchased Assets are to be conveyed hereunder in their condition on
the date hereof, subject to reasonable use, wear and tear between the date
hereof and the Closing Date.
3.20. Accuracy of Information
None of Seller's representations, warranties or statements contained
in this Agreement, or in the exhibits hereto, contains any untrue statement of
a material fact or, to the knowledge of Seller after due inquiry, omits to
state any material fact necessary in order to make any of such
representations, warranties or statements in light of the circumstances under
which they were made not misleading. All information relating to the Business
that is known or would on reasonable inquiry be known to Seller and that may
be material to a purchaser for value of the Purchased Assets has been
disclosed in writing to Buyer.
4. Representations and Warranties of Buyer
Buyer represents and warrants to Seller that:
4.1. Organization and Authority
Buyer is an exempted company duly organized, validly existing and in
good standing under the laws of Bermuda, has full corporate power to execute and
deliver this Agreement, the Assignment and Assumption Agreement and to effect
the transactions contemplated hereby and thereby and has duly authorized the
execution, delivery and performance of this Agreement, the Assignment and
Assumption Agreement and the amendments to the Operating Agreements called for
by Section 5.5 by all necessary corporate action. Buyer has all corporate power
and authority necessary to carry on its business as now being conducted and to
own or lease and operate its properties as, and in the places where, such
business is now conducted and such properties are now owned, leased or operated.
Without limiting the foregoing, Buyer is duly qualified to do business and is in
<PAGE>34
good standing in each jurisdiction in which its ownership of its business
requires such qualification.
4.2. Authorization; Binding Obligations
This Agreement has been duly executed and delivered by Buyer and this
Agreement is, and the Assignment and Assumption Agreement and the Operating
Agreements once duly executed and delivered by Buyer will be, the valid and
legally binding obligations of Buyer, enforceable against it in accordance with
their terms, except to the extent that enforcement of the rights and remedies
created hereby and thereby may be limited by bankruptcy and other similar laws
of general application affecting the rights and remedies of creditors and by
general equity principles.
4.3. No Violations
(a) The execution, delivery and performance of this Agreement,
the Assignment and Assumption Agreement and the Operating Agreements by Buyer
and the consummation of the transactions contemplated hereby and thereby do not
and will not (i) result in a breach or violation of any provision of Buyer's
Memorandum of Association or bye-laws or in a material violation of any statute,
rule, regulation or ordinance applicable to Buyer or (ii) violate or result in a
breach of or constitute an occurrence of default (or an event that might, upon
the passage of time or the giving of notice, or both, constitute an occurrence
of default) under any provision of, result in acceleration or cancellation of
any obligation under, or give rise to a right by any party to terminate or amend
its obligations under, any material mortgage, deed of trust, conveyance to
secure debt, note, loan, indenture, Encumbrance, lease, agreement, instrument,
order, judgment, decree or other material arrangement or commitment to which
Buyer is a party or by which it or its assets or properties are bound, or (iii)
violate any order, judgment, decree, rule or regulation of any court or any
Governmental Body having jurisdiction over Buyer or any of its properties.
(b) Except as disclosed on Schedule 4.3, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Person is required by Buyer in connection with the execution and delivery of
this Agreement and the Operating Agreements or the consummation of the
transactions contemplated hereby or thereby, except for (i) any filings required
to be made with the SEC or under the Communications Act, FCC rules, or the HSR
Act, and (ii) such consents, approvals, orders, authorizations, registrations,
declarations or filings where failure of compliance would not, individually or
in the aggregate, have a material adverse effect on Buyer's ability to
consummate the transactions contemplated hereby and thereby.
<PAGE>35
4.4. Brokers
No broker, investment banker, financial advisor or other Person, other
than Lazard Freres & Co., the fees and expenses of which shall be paid by Buyer,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based on arrangements made by or on behalf of Buyer.
5. Certain Covenants
5.1. Information
(a) Seller will give to Buyer and to its officers, employees,
accountants, counsel and other representatives reasonable access during Seller's
normal business hours throughout the period prior to the Closing to all of
Seller's properties, books, contracts, commitments, reports of examination and
records directly relating to the Business (but excluding the Excluded Assets and
Excluded Liabilities and subject to any limitations that are reasonably required
to preserve any applicable attorney-client privilege, third-party
confidentiality obligation or other confidentiality obligations imposed by law).
Buyer will hold, and will cause each such Person to hold, such information in
confidence as provided in Article 6.
(b) After the Closing Date, Seller and Buyer will provide to
each other and to their respective officers, employees, counsel and other
representatives, upon request (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege or third-party
confidentiality obligation), reasonable access for inspection and copying, of
all Business Records, Governmental Permits, Contracts and any other information
existing as of the Closing Date and relating to the Business, and will make
their respective personnel reasonably available to provide information relating
to the Business or the Purchased Assets prior to the Closing Date, and as
otherwise may be necessary or desirable to enable the party requesting such
assistance to: (i) comply with reporting, filing or other requirements imposed
by any foreign, local, state or federal court, agency or regulatory body; (ii)
assert or defend any claims or allegations in any litigation or arbitration or
in any administrative or legal proceeding other than claims or allegations that
one party to this Agreement has asserted against the other; or (iii) subject to
clause (ii) above, perform its obligations under this Agreement. The party
requesting such information or assistance shall reimburse the other party for
all out-of-pocket costs and expenses incurred by such party in providing such
information and in rendering such assistance. The access to files, books and
records contemplated by this Section 5.1(b) shall be during normal business
hours and upon not less than two Business Days' prior written request and shall
be subject to such reasonable limitations as the party having
<PAGE>36
custody or control thereof may impose to preserve the confidentiality of
information contained therein.
(c) Buyer agrees to use its Best Efforts to preserve all
Business Records and Governmental Permits for at least 10 years after the
Closing Date. After this 10 year period and at least 90 days prior to the
planned destruction of any Business Records or Governmental Permits, Buyer shall
notify Seller in writing and shall make available to Seller, upon its request,
such Business Records and Governmental Permits.
(d) Buyer agrees to provide Seller a list of those Business
Employees hired by Buyer and, for a period of 18 months following the Closing,
reasonable notice of any change in the employment status of any Business
Employee hired by Buyer, including death, retirement or other termination of
employment with Buyer of such Business Employee.
(e) Buyer and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with any Tax
audit, litigation or other Tax proceeding relating to the Business or the
Purchased Assets. Such cooperation shall include the retention and, upon the
other party's request, the provision of records and information reasonably
relevant to any such audit, litigation or other proceeding and making employees
reasonably available to provide additional information and explanation of any
records and information provided hereunder. Notwithstanding any other provision
of this Agreement, Buyer and Seller further agree to furnish or cause to be
furnished to each other, as promptly as practicable, such information and
assistance relating to the Business as is reasonably necessary to the
preparation and filing of any Tax Return, claim for refund or other required or
optional filings relating to Tax matters.
5.2. Conduct of Business
From and after the date of this Agreement and until the Closing Date or
as otherwise contemplated by this Agreement or as Buyer shall otherwise consent
to in writing, Seller, with respect to the Business insofar as the Purchased
Assets and Assumed Liabilities are concerned:
(a) will carry on the Business in the ordinary course and in
substantially the same manner as heretofore, including without limitation
keeping in full force and effect insurance comparable in amount and scope to the
coverage maintained by it (or on behalf of it) on the date hereof, and will not
acquire any assets or properties, or enter into any other transaction, other
than in the ordinary course of business consistent with past practice;
(b) will not permit all or any of the Purchased Assets (real
or personal, tangible or intangible) to be sold, licensed or subjected to any
Encumbrance (other than a Permitted
<PAGE>37
Encumbrance or a Permitted Realty Encumbrance) except in dispositions of
inventory or of worn-out or obsolete equipment for fair or reasonable value in
the ordinary course of business consistent with past practices;
(c) will exercise its Best Efforts to maintain and preserve
for Buyer its relationships with customers, suppliers and others having business
relationships with the Business;
(d) will exercise its Best Efforts to establish new material
relationships with customers, suppliers and others contemplating business
relationships with the Business and will keep Buyer reasonably informed of its
progress in this regard;
(e) will operate the Business in compliance in all material
respects with all applicable foreign, federal, state and local laws and
regulations;
(f) will maintain its inventory levels in a manner and in
an amount consistent with past practice;
(g) will not, with respect to any Business Employee, enter
into any new (or amend any existing) employee benefit plan, program or
arrangement or any new (or amend any existing) employment, severance or
consulting agreement, in any such case, if it would result in a material
increase in benefits with respect to such Business Employee, grant any general
increase in the compensation of Business Employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to become
payable to any Business Employee, except (i) with the prior consent of Buyer,
which shall not be unreasonably withheld or (ii) in accordance with
pre-existing contractual provisions or consistent with past practice; provided
that to the extent that Seller cannot legally avoid making such a change
applicable to the Business Employees, Seller shall give Buyer prior written
notice of such change;
(h) will not make or commit to make any capital expenditure
in excess of $250,000, except (i) as expressly contemplated by the capital
expenditure budget dated September 11, 1996, a complete and correct copy of
which has been delivered to Buyer by Seller and (ii) capital expenditures with
respect to Telstar 6;
(i) will not pay, lend or advance any amount to, or sell,
transfer or lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates;
(j) will not take any action that would cause any of the
representations and warranties made by Seller in this Agreement not to remain
true and correct;
<PAGE>38
(k) will not make any change in any method of accounting or
accounting principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP (other than changes in
policy that are applied throughout Seller's operations; provided that no such
change shall be taken into account in connection with the preparation of the
Closing Net Asset Statement), or write down the value of any inventory or
write off as uncollectible any accounts receivable except in the ordinary
course of business consistent with past practice;
(l) will not settle, release or forgive any claim or
litigation or waive any right thereto, except for any such settlement,
release, forgiveness or waiver in respect of a claim or litigation involving
only an amount reasonably in controversy, and a cash payment by Seller, not
greater than $250,000;
(m) will not make, enter into, modify, amend in any material
respect or terminate any Material Contract or material bid with respect to the
Business; and
(n) will continue to maintain, in all material respects, the
Purchased Assets in accordance with present practice in a condition suitable
for their current use.
Notwithstanding anything to the contrary in this Section 5.2, Seller
shall have the right to continue to enter into transponder leases in the
ordinary course of business consistent with past practices; provided that all
such transponder leases taken together shall at all times provide for lease
payments producing aggregate operating margins not lower than the projected
operating margins for the Business; and provided, further, that any such lease
calling for aggregate lease payments in excess of $15 million in net present
value (determined using a 12.5% per annum discount rate shall require the
prior consent of Buyer following disclosure of all relevant information.
5.3. Tax Reporting and Allocation of Consideration
(a) Seller and Buyer acknowledge and agree that (i) Seller
will be responsible for and will perform all Tax withholding, payment and
reporting duties with respect to any wages and other compensation paid by
Seller to any Business Employee in connection with operating the Business
prior to or on the Closing Date and (ii) Buyer will be responsible for and
will perform all Tax withholding payment and reporting duties with respect to
any wages and other compensation paid by Buyer to any employee in connection
with operating the Business after the Closing Date.
(b) Buyer and Seller recognize their mutual obligations
pursuant to Section 1060 of the Code to timely file IRS Form 8594 (the "Asset
Acquisition Statement") with each of
<PAGE>39
their respective federal income tax returns. Buyer and Seller agree that they
shall negotiate in good faith to enter into an agreement on or after the
Closing Date concerning the allocation of the Purchase Price and the Assumed
Liabilities among the Purchased Assets (any agreed allocation hereinafter
referred to as the "Allocation"); provided that Buyer and Seller shall
determine the allocated Purchase Price for each Satellite Control Facility
prior to the Closing Date based upon an appraisal of the real property
constituting the Satellite Control Facilities prepared by a licensed ASA
appraiser in the relevant jurisdiction and selected by Buyer. Buyer and
Seller agree that the Allocation shall be made pursuant to the following
procedure: Buyer shall deliver to Seller an allocation of the Purchase Price
and Assumed Liabilities among the Purchased Assets ("Buyer's Appraisal").
Seller shall accept and agree to the allocation unless such allocation is
manifestly unreasonable, in which case Seller shall deliver written notice to
Buyer within 30 days after Seller's receipt of Buyer's Appraisal. Buyer and
Seller further agree to act in accordance with the Allocation, if any, in any
Tax Returns or similar filings. In the event that any Tax authority disputes
the Allocation, if any, Seller or Buyer, as the case may be, shall promptly
notify the other party of the nature of such dispute.
5.4. Business Employees; Collective Bargaining Agreements
(a) Buyer shall be solely responsible for the conduct of any
negotiations prior to the Closing Date with any union with respect to
collective bargaining agreements, if any, or other labor agreements applicable
to its employees to be effective after the Closing Date, whether or not at the
time of the negotiation such individuals are Business Employees or former
Business Employees. Nothing contained in this Agreement shall be construed as
an agreement by Buyer to assume, adopt or succeed to any collective bargaining
agreement or to assume, adopt or extend any Benefit Plan that constitutes an
Excluded Employee Obligation.
(b) Except with respect to any Business Employee whose
employment with Seller has terminated prior to January 1, 1997, Buyer shall
make offers of employment to all Business Employees as promptly as possible
following the date of this Agreement, but in no event later than the earlier
of the Closing Date and January 1, 1997, and shall allow at least one week for
acceptance of such offers. Employment with Buyer by the Business Employees who
accept Buyer's offer and who are actively employed immediately prior to the
Closing Date shall be effective on the Closing Date. Offers of employment
extended to Business Employees receiving short-term disability benefits, sick
leave benefits or on approved leave of absence on the Closing Date will become
effective upon their return to active status at the termination of the
short-term disability, sick leave or approved leave of absence, respectively,
provided such return to active status occurs within six (6) months of the
Closing Date or such
<PAGE>40
later date that their employment rights are protected by applicable law.
(c) The term "Acquired Employees" shall mean all Business
Employees who accept Buyer's offer and are employed by Buyer, as provided in
Section 5.4(b). Buyer shall maintain aggregate base cash compensation levels
for all Acquired Employees at least comparable to the levels in effect on the
Closing Date for at least one year following the Closing Date. Subject to
Buyer's determination that the Acquired Employees have satisfied the
applicable incentive prerequisites for the payment of bonus compensation under
any incentive compensation plan maintained by Buyer for the Acquired Employees
and provided the Closing shall occur in 1996, Buyer shall pay aggregate 1996
bonus compensation to the Acquired Employees equal to not less than the
aggregate bonus compensation paid to the Acquired Employees for 1995,
multiplied by a fraction equal to the number of days from the Closing Date
through December 31, 1996 over 366. Subject to Seller's determination that the
Acquired Employees have satisfied the applicable incentive prerequisites for
the payment of bonus compensation under any Benefit Plan and provided the
Closing shall occur in 1996, Seller shall pay, in accordance with past
practice, aggregate 1996 bonus compensation to the Acquired Employees equal to
not less than the aggregate bonus compensation paid to the Acquired Employees
for 1995, multiplied by a fraction equal to the number of days from January 1,
1996 through the Closing Date over 366. If the Closing shall not occur until
after December 31, 1996, Seller shall, in accordance with past practice,
determine and be liable for the payment of any bonus compensation to the
Acquired Employees in respect of 1996, and all references to the year 1996 in
the preceding sentences of this Section 5.4(c) shall be replaced by the year
1997 and the number 366 shall be replaced by 365.
(d) Except as otherwise provided by this Agreement, on the
Closing Date (or such later date when any inactive Business Employee becomes
an Acquired Employee pursuant to Section 5.4(b)), all Acquired Employees will
cease to participate in and accrue benefits under the Seller's Benefit Plans.
Buyer and its Affiliates shall not assume, continue or maintain any Benefit
Plans that constitute Excluded Employee Obligations, and no assets or
liabilities of any such Benefit Plans shall be transferred to, or assumed by,
Buyer or its Affiliates or any benefit plans of Buyer or its Affiliates.
Except as otherwise expressly set forth in this Agreement or any other
agreement executed in consummation of the transactions contemplated by this
Agreement, Buyer and its Affiliates shall not assume nor have any direct or
indirect obligation or liability of any nature, whether matured or unmatured,
accrued or contingent, due or to become due or otherwise, to any Acquired
Employee or other present or former employee of Seller or its Affiliates, or
to any dependent, survivor or beneficiary thereof, arising out of or in
relation to such person's employment with Seller or its Affiliates or the
<PAGE>41
termination of such employment prior to the Closing Date, and Buyer and its
Affiliates shall not assume nor have any direct or indirect obligation or
liability of any nature, whether matured or unmatured, accrued or contingent,
due or to become due or otherwise, arising out of or relating to the
sponsorship by Seller or its Affiliates of any Benefit Plan, whether to Seller
or its Affiliates or to any individual. Seller agrees to indemnify and hold
harmless Buyer and its Affiliates, in accordance with the provisions and
procedures set forth in Section 9.4, with respect to any and all direct or
indirect obligations or liabilities described in this Subsection 5.4(d) that
may arise before or after the Closing Date. Except as otherwise expressly set
forth in this Agreement or any other agreement executed in consummation of the
transactions contemplated by this Agreement, neither Seller nor any of its
Affiliates shall assume or have any direct or indirect obligation or liability
of any nature whether matured or unmatured, accrued or contingent, due or to
become due or otherwise, to any Acquired Employee or other present or former
employee of Buyer, or to any dependent, survivor or beneficiary thereof,
arising out of or relating to such person's employment with Buyer or the
termination of such employment by Buyer on or after the Closing Date, and
neither Seller nor any of its Affiliates shall assume or have any direct or
indirect obligation or liability of any nature, whether matured or unmatured,
accrued or contingent, due or to become due or otherwise, arising out of or
relating to the sponsorship by Buyer or its Affiliates of any employee benefit
plan, whether to Buyer or to any individual. Buyer agrees to indemnify and
hold harmless Seller and its Affiliates, in accordance with the provisions and
procedures set forth in Section 9.4 of this Agreement, with respect to any and
all direct or indirect obligations or liabilities described in this Section
5.4(d) that may arise before or after the Closing Date.
(e) Except as otherwise expressly provided by this Section
5.4, as of the Closing Date Buyer agrees that it will provide, or cause its
Affiliates to provide, for at least one year following the Closing Date, the
Acquired Employees with core employee benefit plans, programs and arrangements
providing retirement, savings, life, health and disability benefits that, in
the aggregate, are comparable to the employee benefit plans, programs and
arrangements providing such benefits that are currently made available to the
Business Employees; provided, however, that any benefits provided with respect
to the Acquired Employees who are covered by a collective bargaining agreement
shall be determined by the terms of the collective bargaining agreement
covering such employees. Except with respect to pension accrual service, Buyer
shall recognize all service performed by the Acquired Employees with Seller,
including service with predecessor employers that was recognized by Seller,
for purposes of the employee benefit plans, programs and arrangements
maintained by Buyer and its Affiliates in which the Acquired Employees are
eligible to participate, including, but not limited to, vacation entitlement,
retirement and savings plan
<PAGE>42
participation and vesting, entitlement to early retirement pension plan
subsidies, welfare plan participation and vesting, and severance pay. No
pre-existing condition exclusions or waiting periods may be imposed under
Buyer's employee welfare benefit plans within the meaning of Section 3(l) of
ERISA upon any Acquired Employee, other than limitations or waiting periods
that were in effect under the Benefit Plans and that have not been satisfied
as of the Closing Date. Buyer shall permit all Acquired Employees who have
satisfied any relevant eligibility requirements as of the Closing Date to
immediately commence participation in any plans used to satisfy Buyer's
obligations under this Section 5.4(e). For purposes of determining whether any
Acquired Employee or his covered dependents have satisfied any required
co-payments, annual deductibles and out-of-pocket maximums under the terms of
the Buyer's group health plan for the calendar year in which their employment
with Buyer commences, Acquired Employees and their covered dependents shall be
credited with the amount of deductibles and co-payments made by, or on behalf
of, such Acquired Employees and their covered dependents under the Seller's
medical expense plan for such year.
(f)(i) As soon as practicable after, and effective as of the
Closing Date, Buyer or its Affiliate shall establish a defined benefit pension
plan and trust intended to qualify under Section 401(a) and Section 501(a) of
the Code (the "Buyer Pension Plan") for the benefit of the Acquired Employees.
The Buyer Pension Plan shall provide aggregate benefits that are substantially
comparable to the benefits provided by Seller for the Acquired Employees under
Seller's qualified defined benefit pension plans (the "Seller Pension Plans");
provided, however, that any benefits provided with respect to the Acquired
Employees who are covered by a collective bargaining agreement shall be
determined by the terms of the collective bargaining agreement covering such
employees.
(f)(ii)(A) Each Acquired Employee who, as of the
Closing Date
(1) is not eligible to retire with a
Service Pension as that term is defined in the AT&T
Management Pension Plan or the AT&T Pension Plan or will not
become eligible to retire with a Service Pension by virtue
of the Transition Leave of Absence as defined in the AT&T
Management Pension Plan; and
(2) remains continuously employed by
Buyer and completes a period of five (5) consecutive years
of credited service commencing immediately after the Closing
Date, or becomes totally and permanently disabled prior to
the fifth anniversary of the Closing Date
<PAGE>43
shall receive a lump sum payment in cash on the fifth anniversary of
the Closing Date in the amount set forth on Schedule 5.4(f)(ii) hereof
with respect to each such Acquired Employee. Schedule 5.4(f)(ii) shall
be completed within 30 days of the date of this Agreement, it being
understood that, subject to individual calculation and agreements of
the parties as to the amounts set forth on Schedule 5.4(f)(ii) (which
agreement shall in any event assume that all Acquired Employees who
satisfy the eligibility requirements of clause (f)(ii)(A)(1) above will
also satisfy the eligibility requirements of clause (f)(ii)(A)(2)
above), the estimated present value of all such payments is
approximately $2 million.
(B) In the event the employment of an Acquired Employee with
Buyer is involuntarily terminated, other than for intentional
misconduct, or in the event an Acquired Employee dies, prior to the
fifth anniversary of the Closing Date, such Acquired Employee or his or
her estate, as the case may be, shall receive as soon as practicable
after such termination or death the amount listed on Schedule
5.4(f)(ii) with respect to such Acquired Employee multiplied by a
fraction, the number of which is the number of complete months of
service with Buyer after the Closing Date and the denominator of which
is 60.
(C) On the Closing Date, Seller shall deliver to an agent
mutually agreeable to Seller and Buyer, immediately available funds
sufficient to satisfy the obligations set forth above, assuming
earnings on those funds of 7.5% per annum and using the same actuarial
or other assumptions set forth or agreed upon pursuant to clause
(f)(ii)(A) above. Upon satisfaction of all of the obligations set forth
in this subsection 5.4(f)(ii), any remaining funds shall be distributed
to Buyer. In the event funds accumulated as of the fifth anniversary of
the Closing Date are insufficient to satisfy all of the obligations set
forth in this subsection 5.4(f)(ii), Buyer shall deposit funds
necessary to satisfy such obligations in full.
(D) Buyer shall be solely responsible for notifying the agent
of the attainment of eligibility of Acquired Employees to receive the
payments set forth in this subsection 5.4(f)(ii).
(E) Notwithstanding any other provision of this agreement to
the contrary, the Acquired Employees listed on Schedule 5.4(f)(ii)
shall be deemed third party beneficiaries of this subsection 5.4(f)(ii)
and shall have the right to individually seek enforcement of its
provisions.
<PAGE>44
(g) Seller currently maintains a 401(k) savings plan and an
employee stock ownership plan in which certain of the Acquired Employees
participate (the "Seller Defined Contribution Plans"). Prior to the Closing
Date, Seller shall take all necessary and appropriate action to amend the Seller
Defined Contribution Plans to provide: (i) the Acquired Employees with full and
immediate vesting in any employer derived benefits under such plans, and (ii)
that any Acquired Employee with an outstanding loan from the Seller Defined
Contribution Plans will not be in default on such loan unless and until the
Acquired Employee receives a distribution from such plan or the Acquired
Employee fails to make a timely payment on such loan. Buyer will cooperate with
and assist Seller or its designee in the continued administration of the Seller
Defined Contribution Plans, including without limitation providing employment
service information and, with the written consent of the Acquired Employee,
collecting and remitting to the trustee of the Seller Defined Contribution Plans
payroll deductions relating to any outstanding loans if and to the extent Seller
elects not to continue current arrangements for coupon repayment.
(h) Seller currently maintains a program of post-retirement
medical and life insurance benefits for certain eligible retired employees (the
"Seller Retiree Welfare Plans"). Prior to the Closing Date, Seller shall take
all necessary and appropriate action to amend the Seller Retiree Welfare Plans
so that each Acquired Employee who has satisfied the applicable age and service
requirements under the Seller Retiree Welfare Plans as of the first anniversary
of the Closing Date, taking into account service with Buyer and its Affiliates
after the Closing Date, shall be entitled to coverage under the Seller Retiree
Welfare Plans from and after the date that such Acquired Employee is no longer
covered by a medical or life insurance plan of Buyer or its Affiliates which
provides coverage for active employees. Buyer will cooperate with and assist
Seller or its designee in the continued administration of the Seller Retiree
Welfare Plans for purposes of providing employment service information in
respect of the Acquired Employees.
(i) Seller shall pay, as soon as practicable following the
Closing Date, each Acquired Employee the cash equivalent value of any accrued
but unused vacation earned as of the Closing Date under the vacation policy of
Seller applicable to such Acquired Employee. Buyer and its Affiliates shall
recognize service by each Acquired Employee with Seller for purposes of
determining an Acquired Employee's entitlement to and the amount of vacation and
sick leave benefits following the Closing Date under the applicable vacation and
sick leave policy of Buyer and its Affiliates; provided, however, that this
Section 5.4(i) shall not entitle any Acquired Employee to be credited with any
additional vacation or sick leave benefits under the vacation and sick leave
policy maintained after the Closing Date by Buyer or
<PAGE>45
its Affiliates for any period of employment prior to the Closing Date.
(j) If Buyer involuntarily terminates, other than for
intentional misconduct, the employment of an Acquired Employee whose employment
is not subject to a collective bargaining agreement during the first six months
of employment following the Closing Date, Buyer shall provide the Acquired
Employee with severance benefits equal to the greater of: (i) the benefits
payable under the severance policy maintained after the Closing Date for the
benefit of the Acquired Employees, or (ii) one week's base pay for each year of
service with Seller and Buyer, but not to exceed 26 weeks base pay.
5.5. Operating Agreements
On or prior to the Closing Date, Buyer shall execute and deliver to
Seller and Seller shall execute and deliver to Buyer amendments, novating and
modifying the following existing Operating Agreements:
(a) the Network and Computing Services Transponder Capacity
Agreement attached hereto as Exhibit B-1,
(b) the Tridom Technical Support Agreement attached hereto
as Exhibit B-2, and
(c) the Tridom Capacity Agreement attached hereto as
Exhibit B-3.
Such amendments to the existing Operating Agreements will provide for the
modifications thereto specified on Schedule 5.5. In addition, until the
earlier of (i) the second anniversary of the Closing Date and (ii) the stated
expiration (excluding any optional extensions) of the Contract Tariff
Agreement specified in Schedule 5.5, Buyer agrees to provide Seller Satellite
Services in quantities sufficient to meet Seller's express, fixed obligations
set forth in said agreement. Such Satellite Services will be provided at the
rates expressed in said agreement, which Seller represents and warrants are
consistent with the Projections heretofore furnished by Seller to Buyer.
5.6. Antitrust and Communications Act Compliance
Each of Buyer and Seller shall cooperate with the other in
making filings under the HSR Act and the Communications Act and FCC rules and
shall use its Best Efforts to resolve such objections, if any, as the
Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement, the FCC or other Governmental Body
may assert under the antitrust laws or the Communications Act with respect to
the transactions contemplated hereby.
<PAGE>46
5.7. Noncompetition; No Solicitation or Hire
(a) For a period of three (3) years commencing on the
earlier of the Closing Date or June 30, 1997, neither Seller nor any
Affiliates of Seller that Seller controls will compete with Buyer in:
(i) the provision of Satellite Services via C Band
and/or Ku Band worldwide;
(ii) the maintenance and operation of Third Party C
Band and/or Ku Band and/or C/Ku Band satellites; or
(iii) prepare to so compete by contracting with Third
Parties with respect to marketing any C Band and/or Ku Band
Satellite Services.
(b) The matters described in clauses (i), (ii) and (iii)
above are collectively referred to as the "Noncompetition
Undertakings." It is expressly understood that the Noncompetition Undertakings
shall exclude the following businesses and undertakings of Seller or its
Affiliates: DirecTV, Ka Band services and terrestrial wireless (including PCS)
and terrestrial Internet businesses.
Notwithstanding anything to the contrary contained in this
Section 5.7, Seller may (A) commencing two (2) years after the earlier of the
Closing Date or June 30, 1997, contract with Third Parties with respect to any
C Band or Ku Band satellite construction, (B) subject to Section 5.13, lease C
Band and/or Ku Band transponders for use (i) by its Tridom VSAT or AT&T
Solutions businesses, Message Toll Services, direct to home or any other
business of Seller or its Affiliates that require the provision of C Band or
Ku Band transponder capacity as part, but not all, of a comprehensive or
bundled services offering and (ii) by its aircraft-based and maritime
communications services and messaging and paging businesses, and (C) sell any
excess capacity to which it may then be committed, provided that Buyer will
have the right of first refusal with respect to such excess capacity.
(c) For the period commencing on the date hereof and ending
on the Closing Date, Seller will use its Best Efforts to ensure that neither
Seller nor any Affiliate of Seller that Seller controls: (i) makes, offers,
solicits or seeks to enter into, directly or indirectly, any written or oral
arrangement, agreement or understanding regarding employment or retention as a
consultant or independent contractor or otherwise with any Business Employee
(other than those listed on Schedule 5.7(c) and other than public
solicitations made by Seller in good faith and without a view to circumventing
the provisions hereof) or (ii) enter into, directly or indirectly, any written
or oral arrangement, agreement or understanding regarding employment or
retention as a consultant or independent contractor or otherwise
<PAGE>47
with any Business Employee; provided that, in the case of employees covered by
collective bargaining agreements limiting the period during which such
restrictions may be applied to 60 days, the foregoing will require only that
such restrictions be put into effect during such 60-day period as Seller's
Skynet divisional management believes in its good faith judgment will be most
effective in retaining the maximum number of such employees in the Skynet
business. As promptly as practicable following the execution and delivery of
this Agreement, Seller will prepare and circulate to all of its officers a
letter executed by a senior executive officer of Seller informing such
officers of the foregoing provisions of this Section 5.7(c) and further
informing them that it is the policy of Seller during the period prior to the
Closing (i) to encourage all Business Employees (other than the persons listed
on Schedule 5.7(c)) to accept the offers of employment that will be made by
Buyer as of the Closing Date, as contemplated by this Agreement, (ii) not to
make offers of employment or consulting arrangements to such Business
Employees and not to otherwise solicit any interest in seeking such
arrangements or indicate in any way that any such arrangements would be
available following the Closing and (iii) directing such officers to use their
best efforts to ensure that these policies are effectuated, provided that
nothing contained in this Section 5.7(c) shall be construed to limit Seller's
policies or practices following the Closing Date with respect to Business
Employees who do not become Acquired Employees.
(d) From and after the Closing Date until the earlier of the
second anniversary thereof or June 30, 1999, neither Seller nor any Affiliates
of Seller that Seller controls will (i) make, offer, solicit or seek to enter
into, directly or indirectly, any written or oral arrangement, agreement or
understanding regarding employment or retention as a consultant or independent
contractor or otherwise with any Acquired Employee (other than public
solicitations made by Seller in good faith and without a view to circumventing
the provisions hereof) or (ii) enter into, directly or indirectly, any written
or oral arrangement, agreement or understanding regarding employment or
retention as a consultant or independent contractor or otherwise with any
Acquired Employee.
(e) Seller agrees that (i) Buyer will have no adequate
remedy at law for a breach of the obligations set forth in this Section 5.7,
(ii) a monetary remedy for a breach of the obligations set forth in this
Section 5.7 will be inadequate, (iii) such a breach would cause Buyer
irreparable harm, (iv) Buyer's right to specific performance of this Section
5.7 is essential to protect the rights and interests of Buyer and (v) in
addition to any other remedies Buyer may have at law or in equity, Buyer shall
be entitled to have all of the obligations of Seller set forth in this Section
5.7 specifically performed and to temporary and permanent injunctive relief
without the necessity of proving actual damages or having to post a bond or
other form of security. In the event of such a breach, Seller
<PAGE>48
agrees that Buyer shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent
injunctions as a court of competent jurisdiction may determine.
(f) The term "compete" as used in this Section 5.7 shall not
include equity investments in Third Parties of less than 10% of the equity
outstanding (on a fully-diluted basis) at the time of such investment or
non-equity investments without regard to percentage.
5.8. AT&T Name
Buyer shall, for six (6) months after the Closing Date, have
the right to use all references to the name AT&T on labels, signs and other
printed material or matter included among the Purchased Assets and used by
Buyer in connection with the Business, provided, that Buyer shall clearly
identify to Third Parties after the Closing Date that the Purchased Assets and
the Business are owned and operated by Buyer.
5.9. Additional Insurance
If Buyer at any time purchases additional insurance covering Assumed
Liabilities with respect to the transponders on Telstar 401 or Telstar 402R
heretofore sold to Third Parties, Seller shall pay 50% of the premiums payable
in respect thereof, not to exceed at any time a sum that would have had a net
present value as of the Closing Date, discounted back to the Closing Date
using a discount rate of 14% per annum, equal to Two Million Dollars
($2,000,000).
5.10. Efforts to Satisfy Certain Closing Conditions
(a) Buyer and Seller shall use their Best Efforts to effect the
Closing of the transactions contemplated by this Agreement by no later than
January 31, 1997.
(b) Buyer shall, as soon as practicable after the execution and
delivery of this Agreement, commence and pursue in good faith to secure or
complete, as appropriate, the various searches, surveys, amendments and other
matters referred to in Section 8.2(c) and shall inform Seller (promptly upon
their becoming known to Buyer) of all impediments to the satisfaction of the
conditions set forth in Section 8.2(c).
5.11. Financial Statements
Seller shall prepare, and retain Coopers & Lybrand to audit, balance
sheets for the Business as at December 31, 1994, December 31, 1995 and
December 31, 1996, together with statements of operations and cash flows and
notes thereto in accordance with Article 3-05 of Regulation S-X of the SEC for
the periods then
<PAGE>49
ended. Seller shall cause Coopers & Lybrand promptly to provide to Buyer such
information (including copies of all workpapers) related to such balance
sheets and statements as may be reasonably requested by Buyer. Buyer shall use
its Best Efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to assist and
otherwise cause Coopers & Lybrand to complete the audit of the financial
statements as promptly as reasonably practicable, but in no event later than
sixty (60) days after the Closing Date. Buyer shall pay the fees and expenses
for auditing the financial statements. If the Closing Date is a date after
March 31, 1997, Seller shall provide as promptly as reasonably practicable,
but in no event later than sixty (60) days after the Closing Date, quarterly
unaudited financial statements relating to the Business and covering the most
recent quarterly period ending prior to the Closing Date and for the
corresponding period in the prior year.
5.12. Transitional Services; Nonassignable Licenses
(a) For one year following the Closing Date, Seller will provide or
cause to be provided to Buyer with respect to the Business the operational and
administrative support services that are being provided to the Business by
Seller and its Affiliates on the date hereof. Such services will be provided
on the same basis as such services are being provided by Seller to the
Business on the date hereof, on a basis consistent with the Projections. Buyer
will use its Best Efforts to reduce or eliminate its need for Seller to
provide such services as soon as is reasonably practicable. Buyer may
terminate any such service upon 30 days' prior written notice.
(b) Notwithstanding anything to the contrary contained in Section
5.12, it is understood and agreed that, following the Closing, the Acquired
Employees currently located at Seller's Bedminster, NJ and Holmdel, NJ
facilities will require immediate relocation. Seller and Buyer will confer
prior to the Closing to determine whether Seller has reasonably available
suitable office space in the same vicinity as such facilities. If a mutually
agreeable facility of Seller is found, the parties will negotiate in good
faith a lease agreement whose term will commence on the Closing Date, and
which will continue for a period of one year, subject to early termination on
thirty (30) days' prior written notice, at rental rates substantially similar
to rents for comparable properties in such vicinity, and otherwise containing
terms and conditions customary in leases of this kind entered into between
unrelated third parties. If no such facility is found, Seller and Buyer will
cooperate with each other to locate suitable space available for lease from a
third party and, at Buyer's expense, Seller will use its commercially
reasonable efforts to provide interim space in Seller's facilities until such
space is available.
(c) Seller shall use its Best Efforts to allow Buyer to practice the
technology under the Nonassignable IP Licenses and
<PAGE>50
to negotiate licenses for Buyer thereunder under terms no less favorable to
Buyer than the existing licenses' terms are to Seller.
5.13. Preferred Supplier Relationship
Seller and Buyer acknowledge that a portion of the Business has been
and a significant portion of the Business is proposed to be devoted to
providing services to other businesses of AT&T, and that this business
relationship is intended to continue following the Closing pursuant to the
Operating Agreements, as contemplated in Section 5.5, which Seller represents
and warrants have been prepared in such a manner as to memorialize such prior
business relationships, including the prices thereof, in a manner consistent
with the projections (the "Projections") heretofore furnished by Seller to
Buyer. Buyer agrees that it will keep Seller reasonably informed from time to
time of its current and proposed Satellite Services offerings, capacities and
capabilities. Seller further agrees that, for a period of five years after the
Closing Date in the event that it or any Affiliate that it controls requires
or anticipates that it will require additional C and/or Ku band satellite
services of the kind at the time provided or proposed to be provided by Buyer,
it will so inform Buyer and, if Buyer is prepared to provide in a timely
fashion some or all of such C and/or Ku band services Seller requires at the
requisite levels of service quality on terms and conditions (including,
without limitation, pricing terms) substantially similar to those generally
available from other service providers, Seller will contract to purchase such
services on such terms. The scope of this covenant will apply, without
limitation, to Alascom, Inc. (d/b/a AT&T Alascom), and AT&T Solutions, but
will not be construed to conflict with contractual obligations of Seller or
its Affiliates in effect on the date hereof, all of which Seller will identify
to Buyer on or before September 30, 1996.
5.14. Proprietary Information
(a) Seller will not assign or license the Joint Patents to
any other Person after the date hereof.
(b) Seller will grant licenses under the Joint Patents on
the same terms granted herein to any Person that purchases all or
substantially all of the Business from Buyer and its Affiliates.
(c) All licenses granted by Seller to Buyer hereunder as of
or after the Closing Date shall be deemed to extend upon the same terms and
subject to the same conditions to all current and future Affiliates of Buyer
that engage in all or any part of the Business. To the extent the foregoing is
ineffective to extend the benefits of any such license to any such Affiliate,
Seller will separately license the subject matter of such
<PAGE>51
license, without unreasonable delay, to the affected Affiliate of Buyer on the
same terms and subject to the same conditions as the licenses granted by
Seller to Buyer hereunder.
6. Confidential Nature of Information
Buyer agrees that the Confidentiality Agreement between Buyer and
Seller dated May 14, 1996 shall apply to (a) all documents, materials and
other information that it shall have obtained regarding Seller or its
Affiliates during the course of the negotiations leading to the consummation
of the transactions contemplated hereby (whether obtained before or after the
date of this Agreement), any investigations made in connection therewith and
the preparation of this Agreement and related documents and (b) all analyses,
reports, compilations, evaluations and other materials prepared by Buyer or
its counsel, accountants or financial advisors that contain or otherwise
reflect or are based upon, in whole or in part, any of the provided
information; provided, however, that said Confidentiality Agreement shall
terminate as of the Closing and shall be of no further force and effect
thereafter.
7. Closing
At the Closing, the following transactions shall take place:
7.1. Documents to be Delivered by Seller
On the Closing Date, Seller shall deliver, or execute and deliver,
the following documents and agreements to Buyer:
(a) amendments to the Operating Agreements pursuant to
Section 5.5;
(b) a Bill of Sale in substantially the form set forth as
Exhibit E with respect to the Purchased Assets;
(c) a grant deed substantially in the form attached hereto
as Exhibit F, duly executed and acknowledged so as to convey to Buyer
insurable title to the Satellite Control Facility located in Three Peaks,
California, subject to the Permitted Realty Encumbrances;
(d) a special warranty deed substantially in the form
attached hereto as Exhibit G, duly executed and acknowledged so as to convey
to Buyer insurable title to the Satellite Control Facility located in Hawley,
Pennsylvania, subject to the Permitted Realty Encumbrances;
(e) any and all title affidavits and indemnities customarily
delivered by a purchaser or seller, as the case may reasonably be, required by
the Title Insurance Company (including, without limitation, an indemnity in
favor of the Title Insurance Company, Buyer, their respective successors and
<PAGE>52
assigns and any subsequent owner of the Satellite Control Facility located in
Hawley, Pennsylvania in form and substance satisfactory to the Title Insurance
Company and Buyer that will remove as an exception from the Title Policy that
certain Contract, dated March 15, 1974 and recorded April 15, 1974 in the
Office of Recorder and Prothonotary, Pike County, Pennsylvania in Volume 430
at Page 281 and Seller shall indemnify and hold all of the foregoing parties
harmless from any loss or damage to any of the foregoing parties) to issue a
title insurance policy or title insurance policies or marked commitments
irrevocably obligating the Title Insurance Company to issue title policies in
the amount of the Purchase Price allocated to the Satellite Control
Facilities, in form reasonably acceptable to Buyer, subject to the Permitted
Realty Encumbrances, together with all title insurance endorsements reasonably
requested by Buyer, including zoning endorsements where available (the "Title
Policies");
(f) all consents, waivers or approvals theretofore obtained
by Seller with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement;
(g) an opinion or opinions of Counsel for Seller dated the
Closing Date with respect to the matters described in Sections 3.1, 3.2, 3.3
and 3.9 in a form and subject to such exceptions as are customary for
transactions similar to those contemplated hereby, which form shall be
reasonably acceptable to Buyer;
(h) a certificate of an appropriate officer of Seller, dated
the Closing Date, certifying, to the best of his or her knowledge the
fulfillment of the conditions set forth in Sections 8.2(a) and (b); and
(i) all such other bills of sale, assignments and other
instruments of assignment, transfer or conveyance as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect the sale,
transfer, assignment, conveyance and delivery of the Purchased Assets to Buyer
and to put Buyer in actual possession or control of the Purchased Assets.
7.2. Documents to be Delivered by Buyer
On the Closing Date, Buyer shall deliver, or execute and deliver, the
following funds, documents and agreements to Seller:
(a) the Purchase Price as provided in Section 2.4;
(b) amendments to the Operating Agreements pursuant to
Section 5.5;
(c) the Assignment and Assumption Agreement;
<PAGE>53
(d) an opinion or opinions of Counsel for Buyer dated the
Closing Date with respect to the matters described in Sections 4.1, 4.2 and 4.3
in a form and subject to such exceptions as are customary for transactions
similar to those contemplated hereby, which form shall be reasonably acceptable
to Seller;
(e) a certificate of an appropriate officer of Buyer, dated
the Closing Date, certifying to the best of his or her knowledge the fulfillment
of the conditions set forth in Sections 8.3(a), (b), and (c); and
(f) all such other documents and instruments as Seller may
reasonably request or as may be otherwise necessary or desirable to evidence and
effect the assumption by Buyer of the Assumed Liabilities.
7.3. Contemporaneous Effectiveness
All acts and deliveries prescribed by this Section 7.1 and 7.2,
regardless of chronological sequence, will be deemed to occur contemporaneously
and simultaneously on the occurrence of the last act or delivery, and none of
such acts or deliveries will be effective until the last of the same has
occurred.
8. Conditions Precedent to Closing
8.1. General Conditions
The respective obligations of Buyer and Seller to effect the Closing of
the transactions contemplated hereby are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
(a) Legal Proceedings. No order of any court or administrative
agency shall have been in effect that enjoins, restrains, conditions or
prohibits consummation of this Agreement, and no litigation, investigation or
administrative proceeding that has a substantial chance of success on its merits
initiated by any bona fide Third Party shall have been pending or threatened
that would enjoin, restrain, condition or prohibit consummation of this
Agreement.
(b) HSR Act. Any applicable waiting period under the HSR Act
relating to the transactions contemplated by this Agreement shall have expired
or been terminated.
(c) Communications Act and FCC Rules. All consents and
approvals required for transfer of the FCC Licenses under the Communications Act
and FCC rules shall have been obtained.
<PAGE>54
8.2. Conditions Precedent to Buyer's Obligations
The obligations of Buyer to effect the Closing of the transactions
contemplated hereby are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions, any of which may be waived in writing by
Buyer:
(a) Representations and Warranties of Seller True at Closing.
The representations and warranties of Seller contained in this Agreement or in
any schedule, certificate or document delivered pursuant to the provisions
hereof or in connection with the transactions contemplated hereby shall have
been true and correct in all material respects when made and at and as of the
Closing Date, as though such representations and warranties were made at and as
of the Closing Date except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true in all material respects as of the date specified.
(b) Performance by Seller. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
(c) Real Estate. With respect to the Satellite Control
Facilities, Seller shall have delivered or caused to be delivered to Buyer, or
Buyer shall have otherwise received (and in the case of (i), (ii) and (iii)
below, at Buyer's initiation and expense), the following documents and
instruments, which shall be current as of the Closing Date:
(i) searches of UCC and Tax records reasonably satisfactory
to Buyer;
(ii) the Title Policies;
(iii) surveys performed in accordance with the "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys" and
otherwise reasonably satisfactory to Buyer;
(iv) such other evidence (including consents and amendments
to related instruments and agreements, duly executed and delivered by
all relevant parties) as Buyer shall reasonably require in order to
confirm that (A) the Satellite Control Facilities are: (x) legally
subdivided and in compliance with all applicable zoning regulations
and not subject to any pending or threatened rezoning or condemnation
or similar proceedings, (y) assessed as one or more separate tax lots
and not (wholly or partially) within a tax lot that includes property
that is not part of the Satellite Control Facilities, and (z) not
subject to any other matter or exception other than the Permitted
Realty
<PAGE>55
Encumbrances, (B) the right of first refusal held by Marin
Municipal Water District pursuant to Section 2.02 of that certain
Agreement of Purchase and Sale, dated January 24, 1979 by and between
American Telephone and Telegraph Company and said Water District (the
"Three Peaks Agreement") shall not interfere with Buyer's continued
use of the Satellite Control Facility located in Three Peaks,
California in connection with the conduct of the Business; and (C)
Buyer shall be entitled to any and all existing right, title and
interest of Seller (formerly known as American Telephone and
Telegraph Company), under the Three Peaks Agreement; and
(v) with reference to that certain access easement relating
to the Satellite Control Facility located in Three Peaks, California,
as more particularly described in that certain Easement Agreement
dated January 22, 1974, and recorded on January 25, 1974 in the
Office of Records of Marin County, California in Book 2759 at Page
544, Seller shall have caused such access easement to be widened,
sufficient to provide access to such Satellite Control Facility to
permit the owner of such Satellite Control Facility to complete its
budgeted construction projects and perform its obligations under the
Contracts; provided that such widening shall have been effectuated
(A) either through a condemnation proceeding or through an amendment
or restatement of said Easement Agreement in recordable form (in
either case, having obtained Buyer's prior approval, which approval
shall not be unreasonably withheld, as to the form and substance of
all documents to be executed and actions to be carried out in
furtherance of such widening) and (B) in a manner satisfactory to the
Title Insurance Company to issue a satisfactory access easement
endorsement to Buyer.
(d) Office Facilities. Reasonably satisfactory office
facilities shall have been made available to Buyer upon reasonable terms and
conditions for occupancy by the Acquired Employees following the Closing Date.
(e) Environmental Matter. Seller shall either (i) have
received closure approval to Buyer from the Pennsylvania Department of
Environmental Protection with respect to the underground storage tanks located
at the Hawley, Pennsylvania Satellite Control Facility or (ii) have removed
said underground storage tanks (and shall have restored all portions of said
Satellite Control Facility disrupted in connection therewith) in accordance
with all applicable Environmental Laws.
<PAGE>56
8.3. Conditions Precedent to Seller's Obligations
The obligations of Seller to effect the Closing of the transactions
contemplated hereby are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions, any of which may be waived in
writing by Seller:
(a) Representations and Warranties of Buyer True at Closing.
The representations and warranties of Buyer contained in this Agreement or in
any certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby shall have been true in
all material respects when made and at and as of the Closing Date as though
such representations and warranties were made at and as of the Closing Date,
except to the extent that such representations and warranties are made as of a
specified date, in which case such representations and warranties shall be
true in all material respects as of the specified date.
(b) Performance by Buyer. Buyer shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
9. Status of Agreement
The rights and obligations of Buyer and Seller under this Agreement
shall be subject to the following terms and conditions:
9.1. Effect of Breach
In the event that Buyer or Seller elects to not proceed with the
Closing of this Agreement because the conditions to Closing specified in
Section 8.1, 8.2(a) or 8.3(a) are not satisfied, such election not to proceed
shall be the sole remedy for such breach.
9.2. Survival of Representations and Warranties
The representations and warranties of Buyer and Seller contained in
this Agreement shall be deemed represented and made by Buyer and Seller at the
Closing as if made at such time and shall survive until the close of business
on March 31, 1998. Neither Seller nor Buyer shall have any liability
whatsoever with respect to any such representations or warranties after the
survival period for such representation or warranty expires, except for claims
then pending or theretofore asserted in writing by any party in accordance
with the terms and conditions of this Agreement.
<PAGE>57
9.3. General Agreement to Indemnify
(a) Each party shall indemnify, defend and hold harmless the
other party hereto and any director, officer or Affiliate of the other party
(each an "Indemnified Party") from and against any and all claims, actions,
suits, proceedings, liabilities, obligations, losses, and damages, amounts
paid in settlement, interest, costs and expenses (including reasonable
attorney's fees, court costs and other out-of-pocket expenses incurred in
investigating, preparing or defending, the foregoing) (collectively, "Losses")
incurred or suffered by any Indemnified Party to the extent that the Losses
arise by reason of, or result from (i) the failure of any representation or
warranty of such party contained in this Agreement to have been true in all
material respects when made and as of the Closing Date or (ii) the breach by
such party of any covenant or agreement of such party contained in this
Agreement to the extent not waived by the other party.
(b) Buyer further agrees to indemnify and hold harmless
Seller with respect to: (i) any failure of Buyer to discharge any of the
Assumed Liabilities whether known or unknown, accrued or contingent, or now or
subsequently incurred; (ii) any liability arising out of the operation of the
Business after the Closing Date; and (iii) any claim, demand or liability for
its portion of the Transfer Taxes referred to in Section 2.11, including
interest and penalties thereon.
(c) Seller further agrees to indemnify and hold harmless
Buyer from and against any Losses incurred by Buyer arising out of, resulting
from, or relating to: (i) the Excluded Liabilities; (ii) any termination,
salary continuation or severance pay or benefits payable by Seller to any
Business Employee by reason of such Business Employee's termination of
employment by Seller on or before the Closing Date; and (iii) any claim,
demand or liability for its portion of the Transfer Taxes referred to in
Section 2.11, including interest and penalties thereon.
(d) Amounts payable in respect of the parties'
indemnification obligations shall be treated as an adjustment to the Purchase
Price. Buyer and Seller agree to cooperate in the preparation of a
supplemental Asset Acquisition Statement as required by Section 5.3 and
Treasury Reg. (beta) 1.1060-1T(f) and (h)(2)(ii) as a result of any adjustment
to the Purchase Price pursuant to the preceding sentence. Whether or not the
Indemnifying Party (as defined below) chooses to defend or prosecute any
Third-Party Claim, Infringement Claim or Environmental Claim, both parties
hereto shall cooperate in the defense or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith or as provided in Section 5.1.
<PAGE>58
(e) The amount of the Indemnifying Party's liability under
this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually
reduce the overall impact of the Losses upon, the Indemnified Party. The
indemnification obligations of each party hereto under this Article 9 shall
inure to the benefit of the directors, officers and Affiliates of the other
party hereto on the same terms as are applicable to such other party.
(f) Seller's liability for claims made under Section
9.3(a)(i), 9.5 and 9.6 shall be subject to the following limitations: (i)
Seller shall have no liability for such claims until the aggregate amount of
the Losses, Infringement Claims, Remedial Actions and Environmental Claims
incurred shall exceed $100,000, in which case Seller shall be liable only for
the portion thereof exceeding $100,000, and (ii) Seller's aggregate liability
for all such claims shall not exceed Sixty Million Dollars ($60,000,000).
(g) Notwithstanding anything contained in this Agreement to
the contrary, no party shall be liable to the other party for punitive damages
arising out of this Agreement or any damages constituting lost profits, lost
revenues, or opportunities foregone (by whatever name), except to the extent
such damages constitute direct, proximate damages. Nothing contained in this
Agreement shall be construed to waive or limit remedies provided at law or in
equity for knowing and willful misrepresentation. Both parties shall mitigate
their damages.
9.4. General Procedures for Indemnification
(a) The procedures set forth in this Section 9.4 shall apply
generally to indemnification sought pursuant to this Article 9; provided,
however, that claims for indemnification for alleged breaches of Section 3.15
(Proprietary Information) shall be governed by Section 9.5 (Procedures for
Intellectual Property Indemnification) and for alleged breaches of Section
3.13 (Environmental Matters) by Section 9.6.3 (Procedures for Environmental
Indemnification).
(b) The Indemnified Party seeking indemnification under this
Agreement shall promptly notify the party against whom indemnification is
sought (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any action, suit or proceeding by any Third Party, in respect
of which indemnity may be sought hereunder and will give the Indemnifying
Party such information with respect thereto as the Indemnifying Party may
reasonably request, but failure to give such notice shall not relieve the
Indemnifying Party of any liability hereunder (except to the extent that the
Indemnifying Party has suffered actual prejudice by such failure). The
Indemnifying Party shall have the right, but not the obligation, exercisable
by written notice to the Indemnified Party within thirty (30) days of receipt
of
<PAGE>59
notice from the Indemnified Party of the commencement of or assertion of any
claim, action, suit or proceeding by a Third Party in respect of which
indemnity may be sought hereunder (a "Third-Party Claim"), to assume the
defense and control the settlement of such Third-Party Claim.
(c) The Indemnifying Party or the Indemnified Party, as the
case may be, shall have the right to participate in (but not control), at its
own expense, the defense of any Third-Party Claim that the other is defending
as provided in this Agreement.
(d) The Indemnifying Party, if it has assumed the defense of
any Third-Party Claim as provided in this Agreement, shall not consent to a
settlement of, or the entry of any judgment arising from, any such Third-Party
Claim without the Indemnified Party's prior written consent (which consent
shall not be unreasonably withheld) unless such settlement or judgment relates
solely to monetary damages. The Indemnifying Party shall not, without the
Indemnified Party's prior written consent, enter into any compromise or
settlement that (i) commits the Indemnified Party to take, or to forbear to
take, any action or (ii) does not provide for a complete release by such Third
Party of the Indemnified Party. The Indemnified Party shall have the sole and
exclusive right to settle any Third-Party Claim, on such terms and conditions
as it deems reasonably appropriate, to the extent such Third-Party Claim
involves equitable or other nonmonetary relief against the Indemnified Party,
and shall have the right to settle any Third-Party Claim involving money
damages for which Seller has not assumed the defense pursuant to this Section
9.4 with the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.5. Procedures for Intellectual Property Indemnification
Seller shall indemnify and hold harmless Buyer from any and all
claims and actions based on infringement, to the extent arising out of the
Business, of any Third Party intellectual property rights, including any
service mark, patent, trademark, trade name, trademark or trade name
registration, copyright registration, trade secrets or know-how, to the extent
they occur before or are based on acts or occurrences before the Closing Date.
Buyer and Seller agree that in the event a claim for indemnification is made
by Buyer under this Section 9.5, in lieu of the procedures set forth in
Section 9.4, the following procedures shall apply:
(a) Buyer shall promptly notify Seller of the assertion of any
claim, or the commencement of any action, suit or proceeding by any Third Party,
in respect of which indemnity may be sought under this Section 9.5 (an
"Infringement Claim") and give Seller such information with respect thereto as
Seller may reasonably request, but failure to give such notice shall not relieve
Seller of any liability hereunder (except to the extent
<PAGE>60
Seller has suffered actual prejudice by such failure). Seller shall have the
right, but not the obligation, exercisable by written notice to Buyer within
thirty (30) days of receipt of notice from Buyer of an Infringement Claim to
assume the defense and, subject to the other provisions of this Section 9.5,
control the settlement of such Infringement Claim.
(b) Buyer shall have the right to participate in (but not
control), at its own expense, the defense of any Infringement Claim that Seller
is defending as provided in this Agreement. Buyer shall cooperate with Seller in
a reasonable way to facilitate the settlement or defense of such Claim, and
shall not acknowledge the validity of any alleged Infringement Claim or of any
patent, copyright or mask work of any Third Party, or otherwise make statements
that could reasonably be expected to have the effect of hampering or undermining
Seller's defense or settlement of the Infringement Claim. In the event a
question arises concerning a matter subject to this Section 9.5, Seller shall,
after the Closing Date, be entitled to reasonable discovery in order to
ascertain relevant facts, including reasonable access to the Satellite Control
Facilities, to Buyer's records and to Buyer's employees with relevant knowledge.
(c) Seller, if it shall have assumed the defense of any
Infringement Claim as provided in this Section 9.5, shall not consent to the
settlement of, or the entry of any judgment arising from, any such Infringement
Claim without Buyer's prior written consent (which consent shall not be
unreasonably withheld), unless such settlement or judgment relates solely to
monetary damages or the payment of a royalty or other compensation, whether
retroactive and/or prospective, for the use of Proprietary Information. Seller
shall not, without Buyer's prior written consent, enter into any compromise or
settlement that (i) commits Buyer to take, or forebear to take, any action,
other than the payment of a royalty or other compensation for the use of
Proprietary Information or (ii) does not obtain for Buyer the right to continued
use of the allegedly infringing Proprietary Information unless Seller has (y)
procured for Buyer the right to continue using such Proprietary Information or
(z) provided instructions to replace or modify the same so that it is not
subject to such Infringement Claim and is functionally equivalent.
<PAGE>61
9.6. Environmental Matters.
Scope. Except as otherwise expressly provided in this Agreement, this
Section 9.6 contains the complete and entire agreement among Buyer and Seller
regarding the responsibilities, liabilities, rights and remedies of Buyer and
Seller for any loss, damage, cost or other liability or expense, however
defined, resulting from any Environmental Matters relating to or affecting the
Business and Assets, and the sole and complete indemnities made by Buyer and
Seller with respect to any Environmental Matters. Any disputes arising under
this Section 9.6 shall be resolved in accordance with the provisions concerning
resolution of disputes in Section 9.7 hereof.
9.6.1. Seller's Responsibilities
(a) From and after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and
its officers and directors from and against any
and all suits, claims, including third party
claims, damages, judgments, penalties, fines,
costs (including attorneys' and consultants'
fees), and liabilities, including but not
limited to, liabilities for injuries to or
death of any person and liabilities for damaged
to or loss of property caused by contamination
to air, soil or groundwater to the extent
resulting from, caused by, arising out of or in
any way attributable to:
(i) any material breach or untruth of
the environmental representations
and warranties contained in Section
3.13;
(ii) any Environmental Conditions on, in
or under the Satellite Control
Facilities that exist on or before
the Closing Date;
(iii) the offsite disposal, recycling,
reclamation, incineration,
arrangement of transportation,
dumping or spilling by Seller in the
operation of the Business of any
Hazardous Materials or Wastes that
occur on or before the Closing Date;
and
(iv) any violation by Seller in the
operation of the Business of
Environmental Law that occurs on or
before the Closing Date.
The entitlement to indemnification
under (i), (ii) and (iv) above shall be
conditioned on claims being made or notice of
Environmental Conditions or of violation of
Environmental Law being provided to Seller
prior to March 31,
<PAGE>62
1998, provided, however, that the Buyer's right
to be indemnified and the Sellers obligation to
indemnify shall not be barred on the basis that
the amount of the claim, or the extent or
nature of the Environmental Conditions or
violation of Environmental Law have not been
fully ascertained, judicially determined or
liquidated on or before the expiration of the
aforesaid period, so long as a claim or notice
of Environmental Conditions or violation of
Environmental Law has been identified and
asserted on or before such expiration.
(b) Seller shall, upon reasonable request, provide
access at reasonable times and under reasonable
circumstances to permit Buyer to conduct an
environmental assessment of the Satellite Control
Facilities prior to the Closing Date. Seller
further agrees to supply any necessary water,
power, utility location markings, and access
reasonably needed for the on-site work required
for the assessment.
9.6.2. Buyer's Responsibilities
(a) From and after the Closing Date, Buyer shall
indemnify, defend and hold harmless Seller and
its officers and directors from and against any
and all suits, claims, including third party
claims, damages, judgments, penalties, fines,
costs (including attorneys' and consultants'
fees), and liabilities, including but not
limited to, liabilities for injuries to or
death of any person and liabilities for damage
to or loss of property caused by contamination
to air, soil or groundwater to the extent
resulting from, caused by, arising out of or in
any way attributable to:
(i) any Environmental Conditions on, in
or under the Satellite Control
Facilities that are caused,
exacerbated or made worse by Buyer
on or after the Closing Date;
(ii) the offsite disposal, recycling,
reclamation, incineration,
arrangement of transportation,
dumping or spilling by Buyer in the
operation of the Business of any
Hazardous Materials or Wastes that
occur on or after the Closing Date;
and
<PAGE>63
(iii) any violation by Buyer in the
operation of the Business of
Environmental Law that occurs on or
after the Closing Date.
(b) Buyer shall have the right, but not the
obligation, to perform an environmental
assessment of the Satellite Control Facilities
prior to the Closing Date. Buyer shall pay for
its assessment and for all associated sampling
and analytical work. Buyer shall notify Seller
as far in advance as possible but at least
three (3) Business Days prior to any sample
collection and shall permit Seller to observe
sample collection and obtain split samples. At
Seller's request, Buyer shall present to Seller
results of Buyer's assessment. Buyer shall
obtain advance approval from Seller for any
drilling or excavation, which approval shall
not be unreasonably withheld, and shall
indemnify and hold harmless Seller for any
loss, damage or liability arising from the
conduct of Buyer's environmental assessment.
Buyer shall be responsible for obtaining any
notices, permits or authorizations required by
law for the conduct of Buyer's environmental
assessment.
9.6.3. Procedures for Environmental Indemnification
Buyer and Seller agree that in the event a claim for
indemnification is made under this Section 9.6, in lieu of the
procedures set forth in Section 9.4, the following procedures shall
apply:
(a) The party seeking indemnification for a claim
("Environmental Claim") subject to this
Section 9.6 shall, within thirty (30) days of
any claim, suit, action, proceeding which it
becomes aware that may be brought against the
Indemnifying Party, notify the Indemnifying
Party of the assertion of any Environmental
Claim in respect of which indemnity may be
sought hereunder and will give the
Indemnifying Party such information with
respect thereto as the Indemnifying Party may
reasonably request, but failure to give such
notice shall not relieve the Indemnifying
Party of any liability hereunder except to
the extent that the Indemnifying Party has
been damaged by such failure. The
Indemnifying Party shall have the right, but
not the obligation, exercisable by written
notice to the Indemnified Party within thirty
(30) days
<PAGE>64
of receipt of notice from the Indemnified
Party of the Environmental Claim to assume
the defense of the Environmental Claim;
provided however, that if any action is
required prior to the expiration of the
Indemnifying Party's 30-day response period
in order to preserve the rights of the
Indemnified Party, the Indemnified Party
shall so notify the Indemnifying Party and
the Indemnified Party may assume the defense
of the Environmental Claim until the
Indemnifying Party responds, unless the
Indemnifying Party provides written notice
that it will timely perform such required
action. The Indemnifying Party shall
reimburse the Indemnified Party for its
reasonable costs in assuming the defense of
the Environmental Claim until the
Indemnifying Party responds pursuant to the
terms herein.
(b) The Indemnifying Party shall have authority
and control over litigation or investigations
(whether initiated voluntarily or by
regulatory authorities) relating to matters
on which the Indemnifying Party agrees, in
writing, to defend and fully indemnify the
Indemnified Party, and for the methodology,
extent and implementation of any cleanup or
remedial actions for which it has
responsibility. The Indemnifying Party shall
exercise such authority and control
("Management") in a reasonable manner and in
compliance with all applicable Environmental
Laws. The Indemnified Party may participate
in, but not control, the settlement or
defense of an Environmental Claim through
counsel chosen by the Indemnified Party,
provided that the Indemnified Party assumes
the fees and expenses of such counsel. The
Indemnified Party shall have the right, but
not the obligation, to control the litigation
or investigation of matters on which the
Indemnifying Party agrees to defend, but not
fully indemnify, the Indemnified Party until
such time that the Indemnifying Party agrees,
in writing, to fully indemnify the
Indemnified Party.
(c) The Indemnifying Party shall inform the
Indemnified Party at least quarterly of
action taken in furtherance of such
investigations, cleanups or Remedial Actions
since the previous update and actions
anticipated prior to the next update. The
purpose of such
<PAGE>65
updates shall be to attempt to reach
consensus as to the best means of Management.
All consultant proposals, reports,
conclusions or data shall be submitted
promptly to the Indemnified Party upon the
Indemnifying Party's receipt thereof. Any
submissions by the Indemnifying Party to
environmental regulatory agencies shall be
submitted to the Indemnified Party for review
prior to submission to such agency. The
Indemnified Party recognizes that the
communications required by this Section
9.6.3(c) are in anticipation of litigation
and Indemnified Party shall maintain the
confidentiality and privileged status of all
such communications. The Indemnified Party
shall bear all of its own costs of such
communications, including any costs of
attorneys or contractors.
Should the Indemnified Party suggest
an alternative means of Management
("Alternative") and provide sound business
reasons why the Alternative should be
implemented in lieu of the Indemnifying
Party's proposed course of action, the
Indemnifying Party agrees to implement the
Alternative, provided that the Alternative is
technically sound, does not increase
significantly the cost, exposure or other
burden to the Indemnifying Party (provided
that if the Alternative would do so, the
Alternative shall be implemented only if the
Indemnified Party agrees to bear all such
additional cost, exposure or other burden),
and is in compliance with all applicable
Environmental Laws.
(d) If a Remedial Action or other action proposed
to be taken by the Indemnifying Party in
settlement of the Environmental Claim would
materially and adversely affect the
Indemnified Party's operation of the
Business, including any material impairment
in its relationships with customers,
suppliers or the general public, such action
shall not be taken without the Indemnified
Party's written consent, which consent shall
not be unreasonably withheld.
Notwithstanding any other provision of this
Agreement, the Indemnifying Party agrees to
compensate the Indemnified Party for any and
all damages or Losses resulting from the
Remedial Action's
<PAGE>66
affect on the Indemnified Party's operation
of the Business.
(e) The Indemnifying Party shall not compromise
or settle any Environmental Claim unless such
compromise or settlement provides only for
the payment of money, provides a complete
release of the Indemnified Party, and does
not materially and adversely affect the
Indemnified Party's operation of the Business
without the Indemnified Party's written
consent, which consent shall not be
unreasonably withheld.
(f) the Indemnified Party shall cooperate with
the Indemnifying Party in connection with
defending, remedying, compromising or
settling an Environmental Claim, which
cooperation shall include, but not be limited
to:
(i) furnishing such nonprivileged
records, information and
testimony, and attending such
conferences, discovery
proceedings, hearings, trials and
appeals, as may be reasonably
requested by the Indemnifying
Party;
(ii) providing reasonable access upon
prior written notice to any
property if such access is
necessary to perform Remedial
Action; provided, however, that
such access does not materially
and adversely affect the operation
of the Business;
(iii) providing any and all reasonable
assistance in securing any
required permits or approvals
(including, without limitation, by
holding in its name any such
permit where necessary or
appropriate) in order to perform
any Remedial Action; and
(iv) providing such decisions, comments
or information as may reasonably
be requested by the Indemnifying
Party to avoid delay in the
performance of the Remedial Action
and in otherwise managing,
settling or defending any
Environmental Claim.
9.7. Arbitration; Choice of Law
(a) Any dispute, controversy or claim, whether based on
contract, tort, statute or other legal theory (including, but
<PAGE>67
not limited to, any claim of fraud or misrepresentation), arising out of or
related to this Agreement, or any subsequent agreement between the parties,
shall be resolved by arbitration pursuant to this Section 9.7 and the
then-current Commercial Rules and supervision of the American Arbitration
Association. The duty to arbitrate shall extend to any officer, employee,
shareholder, principal, agent, trustee in bankruptcy or otherwise, affiliate,
subsidiary, third-party beneficiary or guarantor, of a party hereto making or
defending any claim which would otherwise be arbitrable hereunder.
(b) Prior to demanding arbitration, the parties shall first
in good faith consult among appropriate officers of Buyer and Seller, which
shall begin promptly after one party has delivered to the other a written
request for consultation. At any time thereafter, either party may request in
writing that the dispute be referred to appropriate Senior Executives of Buyer
and Seller. Within 10 Business Days after such request, the Senior Executives
(and not their designees) shall meet and attempt in good faith to resolve the
dispute.
(c) Neither party shall file a demand for arbitration until
thirty (30) Business Days after a request is made for Senior Executive
meetings as provided for in Section 9.7(b).
(d) The arbitration shall be held in the headquarters city
of the party not initiating the claim before a single arbitrator who is
knowledgeable in the subject matter of the dispute. The arbitrator's decisions
and award shall be issued within thirty (30) Business Days from the hearing of
final arguments of the parties. The decision and award shall be final and
binding and may be entered in any court having jurisdiction thereof. The
arbitrator shall not have the power to award punitive or exemplary damages, or
any damages excluded by, or in excess of any damage limitations expressed in,
this Agreement or any subsequent agreement between the parties.
(e) In order to prevent irreparable harm, the arbitrator may
grant temporary or permanent injunctive or other equitable relief.
(f) Issues of arbitrability shall be determined in
accordance with the federal substantive and procedural laws relating to
arbitration; all other aspects of this Agreement shall be interpreted in
accordance with, and the arbitrator shall apply and be bound to follow the
substantive laws of, the State of New York. Each party shall bear its own
attorneys' fees associated with the arbitration and other costs and expenses
of the arbitration shall be borne as provided by the rules of the American
Arbitration Association.
(g) The parties agree not to submit a dispute subject to
this Section 9.7 to any federal, state, local or foreign court or arbitration
association except as may be necessary to enforce
<PAGE>68
the arbitration procedures of this Section 9.7, or to enforce the award of the
arbitrator. If court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay all
associated costs, expenses and attorneys' fees which are reasonably incurred
by the other party.
(h) The arbitrator may order the parties to exchange copies
of non-rebuttal exhibits and copies of witness lists in advance of the
arbitration hearing. However, the arbitrator shall have no other power to
order discovery or depositions unless and then only to the extent that all
parties otherwise agree in writing.
(i) Neither a party, witness or the arbitrator may disclose
the contents or results of any arbitration hereunder without prior written
consent of all parties, unless and then only to the extent required to enforce
or challenge the award, as required by law, or as necessary for financial and
tax reports and audits.
(j) Notwithstanding anything to the contrary in this Section
9.7, in the event of alleged violation of a party's intellectual property
rights (including, but not limited to, unauthorized disclosure of confidential
information), that party may seek temporary injunctive relief from any court
of competent jurisdiction pending appointment of an arbitrator. The party
requesting such relief shall simultaneously file a demand for arbitration of
the dispute, and shall request the American Arbitration Association to proceed
under its rules for expedited hearing. In no event shall any such temporary
injunctive relief continue for more than 30 days.
(k) If any part of this Section 9.7 is held to be
unenforceable, it shall be severed and shall not affect either the duty to
arbitrate hereunder or any other part of this Section 9.7.
10. Miscellaneous Provisions
10.1. Notices
All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given upon receipt if (i) sent by
Federal Express or other express carrier, fee prepaid, (ii) sent via facsimile
with receipt confirmed, or (iii) delivered personally, addressed as follows or
to such other address or addresses of which the respective party shall have
notified the other.
(a) If to Seller, to:
AT&T Corp. Skynet Satellite Services
900 Route 202/206N
Bedminster, NJ 07921-0752
Attn: Mary Jane McKeever
<PAGE>69
With a copy to:
AT&T Corp.
295 Maple Avenue
Basking Ridge, NJ 07920-1002
Attn: Mufit J. Cinali
(b) If to Buyer, to:
Loral Space & Communications Ltd.
600 Third Avenue
New York, NY 10016
Attn: Eric J. Zahler, Esq.,
General Counsel
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attn: Bruce R. Kraus, Esq.
10.2. Expenses
Except as otherwise provided in this Agreement, each party to this
Agreement will bear all the fees, costs and expenses that are incurred by it in
connection with the transactions contemplated hereby, whether or not such
transactions are consummated; provided, however, that each party shall bear
one-half of the fee required in connection with any filings under the HSR Act.
10.3. Entire Agreement; Modification
The agreement of the parties, which is comprised of this Agreement, the
Schedules and Exhibits hereto and the documents referred to herein, sets forth
the entire agreement and understanding between the parties and supersedes any
prior
<PAGE>70
agreement or understanding, written or oral, relating to the subject matter of
this Agreement.
10.4. Assignment; Binding Effect; Severability
Except as provided herein, this Agreement may not be assigned by either
party hereto without the other party's written consent. Notwithstanding the
foregoing, Buyer may assign the rights to acquire all or any portion of the
Purchased Assets to one or more Affiliates of Buyer on or prior to the Closing
Date. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors, legal representatives and permitted assigns of
each party hereto. The provisions of this Agreement are severable, and in the
event that any one or more provisions are deemed illegal or unenforceable, the
remaining provisions shall remain in full force and effect unless the deletion
of such provision shall cause this Agreement to become materially adverse to
either party, in which event the parties shall use Best Efforts to arrive at an
accommodation that best preserves for the parties the benefits and obligations
of the offending provision.
10.5. Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York.
10.6. Execution in Counterparts
This Agreement may be executed in any number of counterparts with the
same effect as if the signatures thereto were on one instrument.
10.7. Public Announcement
Neither Seller nor Buyer shall, without the prior written approval of
the other party, make any press release or other public announcement concerning
the terms of the transactions contemplated by this Agreement, except as and to
the extent that any such party shall be so obligated by law, in which case the
other party shall be advised and the parties shall use reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
however, that the foregoing shall not preclude communications or disclosures
necessary to (a) implement the provisions of this Agreement or (b) comply with
accounting, Securities and Exchange Commission, Federal Communications
Commission, and stock exchange disclosure obligations.
10.8. No Third-Party Beneficiaries
Except as expressly provided in Section 5.4(f)(ii)(E), nothing in this
Agreement, express or implied, is intended to or shall (a) confer on any Person
other than the parties hereto and their respective successors or assigns any
rights (including
<PAGE>71
third-party beneficiary rights), remedies, obligations or liabilities under or
by reason of this Agreement or (b) constitute the parties hereto as partners
or as participants in a joint venture. This Agreement shall not provide third
parties with any remedy, claim, liability, reimbursement, cause of action or
other right in excess of those existing without reference to the terms of this
Agreement. Nothing in this Agreement shall be construed as giving to any
Business Employee, or any other individual, any right or entitlement under any
benefit plan, policy or procedure maintained by Seller or Buyer, except as
expressly provided in such benefit plan, policy or procedure. No third party
shall have any rights under Section 502, 503 or 504 of ERISA or any
regulations thereunder because of this Agreement that would not otherwise
exist without reference to this Agreement. No third party shall have any
right, independent of any right that exist irrespective of this Agreement,
under or granted by this Agreement, to bring, any suit at law or equity for
any matter governed by or subject to the provisions of this Agreement. Nothing
herein expressed or implied by this Agreement shall confer upon any Acquired
Employee any right to employment by Buyer or any of its Affiliates for a
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement.
11. Termination and Waiver
11.1. Termination
This Agreement may be terminated at any time prior to the Closing Date
by:
(a) The mutual written consent of Buyer and Seller;
(b) Buyer or Seller if there shall be in effect a
nonappealable order of a court of competent jurisdiction prohibiting the
consummation of the transactions contemplated hereby;
(c) Seller, if the Closing shall not have occurred on or
before March 31, 1997, by providing Buyer with a written notice on or before
April 10, 1997 of Seller's intention to terminate this Agreement five Business
Days after Buyer's receipt of such notice (the fifth Business Day after such
receipt, the "Termination Date"), provided Buyer shall have the right to extend
such Termination Date (an "Extension") until June 30, 1997 by written notice
delivered on or before the Termination Date.
11.2. Effect of Termination
(a) In the event of the termination of this Agreement, this
Agreement shall become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders, except as provided
in Article 6 and Sections 10.2, 10.7, 11.1(c) and 11.2(b).
<PAGE>72
(b) If, following an Extension, the Closing shall not have
occurred on or prior to June 30, 1997, Buyer will pay Seller $30,000,000 on or
before July 7, 1997. Such amount shall be unconditionally payable on such date
regardless of whether Buyer has defenses to Seller's claim therefor or claims
against Seller arising out of this Agreement or the transactions contemplated
hereby, provided that such payment shall not prejudice the later assertion of
any such defenses or claims.
(c) If, following an Extension, the Closing has not occurred
on or before June 30, 1997, and Seller certifies in writing on or prior to July
7, 1997 that it has no present intention of selling or seeking to sell the
Business to any Person within the next 12 months, Buyer will pay Seller an
additional $10,000,000 within five Business Days of its receipt of such
certification, provided that Seller will refund such amount to Buyer promptly,
with interest at 7% per annum, in the event that it sells or enters into any
bona fide, definitive agreement to sell the Business on or before June 30, 1998.
If Seller does not make such a certification, Seller will use all reasonable
efforts to sell the Business as promptly as practicable on commercially
reasonable terms, and if Seller has not sold or entered into bona fide,
definitive agreement to sell the Business on or before June 30, 1998, Buyer will
pay Seller $10,000,000.
(d) If, on or before the first anniversary of the Termination
Date, Seller sells, or enters into a bona fide, definitive agreement to sell,
the Business to a Third Party, Seller will pay Buyer 50% of any Resale Profit
Amount, up to a maximum payment of $50,000,000 and, if, but only if, Buyer shall
have extended the Termination Date, Buyer will pay Seller 50% of any Resale Loss
Amount, up to a maximum payment of $20,000,000.
11.3. Waiver of Agreement
Any term or condition hereof may be waived at any time prior
to the Closing Date by the party hereto which is entitled to the benefits
thereof by action taken by its Board of Directors or its duly authorized officer
or employee, whether before or after the action of such party; provided,
however, that such action shall be evidenced by a written instrument duly
executed on behalf of such party by its duly authorized officer or employee. The
failure of either party to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision nor shall it in any way
affect the validity of this Agreement or the right of such party thereafter to
enforce each and every such provision. No waiver of any breach of this Agreement
shall be held to constitute a waiver of any other or subsequent breach.
<PAGE>73
11.4. Amendment of Agreement
This Agreement may be amended with respect to any provision
contained herein at any time prior to the Closing Date by action of the parties
hereto taken by their Boards of Directors or by their duly authorized officers
or employees, whether before or after such party's action; provided, however,
that such amendment shall be evidenced by a written instrument duly executed on
behalf of each party by its duly authorized officer or employee.
<PAGE>74
IN WITNESS WHEREOF, each of Seller and Buyer has caused this
Agreement to be duly executed on its behalf by one of its duly authorized
officers as of the date first written above.
AT&T CORP.
By: /s/ Robert M. Aquilina
Name: Robert M. Aquilina
Title:
LORAL SPACE & COMMUNICATIONS LTD.
By: /s/ Michael B. Targoff
Name: Michael B. Targoff
Title: President and Chief
Operating Officer
<PAGE>1
Contact: Jeanette Clonan
Loral
(212) 338-5658
Michael Granieri
AT&T
(908) 221-7611
LORAL TO ACQUIRE AT&T SKYNET SATELLITE SERVICE
OPERATIONS IN $712.5 MILLION TRANSACTION
Includes Telstar Satellites, Control Stations and Orbital Slots
Loral to Retain All SKYNET Employees
First Acquisition for the "New" Loral
NEW YORK, September 25, 1996 -- Loral Space & Communications Ltd. (NYSE:LOR)
announced today that it has entered into a definitive agreement to acquire
AT&T's SKYNET Satellite Services for $712.5 million in cash. The acquisition
is the first for the "new" Loral and, together with Loral's existing satellite
activities, creates one of the world's largest satellite-based businesses.
SKYNET is a leading U.S. satellite operator specializing in the
distribution of entertainment and educational programming to mass audiences
throughout the nation via a network of C- and Ku-band geosynchronous
satellites known as the Telstar series. The company also operates two
state-of-the-art satellite telecommunications control stations and an advanced
research and development facility.
-more-
<PAGE>2
-2-
"SKYNET will serve as a critical building block for our worldwide
satellite network service strategy," stated Loral chairman and chief executive
officer, Bernard L. Schwartz. "SKYNET, one of the three leading domestic
satellite service providers, was our premier opportunity for value to advance
this strategy. Historically a domestic provider, SKYNET not only jump starts
our U.S. capabilities, but provides us with a world-class platform for
expansion into the international arena."
"AT&T's strategy is to take advantage of the many opportunities
opened up by the new telecommunications regulation by focusing on our core
businesses and customer franchises," said Bob Aquilina, vice president of
product management - business markets for AT&T. "While SKYNET is a strong
business and is expected to continue to grow, selling it makes sense for AT&T
because it is not central to our new strategy. We think Loral and SKYNET
Satellite Services are a great match because Loral's principal business focus
is satellite communications and it is committed to continuing to deliver the
high level of service to which SKYNET customers are accustomed," Mr. Aquilina
said. "We're delighted Loral has agreed to employing the entire SKYNET team
and we look forward to being a customer of Loral's satellite offerings."
In addition to Space Systems/Loral, one of the world's largest
manufacturers of satellites, Loral has two other major initiatives under
development as part of its global network strategy. In the second half of 1997
Loral's Globalstar will begin launching a constellation of 48
low-earth-orbiting (LEO) satellites for its worldwide telephony system. Loral
also plans geostationary satellites (GEOs) operating in the Ku- and Ka-band
for CyberStar, its two-way digital communications system for the low-cost
transmission of broadband data, planned for a phased roll-out beginning in
late 1997.
-more-
<PAGE>3
-3-
"The demand for satellite services is huge and growing," Mr.
Schwartz said. It is the most cost-effective method of extending high quality
broadcast and broadband interactive multi-media services worldwide. SKYNET
significantly adds to Loral's ability to develop a major, truly integrated
system of GEO and LEO satellite networks."
Much of SKYNET's revenues is derived from long-term contracts for
telecommunications services under noncancelable transponder leases. As
recently launched satellites and satellites currently under construction are
deployed, revenues and earnings are expected to increase dramatically. For
example, without a full-year's benefit from the launch of Telstar 5, SKYNET'S
1997 revenues should exceed $145 million and earnings before interest, taxes,
depreciation and amortization (EBITDA) should grow to in excess of $95
million. It is expected that the acquisition will be accretive to Loral's
pre-tax earnings in 1998, SKYNET'S first full year under Loral ownership,
contributing approximately $30 million that year. Loral will use $500 million
of debt to finance the acquisition, leaving it with approximately $400 million
in cash after the transaction.
"Loral is experienced at acquiring non-core divisions of large
companies, investing in them and enabling them to realize their full potential
as part of our core business," said Mr. Schwartz. "The acquisition of SKYNET,
which is known for its exemplary customer service and technological
innovation, multiplies our ability to capitalize on the huge demand for
satellite service."
Among SKYNET's customers are some of the strongest content providers
in the broadcast industry, including ABC, Fox, PBS, Viacom, EDS, and Western
Telecommunications, Inc. Additionally, SKYNET leases satellite capacity to
direct-to-home service provider AlphaStar. Loral SKYNET, as the company will
be called upon closing, will also continue to serve AT&T's VSAT customers and
will support other AT&T communications services.
-more-
<PAGE>4
-4-
Loral intends to retain all SKYNET employees, consistent with its
practice of building on the resources of its acquisitions. SKYNET is
headquartered in Bedminster, New Jersey. It has two operations centers, one
based in Hawley, Pennsylvania, and the other in Three Peaks, California.
SKYNET's research and development is based in Holmdel, New Jersey.
The transaction, which is subject to Federal Communications
Commission and Federal Trade Commission/Department of Justice approval, is
expected to conclude in approximately six months.
Loral Space & Communications Ltd. is a $1.7 billion high technology
company headquartered in New York that concentrates on satellite manufacturing
and satellite-based services. Loral manages and is the largest equity owner of
both Globalstar, in which it holds a 34% interest, and Space Systems/Loral, a
leading manufacturer of large, high-powered satellites for telecommunications
and environmental applications, in which it holds a 51% interest.
# # #
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In addition, from time to time,
Loral Space & Communications Ltd. or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
the Company with the Securities and Exchange Commission, press releases or
oral statements made with the approval of an authorized executive officer of
the Company. Actual results could differ materially from those projected or
suggested in any forward-looking statements as a result of a wide variety of
factors and conditions. These factors and conditions have been described in
the section of the Company's Information Statement, dated April 12, 1996,
entitled, "Risk Factors," and other documents the Company files, from time to
time, with the Securities and Exchange Commission, including the Company's
annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K. The reader is specifically referred to these documents
regarding the factors and conditions that may affect future results.
