<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): August 22, 1994
The Williams Companies, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-4174 73-0569878
-------- ------ ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
One Williams Center, Tulsa, Oklahoma 74172
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918/588-2000
------------
Not Applicable
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events.
The Williams Companies, Inc. (the "Company") has entered into a Stock
Purchase Agreement, dated as of August 22, 1994, by and among the Company, WTG
Holdings, Inc. ("Holdings"), a wholly owned subsidiary of the Company, and LDDS
Communications, Inc. ("LDDS"), providing for the sale by Holdings of all of
the outstanding capital stock of Williams Telecommunications Group, Inc.
("WTG") to LDDS for $2.5 billion in cash. The sale is subject to the
expiration of the Hart-Scott-Rodino waiting period and approvals of the Federal
Communications Commission and various state public service agencies, which are
expected by year end. The Company will retain WilTel Communications Systems,
Inc., a national telecommunications equipment supplier and service company, and
Vyvx, Inc., a company that operates a national video network specializing in
broadcast television applications, as well as certain other nonsignificant
subsidiaries of WTG.
The Board of Directors of the Company has also approved discretionary
open market repurchases of up to $800 million of the Company's Common Stock
over the next 12 months. Such repurchases may be made by the Company or a
subsidiary of the Company from time to time and at prices to be determined at
the discretion of the Company's Chairman of the Board and President and will
depend upon, among other things, the price of the Company's stock.
2
<PAGE> 3
Item 7. Financial Statements and Exhibits.
The following exhibits are filed as part of this Report:
Exhibit 2. Copy of the Stock Purchase Agreement by and among the
Company, WTG Holdings, Inc. and LDDS Communications,
Inc., dated as of August 22, 1994.
Exhibit 99. Copy of the Company's press release, dated August 22,
1994, publicly announcing the actions reported
herein.
3
<PAGE> 4
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.
THE WILLIAMS COMPANIES, INC.
Date: August 26, 1994 By: /s/ J. FURMAN LEWIS
Name: J. Furman Lewis
Title: Senior Vice President
4
<PAGE> 5
EXHIBIT INDEX
Exhibit 2. Copy of the Stock Purchase Agreement by and among the
Company, WTG Holdings, Inc. and LDDS Communications,
Inc., dated as of August 22, 1994.
Exhibit 99. Copy of the Company's press release, dated August 22,
1994, publicly announcing the actions reported
herein.
<PAGE> 1
EXHIBIT 2
CONFORMED COPY
================================================================================
STOCK PURCHASE AGREEMENT
By and Among
LDDS Communications, Inc.,
The Williams Companies, Inc.
and
WTG Holdings, Inc.
Dated as of
August 22, 1994
================================================================================
<PAGE> 2
EXECUTION FORM
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
PURCHASE AND SALE
1.1. Purchase and Sale; Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RESENTATIONS AND WARRANTIES OF THE BUYER
2.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4. Financing Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5. Governmental Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1. Organization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Certificate of Incorporation, Bylaws and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Capital Structure and Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7. Real Property, Rights of Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10. Liabilities, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12. Litigation and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14. Governmental Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.15. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.16. Employee Benefit Plans and Related Matters;
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.17. Taxes and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18. Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.19. Employees, Labor Matters, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.20. Minute and Stock Books; Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.21. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.22. Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
4.1. Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3. Access; Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4. Governmental Approvals, Consents, Filings and
Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.5. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7. Cancellation of Intercompany Accounts; Main-
tenance of Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.8. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.9. Survival, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.10. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.12. Noncompete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.13. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.14. Transfer of Excluded Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.15. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.16. Trademark License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.17. Governmental Approval and Consent Indemnity . . . . . . . . . . . . . . . . . . . . . . 70
4.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.19. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE V
CONDITIONS TO CLOSING
5.1. The Seller's Conditions to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
5.2. The Buyer's Conditions to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE VI
THE CLOSING
6.1. Deliveries by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.2. Deliveries by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE VII
TERMINATION
7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE VIII
CERTAIN DEFINITIONS
8.1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS
9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.2. Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.3. Governing Law and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . 102
9.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.6. Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.8. Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.10. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9.12. Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
</TABLE>
iii
<PAGE> 5
LIST OF DISCLOSURE SCHEDULES AND ANNEXES
<TABLE>
<CAPTION>
Disclosure Schedules Description
- -------------------- -----------
<S> <C>
Buyer Disclosure Schedule
- -------------------------
Schedule 2.5 Buyer's Governmental Approvals
and Consents
Schedule 5.2(c)(i) Certain Closing Consents
Schedule 5.2(c)(iii) Certain Additional Closing
Consents
Schedule 5.2(c)(iv) Excepted Consent
Schedule 5.2(f) Certain Proceedings
Seller Disclosure Schedule (pages)
- ----------------------------------
Schedule 3.1(a) Jurisdictions of Incorporation (2)
Schedule 3.1(b) Subsidiaries; Holdings (2)
Schedule 3.2 Restrictions upon Transfer or
Pertaining to Securities (1)
Schedule 3.3 Capital Structure and Owner-
ship (1)
Schedule 3.5 Financial Statement Exceptions (3)
Schedule 3.7(a) Owned Real Property (3)
Schedule 3.7(b) Leases (6)
Schedule 3.8(a) Environmental Compliance (1)
Schedule 3.8(b) Other Environmental Matters (1)
Schedule 3.9(a)(i) Owned Intellectual Property (11)
Schedule 3.9(a)(ii) Excluded Intellectual Property (5)
Schedule 3.9(b)(i) Other Intellectual Property
Rights (10)
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Schedule 3.9(b)(ii) Non-Exclusive Intellectual
Property Rights (12)
Schedule 3.9(c) Infringement (1)
Schedule 3.9(d) Due Registration (1)
Schedule 3.10 Liabilities (1)
Schedule 3.11(b)(i) Contracts (1067)
Schedule 3.11(b)(ii) Scheduled Contracts (13)
Schedule 3.11(c) Contract Violations (246)
Schedule 3.12(a) Litigation (17)
Schedule 3.12(b) Compliance (1)
Schedule 3.13 No Conflicts (1)
Schedule 3.14(a) Required Approvals and Con-
sents to Conduct of the Busi-
ness (1)
Schedule 3.14(b) Seller's Governmental Approv-
als and Consents (74)
Schedule 3.15 Insurance (2)
Schedule 3.16(a) Employee Benefit Plans (5)
Schedule 3.16(c) Employee Benefit Plan
Liability (1)
Schedule 3.16(d) Defaults (1)
Schedule 3.17 Tax Matters (56)
Schedule 3.18 Absence of Changes (1)
Schedule 3.19 Labor Matters (1)
Schedule 3.21 Affiliate Transactions (19)
Schedule 3.22 Bonus Payments (1)
Schedule 4.1(1) Certain Contract (1)
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
Schedule 4.7 Intercompany Accounts (10)
Schedule 4.10(b)(i) Seller Sponsored Plans (3)
Schedule 4.10(b)(ii) Company Plans (2)
Schedule 4.15(a) 1994 Capital Requirements
Budget (1)
Schedule 4.15(d) Supplemental Capital Expendi-
tures (1)
Schedule 4.18 Insurance Claims (1)
Schedule 5.1(c) Required Consents (3)
Schedule 8.1 Excluded Indebtedness (1)
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Annex Description
- ----- -----------
<S> <C>
Annex A Form of Seller Non-Compete
Agreement
Annex B Matters to be Covered in
Opinion of Seller's Counsel
Annex C Matters to be Covered in Opin-
ion of Buyer's Counsel
Annex D Rights of Way
</TABLE>
vii
<PAGE> 9
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
August 22, 1994, by and among LDDS Communications, Inc., a Georgia corporation
(the "Buyer"), The Williams Companies, Inc., a Delaware corporation (the
"Seller"), and WTG Holdings, Inc., a Delaware corporation (the "Selling
Subsidiary").
W I T N E S S E T H:
WHEREAS, the Seller owns all of the issued and outstanding
shares of capital stock of the Selling Subsidiary, and the Selling Subsidiary
owns all of the issued and outstanding capital stock (the "Shares") of Williams
Telecommunications Group, Inc., a Delaware corporation (the "Company"); and
WHEREAS, the Selling Subsidiary wishes to, and the Seller
wishes to cause Selling Subsidiary to, sell the Shares to the Buyer, and the
Buyer wishes to purchase the Shares from the Selling Subsidiary, on the terms
and conditions and for the consideration described in this Agreement
(capitalized and other terms defined as provided in Article VIII hereof being
used as therein defined);
NOW THEREFORE, in consideration of the premises and the mutual
promises, covenants, agreements, representations and warranties hereinafter set
forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. Purchase and Sale; Purchase Price. (a) Each of the Seller
and the Buyer acknowledges and agrees that the representations, covenants,
warranties, agreements, indemnities and other undertakings contained in this
Agreement are made for the benefit of the other such party hereto and that the
parties hereto, in reliance thereon, have agreed to execute this Agreement and
consummate the transactions contemplated by this Agreement. Subject to the
satisfaction or waiver of the conditions set forth in this Agreement, on the
Closing Date, the Selling Subsidiary shall, and the Seller shall cause the
Selling Subsidiary to,
<PAGE> 10
sell, convey, transfer, assign and deliver to the Buyer free and clear of all
Liens other than any Lien arising as a result of any action taken by the Buyer
or the Buyer Affiliates, and the Buyer shall purchase, all right, title and
interest in and to the Shares.
(b) In full payment for the Shares, and also in consideration
of the representations, covenants, warranties, agreements and indemnities
contained in this Agreement, the Buyer shall pay, and the Selling Subsidiary
shall accept (and the Seller shall cause the Selling Subsidiary to accept), at
the Closing, subject to the provisions of this Agreement and any applicable
withholding requirements, an amount equal to $2,500,000,000 (2.5 billion U.S.
dollars) plus the Additional Amount, if any (as such aggregate amount may be
adjusted as provided in Sections 4.7(b) and 4.15, the "Purchase Price"). As
used in this Agreement, the term "Additional Amount" means, in the event that
the Closing shall occur after January 2, 1995, an amount equivalent to interest
on $2,500,000,000, for the period from January 2, 1995 to the Closing Date, at
a rate per annum equal to the prime rate as published by The Wall Street
Journal from time to time (calculated on the basis of a 365-day year, for the
actual number of days elapsed during the period from but not including January
2, 1995 to and including the Closing Date).
1.2. Time and Place of Closing. The closing of the sale and
purchase of the Shares (the "Closing") shall take place at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, at 10:00 a.m.
on December 1, 1994, or such other time, date and place as the Buyer and the
Seller may mutually determine as soon as practicable after all of the
conditions hereunder to the obligations of the parties hereto shall have been
satisfied or waived (the date on which the Closing occurs, the "Closing Date").
At the Closing:
(a) the Selling Subsidiary shall deliver (and the Seller shall
cause the Selling Subsidiary to deliver) to the Buyer, free and clear
of all Liens other than any Lien arising as a result of any action
taken by the Buyer or the Buyer Affiliates, certificates representing
the Shares, duly endorsed in blank or accompanied by stock powers or
other instruments of transfer duly executed in blank, and bearing or
accompanied by all requisite stock transfer stamps; and
2
<PAGE> 11
(b) the Buyer shall pay the Purchase Price to the Selling
Subsidiary for the Shares so delivered by the Selling Subsidiary, by
wire transfer of immediately available funds to the account of the
Selling Subsidiary designated at least two business days prior to the
Closing Date.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows,
which representations and warranties are made as of the date hereof and (with
such changes as the Seller may hereafter expressly consent to in writing prior
to the Closing Date) as of the Closing Date:
2.1. Organization. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Georgia.
2.2. Authorization. The Buyer has full corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Buyer of this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been, or as of the Closing Date will have
been, duly and validly authorized by all necessary corporate action on the part
of the Buyer. The Buyer has duly executed and delivered this Agreement, and on
the Closing Date shall have duly executed and delivered the Ancillary
Agreements to which it is a party. This Agreement constitutes, and the
Ancillary Agreements when executed and delivered shall constitute, legal, valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their terms, subject to (i) general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at
law, and (ii) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
2.3. Non-Contravention. Neither the execution, delivery or
performance by the Buyer of this Agreement or the Ancillary Agreements to which
the Buyer is a party, nor
3
<PAGE> 12
the consummation of the transactions contemplated hereby or thereby, will
conflict with, contravene, result in the breach of any term or provision of, or
constitute a default under (with or without the giving of notice or the lapse
of time or both), create in any other Person a right or claim of termination,
amendment, modification, acceleration or cancellation of, or result in the
creation of any Lien (or any obligation to create any Lien) upon any of the
properties of the Buyer under, (a) any provision of the Organizational
Documents of the Buyer, (b) any Law applicable to the Buyer or (c) any
agreement (including without limitation any loan agreement or promissory note
or indenture), or instrument to which the Buyer is a party or by which it is
bound, except in the case of the preceding clauses (b) and (c) for conflicts,
contraventions, breaches, defaults, rights, claims and Liens that (x) would
exist if the Governmental Approvals and Consents set forth in Schedule 2.5 of
the written disclosure schedule previously delivered by the Buyer to the Seller
(the "Buyer Disclosure Schedule") were not obtained or made, or (y)
individually and in the aggregate, would not reasonably be expected to
materially impair the ability of the Buyer to perform its obligations hereunder
and under the Ancillary Agreements to which it is a party.
2.4. Financing Commitment. The Buyer has delivered to the
Seller copies of binding commitment letters (the "Commitment Letters") pursuant
to which the lenders party thereto have advised the Buyer that they are
willing, on the terms and subject to the conditions set forth in the Commitment
Letters, to provide financing to the Buyer in an aggregate amount sufficient to
consummate the transactions contemplated by this Agreement.
2.5. Governmental Approvals and Consents. Schedule 2.5 of the
Buyer Disclosure Schedule sets forth all Governmental Approvals, Consents,
transfers or other actions of any kind required to be made, filed, given or
obtained by or on behalf of the Buyer with, to or from any Governmental
Authority or other Person in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby, except for Governmental Approvals and Consents
the failure of which to be made or obtained, individually and in the aggregate,
would not reasonably be expected to materially impair the ability of the Buyer
to perform its obligations hereunder and under the Ancillary Agreements to
which it is a party.
4
<PAGE> 13
2.6. Purchase for Investment. The Buyer is purchasing the
Shares solely for investment, with no present intention to resell the Shares.
The Buyer hereby acknowledges that the Shares have not been registered pursuant
to the Securities Act of 1933, as amended, and may not be transferred in the
absence of such registration or an exemption therefrom under such Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows,
which representations and warranties are made as of the date hereof and (with
such changes as the Buyer may hereafter expressly consent to in writing prior
to the Closing Date) as of the Closing Date:
3.1. Organization, etc. (a) Organization and Qualification.
Each of the Seller, the Selling Subsidiary, each member of the Seller Group
party to an Ancillary Agreement and each member of the Company Group is a
corporation duly organized validly existing and in good standing under the laws
of the state of its incorporation, which states are set forth in Schedule
3.1(a) of the written disclosure schedule previously delivered by the Seller to
the Buyer (the "Seller Disclosure Schedule"), and has full corporate power and
authority to own or lease its properties and assets and to carry on lawfully
its business as and where it is currently conducted.
(b) Subsidiaries. Except as set forth in Schedule 3.1(b) of
the Seller Disclosure Schedule, the Company does not have any Subsidiaries and
neither it nor any other member of the Company Group owns or holds any
securities of, or any interest in, any other Person and is not a partner or
member in or subject to any joint venture, partnership, limited liability
company or other arrangement or contract that is or would reasonably be
expected to be treated as a partnership for federal income tax purposes. The
members of the Company Group are set forth in Schedule 3.1(b) of the Seller
Disclosure Schedule. Each member of the Company Group is duly qualified or
licensed to do business and is in good standing in each of the jurisdictions
specified in Schedule 3.1(b) of the Seller Disclosure Schedule, which includes
each jurisdiction it which the nature of its business or the properties and
assets owned or leased by it makes such qualification or licensing necessary,
except where the
5
<PAGE> 14
failure to be so qualified or licensed, individually and in the aggregate,
would not reasonably be expected to have or result in a Material Adverse
Effect.
3.2. Certificate of Incorporation, Bylaws an Agreements. A
complete and correct copy of the Certificate and/or Articles of Incorporation
and Bylaws (the "Organizational Documents") of each member of the Company Group,
together with all amendments thereto, have been delivered to the Buyer. Each of
the Organizational Documents of each member of the Company Group is in full
force and effect. No member of the Company Group is in violation of any of the
provisions of its Organizational Documents in any material respect. Except as
set forth in Schedule 3.2 of the Seller Disclosure Schedule, there are no
agreements to which any member of the Seller Group is a party, imposing any
restrictions upon the transfer of or otherwise pertaining to the shares of
capital stock or other securities of any member of the Company Group (including
but not limited to the Shares) or the ownership thereof. Except as expressly
contemplated by Section 4.17, any and all such restrictions set forth or
required to be set forth in Schedule 3.2 of the Seller Disclosure Schedule
shall be duly complied with or effectively waived as of the Closing.
3.3. Capital Structure and Ownership. (a) All of the
outstanding shares of capital stock of the Selling Subsidiary are owned
beneficially and of record by the Seller. Schedule 3.3 of the Seller Disclosure
Schedule sets forth a complete and correct list of all of the authorized,
issued or outstanding shares of capital stock and other equity securities of
each member of the Company Group. There are no outstanding contractual or other
rights or obligations to or of any member of the Seller Group or any other
Person to repurchase, redeem or otherwise acquire any outstanding shares of
capital stock or other equity securities of any member of the Company Group.
All such outstanding shares of capital stock have been duly and validly issued,
are fully paid and nonassessable. All such outstanding shares of capital stock
and other equity securities (i) are owned beneficially and of record by another
member of the Company Group or (in the case of the Company) the Selling
Subsidiary, free and clear of any Liens other than Liens arising as a result of
any action taken by the Buyer or the Buyer Affiliates, in each case as set
forth in Schedule 3.3 of the Seller Disclosure Schedule, and (ii) have not been
issued in violation of the preemptive rights of any Person or applicable
federal, state or foreign securities
6
<PAGE> 15
Laws. As of the Closing Date there will be no issued or outstanding debt
securities of any member of the Company Group. There are no outstanding
subscriptions, options, warrants or other rights to acquire securities of any
member of the Company Group, nor are there securities outstanding which are
convertible into or exchangeable for securities of any member of the Company
Group, except as set forth in Schedule 3.3 of the Seller Disclosure Schedule.
Except pursuant to applicable corporate Laws or as set forth in Schedule 3.3 of
the Seller Disclosure Schedule, there are no restrictions that will survive the
closing, including but not limited to self-imposed restrictions, on the
retained earnings of any member of the Company Group or on the ability of any
member of the Company Group to declare and pay dividends.
(b) The Selling Subsidiary owns, beneficially and of record,
the Shares free and clear of all Liens. Upon consummation of the transactions
at the Closing as contemplated by this Agreement, the Buyer will acquire good
and valid title to all the Shares, free and clear of any Lien other than any
Lien arising as a result of any action taken by the Buyer or the Buyer
Affiliates.
3.4. Authorization (a) Each of the Seller and the Selling
Subsidiary has full corporate power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by each of the
Seller and the Selling Subsidiary of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Seller and the Selling
Subsidiary. Each of the Seller and the Selling Subsidiary has duly executed and
delivered this Agreement, and this Agreement constitutes the legal, valid and
binding obligation of each of the Seller and the Selling Subsidiary,
enforceable against the Seller and the Selling Subsidiary in accordance with
its terms, subject to (i) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law, and (ii)
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting creditors' rights
generally.
(b) Each member of the Seller Group party to an Ancillary
Agreement has full corporate power and authority to enter into the Ancillary
Agreements to which it is a
7
<PAGE> 16
party, to perform its obligations thereunder and to consummate the transactions
contemplated thereby. The execution, delivery and performance by each member of
the Seller Group of the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated thereby have been, or as of the
Closing Date will have been, duly and validly authorized by all necessary
corporate action on the part of each such member of the Seller Group. On or
prior to the Closing Date, each member of the Seller Group party to an
Ancillary Agreement shall have duly executed and delivered the Ancillary
Agreements to which it is a party. The Ancillary Agreements when executed and
delivered shall constitute legal, valid and binding obligations of each such
member of the Seller Group party thereto, enforceable against each such member
of the Seller Group in accordance with their terms, subject to (i) general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law, and (ii) bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium, receivership or other similar
laws relating to or affecting creditors' rights generally.
3.5. Financial Statements. (a) The Seller has delivered to the
Buyer correct and complete copies of (i) the audited combined balance sheets as
of December 31, 1993 and 1992, and the audited combined income statements and
combined statements of stockholders' equity and cash flows for the fiscal years
ending December 31, 1993, 1992, and 1991, of WilTel Network Services (the
"Audited Year-End Financial Statements") and (ii) the audited combined balance
sheet as of June 30, 1994, and the audited combined income statement and
combined statements of stockholders' equity and cash flows for the six month
period then ended, of WilTel Network Services (the "Audited Six-Month Financial
Statements," and together with the Audited Year-End Financial Statements, the
"Audited Financial Statements"), accompanied by an unqualified report of the
Company's independent public accountants, Ernst & Young, on each of the Audited
Financial Statements as of and for the fiscal years ended December 31, 1993 and
1992 and the six month period ended June 30, 1994, and an unqualified report of
the Company's independent public accountants, Deloitte and Touche, on each of
the Audited Financial Statements for the fiscal year ended December 31, 1991
(the Audited Financial Statements, together with the subsequent Financial
Statements, the "Financial Statements").
8
<PAGE> 17
(b) The balance sheets included in the Audited Financial
Statements present, and the balance sheets included in the Subsequent Financial
Statements will present, fairly in all material respects the financial position
of WilTel Network Services as of the respective dates thereof. The statements
of income, statements of stockholders' equity and statements of cash flows
included in the Audited Financial Statements present, and the statements of
income, statements of stockholders' equity and statements of cash flows
included in the Subsequent Financial Statements will present, fairly in all
material respects the results of operations and cash flows of WilTel Network
Services for the respective periods indicated.
(c) The Audited Financial Statements were, and the Subsequent
Financial Statements will have been, based on the accounting books and records
of the Company Group and have been prepared in accordance with United States
generally accepted accounting principles applicable to the business of the
Company Group ("GAAP") applied on a consistent basis throughout the periods
presented in the Financial Statements, except that (x) the Subsequent Financial
Statements may be subject to normal year-end adjustments and (y) the Subsequent
Monthly Financial statements will not contain notes.
(d) Except as set forth in Schedule 3.5 of the Seller
Disclosure Schedule, the balance sheets included in the Audited Financial
Statements do not, and the balance sheets included in the Subsequent Financial
Statements will not, include any material assets or liabilities (other than
Excluded Indebtedness) not intended to constitute a part of the assets and
liabilities of the Company Group after giving effect to the transactions
contemplated hereby and by the Ancillary Agreements. Except as set forth in
Schedule 3.5 of the Seller Disclosure Schedule, the statements of income,
statements of stockholders' equity and statements of cash flows included in the
Audited Financial Statements do not, and the statements of income, statements
of stockholders' equity and statements of cash flows included in the Subsequent
Financial Statements will not, reflect the operations of any Person or business
not intended to constitute a part of the business of the Company Group after
giving effect to all such transactions. The statements of income included in
the Audited Financial Statements reflect, and the statements of income included
in the Subsequent Financial Statements will reflect, all of the material costs
and expenses incurred in connection with the Business, including those
9
<PAGE> 18
incurred in generating the revenues reflected in the Financial Statements, in
each case, for the periods covered thereby, that would be required to be so
reflected under GAAP in combined financial statements of the Company Group for
the periods presented.
3.6. Assets. The Company Group owns, or otherwise has
sufficient and legally enforceable rights to use, all of the properties and
assets necessary for the conduct of, or otherwise material to, the Business,
except for the Rights of Way (which are addressed in Section 3.7). Except with
respect to the Real Property and the Rights of Way (which are addressed in
Section 3.7) and the Intellectual Property (which is addressed in Section 3.9),
the Company Group has good, valid and marketable title to, or in the case of
leased property has good and valid leasehold interests in, all Assets that are
material to the Business, including but not limited to all such Assets
reflected in the Audited June 30 Balance Sheet or acquired since the date
thereof (except as have been or may hereafter be disposed of in the Ordinary
Course of Business or as otherwise expressly permitted by Section 4.1(i)), in
each case free and clear of any Lien, other than Permitted Liens. The Company
Group has maintained all tangible Assets that are material to the Business in
good repair and operating condition consistent with its customary practice and
generally accepted industry standards, and all such tangible Assets are
adequate and suitable for the purposes for which they are presently being used
in the Business.
3.7. Real Property; Rights of Way. (a) Owned Real Property.
Schedule 3.7(a) of the Seller Disclosure Schedule contains a complete and
correct list of all Owned Real Property (including the location and the present
use thereof), except for any Owned Real Property acquired after the date hereof
in the Ordinary Course of Business as expressly permitted by Section 4.1, or as
expressly permitted by Section 4.15. Except as set forth in Schedule 3.7(a) of
the Seller Disclosure Schedule, each member of the Company Group has good,
valid and marketable title to its respective Owned Real Property, free and
clear of all Liens, other than Permitted Liens.
(b) Leases. Schedule 3.7(b) of the Seller Disclosure Schedule
contains a complete and correct list of all (x) Leases with an annual rental in
excess of $500,000, (y) all Leases for "points of presence" and (z) all Leases
for property located in the Williams Center in Tulsa,
10
<PAGE> 19
Oklahoma (including the names of the lessor and lessee, the location and the
present use thereof), except for any such Lease (each, a "Subsequent Lease")
entered into after the date hereof in the Ordinary Course of Business as
expressly permitted by Section 4.1. The Seller has delivered or made available
to the Buyer correct and complete copies of all Leases set forth or required to
be set forth in Schedule 3.7(b) of the Seller Disclosure Schedule (the
"Scheduled Leases"), except for those stated to be oral in such Schedule (and as
of the Closing Date the Seller will have delivered or made available to the
Buyer complete and correct copies of all Subsequent Leases). Each member of the
Company Group claiming by, through or under each Scheduled Lease or Subsequent
Lease has good and valid title to the leasehold estate under such Lease, free
and clear of any Lien other than Permitted Liens (and except for defects in the
title of the underlying fee owner), and enjoys peaceful and undisturbed
possession under its respective Leases, except for such failures to have such
title or possession that, individually and in the aggregate, would not
reasonably be expected to have or result in a Material Adverse Effect.
(c) Rights of Way. The Company Group has, and immediately
after the Closing will have, rights consisting of, and rights with respect to,
the Rights of Way sufficient for the conduct of the Business (other than to the
extent the failure to have such rights, individually and in the aggregate,
would not reasonably be expected to have or result in a Material Adverse
Effect), free and clear of any Liens created or incurred by any member of the
Seller Group, other than Permitted Liens.
3.8. Environmental Matters. (a) Compliance with Environmental
Laws. Except as set forth in Schedule 3.8(a) of the Seller Disclosure Schedule,
each member of the Seller Group has complied and is in compliance with all
applicable Environmental Laws pertaining to any of the Assets or the use,
ownership or transferability thereof, or to the operation of the Business, and
no violation by any member of the Seller Group is, to the best knowledge of
each member of the Seller Group, being alleged with respect to any applicable
Environmental Law relating to any of the Assets or the use, ownership or
transferability thereof, or to the operation of the Business, except for such
events of non-compliance and allegations of violations that, individually and
in the aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect.
11
<PAGE> 20
(b) Other Environmental Matters. Except as set forth in
Schedule 3.8(b) of the Seller Disclosure Schedule, no member of the Seller
Group or any other Person has caused or has taken any action that would
reasonably be expected to result in, and no member of the Company Group is
subject to, any liability or obligation on the part of any member of the
Company Group or the Buyer or any of its Affiliates, relating to (x) the
environmental conditions on, under, or about the Real Property and Rights of
Way owned, leased, operated or used by any member of the Company Group or any
predecessor thereto at the present time or in the past, including without
limitation, the air, soil and groundwater conditions at such properties; or (y)
the past or present use, management, handling, transport, treatment,
generation, storage, disposal or Release of any Hazardous Materials, except for
liabilities or obligations that, individually and in the aggregate, would not
reasonably be expected to have or result in a Material Adverse Effect. Without
limiting the generality of the foregoing, except as disclosed in Schedule
3.8(b) of the Seller Disclosure Schedule;
(1) none of the Company Group's current or past operations,
and none of the currently or formerly owned or leased Real Property,
is, to the best knowledge of each member of the Seller Group, the
subject of any investigation or evaluation by any Governmental
Authority as to whether any Remedial Action is needed to respond to a
Release or threatened Release of any Hazardous Materials, which
individually or in the aggregate, would reasonably be expected to have
or result in a Material Adverse Effect.
(2) The Company Group has filed all notices required to be
filed by any member thereof under any Environmental Law, except to the
extent that the failure to file, individually and in the aggregate,
would not reasonably be expected to have or result in a Material
Adverse Effect.
(c) There are no environmental conditions on any Real Property
or (to the best knowledge of each member of the Seller Group) Rights of Way
that would reasonably be expected to result in a requirement under
Environmental Laws that any member of the Company Group perform Remedial
Actions that, individually or in the aggregate, would reasonably be expected to
have or result in a Material Adverse Effect.
12
<PAGE> 21
(d) The Seller has made available to the Buyer all written
environmental assessments, evaluations, audits, studies, investigations or
other reports within the possession, custody or control of any member of the
Seller Group that (i) relate to the Real Property and other Assets or (ii)
otherwise contain information about existing or potential liabilities or
obligations under Environmental Laws that would reasonably be expected to be
imposed upon any member of the Company Group.
3.9. Intellectual Property. (a) As used in this Agreement, the
term "Owned Intellectual Property" means all Intellectual Property that is
owned by any member of the Company Group, other than the Excluded Intellectual
Property. Schedule 3.9(a)(i) of the Seller Disclosure Schedule sets forth a
complete and correct list of all Owned Intellectual Property, other than Owned
Intellectual Property (A) that consists of either (i) inventions, processes,
designs, formulae, trade secrets, know-how, confidential information, data and
documentation and (ii) Intellectual Property (other than any trademarks,
servicemarks or tradenames) that is (x) not registered or under application for
registration and (y) not material to the Business or (B) acquired after the
date hereof in the Ordinary Course of Business or as otherwise expressly
permitted by Section 4.1. As of the Closing Date, the Seller will have
delivered to the Buyer a complete and correct list of all owned Intellectual
Property acquired after the date hereof (other than Owned Intellectual Property
of a type referred to in clause (A) of the preceding sentence). The Company
Group has good and valid title to all Owned Intellectual Property set forth or
required to be set forth in Schedule 3.9(a)(i) of the Seller Disclosure
Schedule (or in the list referred to in the preceding sentence), free and clear
of all Liens (other than Permitted Liens). Schedule 3.9(a)(ii) of the Seller
Disclosure schedule sets forth a complete and correct list of all Excluded
intellectual Property.
(b) The Owned Intellectual Property constitutes all
Intellectual Property necessary for the conduct of, or otherwise material to,
the Business, except for the Intellectual Property described in Schedule
3.9(b)(i) of the Seller Disclosure Schedule. Immediately after the Closing, one
or more of the members of the Company Group will own all Owned Intellectual
Property, and have sufficient and legally enforceable rights to use all
Intellectual Property described in Schedule 3.9(b) (i) of the Seller Disclosure
Schedule on a royalty-free, exclusive basis (except as
13
<PAGE> 22
otherwise disclosed in Schedule 3.9(b)(ii) of the Seller Disclosure Schedule),
in each case free from Liens (other than Permitted Liens, and Liens created by
the licensor or owner thereof), and on the same terms and conditions as in
effect prior to the Closing (except as otherwise expressly provided in any
relevant Ancillary Agreement).
(c) The conduct of the Business does not infringe or otherwise
conflict with any rights of any Person in respect of any Intellectual Property,
except for such infringements or conflicts that, individually and in the
aggregate, would not reasonably be expected to have or result in a Material
Adverse Effect. To the best knowledge of each member of the Seller Group, none
of the Owned Intellectual Property is being infringed or otherwise used or
available for use by any Person without a license or permission from any member
of the Company Group, except as set forth in Schedule 3.9(c) of the Seller
Disclosure Schedule.
(d) Except as set forth in Schedule 3.9(d) of the Seller
Disclosure Schedule, the Company Group has taken all actions to protect the
Owned Intellectual Property under any applicable Law to the extent necessary
for the conduct of the Business.
3.10. Liabilities, etc. No member of the Company Group has any
material liabilities or obligations (whether known or unknown, direct or
indirect, joint or several, secured or unsecured, accrued, absolute, contingent
or otherwise, and whether due or to became due), except (a) as set forth in
Schedule 3.10 of the Seller Disclosure Schedule, (b) as and to the extent
disclosed or reserved against in the Audited June 30 Balance Sheet, (c) for
liabilities and obligations that are incurred after June 30, 1994 in the
Ordinary Course of Business or after the date hereof as expressly permitted by
Section 4.1, which liabilities and obligations, individually and in the
aggregate, would not reasonably be expected to have or result in a Material
Adverse Effect, and (d) liabilities for Taxes. Except as set forth in Schedule
3.10 of the Seller Disclosure Schedule, since June 30, 1994 there has not
occurred or come to exist any event, occurrence, fact, condition, change or
development (other than any event, occurrence, fact, condition, change or
development that affects the economy generally or the telecommunications
industry as a whole) that, individually or in the aggregate, has had or
resulted in, or would reasonably be expected to have or result in, a material
Adverse Effect.
14
<PAGE> 23
3.11. Contracts. (a) As used in this Agreement, the term
"Contract" means any of the following to or by which any member of the Company
Group is a party or bound or affected (other than the Plans):
(1) any contract or agreement for the purchase or sale of any
services, equipment, inventory, materials, supplies, or capital item
or items, including, but not limited to, any supply agreements with
any Governmental Authority, (i) pursuant to which, in each case, the
aggregate revenue to or financial obligation of the Company Group
exceeds $5,000,000 annually, or (ii) which is not terminable by such
member of the Company Group without penalty upon no more than 30 days,
notice;
(2) any employment, consulting, severance, bonus, deferred
compensation or similar agreement;
(3) any agreement, indenture or other instrument relating to
the borrowing of money or the obtaining of or extension of credit, or
to the guaranty of any obligation for the borrowing of money or the
obtaining of or extension of credit, or to any indebtedness by way of
lease-purchase arrangement, conditional sale, guarantee or other
undertaking on which others rely in extending credit, or to any
mortgage or other security arrangement;
(4) any agreement relating to the Rights of Way or any Lease;
(5) any license, lease or other agreement to provide or
acquire telecommunications or related services or equipment (i)
pursuant to which, in each case, the aggregate revenue to or financial
obligation of the Company Group exceeds $1,000,000 annually, or (ii)
which is not terminable by such member of the Company Group without
penalty upon no more than 30 days' notice;
(6) any insurance policy naming any member of the Company
Group as an insured or beneficiary or as a loss payee, or for which
any member of the Company Croup has paid all or part of the premium;
(7) any agreement, contract, or obligation to or by which any
member of the Company Group, on the one
15
<PAGE> 24
hand, and any member of the Seller Group, on the other hand, is a
party or otherwise bound or affected;
(8) any other plan, agreement, contract, power of attorney or
commitment, whether written or oral, (i) pursuant to which, in each
case, the aggregate revenue to or financial obligation of the Company
Group exceeds $10,000,000, or (ii) which is not terminable by such
member of the Company Group without penalty upon no more than 30 days'
notice;
(9) any contract, agreement, commitment or instrument that (i)
relates to any joint venture, or any acquisition, lease or disposition
of (or of any material interest in) any member of the Company Group or
other Person, any business, or any material assets or properties,
whether currently in effect or proposed, (ii) prohibits or materially
restricts the ability of any member of the Company Group to conduct
the Business, to engage in any business or operate in any geographical
area or to compete with any Person, or (iii) provides for payments or
benefits that are conditioned, in whole or in part, on a change of
control of any member of the Company Group;
(10) any license, licensing arrangement or other agreement
providing for the use of, or limiting the use of, any Intellectual
Property (except for any licenses or agreements for commercially
available software pursuant to which the aggregate financial
obligation of the Company Group is less than $25,000); and
(11) any other contracts, agreements, commitments or
instruments that, individually or in the aggregate, are or would
reasonably be expected to be material to the Business.
(b) Schedule 3.11(b)(i) of the Seller Disclosure Schedule sets
forth a complete and correct list of all material Contracts, and Schedule
3.11(b)(ii) sets forth a complete and correct list of all Scheduled Contracts,
in each case except for any such Contract (each, a "Subsequent Contract")
entered into after the date hereof in the Ordinary Course of Business, or as
otherwise expressly permitted by Section 4.1. The Seller has delivered or made
available to the Buyer complete and correct copies of all Contracts set forth
or required to be set forth in Schedules 3.11(b)(i) and 3.11(b)(ii) of the
Seller Disclosure Schedule, except in
16
<PAGE> 25
certain cases where proper names and dollar amounts have been redacted (and as
of the Closing Date the Seller will have delivered or made available to the
Buyer complete and correct copies of all such Contracts, and all Subsequent
Contracts).
(c) Except as set forth in Schedule 3.11(c) of the Seller
Disclosure Schedule, no member of the Company Group and, to the best knowledge
of each member of the Seller Group, no other Person has breached any provisions
of, or is in violation, breach or default under the terms of, or has caused or
permitted to exist any event or condition that (with or without due notice or
lapse of time or both) would constitute a violation, breach, default or event
of default under, any Contract, except for such violations, breaches and
defaults that, individually and in the aggregate, would not reasonably be
expected to have or result in a Material Adverse Effect. All Contracts are
legal, valid, binding, in full force and effect, and enforceable against each
member of the Company Group party thereto, and (to the best knowledge of each
member of the Seller Group) each other Person party thereto, except to the
extent that any failure to be enforceable, individually and in the aggregate,
would not reasonably be expected to have or result in a Material Adverse
Effect.
3.12. Litigation and Compliance. (a) Except as set forth in
Schedule 3.12(a) of the Seller Disclosure Schedule, there is no Litigation
pending or, to the best knowledge of any member of the Seller Group, threatened
by or against any member of the Seller Group, that, individually or in the
aggregate, would reasonably be expected to materially impair the ability of any
member of the Seller Group to perform its obligations hereunder (in the case of
the Seller or the Selling Subsidiary) or under the Ancillary Agreements to
which it is a party, or would reasonably be expected to have or result in a
Material Adverse Effect. Except as set forth in Schedule 3.12(a) of the Seller
Disclosure Schedule, there is no order, writ, judgment, injunction or decree in
any Litigation, to or by which any member of the Seller Group is a party or is
bound, that, individually or in the aggregate, has had or resulted in, or would
reasonably be expected to have or result in, a Material Adverse Effect, or
would reasonably be expected to materially impair the ability of any member of
the Seller Group to perform its obligations hereunder (in the case of the
Seller or the Selling Subsidiary) or under the Ancillary Agreements to which it
is a party.
17
<PAGE> 26
(b) Except as set forth in Schedule 3.12(b) of the Seller
Disclosure Schedule, (i) neither the Seller nor any member of the Company Group
is in conflict with or in violation or breach of or default under (and there
exists no event that, with notice or passage of time or both, would constitute
a conflict, violation, breach or default with, of or under) (x) any tariff,
rule or regulation of a local exchange carrier or interexchange carrier
applicable to it or any of its properties, assets, operations or business, (y)
any Law applicable to it or any of its properties, assets, operations or
business, or (z) any Contract, or any other agreement or instrument to which it
is party or by which it or any of its properties or assets is bound or
affected, except for any such conflicts, breaches, violations and defaults
that, individually and in the aggregate, would not reasonably be expected to
have or result in a Material Adverse Effect, and would not reasonably be
expected to materially impair the ability of any member of the Seller Group to
perform its obligations hereunder (in the case of the Seller or the Selling
Subsidiary) or under the Ancillary Agreements to which it is a party, and (ii)
no member of the Seller Group has received any notice or has knowledge of any
claim alleging any such conflict violation, breach or default. Each
registration, report, statement, notice or other filing requested or required
to be filed by any member of the Company Group (or, to the best knowledge of
any member of the Seller Group, by any Non-Company Affiliate in connection
with the Business) with any Governmental Authority under any applicable Law has
been timely filed, and when filed complied with applicable Law, except for such
failures to be timely filed or to so comply that, individually and in the
aggregate, would not reasonably be expected to have or result in a Material
Adverse Effect.
3.13. Non-Contravention. Except as set forth in Schedule 3.13
of the Seller Disclosure Schedule, neither the execution, delivery or
performance by any member of the Seller Group of this Agreement (in the case of
the Seller or the Selling Subsidiary) or the Ancillary Agreements to which it
is a party nor the consummation of the transactions contemplated hereby and
thereby shall conflict with, contravene, result in the breach of any term or
provision of, constitute a violation of or default under (with or without the
giving of notice or the lapse of time or both), create in any other Person a
right or claim of termination, amendment, modification, acceleration or
cancellation of, or result in the creation of any Lien (or any obligation to
18
<PAGE> 27
create any Lien) upon any of the Shares or any of the Assets (other than, with
respect to the Assets, a Permitted Lien) under, (a) any provision of the
organizational Documents of any member of the Seller Group (excluding any
Plan), (b) any Law or Consent applicable to any member of the Seller Group, or
any of their respective properties or assets, or the Business (excluding any
Plan), or (c) any agreement (including without limitation any Contract, loan
agreement, promissory note or indenture, but not including any Plan) or
instrument (including without limitation any Contract, loan agreement,
promissory note or indenture, but not including any Plan), to which any member
of the Seller Group is a party or by which any of them is bound or affected,
except in the case of the preceding clauses (b) and (c) for such conflicts,
contraventions, breaches, violations, defaults, rights and claims that (x)
would exist if the Governmental Approvals and Consents set forth in Schedule
3.14(b) of the Seller Disclosure Schedule were not obtained or made, or (y)
individually and in the aggregate, would neither reasonably be expected to have
or result in a Material Adverse Effect, nor reasonably be expected to
materially impair the ability of any member of the Seller Group to perform its
respective obligations hereunder (in the case of the Seller or the Selling
Subsidiary) and under the Ancillary Agreements to which it is a party.
3.14. Governmental Approvals and Consents. (a) Each member of
the Company Group has all Governmental Approvals and Consents necessary for, or
otherwise material to, the conduct of the Business. Except as set forth in
Schedule 3.14(a) of the Seller Disclosure Schedule, all such Governmental
Approvals and Consents are in full force and effect, and no violations have
been made in respect thereof except for such violations that, individually and
in the aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect. Except as set forth in Schedule 3.14(a) of the Seller
Disclosure Schedule, no Litigation by or against any member of the Seller Group
is pending or, to the best knowledge of each member of the Seller Group,
threatened that would result in any revocation, cancellation, suspension or
modification of any such Governmental Approval or Consent, except for such
revocations, cancellations, suspensions and modifications that, individually
and in the aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect. Except as set forth in Schedule 3.14(a) of the Seller
Disclosure Schedule, no member of the Seller Group has been notified that any
such Government Approval or Consent will, and (to
19
<PAGE> 28
the best knowledge of each member of the Seller Group) there is no reasonable
basis for any thereof to, be revoked, suspended, cancelled or modified, or not
be renewed in the Ordinary Course of Business.
(b) Schedule 3.14(b) of the Seller Disclosure Schedule sets
forth a complete and correct list of all Governmental Approvals, Consents,
transfers or other actions of any kind required to be made, filed, given or
obtained by or on behalf of any member of the Seller Group with, to or from any
Governmental Authority or other Person in connection with the execution and
delivery of this Agreement and the Ancillary Agreements or the consummation of
the transactions contemplated hereby or thereby, except for such Governmental
Approvals and Consents the failure of which to be made or obtained,
individually and in the aggregate, would not reasonably be expected to have or
result in a Material Adverse Effect, and would not reasonably be expected to
materially impair the ability of any member of the Seller Group to perform its
respective obligations hereunder (in the case of the Seller or the Selling
Subsidiary) and under the Ancillary Agreements to which it is a party or the
ability of the Company Group, following the Closing, to continue to conduct the
Business.
3.15. Insurance. Schedules 3.15 and 3.16(a) of the Seller
Disclosure Schedule together set forth a complete and correct list of all
policies of insurance which insure the properties, business or liability
(including, but not limited to, directors' and officers' liability) of any
member of the Company Group, setting forth the types and amounts of coverage,
except for any such policies of insurance entered into after the date hereof in
the Ordinary Course of Business or as otherwise expressly permitted or required
by Section 4.1.
3.16. Employee Benefit Plans and Related Matters; ERISA. (a)
Employee Benefit Plans.
(i) An used in this Agreement, the term "Plan" means each
written and (if there would reasonably be expected to be liability of
$50,000 to any individual Employee (as defined below) or $500,000 to
all Employees in the aggregate in connection therewith) each unwritten
"employee benefit plan", as such term is defined in section 3(3) of
ERISA, and each written and (if there would reasonably be expected to
be liability of $50,000 to any individual Employee or $500,000 to
20
<PAGE> 29
all Employees in the aggregate in connection therewith) each unwritten
bonus, incentive or deferred compensation, severance, termination,
retention, change of control, insurance, employment, stock option,
stock appreciation, stock purchase, phantom stock or other
equity-based, performance, vacation or other employee or retiree
benefit or compensation plan, program, arrangement, agreement, policy
or understanding that (A) provides or is reasonably expected to
provide benefits or compensation in respect of any current or former
employee of any member of the Company Group (each, an "Employee") or
the beneficiaries or dependents of any Employee (each, a
"Beneficiary") or under which any Employee or Beneficiary is or is
reasonably expected to became eligible to participate or derive a
benefit and (B) with respect to any Plan that is subject to ERISA, at
any time within the preceding six years, or, with respect to any other
Plan, at any time within the preceding three years, is or has been
maintained, established or entered into by any member of the Company
Group or any other trade or business, whether or not incorporated,
which, together with any member of the Company Group, is or would have
been at any date of determination, treated as a single employer under
section 414 of the Code (such other trades and businesses referred to
collectively as the "Related Persons"), or to which any member of the
Company Group or any Related Person contributes or is or has been
obligated or required to contribute.
(ii) Schedule 3.16(a) of the Seller Disclosure Schedule sets
forth a complete and correct list of (A) those Plans (x) that have
been entered into, or are currently maintained, sponsored or
contributed to, by any member of the Company Group or any Related
Person (other than Digital Communications of America, Inc. ("DCA"))
and (y) with respect to which any member of the Company Group
currently has any obligation to contribute or currently has any
liability and (B) those Plans that are currently sponsored, maintained
or contributed to by DCA and were in existence at any time after June
24, 1994, except for those Plans that have been adopted or entered
into after the date hereof as expressly permitted by Section 4.1(m).
(iii) With respect to each Plan listed or required to be
listed on Schedule 3.16(a) of the Seller Disclosure Schedule (other
than the Equity Plan), the
21
<PAGE> 30
Seller has made available or, upon the Buyer's request, will by the
Closing Date make available to the Buyer complete and correct copies
of: (A) such Plan and (B) to the extent applicable to such Plan, all
trust agreements, insurance contracts (except that, in the case of any
such HMO contract, such contract shall be made available only if the
Seller is able to obtain permission from the HMO provider after
reasonable efforts) or other funding arrangements, the two most recent
actuarial and trust reports, the two most recent Forms 5500 required
to have been filed with the IRS and all schedules thereto, the most
recent IRS determination letter, all current summary plan
descriptions, all material written communications received from or
sent to the IRS, the Pension Benefit Guaranty Corporation or the
Department of Labor relating to any enforcement action or termination
proceeding under consideration, any available written actuarial study
of any post-employment life or medical benefits provided under any
such Plan, statements or other communications regarding withdrawal or
other multiemployer plan liabilities, if any, and all material
amendments and modifications to any such document.
(b) Qualification. Each Plan intended to be qualified under
section 401(a) of the Code so qualities and the trust (if any) forming a part
thereof is exempt from taxation under section 501(a) of the Code.
(c) Compliance; Liability.
(i) Except as set forth in Schedule 3.16(c) of the Seller
Disclosure Schedule, neither the Seller nor any member of the Company
Group would reasonably be expected to be liable (either directly or
indirectly, including but not limited to, as a result of any joint and
several liability obligation) for any material amount pursuant to
section 4062, 4063 or 4064 of ERISA if any Plan that is subject to
Title IV Of ERISA were to terminate as of the date hereof.
(ii) None of the Seller, any member of the Company Group or
any Related Person has been involved in any transaction that would
reasonably be expected to cause the Seller, any member of the Company
Group or, following the Closing, the Buyer or any of its Affiliates,
to be subject to liability under section 4069 or 4212 of ERISA.
Neither the Seller nor any member of the Com-
22
<PAGE> 31
pany Group has incurred (either directly or indirectly, including,
without limitation, as a result of an indemnification or joint and
several liability obligation) any liability under or pursuant to Title
I or IV of ERISA or the penalty, excise tax or joint and several
liability provisions of the Code relating to employee benefit plans
that, individually or in the aggregate, would reasonably be expected
to have or result in a Material Adverse Effect and no event,
transaction or condition has occurred or exists or would reasonably be
expected to occur or exist that would reasonably be expected to result
in any such liability to the Company Group or, following the Closing,
the Buyer or any of its Affiliates other than to the extent resulting
from actions taken by the Buyer or any Person who is an Affiliate of
the Buyer at the time of the action. Except as set forth on Schedule
3.16(c) of the Seller Disclosure Schedule, all contributions and
premiums required to have been paid by the Seller or any member of the
Company Group to or in respect of any Plan under the terms of any such
Plan or its related trust, insurance contract or other funding
arrangement, or pursuant to any applicable Law or collective
bargaining agreement (including, but not limited to, ERISA and the
Code) have been paid when due.
(iii) Each of the Plans has been operated and administered in
all respects in compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements, except for any failures
so to comply that, individually and in the aggregate, would not
reasonably be expected to result in a material liability or obligation
on the part of the Buyer or any of its Affiliates (other than the
Company Group) and, as to the Company Group, would not reasonably be
expected to have or result in a Material Adverse Effect. There are no
material pending or, to the best knowledge of each member of the
Seller Group, threatened claims by or on behalf of any of the Plans,
by any Employee, any Beneficiary or otherwise involving any such Plan
or the assets of any Plan (other than routine claims for benefits).
(iv) No Plan is a multiemployer plan (as defined in section
4001(a)(3) of ERISA) or, except as set forth on Schedule 3.16(c) of
the Seller Disclosure Schedule, a "multiple employer plan", within the
meaning of section 4063 or 4064 of ERISA.
23
<PAGE> 32
(v) Except to the extent set forth in Schedule 3.16(c) of the
Seller Disclosure Schedule, each Plan that is subject to the minimum
funding standards of ERISA or the Code satisfies such standards under
sections 412 and 302 of the Code and ERISA, respectively, and no such
Plan has incurred an 'accumulated funding deficiency" within the
meaning of either of such sections, whether or not waived.
(vi) Except to the extent set forth in Schedule 3.16(c) of the
Seller Disclosure Schedule, (A) and except as provided under the terms
and conditions of the Plans, no Employee or Beneficiary is or will
become entitled to post-employment retirement or welfare benefits of
any kind by reason of employment prior to the date hereof with any
member of the Company Group, including, without limitation, death or
medical benefits (whether or not insured), other than such benefits
(x) the full costs of which are borne by the Employee or Beneficiary,
(y) coverage mandated by Law or (z) as expressly required by Section
4.10 of this Agreement and (B) the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements would not
reasonably be expected to (1) result in an increase in the amount of
compensation or benefits or the acceleration of the vesting or timing
of payment of any compensation or benefits payable to or in respect of
any Employee or Beneficiary under any Plan, or (2) entitle any
Employee or Beneficiary to any payment (whether in the form of cash or
in any other form) related to a change in control or any payment in
the nature of a retention or similar bonus under any Plan.
(d) Defaults. Except as set forth on Schedule 3.16(d) of the
Seller Disclosure Schedule, no member of the Company Group and, to the best
knowledge of each member of the Seller Group, no other Person has breached any
provisions of, or is in violation, breach or default under the terms of, or has
caused or permitted to exist any event or condition that (with or without due
notice or lapse of time or both) would reasonably be expected to constitute a
violation, breach, default or event of default under, any Plan, except for such
violations, breaches and defaults that, individually and in the aggregate,
would not reasonably be expected to have or result in a Material Adverse
Effect, and would not reasonably be expected to materially impair the ability
of any member of the Seller Group to perform its respective obligations
hereunder (in the case of the Seller
24
<PAGE> 33
or the Selling Subsidiary) and under the Ancillary Agreements to which it is a
party.
3.17. Taxes and Returns. (a) (i) Except as set forth in
Schedule 3,17 of the Seller Disclosure Schedule, all Income Taxes, and all
other Taxes the failure of which to be paid, individually or in the aggregate,
would reasonably be expected to have or result in a Material Adverse Effect,
for which any member of the Company Group is or may be liable, required to be
paid, collected or withheld with respect to all open years have been paid or
collected or withheld and remitted to the appropriate Governmental Authority
except for any Taxes which any member of the Company Group is contesting in
good faith and for which adequate reserves with respect thereto have been
established and are being maintained in accordance with GAAP, and except for
Taxes not yet payable which have been adequately provided for in the Financial
Statements in accordance with GAAP.
(ii) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, complete and correct Tax Returns have been timely filed
with the appropriate Governmental Authority with respect to all Income Taxes,
and all other Taxes the failure of which to be paid, individually or in the
aggregate, would reasonably be expected to have or result in a Material Adverse
Effect, and the copies thereof which have been provided to the Buyer are
accurate and complete.
(iii) No member of the Company Group or any group of which a
member of the Company Group is now or ever was a member has filed or entered
into any election, consent or extension agreement that extends any applicable
statute of limitations or the time within which a Tax Return must be filed
except (A) as set forth in Schedule 3.17 of the Seller Disclosure Schedule and
(B) for such elections, consents or extension agreements that are filed or
entered into in the ordinary course of business after the date hereof, provided
that such elections, consents or extension agreements do not result in any Tax
for which the Buyer is responsible under Section 4.6(b)(ii) or 4.6(f) of this
Agreement.
(iv) No member of the Company Group or any group of which a
member of the Company Group is now or ever was a member is a party to any
action or proceeding pending or, to the best knowledge of each member of the
Seller Group, threatened by any Governmental Authority for assessment or
25
<PAGE> 34
collection of Taxes, no unresolved claim for assessment or collection of Taxes
has been asserted, and no audit or investigation by any Governmental Authority
is pending or, to the best knowledge of each member of the Seller Group,
threatened except (A) as set forth in Schedule 3.17 of the Seller Disclosure
Schedule and (B) for such actions, proceedings, claims, audits and
investigations that occur after the date hereof and would not, individually or
in the aggregate, taking into account any other Taxes for which any member of
the Company Group is or may be liable, reasonably be expected to have or result
in a Material Adverse Effect and which the Seller shall have set forth in a
supplement to Schedule 3.17 of the Seller Disclosure Schedule prior to the
Closing Date.
(v) No deficiencies for Taxes have been assessed by any taxing
or other Governmental Authority except (A) as set forth on Schedule 3.17 of the
Seller Disclosure Schedule and (B) for such deficiencies that are assessed
after the date hereof and that would not, individually or in the aggregate,
taking into account any other Taxes for which any member of the Company Group
is or may be liable, reasonably be expected to have or result in a Material
Adverse Effect and which the Seller shall have set forth in a supplement to
Schedule 3.17 of the Seller Disclosure Schedule prior to the Closing Date.
(b) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, no member of the Company Group is or has been a member of
any affiliated, consolidated, combined or unitary group for purposes of filing
Tax Returns or paying Taxes at any time.
(c) All Tax sharing agreements or similar arrangements with
respect to or involving the Company Group are set forth in Schedule 3.17 of the
Seller Disclosure Schedule.
(d) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, no member of the Company Group has made or become
obligated to make, or shall, as a result of the transactions contemplated by
this Agreement, make or become obligated to make, any "excess parachute
payment" as defined in Section 280G of the Code.
(e) There are no outstanding balances of deferred gain or loss
accounts related to any deferred intercompany transactions to which a member of
the Company Group was a
26
<PAGE> 35
party except (i) as set forth in Schedule 3.17 of the Seller Disclosure
Schedule and (ii) for such outstanding balances that are incurred after the
date hereof (A) in the ordinary course of business and that are not material in
amount or (B) as provided for under Section 4.14. Prior to the Closing Date,
the Seller shall have delivered to the Buyer a supplement to Schedule 3.17 of
the Seller Disclosure Schedule setting forth such outstanding balances.
(f) No member of the Company Group is or has been a "United
States real property holding corporation" (as defined in Section 897(c)(2) Of
the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) Of
the Code.
(g) Except as provided in Schedule 3.17 of the Seller
Disclosure Schedule, no member of the Company Group or the Seller is a Person
other than a United States person within the meaning of the Code.
(h) None of the Assets is property which any member of the
Company Group is required to treat as being owned by any other Person pursuant
to the so-called "safe harbor lease" provisions of former Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended.
(i) The transactions contemplated herein are not subject to
the tax withholding provisions of Code Section 3406, or of Subchapter A of
Chapter 3 of the Code or of any other provision of Law.
(j) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule: (i) none of the Assets have been financed with or directly
or indirectly secure any industrial development bond or debt the interest on
which is tax exempt under Section 103(a) of the Code; (ii) no member of the
Company Group is a borrower or guarantor of any outstanding industrial revenue
bond; and (iii) no member of the Company Group is a tenant, principal user or
related person to any principal user (within the meaning of Section 144(a) of
the Code) of any property which has been financed or improved with the proceeds
of any industrial revenue bond.
(k) Schedule 3.17 of the Seller Disclosure Schedule sets forth
the states, political subdivisions thereof and foreign countries in which the
Company Group files Tax Returns as of the date hereof, but does not set forth
the
27
<PAGE> 36
states, political subdivisions thereof and foreign countries in which the
Company Group begins to file Tax Returns after the date hereof. As of the
Closing Date, the Seller shall have delivered to the Buyer a complete and
correct list of all states, political subdivisions thereof and foreign
countries in which the Company begins to file Tax Returns after the date
hereof.
(l) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, since January 1, 1991, no member of the Company Group has
acquired (i) any trade or business (whether through a taxable or nontaxable
asset or stock acquisition), or (ii) any asset by way of merger or liquidation.
The Buyer and the Seller agree that the consummation of the transactions
provided for in Section 4.14 shall not constitute a breach of this
representation.
(m) No member of the Company Group has participated in an
international boycott within the meaning of Section 999 of the Code.
(n) No member of the Company Group is a party to or otherwise
subject to any arrangement entered into in anticipation of the Closing, not in
accordance with past practice and not required by this Agreement or any
Ancillary Agreement, (i) having the effect of or giving rise to the recognition
of a deduction or loss before the Closing Date, and a corresponding recognition
of taxable income or gain after the Closing Date, or (ii) that would reasonably
be expected to have the effect of or give rise to the recognition of taxable
income or gain by a member of the Company Group after the Closing Date without
the receipt of or entitlement to a corresponding amount of cash.
(o) Schedule 3.17 of the Seller Disclosure Schedule sets forth
all elections with respect to Taxes affecting the Company Group as of the date
hereof, but does not include such elections made after the date hereof. As of
the Closing Date, the Seller shall have delivered to the Buyer a complete and
correct list of all elections affecting the Company Group made after the date
hereof. Any election with respect to Taxes affecting the Company Group made
after the date hereof and on or prior to the Closing Date without the prior
written consent of the Buyer shall have no adverse effect, direct or indirect,
on the Buyer. No member of the Company Group; (i) has consented at any time
under Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2)
of the Code apply to any disposition of any
28
<PAGE> 37
member of the Company Group's assets; (ii) has agreed, or is required, to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (iii) has made an election, or is required, to
treat any asset of any member of the Company Group as owned by another person
for federal Income Tax purposes or as tax-exempt bond financed property or tax-
exempt use property within the meaning of Section 168 of the Code; or (iv) has
made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local Income Tax provision.
(p) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, there is no ruling received from, or closing agreement
executed with, the IRS that will be binding upon any member of the Company
Group after the Closing.
(q) Except as set forth in Schedule 3.17 of the Seller
Disclosure Schedule, there is no power of attorney given by any member of the
Company Group to any Person other than any other member of the Company Group
with respect to Taxes.
3.18. Changes. Except as otherwise disclosed in Schedule 3.18
of the Seller Disclosure Schedule, since June 30, 1994, there has not been,
with respect to the Business or any Assets;
(a) any damage, destruction or loss (whether or not covered by
insurance) or other occurrence (including, but not limited to, any
change in relations with or any loss of a supplier or customer), that,
individually or in the aggregate, would reasonably be expected to have
or result in a Material Adverse Effect;
(b) any acquisition or disposition of any material Asset,
other than in the Ordinary Course of Business (except for the
transfers of the capital stock of the Excluded Subsidiaries and the
assets of the Excluded Businesses as expressly required by Section
4.14);
(c) any direct or indirect redemption, purchase or other
acquisition of, or any declaration, setting aside or payment of any
dividend or other distribution on or in respect of, any stock or other
securities of any member of the Company Group, except (i) as express-
29
<PAGE> 38
ly required by Section 4.14, (ii) for dividends to another member of
the Company Group and (iii) for cash dividends by the Company to the
Seller or the Selling Subsidiary declared out of operating profits;
(d) any changes in the accounting methods or practice followed
by any member of the Company Group, or any change in depreciation or
amortization policies or rates, or (other than in the Ordinary Course
of Business) any material changes in policies or practices relating to
selling practices, discounts or other terms of sale;
(e) any forgiveness, cancellation, compromise, waiver or
release of any debts, claims or rights, except for debts of, and
claims and rights against, Persons (other than any member of the
Seller Group) that have been forgiven, cancelled, compromised, waived
or released in the ordinary Course of Business;
(f) any grant or any payment by the Seller or any member of
the Company Group of any bonus or increase in compensation in any form
to any officer, director or other employee, sales representative,
agent or consultant of any member of the Company Group, other than any
such bonuses or increases not exceeding $500,000 in any one case and
granted or paid in the ordinary Course of Business;
(g) any entering into, adoption, amendment, modification or
termination by any member of the Seller Group, or any commitment by
any member of the Seller Group to enter into, adopt, amend, modify or
terminate, of any employment, consulting, retention,
change-in-control, collective bargaining, bonus or other incentive
compensation, profit-sharing, health or other welfare, stock option or
other equity, pension, retirement, vacation, severance, deferred
compensation or other employment, compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect
of any shareholder, officer, director, other employee, sales
representative agent, consultant or Affiliate of any member of the
Company Group (whether or not legally binding), including, but not
limited to any Plan, other than (w) with respect to the Equity Plan,
which change or changes will not result in any liability or obligation
on the part of the Company Group or the Buyer or its Affiliates, (x)
those that
30
<PAGE> 39
would not reasonably be expected to result in an increase in the
liabilities or obligations of the Company Group or the Buyer or its
Affiliates of $100,000 or more individually or $3,000,000 or more in
the aggregate, (y) those made or done in the ordinary Course of
Business or (z) those to the extent required by applicable Law or as
expressly required by Section 4.10;
(h) any action (other than in the Ordinary Course of Business)
whereby one or more members of the Company Group has incurred,
assumed, guaranteed or otherwise become directly or indirectly liable
with respect to any liability or obligation in excess of $5,000,000 in
each ease at any one time outstanding (whether absolute, accrued,
contingent or otherwise and whether direct or indirect, or as
guarantor or otherwise with respect to any liability or obligation of
any other Person); or
(i) any action or omission to take any action that would
reasonably be expected to result in the occurrence of any of the
foregoing.
3.19. Employees, Labor Matters, etc. Except as set forth in
Schedule 3.19 of the Seller Disclosure Schedule, no member of the Company Group
is a party to or bound by any collective bargaining agreement, and there are no
labor unions or other organizations representing, purporting to represent or,
to the best knowledge of any member of the Seller Group, attempting to
represent any employees employed by any member of the Company Group. Since
January 1, 1992, there has not occurred or, to the best knowledge of any member
of the Seller Group, been threatened any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any current employees of any member of the Company Group
concerning employment with any member of the Company Group. Except as set forth
in Schedule 3.12(a) or Schedule 3.19 of the Seller Disclosure Schedule, there
are no labor disputes currently subject to any grievance procedure, arbitration
or litigation that, individually or in the aggregate, would be reasonably
expected to have or result in a Material Adverse Effect, and there is no
representation petition pending or, to the best knowledge of each member of the
Seller Group, threatened with respect to any current employee of any member of
the Company Group. Except as set forth in Schedule 3.19 of the Seller
Disclosure Schedule, the Company
31
<PAGE> 40
Group has complied with all applicable Laws pertaining to the employment or
termination of employment of their respective employees, including, without
limitation, all such Laws relating to labor relations, equal employment
opportunities, fair employment practices, prohibited discrimination or
distinction and other similar employment activities, except for (x) any
failures so to comply that, individually and in the aggregate, would not
reasonably be expected to result in any material liability or obligation on the
part of the Buyer or any of its Affiliates (other than the Company Group) and,
as to the Company Group, would not reasonably be expected to have or result in
a Material Adverse Effect and (y) any failures to the extent such failures
result from actions taken by the Buyer or any Person who is an Affiliate of the
Buyer at the time of the action.
3.20. Minute and Stock Books; Records. The respective minute
books of each member of the Company Group have been made available to the
Buyer, and contain the records of all meetings and other corporate actions of
the respective shareholders and directors (and committees thereof) and
accurately reflect all such actions. The Bylaws contained in or kept with said
minute books are complete and correct copies of the Bylaws of members of the
Company Group and all amendments thereto duly adopted and in force. The
respective stock books maintained by the members of the Company Group made
available to the Buyer are complete and accurately disclose all issuances and
transfers of stock of the members of the Company Group. The Company Group has
possession, custody or control of all records or information of any member of
the Company Group, and as of the Closing Date will have possession of all
records or information of any member of the Seller Group necessary for the
conduct of, or otherwise material to, the Business.
3.21. Affiliate Transactions. Schedule 3.21 of the Seller
Disclosure Schedule contains a complete and correct list of all agreements,
contracts, leases, arrangements, understandings, transfers of assets or
liabilities or other commitments or transactions, whether or not entered into
in the Ordinary Course of Business, to or by which any member of the Company
Group, on the one hand, and any member of the Seller Group, on the other hand,
are a party or otherwise bound or affected, and that involve continuing
liabilities and obligations that, individually or in the aggregate, are or
would reasonably be expected to be material to the Company Group.
32
<PAGE> 41
3.22. Brokers, Finders, etc, All negotiations relating to this
Agreement, the Ancillary Agreements and the transactions contemplated hereby
and thereby have been carried on without the participation of any Person acting
on behalf of any member of the Seller Group in such a manner as to, and the
transactions contemplated hereby and thereby will not otherwise, give rise to
any valid claim against any member of the Company Group or the Buyer for any
brokerage or finder's commission, fee or similar compensation, or (except as
set forth in Schedule 3.22 of the Seller Disclosure Schedule) for any bonus
payable to any officer, director, employee, agent or representative of or
consultant to any member of the Company Group upon consummation of the
transactions contemplated hereby or thereby.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
4.1. Ordinary Course. The Seller covenants and agrees that
from and after the date of this Agreement to the Closing Date, unless the Buyer
shall otherwise expressly consent in writing, each member of the Company Group
shall, and the Seller shall cause each such member to:
(a) carry on the Business only in the Ordinary Course of
Business (except for such transactions as are expressly required by
this Agreement), and use all reasonable efforts to preserve intact its
present business organization, keep available the services of its
present officers and employees, and preserve its relationships with
customers, suppliers and others having business dealings with it;
(b) use all reasonable efforts to keep in full force and
effect insurance comparable in amount and scope of coverage to
insurance now carried by it or applicable to the Business;
(c) pay all accounts payable and other obligations, when they
become due and payable, in the Ordinary Course of Business (except as
otherwise expressly contemplated by Sections 4.7 and 4.10);
(d) comply with all Laws applicable to it or any of the Assets
or the Business and maintain in full force and effect all Governmental
Approvals and Consents necessary for, or otherwise material to, the
33
<PAGE> 42
Business, except for such failures so to comply or maintain (i) that
are set forth in Schedule 3.14(a) of the Seller Disclosure Schedule or
(ii) that, individually and in the aggregate, would not reasonably be
expected to have or result in a Material Adverse Effect;
(e) not compromise, settle, grant any waiver or release
relating to or otherwise adjust any Litigation, except routine
Litigation in the Ordinary Course of Business, involving a payment not
in excess of $100,000;
(f) not cause or permit any amendment, supplement, waiver or
modification to or of any of its Organizational Documents;
(g) not take any action or omit to take any action, which
action or omission would reasonably be expected to result in a breach
of any of the representations and warranties set forth in Section
3.18;
(h) except as required to obtain funds from the Seller or an
Affiliate of the Seller to pay for capital expenditures required by
Section 4.15, not borrow any sums or enter into any financial
guarantees or otherwise incur any indebtedness or other liability for
borrowed money, other than in the Ordinary Course of Business;
(i) not sell, assign, transfer, lease, mortgage, pledge or
subject to any Lien (other than a Permitted Lien), or otherwise
encumber, any of its Assets, other than in the Ordinary Course of
Business (and except for the transfers of the capital stock of the
Excluded Subsidiaries and the assets of the Excluded Businesses as
expressly required by Section 4.14);
(j) manage customer accounts, equipment, inventories and other
supplies only in the Ordinary Course of Business;
(k) except as expressly required by Section 4.14, not issue or
sell any shares of capital stock or other securities of any member of
the Company Group, or issue or sell any securities convertible into or
exchangeable for, or options with respect to, or warrants to purchase
or rights to subscribe to, any such shares or
34
<PAGE> 43
other securities, nor make any commitment to issue or sell any such
shares, securities, options, warrants or rights;
(l) not (x) enter into any lease (i) pursuant to which the
aggregate financial obligation of the Company Group in any case
exceeds $750,000 annually or (ii) which has a term of seven years or
more, or (y) amend, waive, modify or terminate the Contract listed in
Schedule 4.1(1) of the Seller Disclosure Schedule, or any provision
thereof, other than waivers in the Ordinary Course of Business;
(m) not make or authorize or commit to make or authorize any
compensation (whether relating to base compensation, incentive
compensation, commissions, bonuses, benefits or otherwise) increase
for, or enter into, adopt, amend, modify or terminate or commit to
enter into, adopt, amend, modify or terminate, any employment,
consulting, retention, change in control, collective bargaining, bonus
or other incentive compensation, profit sharing, health or other
welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other employment, compensation or
benefit plan, policy, agreement, trust, fund or arrangement with, for
or in respect of, any officer, director, other employee, sales
representative, agent, consultant or Affiliate of any member of the
Company Group (whether or not legally binding), including but not
limited to any Plan, other than (i) with respect to the Equity Plan,
which change or changes will not result in any liability or obligation
on the part of the Company Group or the Buyer or its Affiliates, (ii)
those that would not reasonably be expected to result in an increase
in the liabilities or obligations of the Company Group or the Buyer or
its Affiliates of $100,000 or more individually or $3,000,000 or more
in the aggregate, (iii) those made or done in the Ordinary Course of
Business or (iv) those to the extent required by applicable law or as
expressly required by Section 4.10;
(n) not declare, pay or set aside for payment any dividend,
distribution or return of capital in respect of its capital stock or,
directly or indirectly, redeem, purchase or otherwise acquire any
shares of capital stock or other securities of any member of the
Seller Group, except (i) as expressly required by Sec-
35
<PAGE> 44
tion 4.14, (ii) for dividends to another member of the Company Group
and (iii) for cash dividends by the Company to the Selling Subsidiary
declared out of operating profits;
(o) not make any new elections with respect to Taxes, other
than the Section 338(h)(10) Election and all comparable elections
under state and local Income Tax law, that will be binding on any
member of the Company Group or the Buyer after the Closing, or make
any changes in current elections with respect to Taxes;
(p) except as expressly required or permitted by Section 4.7,
not repay or prepay any Indebtedness of any member of the Company
Group other than in accordance with the stated maturity schedule of
such Indebtedness or in the Ordinary Course of Business, or fail to
pay scheduled installments of principal and interest on any such
Indebtedness when the same become due and payable, or amend,
supplement, waive or modify any agreement, instrument or other
document in respect of any such Indebtedness (whether to change the
stated maturity schedule thereof or otherwise);
(q) not otherwise enter into any transaction or take other
action not in the Ordinary Course of Business (except for such
transactions and actions as are expressly required by this Agreement),
or agree or otherwise commit to take any of the actions prohibited
under this Section 4.1; and
(r) subject to the foregoing clauses (a) through (q), use
reasonable efforts to maintain the Current Ratio of the Company Group
equal to the Audited Balance Sheet Current Ratio.
4.2. No Solicitation. The Seller shall not, and shall not
permit any of its officers, directors, employees or agents, or any of its
Subsidiaries or their respective officers, directors, employees or agents to,
and shall use its reasonable efforts not to permit any of the respective
representatives or advisors to or of the Seller or any such Subsidiary (the
Seller and such Subsidiaries, officers, directors, employees, agents,
representatives and advisors are hereinafter referred to collectively as
"Restricted Parties") to, (i) directly or indirectly solicit or encourage any
inquiries or proposals for, or enter into or continue any discussions with any
Person other than the Buyer with
36
<PAGE> 45
respect to, the acquisition by any third party of any of the Shares, any other
shares of capital stock or other securities of any member of the Company Group
or the Selling Subsidiary (if any), or all or any substantial part of the
business or assets of any member of the Company Group (an "Acquisition
Transaction") or (ii) furnish or permit to be furnished any non-public
information concerning any member of the Company Group or its business or
operations to any Person (other than the Buyer and its agents and
representatives and the Buyer's prospective lenders and their agents and
representatives), other than information furnished in the Ordinary Course of
Business. The Seller shall promptly notify the Buyer of any inquiry or proposal
received by any member of the Seller Group or any other Restricted Party with
respect to any Acquisition Transaction. The Seller shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any Person other than the Buyer in respect of any Acquisition Transaction.
4.3. Access; Records. (a) Each member of the Seller Group and
their respective directors, officers, agents and employees shall afford the
Buyer and its representatives (including, without limitation, its accountants,
banks or other lenders, environmental, actuarial and other consultants,
attorneys and each of their respective representatives) reasonable access,
during reasonable business hours, from the date hereof through the Closing to
any and all of the premises, properties, contracts, commitments, books,
records, data, personnel, representatives, lenders and (on a basis mutually
agreeable to the Seller and the Buyer in their reasonable judgment) customers
and vendors, of or relating to any member of the Company Group or their
business or operations, and make available to them (and furnish to them copies,
as reasonably requested, of) all such documents, records and information with
respect to the properties, assets and business of the Company Group and copies
of any work papers relating thereto as the Buyer may from time to time
reasonably request. In addition, the Seller shall, and shall cause each member
of the Seller Group to, permit the Buyer and its representatives reasonable
access, during reasonable business hours, to each of the members of the Seller
Group, and its respective representatives or other personnel, as the Buyer may
reasonably request in connection with its review relating to the Company Group,
its properties, assets and business and the above mentioned documents, records
and information, provided that such access does not unreasonably interfere with
the opera-
37
<PAGE> 46
tion of the business of any member of the Seller Group. The Seller shall cause
the senior management of the Seller and the Company Group, and such other
personnel of the Seller and the Company Group as the Buyer may reasonably
request, to meet with the Buyer's senior management and other representatives
not less than once every two weeks to inform such representatives concerning
the affairs of and plans and developments with respect to the Business, and to
advise and consult with such representatives concerning the conduct of the
Business. Such meetings shall be held at the Seller's offices at the address
set forth in Section 9.4, unless otherwise agreed by the Seller and the Buyer.
The attendance at such meetings of the Buyer's representatives shall be at the
Buyer's expense.
(b) Notwithstanding any provision of Section 4.3(a), prior to
the Closing the Buyer and its representatives shall have to right to access or
obtain copies of any documents, files, data, analyses or other documentation in
whatever medium to the extent that the same relate to the Company Group's
existing contracts, disputes, negotiations, proposals or other contacts with
the buyer or its Affiliates; provided that to the extent that the same do not
relate thereto, the Seller shall afford such access to, and provide such copies
of, such portions of the same that do not so relate.
(c) Notwithstanding any provision of Section 4.3(a) or 4.3(d),
the Seller may restrict access to customer Contracts, marketing strategies and
customer pricing data, to the Buyer's lenders and the attorneys and accountants
for the Buyer or such lenders. The Buyer acknowledges that such information may
only be used as permitted by Section 3(d) of the Non-Disclosure Agreement, and
(unless and until the Closing shall occur) shall not use such information to
solicit the customers of, or otherwise to compete with, the Company Group. The
Buyer shall so advise such lenders, attorneys and accountants as required by
Section 3(c) of the Non-Disclosure Agreement.
(d) Immediately following the execution of this Agreement, the
Seller shall deliver or otherwise make available to the Buyer complete, correct
and unredacted copies of all Contracts previously delivered or otherwise made
available to the Buyer in a redacted form.
(e) The Seller shall, and shall cause each other member of the
Seller Group to, retain all books and records
38
<PAGE> 47
relating to the Company Group in accordance with the Seller's record retention
policies as presently in effect.
(f) From and after the Closing Date, (i) subject to Section
4.3(e) hereof, the Seller shall, and shall cause each member of the Seller
Group to, permit the Buyer and its Affiliates (including each member of the
Company Group) reasonable access, during reasonable business hours and at the
Buyer's expense, to the relevant books and records (including all relevant Tax
Returns and related work papers) of any member of the Seller Group in existence
at the Closing Date relating to the Business or the Company Group, and (ii)
subject to the Buyer's record retention policies as presently in effect, the
Buyer shall, and shall cause each member of the Company Group to, permit each
member of the Seller Group reasonable access, during reasonable business hours
and at the Seller's expense, to the relevant books and records (including all
relevant Tax Returns and related work papers) of each member of the Company
Group in existence at the Closing Date relating to the Business or the Company
Group. Except to the extent required by law or legal process, the Seller shall,
and shall cause each member of the Seller Group to, maintain any information so
obtained pertaining to the Buyer or any member of the Company Group or the
business and operations of the Company Group in confidence, and the Buyer
shall, and shall cause each member of the Company Group to, maintain any
information so obtained pertaining to any member of the Seller Group in
confidence.
4.4. Governmental Approvals. Consents, Filings and Further
Actions. (a) Each party hereto shall, as promptly as practicable, (i) make, or
cause to be made, all filings and submissions (including but not limited to
under the HSR Act) required under any Law applicable to such party (or in the
case of the Seller, any member of the Seller Group), and give such reasonable
undertakings as may be required in connection therewith, and (ii) use all
reasonable efforts to obtain or make, or cause to be obtained or made, all
Governmental Approvals and Consents necessary to be obtained or made by such
party (or in the case of the Seller, any member of the Seller Group), in each
case in connection with this Agreement or the Ancillary Agreements, the sale
and transfer of the Shares pursuant hereto, or the consummation of the other
transactions contemplated hereby or thereby. Each party hereto shall use all
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all other things, necessary, proper or advisable in order for such
party (or in the case of the
39
<PAGE> 48
Seller, each member of the Seller Group) to fulfill and perform its obligations
in respect of this Agreement and the Ancillary Agreements to which it is a
party, or otherwise to consummate and make effective the transactions
contemplated hereby and thereby.
(b) The Buyer shall use all reasonable efforts to obtain as
promptly as practicable the financing contemplated by the Commitment Letters
(or alternative financing on terms substantially comparable to those
contemplated by the Commitment Letters), providing sufficient funds for the
Buyer to consummate the transactions contemplated hereby, pursuant to
definitive agreements in form and substance satisfactory to the Buyer in its
reasonable judgment.
(c) The Buyer shall use all reasonable efforts to assist the
Seller (and the Seller shall cooperate fully with the Buyer) in obtaining
releases of the Seller's obligations under the Sale-Leaseback Guarantees, which
efforts shall include without limitation offering (i) to enter into substitute
guarantees on terms mutually satisfactory to the Sale-Leaseback Parties and the
Buyer in their reasonable judgment, provided that in no event shall any such
substitute guarantee be required to contain financial covenants that are any
more restrictive than those that are contained in the Buyer Financing
Agreements, and (ii) to provide to the Sale-Leaseback Parties a letter of
credit on commercially reasonable terms in a face amount not to exceed
$29,000,000, in substitution for the currently outstanding letter of credit
provided by the Seller. The Buyer's obligations under this Section 4.4(c) shall
not require the Buyer to agree to any additional or different terms of the
Sale-Leaseback Financings. In the event that the Buyer and the Seller are
unable to obtain releases of the Seller's obligations under the Sale-Leaseback
Guarantees, the Buyer and the Seller shall, at or prior to the Closing, enter
into an agreement pursuant to which the Buyer shall agree to indemnify the
Seller against any obligation the Seller may incur from and after the closing
under the Sale-Leaseback Guarantees on terms mutually satisfactory to the Buyer
and the Seller in their reasonable judgment, and the Buyer shall pay to the
Seller a fee of $1,000,000 per annum until such time as the Seller shall be
released from its obligations under the Sale-Leaseback Guarantees. The Seller
agrees to use reasonable efforts to obtain the consent of the Sale-Leaseback
Parties to the termination of any continuing requirement for the provision of
letters of credit in respect of the Sale-Leaseback Financings.
40
<PAGE> 49
(d) At all times prior to the Closing Date, (i) the Seller shall
promptly notify the Buyer in writing of any event, occurrence, fact, condition,
change or effect that, individually or in the aggregate, would reasonably be
expected to have or result in a Material Adverse Effect, and (ii) each party
hereto shall promptly notify the other party hereto in writing of any fact,
condition, event or occurrence that would reasonably be expected to result in
the failure of any of the conditions contained in Section 5.2 (in the case of
the Seller) or Section 5.1 (in the case of the Buyer) to be satisfied, promptly
upon becoming aware of the same.
4.5. Further Assurances. Following the Closing Date, the Buyer
and the Seller shall, the Buyer shall cause each member of the Company Group
to, and the Seller shall cause each other member of the Seller Group to, from
time to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably be requested by the Seller or the Buyer as the case may
be, to confirm and assure the rights and obligations provided for in this
Agreement and the Ancillary Agreements and render effective the consummation of
the transactions contemplated hereby and thereby, or otherwise to carry out the
intent and purposes of this Agreement (which include the transfer to the Buyer
of the ownership and intended related benefits of the Business and the Company
Group).
4.6. Taxes. (a) Tax Sharing Agreements. On the Closing Date,
all Tax sharing agreements and arrangements between any member of the Company
Group, on the one hand, and the Seller or any of the Non-Company Affiliates, on
the other hand (copies of which have been provided to the Buyer), shall be
terminated, and no additional payments shall be made thereunder after the
Closing.
(b) Payments. (i) The Seller's Responsibility. Except as
otherwise provided in this Agreement, the Seller shall pay or cause to be paid
(without duplication of amounts otherwise payable), and shall defend, indemnify
and hold harmless each of the Buyer Indemnitees (as defined in Section 4.8(a))
from and against (and pay or reimburse each of the Buyer Indemnitees for) any
and all claims, demands, liabilities, obligations, losses, fines, costs,
expenses, Litigation, deficiencies or damages (whether absolute, accrued,
conditional or otherwise and whether or not resulting from third party claims),
including but not limited to out-
41
<PAGE> 50
of-pocket expenses and reasonable attorneys and accountants' fees and expenses
incurred in the investigation or defense of any of the same or in asserting,
preserving or enforcing any of their respective rights hereunder, but not
including any Income Taxes imposed upon the receipt by a Buyer Indemnitee of a
payment under this Section 4.6(b)(i), which any of the foregoing may incur or
to which any of the foregoing may be subjected, resulting from, arising out of
or otherwise based upon, (A) all federal Income Taxes payable with respect to
which any member of the Company Group has filed or is required to file pursuant
to Section 4.6(c)(i)(A) a consolidated federal Income Tax Return with the
consolidated group of which the Seller is a member (the "Seller's Consolidated
Group"), payable with respect to any such member of the Company Group for all
periods or portions thereof ending on or prior to the Closing Date, (B) all
state, local and foreign Income Taxes with respect to which any member of the
Company Group has filed or is required to file pursuant to Section 4.6(c)(i)(B)
a combined, consolidated or unitary state, local or foreign Income Tax Return
with the Seller or any of the Non-Company Affiliates, payable with respect to
any such member of the Company Group for all periods or portions thereof ending
on or prior to the Closing Date, (C) all state, local and foreign Income Taxes
not described in the preceding clause (B) imposed on or payable by any member
of the Company Group with respect to all periods ending on or prior to the
Closing Date and all periods commencing before and ending after the Closing
Date, and all other Taxes relating to the assets or the business of any member
of the Company Group not otherwise specifically provided for in this Section
4.6 with respect to all such periods (other than those sales and transfer taxes
for which the Buyer is responsible under Section 4.6(f)), in each case
apportioned in the manner described in the next succeeding sentence, (D) any
Taxes resulting from the deemed sale of assets and other deemed transactions
arising from the Section 338(h)(10) Election and all comparable elections under
state and local Income Tax law (other than those sales and transfer taxes for
which the Buyer is responsible under Section 4.6(f)), (E) all Taxes for which
any member of the Company Group may be held liable as a member of the Seller's
Consolidated Group pursuant to section 1.1502-6(a) of the Treasury Regulations
or as a member of any combined, consolidated or unitary group of which the
Seller or any of the Non-Company Affiliates is or was a member pursuant to any
similar provision of any state, local or foreign law with respect to Income
Taxes, and (F) all Taxes that may be imposed, and other amounts
42
<PAGE> 51
that may become payable to third parties, that would not be imposed or payable
if there were no inaccuracy or breach of any representation or warranty set
forth in Section 3.17 (such inaccuracy or breach to be determined based on a
conclusive presumption that, if a matter has occurred, any requirement on
qualification that such matter "reasonably be expected" to occur or not occur
shall have been satisfied; and the indemnification for such inaccuracy or
breach by the Seller under this Section 4.6(b)(i) shall, except as otherwise
provided in this Section 4.6(b)(i), be the sole and exclusive remedy of the
Buyer after the Closing for such inaccuracy or breach of any such
representation or warranty); provided, however, that the Seller shall not be
obligated to make any payment under clause (C) or, to the extent a payment
would be required under both clause (C) and clause (F), clause (F), unless and
until the aggregate amount due from the Seller under such clauses exceeds
$3,000,000 and then only to the extent such aggregate amount exceeds
$3,000,000; provided, further, that (x) the preceding proviso shall not apply
(I) to limit the Seller's responsibility to pay its share (determined pursuant
to the last sentence of this Section 4.6(b)(i)) of Taxes described in clause
(C) above for all taxable periods ending on or before the Closing Date, or for
the taxable periods that include the Closing Date, in either case to the extent
such Taxes are shown as due on the relevant Tax Return timely filed and
prepared in a manner consistent with past practices used in preparing such Tax
Returns, (II) in respect of any Taxes with respect to which an audit or similar
proceeding is pending and a deficiency has been assessed or proposed to be
assessed against the relevant member of the Company Group and has not been paid
as of the Closing, (III) in respect of any Taxes for which an election, consent
or extension agreement described in clause (iii)(B) of Section 3.17(a) was
filed or entered into after the date hereof and prior to the Closing or (IV) in
respect of any Taxes to the extent such Taxes are attributable to an election
described in the third sentence of Section 3.17(o) that is made after the date
hereof and prior to the Closing, and (y) nothing herein shall limit in any way
the Buyer's remedies in respect of (and the preceding proviso shall not apply
in the event of) any actual fraud by any member of the Seller Group. With
respect to payments required to be made pursuant to clause (C) above, Tax
liability shall be computed in a manner consistent with past practices used in
preparing Tax Returns and, as between the Seller and the Buyer, such liability
shall be apportioned between the period through and including the Closing Date
(for which the Seller
43
<PAGE> 52
shall be responsible under clause (C) above), on the one hand, and the balance
of the tax year (for which the Buyer shall be responsible under Section
4.6(b)(ii)), on the other hand, based upon the number of days in each such
period, unless with respect to any specified Tax other than property Taxes
either party shall request that such amount for such specified Tax be
determined based upon the actual books and records, in which case such amount
shall be determined based upon the actual books and records, provided that in
all cases the Seller shall be responsible for all Taxes arising from the
Section 338(h)(10) Election and all comparable elections under state and local
Income Tax law (other than those sales and transfer taxes for which the Buyer
is responsible under Section 4.6(f)).
(ii) The Buyer's Responsibility. Except as otherwise provided
in this Agreement, the Buyer shall pay or cause to be paid (without duplication
of amounts otherwise payable), all Taxes payable with respect to any member of
the Company Group (A) for all periods or portions thereof beginning after the
Closing Date (including Taxes for which the Buyer shall be responsible under
the last sentence of Section 4.6(b)(i)) and (A) attributable to operations,
acts or omissions of the Buyer or (after the consummation of the Closing) any
member of the Company Group on the Closing Date which are not in the Ordinary
Course of Business other than such operations, acts or omissions contemplated
by this Agreement or any Ancillary Agreement.
(c) Tax Returns. (i) The Seller's Responsibility. The Seller
shall file, or cause to be filed, and the Seller and the Buyer shall cause the
Company Group, to the extent permitted by law, to join, for all taxable periods
or portions thereof ending on or prior to the Closing Date, in (A) the
consolidated federal Income Tax Returns of the Seller's Consolidated Group and
(B) the combined, consolidated or unitary Tax Returns for state, local and
foreign Income Taxes which include the Seller or any Non-Company Affiliate and
with respect to which any member of the Company Group (x) joined in such a Tax
Return for the most recent taxable period for which a Tax Return has been filed
prior to the Closing Date and may file such a Tax Return for subsequent taxable
periods or (y) is required to join in such a Tax Return. The income, deductions
and credits of any such member of the Company Group for all periods or portions
thereof ending on or prior to the Closing Date shall be included in the
consolidated federal Income Tax Returns of thy Seller's Consolidated Group and
in such combined, con-
44
<PAGE> 53
solidated and unitary Tax Returns where applicable. The Seller shall file, or
cause to be filed, all other Tax Returns with respect to any member of the
Company Group for all periods ending on or before the Closing Date.
(ii) The Buyer's Responsibility. The Buyer shall file, or
cause to be filed, all Tax Returns relating to the business or assets of the
Company Group other than those Tax Returns described in Section 4.6(c)(i)
(including, without limitation, any federal Income Tax Return filed by the
consolidated group of which the Buyer is a member with respect to any taxable
period ending after the Closing Date). The income, deductions and credits of
the Company Group, other than those required to be included in the Tax Returns
described in Section 4.6(c)(i), shall be included in the Tax Returns described
in the immediately preceding sentence.
(iii) Cooperation. The Buyer and the Seller shall cooperate,
and the Buyer shall cause the Company Group to cooperate with the Seller, with
respect to the preparation and filing of any Tax Return for which the other is
responsible pursuant to this Section 4.6(c).
(d) Refunds. Subject to the provisions of this Section 4.6(d),
(i) the Seller shall be entitled to retain, or receive immediate payment from
the Company Group or the Buyer of, any refund or credit with respect to Taxes
(including, without limitation, refunds and credits arising by reason of
amended Returns filed after the Closing Date), plus any interest received with
respect thereto from the applicable taxing authorities, relating to any member
of the Company Group that are described as being the responsibility of the
Seller in Section 4.6(b)(i) and (ii) the Buyer or the Company Group shall be
entitled to retain, or receive immediate payment from the Seller of, any refund
or credit with respect to Taxes, plus any interest received with respect
thereto from the applicable taxing authorities, relating to any member of the
Company Group that are described as being the responsibility of the Buyer in
Section 4.6(b)(ii). The Buyer and the Seller shall cooperate, and the Buyer
shall cause the Company Group to cooperate with the Seller, with respect to
claiming any refund or credit with respect to Taxes referred to in this Section
4.6(d). Such cooperation shall include providing all relevant information
available to the Seller or the Buyer (through the Company or otherwise), as the
case may be, with respect to any such claim; filing and diligently pursuing
such claim (including by litigation, if appropriate); paying over to the Seller
or
45
<PAGE> 54
the Buyer, as the case may be, in accordance with this provision, any amount
received by the Buyer (or any member of the Company Group) or the Seller (or
any Non-Company Affiliate), as the case may be, with respect to such claim;
and, in the case of the party filing such a claim, consulting with the other
party prior to agreeing to any disposition of such claim, provided, that the
foregoing shall be done in a manner so as not to interfere unreasonably with
the conduct of the business of the parties. The party that is to enjoy the
economic benefit of a refund under this Section 4.6(d) shall bear the
out-of-pocket expenses of the other party reasonably incurred in seeking such
refund. If one party is to enjoy the economic benefit of a refund under this
Section 4.6(d) but the refund involves an issue that (A) in the case of the
Buyer, would reasonably be expected to have a Material Adverse Effect and (B)
in the case of the Seller, would reasonably be expected to be materially
adverse to the business, operations, results of operations or financial
condition of the Seller Group taken as a whole (provided that for purposes of
this clause (B), the materiality shall exist if an amount involved is
comparable to the amount that would result in a Material Adverse Effect), the
party that would enjoy the economic benefit shall give notice to the other
party of such issue, with respect to which the parties, each at its own
expense, shall jointly pursue such issue, and any disagreement between them as
to such issue shall be resolved pursuant to the Tax Dispute Resolution
Mechanism.
(e) Audits. Each of the Buyer and the Seller shall promptly
notify the other in writing within twenty days from its receipt of notice of
(i) any pending or threatened Tax audits or assessments of any member of the
Company Group, as long as any taxable periods ending on or prior to the Closing
Date remain open and (ii) any pending or threatened Tax audits or assessments
of the Buyer or the Seller, or any of the Affiliates thereof, that may affect
the Tax liabilities of any member of the Company Group, in each case for
taxable periods ending on or prior to the Closing Date. The Seller shall have
the right to represent the interests of the Company Group in any Tax audit or
administrative or court proceeding to the extent relating to Taxes that are
described as being the responsibility of the Seller in Section 4.6(b)(i), and
to employ counsel of its choice at its expense, provided, that the Seller shall
give notice to the Buyer with respect to any issue relating to such audit or
proceeding that would reasonably be expected to affect the aggregate Tax
liability of the Buyer or the
46
<PAGE> 55
Company Group by more than $1,000,000 (taking into account any recurring
effects of such issue) with respect to Taxes that are described as being the
responsibility of the Buyer in Section 4.6(b)(ii), with respect to which issue
the Seller and the Buyer, each at its own expense, shall jointly have the right
to represent the interests of the Company Group, and any disagreement between
the Seller and the Buyer as to such issue shall be resolved pursuant to the Tax
Dispute Resolution Mechanism. The Buyer shall have the right to represent the
interests of the Company Group in any Tax audit or administrative or court
proceeding not described in the immediately preceding sentence and to employ
counsel of its choice at its expense, provided, that the Buyer shall give
notice to the Seller with respect to any issue relating to such audit or
proceeding that would reasonably be expected to affect the aggregate Tax
liability of the Seller or the Company Group by more than $1,000,000 (taking
into account any recurring effects of such issue) with respect to Taxes that
are described as being the responsibility of the Seller in Section 4.6(b)(i),
with respect to which issue the Buyer and the Seller, each at its own expense,
shall jointly have the right to represent the interests of the Company Group,
and any disagreement between the Seller and the Buyer as to such issue shall be
resolved pursuant to the Tax Dispute Resolution Mechanism. The Buyer and the
Seller shall cooperate, and the Buyer shall cause the Company Group to
cooperate with the Seller, with respect to any Tax audit or administrative or
court proceeding relating to Taxes referred to in this Section 4.6(e). Such
cooperation shall include providing all relevant information available to the
Seller or the Buyer (through the Company or otherwise), as the case may be,
with respect to any such audit or proceeding and making personnel available at
and for reasonable times, provided, that the foregoing shall be done in a
manner so as not to interfere unreasonably with the conduct of the business of
the parties.
(f) Transaction-Related Taxes. The Seller shall be responsible
for, and neither the Buyer nor any member of the Company Group shall bear, any
Taxes that relate to the purchase and sale of the shares pursuant to this
Agreement and the consummation of the other transactions contemplated hereby
(including, without limitation, any real property gains and transfer Taxes but
not including any Income Taxes imposed upon the receipt by a Buyer Indemnitee
of a payment under this Section 4.6(f)), except for up to $100,000 in the
aggregate of the sum of (i) stock transfer taxes imposed on the transfer of the
Shares to the Buyer (other than any
47
<PAGE> 56
interest or penalty thereon or additions thereto resulting from the negligence
or willful misconduct of the Seller or any Non-Company Affiliate) and (ii)
sales and transfer taxes resulting from the Section 338(h)(10) Election and all
comparable elections under state and local Income Tax law (other than any
interest or penalty thereon or additions thereto resulting from the negligence
or willful misconduct of the Seller or any Non-Company Affiliate), for which
the Buyer shall be responsible. Nothing contained in this Section 4.6(f) shall
limit the Buyer's responsibility for Taxes pursuant to Section 4.6(b)(ii).
(g) Section 338(h)(10) Election. (i) Election. The Buyer
shall, and the Seller shall cause the common parent of the Seller's
Consolidated Group to, join in an election pursuant to Section 338(h)(10) of
the Code with respect to each member of the Company Group (a "Section
338(h)(10) Election"), and the Buyer shall, and the Seller shall, or shall
cause the proper Non-Company Affiliates to, join in all comparable elections
under state and local Income Tax law with respect to each member of the Company
Group.
(ii) Forms. On or before the date that is ten (10) business
days before the Closing Date, the Buyer shall provide to the Seller drafts of
all forms, together with all drafts of required attachments thereto, required
for making the Section 338(h)(10) Election and all comparable elections under
state and local Tax law (the "Election Forms"). On the Closing Date the Seller
shall deliver to the Buyer the Election Forms, properly executed by the common
parent of the Seller's Group or any proper Non-Company Affiliate. The Seller
and the Buyer shall cooperate in drafting and making final the Election Forms,
and any dispute with respect thereto shall be resolved pursuant to the Tax
Dispute Resolution Mechanism. The Buyer shall be responsible for filing the
Election Forms with the proper taxing authorities, provided that the Seller
shall be responsible for filing any Election Form that must be filed with a Tax
Return described in Section 4.6(c)(i) above.
(iii) Allocation. On or before the date that is 120 days after
the Closing Date, the Buyer shall provide to the Seller a proposed allocation
of the purchase price, for the Seller Noncompete Agreement and the deemed sale
of assets resulting from the making of the Section 338(h)(10) Election, setting
forth the estimated fair market values of the assets of the Company and, to the
extent relevant to
48
<PAGE> 57
such deemed sale, other members of the Company Group. On or before the date
that is 180 days after the Closing Date, the Seller and the Buyer shall agree
upon a final allocation of such purchase price (the "Final Allocation"), which
shall be based upon the Buyer's proposed allocation of such purchase price in
the absence of manifest error. The Seller agrees that the Seller shall
cooperate with the Buyer in developing the Final Allocation.
(iv) modification; Revocation. The Buyer and the Seller each
agree that it shall not, and shall not permit any of its respective Affiliates
to, take any action to modify the Election Forms following the execution
thereof, or to modify or revoke the Section 338(h)(10) Election or any
comparable election under state and local Tax law following the filing of the
Election Forms, without the written consent of the Seller or the Buyer, as the
case may be.
(v) Consistent Treatment. The Buyer and the Seller shall, and
shall cause their respective Affiliates to, file all Tax Returns in a manner
consistent with the information contained in the Election Forms as filed and
the Final Allocation, unless otherwise required because of a change in
applicable Tax law.
(vi) Expenses Resulting from Elections. The Buyer and its
Affiliates (including the Company Group following the Closing), on the one
side, and the Seller and the Non-Company Affiliates, on the other side, shall
bear their respective administrative, legal, accounting and similar expenses
resulting from the making of the Section 338(h)(10) Election and all comparable
elections under state and local Tax law. As specified in the last sentence of
Section 9.1(a), the Buyer shall bear any appraisal fees incurred by it in
developing the allocation of the Purchase Price.
(h) Tax Dispute Resolution Mechanism. Wherever in this Section
4.6 it shall be provided that a dispute shall be resolved pursuant to the "Tax
Dispute Resolution Mechanism," such dispute shall be resolved as follows: (i)
the parties shall in good faith attempt to negotiate a settlement of the
dispute, (ii) if the parties are unable to negotiate a resolution of the
dispute within 30 days, the dispute shall be submitted, as soon as practicable
thereafter, to the national office of KPMG Peat Marwick or other independent
accountants of nationally recognized standing reasonably satisfactory to the
Seller and the Buyer (the
49
<PAGE> 58
"Tax Dispute Accountants") (iii) the parties shall present their arguments to
the Tax Dispute Accountants within 15 days after submission of the dispute to
the Tax Dispute Accountants, (iv) the Tax Dispute Accountants shall resolve the
dispute, in a fair and equitable manner and in accordance with the applicable
Tax law, within 30 days after the parties have presented their arguments to the
Tax Dispute Accountants, whose decision shall be final, conclusive and binding
on the parties, (v) any payment to be made as a result of the resolution of a
dispute shall be made, and any other action to be taken as a result of the
resolution of a dispute shall be taken, on or before the later of (A) the date
on which such payment or action would otherwise be required or (B) the third
business day following the date on which the dispute is resolved (in the case
of a dispute resolved by the Tax Dispute Accountants, such date being the date
on which the parties receive written notice from the Tax Dispute Accountants of
their resolution) and (vi) the fees and expenses of the Tax Dispute Accountants
in resolving a dispute shall be borne equally by the Seller and the Buyer.
(i) Federal Income Tax Treatment of Indemnification Payments.
Without affecting any rights of the Buyer or the Seller under any other
provisions of this Agreement or otherwise, each of the Buyer and the Seller
agrees to treat any payments pursuant to Sections 4.6, 4.7(b), 4.8, 4.15 or
4.17 as adjustments (i.e., reductions or increases, as the case may be) of the
Purchase Price for federal Income Tax purposes and file federal Income Tax
Returns in a manner consistent with such treatment unless (i) otherwise
required by a court of competent jurisdiction, (ii) otherwise required by the
IRS following an audit (but only if the amount of payments for which the IRS
requires a different treatment in any taxable year is less than $150,000) or
(iii) such party receives a written opinion from a nationally recognized law
firm (which opinion and law firm shall be reasonably acceptable to the other
party) that there is no substantial authority (within the meaning of Section
6662(d)(2)(B)(i) of the Code) for such position.
4.7. Cancellation of Intercompany Accounts; Maintenance of
Current Ratio. (a) The Seller agrees to cause all accounts payable, accounts
receivable, Contracts, Plans, agreements, instruments, commitments, claims and
other obligations pursuant to which any member of the Company Group has made or
is obligated to make payments or incur expenses to or for the benefit of the
Seller or any Non-Company Af-
50
<PAGE> 59
filiate to be cancelled, terminated, waived and released at or prior to the
Closing without any consideration being paid or payable in respect thereof,
pursuant to appropriate agreements and instruments in form and substance
mutually satisfactory to the Buyer and the Seller in their reasonable judgment;
provided that the accounts payable, accounts receivable, Contracts, Plans,
agreements, instruments, commitments, claims and other obligations set forth in
Schedule 4.7 of the Seller Disclosure Schedule shall be treated in the manner
expressly set forth in such Schedule.
(b) From the date hereof to the Closing Date, the Company
Group shall be permitted to continue to make payments in the Ordinary Course of
Business to any member of the Seller Group in respect of indebtedness of the
Company Group to any member of Seller Group incurred in the Ordinary Course of
Business; provided that the Current Ratio of the Company Group as of the
Closing Date (the "Closing Date Current Ratio") is equal to the Current Ratio
of the Company Group as at December 31, 1993, as determined based on the
Audited 1993 Balance Sheet (the "Audited Balance Sheet Current Ratio"). In the
event that the Closing Date Current Ratio is not equal to the Audited Balance
Sheet Current Ratio, the Purchase Price shall be adjusted following the Closing
by a cash payment, to be made within 30 days after the Closing Date. If the
Closing Date Current Ratio is less than the Audited Balance Sheet Current
Ratio, the Seller shall pay to the Buyer an amount equal to the amount that,
when added to the amount of current assets utilized in determining the Closing
Date Current Ratio, causes the Closing Date Current Ratio as so adjusted to be
equal to the Audited Balance Sheet Current Ratio. If the Closing Date Current
Ratio is greater than the Audited Balance Sheet Current Ratio, the Buyer shall
pay to the Seller an amount equal to the amount that, when subtracted from the
amount of current assets utilized in determining the Closing Date Current
Ratio, causes the Closing Date Current Ratio as so adjusted to be equal to the
Audited Balance Sheet Current Ratio. Any such amount to be paid in accordance
with this Section 4.7(b) shall be paid together with an amount equivalent to
interest thereon at a rate per annum equal to the prime rate as published by
the Wall Street Journal from time to time (calculated on the basis of a 365-day
year, for the actual number of days elapsed during the period from but not
including the Closing Date to and including the date of payment).
51
<PAGE> 60
4.8. Indemnity. (a) The Seller covenants and agrees to defend,
indemnify and hold harmless each of the Buyer, its Affiliates, the members of
the Company Group and their respective officers, directors, employees, agents,
advisers and representatives (collectively, the "Buyer Indemnities") from and
against, and pay or reimburse each of the Buyer Indemnities for, any and all
claims, demands, liabilities, obligations, losses, fines, costs, expenses,
royalties, Litigation, deficiencies or damages (whether absolute, accrued,
conditional or otherwise and whether or not resulting from third party claims)
including but not limited to interest and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder or
under any Ancillary Agreement but not including any Income Taxes imposed upon
the receipt by a Buyer Indemnitee of a payment under this Section
4.8(a) (collectively, "Losses"), which any of the foregoing may incur or to
which any of the foregoing may be subjected, resulting from, arising out of or
otherwise based upon any of the following:
(i) any inaccuracy or breach of any representation or warranty
made by any member of the Seller Group herein (other than any
representation or warranty contained in Section 3.17) or in any of the
Ancillary Agreements or in connection herewith or therewith, at or as
of the date made or deemed made or the Closing Date (such inaccuracy
or breach to be determined based upon a conclusive presumption that,
if a matter has occurred, any requirement or qualification that such
matter "reasonably be expected" to occur or not occur shall have been
satisfied); or
(ii) any and all Excluded Liabilities.
(b) Except for inaccuracies in or breaches of the
representations and warranties contained in Sections 3.3 and 3.4, the Seller
shall not be required to indemnify the Buyer Indemnities with respect to any
claim for indemnification pursuant to clause (i) of Section 4.8(a) in respect
of any inaccuracies in or breaches of the representations and warranties of any
member of the Seller Group referred to in such clause, unless and until the
aggregate amount of all claims against the Seller under this Section 4.8
exceeds $25,000,000 and then only to the extent such aggregate amount exceeds
$25,000,000, provided, however, that the
52
<PAGE> 61
aggregate liability of the Seller to the Buyer under this Section 4.8 with
respect to all claims for indemnification pursuant to clause (i) of Section
4.8(a) shall not exceed the Purchase Price. The indemnity provided for in this
Section 4.8 shall be the sole and exclusive remedy of the Buyer after the
Closing for any inaccuracy of any representation or warranty of the Seller
herein and referred to in clause (i) of Section 4.8(a); provided that nothing
herein shall limit in any way the Buyer's remedies in respect of (and this
Section 4.8(b) shall not apply in the event of) actual fraud by any member of
the Seller Group in connection herewith or with any Ancillary Agreement or the
transactions contemplated hereby or thereby. Any indemnity payment made by the
Seller to any Buyer indemnitee with respect to any claim for indemnification
pursuant to clause (i) of Section 4.8(a) shall be net of any amounts actually
recovered (after deducting any related costs and expenses) by the Buyer or any
member of the Company Group, for the Losses for which such indemnity payment is
made, under any warranty or indemnity from any third party existing at the
Closing Date to or for the benefit of any member of the Company Group. Neither
the Buyer nor any member of the Company Group shall be obligated to seek any
recovery under any such warranty or indemnity. If the Buyer and the Company
Group determine not to pursue any such recovery, the Buyer shall promptly so
notify the Seller, and the Seller (in its name or in the name of the
appropriate member of the Company Group) shall be entitled to pursue such
recovery directly and the Buyer and the Company Group shall use reasonable
efforts to cooperate with the Seller in its pursuit of such recovery, provided
that (x) such pursuit of such recovery shall not unreasonably interfere with
the operation of the business of the Buyer or any member of the Company Group
and (y) the Seller shall defend, indemnify and hold harmless the Buyer
Indemnities from and against, and shall pay or reimburse the Buyer Indemnities
for, any Losses which any of them may incur or to which any of them may be
subjected, resulting from or arising out of or otherwise based upon the
Seller's efforts to pursue any such recovery.
(c) In the case of any claim asserted by a third party against
a Buyer Indemnitee, notice shall be given by such Buyer Indemnitee to the
Seller promptly after such Buyer Indemnitee has actual knowledge of any claim
as to which indemnity may be sought, and such Buyer Indemnitee shall permit the
Seller (at the Seller's expense) to assume the defense of any claim or any
litigation resulting therefrom, provided, that (i) counsel for the Seller who
shall conduct
53
<PAGE> 62
the defense of such claim or litigation shall be reasonably satisfactory to
such Buyer Indemnitee, and such Buyer Indemnitee may participate in such
defense at such Buyer Indemnitee's expense, and (ii) the failure of any Buyer
Indemnitee to give notice as provided herein shall not relieve the Seller of
its indemnification obligation under this Agreement except to the extent that
such failure results in a lack of actual notice to the Seller and the Seller is
materially prejudiced as a result of such failure to give notice. Except with
the prior written consent of such Buyer Indemnitee, which consent shall not be
unreasonably withheld, the Seller shall not, in the defense of any such claim
or litigation, consent to entry of any judgment or enter into any settlement
that provides for injunctive or other nonmonetary relief affecting such Buyer
Indemnitee or that does not include as an unconditional term thereof the giving
by each claimant or plaintiff to such Buyer Indemnitee of a release from all
liability with respect to such claim or litigation. In the event that such
Buyer Indemnitee shall in good faith determine that such Buyer Indemnitee may
have available to it one or more defenses or counterclaims that are
inconsistent with one or more of those that may be available to the Seller in
respect of such claim or any litigation relating thereto, such Buyer Indemnitee
shall have the right at all times to take over and assume control over the
defense, settlement, negotiations or litigation relating to any such claim at
the sole cost of such Buyer Indemnitee, provided, that if such Buyer Indemnitee
does so take over and assume control, such Buyer Indemnitee shall not settle
such claim or litigation without the written consent of the Seller, such
consent not to be unreasonably withheld. In the event that the Seller fails to
assume or does not accept the defense of any matter as above provided promptly
after receipt of notice thereof from such Buyer Indemnitee (and in any event
within 20 days of such receipt), such Buyer Indemnitee shall have the full
right to defend against any such claim or demand, and shall be entitled to
settle or agree to pay in full such claim or demand. In any event, the Seller
and the Buyer shall cooperate in the defense of any claim or litigation subject
to this Section 4.8 and the records of each shall be available to the other
with respect to such defense.
4.9. Survival, etc. (a) All claims for indemnification under
clause (i) of Section 4.8(a) or under clause (F) of Section 4.6(b)(i) with
respect to the representations and warranties contained herein must be asserted
on or prior to the date that is 30 days after the termina-
54
<PAGE> 63
tion of the respective survival periods set forth in this Section 4.9(a). The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any examination by or on behalf of
the parties hereto and the completion of the transactions contemplated herein,
but only to the extent specified below:
(i) except as set forth in clauses (ii) and (iii) below, the
representations and warranties contained in Articles II and III shall
survive until 11:59 p.m. Eastern time on the second anniversary of the
Closing Date;
(ii) the representations and warranties of the Seller
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.16(c)(ii) and 3.17 shall
survive without limitation (subject, in the case of Section 3.17, to
any statutes of limitations applicable to the particular Tax at issue,
and in the case of Section 3.16(c)(ii), to any statutes of limitations
applicable to the particular provision of ERISA or the Code at issue);
and
(iii) the representations and warranties of the Seller
contained in Sections 3.5, 3.10, 3.11, 3.13, 3.15, 3.16 (other than
3.16(c)(ii)), 3.21 and 3.22 shall survive until 11:59 p.m. Eastern
time on the 60th day after the date on which the Buyer receives the
audited consolidated financial statements of the Buyer and its
subsidiaries (including the Company Group) for the year ended December
31, 1995 accompanied by a report of the Buyer's independent public
accountants.
(b) The covenants and agreements (including but not limited to
the indemnities) contained in this Agreement shall survive the execution and
delivery thereof, any examination by or on behalf of the parties hereto, the
completion of the transactions contemplated herein and any expiration of the
respective survival periods set forth in Section 4.9(a), without limitation,
provided that the provisions of Section 4.11(a) shall only survive until the
second anniversary of the date hereof and thereafter the Confidentiality
Agreements will be void and of no further force or effect, except as to any
breach prior to such date of Section 4.11(a) or the Confidentiality Agreements.
4.10. Employees. (a) From and after the Closing, the Seller
shall be solely responsible, and, effective as of the Closing, hereby assumes
the responsibility of each mem-
55
<PAGE> 64
ber of the Company Group, for, and shall pay, any and all claims, liabilities,
obligations, commitments, costs and expenses under or in respect of the
Williams Telecommunications Group, Inc. Long-Term Equity incentive Compensation
Plan, including any cash or stock awards granted in respect of the termination
of such Plan (such Plan and awards referred to collectively as the "Equity
Plan"), including, but not limited to, all such claims, liabilities,
obligations, commitments, costs and expenses relating to or arising as a result
of or in connection with the termination or replacement of the Equity Plan and
any and all compensation or benefit entitlements thereunder or under any such
replacement plan or arrangement. Prior to the Closing, the Seller shall cause
the accrual relating to the Equity Plan that is reflected as a liability on the
most recent Subsequent Monthly Financial Statement to be transferred to the
Seller without any payment therefor on the part of any member of the Company
Group or the Buyer or its Affiliates.
(b) (i) Prior to the Closing, Seller shall cause each member
of the Company Group to withdraw as a participating employer from the Plans
sponsored by the Seller which are listed on Schedule 4.10(b)(i) of the Seller
Disclosure Schedule (the "Seller Sponsored Plans"). The withdrawal of the
members of the Company Group from the Seller Sponsored Plans shall not cause
any assets held by, for or with respect to any member of the Seller Group under
such Seller Sponsored Plans or trusts or insurance contracts related thereto to
be transferred either: (i) to the Buyer, any of its Affiliates or the Company
Group; or (ii) to any employee benefit plans, program or arrangement
established, sponsored or maintained by the Buyer, any of its Affiliates or the
Company Group. From and after the Closing, the Buyer shall cause the Company
Group to assume, and to pay or reimburse the Seller for, any and all claims of
the Employees and Beneficiaries incurred but not paid, or paid by the Seller
but not yet reimbursed to the Seller by the Company Group, prior to the Closing
Date under those Plans that are medical, dental, life or accident insurance,
disability, educational assistance, legal services or Code section 125 flexible
reimbursement account plans (the "Seller Welfare Plans") except to the extent
any such claim is paid by insurance without the requirement that the Seller
reimburse the insurer with respect to such claim. From and after the date
hereof to the Closing Date, the Seller shall cause the Company Group to pay all
claims of the Employees and Beneficiaries under the Seller Welfare Plans
promptly upon receipt of notice of each such claim and otherwise in the
ordinary
56
<PAGE> 65
Course of Business. Prior to the Closing, the Seller shall cause the Company
Group to (x) pay cash equal to those amounts necessary to satisfy all of the
obligations of the Company Group with respect to the Employees under those
Seller Sponsored Plans that are qualified plans under section 401(a) of the
Code with respect to service of such Employees completed prior to the Closing,
including employer matching contributions under the Seller's Savings Plan, such
cash amount to be determined in the Ordinary Course of Business and to be paid
to the Seller for the benefit of such qualified plans; provided, however, that
immediately prior to the Closing, such cash amount shall be determined pursuant
to Schedule 4.7 of the Seller Disclosure Schedule, and (y) transfer to the
Seller the accrual relating to the Seller's Supplemental Retirement Plan that
is reflected as a liability on the most recent Subsequent Monthly Financial
Statement, together with a cash payment by the Company Group equal to the
amount of such accrual.
(ii) With respect to the Plans (other than the Equity Plan)
that are not Seller Sponsored Plans and that are listed on Schedule 4.10(b)(ii)
of the Seller Disclosure Schedule (the "Company Plans"), from and after the
Closing Date, the Buyer shall pay or cause the Company Group to pay all amounts
attributable to such Company Plans in accordance with the applicable terms
thereof. From and after the Closing, all assets and liabilities of the Company
Plans shall be retained by the Company Group and, to the extent that,
immediately prior to the Closing Date, any rights or assets in respect of any
Company Plan are held by or for the benefit of any member of the Seller Group
other than the Company Group, no later than 30 days following the Closing Date,
the Seller shall, or shall cause, any and all such rights and assets to be
transferred, in cash or kind, as directed by the Buyer, to the Company or to
any employee benefit fund established by the Company to receive such assets.
(iii) From and after the Closing, the Seller shall be solely
responsible, and, effective as of the Closing, hereby assumes the
responsibility of each member of the Company Group, for, and shall pay, any and
all claims, liabilities, obligations, commitments, costs and expenses under
each Plan, other than the Company Plans, to or in respect of any Employee or
Beneficiary, except (A) to the extent the Buyer has expressly agreed in this
Section 4.10 to assume the liability of the Seller to or in respect of any
Employee or Beneficiary under any such Plan and (B) if there is a transfer of
assets from the Seller's Savings Plan to the
57
<PAGE> 66
Buyer's Savings Plan, as contemplated by Section 4.10(h), then, from and after
the date of such transfer, for Seller's obligations with respect to the payment
of benefits accrued under the Seller's Savings Plan as of the Closing.
(c) (i) Effective as of the Closing, the Buyer shall cause the
Company Group to make available to the current employees of the Company Group
and their Beneficiaries (collectively, the "Current Employees") and to those
former employees of the Company Group who, immediately prior to the Closing,
are totally disabled and, therefore, receiving benefits under the Seller's Long
Term Disability Plan and the Beneficiaries of such former employees
(collectively, the "LTD Employees") employee benefit plans, programs and
arrangements of the Buyer or its Affiliates.
(ii) Effective as of the Closing, the Buyer shall cause the
Company Group to make available "continuation coverage", within the meaning of
section 4980B of the Code, under the Buyer's group health plans to those former
employees of the Company Group who are "covered employees" and those
Beneficiaries who are "qualified beneficiaries", in each case, within the
meaning of section 4980B of the Code, and who, immediately prior to the
Closing, are receiving or are eligible to receive continuation coverage under
those Plans that are group health plans subject to the requirements of section
4980B of the Code (such former employees and Beneficiaries referred to
collectively as the "COBRA Participants").
(iii) in the case of the Buyer's or the Company Group's
medical, dental and hospitalization plans, the Buyer shall cause such plans to
(A) provide for each Current Employee, LTD Employee and COBRA Participant a
credit for any copayments or deductibles already incurred by such Current
Employee, LTD Employee or COBRA Participant, as the case may be, during the
calendar year in which the Closing occurs under the comparable Plan in which
such Current Employee, LTD Employee or COBRA Participant, as the case may be,
was an active participant immediately prior to the Closing and (B) waive any
pre-existing condition restrictions to the extent that, as of the Closing, the
pre-existing condition of any Current Employee, LTD Employee or COBRA
Participant, as the case may be, would not have been excluded under the
pre-existing condition restrictions of the comparable Plan in which such
Current Employee, LTD Employee or COBRA Participant, as the case may be, was an
active participant immediately prior to the Closing. To the extent a Current
58
<PAGE> 67
Employee becomes eligible to participate in a qualified retirement plan
maintained by the Buyer or its Affiliates, including following the Closing the
Company Group, such Current Employee shall be credited under such plan for
participation and vesting purposes with the service credited to such Current
Employee for such purposes under the Seller's Investment Plus Plan (the
"Seller's Savings Plan") as of the Closing Date. To the extent a Current
Employee becomes eligible to participate in a vacation policy, short-term
disability plan and/or severance plan maintained or established by the Buyer or
its Affiliates, including following the Closing the Company Group, such Current
Employee shall be credited under such plan or arrangement for participation,
vesting and benefit determination purposes with the most recent period of such
Current Employee's continuous service with the Seller and its Affiliates as of
the Closing Date.
(d) (i) With respect to those former employees of the Company
Group and their eligible dependents (the "Medical Plan Retirees") who,
immediately prior to the Closing, are provided retiree medical coverage under
Plans that provide retiree medical or hospitalization coverage (the "Seller
Retiree Medical Plans"), the Buyer shall, effective as of the Closing, cause
the Company Group to make available retiree medical and hospitalization
benefits that are substantially comparable, in the aggregate, to the retiree
medical and hospitalization benefits of such Medical Plan Retirees under the
Seller Retiree Medical Plans as in effect immediately prior to the Closing. The
Buyer shall cause its or the Company Group's retiree medical and
hospitalization plans covering the Medical Plan Retirees to provide for each
Medical Plan Retiree a credit for any copayments or deductibles already
incurred by such Medical Plan Retiree during the calendar year in which the
Closing occurs under the comparable Seller Retiree Medical Plan in which such
Medical Plan Retiree was an active participant immediately prior to the Closing
and waive any pre-existing condition restrictions to the extent that, as of
the Closing, the pre-existing condition of any such Medical Plan Retiree would
not have been excluded under the pre-existing condition restrictions of the
comparable Seller Retiree Medical Plan in which such Medical Plan Retiree was
an active participant immediately prior to the Closing.
(ii) Effective as of the Closing, the Buyer shall cause its
medical and hospitalization plans to be amended to provide retiree medical and
hospitalization coverage, that
59
<PAGE> 68
is comparable, in the aggregate, to that provided to the Medical Plan Retirees,
to those Current Employees (the "Eligible Retirees") who, as of the Closing
Date, have satisfied the age, service and other eligibility requirements
therefor under the Seller Retiree Medical Plans.
(e) (i) Subject to Section 4.10(a), all liabilities,
obligations, commitments, costs or expenses with respect to any severance,
separation pay, change in control or other severance (or termination) benefits
that become payable under a Plan (other than the Equity Plan) to any Current
Employee with respect to employment with the Company Group prior to the Closing
or that become payable under any plan, program or arrangement of the Buyer or,
following the Closing, the Company Group to a Current Employee or a future
employee of the Company Group with respect to employment following the Closing
with the Buyer or any of its Affiliates shall be the sole responsibility of the
Buyer and its Affiliates. Subject to Section 4.10(a), liabilities for claims of
any Employee other than a Current Employee for severance or other termination
benefits payable under a Plan (other than the Equity Plan) resulting from the
termination of any such Employee's employment with the Company Group prior to
the Closing shall continue to be the responsibility of the Company Group.
(ii) Subject to Section 4.10(a), all claims of any Employee
under any Law respecting employment, including any litigation under any such
Law instituted by or on behalf of any such Employee prior to the Closing and
claims of any Current Employee alleging that such Current Employee has suffered
a constructive termination of employment as a result of the consummation of the
transactions contemplated by this Agreement, shall continue to be the
responsibility of the Company Group, except for any such claims relating to any
Plan, other than (x) a Company Plan and (y) to the extent the Buyer has
expressly agreed in Section 4.10 to assume any liability under any Plan.
Notwithstanding the foregoing, from and after the Closing Date, the Buyer shall
cause the Company Group to continue to be responsible for, and shall indemnify
the Seller from and against, and shall pay the Seller for, any and all Losses
arising under any claims and liabilities of any Current Employee, Medical Plan
Retiree or Eligible Retiree or any of their eligible dependents with respect to
the failure of the Company Group following the Closing to make available to
such Current Employee, Medical Plan Retiree or Eligible Retiree and their
60
<PAGE> 69
eligible dependents retiree medical and hospitalization benefits, including any
such claim under any Plan.
(f) At the Closing, the Buyer shall, or shall cause the
Company to, offer to enter into a new employment agreement (the "New Contract")
with Roy A. Wilkens ("Wilkens") which shall contain substantially the same
terms and conditions as provided in that certain Employment Agreement, dated as
of January 1, 1990, among the Seller, the Company and Wilkens, as amended and
in effect on the date hereof (the "Existing Contract"). In the event that (x)
the terms of the New Contract, as executed and delivered by Wilkens, on the one
hand, and the Company and/or the Buyer, on the other hand, do not provide for
the termination of the Existing Contract and the release by Wilkens of the
Seller and the Company from all further liability or obligation in respect of
the Existing Contract or (y) Wilkens and the Buyer and/or the Company do not
execute and deliver the New Contract, then, notwithstanding Section 4.8 but
subject to Section 4.10(a), from and after the Closing (i) the Buyer shall
indemnify the Seller, its Affiliates (other than the Company Group), other
members of the Seller Group and their respective employees and directors from
all claims and liabilities under the Existing Contract to the extent such
claims and liabilities relate to (A) any act or failure to act on the part of
the Buyer or, following the Closing, the Company Group or (B) the failure of
Wilkens and the Buyer and/or the Company to enter into the New Contract and
(ii) the Seller shall indemnify the Buyer, its Affiliates (including, following
the Closing, the Company Group) and their respective employees and directors
from all claims and liabilities under the Existing Contract to the extent such
claims and liabilities relate to (A) any act or failure to act on the part of
the Seller or, prior to the Closing, the Company Group or (A) any amendment to
the Existing Contract after the date hereof, except any such amendment to which
the Buyer has expressly consented.
(g) In accordance with all applicable terms and conditions of
the Seller's Consolidated Pension Plan, as amended from time to time (the
"Pension Plan"), the Seller shall cause the Pension Plan to continue to credit
benefit service to the LTD Employees solely during such LTD Employee's period
of total disability (within the meaning of the Pension Plan). Effective as of
the Closing Date, the Seller shall cause the Current Employees to be fully
vested (x) in their "Accrued Benefit," as defined in Section 2.1 of the Pension
Plan, and (y) in their account balances in the Sell-
61
<PAGE> 70
er's Savings Plan and the Seller's Bonus Employee Stock Ownership Plan.
(h) (i) Promptly following the date hereof, the Seller and the
Buyer shall each use its best efforts and shall each cooperate with the other
to determine whether the account balances of the Current Employees under the
Seller's Savings Plan can be transferred to the Buyer's Savings Plan in
accordance with the Code and ERISA. If the Buyer and the Seller reasonably
determine prior to the Closing that such transfer may be effected, in the manner
described in Section 4.10(h)(ii), in compliance with ERISA and the Code and, if
requested by the Buyer or the Seller, the IRS has provided reasonable assurance
that such transfer, effected in such manner, will not result in a
disqualification of the Seller's Savings Plan or the Buyer's Savings Plan, such
transfer shall be so effected within six months following the Closing.
(ii) Subject to the foregoing provisions of this Section
4.10(h), effective as of the Closing Date, (x) the Buyer shall (A) amend the
Buyer's defined contribution plan (the "Buyer's Savings Plan") to permit the
Current Employees to participate therein and to permit the account balances of
the Current Employees under the Seller's Savings Plan to be transferred to the
Buyer's Plan pursuant to section 414(l) of the Code, including the transfer of
any outstanding loan in respect of any Current Employee under the Seller's
Savings Plan and the related promissory note evidencing such loan and (B) cause
the Buyer's Savings Plan to contain those provisions with respect to optional
forms of benefit that are required to be provided by a transferee plan pursuant
to section 411(d)(6) of the Code and (y) as soon as reasonably practicable, but
in no event later than 60 days, after (A) the amendment of the Buyer's Savings
Plan and (B) receipt by the Seller of (i) a copy of the Buyer's Savings Plan,
all amendments thereto, any related trust documents (as amended), the last IRS
determination letter with respect to the Buyer's Savings Plan and the three
most recent IRS Forms 5500 with respect to such Plan and (ii) a written opinion
of counsel to the Buyer reasonably acceptable to the Seller to the effect that
the Buyer's Savings Plan contains the material terms required for qualification
under section 401(a) of the Code, the Seller shall transfer, or cause to be
transferred, to the trust under the Buyer's Savings Plan an amount, in cash, in
kind, or in Seller's common stock and, with respect to outstanding participant
loans, the related promissory notes evidencing such loans, equal to
62
<PAGE> 71
the fair market value, determined as of the date of such transfer, of the
aggregate account balances under the Seller's Savings Plan of the Current
Employees.
(iii) Notwithstanding whether a transfer of assets is
effected, from and after the Closing, the Seller shall permit the Current
Employees to repay any outstanding loans of such Current Employees under the
Seller's Saving Plan in accordance with the loan repayment schedule in effect
with respect to each such loan immediately prior to the Closing Date, provided
that, from and after the Closing, the Buyer causes such repayment amounts that
are currently due in accordance with the applicable repayment schedule to be
deducted from each affected Current Employee's paycheck and timely remits (so
as to avoid a default of the applicable loan) such deducted amounts to the
trustee of the Seller's Savings Plan for credit to each such Current Employee's
account under the Seller's Savings Plan.
(i) Subject to Section 4.10(a), at or before the Closing, the
Seller shall cause (x) the Company Group to accelerate and, in accordance with
the terms of the applicable Plan and related award agreement, if any, pay,
perform and satisfy each of the then outstanding deferred awards granted under
the Seller's Executive Incentive Compensation Plan to any Current Employee and
(y) all restrictions on transferability to lapse with respect to all then
outstanding restricted stock awards under the Seller's Restricted Stock Plan in
respect of any Current Employee, such that the Seller's stock subject to such
awards becomes freely transferable by each such Current Employee. Subject to
Section 4.10(a), at or before the Closing, the Seller shall cause the Company
Group to pay, perform and satisfy, in accordance with the terms of such
Founders Award Plan, each of the awards granted to any Current Employee under
the Williams Telecommunications Group, Inc. Founders Award Plan that remain
outstanding as of the date hereof.
4.11. Confidentiality. (a) Existing Agreements. The parties
hereto agree that with respect to the disclosure of information furnished
hereunder or in connection herewith, the parties shall continue to be bound by
the terms of that certain letter agreement, dated July 16, 1993 (the
"Non-Disclosure Agreement"), between the Buyer and WilTel and the supplemental
letter agreement, dated June 14, 1994 (the "Supplemental Agreement, and
together with the Non-Disclosure Agreement, the "Confidentiality Agreements"),
among the Buyer, the Seller, the Company and WilTel. The
63
<PAGE> 72
Seller agrees to cause each member of the Seller Group to comply with the
provisions of the Confidentiality Agreements as if each of them were parties to
such agreement. From and after the Closing Date, the Buyer and its Affiliates,
officers, directors, employees, agents, advisers and representatives shall have
no further liability or obligation under the Confidentiality Agreements with
respect to information, agreements or documents of or relating to the Company
Group.
(b) Post-Closing Confidentiality. (i) From and after one
Closing Date, the Seller shall not disclose, and shall not permit any Excluded
Subsidiary, Pipeline Subsidiary or other Seller Group member (together with the
Seller, "Seller Parties") or any officers, directors or employees of the Seller
or any Excluded Subsidiary, Pipeline Subsidiary or other Seller Group member to
disclose, and shall use its reasonable efforts to prevent the respective
representatives, advisors, consultants, contractors or agents of the Seller or
any Excluded Subsidiary, Pipeline Subsidiary or other Seller Group member (such
officers, directors, employees, representatives, advisors, consultants,
contractors and agents, "Seller Representatives") from disclosing, to any
Person, (x) until the second anniversary of the Closing Date shall have
occurred, any Buyer Information (as hereinafter defined) that is known to any
Seller Party on the Closing Date, or (y) any Confidential Buyer information (as
hereinafter defined) that becomes known to any Seller Party after the Closing
Date pursuant to this Agreement or any Ancillary Agreement or in connection
with any of the transactions contemplated hereby or thereby. The term "Buyer
Information" means any information concerning the Buyer or any member of the
Company Group, or the business, activities or operations of the Buyer or any
member of the Company Group, including but not limited to information relating
to pricing, technologies, trade secrets, processes, customers, suppliers,
financial data, statistics, or research and development, other than information
that (i) is or becomes generally available to the public other than as a result
of a disclosure by any Seller Party or Seller Representative, or (ii) any
Seller Party or Seller Representative is required to disclose by law or legal
process. The term "Confidential Buyer Information" means any Buyer Information
that the receiving Seller Party knows or reasonably should know is confidential
or proprietary, or that the Buyer or any member of the Company Group has
identified in writing to the receiving Seller Party as being confidential or
proprietary.
64
<PAGE> 73
(ii) From and after the Closing Date, the Buyer shall not
disclose, and shall not permit any Buyer Affiliate (including the Company
Group) (together with the Buyer, "Buyer Parties") or any officers, directors or
employees of the Buyer or any Buyer Affiliate (including of the Company Group)
to disclose, and shall use its reasonable efforts to prevent the respective
representatives, advisors, consultants, contractors or agents of the Buyer or
any Buyer Affiliate (including of the Company Group) (such officers, directors,
employees, representatives, advisors, consultants, contractors and agents,
"Buyer Representatives") from disclosing, to any Person, (x) until the second
anniversary of the Closing Date shall have occurred, any Seller information (as
hereinafter defined) that is known to any Buyer Party on the Closing Date, or
(y) any Confidential Seller Information (as hereinafter defined) that becomes
known to any Buyer Party after the Closing Date pursuant to this Agreement or
any Ancillary Agreement or in connection with any of the transactions
contemplated hereby or thereby. The term "Seller Information" means any
information concerning the Seller or any Excluded Subsidiary or Pipeline
Subsidiary, or the business, activities or operations of the Seller or any
Excluded Subsidiary or Pipeline Subsidiary, including but not limited to
information relating to pricing, technologies, trade secrets, processes,
customers, suppliers, financial data, statistics, or research and development,
other than information that (i) is or becomes generally available to the public
other than as a result of a disclosure by any Buyer Party or Buyer
Representative, or (ii) any Buyer Party or Buyer Representative is required to
disclose by law or legal process. The term "Confidential Seller Information"
means any Seller Information that the receiving Buyer Party knows or reasonably
should know is confidential or proprietary, or that the Seller or any Excluded
Subsidiary or Pipeline Subsidiary has identified in writing to the receiving
Buyer Party as being confidential or proprietary.
(iii) In the event that any Seller Party is requested in any
proceeding to disclose any Buyer Information, the Seller shall give the Buyer
prompt written notice of such request so that the Buyer may seek an appropriate
protective order. If in the absence of a protective order any Seller Party is
compelled in a proceeding to disclose Buyer Information, such Seller Party may
disclose such portion of the Buyer Information that in the opinion of the
Seller's counsel such Seller Party is compelled to disclose, without liability
under this Agreement, provided, however, that the
65
<PAGE> 74
Seller shall give the Buyer written notice of the Buyer Information to be
disclosed as far in advance of its disclosure as is practicable and shall use
reasonable efforts to obtain assurances that confidential treatment will be
accorded to such Buyer information. In the event that any Buyer Party is
requested in any proceeding to disclose any Seller information, the Buyer shall
give the Seller prompt written notice of such request so that the Seller may
seek an appropriate protective order. If in the absence of a protective order
any Buyer Party is compelled in a proceeding to disclose Seller Information,
such Buyer Party may disclose such portion of the Seller information that in
the opinion of the Buyer's counsel such Buyer Party is compelled to disclose,
without liability under this Agreement, provided, however, that the Buyer shall
give the Seller written notice of the Seller information to be disclosed as far
in advance of its disclosure as is practicable and shall use reasonable efforts
to obtain assurances that confidential treatment will be accorded to such
Seller information. Except as may be provided in any Ancillary Agreement, the
Seller agrees that neither it nor any other Seller Party will appropriate any
proprietary Buyer Information for its or their benefit, and the Buyer agrees
that neither it nor any other Buyer Party will appropriate any proprietary
Seller Information for its or their benefit.
(iv) The Seller and the Buyer each acknowledge that the other
such party and its Affiliates would be irreparably damaged in the event of a
breach or a threatened breach of any of the acknowledging party's obligations
under this Section 4.11(b), and agrees (and shall cause each Excluded
Subsidiary and Pipeline Subsidiary, in the case of the Seller, and each member
of the Company Group, in the case of the Buyer, to agree) that, in the event of
a breach or a threatened breach of any such obligation, the other such party
shall, in addition to any other rights and remedies available to it in respect
of such breach, be entitled to an injunction from a court of competent
jurisdiction granting it specific performance of the provisions of this Section
4.11(b).
(v) The provisions of this Section 4.11 shall not restrict the
Buyer or any member of the Company Group, or the Seller or any Excluded
Subsidiary or Pipeline Subsidiary, from using Information in performing their
respective obligations under, or enforcing the terms of, this Agreement or any
Ancillary Agreement, or in exercising their respec-
66
<PAGE> 75
tive rights relating hereto or thereto or to the transactions contemplated
hereby or thereby.
4.12. Noncompete Agreement. As of the Closing, the Seller
shall have executed a noncompete and nonsolicitation agreement in substantially
the form attached hereto as Annex A (the "Seller Noncompete Agreement").
4.13. Financial Statements. Until the Closing, (i) on or
before the 21st day of each month beginning with the month following the
execution of this Agreement, the Seller shall deliver to the Buyer unaudited
monthly financial statements of WilTel Network Services as at and for the
monthly period ending the last day of the preceding month (the "Subsequent
Monthly Financial Statements"), and (ii) within 45 days after the end of each
fiscal quarter, the Seller shall deliver to the Buyer unaudited combined
balance sheets as of the end of such fiscal quarter and unaudited combined
income statements and combined statements of stockholders' equity and cash
flows for the three month and year-to-date periods then ended, of WilTel
Network Services (the "Subsequent Quarterly Financial Statements"). The
Subsequent Monthly Financial Statements shall be prepared in a format
consistent with the Audited Financial Statements, but without notes.
4.14. Transfer of Excluded Businesses. Prior to or on the
Closing Date (but in no event later than the consummation of the Closing), the
Seller shall cause the members of the Company Group to transfer to the Seller
or an Affiliate of the Seller, on an AS IS, WHERE IS basis (in respect of each
member of the Company Group, the Buyer or any Affiliate thereof), all of the
capital stock of the Excluded Subsidiaries and all tangible and intangible
assets of the Excluded Businesses not owned by any Excluded Subsidiary,
pursuant to all necessary or appropriate stock powers, bills of sale,
sublicenses, subleases and other instruments of transfer or conveyance, each in
form and substance mutually satisfactory to the Buyer and the Seller in their
reasonable judgment. In connection with such transfer, the Seller shall assume
all liabilities and obligations of the Company Group related to the Excluded
Businesses, pursuant to agreements and instruments of assumption in form and
substance mutually satisfactory to the Buyer and the Seller in their reasonable
judgment. The Seller shall be responsible for any severance or other benefits
payable by any member of the Seller Group to employees who are or were employed
or engaged primarily in functions comprising a part
67
<PAGE> 76
of the Excluded Businesses or are beneficiaries or dependents of Persons so
employed or engaged.
4.15. Capital Expenditures. (a) From the date hereof through
the Closing Date, the Seller shall use reasonable efforts to cause the members
of the Company Group to make capital expenditures relating to the Business in a
manner consistent with the 1994 capital expenditures budget sat forth in
Schedule 4.15(a) of the Seller Disclosure Schedule such that, for the period
beginning on January 1, 1994 and ending on the Closing Date (the "Preclosing
Period"), the Company Group shall have made capital expenditures in an
aggregate amount at least equal to $97,865,700 (the "Required Amount"),
representing the "original" 1994 budgeted amount shown therein (multiplied by
eleven-twelfths and adjusted to exclude capital expenditures attributable to
the Excluded Subsidiaries) plus the 1993 carryforward amount shown therein. If,
however, the Closing Date occurs prior to November 30, 1994, the Required
Amount shall be reduced by $225,023 for each day by which the Closing Date
precedes November 30, 1994.
(b) If the amount of any capital expenditures paid by the
Company Group relating to the Business during the Preclosing Period (the
"Actual Amount") is less than the Required Amount, the difference between the
Required Amount and the Actual Amount shall be paid by the Seller to the Buyer
following the Closing. If the Actual Amount exceeds the Required Amount, the
difference between the Required Amount and the Actual Amount shall be paid by
the Buyer to the Seller following the Closing, provided that the Buyer shall
have no obligation so to pay, and the Actual Amount shall be reduced by, the
aggregate amount of all Extraordinary Expenditures (as hereinafter defined)
made without the prior written consent of the Buyer. In the event that the
Forum Property is transferred to the Seller as contemplated by Section 4.15(e),
the Actual Amount for purposes of any calculation to be made pursuant to this
Section 4.15(b) shall be reduced (without duplication) by the aggregate amount
of all Forum Expenditures (as hereinafter defined) made by the Company Group.
(c) The amount payable pursuant to Section 4.15(b) shall be
paid in cash within 30 days after the Closing Date, together with an amount
equivalent to interest thereon at a rate per annum equal to the prime rate as
published by the Wall Street Journal from time to time (calculated on the basis
of a 365-day year, for the actual number
68
<PAGE> 77
of days elapsed during the period from but not including the Closing Date to
and including the date of payment). Any amounts payable pursuant to this
Section 4.15 shall be an adjustment to the Purchase Price.
(d) The Buyer shall have no obligation to reimburse the Seller
for any Extraordinary Expenditures, unless the Seller shall have obtained the
prior written consent of the Buyer to such Extraordinary Expenditures. For
purposes of this Agreement, the term "Extraordinary Expenditures" means any
capital expenditures by the Company Group incurred or paid during the period
from the date hereof through the Closing Date (i) in the category labelled
"Forum Property (including the parking lot) and Buildout" in Schedule 4.15(d)
of the Seller Disclosure Schedule ("Forum Expenditures"), (ii) in the category
labelled "Transaction Network" in such Schedule, (iii) in the category labelled
"Cuba", in such Schedule, (iv) in any category set forth in such Schedule, that
exceed the respective amount set forth next to such category in such Schedule,
or (v) for new capital projects not set forth in such Schedule, that exceed
$3,000,000 in each case or $10,000,000 in the aggregate.
(e) The Buyer agrees that, if it has not, on or prior to
October 15, 1994, (i) given written notice to the Seller that the Buyer
consents to the making of the Forum Expenditures, in an aggregate amount not to
exceed the amount set forth therefor in Schedule 4.15(d) in the Seller
Disclosure Schedule, and (ii) confirmed to the Seller in writing and publicly
announced (by means of a press release or press conference) its intent to
remodel and fully occupy the Forum Property to be acquired by such capital
expenditures, then the Forum Property or the contract rights to acquire the
Forum Property shall be transferred to the Seller, on an AS IS, WHERE IS basis
without the payment of any consideration, prior to the Closing.
(f) The Buyer agrees that on or prior to the date that is 30
days after the date hereof, it will give written notice to the Seller as to
whether the Buyer will consent to the making of the capital expenditures set
forth in the category labelled "Transaction Network" in Schedule 4.15(d) of the
Seller Disclosure Schedule. If the Buyer does not so consent to the making of
such expenditures, then the Seller shall have the right to enter into the
packet switching transaction network venture for which such proposed
expenditures have been allocated, notwithstanding any provision of
69
<PAGE> 78
the Seller Non-Compete Agreement, but without using the Vyvx Property (as
defined in the Vyvx Agreement).
(g) The Buyer agrees that it will not unreasonably delay or
deny consent to the making of the capital expenditures set forth in the
category labelled "Cuba" in Schedule 4.15(d) of the Seller Disclosure Schedule,
provided that the Seller provides, or causes the Company Group to provide, to
the Buyer a detailed explanation and sufficient justification, as determined by
the Buyer in its reasonable judgment, of the need for such expenditures.
(h) Except as otherwise expressly provided in this Section
4.15, all references in this Section 4.15 to expenditures listed in Schedule
4.15(d) of the Seller Disclosure Schedule refer to the amounts listed under the
heading "Supplemental Approved Budget" in such Schedule.
4.16. Trademark License Agreement. At the Closing, the Seller
shall grant or cause to be granted to the Buyer, and such member or members of
the Company Group as the Buyer may designate, a ten-year, royalty-free license,
pursuant to the Trademark License Agreement, to use the name and mark "WilTel",
the "knight on a horse" logo and the other Licensed Marks referred to therein,
following the closing. Within 60 days following the Closing, the Buyer shall
cause each member of the Company Group to amend its Organizational Documents so
as to change its name so that it does not contain the word "Williams" or any
derivative thereof.
4.17. Governmental Approval and Consent Indemnity. This
Section 4.17 shall not become effective unless and until the Seller shall have
delivered to the Buyer the Indemnification Notice, and from and after such
delivery this Section 4.17 shall be in full force and effect and constitute an
integral part of this Agreement. The Seller covenants and agrees to defend,
indemnify and hold harmless each of the Buyer Indemnities from and against, and
pay or reimburse each of the Buyer Indemnities for, all Losses which any of the
Buyer Indemnities may incur or to which any of the Buyer Indemnities may be
subject, resulting from or arising out of the obtaining or making of any
Governmental Approval or Consent referred to in clause (iii) or (iv) of Section
5.2(c) that shall not have been obtained or made prior to the Closing Date, or
from the failure to obtain or make any such Governmental Approval or Consent;
provided that (a) the Seller shall not be required to indemnify any
70
<PAGE> 79
of the Buyer Indemnitees under this Section 4.17 unless and until the aggregate
amount of all Losses as to which indemnification from the Seller is sought
pursuant to this Section 4.17 ("Consent Losses") exceeds $10,000,000, (b)
thereafter the Seller shall be required to indemnify the Buyer Indemnitees
under this Section 4.17 with respect to all Consent Losses in excess of such
$10,000,000 aggregate amount, until the aggregate amount of all Consent Losses
exceeds $20,000,000, (c) thereafter the Seller shall be required to indemnify
the Buyer Indemnitees under this Section 4.17 with respect to one-half of the
amount of each Consent Loss in excess of such $20,000,000 aggregate amount,
until the aggregate amount of all Consent Losses equals $40,000,000, and (d)
the aggregate liability of the seller to the Buyer Indemnitees for Consent
Losses under this Section 4.17 shall not exceed $20,000,000.
4.18. Insurance. (a) In the event that, after the Closing, the
Buyer or any of its Affiliates (including but not limited to any member of the
Company Group or any successor thereto) shall suffer any loss, arising out of a
third party claim or otherwise, that Buyer in good faith notifies Seller that
the Buyer believes would be covered by any insurance policy maintained by or
for the benefit of any member of the Seller Group (an "Insured Claim"), Seller
shall, and shall cause each member of the Seller Group to, present and
diligently prosecute a claim for payment under such policy in respect of such
loss, and pay to the Buyer the proceeds of such claim under such policy as
reimbursement in respect of the amount of such loss, subject to the provisions
of this Section 4.18.
(b) The Seller shall not be obligated to, or to cause any
member of the Seller Group to, present or prosecute any claim under any such
insurance policy with respect to any Insured Claim unless (i) such Insured
Claim is based upon bodily injury, property damage, wrongful or other acts or
another condition or event that arose or occurred (as determined under the
applicable insurance policy) prior to the Closing and (ii) the Buyer or the
relevant Affiliate of the Buyer cooperates fully at its expense with the
Seller's insurers in the investigation of such Insured Claim and (in the case
of any insured Claim arising out of a third party claim) the defense thereof.
(c) The amount of proceeds of any such insurance claim to be
paid over to the Buyer shall be limited to the amount actually received by the
Seller Group from its insur-
71
<PAGE> 80
ers with respect to such claim (net of any self-insured retention amount,
deductible amount, or other amount that the Seller Group is required to
reimburse its insurers under its contractual agreements with them, in each case
with respect to such claim), minus the aggregate amount of all reasonable
out-of-pocket expenses incurred by the Seller Group in presenting and
prosecuting such claim (to the extent not paid or reimbursed by its insurers).
The Buyer shall reimburse the Seller, upon written demand by the Seller
(accompanied by evidence reasonably satisfactory to the Buyer), for such amount
as the Seller is required to pay and does pay by way of retrospective premium
adjustment in respect of such insurance policy on account of any payment by the
insurer thereunder in respect of such claim.
(d) Nothing contained in this Section 4.18 shall require any
member of the Seller Group to keep in force and effect after the Closing any
insurance coverage in effect at the time of the Closing. The Seller will give
the Buyer 30 days' notice before any member of the Seller Group terminates any
insurance coverage in effect at the time of the Closing and applicable to any
member of the Company Group.
(e) With respect to the claims listed in Schedule 4.18 of the
Seller Disclosure Schedule, the Buyer shall reasonably cooperate with the
Seller and its insurers in the investigation, prosecution and collection of
such claims. The Buyer shall provide reasonable access, during reasonable
business hours and at the Seller's expense, to any and all of the premises,
properties, contracts, commitments, books, records, data, personnel and
representatives of or relating to any member of the Company Group or their
business or operations as may be necessary to investigate, prosecute and
collect such claims. The Buyer's obligation so to cooperate shall not require
the Buyer to incur any unreasonable out-of-pocket expenses. Except to the
extent required by law or legal process, the Seller shall, and shall request
its insurers to, maintain any information so obtained pertaining to the Buyer
or any member of the Company Group or the Business in confidence.
4.19. Dispute Resolution. (a) Negotiations. The Buyer and the
Seller shall attempt in good faith to resolve any dispute arising out of or
relating to the Agreement or any Ancillary Agreement (a "Dispute") by
negotiations between senior executives of such parties. Such negotiations may
be commenced by either such party by written notice to the other party (the
"Negotiation Request"). In
72
<PAGE> 81
the event that such Dispute has not been resolved by such negotiations within
30 days of the delivery of the Negotiation Request, and one party hereto
requests non-binding mediation by written notice to the other party given prior
to the end of such 30-day period, the Buyer and the Seller shall attempt in
good faith to resolve such Dispute by non-binding mediation before a mediator
mutually agreeable to the Buyer and the Seller in their reasonable judgment.
Neither party shall be required to continue with such negotiations or with such
non-binding mediation for more than 90 days after the delivery of the
Negotiation Request (180 days in the case of any Dispute to the extent it
arises out of or relates to any Ancillary Agreement). All such negotiations and
mediation proceedings shall be confidential, and shall be treated as compromise
and settlement negotiations for all evidentiary purposes, including but not
limited to for purposes of the Federal Rules of Evidence and any state rules of
evidence.
(b) Other Remedies. The parties hereto shall not, and shall
not permit their respective Affiliates to, initiate litigation with respect to
the Dispute unless the Dispute has not been resolved within 90 days of the
delivery of the Negotiation Request (180 days, in the case of any Dispute to
the extent it arises out of or relates to any Ancillary Agreement), and shall
not initiate litigation with respect to such Dispute except upon 5 days' prior
written notice to the other party; provided that (i) if one such party has
delivered a Negotiation Request or has so requested non-binding mediation and
the other such party has not responded to any such request within 10 days of
its receipt or is failing to participate in good faith in the procedures
specified in Section 4.19(a), the requesting party or any Affiliate thereof may
initiate litigation prior to the expiration of such 90-day or 180-day period,
as the case may be, and (ii) either such party or Affiliate may at any time or
without notice file a complaint or seek an injunction or provisional judicial
relief, if in such party's or Affiliate's sole judgment such action is
necessary to avoid irreparable damage or to preserve the status quo (including
but not limited to for statute of limitations reasons or to preserve any
defense based upon the passage of time). Despite such action the Buyer and the
Seller will continue to participate in the procedures specified in this Section
4.19 for so long and to the extent so specified.
73
<PAGE> 82
ARTICLE V
CONDITIONS TO CLOSING
5.1. The Seller's Conditions to Close. The obligations of
the Seller and the Selling Subsidiary under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions,
but compliance with any or all of such conditions may be waived (to the extent
permitted by law), in writing, by the Seller:
(a) The representations and warranties of the Buyer
contained in this Agreement and the Ancillary Agreements shall be true
and correct in all material respects on the date hereof or thereof and
on the Closing Date.
(b) The Buyer shall have performed and complied with all
of the covenants and agreements in all material respects, and
satisfied all of the conditions in all material respects, required by
this Agreement and the Ancillary Agreements to be performed or
complied with or satisfied by the Buyer at or prior to the Closing.
(c) All Governmental Approvals and Consents listed in
Schedule 5.1(c) of the Seller Disclosure Schedule (such Governmental
Approvals and Consents collectively, the "Required Consents") shall
have been obtained or made. All applicable waiting periods under the
HSR Act shall have expired.
(d) The Buyer shall have delivered to the Seller each of
the items listed in Section 6.2 below.
(e) No action, suit or proceeding shall have been
instituted or threatened by any Governmental Authority, before a court
or other Governmental Authority, to restrain or prevent the carrying
out of the transactions contemplated by this Agreement or by the
Ancillary Agreements or that seeks other material relief with respect
to any of such transactions. On the Closing Date, there shall be no
injunction, restraining order, judgment or decree of any nature of any
court or other Governmental Authority in effect that restrains or
prohibits the consummation of the transactions contemplated by this
Agreement or by the Ancillary Agreements.
74
<PAGE> 83
5.2. The Buyer's Conditions to Close. The obligations of
the Buyer under this Agreement are subject to the satisfaction at or prior to
the Closing of each of the following conditions, but compliance with any or all
of such conditions may be waived (to the extent permitted by law), in writing,
by the Buyer:
(a) The representations and warranties of the Seller
contained in this Agreement and of each member of the Seller Group
contained in the Ancillary Agreements shall be true and correct in all
material respects on the date hereof or thereof and on the Closing
Date.
(b) Each member of the Seller Group shall have performed
and complied with all the covenants and agreements in all material
respects, and satisfied all the conditions in all material respects,
required by this Agreement and the Ancillary Agreements to be
performed or complied with or satisfied by such member of the Seller
Group at or prior to the Closing.
(c) All Governmental Approvals and Consents shall have
been obtained or made that are (i) required to be obtained or made by
the Buyer and listed in Schedule 5.2(c)(i) of the Buyer Disclosure
Schedule, (ii) Required Consents (including but not limited to such
interim or provisional approvals of the Federal Communications
Commission as shall be satisfactory to the Buyer in its reasonable
judgment), (iii) the Governmental Approvals and Consents listed in
Schedule 5.2(c)(iii) of the Buyer Disclosure Schedule, and (iv) all
other Governmental Approvals and Consents (other than the Consent
listed in Schedule 5.2(c)(iv) of the Buyer Disclosure Schedule), the
failure of which to be obtained or made, individually or in the
aggregate, would reasonably be expected to have or result in a
Material Adverse Effect, or would reasonably be expected to materially
impair the ability of the Buyer, following the Closing, to conduct the
business and operations of the Company Group; provided that the
condition that the Governmental Approvals and Consents described in
the preceding clauses (iii) and (iv) be obtained or made, shall be
deemed satisfied on the date that is five business days after the
later to occur of (x) the date on which the Seller delivers to the
Buyer the indemnification Notice and (y) the date that is 90
75
<PAGE> 84
days after the date of this Agreement. All applicable waiting periods
under the HSR Act shall have expired.
(d) The Buyer shall have obtained the financing
contemplated by the Commitment Letters or alternative financing (on
terms substantially comparable to those contemplated by the Commitment
Letters) in an amount sufficient to enable the Buyer to pay the
Purchase Price and consummate the transactions contemplated by this
Agreement, pursuant to definitive agreements in form and substance
satisfactory to the Buyer in its reasonable judgment.
(e) For the period beginning on September 1, 1994 and
ending on November 30, 1994, the average monthly revenues of the
Company Group (after adjustment to eliminate revenues attributable to
the Buyer and LCI International, Inc.) derived (i) from switched
telecommunications services shall be at least $31,791,000, and (ii)
from private line services shall be at least $32,510,000. Such
revenues shall have been determined pursuant to the accrual basis of
accounting according to GAAP as applicable to the Business and
consistently applied in accordance with past accounting practices
(including an appropriate adjustment for revenues earned during the
month involved but unbilled as of the end of such month and excluding
any finance, late payment or similar charges and any taxes collected
from a customer), all as verified in reasonable detail to the
satisfaction of the Buyer in its reasonable judgment.
(f) No action, suit or proceeding shall have been (i)
instituted or threatened by any Governmental Authority, before a court
or other Governmental Authority, to restrain or prevent the carrying
out of the transactions contemplated by this Agreement or by the
Ancillary Agreements or that seeks other material relief with respect
to any of such transactions, or (ii) instituted by any Person, before
a court or other Governmental Authority, that, individually or in the
aggregate, would reasonably be expected to have or result in a
Material Adverse Effect or (except for any such action, suit or
proceeding (x) that primarily seeks to restrain or prevent the
carrying out of the transactions contemplated by this Agreement or to
obtain other material relief with respect to the consummation of such
transactions or (y) described in Schedule 5.2(f) of the Buyer
Disclosure Schedule) to mate-
76
<PAGE> 85
rially impair the ability of the Buyer, following the Closing, to
conduct the business and operations of the Company Group. On the
Closing Date, there shall be no injunction, restraining order,
judgment or decree of any nature of any court or other Governmental
Authority in effect that restrains or prohibits the consummation of
the transactions contemplated by this Agreement or by the Ancillary
Agreements.
(g) All Excluded Indebtedness shall have been repaid in
full or assumed by the Seller or a Non-Company Affiliate, and all
prepayment premiums and other monetary obligations of any member of
the Company Group relating to such Excluded Indebtedness and repayment
thereof shall have been satisfied, in each case at the Seller's sole
expense or out of any cash funds constituting current assets of the
Company Group, or assumed by the Seller or a Non-Company Affiliate.
(h) The Seller shall have delivered to the Buyer each of
the items listed in Section 6.1 below.
(i) No event, occurrence, fact, condition, change or
development (other than (x) any event, occurrence, fact, condition,
change or development that affects the economy generally or the
telecommunications industry as a whole or (y) any action, suit or
proceeding described in Schedule 5.2(f) of the Buyer Disclosure
Schedule) shall have occurred or come to exist since June 30, 1994
that, individually or in the aggregate, has had or resulted in, or
would reasonably be expected to have or result in, a Material Adverse
Effect.
ARTICLE VI
THE CLOSING
6.1. Deliveries by the Seller. At the Closing, the Buyer
shall be entitled to receive from the Seller the following:
(a) Certificate of good standing in each of the states in
which the Seller, the Selling Subsidiary and each member of the Seller
Group party to an Ancillary Agreement is incorporated, or any member
of the Company Group is incorporated or qualified, stating that each
such member is a validly existing corporation in good standing.
77
<PAGE> 86
(b) A certificate, dated as of the Closing, signed by an
officer of the Seller to the effect set forth above in Section 5.2(a)
and (b).
(c) An opinion from counsel to the Seller, in form and
substance reasonably satisfactory to the Buyer, as to the matters set
forth in Annex B and as to such other matters as may be reasonably
requested by the Buyer.
(d) Copies of duly adopted resolutions of the respective
Board of Directors of the Seller, the Selling subsidiary and each
member of the Seller Group party to an Ancillary Agreement, approving
the execution, delivery and performance of this Agreement (in the case
of the Seller or the Selling Subsidiary) and the Ancillary Agreements
to which it is a party, certified by the respective Secretary or an
Assistant Secretary of such member.
(e) The Ancillary Agreements duly executed by each party
thereto other than the Buyer.
(f) A correct and complete copy of the Certificate or
Articles of Incorporation, as amended, of the Seller, the Selling
Subsidiary, each member of the Seller Group party to any Ancillary
Agreement, and each member of the Company Group, certified by the
Secretary of State of its state of incorporation, and a correct and
complete copy of the Bylaws, as amended, of each member of the Company
Group, certified by the respective Secretary or an Assistant Secretary
of each such member.
(g) Certificates representing the Shares duly endorsed in
blank or accompanied by stock powers or other instruments of transfer
duly executed in blank, and bearing all requisite transfer or other
tax stamps.
(h) The resignations of the directors of each member of
the Company Group.
(i) An original or photostatic copy, duly certified as
accurate and complete, of all Governmental Approvals and other
Consents described in Section 5.2(c) that are obtained or made by a
member of the Seller Group.
78
<PAGE> 87
(j) A certificate of the Seller, the Selling Subsidiary
and each member of the Seller Group party to an Ancillary Agreement,
dated the Closing Date and sworn to under penalty of perjury, setting
forth the name, address and federal tax identification number of the
certifying party and stating that it is not a "foreign person" within
the meaning of section 1445 of the Code, such certificate to be in the
form set forth in the Treasury Regulations thereunder.
(k) All Election Forms, together with all required
attachments thereto, duly executed by the common parent of the Seller
Group.
(l) Evidence of repayment and satisfaction in full of the
Excluded Indebtedness and other obligations referred to in Section
5.2(g), or agreements and instruments of assumption and undertaking
with respect to the Excluded Indebtedness and such obligations, in
each case satisfactory to the Buyer in its reasonable judgment.
(m) An agreement among the Seller, the Pipeline
Subsidiaries, the Buyer and the Company Group, in form and substance
satisfactory to the Buyer and the Seller in their reasonable judgment,
whereby the Seller and the Pipeline Subsidiaries agree to, from time
to time, cooperate with and assist the Buyer and the Company Group and
execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be
reasonably necessary, or otherwise reasonably be requested by the
Buyer or any member of the Company Group, to confirm and assure the
rights provided to the Buyer or any member of the Company Group with
respect to the Rights of Way, including under the Agreement, any
Ancillary Agreement or any other agreement or instrument to which the
Seller or any Pipeline Subsidiary is a party or is bound relating to
the Rights of Way, such actions to include, without limitation, the
delivery of any documents or instruments, in recordable form, if
appropriate, reasonably requested by the Buyer or any member of the
Company Group to evidence the transfer of an interest in any portion
of the Rights of Way heretofore made from any Pipeline Subsidiary to
any member of the Company Group and reasonable cooperation in
obtaining any required consents in connection with such transfers.
79
<PAGE> 88
(n) Such other documents and instruments as the Buyer may
reasonably request.
6.2. Deliveries by the Buyer. At the Closing, the Seller
shall be entitled to receive from the Buyer the following:
(a) Certificate of existence from the Secretary of State
of the State of Georgia, stating that the Buyer is a legally existing
corporation.
(b) A certificate, dated as of the Closing, signed by an
officer of the Buyer to the effect set forth above in Sections 5.1(a)
and (b).
(c) Copies of duly adopted resolutions of the Board of
Directors of the Buyer, approving the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which
the Buyer is a party, certified by the Secretary or an Assistant
Secretary of the Buyer.
(d) The Ancillary Agreements to which the Buyer is to be
a party, duly executed by the Buyer.
(e) Payment of the Purchase Price in cash at the Closing
pursuant to Section 1.1(b).
(f) A correct and complete copy of the Articles of
Incorporation, as amended, of the Buyer, certified by the Secretary of
State of Georgia, and a correct and complete copy of the Bylaws, as
amended, of the Buyer, certified by the Secretary or an Assistant
Secretary of the Buyer.
(g) An opinion from counsel of the Buyer in form and
substance reasonably satisfactory to the Seller, as to the matters set
forth in Annex C and as to such other matters as may be reasonably
requested by the Seller.
(h) An original or photostatic copy, duly certified as
accurate and complete, of all Governmental Approvals and other
Consents described in Section 5.1(c) that are obtained or made by the
Buyer.
(i) Such other documents and instruments as the Seller
may reasonably request.
80
<PAGE> 89
ARTICLE VII
TERMINATION
7.1. Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be terminated at any time prior
to the Closing Date:
(a) by the mutual written consent of the Buyer and the
Seller;
(b) by the Buyer or the Seller by written notice to the
other party after 12:01 a.m. Eastern time an February 1, 1995, if the
Closing shall not have occurred;
(c) by either the Buyer or the Seller by written notice
to the other party if any event shall occur or exist that otherwise
shall have made it impossible to satisfy a condition precedent to the
terminating party's obligations to consummate the transactions
contemplated by this Agreement, unless the occurrence or existence of
such event, fact or condition shall be due to the failure of the
terminating party to perform or comply with any of the agreements or
covenants hereof to be performed or complied with by such party prior
to the Closing; or
(d) by the Seller in the event that a Change in Control
or a Potential Change in Control of the Buyer has occurred and is
continuing. For purposes of this Section 7.1(d), (i) a "Change in
Control" of the Buyer shall be deemed to have occurred if (x) any
"person" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of voting securities of the Buyer representing 50% or more
of the total voting power represented by the Buyer's then outstanding
voting securities, or (y) the stockholders of the Buyer shall have
approved a merger or consolidation of the Buyer with any other
corporation, other than (1) the Buyer's previously announced merger
with (or acquisition by merger of) IDB Communications Group, Inc. or
(2) a merger or consolidation which would result in the voting
securities of the Buyer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
81
<PAGE> 90
converted into voting securities of the surviving entity) at least a
majority of the total voting power represented by the voting
securities of the Buyer or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of
the Buyer shall have approved an agreement for the sale or disposition
by the Buyer (in one transaction or a series of related transactions)
of all or substantially all of the Buyer's assets, and (ii) a
"Potential Change in Control" of the Buyer shall be deemed to have
occurred and be continuing if (x) the Buyer shall have entered into an
agreement, approved by the Board of Directors of the Buyer, the
consummation of which would result in the occurrence of a Change in
Control, and such agreement shall not have been terminated, expired or
been abandoned, or (y) (1) any "person" (as defined above) shall have
commenced a tender or exchange offer for voting securities of the
Buyer representing 50% or more of the total voting power represented
by the Buyer's then outstanding voting securities, and the Buyer shall
have sent to its shareholders, at a time when such offer remains
outstanding, a statement recommending that they accept such offer or
stating that the Buyer expresses no opinion and is remaining neutral
towards such offer, and (2) such tender offer remains outstanding.
7.2. Effect of Termination. (a) Except as provided in
Section 7.2(b) below, in the event of the termination and abandonment of this
Agreement pursuant to the preceding Section of this Agreement, this Agreement
shall become void and have no effect, and without any liability to any Person
in respect hereof or of the transactions contemplated hereby on the part of any
party hereto, or any of its shareholders, directors, officers, employees,
representatives or Affiliates, except as otherwise expressly provided in this
Agreement and except for any liability of any such party resulting from such
party's breach of any covenant or agreement of such party contained in this
Agreement.
(b) In the event of the termination and abandonment of
this Agreement by the Seller solely because of the failure by the Buyer to
obtain financing sufficient to consummate the transactions contemplated hereby
as contemplated by Section 4.4(b), other than through a failure to satisfy a
condition that is also a condition to the Buyer's obligations under this
Agreement, the Buyer shall pay the Seller a termination fee in cash as follows
(the "Termination Fee"):
82
<PAGE> 91
(i) in the event that the Buyer's lenders refuse to finance the transaction as a
result of (x) any breach by the Buyer of a covenant contained in its Commitment
Letters, (y) any breach by the Buyer of one of its representations in the
Commitment Letters or (z) a material adverse change in the Buyer's business,
then the Termination Fee shall be in an amount equal to $40,000,000 (if such
termination occurs prior to November 1, 1994) or $50,000,000 (if such
termination occurs thereafter), and (ii) in the event that (x) the Buyer's
lenders refuse to finance the transaction other than as a result of the matters
described in clause (i), or (y) the condition to the Buyer's obligations
contained in Section 5.2(i) would not have been satisfied in the absence of the
parenthetical appearing in Section 5.2(i), then the Termination Fee shall be in
an amount equal to $25,000,000.
(c) Payment of any Termination Fee pursuant to this
Section 7.2 shall be made by wire transfer to the account of the Seller on the
date that is 10 business days following termination of this Agreement.
ARTICLE VIII
CERTAIN DEFINITIONS
8.1. Certain Definitions. All references herein to
Articles, Sections, Exhibits and Annexes shall be deemed references to Articles
and Sections of, and Exhibits and Annexes to, this Agreement, unless the
context shall otherwise require. All references to Schedules shall be deemed
references to the Seller Disclosure Schedule, except for express references to
the Buyer Disclosure Schedule, and unless the context shall otherwise require.
Whenever used in this Agreement (including in the Buyer Disclosure Schedule and
the Seller Disclosure Schedule), the following terms shall have the respective
meanings given to them below or in the Sections indicated below:
Actual Amount: as defined in Section 4.15(b).
Acquisition Transaction: as defined in Section 4.2.
Additional Amount: as defined in Section 1.1(b).
Affiliate: any Person (i) that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or
is under common control with, the
83
<PAGE> 92
Person involved, including, without limitation, officers and
directors, (ii) that directly or beneficially owns or holds 5% or more
of any equity interest in the Person involved, or (iii) 5% or more of
whose voting securities (or in the case of a Person which is not a
corporation, 5% or more of any equity interest) is owned directly or
beneficially by the Person involved. As used herein, the term
"control" shall mean possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a
Person, whether through ownership of securities, by contract or
otherwise.
Agreement: this Stock Purchase Agreement, including the Buyer
Disclosure Schedule and Seller Disclosure Schedule.
Ancillary Agreements: (a) the Litigation Assumption Agreement
and (b) the following agreements, each of which shall be dated as of
the Closing Date:
(1) the Seller Non-Compete Agreement;
(2) the Seller's Administrative Services
Agreement, by and among the Seller, the Buyer, the Company and
the members of the Company Group listed on the signature pages
thereof, providing for the provision of transitional services
by the Seller to the Company Group;
(3) the Company's Administrative Services
Agreement, by and among the Seller, the Company and the other
members of the Company Group listed on the signature pages
thereof, providing for the provision of transitional services
by the Company Group to the Seller;
(4) the License Agreement, among Williams
Information Services Corporation ("WISC"), the Company and
WilTel, providing for the license by WISC to the Company and
WilTel of certain trademarks (the "Trademark License
Agreement");
(5) the Cross-License Agreement among WISC, Vyvx,
Inc. ("Vyvx"), WilTel Data Network Services ("WDNS"), WilTel
Communications Services ("WCS"), including subsidiaries of WCS
and WilTel International, Inc., providing for the license by
the
84
<PAGE> 93
Company Group of certain software to WISC and the license by
WISC to the Company Group of certain software;
(6) the Assignment of Rights, between the
Company, WDNS and WISC, providing for the assignment by the
Company and WDNS of certain patents to WISC;
(7) Assignment of Rights Agreement, among the
Company, WilTel and WCS, providing for the assignment by the
Company and WilTel of certain patents and inventions to WCS;
(8) the Assignment of Marks Agreement, between
the Company and WISC, providing for the assignment by the
Company of certain trademarks to WISC;
(9) the Assignment of Marks Agreement, between
the Company and WCS, providing for the assignment by the
Company of certain trademarks to WCS;
(10) the Assignment of Marks Agreement, between
the Company and WDNS, providing for the assignment by the
Company of certain trademarks to WDNS;
(11) the Assignment of Marks Agreement, between
the Company and Vyvx, providing for the assignment by the
Company of certain trademarks to Vyvx;
(12) Assignment of ITU Marks Agreement, between
the Company and WISC, providing for the assignment by the
Company of certain intent-to-use trademark applications to
WISC;
(13) the Joint Marketing Agreement, among the
Company, WCS and WDNS, providing for the joint marketing of
long distance services and related equipment and services;
(14) the Right of Use Agreement, among WilTel, WCS
and Vyvx, providing for joint use of certain leased
facilities;
85
<PAGE> 94
(15) the Amended and Restated Telecommunications
Services Agreement, between the Seller and WilTel, providing
for the provision of private line and switched
telecommunications services to the Seller and the Seller Group
(the "Telecommunications Services Agreement");
(16) the Amended and Restated Agreement, between
WilTel and Vyvx, providing for the transfer of a fiber strand
and related services to Vyvx;
(17) the Master Purchase and Service Agreement,
between the Buyer and WCS, providing for the sale of
telecommunications equipment and related services to the
Buyer;
(18) the Rights of Way Confirmation Agreement,
among the Seller, the Pipeline Subsidiaries, the Buyer, the
Company and WilTel, relating to certain agreements to which
the Pipeline Subsidiaries are parties, with respect to the
Rights of Way;
(19) the WilTel Collocate Agreement, between
WilTel and Vyvx, relating to the collocation of certain WilTel
and Vyvx properties;
(20) Amendment to Station Site Assignment between
Williams Pipe Line Company ("Williams Pipe Line") and WilTel,
amending the Station Site Assignment delivered pursuant to the
Midwest Cross Master Agreement;
(21) Amendment to Station Site Lease, between
Williams Pipe Line and WilTel, amending the Station Site Lease
delivered pursuant to the Midwest Cross Master Agreement;
(22) Mobile Radio Base Station Facilities
Agreement, between Williams Pipe Line and WilTel, granting
WilTel the right to use certain mobile radio base station
facilities;
(23) Partial Release of Co-occupancy Agreement,
between Williams Pipe Line and WilTel releasing WilTel from
certain indemnification obligations;
86
<PAGE> 95
(24) Pipeline Bill of Sale, between Williams Pipe
Line and WilTel transferring to WilTel a pipeline located in
Kansas;
(25) Co-occupancy Agreement, between Williams Pipe
Line and WilTel, relating to a portion of the PD-10 pipeline;
(26) Co-occupancy Agreement, between Williams Pipe
Line and WilTel, relating to a portion of the PD-10 pipeline;
and
(27) Second Amendment to Agreement, between
Williams Pipe Line and WilTel, amending the Mobil Purchase
Agreement;
in each case in the respective forms thereof contained in the Exhibit
Schedule previously delivered by the Seller and the Buyer.
Assets: the properties and assets of the Company Group,
including but not limited to the Real Property.
Audited Balance Sheet Current Ratio: as defined in Section
4.7(b).
Audited Financial Statements: as defined in Section 3.5(a).
Audited Six-Month Financial Statements: as defined in Section
3.5(a).
Audited June 30 Balance Sheet: the audited combined balance
sheet of WilTel Network Services as at June 30, 1994 included in the
Audited Financial Statements.
Audited 1993 Balance Sheet: the audited combined balance
sheet of WilTel Network Services as at December 31, 1993 included in
the Audited Financial Statements.
Audited Year-End Financial Statements; as defined in Section
3.5(a).
Beneficiary: as defined in Section 3.16(a)(i).
87
<PAGE> 96
Business: as of any date on or prior to the Closing Date, the
business and operations of the Company Group as currently conducted.
Buyer: as defined in the first paragraph of this Agreement.
Buyer Affiliate: any Subsidiary or other controlled Affiliate
of the Buyer (including, following the Closing, the Company Group).
Buyer Disclosure Schedule: as defined in Section 2.3.
Buyer Financing Agreements: the financing agreements
contemplated by Section 4.4(b).
Buyer Indemnitees: as defined in Section 4.8(a).
Buyer Information: as defined in Section 4.11(b).
Buyer Parties: as defined in Section 4.11(b).
Buyer Representatives: as defined in Section 4.11(b).
Buyer's Savings Plan: as defined in Section 4.10(h)(ii).
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq.
Change in Control: as defined in Section 7.1(d).
Closing: as defined in Section 1.2.
Closing Date: as defined in Section 1.2.
Closing Date Current Ratio: as defined in Section 4.7(b).
COBRA Participant: as defined in Section 4.10(c)(ii).
Code: the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
88
<PAGE> 97
Commitment Letters: as defined in Section 2.4.
Company: as defined in the first recital to this Agreement.
Company Group: the Company and its Subsidiaries other than
the Excluded Subsidiaries; provided that Digital Communications of
America, Inc. shall be included in the Company Group only from and
after June 24, 1994.
Company Plan: as defined in Section 4.10(b)(ii).
Confidential Buyer Information: as defined in Section 4.11(b).
Confidential Seller Information: as defined in Section 4.11(b).
Confidentiality Agreements: as defined in Section 4.11(a).
Consent: any consent, approval, authorization, waiver,
permit, grant, franchise, tariff, concession, agreement, license,
ordinance, certificate, exemption, order, registration, declaration,
certification, filing, report or notice of, with or to any Person
other than a Governmental Authority.
Consent Losses: as defined in Section 4.17.
Contract: as defined in Section 3.11(a).
Current Employees: as defined in Section 4.10(c)(i).
Current Ratio: as at any date, the ratio of the combined
current assets of the Company Group to the combined current
liabilities of the Company Group, as such assets and liabilities would
be set forth in a combined balance sheet of the Company Group as at
such date prepared in accordance with GAAP applied on a basis
consistent with the past practices of the Company Group; provided that
the respective amounts of such assets and liabilities shall be
adjusted to exclude (i) cash and cash equivalents, (ii) accounts
payable--affiliates and other intercompany amounts and (iii) accruals
for Income Taxes payable or receivable. In
89
<PAGE> 98
addition, the Closing Date Current Ratio shall be adjusted by
deducting from the combined current liabilities of the Company Group
any accounts payable amount for capital expenditures which, when added
to the capital expenditures already paid during 1994 by the Company
Group (or by the Seller on their behalf), are in excess of the
Required Amount, such deduction not to exceed the amount of accounts
payable for capital expenditures.
DCA: as defined in Section 3.16(a)(ii).
Dispute: as defined in Section 4.19(a).
Election Forms: as defined in Section 4.6(g)(ii).
Eligible Retirees: as defined in Section 4.10(d)(ii).
Employee: as defined in Section 3.16(a)(i).
Environmental Laws: all Laws relating to the protection of
the environment, or to any environmental activity, including, without
limitation, (a) CERCLA and the Resource Conservation and Recovery Act,
and (b) all other requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions, discharges,
Releases or threatened Releases of Hazardous Materials into the air,
surface water, groundwater or land, or regulating the manufacture,
processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport or handling of Hazardous Materials.
Equity Plan: as defined in Section 4.10(a).
ERISA: the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
Excluded Businesses: the business and operations of the
Excluded Subsidiaries as currently conducted.
Excluded Indebtedness: all Indebtedness of or guaranteed by
any member of the Company Group, other than any such Indebtedness
listed on Schedule 8.1 of the Seller Disclosure Schedule.
90
<PAGE> 99
Excluded Intellectual Property: the Licensed Marks and all
other trademarks, servicemarks and tradenames used by the Excluded
Subsidiaries in connection with the Excluded Businesses to be
transferred to the Seller or an Affiliate of the Seller prior to the
Closing in accordance with Section 4.14.
Excluded Liabilities: (i) the liabilities, obligations,
commitments, costs and expenses for which the Seller is responsible
pursuant to Section 4.10 and 4.14, (ii) the Expenses described in
Section 9.1(b), and (iii) all liabilities and obligations relating to
the Excluded Indebtedness.
Excluded Subsidiaries: Vyvx, Inc., a Delaware corporation,
WilTel Communications Systems, Inc., a Delaware corporation, WilTel
Financial Corporation, a Delaware corporation, WCS Communications
Systems, Inc., a Delaware corporation, WCS, Inc., a Delaware
corporation, WCS Microwave Services, Inc., a Nevada corporation,
Facilities Communications International, a Texas partnership, and
WilTel Data Network Services, Inc., a Delaware corporation.
Existing Contract: as defined in Section 4.10(f).
Expenses: as defined in Section 9.1(a).
Extraordinary Expenditures: as defined in Section 4.15(d).
Final Allocation: as defined in Section 4.6(g)(iii).
Financial Statements: as defined in Section 3.5(a).
Forum Expenditures: as defined in Section 4.15(d).
Forum Property: the parcels of real property described by
metes and bounds in Exhibit A to the Agreement of Purchase and Sale,
dated August 5, 1994, between TCEP Forum, Inc., as Seller, and WilTel,
Inc., as Purchaser, and more commonly known as "The Forum at Williams
Center" and "Lot A".
GAAP: as defined in Section 3.5(c).
91
<PAGE> 100
Governmental Approval: any consent, approval, authorization,
waiver, permit, grant, franchise, tariff, concession, agreement,
license, ordinance, certificate, exemption, order, registration,
declaration, certification, filing, report or notice consent of, with
or to any Governmental Authority.
Governmental Authority: any nation or government, any state
or other political subdivision thereof; any entity, authority or body
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including,
without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof; or any
court, or legally constituted tribunal or arbitrator.
Hazardous Materials: any substance that: (a) is or contains
friable asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum or petroleum-derived substances or wastes, radon
gas or related materials, (b) requires investigation, removal or
remediation under any Environmental Law, or is defined, listed or
identified as a "hazardous waste" or "hazardous substance" thereunder,
or (c) is toxic, explosive, corrosive, flammable, infectious, radio-
active, carcinogenic, mutagenic, or otherwise hazardous and is
regulated by any Governmental Authority or Environmental Law.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
Income Tax: any Tax computed in whole or in part based on or
by reference to net income and any alternative, minimum, accumulated
earnings or personal holding company Tax (including all interest and
penalties thereon and additions thereto).
Income Tax Return: any return, report, declaration, form,
claim for refund or information return or statement relating to Income
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
92
<PAGE> 101
Indebtedness: as applied to any Person, means, without
duplication, (a) all indebtedness for borrowed money, (b) all
obligations evidenced by a note, bond, debenture, letter of credit,
draft or similar instrument, (c) that portion of obligations with
respect to capital leases that is properly classified as a liability
on a balance sheet in conformity with GAAP, (d) notes payable and
drafts accepted representing extensions of credit, (e) any obligation
owed for all or any part of the deferred purchase price of property or
services, which purchase price is due more than six months from the
date of incurrence of the obligation in respect thereof, and (f) all
indebtedness and obligations of the types described in the foregoing
clauses (a) through (e) directly or indirectly guaranteed or in effect
guaranteed by such Person, or secured by any Lien on any property or
asset owned or held by such Person regardless of whether the
indebtedness secured thereby shall have been assumed by such Person or
is nonrecourse to the credit of such Person.
Indemnification Notice: the written notice, if any, to be
delivered by the Seller to the Buyer, stating that the Seller shall
provide the indemnity set forth in Section 4.17.
Insured Claim: as defined in Section 4.18(a).
Intellectual Property: the United States and foreign
trademarks, service marks, trade names, trade dress, copyrights, and
similar rights, including, without limitation, registrations and
applications to register or renew the registration of any of the
foregoing, the United States and foreign letters patent and patent
applications, and inventions, processes, designs, formulae, trade
secrets, know-how, confidential information, computer software, data
and documentation, and all similar intellectual property rights,
tangible embodiments of any of the foregoing (in any medium including
electronic media).
IRS: the Internal Revenue Service.
Law: all applicable provisions of all (a) constitutions,
treaties, statutes, laws, codes, rules, regulations or ordinances of
any Governmental Authority, (b) Governmental Approvals and (c) orders,
decisions,
93
<PAGE> 102
injunctions, judgments, awards and decrees of any Governmental
Authority.
Leased Real Property: all interests in real property leased
to any member of the Company Group pursuant to the Leases.
Leases: the real property leases, subleases, tenancies and
occupancy agreements pursuant to which any member of the Company Group
is the lessee, sublessee, tenant or occupant of real property.
Licensed Marks: as such term shall be defined in the
trademark License Agreement.
Lien: any mortgage, pledge, deed of trust, hypothecation,
security interest, encumbrance, title retention agreement, license,
easement, covenant, encroachment, interest, option, right of first
offer, negotiation or refusal, lien, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to
such Liens as may arise under any Contract, or (with respect to the
Shares or other equity securities of any member of the Company Group)
any voting trust agreement or proxy.
Litigation: any action, cause of action, claim, demand, suit,
proceeding, citation, summons, subpoena, inquiry or investigation of
any nature, civil, criminal, regulatory or otherwise, in law or in
equity, by or before any arbitrator or Governmental Authority.
Litigation Assumption Agreement: the Litigation Assumption
Agreement, to be dated as of the Closing Date, to be entered into
among the Seller, the Buyer, the Company and WilTel, as contemplated
by and on the terms set forth in that certain letter of even date
herewith among the parties hereto.
Litigation Claims: as defined in Section 4.19.
Losses: as defined in Section 4.8(a).
LTD Employees: as defined in Section 4.10(c)(i).
Material Adverse Effect: any event, occurrence, fact,
condition, change, development or effect that is materially adverse to
the business, operations, results
94
<PAGE> 103
of operations or financial condition of the Company Group taken as a
whole.
Medical Plan Retirees: as defined in Section 4.10(d)(i).
Negotiation Request: as defined in Section 4.19(a).
New Contract: as defined in Section 4.10(f).
1994 Capital Requirements Budget: as defined in Section 4.15.
Non-Company Affiliate: any Affiliate of the Seller other than
a member of the Company Group.
Non-Disclosure Agreement: as defined in Section 4.11(a).
Ordinary Course of Business: the usual, regular and ordinary
course of business of the Company Group, consistent with the past
custom and practice thereof recognizing the rapidly evolving
telecommunications industry.
Organizational Documents: as defined in Section 3.2.
Owned Intellectual Property: as defined in Section 3.9(a).
Owned Real Property: the real property owned by any member of
the Company Group, together with all structures, facilities,
improvements, fixtures, systems, equipment and items of property
presently or hereafter located thereon or attached or appurtenant
thereto or owned by any member of the Company Group and located on
Leased Real Property, and all easements, rights of way, licenses,
rights and appurtenances relating to the foregoing for the benefit of
a member of the Company Group.
Pension Plan: as defined in Section 4.10(g).
95
<PAGE> 104
Permitted Liens: (i) Liens for Taxes not yet due and payable
or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained
in accordance with GAAP, or (ii) Liens that, individually and in the
aggregate, do not and would not reasonably be expected to materially
detract from the value of any of the property or assets of the
Business or materially interfere with the use thereof as currently
used by the Company Group.
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
Pipeline Subsidiaries: shall mean Williams Pipe Line Company,
a Delaware corporation, Northwest Pipeline Corporation, a Delaware
corporation, and Williams Natural Gas Company (formerly named
Northwest Central Pipeline Corporation), a Delaware corporation.
Plan: as defined in Section 3.16(a)(i).
Potential Change in Control: as defined in Section 7. 1(d).
Preclosing Period: as defined in Section 4.15.
Purchase Price: as defined in Section 1.1(b).
Real Property: the Owned Real Property and the Leased Real
Property.
Related Persons: as defined in Section 3.16(a)(i).
Release: any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, leeching, migration, transporting,
placing, pouring, or any similar activity, including without
limitation, the moving of any materials through, into or upon, any
land, soil, surface water, ground water or air, or otherwise entering
into the environment.
Remedial Action: all actions required under applicable
Environmental Laws to (i) clean up, remove, treat or in any other way
remediate any Hazardous Mate-
96
<PAGE> 105
rials; (ii) prevent the Release or threatened Release into the
environment of Hazardous Materials or (iii) perform studies,
investigations, monitoring and closure and post-closure activities
related to any such Hazardous Materials.
Required Amount: as defined in Section 4.15(a).
Required Consents: as defined in Section 5.1(c).
Restricted Parties: as defined in Section 4.2.
Rights of Way: the easements, rights of way and other rights
entitling the Company Group to own, use, operate and maintain the
telecommunications network shown on the map attached as Annex D
hereto, consisting of the Midwest Cross, Western Build, LDX, RCI, East
Link, Lightnet, microwave and North-South California segments.
Sale-Leaseback Financings: those certain transactions pursuant
to the Sale-Leaseback Participation Agreements pursuant to which the
Company sold (a) its entire fiberoptics telecommunications system
comprised of approximately 1,080 route miles from Fairfax, Kansas to
Salt Lake City, Utah, (b) its entire fiberoptics telecommunications
system comprised of approximately 747 route miles from Salt Lake City,
Utah to Los Angeles, California, and (c) its entire digital microwave
telecommunications system comprised of approximately 841 route miles
from Evanston, Wyoming to Portland, Oregon, and the owner participants
leased such systems back to the Company.
Sale-Leaseback Guarantees: those certain guarantees provided
by the Seller to the Sale-Leaseback Parties, pursuant to the
Sale-Leaseback Participation Agreements and the separate guarantees
thereunder, guaranteeing the Company's rental payment and other
obligations under the Sale-Leaseback Financings.
Sale-Leaseback Participation Agreements: (i) the First
Supplemental Participation Agreement, dated as of April 15, 1987,
among Williams Telecommunications Company, as Lessee, The CIT
Group/Factoring Manufacturers Hanover, Inc. ("CIT"), as Owner
Participant, Wilmington Trust Company and William J. Wade, as Owner
Trustee, the purchasers listed in Schedule I thereto, as Pur-
97
<PAGE> 106
chasers and The Connecticut Trust Company, National Association
("CBT"), as Indenture Trustee, (ii) the Participation Agreement, dated
as of April 15, 1987, among Williams Telecommunications Company, as
Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington
Trust Company and William J. Wade as Owner Trustee, the financial
institutions listed in Schedule I thereto as Loan Participants, and
CBT, as Indenture Trustee, and (iii) the Participation Agreement,
dated as of April 16, 1987, among Williams TeleCommunications Company,
as Lessee, Ford Motor Credit Company, as Owner Participant, Wilmington
Trust Company and William J. Wade, as Owner Trustee, the financial
institutions listed in Schedule I thereto, as Loan Participants, and
CBT, as Indenture Trustee,
Sale-Leaseback Parties: the owner participants and the loan
participants under the Sale-Leaseback Participation Agreements.
Scheduled Contracts: means any (i) Contract referred to in
Section 3.11(a)(1)(i), for aggregate revenues based upon an annualized
amount derived from the actual billings dated June 1994 or financial
obligations based upon an annualized amount derived from actual
payments by the Company Group for the six months ending June 30, 1994;
(ii) any Contract that is a consulting agreement that provides for
payments of more than $500,000 in the aggregate or $50,000 annually
based upon an annualized amount derived from actual payments by the
Company Group for the six months ending June 30, 1994, or is for a
term of more than five years; (iii) any Contract referred to in
Section 3.11(a)(3) that will continue to be in affect, or will be
subject to reinstatement, following the Closing; (iv) any Contract
relating to the Rights of Way that (w) covers 100 miles or more of
Rights of Way, (x) covers a portion of the Rights of Way acquired for
a purchase price of $1,000,000 or more, (y) provides for annual
payments of $50,000 or more, or (z) is a Contract to or by which any
member of the Company Group, on the one hand, and any member of the
Seller Group, on the other hand, is a party or otherwise bound or
affected; (v) any Contract referred to in Section 3.11(a)(5)(i) for
aggregate revenues based upon an annualized amount derived from the
actual billings dated June 1994 or financial obligations based upon an
annualized amount derived from the actual payments by
98
<PAGE> 107
the Company Group for the six months ending June 30, 1994; (vi) any
Contract referred to in Section 3.11(a)(8)(i) for aggregate revenues
based upon an annualized amount derived from the actual billings dated
June 1994 or financial obligations based upon an annualized amount
derived from actual payments by the Company Group for the six months
ending June 30, 1994; (vii) any Contract referred to in Section
3.11(a)(9); (viii) any Contract referred to in Section 3.11(a)(10);
and (ix) any Contract with American Telephone & Telegraph Co., MCI
Communications Corp., Sprint Corporation, any Regional Bell Operating
Company ("RBOC"), Cable and Wireless Communications, Inc. or any other
foreign long-distance telephone carrier (other than any non-disclosure
agreement with any such foreign long-distance telephone carrier or any
entrance facilities agreement with any RBOC), that is not included in
any of the foregoing categories.
Scheduled Leases: as defined in Section 3.7(b).
Section 338(h)(10) Election: as defined in Section 4.6(g)(i).
Seller: as defined in the introductory paragraph of this
Agreement.
Seller Disclosure Schedule: as defined in Section 3.1(a).
Seller Group: the Seller and its Affiliates, including (prior
to the consummation of the Closing) the Company Group.
Seller Information: as defined in Section 4.11(b).
Seller Non-Compete Agreement: as defined in Section 4.12.
Seller Parties: as defined in Section 4.11(b).
Seller Representatives: as defined in Section 4.11(b).
Seller Retiree Medical Plans: as defined in Section 4.10(d)(i).
99
<PAGE> 108
Seller's Consolidated Group: as defined in Section 4.6(b)(i).
Seller's Savings Plan: as defined in Section 4.10(c)(iii).
Seller Sponsored Plans: as defined in Section 4.10(b) (i).
Seller Welfare Plans: as defined in Section 4.10(b)(i).
Selling Subsidiary: as defined in the introductory paragraph
of this Agreement.
Shares: as defined in the first recital to this Agreement.
Subsequent Contract: as defined in Section 3.11(b).
Subsequent Financial Statements: the Subsequent Monthly
Financial Statements and the Subsequent Quarterly Financial
Statements.
Subsequent Lease: as defined in Section 3.7(b).
Subsequent Monthly Financial Statements: as defined in Section
4.13.
Subsequent Quarterly Financial Statements: as defined in
Section 4.13.
Subsidiaries: each corporation or other Person in which a
Person owns or controls, directly or indirectly, capital stock or
other equity interests representing more than 50% of the outstanding
voting stock or other equity interests.
Supplemental Agreement: as defined in Section 4.11(a).
Supplemental Approved Budget: as defined in Section 4.15(h).
Tax: any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise,
capital stock, profits,
100
<PAGE> 109
windfall profits, gross receipts, sales, use, value added, transfer,
registration, stamp, premium, excise, customs duties, severance,
environmental (including taxes under section 59A of the Code), real
property, personal property, ad valorem, occupancy, license,
occupation, employment, payroll, social security, disability,
unemployment, workers' compensation, withholding, estimated or other
similar tax, duty, fee, assessment or other similar governmental
charge or deficiencies thereof (including all interest and penalties
thereon and additions thereto).
Tax Dispute Accountants: as defined in Section 4.6(h).
Tax Dispute Resolution Mechanism: as defined in Section 4.6(h).
Tax Return: any return, report, declaration, form,, claim for
refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
Telecommunications Services Agreement: as defined in the
definition of the term "Ancillary Agreements."
Termination Fee: as defined in Section 7.2(b).
Trademark License Agreement: as defined in the definition of
the term "Ancillary Agreements."
Transaction Expenses: as defined in Section 9.1(a).
Treasury Regulations: the regulations prescribed under the
Code.
Wilkens: as defined in Section 4.10(f).
WilTel: WilTel, Inc., a Delaware corporation and a wholly
owned Subsidiary of the Company.
WilTel Network Services: the network services operations of
the Company Group, consisting of the business and operations of the
members of the Company Group other than the Company.
101
<PAGE> 110
ARTICLE IX
MISCELLANEOUS
9.1. Expenses. (a) Except as set forth below in this Section
9.1 or as otherwise specifically provided for in this Agreement, the Seller,
on the one hand, and the Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including but not limited to attorneys', auditors',
brokers', consultants', actuaries, and financing commitment fees) ("Expenses")
in connection with the transactions contemplated hereby and by the Ancillary
Agreements, including the preparation, execution and delivery of this Agreement
and the Ancillary Agreements and performance hereof and thereof, whether or not
the transactions contemplated hereby and thereby shall be consummated (the
foregoing Expenses, collectively, "Transaction Expenses"). Without limiting the
foregoing, the Buyer shall bear any appraisal fees and other Transaction
Expenses incurred by it in developing the allocation of the Purchase Price.
(b) The Seller shall cause any Transaction Expenses incurred
by any member of the Company Group to be fully paid for prior to the Closing
Date, and in no event shall any Transaction Expenses be accrued on the
financial statements of the Company Group as of the Closing Date.
(c) Any Expenses that relate to the preparation and delivery
of the Financial Statements shall be borne by the Seller.
9.2. Public Disclosure. Prior to the Closing, no press release
or other public announcement or communication shall be made or caused to be
made concerning the terms and conditions of this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby by either party
hereto without notice to and consultation with the other party, except for such
disclosures as are required by law or the rules of any national securities
exchange.
9.3. Governing Law and Consent to Jurisdiction. This Agreement
shall be governed in all respects, including as to validity, interpretation and
effect, by the internal laws of, the State of New York, without giving effect
to the conflict of laws rules thereof. The Buyer, the Seller and the Selling
Subsidiary hereby irrevocably (a) submit to the exclusive jurisdiction of the
courts of the State of New York and the Federal courts of the United States of
America located in the State, City and County of New York (and the
102
<PAGE> 111
New York State and Federal courts having jurisdiction over appeals therefrom)
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the Ancillary Agreements and other agreements and
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby and thereby, (b) waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document, that it is not subject thereto or that such an
action, suit or proceeding may not be brought or is not maintainable in said
courts or that the venue thereof may not be appropriate or that this Agreement
or any such Ancillary Agreement or other agreement or document may not be
enforced in or by such courts, and (c) agree not to commence any such action,
suit or proceeding except in, and all claims with respect to such an action,
suit or proceeding shall be heard and determined in, such a New York State or
Federal court. The Buyer, the Seller and the Selling Subsidiary hereby consent
to and grant any such court jurisdiction over the person of such parties and
over the subject matter of any such dispute and agree that mailing of process
or other papers in connection with any such action or proceeding in the manner
provided in Section 9.4 or in such other manner as may be permitted by law,
shall be valid and sufficient service thereof.
9.4. Notices. Any notices or other communications required or
permitted to be given under this Agreement shall be in writing, shall be deemed
to have been given when delivered in person, by telex or telecopier, when
delivered to a recognized next business day courier, or, if mailed, when
deposited in the United States first class mail, registered or certified,
return receipt requested, with proper postage prepaid, addressed as follows or
to such other address as notice shall have been given pursuant hereto:
If to the Seller or the Selling Subsidiary:
The Williams Companies
One Williams Center
Tulsa, Oklahoma 74172
Attn: Senior Vice President,
Corporate Development &
Planning
Telecopy: (918) 588-2334
Confirmation phone no.: (918) 588-2390
103
<PAGE> 112
with a copy to:
The Williams Companies
One Williams Center
Tulsa, Oklahoma 74172
Attn: General Counsel
Telecopy: (918) 588-2334
Confirmation no.: (918) 588-2302
If to the Buyer:
LDDS Communications, Inc.
515 East Amite Street
Jackson, Mississippi 39201
Attn: Chief Financial Officer
Telecopy: (601) 360-8615
Confirmation phone no.: (601) 360-8610
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Meredith M. Brown, Esq.
Telecopy: (212) 909-6836
Confirmation phone no.: (212) 909-6000
9.5. Assignment. This Agreement may not be assigned, by
operation of law or otherwise, without the prior written consent of the other
parties hereto, except that the Buyer may assign its rights under this
Agreement in whole or in part to a wholly owned Subsidiary of the Buyer
(including but not limited to any wholly owned Subsidiary of the Buyer formed
or acquired following the date hereof) or following the Closing to any lender
to the Buyer or any Subsidiary thereof as security for obligations to such
lender, provided that no such assignment by the Buyer of such rights shall
relieve the Buyer of its obligations hereunder.
9.6. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.7. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
104
<PAGE> 113
9.8. Amendment; Waivers. Except as hereinafter provided, this
Agreement may not be amended, modified or discharged and no provision contained
in this Agreement may be waived, except by a writing duly executed by the party
against whom enforcement of the amendment, modification, discharge or waiver is
sought. Any waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the
party granting such waiver in any other respect or at any other time. Neither
the waiver by any of the parties hereto of a breach of or a default under any
of the provisions of this Agreement, nor the failure by any of the parties, on
one or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of
any other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. Except as expressly provided in the
first sentence of Section 4.6(b)(i) and the second sentence of Section 4.8(b)
with respect to the exclusivity of the indemnities provided for in Sections 4.6
and 4.8, the rights and remedies herein provided are cumulative and none is
exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity. The representations, warranties, covenants
and agreements of any member of the Seller Group made in or in connection with
this Agreement or the Ancillary Agreements shall not be affected or deemed
waived by reason of any investigation made or information obtained by or on
behalf of the Buyer (including but not limited to by any of its advisors,
consultants or representatives) or by reason of the fact that the Buyer or any
of such advisors, consultants or representatives knew or should have known that
any such representation or warranty is or might be inaccurate.
9.9. Entire Agreement. This Agreement, the Confidentiality
Agreements and the Ancillary Agreements (when executed and delivered)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
9.10. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
9.11. Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable for any reason, the validity,
legality and enforceabil-
105
<PAGE> 114
ity of the remaining provisions hereof shall not in any way be affected or
impaired thereby.
9.12. Third Parties. Except as provided in Sections 4.6, 4.8
and 4.17 with respect to indemnification of the Buyer Indemnitees hereunder,
nothing contained in this Agreement or in any instrument or document executed
by any party in connection with the transactions contemplated hereby shall
create any rights in, or be deemed to have been executed for the benefit of,
any person or entity that is
106
<PAGE> 115
not a party hereto or a successor or permitted assign of such a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
LDDS COMMUNICATIONS, INC.
By /s/ BERNARD J. EBBERS
Bernard J. Ebbers, President
THE WILLIAMS COMPANIES, INC.
By /s/ KEITH BAILEY
Keith Bailey, President
WTG HOLDINGS, INC.
By /s/ ROY A. WILKENS
Roy A. Wilkens, President
107
<PAGE> 1
EXHIBIT 99
NEWS
THE WILLIAMS COMPANIES, INC. (LOGO) ONE WILLIAMS CENTER * TULSA, OKLAHOMA 74172
- --------------------------------------------------------------------------------
For release: Aug. 22, 1994
For more information contact: Jim Gipson (918) 588-2111 (Media)
Linda Lawson (918) 588-2087 (Investors)
(918) 561-6714 (FAX)
- --------------------------------------------------------------------------------
The Williams Companies agrees to sell WilTel's Network to LDDS for $2.5 billion
TULSA -- The Willams Companies, Inc. and LDDS Communications, Inc. signed
a definitive agreement today for Williams to sell WilTel Network Services, a
division of WilTel, to LDDS for $2.5 billion in cash.
The sale is subject to the expiration of the Hart-Scott-Rodino waiting
period and approvals by the Federal Communications Commission and various state
public service agencies, which are expected by year end.
"We take great pride in the people within our organization who created
such substantial value from what began as just an idea," said Keith E. Bailey,
chairman, president and chief executive officer of Williams. "In an industry
that enjoys significant economies of scale, the combination of LDDS and WilTel
Network Services should be assured of success over time.
"We are satisfied the offer by LDDS represents a full and fair value for
WilTel Network Services," he said. "In the long term, we believe accepting the
offer is in the best interest of our shareholders and employees."
Under the terms of the agreement, Williams will retain WilTel
Communications Systems, a national telecommunications equipment supplier and
service company, and Vyvx, which operates a national video network specializing
in broadcast television applications.
WilTel Network Services, which employs about 2,100 people, operates one of
only four national digital telecommunications networks in the United States.
Bernard J. Ebbers, president and chief executive officer of LDDS, a
Jackson, Miss.-based company that has been one of WilTel's largest customers,
said operations headquarters for WilTel will remain in Tulsa.
"We expect significant operating synergies as a result of combining the
operations of
<PAGE> 2
WilTel and LDDS," Ebbers said. "WilTel is recognized as a leading 'carrier's
carrier,' but is also well recognized for its development of leading edge
technology for larger telecommunications users. This ideally complements our
historical focus on smaller business customers."
Under the terms of the agreement, Williams will continue to operate WilTel
until closing and will provide administrative service support for some period
of time beyond closing. For that reason, there is not expected to be any
immediate impact on the employees of Williams or WilTel Network Services.
Bailey said he expects Williams will quickly redeploy proceeds from the
sale.
"We have identified a number of investments in the energy area that we are
actively pursuing," Bailey said. "We are very optimistic we can continue to
grow earnings for the foreseeable future."
Subject to future adjustments, cash proceeds from the transaction net of
related costs and income taxes are estimated to be in excess of $1.6 billion,
with an after-tax gain estimated to be at least $950 million.
He said the Williams board of directors, which approved the sale earlier
today, also authorized discretionary open-market repurchases of up to $800
million of Williams' common stock over the next 12 months.
"The timing and extent of any repurchases will be dictated by the rate of
our capital redeployment and the price of our stock," Bailey said.
Ebbers said today's announcement, "like our pending acquisition of IDB
Communications Group, Inc., represents a continuation of the company's overall
strategy that includes the acquisition of, or merger with, other significant
telecommunications providers."
He said combining LDDS' and WilTel's networks will result in a 15,000-plus
mile state-of-the-art digital system.
LDDS has secured a $3.25 billion underwritten commitment from a group of
banks managed by NationsBank to both finance this transaction and re-finance
LDDS' existing outstanding indebtedness. The financing is subject to normal
closing conditions.
Williams is listed on the New York and Pacific stock exchanges under the
symbol WMB. LDDS Communications is Nasdaq-listed as LDDS.
For information from LDDS: (601) 360-8602 (Media)
(601) 360-8608 (Investors)
