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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
AMENDMENT TO APPLICATION OR REPORT FILED
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
PRIMARK CORPORATION
(Exact name of registrant as specified in its charter)
1-8260
(Commission File Number)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
December 9, 1997, as set forth on the pages attached hereto:
Item 7. Financial Statements and Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRIMARK CORPORATION
(Registrant)
Date: December 10, 1997 By: /s/ STEPHEN H. CURRAN
---------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Exhibits
Exhibit
Number Description
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<S> <C>
2.1 Stock Purchase Agreement by and among Primark Corporation, Primark
Information Services UK Limited and Litton Industries, Inc. and
Litton U.K. Limited dated as of December 8, 1997.
2.2 Information Technology Services Agreement by and among Primark
Corporation, TASC, Inc. and Litton Industries, Inc.
</TABLE>
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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
by and among
PRIMARK CORPORATION,
PRIMARK HOLDING CORPORATION,
PRIMARK INFORMATION SERVICES UK LIMITED
and
LITTON INDUSTRIES, INC.
and
LITTON U.K. LIMITED
Dated as of December 8, 1997
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TABLE OF CONTENTS
ARCTICLE I SALE OF STOCK
Page
----
Section 1.1. Purchase and Sale of Shares; Entry into
Covenant not to Compete.......................................2
Section 1.2. Time and Place of Closing.....................................3
Section 1.3. Purchase Price Adjustment.....................................3
Section 1.4. Deliveries by the Parent and the Sellers......................5
Section 1.5. Deliveries by the Buyer.......................................6
Section 1.6. Use of the Parent's Name and Logo.............................7
Section 1.7. No Ongoing or Transition Services.............................7
Section 1.8. Intercompany Accounts.........................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OFTHE PARENT AND THE SELLERS
Section 2.1. Organization; Etc.............................................8
Section 2.2. Authority Relative to this Agreement..........................9
Section 2.3. Capitalization...............................................10
Section 2.4. Ownership of Shares..........................................10
Section 2.5. Subsidiaries.................................................11
Section 2.6. Consents and Approvals; No Violations........................12
Section 2.7. Financial Statements.........................................13
Section 2.8. Absence of Undisclosed Liabilities...........................13
Section 2.9. Absence of Certain Changes...................................14
Section 2.10. Litigation...................................................14
Section 2.11. Compliance with Law..........................................14
Section 2.12. Employee Benefit Plans; ERISA................................15
Section 2.13. Taxes........................................................17
Section 2.14. Title, Ownership and Related Matters.........................19
Section 2.15. Leases.......................................................20
Section 2.16. Certain Contracts and Arrangements...........................20
Section 2.17. Intellectual Property........................................21
Section 2.18. Computer Software............................................22
Section 2.19. Brokers; Finders and Fees....................................23
Section 2.20. Permits and Security Clearances..............................23
Section 2.21. Government Contracts.........................................23
Section 2.22. Environmental Matters........................................29
Section 2.23. Insurance....................................................30
Section 2.24. Intercompany Transactions....................................31
Section 2.25. Powers of Attorney...........................................31
Section 2.26. Aggregation..................................................31
Section 2.27. Disclosure...................................................31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1. Organization; Etc.............................................32
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Section 3.2. Authority Relative to this Agreement..........................32
Section 3.3. Consents and Approvals; No Violations.........................33
Section 3.4. Acquisition of Shares for Investment..........................33
Section 3.5. Availability of Funds.........................................33
Section 3.6. Litigation....................................................34
Section 3.7. Investigation by Buyer........................................34
Section 3.8. Brokers; Finders and Fees.....................................34
ARTICLE IV COVENANTS OF THE PARTIES
Section 4.1. Conduct of Business of the Company...........................34
Section 4.2. Access to Information........................................37
Section 4.3. Consents; Cooperation........................................38
Section 4.4. Commercially Reasonable Efforts..............................39
Section 4.5. Public Announcements.........................................39
Section 4.6. Tax Matters..................................................39
Section 4.7. The Buyer's Knowledge of Breach..............................45
Section 4.8. Employees; Employee Benefits.................................46
Section 4.9. Shareholders' Meeting........................................49
Section 4.10. Substitute Guaranty; Indemnity...............................49
Section 4.11. Notification of Certain Matters..............................50
Section 4.12. Prior Knowledge..............................................51
Section 4.13. Supplemental Disclosure......................................51
Section 4.14. Noncompetition...............................................52
Section 4.15. Nondisclosure of Proprietary Data............................53
Section 4.16. Inconsistent Agreements......................................53
Section 4.17. Redemption of Parent Notes...................................54
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ARTICLE V CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
Section 5.1. Conditions to Each Party's Obligations
to Consummate the Stock Purchase.............................54
Section 5.2. Further Conditions to the Parent's and the
Sellers' Obligations.........................................55
Section 5.3. Further Conditions to the Buyer's
Obligations..................................................56
Section 5.4. Materiality of Conditions....................................57
ARTICLE VI TERMINATION AND ABANDONMENT
Section 6.1. Termination..................................................58
Section 6.2. Procedure for and Effect of Termination......................58
ARTICLE VII SURVIVAL AND INDEMNIFICATION
Section 7.1. Survival Periods.............................................60
Section 7.2. Parent's and the Sellers' Agreement to
Indemnify....................................................60
Section 7.3. The Buyer's Agreement to Indemnify...........................62
Section 7.4. Third Party Indemnification..................................65
Section 7.5. No Set-Off...................................................66
Section 7.6. Insurance....................................................66
Section 7.7. No Duplication...............................................67
ARTICLE VIII MISCELLANEOUS PROVISIONS
Section 8.1. Amendment and Modification...................................67
Section 8.2. Extension; Waiver............................................67
Section 8.3. Entire Agreement; Assignment.................................67
Section 8.4. Severability.................................................67
Section 8.5. Notices......................................................68
Section 8.6. Governing Law; Arbitration...................................69
Section 8.7. Descriptive Headings.........................................70
Section 8.8. Counterparts.................................................70
Section 8.9. Fees and Expenses............................................70
Section 8.10. Knowledge....................................................71
Section 8.11. Interpretation...............................................71
Section 8.12. No Third Party Beneficiaries................................71
Section 8.13. No Waivers..................................................72
Section 8.14. Specific Performance........................................72
Section 8.15. Further Assurances..........................................72
Section 8.16. Preservation of and Access to Certain
Information After Closing...................................72
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STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT, dated as of December 8, 1997
(this "Agreement"), is entered into by and among Primark Corporation, a Michigan
corporation (the "Parent"), Primark Holding Corporation, a Delaware corporation
(the "U.S. Seller"), Primark Information Services UK Limited, a company
incorporated under the laws of England and Wales (the "U.K. Seller," and
together with the U.S. Seller, the "Sellers"), Litton Industries, Inc., a
Delaware corporation (the "U.S. Buyer"), and Litton U.K. Limited, a company
organized under the laws of England (the "U.K. Buyer," and collectively with the
U.S. Buyer, the "Buyer").
WHEREAS, the Parent owns all of the outstanding shares of
capital stock of the U.S. Seller; and
WHEREAS, the U.S. Seller owns all of the outstanding shares of
capital stock of TASC, Inc., a Massachusetts corporation (the "U.S. Company");
and
WHEREAS, the U.S. Seller owns the entire issued share capital
of the U.K. Seller; and
WHEREAS, the U.K. Seller owns the entire issued share capital
of The Analytic Sciences Corporation Limited, a company incorporated under the
laws of England and Wales (the "U.K. Company," and together with the U.S.
Company, the "Companies" and each a "Company"); and
WHEREAS, the Sellers desire to sell to the Buyer, and the U.S.
Buyer desires to purchase from the U.S. Seller, 1,000 shares of common stock,
par value $.10 per share (the "U.S. Shares"), representing all of the issued and
outstanding shares of the U.S. Company, and the U.K. Buyer desires to purchase
from the U.K. Seller 316,107 ordinary shares (the "U.K. Shares," and together
with the U.S. Shares, the "Shares"), representing the entire issued share
capital of the U.K. Company, in each case upon the terms and subject to the
conditions set forth herein; and
WHEREAS, concurrently with the execution of this Agreement,
certain executive officers of the Parent and/or the Sellers who own stock in the
Parent have each entered into a voting agreement with the U.S. Buyer
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(collectively, the "Voting Agreements") pursuant to which each such executive
officer has agreed, among other things, to vote his or her shares of the Parent
to approve the acquisition of the Companies by the Buyer; and
WHEREAS, the Parent and the Sellers wish to enter into a
covenant which will prevent them from engaging in certain lines of business for
a certain period of time; and
WHEREAS, the Parent, the U.S. Buyer and the U.S. Company have
agreed to enter into an Information Technology Services Agreement (the "IT
Services Agreement"), the form of which is attached hereto as Exhibit 1,
---------
effective upon the purchase and sale of the Shares, concerning the provision to
the Parent by the U.S. Company of certain information technology services.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained herein,
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK
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Section I.1. Purchase and Sale of Shares; Entry into Covenant
------------------------------------------------
not to Compete. Upon the terms and subject to the conditions of this Agreement,
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at the Closing (as hereinafter defined): (i) the U.K. Seller will sell, convey,
assign, transfer and deliver the U.K. Shares to the U.K. Buyer for
$80,000,000.00; (ii) the U.S. Seller will sell, convey, assign, transfer and
deliver the U.S. Shares to the U.S. Buyer for $267,000,000.00; and (iii) the
Sellers and the Parent will enter into the covenant set forth in Section 4.14,
for which the U.K. Buyer will pay to the U.K. Seller $5,000,000.00, and for
which the U.S. Buyer will pay to the U.S. Seller $10,000,000.00, and for which
the U.S. Buyer will pay to the Parent $70,000,000.00. All amounts to be paid by
the Buyer to the Sellers and the Parent pursuant to this Section 1.1 (as the
same is adjusted as provided below, the "Purchase Price") shall be paid in cash
by wire transfer of immediately available funds to
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an account or accounts designated by the Sellers and the Parent prior to the
Closing. The transactions contemplated by clauses (i) and (ii) of this Section
1.1 are sometimes herein referred to as the "Stock Purchase."
Section I.2. Time and Place of Closing. Upon the terms and
-------------------------
subject to the conditions of this Agreement, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon Street, Boston,
Massachusetts 02108, at 9:00 a.m. (local time) on the first business day
following the date on which all of the conditions to each party's obligations
hereunder have been satisfied or waived, or at such other date, place or time as
the parties may agree. The date on which the Closing occurs and the transactions
contemplated hereby become effective is referred to herein as the "Closing
Date."
Section I.3. Purchase Price Adjustment. (a) The Parent and the
-------------------------
Sellers will prepare consolidated financial statements ("Closing Financial
Statements") of the Companies as of the Closing Date. During the period
following the Buyer's receipt of the Closing Financial Statements from the
Parent and the Sellers, representatives of the Buyer shall have the opportunity,
upon reasonable notice, to inspect the workpapers relevant to the preparation of
the Closing Financial Statements, interview the personnel involved in the
preparation of the Closing Financial Statements, and otherwise observe the
preparation of those workpapers and the Closing Financial Statements. The Parent
and the Sellers will deliver the Closing Financial Statements (including the
calculation of the Adjustment Amount (as defined below)) to the Buyer within 60
days after the Closing Date. If within 120 days following the Closing Date, the
Buyer has not given the Parent and the Sellers notice of its objection to the
Closing Financial Statements (which notice must contain a statement of the basis
of the Buyer's objection), then the "Shareholders' Equity" reflected in the
Closing Financial Statements will be used in computing an amount (which may be a
positive or negative number) equal to (x) "Shareholders' Equity" as of the
Closing Date, minus the balance of the intercompany account(s) as of the Closing
Date and minus all Income Tax liabilities due the Parent or governmental
authorities as of the Closing Date, and minus any cash balance as of the
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Closing Date, minus (y) "Shareholders' Equity" as of September 30, 1997, minus
the balance of the intercompany account(s) as of September 30, 1997 and minus
all Income Tax liabilities due the Parent or governmental authorities as of
September 30, 1997, and minus any cash balance as of September 30, 1997 (the
"Adjustment Amount"). The parties agree that the "Shareholders' Equity" as of
September 30, 1997 minus the balance of the intercompany account(s) as of
September 30, 1997 and minus all Income Tax liabilities due the Parent or
governmental authorities as of September 30, 1997 and minus any cash balance as
of September 30, 1997 is $154,741,299 as calculated in Exhibit 2. If the Buyer
gives such notice of objection, the Buyer, the Parent and the Sellers shall
endeavor in good faith to resolve any disputed items within 20 days after the
Sellers' receipt of the Buyer's notice of objections. If they are unable to do
so, then the issues in dispute will be submitted to a mutually agreeable
nationally known independent accounting firm (the "Accountants") for resolution.
If issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (as defined below) (or its
independent public accountants), and will be afforded the opportunity to present
to the Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties; and (iii) the Buyer and the Sellers will
each bear 50% of the fees of the Accountants for such determination. For
purposes of this Section 1.3, "Shareholders' Equity" means shareholders' equity
set forth on a balance sheet prepared in accordance with the September 30, 1997
Balance Sheet (as defined below).
(b) If during the period from September 30, 1997
through the Closing Date, the Parent and the Sellers pay amounts in excess of
the aggregate Income Taxes of the Companies and their Subsidiaries applicable to
such period and the Buyer receives a benefit as a result of such excess
payments, the Buyer will promptly pay the Parent and the Sellers the amount of
any benefit actually received by the Buyer.
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(c) The "Shareholders' Equity" shall be determined in
accordance with generally accepted accounting principles in the United States
("GAAP"), in a manner consistent with and as provided in the financial
statements identified in Section 2.7, and shall be certified by the chief
financial officer of the Parent as having been prepared consistent with the
provisions of this Section 1.3. The accounting firm selected to resolve any
disputes will be instructed to determine the "Shareholders' Equity" in the same
manner.
(d) On the tenth business day following the final
determination of the Adjustment Amount, if the Adjustment Amount
is a positive number, the Buyer will pay the Adjustment Amount to the Parent,
and if the Adjustment Amount is a negative number, the Parent will pay the
Adjustment Amount to the Buyer. All payments will be made together with interest
at a rate of 6% per annum simple interest based on actual days over a 365-day
year from the Closing Date through the date of payment. Payments must be made in
immediately available funds. Payments to the Buyer or to the Parent must be made
by wire transfer to such bank account as the Buyer or the Parent, as the case
may be, will specify.
Section I.4. Deliveries by the Parent and the Sellers. Subject
----------------------------------------
to the terms and conditions hereof, at the Closing, the Parent and the Sellers
will deliver the following to the Buyer:
(a) Certificates representing the Shares, accompanied by stock
powers duly endorsed in blank or accompanied by duly executed instruments of
transfer;
(b) An executed copy of the IT Services Agreement;
(c) The resignations of all directors and officers of the
Companies or any of their respective Subsidiaries;
(d) Executed copies of the Voting Agreements;
(e) A certificate of the Secretary or an Assistant Secretary
of the Parent and each Seller, dated the Closing Date, setting forth the
resolutions of the
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Boards of Directors of the Parent or such Seller, as the case may be,
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and certifying that such resolutions have
not been amended or rescinded and are in full force and effect;
(f) A good standing certificate and certified charter
documents, dated as of a date reasonably close to the Closing Date, for each
Company and each of its respective Subsidiaries;
(g) An opinion dated as of the Closing Date from legal counsel
to the Parent and the Sellers in the form attached hereto as Exhibit 3; and
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(h) All other documents, instruments and writings required to
be delivered by the Parent and the Sellers at or prior to the Closing Date
pursuant to this Agreement.
Section I.5. Deliveries by the Buyer. Subject to the terms and
-----------------------
conditions hereof, at the Closing, the Buyer will deliver the following to the
Sellers and/or the Parent, as appropriate:
(a) The Purchase Price, in immediately available funds, as set
forth in Section 1.1 hereof;
(b) An executed copy of the IT Services Agreement;
(c) A certificate of the Secretary or an Assistant Secretary
of the Buyer, dated the Closing Date, setting forth the resolutions of the Board
of Directors of the Buyer authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and
certifying that such resolutions have not been amended or rescinded and are in
full force and effect;
(d) An opinion dated as of the Closing Date from legal counsel
to the Buyer in the form attached hereto as Exhibit 4; and
---------
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(e) All other documents, instruments and writings required to
be delivered by the Buyer at or prior to the Closing Date pursuant to this
Agreement.
Section I.6. Use of the Parent's Name and Logo. It is
---------------------------------
expressly agreed that the Buyer is not purchasing, acquiring or otherwise
obtaining any right, title or interest in the name (i) "Primark" or the "globe"
logo (whether alone or in combination with any name, word or other symbol), or
any trade names, trademarks, identifying logos or service marks or employing the
word "Primark" or any variation of any of the foregoing, or (ii) any other marks
owned or used by the Parent and its Subsidiaries, (collectively, the "Parent's
Trademarks"). The Parent acknowledges that the Companies and their Subsidiaries
do not use any of the Parent's Trademarks except ones that are described in
clause (i) above. The Buyer agrees that neither it nor any of its affiliates
shall make any use of, or attempt to register, the Parent's Trademarks from and
after the Closing Date. Without limiting the generality of the foregoing, within
90 days after the Closing Date, the Buyer shall delete all references to the
Parent's Trademarks from all advertising, inventory, stationary, signage and any
other materials.
Section I.7. No Ongoing or Transition Services. Except as
---------------------------------
otherwise agreed to in writing on or before the Closing Date by the Parent
and/or either of the Sellers, on the one hand, and the Buyer, on the other hand
or as set forth in Section 1.7 of the disclosure schedule being delivered by the
Parent and the Sellers to the Buyer concurrently herewith (the "Disclosure
Schedule"), as of the Closing, all accounting, insurance, banking, tax,
personnel, legal, communications and other products and services, provided to
the Companies or any of their respective affiliates, employees or consultants by
the Parent, the Sellers or any of their respective affiliates, including any
agreements or understandings (written or oral) with respect thereto, will
terminate. The Parent and the Sellers agree to cooperate with the Buyer and the
Companies during the change of ownership of the Companies including the
provision by the Parent and the Sellers of such services for a 90 day period
following the Closing as the Buyer shall reasonably request on or prior to the
Closing Date to be compensated at a
7
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customary rate agreed to by the Buyer, the Parent and the Sellers.
Section I.8. Intercompany Accounts. On or prior to the Closing
---------------------
Date, all intercompany accounts between the Companies, on the one hand, and the
Parent, the Sellers and their respective affiliates, on the other hand, other
than those arising from ordinary course arms length transactions between such
parties which are reflected in accounts receivables or accounts payables, shall
be contributed to the capital of the respective Company and otherwise cancelled
and no adjustment shall be made to the Purchase Price as a result of any such
cancellation. In addition, the Sellers shall have the right and do intend, at or
immediately prior to the Closing, to cause the Companies and their respective
Subsidiaries to distribute all cash holdings to the Sellers or their respective
affiliates, by one or more cash dividends and/or other distributions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE PARENT AND THE SELLERS
--------------------------
The Parent and the U.S. Seller, with respect to the U.S.
Company, and the Parent, the U.S. Seller and the U.K. Seller, with respect to
the U.K. Company, hereby each represents and warrants to the Buyer as follows:
Section II.1. Organization; Etc. The Parent and the Sellers
-----------------
are corporations duly organized or incorporated, validly existing and in good
standing under the respective laws of the jurisdiction of their incorporation or
organization. Each Seller has all necessary corporate power and authority to
execute, deliver and perform this Agreement and any related agreements to which
it is a party. Each Company and each of their respective Subsidiaries (a) is
duly organized or incorporated, validly existing and in good standing under the
laws of its jurisdiction of organization, (b) has all requisite corporate power
and authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted, and (c) is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership, operation or leasing of its properties
8
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makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Company Material Adverse
Effect (as hereinafter defined). Section 2.1 of the Disclosure Schedule
correctly sets forth the jurisdiction in which each Company was and is required
to be organized, each jurisdiction in which each Company is qualified or
licensed to do business and the current directors and executive officers of each
Company. True, correct and complete copies of the respective charter documents
of each Company as in effect on the date hereof have been delivered to the
Buyer. Neither Company is a registered or reporting company under the Securities
Exchange Act of 1934, as amended. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which at least a
majority of the securities or other interests having by their terms ordinary
voting power (other than as affected by events of default) to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. As used in this Agreement, the term
"Company Material Adverse Effect" shall mean a material adverse change in, or
effect on, the business, financial condition, results of operations of the
Companies and their respective Subsidiaries, taken as a whole, provided,
--------
however, that the effects of changes that are generally applicable to the
- -------
industries in which the Companies or their respective Subsidiaries operate or to
the United States or the United Kingdom economies generally shall be excluded
from such determination.
Section II.2. Authority Relative to this Agreement. Each of
------------------------------------
the Parent and the Sellers has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the approval of the
Parent's shareholders, to consummate the transactions contemplated hereby and in
any related document. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Boards of Directors of the Parent and the Sellers and all
other requisite corporate action on the part of the Parent and the Sellers and,
except for obtaining the
9
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approval of the Parent's shareholders as contemplated by Section 4.9 hereof, no
other corporate proceedings on the part of the Parent or the Sellers are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
each of the Parent and the Sellers and, subject to approval and adoption of this
Agreement by the Parent's shareholders, assuming this Agreement has been duly
authorized, executed and delivered by the Buyer, constitutes the legally valid
and binding agreement of each of the Parent and the Sellers, enforceable against
each of the Parent and the Sellers in accordance with its terms, except that (a)
such enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (b) enforcement of this
Agreement, including, among other things, the remedy of specific performance and
injunctive and other forms of equitable relief, may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section II.3. Capitalization. Section 2.3 of the Disclosure
--------------
Schedule sets forth the number of issued and outstanding shares of capital stock
of each Company. The Shares represent all of the outstanding capital stock or
issued share capital in the Companies. All of the Shares are validly issued,
fully paid and nonassessable and were issued in conformity with applicable Laws
(as defined below). Except for the Shares, there are not, and at the Closing
there will not be, any existing options, warrants, calls, rights of preemption,
subscriptions or other rights or other agreements or commitments of any
character whatsoever relating to the issued or unissued capital stock or share
capital of the Companies or obligating either Company to issue, transfer or sell
or cause to be issued, transferred or sold any shares of capital stock or issued
share capital of, or other equity interests in, the respective Company or
securities convertible into or exchangeable for such shares or equity interests
or obligating the respective Company to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement or commitment.
Section II.4. Ownership of Shares. Except as set forth in
-------------------
Section 2.4 of the Disclosure Schedule, all
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of the U.S. Shares are owned of record and beneficially by the U.S. Seller, and
all of the U.K. Shares are owned legally and of record and beneficially by the
U.K. Seller, in each case free and clear of all liens, pledges, charges, claims,
security interests or other encumbrances, whether consensual, statutory or
otherwise (collectively, "Liens"). The consummation of the Stock Purchase will
convey to the Buyer good title to the U.S. Shares and to the U.K. Buyer good
title to the U.K. Shares, in each case free and clear of all Liens, except for
those created by the Buyer or arising out of ownership of the Shares by the
Buyer.
Section II.5. Subsidiaries. Except for the Subsidiaries set
------------
forth in Section 2.5 of the Disclosure Schedule, there is no corporation,
partnership, joint venture or other entity in which either Company directly or
indirectly owns any equity or other ownership interest. Set forth in Section 2.5
of the Disclosure Schedule is the number of authorized, issued and outstanding
shares of each of the Subsidiaries and its jurisdiction of incorporation. Except
as set forth in Section 2.5 of the Disclosure Schedule, all the outstanding
shares of capital stock or issued share capital of each of such Subsidiaries are
validly issued, fully paid and nonassessable and were issued in conformity with
applicable Laws, have not been issued in violation of any preemptive or similar
rights, and are owned beneficially and of record by the respective Company
designated in Section 2.5 of the Disclosure Schedule free and clear of any
Liens. There are no outstanding options, warrants, calls, rights or commitments
or any other agreements of any character relating to the sale, issuance or
voting of, or the granting of rights to acquire, any shares of the capital stock
or issued share capital of any such Subsidiary, or any securities or other
instruments convertible into, exchangeable for or evidencing the right to
purchase any shares of capital stock or issued share capital of any of such
Subsidiaries. Section 2.5 of the Disclosure Schedule correctly lists the current
directors and executive officers of each of the Companies' Subsidiaries. True,
correct and complete copies of the respective charter documents of each of the
Companies' Subsidiaries as in effect on the date hereof have been delivered to
the Buyer. No such Subsidiary is a registered or reporting company under the
Exchange Act.
11
<PAGE>
Section II.6. Consents and Approvals; No Violations. Except
-------------------------------------
(i) as set forth in Section 2.6 of the Disclosure Schedule, (ii) for the
approval of the Parent's shareholders, and (iii) for filings, permits,
authorizations, determinations, consents and approvals as may be required under,
and other applicable requirements of, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), Section 721 of the
Defense Production Act of 1950, as amended (the "Exon-Florio Provisions"), and
the National Industrial Security Program Operating Manual (the "NISPOM"),
neither the execution and delivery of this Agreement by the Parent or the
Sellers, nor the consummation by the Parent, the Sellers or the Companies of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificate of incorporation or by-laws of the Parent,
the Sellers, the Companies or any of the Companies' Subsidiaries, (b) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or require any consent under, any indenture, license,
contract, agreement or other instrument or obligation to which the Parent, the
Sellers, the Companies or any of the Companies' Subsidiaries is a party or by
which any of them or any of their respective properties or assets are bound, (c)
violate any order, writ, injunction, decree, statute, rule or regulation
(collectively, "Laws" and, individually, a "Law") applicable to the Parent, the
Sellers, the Companies or any of the Companies' Subsidiaries or any of their
respective properties or assets, (d) require any filing with, or the obtaining
of any permit, authorization, consent or approval of, any governmental or
regulatory authority, domestic or foreign, or (e) result in the imposition of a
Lien on any Company, any of its Subsidiaries, or any of their respective
properties or assets except in the case of clauses (b), (c), (d) and (e) of this
------
Section 2.6 for any such violations, breaches, defaults, rights of termination,
cancellation or acceleration or requirements which, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect and would not reasonably be expected to adversely affect the ability of
the Parent and the Sellers to consummate the transactions contemplated by this
Agreement.
12
<PAGE>
Section II.7. Financial Statements. Section 2.7 of the
--------------------
Disclosure Schedule contains (a) the audited combined balance sheets of the
Companies and their respective Subsidiaries as of December 31, 1996 and the
audited combined statement of operations and statement of cash flows of the
Companies and their respective Subsidiaries for the years then ended and (b) the
unaudited combined balance sheet (the "September 30, 1997 Balance Sheets") of
the Companies and their respective Subsidiaries as of September 30, 1997 and the
unaudited combined statement of operations and statement of cash flows of the
Companies and their respective Subsidiaries for the nine months then ended. Such
balance sheets fairly present in all material respects the financial position of
the Companies and their respective Subsidiaries as of the respective dates
thereof, and such statements of operations fairly present in all material
respects the results of operations of the Companies and their respective
Subsidiaries for the respective periods indicated. All such financial statements
were prepared in accordance with GAAP consistently applied throughout the period
indicated. The Sellers have made available to the Buyer copies of each
management letter delivered to the Sellers, the Parent, any Company or any
Subsidiary of any Company by independent public accountants in connection with
the balance sheets or relating to any review by such accountants of the internal
controls of any Company or any of its respective Subsidiaries during the
five-year period ended September 30, 1997 or thereafter, and have used
reasonable efforts to make available for inspection all reports and working
papers produced or developed by auditors or management in connection with their
examination of financial statements with respect to any Company or any of its
respective Subsidiaries, as well as all such reports and working papers for
prior periods for which any tax liability of any Company or any of its
respective Subsidiaries has not been finally determined or barred by applicable
statutes of limitation. Other than as disclosed in the financial statements of
the U.S. Company, since December 31, 1995, there has been no change in any of
the significant accounting policies, practices or procedures of any Company or
any of its respective Subsidiaries.
Section II.8. Absence of Undisclosed Liabilities. Except (a)
----------------------------------
for liabilities and obligations incurred in the ordinary course of business and
consistent
13
<PAGE>
with past practice since December 31, 1996, and (b) as otherwise disclosed in
Section 2.8 of the Disclosure Schedule, since December 31, 1996 neither Company
nor any of its respective Subsidiaries has incurred any liabilities or
obligations (whether direct, indirect, accrued or contingent) individually or in
the aggregate, that would be required to be reflected or reserved against in a
balance sheet of the respective Company or Subsidiary prepared in accordance
with GAAP as used in preparing the September 30, 1997 Balance Sheets.
Section II.9. Absence of Certain Changes. Except as set forth
--------------------------
in Section 2.9 of the Disclosure Schedule or as otherwise contemplated by this
Agreement, since September 30, 1997, the Companies and their Subsidiaries in the
aggregate have not suffered a Company Material Adverse Effect.
Section II.10. Litigation. Except as set forth in Section 2.10
----------
of the Disclosure Schedule, there is no action, suit, proceeding or governmental
investigation pending or, to the knowledge of the Parent, threatened against the
Parent, the Sellers, the Companies or any of the Companies' Subsidiaries by or
before any court or governmental or regulatory entity, which (a) individually or
in the aggregate, would reasonably be expected to have a Company Material
Adverse Effect, (b) would reasonably be expected to adversely affect the ability
of the Parent and the Sellers to consummate the transactions contemplated
hereby, or (c) involves a claim or potential claim of aggregate liability in
excess of $250,000 against (whether directly or pursuant to obligations to
indemnify other persons), or that enjoins or compels or seeks to enjoin or to
compel any activity by, any Company or any of its respective Subsidiaries.
Section II.11. Compliance with Law. (a) The business of each
-------------------
of the Companies and their Subsidiaries is not being and has not been conducted
in violation of any applicable Law or any order, writ, injunction or decree of
any court or governmental or regulatory entity, except for any such violations
which in the aggregate would not reasonably be expected to have a Company
Material Adverse Effect.
(b) The Companies and their Subsidiaries have all governmental
permits, licenses and authorizations
14
<PAGE>
(collectively, "Permits") which are necessary to own their assets and to operate
their businesses as conducted under all applicable Laws, except for Permits the
failure to have, in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. The Companies and their Subsidiaries have
complied with and are in compliance with the terms of their Permits, except
where the failure to comply, in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect. Except as set forth in Section 2.11
of the Disclosure Schedule, all such Permits are valid and in full force and
effect and will remain so upon consummation of the transactions contemplated by
this Agreement. To the knowledge of the Parent, no suspension, cancellation or
termination of any of such Permits is threatened or imminent that could
reasonably be expected to have a Company Material Adverse Effect.
Section II.12. Employee Benefit Plans; ERISA. (a) Section
-----------------------------
2.12(a) of the Disclosure Schedule sets forth a list of all material employee
benefit plans (including but not limited to plans described in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained by the U.S. Company or by any trade or business, whether or not
incorporated, which together with the U.S. Company would be deemed a "single
employer" within the meaning of Section 4001(b)(15) of ERISA (an "ERISA
Affiliate") for the benefit of employees of the U.S. Company ("Benefit Plans")
and all employment and severance agreements with employees of the U.S. Company
("Employee Agreements"). True and complete copies of all Employee Agreements
have been made available to the Buyer. All material required reports and
descriptions (including Form 5500 Annual Reports) have been filed or distributed
appropriately with respect to each such Benefit Plan.
(b) With respect to each Benefit Plan, except as otherwise set
forth in Section 2.12(b) of the Disclosure Schedule: (i) if intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code"), such plan has
received a determination letter from the Internal Revenue Service stating that
it so qualifies and that its trust is exempt from taxation under Section 501(a)
of the Code; (ii) such plan has been administered in all material respects in
accordance with
15
<PAGE>
its terms and applicable Law; (iii) no breaches of fiduciary duty have occurred
which might reasonably be expected to give rise to material liability on the
part of the U.S. Company; (iv) no disputes are pending, or, to the knowledge of
the Parent, threatened that might reasonably be expected to give rise to
material liability on the part of the U.S. Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) has occurred that might reasonably be expected to give rise to material
liability on the part of the U.S. Company; (vi) all contributions required to be
made to such plan as of the date hereof (taking into account any extensions for
the making of such contributions) have been made in full, and the U.S. Company
and each of its Subsidiaries has otherwise performed in all material respects
its obligations under each Benefit Plan and Employee Agreement; and (vii) all
premiums or other payments if due for all periods ending on or before the
Closing Date have been paid with respect to each such Benefit Plan for which
such payments are required.
(c) Except as set forth in Section 2.12(c) of the Disclosure
Schedule, there are no actions, suits or claims pending or to the knowledge of
the Parent, threatened, including proceedings before the Internal Revenue
Service, the United States Department of Labor, or the United States Pension
Benefit Guaranty Corporation, against any Benefit Plan, Employee Agreement or
any administrator or fiduciary thereof. To the knowledge of the Parent, no facts
exist which could reasonably be expected to give rise to any such actions, suits
or claims contemplated by the preceding sentence, other than benefit claims
arising in the normal course of operation of such Benefit Plan or Employee
Agreement.
(d) Except as set forth in Section 2.12(d) of the Disclosure
Schedule, no Benefit Plan is a "multiemployer pension plan," as defined in
Section 3(37) of ERISA, nor is any Benefit Plan a plan described in Section
4063(a) of ERISA.
(e) Neither the U.S. Company nor any of its ERISA Affiliates
has incurred a "withdrawal" or "partial withdrawal," as defined in Sections 4203
and 4205 of ERISA, from any multi-employer pension plan, which has resulted in
an unpaid liability, or could reasonably be
16
<PAGE>
expected to result in liability, of the U.S. Company or any of its ERISA
Affiliates.
(f) No liability under Title IV of ERISA has been incurred by
the U.S. Company or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the U.S. Company or any
ERISA Affiliate of incurring a material liability under such Title. No Benefit
Plan has incurred an accumulated funding deficiency, as defined in Section 302
of ERISA or Section 412 of the Code, whether or not waived. No Benefit Plan is
subject to Title IV of ERISA. Neither the U.S. Company nor any of its ERISA
Affiliates: (i) have maintained since August 8, 1991 a Benefit Plan that was
subject to Title IV of ERISA; or (ii) are under any obligation, whether
contractual or otherwise, to make any payments, contributions, or other
expenditures with respect to any other benefit plan maintained by any other
person with respect to employees covered by such benefit plan.
(g) Except as set forth in Section 2.12(g) of the Disclosure
Schedule, with respect to each Benefit Plan that is a "welfare plan" (as defined
in Section 3(1) of ERISA), no such plan provides medical or death benefits with
respect to current or former employees of the U.S. Company beyond their
termination of employment (other than to the extent required by applicable law).
(h) Except as set forth in Section 2.12(h) of the Disclosure
Schedule, the Subsidiaries of the U.K. Company neither pay nor are under any
liability to pay to any employee (other than by payment of employer's
contributions under national insurance or social security legislation), any
pension or other benefit on retirement, death or disability or on the attainment
of a specified age or on the completion of a specified number of years of
service.
(i) Except as set forth in Section 2.12(i) of the Disclosure
Schedule, the Subsidiaries of the U.K. Company do not provide any employee
benefits.
Section II.13. Taxes. (a) To the knowledge of the Parent, as
-----
of the Closing Date, the Parent has filed, has caused to be filed or will cause
to be filed, within the times prescribed by law, all federal, state,
17
<PAGE>
local and foreign Tax Returns (as defined below) which are required to be filed
by, or with respect to, the Companies and their respective Subsidiaries. To the
knowledge of the Parent, all such Tax Returns were correct and complete in all
material respects.
(b) To the knowledge of the Parent, each of the Companies, and
their respective Subsidiaries have, within the time prescribed by law, paid (and
until the Closing Date will, within the time prescribed by law, pay) all Taxes,
including all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party
with respect to each of the Companies and their respective Subsidiaries, that
are due and payable (whether or not shown on any Tax Return) on or before the
Closing Date.
(c) To the knowledge of the Parent, there are no material
liens with respect to Taxes upon any of the properties or assets of the
Companies or their respective Subsidiaries.
(d) To the knowledge of the Parent, except as listed in
Section 2.13 of the Disclosure Schedule, neither Company nor any of their
respective Subsidiaries has in effect, as of the date of this Agreement, or will
have in effect, as of the Closing Date, any waiver or extension of any statute
of limitations with respect to Taxes.
(e) To the knowledge of the Parent, except as listed in
Section 2.13 of the Disclosure Schedule, no material federal, state, local or
foreign audits or other administrative proceedings or court proceedings are
presently pending with regard to any Tax Returns.
(f) Neither Company nor any of their respective Subsidiaries
will be a party to any agreement providing for the allocation or sharing of
Taxes as of the Closing Date, and after the Closing Date neither Company nor any
of its respective Subsidiaries shall be bound by or have any liability under any
such agreement.
(g) Neither Company nor any of its respective Subsidiaries has
any liability for the Income Taxes of any person other than the Companies and
their Subsidiaries under Section 1.1502-6 of the Income Tax Regulations and none
of the Companies and their respective Subsidiaries are includible in any
unitary, affiliated, combined or consolidated Income Tax Return (or any similar
provi-
18
<PAGE>
sion of state, local, or foreign law) except as set forth in Section 2.13 of the
Disclosure Schedule.
(h) The affiliated group of corporations (as that term is
defined in Section 1504(a) of the Code) of which the U.S. Company was a member
prior to and as of the Closing Date (the "Affiliated Group") has filed
consolidated federal Income Tax Returns and state Income Tax Returns filed on a
consolidated or combined basis where appropriate for all taxable years falling
within the Pre-Closing Period (as defined below) and during which the U.S.
Company was a member of the Affiliated Group. The Affiliated Group has paid,
withheld or adequately provided for (or will adequately provide for in the
financial statements) all income and franchise tax, levies, or other like
assessments imposed by the United States or any state, county, local or foreign
government, including additions to Tax, interest and penalties thereon.
(i) Neither Company nor any of its respective Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances would obligate it to make any
payments that will not be deductible under Section 280G of the Code (and any
corresponding provision of state or local tax laws) except as set forth in
Section 2.13 of the Disclosure Schedule.
(j) To the knowledge of the Parent, the U.K. Company and its
Subsidiaries are registered and taxable persons for purposes of the United
Kingdom value added tax and have maintained proper records appropriate for the
purposes thereof, and they have not been required to give security to the
Commissioners of HM Customs & Excise and have duly paid or provided for all
value added tax for which they are liable.
Section II.14. Title, Ownership and Related Matters. (a)
------------------------------------
Except as set forth in Section 2.14(a) of the Disclosure Schedule, the Companies
and their Subsidiaries do not own and have not owned any real property.
(b) Each Company and each of its respective Subsidiaries has,
or will as of the Closing have, good title to, or rights by license, lease or
other agreement to use, all properties and assets (or rights thereto) (other
than cash, cash equivalents and securities and except as set forth in Section
2.14(b) of the Disclosure
19
<PAGE>
Schedule) necessary to permit each Company and each of its respective
Subsidiaries to conduct their respective businesses as currently conducted,
except where the failure to have such title or rights would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
Section II.15. Leases. Section 2.15 of the Disclosure Schedule
------
lists, as of the date hereof, all real property leases and subleases for space
occupied by either of the Companies or any of their Subsidiaries (collectively,
the "Leases"). True and complete copies of the Leases and all written amendments
and agreements relating thereto have been delivered to the Buyer. All of the
Leases are valid, binding and enforceable obligations of the U.S. Company, the
U.K. Company or one of their Subsidiaries, as the case may be, in accordance
with their terms, and neither Company nor any of its Subsidiaries, as the case
may be, nor, to the knowledge of the Parent, the other party to any Lease is in
default under such Lease, other than such defaults, if any, which would not,
individually or in the aggregate, have a Company Material Adverse Effect. There
is no action, suit, proceeding or governmental investigation pending or, to the
knowledge of the Parent, threatened that would materially interfere with the
quiet enjoyment of any of the Leases.
Section II.16. Certain Contracts and Arrangements. Except for
----------------------------------
Government Contracts (as defined below) and as set forth in Section 2.16 of the
Disclosure Schedule, as of the date hereof, neither the U.S. Company nor any of
its Subsidiaries is a party to any written (a) employment agreement; (b)
indenture, mortgage, note, agreement or other instrument relating to the
borrowing of money by the U.S. Company or any of its Subsidiaries, as the case
may be (other than intercompany accounts which shall be governed by Section 1.8
hereof), or the guaranty by either of the U.S. Company or any of its
Subsidiaries of any obligation for the borrowing of money; (c) agreement or
contract the loss of which would have a Company Material Adverse Effect;(d)
contract or agreement that has or is expected to generate at least $1,000,000 in
revenue (including unexercised options) to the U.S. Company and its Subsidiaries
for the year ended December 31, 1997; (e) contracts or agreements (excluding
supplier contracts and agreements) having an unexpired term as of the date
hereof (including unexercised options) in excess of two years; (f) contracts or
agree-
20
<PAGE>
ments limiting or restricting the ability of the U.S. Company or any of its
Subsidiaries to compete or otherwise to conduct any business in any manner or
place; (g) grants of power of attorney, agency or similar authority to another
person or entity; (h) contracts or agreements containing a right of first
refusal; (i) contract or agreement to which any affiliate, officer or director
of the Parent, the Sellers, the U.S. Company or its Subsidiaries is party; and
(j) contract or agreement not made in the ordinary course of business
(collectively, "Material Contracts"). All of the Material Contracts are valid,
binding and enforceable obligations of the U.S. Company or its Subsidiaries, as
the case may be, in accordance with their terms. Neither the U.S. Company nor
one of its Subsidiaries, as the case may be, nor, to the knowledge of the
Parent, any other party thereto (i) is in default under any of the aforesaid
agreements, other than such defaults, if any, which would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or (ii) has waived any material rights under any Material Contract (other
than releases executed in the ordinary course of business in connection with
closing contracts or task orders). To the knowledge of the Parent, there are no
written agreements or contracts to which the U.S. Company or any of its
Subsidiaries is a party or by which any of their properties is bound with
respect to which a "show cause" notice, a cure notice or a default notice has
been received or is threatened to be sent to the U.S. Company or any of its
Subsidiaries.
Section II.17. Intellectual Property. (a) Except for the
---------------------
Parent's Trademarks (including those set forth in Section 2.17 of the Disclosure
Schedule), each Company and each of its respective Subsidiaries has, or will as
of the Closing have, ownership of or such rights by license or other agreement
to all trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, copyrights and copyright registrations,
patents and all applications therefor, trade secrets and technology
(collectively, "Intellectual Property") free and clear of any royalty or Lien,
subject in the case of licensed intellectual property to the terms of the
respective license agreements, as are used by the Companies or their
Subsidiaries in the operation of their respective businesses, as currently
conducted, except where the failure to have such ownership, license or right to
use would not, individually or in the aggregate, reasonably be expected to have
a Company Material
21
<PAGE>
Adverse Effect. Section 2.17(a) of the Disclosure Schedule sets forth, as of the
date of this Agreement, a complete list of the U.S. Company's patents and patent
applications and the U.S. Company's trademarks, servicemarks, tradenames and
copyrights which are the subject of registration or application.
(b) Except for proceedings, litigations, and adverse claims
relating to the use of the Parent's Trademarks and as set forth in Section
2.17(b) of the Disclosure Schedule, there are no pending or, to the knowledge of
the Parent, threatened proceedings, litigations or other adverse claims by any
person against either Company or any of its respective Subsidiaries relating to
their respective use of any Intellectual Property. Except as set forth in
Section 2.17(b) of the Disclosure Schedule and except as would not reasonably be
expected to have a Company Material Adverse Effect, none of the Companies nor
any of their Subsidiaries has received any notice or claim that any Intellectual
Property is not valid or enforceable, or of any infringement upon or conflict
with any patent, trademark, servicemark, copyright, tradename, trade secret or
other proprietary right of any third party by the Companies or any of their
Subsidiaries or of any claim by any third party alleging any such infringement
or conflict. Except as set forth in Section 2.17(b) of the Disclosure Schedule
and except as would not, in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, neither the Companies nor any of their
respective Subsidiaries has any knowledge of any infringement by any third party
upon any of the Intellectual Property listed in Section 2.17(b) of the
Disclosure Schedule. Except as set forth in Section 2.17(b) of the Disclosure
Schedule and except as would not, in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, the Companies and their Subsidiaries
will not be infringing any third party's patent, copyright, trademark,
servicemark, tradename, know-how, trade secret or other intellectual property
rights.
Section II.18. Computer Software. Except as set forth in
-----------------
Section 2.18 of the Disclosure Schedule, to the knowledge of the Parent, each
Company and each of its respective Subsidiaries has, or will as of the Closing
have, such ownership of or such rights by license or other agreement to all of
the computer software programs as are used by such Company and or such
Subsidiary as the case may be, in the conduct of their respective businesses as
currently conducted, except where the failure
22
<PAGE>
to have such ownership, license, or right to use would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Section 2.18 of the Disclosure Schedule, all such
licenses and agreements with respect to material software shall remain in full
force and effect after the consummation of the transactions contemplated hereby
upon the same terms and conditions as in effect on the Closing Date immediately
prior to the Closing.
Section II.19. Brokers; Finders and Fees. Except for BT Alex
-------------------------
Brown & Sons Incorporated, whose fees will be paid by the Parent, neither the
Parent, the Sellers nor the Companies nor any affiliate of the foregoing has
employed any investment banker, broker or finder or incurred any liability for
any investment banking fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
Section II.20. Permits and Security Clearances. The Companies
-------------------------------
and their Subsidiaries have all material security clearances necessary to the
conduct of their respective businesses as conducted on the date hereof.
Section II.21. Government Contracts. (a) Section 2.21 of the
--------------------
Disclosure Schedule sets forth a complete and accurate list of all current
Government Contracts to which either Company or any of its Subsidiaries is a
party and which involve aggregate consideration over the anticipated duration of
the contract (including options) in excess of $1,000,000. Except as reflected in
Section 2.21 of the Disclosure Schedule:
(i) to the knowledge of the Parent, all certifications and
representations made by the Companies in the Government Contracts
listed in Section 2.21 of the Disclosure Schedule were complete and
accurate at the time they were made;
(ii) to the knowledge of the Parent, the Companies have
complied fully with all material terms and conditions of the Government
Contracts listed in Section 2.21 of the Disclosure Schedule and have
complied fully with all applicable laws and regulations in performing
those Government Contracts;
23
<PAGE>
(iii) to the knowledge of the Parent, all cost or pricing
data submitted by the Companies in connection with the Government
Contracts listed in Section 2.21 of the Disclosure Schedule was
current, accurate and complete at the time of submission, and at the
time of price agreement, and has been updated as and when required by
applicable law, regulation, or the terms of the Government Contract in
question;
(iv) to the knowledge of the Parent, there have been no
actions or inactions on the part of the Companies, their Subsidiaries
or their respective employees since the award of the Government
Contracts listed in Section 2.21 of the Disclosure Schedule which would
form the basis for any claim or cause of action by or on behalf of the
U.S. Government (as defined below) or the U.K. Government (as defined
below), as the case may be, which could result in any liability of the
U.S. Company or any of its respective Subsidiaries to the U.S.
Government or the U.K. Company or any of its respective Subsidiaries to
the U.K. Government in connection with those Government Contracts;
(v) to the knowledge of the Parent, there have been no
actions or inactions on the part of the U.S. Company, its respective
Subsidiaries or its employees which could result in suspension or
debarment of the U.S. Company or any of its respective Subsidiaries,
and neither the U.S. Company nor any of its Subsidiaries is currently
on the List of Parties Excluded from Procurement Programs;
(vi) to the knowledge of the Parent, there have been no
actions or inactions on the part of the Companies, their Subsidiaries
or their respective employees in connection with Completed Contracts
(as defined below) which could result in any civil or criminal
liability on the part of the U.S. Company or any of its Subsidiaries to
the U.S. Government or the U.K. Company or any of its respective
Subsidiaries to the U.K. Government;
(vii) to the knowledge of the Parent, during the past five
years, no payment has been made by either of the Companies, by any of
their respective Subsidiaries, or by any person or entity authorized to
act on behalf of either of the Companies, or any of their respective
Subsidiaries, to any person in
24
<PAGE>
connection with any Government Contract, in violation of applicable
procurement laws or regulations or in violation of (or requiring
disclosure pursuant to) the Foreign Corrupt Practices Act or any other
Law;
(viii) the cost accounting and procurement systems used by the
Companies and their Subsidiaries with respect to Government Contracts
are in compliance in all material respects with all applicable laws and
governmental regulations;
(ix) to the knowledge of Parent and except as set forth in
Section 2.21 of the Disclosure Schedule, with respect to each
Government Contract: (a) neither the U.S. Government, the U.K.
Government nor any prime contractor or subcontractor to the Companies
has notified either of the Companies, or any of their Subsidiaries,
either orally or in writing, that either of the Companies or any of
their Subsidiaries has breached or violated any applicable law, or any
certification, representation, clause, provision or requirement
pertaining to such Government Contract; (b) no termination for
convenience, termination for default, cure notice or show cause notice
is in effect as of the date hereof pertaining to any Government
Contract; (c) no governmental entity has provided either Company or any
of its Subsidiaries with written notice of any cost incurred by the
Companies or any of their Subsidiaries pertaining to any Government
Contract which has been questioned, challenged or disallowed or has
been the subject of any investigation (other than routine DCAA audits);
and (d) no money due to either Company or any of its Subsidiaries under
any Government Contract has been (or has been attempted to be) withheld
or set off, except for amounts withheld under contracts in the ordinary
course of business;
(x) except as set forth in Section 2.21 of the Disclosure
Schedule: (a) neither of the Companies, none of their Subsidiaries, nor
any of their respective directors, officers or employees is (or during
the last two years has been) under administrative, civil, or criminal
investigation, or indictment by any governmental authority with respect
to any alleged irregularity, misstatement, omission or any other matter
arising under or relating to any Government Contract; and (b) during
the last two years,
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neither of the Companies nor any of their Subsidiaries have conducted
or initiated any internal investigation or made a voluntary disclosure
to the U.S. Government or the U.K. Government with respect to any
alleged irregularity, misstatement, omission or any other matter
arising under or relating to a Government Contract except for matters
relating to routine security violations;
(xi) except as set forth in Section 2.21 of the Disclosure
Schedule, there exist: (a) no outstanding claims against either of the
Companies or any of their Subsidiaries, either by the U.S. Government
or the U.K. Government or by any prime contractor, subcontractor,
vendor or other third party, arising under or relating to any
Government Contract; (b) no material disputes between the U.S. Company
(or any of its Subsidiaries and the U.S. Government under the Contract
Disputes Act or any other Federal statute or between the U.S. Company
(or any of its Subsidiaries and any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract; and (c) no
material disputes between the U.K. Company (or any of its Subsidiaries
and the U.K. Government or between the U.K. Company (or any of its
Subsidiaries and any prime contractor, subcontractor or vendor arising
under or relating to any Government Contract;
(xii) neither Company, none of their Subsidiaries, nor any of
their respective directors, officers or employees is (or during the
last two (2) years has been) suspended or debarred from doing business
with either the U.S. Government or the U.K. Government or is (or during
such period was) the subject of a finding of nonresponsibility or
ineligibility for U.S. Government or U.K. Government contracting.
(b) Except as disclosed in Section 2.21 of the Disclosure
Schedule, neither Company nor any of its Subsidiaries has submitted any Bid
relating to its business which is currently outstanding and which, if accepted,
would result in a Government Contract where the volume of purchases of
materials, supplies, goods, services, equipment or other assets from such
Company or Subsidiary in connection with its business under any such resulting
Government Contract could reasonably be ex-
26
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pected to exceed $1,000,000. Section 2.21(b) of the Disclosure Schedule
identifies each such Bid.
(c) Section 2.21 of the Disclosure Schedule sets forth a list
and description of each settlement agreement between either Company or any of
its Subsidiaries and the U.S. Government or the U.K. Government which will have
a binding effect on the Buyer after the Closing Date, and under which either
Company or any of its Subsidiaries had material underperformed obligations.
(d) To the knowledge of the Parent, except as set forth in
Section 2.21 of the Disclosure Schedule or as set forth or reserved against in
the financial statements identified in Section 2.7, no Loss Contract exists with
respect to any Government Contracts or other contracts to which any Company or
any of its Subsidiaries is a party or with respect to any Bids (as defined
below). Those Government Contracts, contracts or Bids for which a Loss Contract
is not deemed to exist because, after consideration of existing reserves, the
sales price therefor is equal to or less than $100,000 less than the sum of the
cost incurred to date and the expected cost to complete, with all costs
determined in accordance with GAAP on a basis consistent with prior periods,
would not, in the aggregate, reasonably be expected to have a Company Material
Adverse Effect. For purposes of this Agreement, "Loss Contract" shall mean a
contract or Bid, after consideration of existing reserves, the sales price
therefor is more than $100,000 less than the sum of the cost incurred to date
and the expected cost to complete, with all costs determined in accordance with
GAAP on a basis consistent with prior periods. The Buyer acknowledges that in
making the representation in this subparagraph (d), the Parent's knowledge is
based on information known on the date this representation is made; that it may
be difficult to determine profitability of contracts, such as fixed price
contracts, until such contracts are substantially completed; and that this
representation does not constitute a guarantee of profitability for any
particular contract. Nothing in the preceding sentence relieves the Parent and
the Sellers from the representation that the determination as to whether a Loss
Contract exists is to be made in accordance with GAAP on a basis consistent with
prior periods.
(e) Except as would not have a Company Material Adverse
Effect, all personal property, equipment and
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fixtures loaned, bailed or otherwise furnished to either Company or any of its
Subsidiaries by or on behalf of the U.S. Government or the U.K. Government that
are or should be in the possession of such Company or any such Subsidiary
("Customer-Furnished Items") are in good state of maintenance and repair, have
been regularly and appropriately maintained and repaired in accordance with all
contractual, legal and regulatory requirements and, unless returned to the U.S.
Government or the U.K. Government, shall be in possession of such Company or
such Subsidiary on the Closing Date. Except as would not have a Company Material
Adverse Effect, each Company and each of its Subsidiaries has complied in all
material respects with all of its obligations relating to the Customer-Furnished
Items, and upon the return thereof, would have no liability to the U.S.
Government or the U.K. Government with respect thereto. To the knowledge of the
Parent, the Companies and their Subsidiaries have complied in all material
respects with their obligations to keep and maintain records required under
regulations of the U.S. Government and the U.K. Government.
(f) Section 2.21 of the Disclosure Schedule sets forth the backlog of
the Companies and their Subsidiaries as of September 30, 1997 together with the
dollar amount of the backlog that is characterized as "funded" in accordance
with the policies and procedures of the Companies and their Subsidiaries
described in such Section.
(g) For purposes of this Section 2.21, the term "U.S. Government"
means any agency, division, instrumentality, subdivision, audit group, or
procuring office of the federal government, including the employees or agents
thereof; the term "U.K. Government" means any agency, division, instrumentality,
subdivision, audit group, or procuring office of the federal government,
including the employees or agents thereof; the term "Government Contract" means
any prime contract, subcontract, basic ordering agreement, letter contract,
purchase order, delivery order, teaming agreement or arrangement, joint venture,
change order, Bid or other legally binding commitment of any kind, including all
amendments, modifications and options thereunder or relating thereto, between
the U.S. Company or any of its Subsidiaries and either the U.S. Government or
any prime contractor or subcontractor of the U.S. Government currently in force,
or between the U.K. Company or any of
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its Subsidiaries and either the U.K. Government or any prime contractor of the
U.K. Government currently in force; the term "Completed Contracts" means
Government Contracts which expired, were terminated or for which final payment
was received within the three years preceding the date of this Agreement; and
the term "Bid" shall mean any quotation, bid or proposal made by the Parent, the
Sellers, the Companies or their Subsidiaries that, if accepted or awarded, would
lead to a contract with the U.S. Government for the design, manufacture and sale
of products or the provisions of services by the Companies or their
Subsidiaries.
Section II.22. Environmental Matters. (a) Except as set forth in
---------------------
Section 2.22 of the Disclosure Schedule and except as would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect, (i) each of the Companies and each of their Subsidiaries is in
compliance with all applicable environmental Laws, (ii) the Companies and their
Subsidiaries have obtained all permits, licenses and other authorizations that
are required under applicable Laws relating to the protection of the
environment, and (iii) the Companies and their Subsidiaries are in compliance
with the terms and conditions under which such permits, licenses and other
authorizations were issued or granted.
(b) Except as set forth in Section 2.22(b) of the Disclosure Schedule
and except as could not reasonably be expected to have a Company Material
Adverse Effect, (i) none of the Companies nor any of their Subsidiaries has
generated, used, transported, treated, stored, released or disposed of, or has
suffered or permitted anyone else to generate, use, transport, treat, store,
release or dispose of any Hazardous Substance (as defined below) in violation of
any Laws; (ii) there has not been any generation, use, transportation,
treatment, storage, release or disposal of any Hazardous Substance in connection
with the conduct of the business of any Company or any of its Subsidiaries or in
connection with the use of any current or former property or facility of any
Company or any of its Subsidiaries, which has resulted in a release or a
disposal into the environment of any Hazardous Substance or which release or
disposal which has created or might reasonably be expected to create any
condition or liability under any Laws or which would require investigation by,
reporting to or notification of any governmental entity; (iii) no asbestos or
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<PAGE>
polychlorinated biphenyl or underground storage tank is or has been contained in
or located at any facility of any Company or any of its Subsidiaries; and (iv)
any Hazardous Substance handled or dealt with in any way in connection with the
businesses of the Companies or their Subsidiaries, whether before or during the
Sellers' ownership thereof, has been and is being handled or dealt with in all
respects in compliance with applicable Laws. "Hazardous Substances" shall mean
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," oil, pollutant or contaminant or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
radioactivity, carcinogenicity, reproductive toxicity or "EP toxicity."
Section II.23. Insurance. The Companies and their Subsidiaries are,
---------
and at all times during the past five years have been, insured with reputable
insurers against all risks normally insured against by companies in similar
lines of business of a similar size, except for professional liability
insurance. Section 2.23 of the Disclosure Schedule sets forth a list of the
insurance coverage for the Companies and their Subsidiaries in effect as of the
date of this Agreement. None of the insurance carriers listed in Section 2.23
of the Disclosure Schedule are related to or affiliated with the Parent, either
Seller, the Companies or the Companies' Subsidiaries. None of the Companies nor
any of their Subsidiaries is in default under any of its insurance policies.
All insurance policies maintained by the Companies and their Subsidiaries will
remain in full force and effect and may reasonably be expected to be renewed on
comparable terms following consummation of the transactions contemplated by this
Agreement (subject to such entities' continuing compliance with the applicable
terms thereof and any right of insurers to terminate without cause). None of
the Parent, any Seller, any Company or any of the Companies' Subsidiaries has
received notice or other indication from any insurer or agent of any intent to
cancel or not so renew any of such insurance policies. Each of the Companies
and each of their Subsidiaries has complied with and implemented all outstanding
(i) requirements of and recommendations of any insurance company that has issued
a policy to it and (ii) requirements and recommendations of the Board of Fire
Underwriters or any other body exercising similar
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<PAGE>
functions or any governmental entity with respect to any such insurance policy.
Section II.24. Intercompany Transactions. Except as set forth in
-------------------------
Section 2.24 of the Disclosure Schedule, (x) neither Company nor any of its
Subsidiaries has engaged in any transaction with the Parent, either Seller or
any of their affiliates, (y) neither Company nor any of its Subsidiaries has any
liabilities or obligations to the Parent or either Seller or any of their
affiliates and (z) neither the Parent nor either Seller nor any of their
affiliates has any obligations to either Company or any of its Subsidiaries.
The consummation of the transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment arising or becoming due from either Company
or any of its Subsidiaries or the successor or assign of any thereof to the
Parent or either Seller or any of their affiliates.
Section II.25. Powers of Attorney. There are no outstanding powers
------------------
of attorney executed on behalf of either of the Companies or any of their
respective Subsidiaries.
Section II.26. Aggregation. The imperfections, defects, actions,
-----------
orders, defaults, liabilities, inaccuracies and other items omitted from
disclosure in connection with the representations and warranties made in
Sections 2.1 through 2.27 on grounds of immateriality, failure to have a
material adverse effect or failure to constitute a Company Material Adverse
Effect do not, taken as a whole, constitute a Company Material Adverse Effect.
Section II.27. Disclosure. Any information disclosed in one Section
----------
of the Disclosure Schedule shall be deemed to be disclosed in all Sections of
the Disclosure Schedule but only if such deemed disclosure is readily apparent
based on the disclosure in such other Section. The disclosure of any
information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Parent and the Sellers in this Agreement or that it
is material, nor shall such information be deemed to establish a standard of
materiality.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby represents and warrants to each of the Parent and the
Sellers as follows:
Section III.1. Organization; Etc. The Buyer (a) is duly organized,
------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own, lease and
operate all of its properties and assets and to carry on its business as now
being conducted, and (c) is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Buyer Material Adverse Effect (as hereafter defined). As used
in this Agreement, the term "Buyer Material Adverse Effect" shall mean an event,
change or circumstance which would adversely affect the ability of Buyer to
consummate the transactions contemplated hereby.
Section III.2. Authority Relative to this Agreement. The Buyer has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Buyer and all other requisite corporate action on the part of
the Buyer. This Agreement has been duly and validly executed and delivered by
the Buyer and, assuming this Agreement has been duly authorized, executed and
delivered by the Parent and the Sellers, constitutes a valid and binding
agreement of the Buyer, enforceable against the Buyer in accordance with its
terms, except that (a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally and
(b) enforcement of this Agreement, including, among other things, the remedy of
specific performance and injunctive and other forms of equitable relief, may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
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Section III.3. Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, determinations, consents and approvals as may
be required under, and other applicable requirements of, the H-S-R Act, the
Exon-Florio Provisions and the NISPOM, neither the execution and delivery of
this Agreement by the Buyer nor the consummation by the Buyer of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificate of incorporation or by-laws of the Buyer,
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or require any consent under,
any indenture, license, contract, agreement or other instrument or obligation to
which the Buyer or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound, (c) violate any
order, writ, injunction, decree or Laws applicable to the Buyer, any of its
subsidiaries or any of their respective properties or assets, (d) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any governmental or regulatory authority, domestic or foreign, or (e) result
in the imposition of a Lien on the Buyer or any of its properties or assets
except in the case of clauses (b), (c), (d) and (e) of this Section 3.3 for any
- ------
such violations, breaches, defaults rights of termination, cancellation or
acceleration or requirements which, individually or in the aggregate, would not
reasonably be expected to have a Buyer Material Adverse Effect.
Section III.4. Acquisition of Shares for Investment. Each of the
------------------------------------
U.S. Buyer and the U.K. Buyer is acquiring the Shares for investment and not
with a view toward, or for sale in connection with, any distribution thereof,
nor with any present intention of distributing or selling such Shares. Each of
the U.S. Buyer and the U.K. Buyer agrees that the Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities laws, except pursuant to
an exemption from such registration under the Securities Act and such state
securities laws.
Section III.5. Availability of Funds. The Buyer currently has
---------------------
sufficient immediately available
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<PAGE>
funds in cash or cash equivalents and will at the Closing have sufficient
immediately available funds, in cash, to pay the Purchase Price and to pay any
other amounts payable pursuant to this Agreement and to effect the transactions
contemplated hereby.
Section III.6. Litigation. There is no claim, action, suit,
----------
proceeding or, to the knowledge of the Buyer, governmental investigation pending
or, to the knowledge of the Buyer, threatened against the Buyer or any of its
subsidiaries by or before any court or governmental or regulatory authority
which, individually or in the aggregate, would reasonably be expected to have a
Buyer Material Adverse Effect.
Section III.7. Investigation by Buyer. The Buyer has conducted its
----------------------
own independent review and analysis of the business, operations, assets,
liabilities, results of operations, financial condition, software, technology
and prospects of the Companies and their respective Subsidiaries and
acknowledges that the Buyer has been provided access to the personnel,
properties, premises and records of the Companies and their respective
Subsidiaries for such purpose. In entering into this Agreement, the Buyer has
relied solely upon its own investigation and analysis and the representations
and warranties contained herein.
Section III.8. Brokers; Finders and Fees. Except for Goldman, Sachs
-------------------------
& Co. whose fees will be paid by the Buyer, neither the Buyer nor any of its
affiliates has employed any investment banker, broker or finder or incurred any
liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE IV
COVENANTS OF THE PARTIES
------------------------
Section IV.1. Conduct of Business of the Company. During the period
----------------------------------
from the date of this Agreement to the Closing Date, the Parent and the U.S.
Seller will cause the U.S. Company and each of the U.S. Company's Subsidiaries,
and the Parent and the Sellers will cause the U.K. Company and each of the U.K.
Company's Subsidiaries, in each case, to conduct its
34
<PAGE>
business and operations in the ordinary course consistent with past practice to
preserve the business of each of the Companies and their Subsidiaries and to
preserve the goodwill of customers, suppliers and others having business
relations with the Companies and their Subsidiaries. Without limiting the
generality of the foregoing, the Parent and the U.S. Seller will cause the U.S.
Company and each of the U.S. Company's Subsidiaries, and the Parent and the
Sellers will cause the U.K. Company and each of the U.K. Company's Subsidiaries,
in each case, not to, prior to the Closing Date, without the prior consent of
the Buyer:
(a) Amend its certificate of incorporation or by-laws or articles of
association;
(b) Acquire or dispose of any property or assets other than in the
ordinary course of business;
(c) Enter into any employment, severance or similar contract or adopt
any new, or amend any existing, employee benefit plan or agreement, or increase
any compensation payable to officers or employees other than in the ordinary
course of business;
(d) Incur any indebtedness for borrowed money other than from the
Parent or the Sellers or pursuant to any credit agreement which has been
disclosed to the Buyer, issue any debt securities or assume, guarantee or
endorse the obligations of any other persons other than in the ordinary course
or mortgage or encumber any of their respective properties or assets other than
immaterial Liens which do not restrict use or detract from value;
(e) Take any action that would cause any of the representations or
warranties of the Parent and the Sellers to be untrue;
(f) Except as required by their terms, amend, terminate or
renegotiate any Material Contract or any Government Contract or default (or take
or omit to take any action that, with or without the giving of notice or passage
of time, would constitute a default) in any of its obligations under any
Material Contract or any Government Contract or enter into any new Material
Contract or any new Government Contract or take any action that would jeopardize
the continuance of its material supplier or customer relationships;
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<PAGE>
(g) Terminate, amend or fail to renew any existing insurance coverage
other than in the ordinary course of business;
(h) Terminate or fail to renew or preserve any material Permits;
(i) Make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee or stockholder or any of
their respective associates or affiliates other than in the ordinary course of
business;
(j) Other than cash dividends and other than the settlement of
intercompany accounts in each case as contemplated by Section 1.8, declare,
issue, make or pay any dividend or other distribution of assets, whether
consisting of money, other personal property, real property or other thing of
value, to its shareholders, or split, combine, dividend, distribute or
reclassify any shares of its equity securities or authorize for issuance, issue
or sell any additional shares of capital stock or any securities or obligations
convertible into shares of capital stock or issue or grant any option, warrant
or other right to purchase any shares of capital stock;
(k) From and after the date hereof, (i) make any capital expenditures
individually in excess of $250,000 or (ii) make or commit to make capital
expenditures in excess of $2,000,000 in the aggregate;
(l) Dispose of or permit to lapse any rights to the use of any
Intellectual Property or dispose of or disclose any Intellectual Property not a
matter of public knowledge;
(m) Make any Tax election or make any change in any method or period
of accounting or in any accounting policy, practice or significant procedure;
(n) Merge or consolidate with, or purchase or agree to purchase all
or substantially all of the assets of, or otherwise acquire, any other business
entity; or
(o) Agree or commit to take any of the foregoing actions.
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<PAGE>
Section IV.2. Access to Information. (a) To the extent permitted by
---------------------
applicable Law and applicable national security regulations and restrictions,
from the date of this Agreement to the Closing, the Parent and the Sellers will
cause the Companies and the Companies' respective Subsidiaries to (i) give the
Buyer and its authorized representatives access to all books, records,
personnel, offices and other facilities and properties of the Companies, the
Companies' respective Subsidiaries and their accountants as well as all
Government Contracts of the Companies which have organizational conflict of
interest or other similar provisions that would restrict or preclude the Buyer
from providing products or services to any governmental entity or supplier
thereto, (ii) permit the Buyer to make such copies and inspections thereof as
the Buyer may reasonably request, (iii) cause the Companies' and the Companies'
respective Subsidiaries' officers and employees to furnish the Buyer with such
financial and operating data and other information with respect to the business
and properties of the Companies and the respective Company's Subsidiaries as the
Buyer may from time to time reasonably request, and permit the Buyer and its
representatives access to the business plans for the Companies, (iv) permit the
Buyer to conduct or cause to be conducted on any real property of the Companies
or any of their Subsidiaries such soils and geological tests and environmental
inspections, audits and tests (including the taking of soils and ground water
samples) and such structural and other physical inspections as the Buyer shall
deem necessary or useful in connection with the Stock Purchase, and (v) permit
the Buyer to discuss the businesses of the Companies and their Subsidiaries with
their respective directors, officers, employees, accountants and counsel as the
Buyer considers necessary or appropriate for the purposes of familiarizing
itself with such businesses, obtaining any necessary approvals of or permits for
the transactions contemplated by this Agreement and conducting an evaluation of
the organization and business of the Companies and their Subsidiaries, and
permit the Buyer to discuss the businesses of the Companies and their
Subsidiaries with their suppliers, customers and creditors as required by law or
as mutually agreed to by the Buyer and the Parent for the purpose of obtaining
necessary approvals of the transactions contemplated by this Agreement,
provided, however, that any such access shall be conducted at the Buyer's
- -------- -------
expense, at a reasonable time, under
37
<PAGE>
the supervision of the Parent, the U.S. Seller, the U.K. Seller, the U.S.
Company, the U.K. Company, the U.S. Company's Subsidiaries, the U.K. Company's
Subsidiaries or their respective personnel and in such a manner as reasonably to
maintain the confidentiality of this Agreement and the transactions contemplated
hereby and not to interfere unreasonably with the operation of the business of
the Parent, the Sellers, the Companies and the respective Company's
Subsidiaries.
(b) All such information and access shall be subject to the terms and
conditions of the letter agreement (the "Confidentiality Agreement"), between
the Buyer and the Parent, dated September 17, 1997.
Section IV.3. Consents; Cooperation. (a) Each of the Parent, the
---------------------
Sellers and the Buyer shall, and the Parent and the Sellers shall cause each of
the Companies and their Subsidiaries to, cooperate, and use its commercially
reasonable efforts, to make all filings and obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties necessary to consummate the transactions
contemplated by this Agreement, including under the H-S-R Act, the Exon-Florio
Provisions and the NISPOM. In addition to the foregoing, the Parent shall
obtain a release of any Liens on the Shares and the shares of capital stock of
the Companies' respective Subsidiaries as well as a release of any Liens on the
Intellectual Property assets of the Companies and their Subsidiaries. In
addition to the foregoing, the Buyer agrees to provide such assurances as to
financial capability, resources and creditworthiness as the Buyer may deem
reasonably necessary to acquire the approval of any third party whose consent or
approval is sought hereunder.
(b) To the extent permitted by applicable law, including applicable
national security regulations and restrictions and regulations pertaining to
classified information, each of the parties hereto shall, in connection with the
efforts referenced in Section 4.3(a) to obtain all requisite authorizations and
approvals for the consummation of the Stock Purchase, use its commercially
reasonable efforts to (i) keep the other parties, to the extent authorized by
applicable national security regulations, informed in all material respects of
any material communication received by such party from, or given by such party
to, any governmental or regulatory authority
38
<PAGE>
and of any material communication received or given in connection with any
proceeding by a private party, in each case regarding the Stock Purchase and
(ii) permit the other parties, to the extent authorized by national security
regulations, to review any material communication given by it to, and consult
with each other in advance of any meeting or conference with, any governmental
or regulatory authority or, in connection with any proceeding by a private
party, with any other person, give the other parties the opportunity to attend
and participate in such meetings and conferences.
Section IV.4. Commercially Reasonable Efforts. Each of the Parent,
-------------------------------
the Sellers and the Buyer shall cooperate, and use its commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
Section IV.5. Public Announcements. The Parent and the Buyer shall
--------------------
consult with each other prior to issuing any press release with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release prior to such consultation unless required by law.
Section IV.6. Tax Matters. (a) The Parent will prepare and file, or
-----------
cause to be prepared and filed, Income Tax Returns of, or which include, the
Companies and their respective Subsidiaries with respect to any Pre-Closing
Period. In order to assist the Parent in the preparation of all Income Tax
Returns that the Parent is required to prepare, the Buyer will prepare (or cause
the Companies to prepare in accordance with prior practices) and deliver to the
Parent, as soon as reasonably practical after their receipt of a request
therefor from the Parent, all data (including but not limited to the annual tax
reporting package) regarding the Companies and their respective Subsidiaries
reasonably requested by the Parent that is necessary to prepare any Income Tax
Return and properly report the operations of the Companies and their respective
Subsidiaries thereon. The Buyer will prepare and file, or cause to be prepared
and filed, Income Tax Returns of, or which include, the Companies and their
respective Subsidiaries with respect to any Post-Closing Period (as defined
below).
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(b) The Parent will pay or cause to be paid, for all Pre-Closing
Periods (i) all Income Taxes of the Companies and their respective Subsidiaries,
(ii) Income Taxes of the Affiliated Group and (iii) all Taxes (other than Income
Taxes) of the Companies and their respective Subsidiaries to the extent not
adequately reserved for on the Closing Financial Statements. The Buyer will pay
or cause to be paid, all Taxes of the Companies and their respective
Subsidiaries for all taxable periods which do not constitute Pre-Closing
Periods. In the case of a Straddle Period of the Companies and their respective
Subsidiaries, Income Taxes for the entire taxable period shall be allocated to a
deemed Pre-Closing Period using an interim closing-of-the-books method assuming
that the deemed Pre-Closing Period ended as of the close of business on the
Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis shall be apportioned on a per diem basis, real
property taxes shall be allocated in accordance with Section 164(d) of the Code,
and allowable tax deductions attributable to payments made by the Companies and
their respective Subsidiaries which amounts are allocable to the Parent shall be
allocated to the Pre-Closing Period.
(c) The Buyer will prepare and file, or cause to be prepared and
filed, all Tax Returns required to be filed by the Companies and their
respective Subsidiaries for Straddle Periods. The Buyer will notify the Parent
of the Buyer's calculation of the Parent's share of the Taxes of the Companies
or their respective Subsidiaries for any Straddle Period and provide to the
Parent a copy of the Tax Return and the calculation of the split of the Tax
liability of the Straddle Period between the Buyer and the Parent (the
"Statement") no later than 30 days before the due date (including Extensions)
for filing such Tax Return. The Buyer and the Parent will attempt to resolve in
good faith any disagreement arising out of any Straddle Period Tax Return and/or
the Statement. If any such dispute is not resolved, the matter will be resolved
in accordance with Section 4.6(l) of this Agreement.
(d) The Parent and the Buyer will not make an election under Section
338 of the Code (or any similar provision of the law of any country or Tax
jurisdiction) with respect to the sale of the Shares of the U.S. Company
pursuant to this Agreement. The Buyer in its sole discretion will decide
whether to make an election under Section 338 of the Code (or any similar
provision of the
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law of any country or Tax jurisdiction) with respect to the sale of the Shares
of the U.K. Company pursuant to this Agreement.
(e) The Buyer and Sellers agree to file all Tax Returns in
conformance with the purchase price allocation specified in Section 1.1 of this
Agreement.
(f) The Buyer will pay or reimburse the Parent for all sales, use,
transfer, stamp, conveyance, value added or other similar Taxes, duties, excise
or governmental charges imposed by any Tax jurisdiction, and all recording fees,
filing fees, notarial fees and other similar costs with respect to the transfer
of the Shares; provided that the Parent will pay all Income Taxes of the Parent
--------
and the Sellers attributable to either the Stock Purchase or any other receipt
by the Parent or the Sellers of any amounts pursuant to Section 1.1.
(g) The Sellers and the Buyer hereby agree that any amount of Taxes
paid by a Seller to a Buyer constitutes a reduction in the Purchase Price of the
Shares of the Company to which such payment relates. The Sellers and the Buyer
hereby agree that any amount of Taxes paid by a Buyer to a Seller constitutes an
increase in the Purchase Price of the Shares of the Company to which such
payment relates. For purposes of this provision, the value of the common stock
of the Parent (less exercise price) delivered to employees of the Companies and
their respective Subsidiaries after the Closing Date upon the exercise of Parent
stock options shall be considered a payment by the Sellers to the Buyer and the
corresponding compensation deduction may be taken by the Companies and their
respective Subsidiaries for the Post-Closing Period.
(h) The Buyer will promptly notify the Parent in writing upon receipt
by the Buyer of notice of any pending or threatened federal, state, local, or
foreign Tax audits or assessments of the Companies or their respective
Subsidiaries related to a Pre-Closing Period or Straddle Period and any pending
or threatened federal, state, local or foreign Tax audits or assessments of the
Buyer or any affiliate of the Buyer which may affect the Tax liabilities of the
Companies or their respective Subsidiaries for Pre-Closing Periods or Straddle
Period. The Parent will promptly notify the Buyer in writing upon receipt by
the Parent or any affiliate of the Parent of notice of any pending or threatened
federal, state, local, or foreign Tax audits or assessments from any Tax
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authority which may affect the Tax liabilities of the Companies or their
respective Subsidiaries for periods which do not constitute Pre-Closing Periods.
(i) The Parent or the Buyer will have the right to control any audit
or determination by any Tax authority, to initiate any claim for refund or file
any amended Tax Return, and to contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment of
Taxes for any taxable period for which such party is required to file the Tax
Return relating to such Tax. With respect to a Straddle Period, the Buyer shall
not take any action that would affect the Tax liability for which the Parent is
responsible without the Parent's consent, which consent will not be unreasonably
withheld.
(j) After the Closing Date, the Parent and the Buyer will cooperate
fully, and will cause their respective affiliates to cooperate fully, and will
provide assistance as may reasonably be requested, and cause their respective
affiliates to provide assistance as may reasonably be requested, in connection
with the preparation of any Tax Return, the conduct of any audit or the defense
of any litigation or other proceeding with respect to any Tax liability of the
Companies or their respective Subsidiaries for any period and shall retain, or
shall cause to be retained, for the appropriate period any records or
information that may be relevant to any such Tax Return or audit.
(k) The Parent and its Subsidiaries will provide the Buyer, and the
Buyer and its Subsidiaries will provide the Parent, with the right, at
reasonable times and upon reasonable notice, to have access to, and to copy and
use, any records or information which may be relevant for the taxable period for
which the requesting party is charged with payment responsibility for Taxes
under this Agreement in connection with the preparation of any Tax Returns, the
conduct of any audits, the defense of any litigation with respect to any Tax
liability, the filing of any claim for a refund of Tax or allowance of any Tax
credit, or any judicial or administrative proceedings relating to liability for
Taxes.
(l) If the Parent or the Buyer disagree as to any matters governed by
this Section 4.6 of the Agreement, the Parent and the Buyer will promptly
consult with each other in an effort to resolve any such dispute. Any amounts
not in dispute will be paid promptly, and any
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amount payable upon the resolution of a dispute will be paid to a bank account
designated by the payee. If any such disagreement cannot be resolved within ten
days after the Parent or the Buyer asserts in writing that such dispute cannot
be resolved, the Parent and the Buyer will jointly select an independent
accounting firm to act as an arbitrator to resolve the disagreement. The
independent accounting firm's determination will be final and binding upon the
parties and any fees and expense relating to the engagement of the independent
accounting firm will be shared equally by the Parent and the Buyer.
(m) Notwithstanding any other provision of this Agreement, the Parent
and the Sellers shall indemnify and hold harmless the Buyer, the Companies, and
their respective Subsidiaries and Successors against: (i) all Income Taxes paid
or payable with respect to the Companies or their respective Subsidiaries for
any Pre-Closing Period, including without limitation any liability for Income
Taxes arising out of the inclusion of any of the Companies or their respective
Subsidiaries in any consolidated or combined return of income required to be
filed with any taxing authority; (ii) all Income Taxes paid with respect to the
Parent, any of its Subsidiaries, and any member of the Affiliated Group (other
than the Companies and their respective Subsidiaries) for any and all taxable
periods; and (iii) all Taxes (other than Income Taxes) of the Companies and
their respective Subsidiaries to the extent not adequately reserved for on the
Closing Financial Statements. Any indemnification for Taxes (other than Income
Taxes) pursuant to clause (iii) above shall be subject to Section 7.2(b)(i).
The Buyer shall indemnify and hold harmless the Parent and the Sellers against
the Income Taxes required to be paid by the Buyer pursuant to Section 4.6(b).
The covenants of the parties contained in this Section 4.6 shall survive the
Closing Date and shall expire when all applicable statutes of limitations
(including extensions thereof) have expired.
(n) The Buyer or its Successors (as defined below) shall be entitled
to all refunds and credits of all Taxes with respect to the Companies or their
respective Subsidiaries for any Post-Closing Period. The Parent, the Sellers
and their respective Subsidiaries shall, promptly after the receipt thereof,
remit or cause to be remitted to the Buyer any refund of Tax received by the
Parent, the Sellers, or their respective Subsidiaries to the extent that such
refund relates to a Post-Closing Period. The Parent shall be entitled to all
refunds and
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credits of all Taxes with respect to the Companies or their respective
Subsidiaries for any Pre-Closing Period. The Buyer shall, promptly after the
receipt thereof, remit or cause to be remitted to the Parent any refund of Tax
received by the Buyer, the Companies, or their respective Subsidiaries to the
extent that such refund relates to a Pre-Closing Period.
(o) If an audit adjustment, amended return or amended assessment
(collectively, an "Adjustment") shall be made, filed or assessed after the
Closing Date for any period prior to the Closing Date, which causes an increase
in the Tax liability of the Buyer, the Companies or any of their respective
Subsidiaries or Successors in any period after the Closing Date, then, when and
to the extent that the Buyer or such Company or any of its Subsidiaries or
Successors realizes the Tax cost of such Adjustment, the Parent, the Sellers,
their Subsidiaries and their Successors shall promptly pay to the Buyer a cash
amount equal to the amount of the Tax cost realized by the Buyer, the Companies
or any of their Subsidiaries or Successors. This subsection (o) shall be
effective for so long as the periods prior to the Closing Date remain open to
Adjustment.
(p) DEFINITIONS.
-----------
(i) The term "Governmental Authority" shall mean any agency,
----------------------
administrative body or instrumentality of the United States of America or
elsewhere, including, without limitation any parish, county, district,
municipality, state or foreign authority, or any other entity exercising
executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to, whether now or hereafter in effect.
(ii) The term "Post-Closing Period" shall mean a taxable period
-------------------
ending after the Closing Date.
(iii) The term "Pre-Closing Period" shall mean any tax period
------------------
ending on or prior to the Closing Date and, with respect to any Straddle Period,
the portion of such Straddle Period that ends on and includes the Closing Date.
(iv) The term "Straddle Period" shall mean a taxable year or
---------------
taxable period of the Companies or their respective Subsidiaries which begins
before the Closing Date and ends after the Closing Date.
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(v) The term "Successor" shall mean a corporation, limited
---------
liability company, partnership, limited partnership, or other legal entity
which, through amalgamation, consolidation, merger, liquidation, or other legal
succession becomes invested with the rights, and assumes the burdens of, a party
to this Agreement or any Subsidiary thereof.
(vi) The term "Tax" shall mean any federal, state, local, or
---
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
(vii) The term "Income Tax" shall mean all income and franchise
----------
taxes, levies or other like assessments imposed by the United States or any
state, local or foreign taxing jurisdiction, including any interest, penalty, or
addition thereto, whether disputed or not.
(viii) The term "Tax Return" shall mean any return, declaration,
----------
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(ix) The term "Income Tax Return" shall mean any return,
-----------------
declaration, report, claim for refund, or information return or statement
relating to Income Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
Section IV.7. The Buyer's Knowledge of Breach. If prior to the
-------------------------------
Closing the Buyer shall have actual knowledge (but not constructive or imputed
knowledge) that any representation and warranty of the Parent and the U.S.
Seller, and, if applicable, the U.K. Seller contained in Article II shall not be
true and correct in all material respects, the Buyer shall promptly notify the
Parent and the Sellers of its knowledge, in reason-
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able detail, including the amount which the Buyer believes, based on the facts
actually known by it, would be payable by the Parent and the Sellers pursuant to
the indemnification provisions hereof without reference to any indemnification
limitations set forth in Section 7.2 hereof.
Section IV.8. Employees; Employee Benefits. (a) On and after the
----------------------------
Closing for a period of one year, the Buyer shall cause the Companies to provide
their respective employees with salary and benefit plans, programs and
arrangements no less favorable in the aggregate than those currently provided by
the Buyer to its current employees in comparable lines of business with
commensurate service and position. In addition, except as otherwise herein
provided, the Buyer shall cause each Company to honor all employment agreements
entered into by such Company.
(b) If any employee of either Company becomes a participant in any
employee benefit plan, practice or policy of the Buyer or any of its affiliates,
such employee shall be given credit under such plan for all service prior to the
Closing Date with the Companies, or any predecessor employer (to the extent such
credit was given by such Company or such predecessor), and all service prior to
the time such employee becomes such a participant, for purposes of eligibility
and vesting and for all other purposes for which such service is either taken
into account or recognized; provided, however, such service need not be credited
to the extent it would result in a duplication of benefits. In addition, if any
employee of either Company becomes a participant in any employee benefit plan,
practice or policy of the Buyer or any of its affiliates, such employee shall be
given credit under such plan for all copayments and deductibles made and
preexisting condition exclusion periods satisfied (in whole or in part), prior
to the Closing Date, to the extent such copayments, deductibles, and excluded
periods are credited under the corresponding employee benefit plan of such
Company.
(c) The Buyer shall comply with the notice requirements set forth in
the Worker Adjustment and Retraining Notification Act ("WARN Act") prior to
effectuating within 90 days of the Closing (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment of the Companies, or (ii) a
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"mass layoff" (as defined in the WARN Act) affecting any site of employment of
the Companies.
(d) To protect the Buyer against any efforts by the Parent,
the Sellers or any of their affiliates to cause employees of the Companies or
their Subsidiaries to terminate their employment, each of the Parent and the
Sellers agrees that for a period of two years following the Closing Date,
neither the Parent nor any Seller nor any of their affiliates will, directly or
indirectly (i) induce any employee of the Companies or their Subsidiaries with a
then current compensation of more than $50,000 annually to leave any of the
Companies or their Subsidiaries or to accept any other employment or position,
(ii) solicit or hire any such employee, unless such employee's employment with
the Companies or their Subsidiaries is terminated by the Companies or their
Subsidiaries; provided that nothing herein shall prevent the Parent or the
Sellers from soliciting and hiring such employees pursuant to a general
solicitation not specifically directed at such employees, or (iii) assist any
other entity in hiring any such employee.
(e) Within 10 days after the date hereof, the Parent and the
Sellers shall deliver to the Buyer a list of 100 to 150 key employees of the
Companies. Within 30 days after the Buyer's receipt of such list, the Buyer, the
Parent and the Sellers shall meet to discuss any possible changes to such list.
The parties thereafter will work together to develop an incentive compensation
arrangement for such employees that is designed to encourage them to remain with
the Companies after the Closing. Once the parties have agreed upon such
arrangement, the Parent and the Sellers agree to, and the Parent and the Sellers
shall cause the Companies to, assist the Buyer in conveying and promoting the
Buyer's incentive compensation offers to the individuals identified on such
list.
(f) The Parent shall be responsible for the payment to
employees of the Companies of any "success fees" in connection with the
transactions contemplated by this Agreement which will be paid on the Closing
Date, but shall not be obligated to pay any severance or other change of control
fees to such employees.
(g) The Parent, the U.S. Company and the Buyer will enter into
severance and related arrangements with John C. Holt, effective as of the
Closing Date, on terms
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and conditions reasonably acceptable to the Parent and the Buyer, which terms
will include the following: (i) the cancellation of all existing agreements
between the Companies and their Subsidiaries, on the one hand, and Mr. Holt, on
the other (including Mr. Holt's employment agreement with the U.S. Company and
the Parent), (ii) if requested by the Buyer, Mr. Holt entering into a written
consulting agreement with the Buyer to provide a reasonable level of consulting
services, as an independent con-tractor (but in any event not to exceed three
days per week in the first 90 days after Closing and five days per month
thereafter, in each case, on a non-cumulative basis, the selection of which days
shall be mutually agreeable to Mr. Holt and the Buyer), to the Buyer through
December 31, 1998, and which provides Mr. Holt will report only to an executive
officer of the U.S. Buyer, (iii) the U.S. Company paying to Mr. Holt,
immediately after the Closing (with any deduction with respect thereto allocated
to a Post-Closing Period), all amounts owed to Mr. Holt through the Closing Date
pursuant to the Long Term Incentive Agreement ("EVA") dated as of February 29,
1996 between the U.S. Company and Mr. Holt and (iv) with respect to payments to
Mr. Holt other than pursuant to clause (iii) above that may be negotiated in
such severance and related arrangements, whether for services as a consultant
to the Buyer or for salary, bonus, EVA, or otherwise, the U.S. Company shall be
responsible for (and the Buyer will cause the U.S. Company to pay) up to
$1,000,000 of such payments (payable as provided in the next sentence) and the
Parent shall be responsible for (and will pay) any amounts in excess thereof.
The aggregate payments of up to $1,000,000 by the U.S. Company shall be made as
follows: with respect to the EVA, (x) the amount accrued under the EVA at
Closing shall be paid immediately after the Closing (with any deduction with
respect thereto allocated to a Post-Closing Period), (y) if the amount paid
pursuant to (x) above is determined to be less than the amount Mr. Holt is
entitled to based on the Closing Financial Statements as accepted by the
parties, appropriate adjustment shall be made promptly after such acceptance of
the Closing Financial Statements; and (z) all other amounts payable under the
EVA for the period from Closing to December 31, 1998 shall be paid between
August 1, 1998 and August 31, 1998; with respect to independent contractor
compensation to be paid in the same amount as would have been earned as salary
under Mr. Holt's employment contract if it had remained in existence, such
payments shall be made on a periodic basis consistent with the U.S. Company's
prior practice with
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respect to Mr. Holt's payment of salary under his employment agreement; and with
respect to Mr. Holt's 1998 bonus, such bonus shall be paid in December 1998. The
above payments for EVA and bonus shall be computed as if the U.S. Company had
achieved its financial targets for 1998. All payments to Mr. Holt will be made
net of payroll taxes and applicable withholdings.
Section IV.9. Shareholders' Meeting. (a) The Parent, acting
---------------------
through its Board of Directors, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders as soon as practicable for the
purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the Securities and
Exchange Commission ("SEC") a preliminary proxy statement relating to
this Agreement and use its best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy Statement
(as hereinafter defined) and, after consultation with the Buyer, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its shareholders and (y) to obtain
the necessary approvals of this Agreement by its shareholders; and
(iii) subject to the fiduciary obligations of the
Board of Directors under applicable law as advised by independent
counsel, include in the Proxy Statement the recommendation of the Board
of Directors that shareholders of the Parent vote in favor of the
adoption of this Agreement.
(b) The Buyer agrees that it will promptly upon request
provide the Parent with the information concerning the Buyer required to be
included in the Proxy Statement.
Section IV.10. Substitute Guaranty; Indemnity.
------------------------------
(a) The Parent has furnished the Buyer with a copy of the four
guaranties (the "Parent Guaranty") given by the Parent to Lombard North Central
plc and its affiliates ("Lombard") with respect to equipment leases to the
Subsidiaries of the U.K. Company. As soon as reasonably practicable after the
Closing, the Buyer agrees to provide
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a guaranty of the Buyer in respect of all of the Parent's obligations under the
Parent Guaranty, substantially similar to the Parent Guaranty, and to use its
commercially reasonable efforts to have Lombard (i) accept the substitute
guaranty offered by the Buyer in full substitution for the Parent Guaranty and
(ii) release the Parent from all liability and all of its obligations under or
with respect to the Parent Guaranty. From and after the Closing and until the
Parent is fully released from all liability and all of its obligations under or
with respect to the Parent Guaranty, the Buyer agrees to reimburse the
Parent/Seller Indemnitees (as defined in Section 7.3(a)) for any obligations,
costs and expenses incurred as a result of failure so to be fully released.
(b) The Parent has furnished the Buyer with a copy of the
"comfort letter" dated March 31, 1997 (the "Comfort Letter") given by the Parent
to its United Kingdom independent auditors ("Deloitte U.K.") with respect to the
provision of adequate financial support to the U.K. Company and its Subsidiaries
to ensure their ability to operate as going concerns until March 31, 1998. As
soon as reasonably practicable after the Closing, the Buyer agrees to provide
Deloitte U.K. a substitute comfort letter, and to use its commercially
reasonable efforts to have Deloitte U.K. (i) accept the substitute comfort
letter offered by the Buyer in full substitution for the Comfort Letter and (ii)
release the Parent from all liability and all its obligations under or with
respect to the Comfort Letter. From and after the Closing and until the Parent
is fully released from all liabilities and all of its obligations under or with
respect to the Comfort Letter, the Buyer agrees to reimburse the Parent/Seller
Indemnities for any obligations, costs and expenses incurred as a result of
failure so to be fully released.
Section IV.11. Notification of Certain Matters. (a) The Parent
-------------------------------
and the Sellers shall give prompt notice to the Buyer of (i) the occurrence, or
failure to occur, of any event that would be likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Closing Date
and (ii) any failure of the Seller to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. No such notification shall affect the
representations or warranties of the Seller or the conditions of the Seller's
obligations hereunder.
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(b) The Parent and the Sellers shall furnish to the Buyer (i)
as soon as available, and in any event within five business days after it is
prepared, any report by either Company or any of its Subsidiaries for submission
to its board of directors and the working papers related thereto and other
operating or financial reports (including any projections and budgets) prepared
for management of any of their respective businesses and the working papers
related thereto, (ii) monthly and quarterly unaudited balance sheets, statements
of operations and cash flow and changes in shareholders' equity for either
Company, and (iii) such other reports as the Buyer may reasonably request
relating to the Companies and their Subsidiaries. Each of the financial
statements delivered pursuant to this Section 4.11(b) shall be prepared in
accordance with GAAP consistently applied during the periods covered (except as
disclosed therein), except that such financial statements may omit footnote
disclosures required by GAAP to the extent the content thereof would not
materially differ from those disclosures reported in the most recent audited
period and year-end adjustments. Each of the financial statements delivered
pursuant to this Section 4.11(b) shall be accompanied by a certificate of the
respective chief financial officers of the Parent and the relevant Company to
the effect that such financial statements present fairly the financial condition
and results of operations of such Company and its Subsidiaries for the periods
covered and reflect all adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair presentation.
Section IV.12. Prior Knowledge. If the Buyer had actual
---------------
knowledge (but not constructive or imputed knowledge) prior to the execution of
this Agreement that any representation or warranty of the Parent or the Sellers
contained in Article II was not true and correct in all material respects as of
the date hereof, the Buyer may not assert such breach of a representation and
warranty (x) as a basis not to consummate the transactions contemplated hereby,
(y) as a basis for an indemnification claim under Article VII, or (z) in any
respect against the directors, officers, employees, affiliates, controlling
persons, agents, advisors or representatives of the Parent or the Sellers.
Section IV.13. Supplemental Disclosure. The Parent and the
-----------------------
Sellers shall have the right and the obligation from time to time prior to the
Closing to supple-
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ment or amend the Disclosure Schedule with respect to any matter hereafter
arising or discovered which if existing or known at the date of this Agreement
would have been required to be set forth or described in such Disclosure
Schedule; provided, however, that such amended Disclosure Schedule shall be
-------- -------
provided to the Buyer no later than five business days prior to the Closing
Date. Any such supplemental or amended disclosure shall not be deemed to have
cured any breach of any representation or warranty made in this Agreement for
purposes of Article VII. However, if in the aggregate the matters included in
all such supplemental or amended disclosures would reasonably be expected to
have a Company Material Adverse Effect, the condition to the Buyer's obligation
to consummate the transactions set forth in Section 5.3(a) will be deemed not to
be satisfied.
Section IV.14. Noncompetition. (a) The Parent and the Sellers
--------------
agree that after the Closing the Buyer, the Companies and their Subsidiaries
shall be entitled to the goodwill and going concern value of the business of the
Companies and their Subsidiaries and to protect and preserve the same to the
maximum extent permitted by law. The Parent and the Sellers also acknowledge
that their management contributions to the business of the Companies and their
Subsidiaries have been uniquely valuable and involve proprietary information
that would be competitively unfair to make available to any competitor of the
Companies or their Subsidiaries. For these and other reasons and as an
inducement to the Buyer to enter into this Agreement, the Parent and the Sellers
each agrees that for a period of three years after the Closing Date neither the
Parent nor either Seller will, directly or indirectly, for its own benefit or as
agent for another carry on or participate in the ownership, management or
control of, or the financing of, or be employed by, or consult for or otherwise
render services (in the same lines of business in which the Companies or its
Subsidiaries are in as of the Closing Date) to, or allow its name or reputation
to be used in or by any other present or future business enterprise that
competes with the Buyer or the Companies or their Subsidiaries in activities in
which any of the Companies or their Subsidiaries is engaged as of the Closing
Date; provided, however, that nothing herein shall prohibit the Parent and the
-------- -------
Sellers and their Subsidiaries other than the Companies and their Subsidiaries
from engaging in any businesses in which they are involved in as of the Closing
Date or from providing information technology services to the financial
industry.
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(b) Nothing contained herein shall limit the right of the
Parent or either Seller as an investor to hold and make investments in
securities of any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges thereon or
actively traded in a generally recognized over-the-counter market, provided the
equity interest of the Parent and the Sellers therein in the aggregate does not
exceed 5% of the outstanding shares or interests in such corporation or
partnership.
(c) If this Section 4.14 is more restrictive than permitted by
the Laws of the jurisdiction in which the Buyer seeks enforcement hereof, this
Section 4.14 shall be limited to the extent required to permit enforcement under
such Laws.
Section IV.15. Nondisclosure of Proprietary Data. Neither the
---------------------------------
Parent, nor either Seller shall, at any time, make use of, divulge or otherwise
disclose, directly or indirectly, any trade secret or other proprietary data
(including any customer list, record or financial information) concerning the
business or policies of the Companies or their Subsidiaries that the Parent or
the Sellers may have learned as a shareholder, employee, officer or director of
the Companies or their Subsidiaries. In addition, neither the Parent nor the
Sellers shall make use of, divulge or otherwise disclose, directly or
indirectly, to persons other than the Buyer, any confidential information
concerning the business or policies of the Companies or their Subsidiaries which
may have been learned in any such capacity. Notwithstanding the foregoing, this
Section 4.15 shall not apply to any work performed by the U.S. Company on behalf
of the Parent or any of its Subsidiaries or affiliates including work for which
such party for which licenses were granted. Notwithstanding the foregoing, the
Parent, the Sellers, any of their affiliates or representatives shall have no
obligation hereunder for that portion of such confidential information which is
independently developed by or for any of them, which is rightfully received by
any of them from a third party, is disclosed by the Companies or their
Subsidiaries to others without any restriction on use and disclosure, is
approved for release after the Closing by written consent of the Companies or
their Subsidiaries or is generally publicly available.
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Section IV.16. Inconsistent Agreements. The Parent and the
-----------------------
Sellers will not, either directly or indirectly, through the Companies, their
Subsidiaries or otherwise, initiate, solicit or encourage, and will use its best
efforts to cause all of its directors, officers, employees and agents not to
initiate, solicit or encourage, any inquiry, offer or proposal with respect to,
or furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, merger, tender or exchange offer or
other form of business combination, or any acquisition or disposition of all or
any substantial part of the assets or the stock or other securities of the
Companies or any of their Subsidiaries. The Parent and the Sellers will promptly
notify the Buyer of the details of any discussions with or proposal or offer
from any other person relating to an acquisition, merger, tender or exchange
offer or other form of business combination involving any Company, any of their
Subsidiaries or any of their respective securities or substantial assets or any
other proposal, the acceptance of which would be inconsistent with the
consummation of this Agreement in accordance with its terms. With respect to any
party to whom information regarding the Companies and their Subsidiaries was
furnished prior to the date hereof pursuant to a confidentiality agreement, the
Parent shall instruct each of such entities to destroy such information. At the
Closing, if requested by the Buyer, the Parent will assign all of its rights
under such confidentiality agreements to the Buyer.
Section 4.17. Redemption of Parent Notes. Simultaneously with
--------------------------
the Closing, the Parent shall cause to be issued a notice of redemption of all
of its outstanding 8-3/4% Senior Notes Due October 15, 2000 and shall redeem all
such Notes in accordance with the terms of the Indenture dated as of October 18,
1993.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
------------------------------------------------
Section V.1. Conditions to Each Party's Obligations to
-----------------------------------------
Consummate the Stock Purchase. The respective obligations of each party to
- -----------------------------
consummate the transactions contemplated hereby is subject to the satisfaction
at or prior to the Closing Date of the following conditions:
54
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(a) This Agreement shall have been approved and adopted by the
requisite vote of the Parent's shareholders; and
(b) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental or regulatory entity which prohibits the consummation of
the Stock Purchase; and
(c) There shall not be any suit, action, investigation,
inquiry or other proceeding instituted, pending or threatened by any
governmental or other regulatory or administrative agency or commission (i)
challenging or seeking to make illegal or otherwise directly or indirectly
restrain or prohibit or make materially more costly the consummation of the
transactions contemplated hereby, or seeking to obtain material damages in
connection with such transactions; or (ii) which constitutes a Company Material
Adverse Effect, and no order shall have been issued which would have the effect
of or require anything set forth in clause (i) or clause (ii) above; and
(d) Any waiting periods applicable to the transactions
contemplated by this Agreement under applicable U.S. antitrust or trade
regulation laws and regulations, including, without limitation, under the H-S-R
Act, shall have expired or been terminated; and
(e) All consents, approvals, orders and Permits of, and
registrations, declarations and filings with, any governmental authority that
shall be legally required in order to enable the Parent, the Sellers and the
Buyer to consummate the transactions contemplated hereby, including under the
H-S-R Act, the Exon-Florio Provisions and the NISPOM, shall have been made or
obtained.
Section V.2. Further Conditions to the Parent's and the
------------------------------------------
Sellers' Obligations. The obligation of the Parent and the Sellers to consummate
- --------------------
the transactions contemplated hereby are further subject to satisfaction or
waiver of the following conditions:
(a) The representations and warranties of the Buyer contained
in Article III of this Agreement shall be true and correct in all material
respects as of the date hereof and at and as of the Closing Date as though such
representations and warranties were made at and as of such date, except for
representations and warranties which are
55
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as of a different date or period which shall be true and correct in all material
respects as of such other date or period; and
(b) The Buyer shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by it on or prior to the Closing; and
(c) The Parent and the Sellers shall have received a
certificate of an authorized officer of the Buyer to the effect that the
conditions in paragraphs (a) and (b) of this Section 5.2 have been satisfied;
and
(d) The IT Services Agreement shall have been entered into by
the parties thereto.
Section V.3. Further Conditions to the Buyer's Obligations.
---------------------------------------------
The obligation of the Buyer to consummate the transactions contemplated hereby
are further subject to the satisfaction or waiver at or prior to the Closing
Date of the following conditions:
(a) The representations and warranties of the Parent and the
Sellers contained in Article II of this Agreement shall be true and correct in
all material respects as of the date hereof and at and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except for representations and warranties which are as of a different date or
period which shall be true and correct in all material respects as of such other
date or period; and
(b) The Parent and the Sellers shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be performed or complied with by it on or prior to the
Closing; and
(c) Releases shall have been obtained with respect to any
Liens on the Shares or the shares of capital stock of the Companies' respective
Subsidiaries as well as a release of any Liens on the Intellectual Property
assets of the Companies and their Subsidiaries; and
(d) The Parent and the Sellers shall have obtained all
material third-party consents listed in Section 2.6 of the Disclosure Schedule
required for the
56
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consummation of the transactions contemplated by this Agreement; and
(e) The Parent and the Sellers shall have provided the Buyer
with all of the documents required by Section 1.4 to be delivered at Closing by
the Sellers; and
(f) The Buyer shall have entered into employment agreements
with R. Evan Hineman and with at least five of the other seven key employees
identified in Section 5.3 of the Disclosure Schedule, substantially in the form
attached hereto as Exhibit 5; and
---------
(g) Since the date of this Agreement, none of the Companies
nor their Subsidiaries shall have suffered a change or changes in its business
or financial condition that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and
(h) The Parent, the U.S. Company and John C. Holt shall have
entered into severance arrangements upon the terms set forth in Section 4.8(g);
and
(i) The Buyer shall have received a certificate of an
authorized officer of each of the Parent and the Sellers to the effect that the
conditions in paragraphs (a), (b), (c), (d) and (g) of this Section 5.3 have
been satisfied.
Section V.4. Materiality of Conditions. Notwithstanding
-------------------------
anything contained herein, no condition involving performance of agreements by
the Parent, the Sellers or the Companies, on the one hand, or the Buyer, on the
other, or the accuracy of representations and warranties made by the Parent and
the Sellers, on the one hand, or the Buyer, on the other, as of the date hereof
or the Closing Date or any other date or period shall be deemed not fulfilled,
and the Buyer or the Parent and the Sellers, as the case may be, shall not be
entitled to fail to consummate the transactions contemplated by this Agreement
or terminate this Agreement on such basis, if (i) the nonperformance of such
agreements was unintentional and (ii) if the respects in which such agreements
have not been performed or the representations and warranties are untrue, would
not, individually or in the aggregate, have or reasonably be expected to have a
Company Material Adverse Effect or a Buyer Material Adverse Effect, as the case
may be.
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ARTICLE VI
TERMINATION AND ABANDONMENT
---------------------------
Section VI.1. Termination. This Agreement may be terminated
-----------
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing Date:
(a) By mutual written consent of the Parent, the Sellers and
the Buyer; or
(b) By the Parent, the Sellers or the Buyer at any time after
April 30, 1998 if the Closing shall not have occurred by such date; provided,
that the right to terminate this Agreement under this Section 6.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur by such date; or
(c) By the Parent, the Sellers or by the Buyer, if any
governmental entity of competent jurisdiction shall have issued an order, decree
or ruling or taken other action restraining, enjoining or otherwise prohibiting
the transactions contemplated hereby and such order, decree, ruling or other
action shall have become final and nonappealable; or
(d) By the Buyer by written notice to the Sellers if any event
occurs or condition exists which would render impossible the satisfaction of one
or more conditions to the obligations of the Buyer to consummate the
transactions contemplated by this Agreement as set forth in Section 5.3; or
(e) By the Sellers by written notice to the Buyer if any event
occurs or condition exists which would render impossible the satisfaction of one
or more conditions to the obligations of the Sellers to consummate the
transactions contemplated by this Agreement as set forth in Section 5.2.
Section VI.2. Procedure for and Effect of Termination. In the
---------------------------------------
event of termination of this Agreement and abandonment of the transactions
contemplated hereby by the parties hereto pursuant to Section 6.1 hereof,
written notice thereof shall be given by a party so terminating to the other
parties and this Agreement
58
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shall forthwith terminate. If this Agreement is terminated pursuant to Section
6.1 hereof:
(a) Each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 4.2(b) hereof;
(b) All filings, applications and other submissions made
pursuant hereto shall, and to the extent practicable, be withdrawn from the
agency or other person to which made; and
(c) There shall be no liability or obligation hereunder on the
part of the Parent, the Sellers or the Buyer or any of their respective
directors, officers, employees, affiliates, controlling persons, agents or
representatives, except that the Parent, the U.S. Seller, the U.K. Seller or the
Buyer, as the case may be, may have liability to the other parties if the basis
of termination is a breach by the Parent, the U.S. Seller, the U.K. Seller or
the Buyer, as the case may be, of one or more of the provisions of this
Agreement, and except that the obligations provided for in Section 4.5, this
Section 6.2 and Article VIII hereof shall survive any such termination.
(d) Notwithstanding clause (c), if this Agreement or the
transactions contemplated hereby are terminated by reason of (x) the failure by
the Parent to obtain release of any Lien on the Shares or the Intellectual
Property assets of the Companies and their Subsidiaries or (y) a determination
by the Board of Directors of the Parent to change its recommendation to the
shareholders of the Parent, the U.S. Seller shall promptly (and in any event
within five days after such event) pay to the Buyer, in immediately available
funds, the sum of (a) all reasonable out-of-pocket expenses and fees of the
Buyer (including all fees, expenses and disbursements of counsel, accountants,
investment bankers and other representatives of the Buyer) incurred by the Buyer
or on its behalf in connection with the transactions contemplated by this
Agreement and the negotiation, preparation, execution or performance of this
Agreement and any related investiga-
59
<PAGE>
tions of the Parent, the Sellers, the Companies and their Subsidiaries and (b)
an amount equal to $12,000,000.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
----------------------------
Section VII.1. Survival Periods. (a) All representations and
----------------
warranties of the parties contained in this Agreement shall survive the Closing
until 18 months following the Closing Date (the "Survival Period") but, except
as provided in Section 6.2(c) hereof, shall not survive any termination of this
Agreement. The parties intend to shorten the statute of limitations and agree
that no claims or causes of action may be brought against the Parent, the
Sellers or the Buyer based upon, directly or indirectly, any of the
representations, warranties or agreements contained in Articles II and III
hereof after the Survival Period or, except as provided in Section 6.2(c)
hereof, any termination of this Agreement. This Section 7.1 shall not limit any
covenant or agreement of the parties which contemplates performance after the
Closing, including the covenants and agreements set forth in Sections 4.3, 4.6,
4.8, 4.10, 4.11, 4.14, 4.15 and 4.17 hereof.
(b) Notwithstanding anything in this Section 7.1 to the
contrary, the representations and warranties made by the Parent and the Sellers
relating to Income Taxes in Section 2.13 shall survive the Closing Date and
shall expire when all applicable statutes of limitations (including extensions
thereof) have expired. The representations and warranties made by the Parent and
the Sellers relating to Taxes other than Income Taxes expire at the end of the
Survival Period.
Section VII.2. Parent's and the Sellers' Agreement to
--------------------------------------
Indemnify. (a) Subject to the terms and conditions set forth herein, from and
- ---------
after the Closing, the Parent and the Sellers shall jointly and severally
indemnify and hold harmless the Buyer and its directors, officers, employees,
affiliates, controlling persons, agents and representatives and their successors
and assigns (collectively, the "Buyer Indemnitees") from and against all
liability, demands, claims, actions or causes of action, assessments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively "Buyer Damages") asserted against or
incurred by any Buyer Indemnitee as a result of
60
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or arising out of (i) a breach by the Parent or the Sellers of any
representation or warranty contained in this Agreement when made or at and as of
the Closing Date (or at and as of such different date or period specified for
such representation or warranty) as though such representation or warranty were
made at and as of the Closing Date (or such different date or period), (ii) the
merger of Westmark Insurance Services, Inc. into the U.S. Company (including the
liabilities of Westmark Insurance Services, Inc.); and (iii) the conduct of the
business of the Parent, the Sellers and any of their Subsidiaries other than the
Companies and the Companies' Subsidiaries as conducted on the Closing Date.
(b) The Parent's and the Sellers' obligation to indemnify the
Buyer Indemnitees pursuant to Section 7.2(a) is subject to the following
limitations:
(i) No indemnification shall be made by the Parent and the
Sellers unless the aggregate amount of Buyer Damages exceeds $1,500,000
and, in such event, indemnification shall be made by the Parent and the
Sellers only to the extent Buyer Damages exceed $1,500,000; provided,
--------
however, that the indemnity provided for in Section 7.2(a)(ii) and
-------
(iii) shall not be subject to this Section 7.2(b)(i) or any time
limitation.
(ii) In no event shall the Parent's and the Sellers' aggregate
obligation to indemnify the Buyer Indemnitees exceed $100,000,000;
(iii) The amount of any Buyer Damages shall be reduced by (A)
any amount received by a Buyer Indemnitee with respect thereto under
any insurance coverage or from any other party alleged to be
responsible therefor and (B) the amount of any Tax benefit available to
the Buyer Indemnitee relating thereto. The Buyer Indemnitees shall use
reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have
responsibility. If a Buyer Indemnitee receives an amount under
insurance coverage or from such other party with respect to Buyer
Damages at any time subsequent to any indemnification provided by the
Parent and the Sellers pursuant to this Section 7.2, then such Buyer
Indemnitee shall promptly reimburse the Parent and the Sellers, as the
case may be, for any payment made or expense incurred by the Parent
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and the Sellers in connection with providing such indemnification up to
such amount received by the Buyer Indemnitee; and
(iv) The Parent and the Sellers shall be obligated to
indemnify the Buyer Indemnitees only for those claims giving rise to
Buyer Damages as to which the Buyer Indemnitees have given the Parent
and the Sellers written notice thereof prior to the end of the Survival
Period. Any written notice delivered by a Buyer Indemnitee to the
Parent and the Sellers with respect to Buyer Damages shall set forth
with reasonable specificity the basis of the claim for Buyer Damages
and a reasonable estimate of the amount thereof.
Section VII.3. The Buyer's Agreement to Indemnify. (a) Subject
----------------------------------
to the terms and conditions set forth herein, from and after the Closing, the
Buyer shall indemnify and hold harmless the Parent and the Sellers and their
directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, the
"Parent/Seller Indemnitees") from and against all liability, demands, claims,
actions or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Parent/Seller Damages") asserted against or incurred by any
Parent/Seller Indemnitee as a result of or arising out of a breach of any
representation or warranty contained in Article III of this Agreement when made
or at and as of the Closing Date (or at and as of such different date or period
specified for such representation or warranty) as though such representation and
warranty were made at and as of the Closing Date (or such different date or
period).
(b) The Buyer's obligation to indemnify the Parent/Seller
Indemnitees pursuant to Section 7.3(a) hereof is subject to the following
limitations:
(i) No indemnification shall be made by the Buyer unless the
aggregate amount of Parent/Seller Damages exceeds $1,500,000 and, in
such event, indemnification shall be made by the Buyer only to the
extent that the aggregate amount of Parent/Seller Damages exceed
$1,500,000;
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(ii) In no event shall the Buyer's aggregate obligation to
indemnify the Parent/Seller Indemnitees exceed $100,000,000;
(iii) The amount of any Parent/Seller Damages shall be reduced
by (A) any amount received by a Parent/Seller Indemnitee with respect
thereto under any insurance coverage or from any other party alleged to
be responsible therefor and (B) the amount of any Tax benefit available
to the Parent/Seller Indemnitee relating hereto. The Parent/Seller
Indemnitees shall use reasonable efforts to collect any amounts
available under such insurance coverage and from such other party
alleged to have responsibility. If a Parent/Seller Indemnitee receives
any amount under insurance coverage or from such other party with
respect to Parent/Seller Damages at any time subsequent to any
indemnification provided by the Buyer pursuant to this Section 7.3,
then such Parent/Seller Indemnitee shall promptly reimburse the Buyer,
as the case may be, for any payment made or expense incurred by the
Buyer in connection with providing such indemnification up to such
amount received by the Parent/Seller Indemnitee; and
(iv) The Buyer shall be obligated to indemnify the
Parent/Seller Indemnitees only for those claims giving rise to
Parent/Seller Damages as to which the Parent/Seller Indemnitees have
given the Buyer written notice thereof prior to the end of the Survival
Period. Any written notice delivered by a Parent/Seller Indemnitee to
the Indemnifying Party with respect to Parent/Seller Damages shall set
forth with specificity the basis of the claim for Parent/Seller Damages
and a reasonable estimate of the amount thereof.
(c) From and after the Closing, the Buyer shall indemnify
and hold harmless, to the fullest extent permitted by law, the Parent, the
directors and officers of the Parent both in their capacities as directors
and/or officers of the Parent, or any subsidiaries or affiliates of the Parent
and as individuals, and the successors and assigns of the above (the "Bradley
Indemnitees"), from and against all liability, demands, claims, actions or
causes of action, assessments, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) asserted against or
incurred by any Bradley Indemnitee as a result of or arising out of
63
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the acquisition of the U.S. Company by the Parent and which was or is the
subject matter of the Bradley v. Gelb et al. litigation brought in Middlesex
----------------------
Superior Court in 1992 or the settlement thereof including but not limited to
any claims for indemnification in connection with such matter (collectively, the
"Bradley Damages"). If so requested by a Bradley Indemnitee, the Buyer shall pay
or advance (within ten business days of such request) any and all reasonable
expenses which shall include attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with defending, being a witness in or
participating in, or preparing to defend, be a witness in or participate in, any
threatened, pending or completed action, suit, proceeding, inquiry or
investigation involving the Bradley Damages; provided that each such requesting
Bradley Indemnitee agrees to cooperate fully and provide reasonable assistance
to the Buyer in connection with the claims regarding the Bradley Damages.
Notwithstanding anything in this Article VII to the contrary, in the event of a
claim for indemnification pursuant to this Section 7.3(c), the Buyer shall be
permitted to undertake the defense thereof on behalf of itself and such
indemnitees by counsel of its own choosing, which counsel shall be satisfactory
to the Bradley Indemnitee(s) in their reasonable discretion, provided that if in
--------
the Bradley Indemnitee(s)' judgment, upon advice of counsel reasonably
acceptable to the Buyer, a conflict of interest may exist between the Buyer or
its Subsidiaries and any Bradley Indemnitee with respect to such a claim
regarding Bradley Damages, such Bradley Indemnitee(s) shall be entitled to
select counsel of their own choosing, in which event the Buyer shall be
obligated to pay the reasonable fees and expenses of such counsel; provided,
--------
further, that the Bradley Indemnitees may select only one counsel to represent
- -------
all Bradley Indemnitees in such action. Notwithstanding anything in this Article
VII to the contrary, no Bradley Indemnitee shall, without the Buyer's consent,
settle any claim relating to the Bradley Damages. The indemnity provided for in
this paragraph shall not be subject to Section 7.3(b)(i) or any time limitation.
(d) In the event the purchase price allocation as set forth in
Section 1.1 is challenged by the United States or any state, county, local or
foreign taxing authority, the Buyer will fully and promptly indemnify and hold
harmless the Sellers for any increase in Taxes paid by the Sellers as a result
of any reallocation of the purchase price allocation, including interest,
penalties, and other additions, and for the cost of all reasonable
64
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outside legal and Tax services with respect to such Taxes. The Sellers will
cooperate at the Buyer's request in contesting and defending against any such
challenges, and the Buyer will pay all additional fees, costs and Taxes,
including interest and penalties, incurred by the Buyer as a result of such
action. The indemnity provided for in this paragraph shall not be subject to
Section 7.3(b)(i) and shall be subject only to the applicable statute of
limitations.
Section VII.4. Third Party Indemnification. The obligations of
---------------------------
the Parent and the Sellers to indemnify the Buyer Indemnitees under Section 7.2
hereof with respect to Buyer Damages and the obligations of the Buyer to
indemnify the Parent/Seller Indemnitees under Section 7.3 hereof with respect to
Parent/Seller Damages and to indemnify the Bradley Indemnitees with respect to
Bradley Damages, in either case resulting from the assertion of liability by
third parties (each, as the case may be, a "Claim"), will be subject to the
following terms and conditions:
(a) Promptly after acquiring knowledge of any claim in respect
of which a party (the "Indemnified Party") may seek indemnification from the
other party (the "Indemnifying Party") hereunder, the Indemnified Party shall
give written notice thereof to the Indemnifying Party describing such claim and
demanding indemnification hereunder. Notwithstanding the foregoing, failure to
provide the aforementioned notice will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party under this Agreement, except
to the extent that (i) such failure to provide notice causes the amounts paid by
the Indemnifying Party to be greater than they would have been had such notice
been given on a reasonably timely basis; or (ii) such notice is not delivered to
the Indemnifying Party prior to the expiration of any applicable survival
period, if any, under Section 7.1. The Indemnifying Party will be entitled to
assume control of the defense of any claim, and to settle or compromise such
claim in its discretion, subject to the consent of the Indemnified Party which
consent will not be unreasonably withheld or delayed. After written notice by
the Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of any such action, the Indemnifying Party shall not be
liable to such Indemnified Party hereunder for any legal expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof.
Notwithstanding anything in this Section
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7.4 to the contrary, if (i) the Indemnifying Party does not promptly assume
control of the defense of such action as provided in this Section 7.4 or (ii)
the Indemnified Party reasonably believes and so notifies the Indemnifying Party
in writing that the claim, even if indemnified for, materially and adversely
will affect its business, financial condition or results of operations, the
Indemnified Party shall have the right to defend such action in such manner as
it may deem appropriate at the cost and expense of the Indemnifying Party and
the Indemnifying Party will promptly reimburse the Indemnified Party therefor
(subject, if applicable, to the limitations contained in Sections 7.2(b) and
7.3(b)).
(b) Any amounts to which the Indemnified Party is entitled
under this Article VII shall be paid by the Indemnifying Party within ten days
following a request therefor.
(c) Anything in this Section 7.4 to the contrary
notwithstanding, the Indemnifying Party shall not enter into any settlement or
compromise of any action, suit or proceeding or consent to the entry of any
judgment (i) which does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to the Parent/Seller Indemnitee or the
Buyer Indemnitee, as the case may be, of a written release from all liability in
respect of such action, suit or proceeding or (ii) for other than monetary
damages to be borne by the Indemnifying Party, without the prior written consent
of the Parent/Seller Indemnitee or the Buyer Indemnitee, as the case may be,
which consent shall not be unreasonably withheld.
(d) The Indemnifying Party and the Indemnified Party shall
cooperate fully in all aspects of any investigation, defense, pre-trial
activities, trial, compromise, settlement or discharge of any claim in respect
of which indemnity is sought pursuant to this Article VII, including by
providing the other party with reasonable access to employees and officers
(including as witnesses) and other information.
Section VII.5. No Set-Off. Neither the Buyer nor the Parent
----------
and the Sellers shall have any right to set-off any Buyer Damages or
Parent/Seller Damages, respectively, against any payments to be made by any of
them pursuant to this Agreement, the IT Services Agreement or otherwise.
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Section VII.6. Insurance. The indemnifying party shall be
---------
subrogated to the rights of the indemnified party in respect of any insurance
relating to damages to the extent of any indemnification payments made
hereunder.
Section VII.7. No Duplication. Any liability for
--------------
indemnification hereunder shall be determined without duplication of recovery by
reason of the state of facts giving rise to such liability constituting a breach
of more than one representation, warranty, covenant or agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
Section VIII.1. Amendment and Modification. This Agreement may
--------------------------
be amended, modified or supplemented at any time by the parties hereto, pursuant
to an instrument in writing signed by all parties.
Section VIII.2. Extension; Waiver. At any time prior to the
-----------------
Closing Date, the party entitled to the benefit of any respective term or
provision hereof may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document,
certificate or writing delivered pursuant hereto, or (c) waive compliance with
any obligation, covenant, agreement or condition contained herein. Any agreement
on the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party entitled to the
benefits of such extended or waived term or provision.
Section VIII.3. Entire Agreement; Assignment. This Agreement
----------------------------
(including the Disclosure Schedule), the IT Services Agreement, the
Confidentiality Agreement and the Voting Agreements (a) constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede other prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and (b)
shall not be assigned, by operation of law or otherwise, by a party hereto,
without the prior written consent of the other parties except that the Buyer may
assign any or all of its rights hereunder (including its rights under
67
<PAGE>
Article VII) to one or more wholly-owned subsidiaries of the Buyer.
Section VIII.4. Severability. The invalidity or
------------
unenforceability of any term or provision of this Agreement in any situation or
jurisdiction shall not affect the validity or enforceability of the other terms
or provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction and the remaining
terms and provisions shall remain in full force and effect, unless doing so
would result in an interpretation of this Agreement which would deprive a party
of the material benefits intended hereby.
Section VIII.5. Notices. Unless otherwise provided herein, all
-------
notices and other communications hereunder shall be in writing and may be given
by any of the following methods: (a) personal delivery; (b) facsimile
transmission; (c) registered or certified mail, postage prepaid, return receipt
requested; or (d) overnight delivery service. Such notices and communications
shall be sent to the appropriate party at its address or facsimile number given
below or at such other address or facsimile number for such party as shall be
specified by notice given hereunder (and shall be deemed given upon receipt by
such party or upon actual delivery to the appropriate address, or, in case of a
facsimile transmission, upon transmission thereof by the sender and issuance by
the transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error; in the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above,
provided however, that such mailing shall in no way alter the time at which the
- -------- -------
facsimile notice is deemed received):
(a) if to the Parent and the Sellers, to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Joseph E. Kasputys,
Chairman, President and
Chief Executive Officer
68
<PAGE>
with a copy to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Michael R. Kargula, Esq.
Executive Vice President,
General Counsel and
Secretary
and with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telecopy: (202) 393-5760
Attention: Stephen W. Hamilton, Esq.
(b) if to the Buyer, to
Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California 91367
Telecopy:(818) 598-2025
Attention: John E. Preston, Esquire
Senior Vice President and
General Counsel
with a copy to
O'Melveny & Myers LLP
555 13th Street, N.W.
Washington, DC 20004-1109
Telecopy: (202) 383-5414
Attention: David G. Pommerening, Esq.
Section VIII.6. Governing Law; Arbitration. (a) This Agreement
--------------------------
shall be governed by, enforced under and construed in accordance with the laws
of the State of Massachusetts, without giving effect to any choice or conflict
of law provision or rule thereof.
(b) Except as specifically provided for elsewhere in this
Agreement, all claims and controversies arising out of or in connection with
this Agreement shall be subject to binding arbitration by a single arbitrator in
accordance with the commercial arbitration rules of the
69
<PAGE>
American Arbitration Association ("AAA") or the existing Rules of Practice and
Procedures of the Judicial Arbitration and Mediation Services, Inc. ("JAMS").
Any arbitration initiated by the Buyer shall occur in Massachusetts, and any
judgment on the award rendered in such arbitration shall be entered in any
Massachusetts state or federal court having jurisdiction. Any arbitration
initiated by the Parent or any Seller shall occur in California, and any
judgment on the award rendered in such arbitration shall be entered in any
California state or federal court having jurisdiction The party filing the
arbitration shall have the right to select either AAA or JAMS. The parties shall
be entitled to discovery in accordance with the provisions of New York law. The
prevailing party in any arbitration proceeding hereunder as determined by the
arbitrator or in any legal proceedings or actions arising from or in connection
with this Agreement shall be entitled to recover reasonable attorneys' fees and
costs. Nothing herein shall prohibit a party from seeking equitable relief in a
court of law to maintain the status quo while an arbitration is pending
hereunder. The parties agree that the arbitrator shall not have the right to
award punitive damages.
Section VIII.7. Descriptive Headings. The descriptive headings
--------------------
herein are inserted for convenience of reference only and shall in no way be
construed to define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of, or scope or intent
of, this Agreement nor in any way affect this Agreement.
Section VIII.8. Counterparts. This Agreement may be executed
------------
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section VIII.9. Fees and Expenses. Whether or not this
-----------------
Agreement and the transactions contemplated hereby are consummated, and except
as otherwise expressly set forth herein including Section 6.2(d), all costs and
expenses (including legal and financial advisory fees and expenses) incurred in
connection with, or in anticipation of, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. The
Buyer hereby waives compliance by the Parent and the Sellers with any applicable
bulk transfer laws (including any so-called "tax bulk sales provisions"). Each
of the Parent and the Sellers, on the one hand, and the Buyer, on
70
<PAGE>
the other hand, shall indemnify and hold harmless the other party from and
against any and all claims or liabilities for financial advisory and finders'
fees incurred by reason of any action taken by such party or otherwise arising
out of the transactions contemplated by this Agreement by any person claiming to
have been engaged by such party.
Section VIII.10. Knowledge. The phrase "to the knowledge of
---------
the Parent" or any similar phrase shall mean and be limited to the actual (but
not constructive or imputed) knowledge of Joseph E. Kasputys, Stephen H. Curran,
John C. Holt, Michael R. Kargula and William S. Swift who shall make reasonable
written inquiry of Robert Brammer, Mark Gildersleeve, Evan Hineman, Elton
Klibanoff, Stephen Landry, John Putney, James Shields and Noel Widdifield as to
the accuracy of the representations and warranties in this Agreement. The phrase
"to the knowledge of the Buyer" or similar phrase shall mean and be limited to
the actual (but not constructive or imputed) knowledge of John Leonis, Michael
Brown, Lawrence Hoke, John Preston and Richard Russin.
Section VIII.11. Interpretation. (a) In the event an ambiguity
--------------
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
(b) The use in this Agreement or any other related document of
the word "include" or "including", when following any general statement, term or
matter, shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as "without
limitation" or "but not limited to" or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement,
term or matter.
Section VIII.12. No Third Party Beneficiaries. This Agreement
----------------------------
is solely for the benefit of the Parent and the Sellers and their successors and
permitted assigns, with respect to the obligations of the Buyer under this
Agreement, and for the benefit of the Buyer, and its
71
<PAGE>
successors and permitted assigns, with respect to the obligations of the Parent
and the Sellers, under this Agreement, and this Agreement shall not be deemed to
confer upon or give to any other third party any remedy, claim of liability or
reimbursement, cause of action or other right.
Section VIII.13. No Waivers. Except as otherwise expressly
----------
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between the parties, shall constitute a waiver of any such right, power
or remedy. No waiver by a party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence. No waiver shall be valid unless in
writing and signed by the party against whom such waiver is sought to be
enforced.
Section VIII.14. Specific Performance. The parties hereto
--------------------
agree that if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, irreparable
damage would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof and immediate injunctive relief, without the
necessity of proving the inadequacy of money damages as a remedy, in addition to
any other remedy at law or equity.
Section VIII.15. Further Assurances. The parties hereto each
------------------
agree to execute, make, acknowledge, and deliver such instruments, agreements
and other documents as may be reasonably required to effectuate the purposes of
this Agreement and to consummate the transactions contemplated hereby.
Section VIII.16. Preservation of and Access to Certain
-------------------------------------
Information After Closing. The Parent and the Sellers shall give to the Buyer,
- -------------------------
the Companies and their Subsidiaries and their employees, counsel and advisors,
full and complete access upon reasonable notice during normal business hours, to
all agreements, records and other information relating to the Companies and
their Subsidiaries, and will provide copies of such information concerning the
Companies and their Subsidiaries (with
72
<PAGE>
respect to periods prior to the Closing) as the Buyer may reasonably request,
including but not limited to full and complete access in connection with the
preparation of any Tax Returns for the Affiliated Groups, in connection with or
in anticipation of any audit by any federal, state or local Tax authorities of
the Affiliated Groups or matters relating to insurance coverage, third-party
litigation, claims, proceedings and investigations. From and after the Closing
Date, the Parent and the Sellers shall preserve all such agreements, records and
information for a period of eight years, or with respect to Tax matters, until
the expiration of the applicable statute of limitations (including any
extensions thereof), provided, however, that the Parent and the Sellers shall
not destroy or dispose of any such agreements, records or information without
giving notice to the Buyer and the Companies of such pending destruction or
disposal and offering the Buyer and the Companies the right and opportunity to
copy such agreements, records or information. The Buyer shall reimburse the
Parent and the Sellers for all reasonable out-of-pocket expenses they may incur
with respect to the foregoing.
73
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly signed as of the date first above written.
PRIMARK CORPORATION
By:
---------------------------------
Name:
Title:
PRIMARK HOLDING CORPORATION
By:
---------------------------------
Name:
Title:
PRIMARK INFORMATION SERVICES
UK LIMITED
By:
---------------------------------
Name:
Title:
LITTON INDUSTRIES, INC.
By:
---------------------------------
Name:
Title:
LITTON U.K. LIMITED
By:
---------------------------------
Name:
Title:
74
<PAGE>
Exhibit 2.2
-----------
INFORMATION TECHNOLOGY SERVICES AGREEMENT
by and among
PRIMARK CORPORATION
TASC, INC.
and
LITTON INDUSTRIES, INC.
<PAGE>
Dated as of __________, 1997
INFORMATION TECHNOLOGY SERVICES AGREEMENT
-----------------------------------------
INFORMATION TECHNOLOGY SERVICES AGREEMENT dated _____, 1997 (the "IT
Services Agreement") by and among Primark Corporation, a Michigan corporation
("Primark"), TASC, Inc., a Massachusetts corporation ("TASC") and Litton
Industries, Inc., a Delaware corporation ("Buyer").
WHEREAS, Primark and Buyer have entered into a Stock Purchase Agreement
dated as of __________ ___, 1997 (the "Stock Purchase Agreement"), pursuant to
which Buyer will purchase, among other things, all of the outstanding capital
stock of TASC, a wholly-owned indirect subsidiary of Primark (the "Stock
Purchase"); and
WHEREAS, prior to the Closing of the Stock Purchase, TASC has been
providing certain information technology services (the "IT Services") to Primark
and its subsidiaries ("Primark" as hereinafter used in this IT Services
Agreement, means Primark, its direct and indirect subsidiaries, as listed on
Attachment A and Primark Decision Economics, Inc., a Massachusetts corporation
in which Primark owns a minority interest); and
WHEREAS, both Primark and Buyer desire that TASC continue to supply IT
Services on a level of effort basis to Primark subsequent to the Closing of the
Stock Purchase; and
<PAGE>
WHEREAS, this IT Services Agreement shall commence immediately upon the
closing of the Stock Purchase, unless said closing does not take place by April
30, 1998, in which event this IT Services Agreement shall be null and void;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
---------
PROVISION OF SERVICES
---------------------
Section 1.1 Sale of IT Services. The IT Services defined in Section
-------------------
1.3 will be supplied by TASC to Primark on a timely basis either as indicated in
Section 1.2 or as requested by Primark from time to time, as the case may be.
Primark will reimburse TASC for the cost of the IT Services in accordance with
ARTICLE II.
Section 1.2 Information Technology Representative. TASC will
-------------------------------------
designate an Information Technology Representative ("ITR"), who shall be a
senior employee of TASC with the principal responsibility for the planning,
oversight and review of TASC's own information technology research and
development, plans and capabilities. The ITR will be the principal point of
contact between Primark and TASC regarding matters under this IT Services
Agreement.
Section 1.3 Definition of IT Services. The IT Services to be
-------------------------
provided by TASC to Primark are as follows:
(a) The ITR will chair or serve as a member of the Primark
Financial Information Team - Information Technology Committee ("FIT-IT"), as
designated by Primark. The members of the FIT-IT will be designated by Primark.
When serving as Chairman, the ITR will hold monthly meetings of the FIT-IT,
either in person, teleconference or videoconference, establish the agenda,
<PAGE>
issue minutes and pursue necessary action items resulting therefrom. When
serving as a member, but not as Chairman, the ITR will participate in monthly
meetings of the FIT-IT and pursue such necessary action items resulting
therefrom as may be relevant to the obligations of TASC herewith.
(b) The ITR, together with such members of his/her staff as
the ITR considers appropriate, will have regular and on-going contact with
FIT-IT members, visit the facilities of Primark and visit designated customer
locations for the purpose of advising Primark on information technology issues
(including, but not limited to, Year 2000 and Euro issues) related to computers,
communications, networks, software, databases and similar information technology
capabilities used in Primark's internal operations or in the delivery of
products and services to Primark's customers. Such advice may be given orally,
but will thereafter be confirmed in written presentations, memoranda and/or
reports.
(c) The ITR will serve as an advisor to the Primark Financial
Industry Team ("FIT") and attend monthly and special meetings of the FIT, as
requested by the FIT Chairman, for the purpose of providing information
technology advice on Primark's plans, programs and product developments
projects. The ITR will make presentations on information technology to the FIT
from time to time as the ITR considers appropriate and as requested by the FIT
Chairman and, when serving as Chairman of the FIT-IT, make monthly reports on
the activities of the FIT-IT to the FIT, TASC and Primark management.
(d) The ITR will participate in the annual review of
Primark's Five-Year Plan and Annual Budget, together with quarterly updates
thereto, providing advice on information technology matters affecting such plans
and budgets.
(e) The ITR, with the assistance and participation of the
members of the FIT-IT, will prepare an annual Information Technology Plan ("IT
Plan") for Primark, in such form and detail
3
<PAGE>
as the ITR and FIT Chairman shall mutually determine; covering information
technology issues and projects relevant to both the Five-Year Plan and Annual
Budget described in Paragraph (d) of this Section 1.3. The IT Plan will be
prepared on the same cycle as Primark's Five-Year Plan and Annual Budget.
(f) The ITR will, as requested from time to time, provide
special briefings to Primark senior management and the Primark Board of
Directors.
(g) TASC, through the ITR and/or members of the ITR's staff,
will have responsibility for the design and operation of the Primark
Telecommunications Network ("PTN"), including network architecture, procurement
and operation, to the extent mutually agreed upon between TASC and Primark. This
will involve assisting Primark in determining the nature and extent of
telecommunications requirements, designing networks and related capabilities
that will, as a goal, enable Primark to provide high quality state-of-the-art
telecommunications services at the lowest cost internally and to its customers,
drafting requests for proposals, assisting in procurement negotiations and
actual operation of portions of Primark's telecommunications networks. All
contracts for telecommunications services will be executed by Primark and
payments for services will be made directly by Primark.
(h) The ITR, and/or members of the technical staff of TASC,
will participate in special Primark projects from time to time as requested by
Primark and agreed by TASC. Such projects may include performing due diligence
on acquisition candidates, evaluating new product development proposals,
resolving information technology problems for Primark customers and similar
projects, provided that in case of an actual, perceived or potential conflict of
interest, TASC may decline participation in such projects.
4
<PAGE>
(i) Primark may request TASC to undertake information
technology projects on Primark's behalf, or to participate as team members in
such information technology projects undertaken by Primark. Such projects could
include, but are not limited to, information technology surveys and assessments,
research and development on new technology capabilities and the planning,
development and/or testing of new Primark information products and internal
information technology capabilities, provided that in case of an actual,
perceived or potential conflict of interest, TASC may decline participation in
such projects.
ARTICLE II
----------
PAYMENTS FOR SERVICES
---------------------
Section 2.1 Annual Retainer. For the services described in Section
---------------
1.3 (a), (b), (c), (d), (e) and (f), Primark will pay TASC an annual retainer of
$100,000, paid quarterly in advance commencing on the first day of the month
immediately following the Closing of the Stock Purchase. The annual retainer
shall compensate TASC for the availability of the ITR not to exceed 480 hours
---
per year and for the availability of members of his/her staff not to exceed 240
---
hours per year. Efforts of the ITR or members of his/her staff in excess of the
hours stipulated above shall be paid by Primark at a rate or rates agreed upon
by the parties. Primark will also make incentive payments of up to $8,500 at the
end of each quarter during the term of this IT Services Agreement and an
additional amount up to $45,000 at the end of each twelve month period following
the execution of this IT Services Agreement, with such payments to be determined
in the sole discretion of Primark reflecting Primark's judgment on the quality
of the IT Services received. Primark will also reimburse TASC for out-of-pocket
expenses, such as travel and reproduction expenses, at cost, including
applicable overhead, monthly in arrears. The quarterly retainer and out-of-
pocket expenses
5
<PAGE>
will be paid within thirty (30) days after the receipt of invoices by Primark
from TASC. Monthly out-of-pocket expenses may not exceed $5,000 in any month
without prior approval by Primark.
Section 2.2 Telecommunications Services. For the telecommunications
---------------------------
services described in Section 1.3 (g), Primark will reimburse TASC at hourly
rates mutually agreed in advance. Out-of-pocket costs, including any external
vendor charges, will be reimbursed at cost, including such overhead as may be
required to be charged by applicable government regulation. A part of the IT
Plan described in Section 1.3 (e) will include a Telecommunications Cost Annex,
estimating the telecommunications costs for Primark's Five-Year Plan and Annual
Budget. Upon Primark's approval of the telecommunications cost estimate for the
Annual Budget, TASC may begin incurring such costs. The telecommunications cost
estimate for the Annual Budget will be updated quarterly. Any expenditure by
TASC on Primark's behalf in excess of 5% above the approved telecommunications
cost estimate will require prior approval by Primark. Payments for
telecommunications services will be made monthly in arrears, within thirty (30)
days of receipt of invoices.
Section 2.3 Other Services. For the services described in Sections
--------------
1.3 (h) and (i), relating to special projects, upon request by Primark, TASC
will submit a proposal covering the scope of work, milestones, schedule,
deliverables, personnel assigned and costs. TASC may commence work on special
projects upon receipt of approval from Primark. Primark will reimburse TASC for
these other services, at hourly rates mutually agreed by the parties. Out-of-
pocket costs will be reimbursed based on costs incurred, including applicable
overhead. Payments for other services will be made monthly in arrears, within
thirty (30) days of receipt of invoices.
6
<PAGE>
Section 2.4 Overhead. For the purposes of this Article II, overhead
--------
means the overhead and general and administrative expenses (G&A) charges on
cost-based contracts performed for the U.S. Government during similar time
periods, calculated and applied in the same manner.
ARTICLE III
-----------
TERMINATIONS
------------
Section 3.1 Normal Termination Date. This IT Services Agreement
-----------------------
terminates three years from the date of the Closing (as defined in the Stock
Purchase Agreement). However, notwithstanding anything herein to the contrary,
the telecommunications services described in Section 1.3 (g) hereof may be
terminated separately at any time upon ninety (90) calendar days advance notice
to TASC.
Section 3.2 Special Termination. After the first anniversary of
--------------------
this IT Services Agreement, Primark may terminate this Service Agreement at any
time upon ninety (90) calendar days advance notice to TASC.
ARTICLE IV
----------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
Section 4.1 Work to be Performed and IT Services to be Rendered.
---------------------------------------------------
(a) For purposes of this IT Services Agreement "Work Product"
shall mean all data, documentation, software and information, in whatever form,
first produced or created by TASC in the performance of the work or the
rendition of services under this IT Services Agreement and
7
<PAGE>
delivered to Primark as a deliverable hereunder including all proprietary rights
therein including rights of patent, copyright, trademark, mask work and trade
secret ("Intellectual Property Rights").
(b) During the term of this IT Services Agreement TASC shall
render the services set forth in Section 1.3 above. All services to be rendered
hereunder shall be under the general supervision of a designated Primark
representative (the "Primark Representative").
(c) All services to be rendered and deliverables to be
delivered hereunder shall be deemed accepted by the Primark Representative if
not rejected within forty five (45) calendar days of submission to Primark. If
the Primark Representative rejects the services and or deliverables required
hereunder, Primark shall provide reasonably detailed information about the
rejection and TASC shall promptly correct such services and/or deliverables and
resubmit same to Primark for acceptance in accordance with the provisions of
this paragraph (c).
(d) The services to be rendered hereunder shall be performed
by TASC, but such services may be subcontracted or otherwise performed by third
parties on behalf of TASC without the prior consent of Primark if, and only if,
such subcontracting is a customary practice of TASC.
Section 4.2 Ownership of Work Product. (a) TASC acknowledges and
-------------------------
agrees that Primark is to be the exclusive owner of the Work Product, including
all Intellectual Property Rights therein, whether such Work Product is tangible
or intangible and including works-in-progress, and whether such Work Product is
created or reduced to practice by TASC alone or jointly with Primark's employees
or agents. Without limiting the generality of the foregoing, all copyrightable
works included in the Work Product shall be considered "works for hire" of
Primark, and TASC expressly waives any right of attribution, droit morale or
----- ------
similar rights therein.
8
<PAGE>
(b) In the event that title to any or all of the Work Product may
not, by operation of law, vest in Primark or is found not to be a "work for
hire" within the meaning of the Copyright Act, then TASC hereby conveys and
irrevocably assigns to Primark, without further consideration, all its right,
title and interest in all Work Product and all copies thereof, in whatever
medium fixed or embodied, and in all written records, graphics, diagrams, notes,
or reports relating thereto in TASC's possession or under its control.
(c) TASC hereby represents, warrants, and covenants that any
contributions of its own employees or subcontractors (to the extent Intellectual
Property Rights are transferred by subcontractors) to the Work Product,
including but not limited to, contributions of the FIT and his or her staff, are
and shall be "works for hire" of TASC or shall be otherwise owned solely and
exclusively by TASC upon delivery to Primark.
(d) Except as otherwise agreed, to the extent that the delivery of
Services by TASC involves the use of any pre-existing (as of the effective date
of this IT Services Agreement) Intellectual Property Rights which are owned or
controlled by TASC or TASC's subsidiaries (other than WSI), Primark is hereby
granted a non-exclusive, perpetual, royalty-free, fully-paid up, worldwide right
and license, with the right to sublicense or transfer the license for such
Intellectual Property Rights to subsidiaries that remain Primark subsidiaries;
provided, however, that Primark may use said Intellectual Property Rights solely
- -------- -------
for its own use and that of its subsidiaries and may not sublicense or transfer
such license to any third party including a parent or affiliate (other than a
subsidiary). The license hereby granted to Primark shall survive the termination
of this IT Services Agreement for whatever reason.
ARTICLE V
---------
CONFIDENTIALITY
---------------
9
<PAGE>
TASC shall not disclose, or use for the benefit of other than Primark,
any and all written or tangible information marked "confidential," "proprietary"
or with a similar legend disclosed to TASC as a result of this IT Services
Agreement; provided, however, that TASC shall have no obligation hereunder for
that portion of such information which is (i) disclosed by Primark to others
without any restriction on use and disclosure, or (ii) approved for release by
written consent of Primark, or (iii) available to the general public by lawful
means, or (iv) if independently developed by or for TASC or rightfully received
by TASC from a third party, unless any of such information was provided to TASC
as a result of Primark's ownership of TASC.
ARTICLE VI
----------
EMPLOYMENT PROVISIONS
---------------------
The parties acknowledge and agree that: (i) in furnishing the
Services to Primark hereunder, TASC and its Affiliates are functioning as an
independent contractor to Primark; and (ii) except as otherwise provided herein,
TASC and any Affiliate are solely responsible for the payment of salary,
employee benefits and all other compensation due to TASC and Affiliate personnel
for rendering services, and for all applicable federal, state and local tax
withholding with respect to compensation and benefits payable to them under this
IT Services Agreement or otherwise; and (iii) TASC or any Affiliate personnel
shall not participate in or be eligible to participate in any compensation or
benefit plan or perquisite of Primark.
ARTICLE VIII
------------
MISCELLANEOUS PROVISIONS
------------------------
10
<PAGE>
Section 8.1 Definition. The term "Affiliate" as used in this IT
----------
Services Agreement shall mean a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified person.
Section 8.2 Amendment and Modification. This IT Services Agreement
--------------------------
may be amended, modified or supplemented at any time by the parties hereto,
pursuant to an instrument in writing signed by all parties.
Section 8.3 Entire Agreement; Assignment. This IT Services Agreement
----------------------------
(a) constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof and (b) shall not be assigned, by operation of law
or otherwise, by a party hereto, without the prior written consent of the other
parties.
Section 8.4 Severability. The invalidity or unenforceability of any
------------
term or provision of this IT Services Agreement in any situation or jurisdiction
shall not affect the validity or enforceability of the other terms or provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction and the remaining terms and
provisions shall remain in full force and effect, unless doing so would result
in an interpretation of this IT Services Agreement which is manifestly unjust.
Section 8.5 Notices. Unless otherwise provided herein, all notices
-------
and other communications hereunder shall be in writing and may be given by any
of the following methods: (a) personal delivery; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Such notices and communications shall be sent to the
appropriate party at its address or facsimile number given below or at such
other address or facsimile number for such party as shall be specified by notice
given hereunder (and shall
11
<PAGE>
be deemed given upon receipt by such party or upon actual delivery to the
appropriate address or, in case of a facsimile transmission, upon transmission
thereof by the sender and issuance by the transmitting machine of a confirmation
slip that the number of pages constituting the notice have been transmitted
without error. In the case of notices sent by facsimile transmission, the sender
shall contemporaneously mail a copy of the notice to the addressee at the
address provided for above, provided however, that such mailing shall in no way
-------- -------
alter the time at which the facsimile notice is deemed received):
if to Primark, to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Joseph E. Kasputys, Chairman,
President and Chief Executive Officer
with a copy to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Michael R. Kargula, Esq.
Executive Vice President, General
Counsel and Secretary
if to TASC, to
TASC, Inc.
55 Walkers Brook Drive
Reading, Massachusetts 01867
Telecopy: (617)
-----------------
Attention:
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if to Litton Industries, Inc., to
Litton Industries, Inc.
21240 Burbank Blvd.
Woodland Hills, CA 91367
Telecopy: (818) 598-5047
Attention: Alden Munson
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with a copy to
Litton Industries, Inc.
21240 Burbank Blvd.
Woodland Hills, CA 91367
Telecopy: (818) 598-2025
Attention: John E. Preston, Senior VP and
General Counsel
Section 8.6 Governing Law; Arbitration. This IT Services Agreement
--------------------------
shall be governed by, enforced under and construed in accordance with the laws
of the Commonwealth of Massachusetts, without giving effect to any choice or
conflict of law provision or rule thereof. In the event any dispute or
difference of any kind whatsoever shall arise between the parties in connection
with or arising out of the validity or invalidity, construction, execution,
meaning, operation or effect of this IT Services Agreement or breach thereof,
the parties shall seek to resolve the same amicably through good faith
negotiation. Failing resolution by such means the same shall be finally settled
by binding arbitration in Boston, Massachusetts, under the Commercial
Arbitration Rules of the American Arbitration Association governed by the
substantive law of the Commonwealth of Massachusetts. The arbitration shall be
before a panel of three arbitrators unless the parties agree in writing to
arbitration before a single arbitrator. The prevailing party in any arbitration
proceedings hereunder as determined by the arbitrator or in any legal
proceedings or actions arising from or in connection with this IT Services
Agreement shall be entitled to recover reasonable attorneys' fees and costs.
Pending resolution of such dispute, TASC agrees to proceed diligently with the
performance of this IT Services Agreement, unless otherwise directed by Primark.
Section 8.7 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain,
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modify, amplify or add to the interpretation, construction or meaning of any
provision of, or scope or intent of, this IT Services Agreement nor in any way
affect this IT Services Agreement.
Section 8.8 Counterparts. This IT Services Agreement may be executed
------------
in counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
Section 8.9 Interpretation. In the event an ambiguity or question of
--------------
intent or interpretation arises, this IT Services Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this IT Services Agreement.
Section 8.10 No Third Party Beneficiaries. This IT Services Agreement
----------------------------
is solely for the benefit of Primark and its successors and permitted assigns,
with respect to the obligations of TASC and Buyer under this IT Services
Agreement, and for the benefit of Buyer and TASC, and their successors and
permitted assigns, with respect to the obligations of Primark under this IT
Services Agreement, and this IT Services Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim of liability or
reimbursement, cause of action or other right.
Section 8.11 No Waivers. Except as otherwise expressly provided
----------
herein, no failure to exercise, delay in exercising, or single or partial
exercise of any right, power or remedy by any party, and no course of dealing
between the parties, shall constitute a waiver of any such right, power or
remedy. No waiver by a party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence. No waiver shall be valid unless in
writing and signed by the party against whom such waiver is sought to be
enforced.
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Section 8.12 No Solicitation/No Hire. During the period of performance
-----------------------
of this IT Services Agreement, and for two (2) years thereafter, neither party
hereto shall, without the prior written consent of the other party, hire,
solicit for hire or knowingly allow its employees to hire or solicit for hire
any of those employees of the other party or its affiliates who are associated
with the performance of this IT Services Agreement.
Section 8.13 Warranties/Disclaimer. BUYER AND TASC ARE FURNISHING NO
---------------------
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. BUYER AND
TASC SHALL NOT BE LIABLE FOR LOSS FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR
INJURY TO THIRD PARTIES.
IN WITNESS WHEREOF, each of the undersigned has caused this IT Services
Agreement to be duly signed as of the date first above written.
PRIMARK CORPORATION
By:
---------------------------------
Name:
Title:
TASC, INC.
By:
---------------------------------
Name:
Title:
LITTON INDUSTRIES, INC.
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By:
---------------------------------
Name:
Title:
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