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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES ACT OF 1934
COMMISSION FILE NUMBER 0-17195
Landmark Graphics Corporation
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0029459
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15150 MEMORIAL DRIVE 77079-4304
HOUSTON, TEXAS (Zip Code)
(Address of principal executive office)
(713) 560-1000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
The number of shares outstanding of the Registrant's common stock, $0.05 par
value, as of May 1, 1996, was 17,260,896.
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INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
As of March 31, 1996 and June 30, 1995 . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations -
For the Three Months and Nine Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows -
For the Nine Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 9
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 3
LANDMARK GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 55,028 $ 64,099
Receivables:
Trade accounts receivable, net of allowance . . . . . . . . 47,003 51,984
Current income tax receivable . . . . . . . . . . . . . . . 873 1,003
Accrued revenue and other receivables . . . . . . . . . . . 8,456 7,838
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,153 4,340
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 5,474 3,004
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 3,837 3,847
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . 124,824 136,115
Property and equipment, net . . . . . . . . . . . . . . . . . . 47,642 47,503
Software development costs, net . . . . . . . . . . . . . . . . 11,031 7,932
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . 22,876 11,949
Other long-term assets, net . . . . . . . . . . . . . . . . . . 7,009 7,652
--------- ---------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 213,382 $ 211,151
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 13,867 $ 9,488
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 13,029 10,823
Deferred maintenance fees . . . . . . . . . . . . . . . . . . 19,530 14,597
Income taxes payable . . . . . . . . . . . . . . . . . . . . 121 2,683
Current maturities of long-term debt . . . . . . . . . . . . - 1,007
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . 46,547 38,598
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 2,590 2,590
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . - 11,000
Other long-term liabilities . . . . . . . . . . . . . . . . . . 2,943 65
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 52,080 52,253
--------- ---------
Common stockholders' equity:
Common stock, $0.05 par value; 17,498 shares issued and 17,260
outstanding at March 31, 1996, and 17,086 shares issued and
outstanding at June 30, 1995 . . . . . . . . . . . . . . . 875 854
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 128,419 122,407
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 36,143 35,637
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (4,135) -
--------- ---------
Total common stockholders' equity . . . . . . . . . . . 161,302 158,898
--------- ---------
Total Liabilities and Common Stockholders' Equity . . . . . . . $ 213,382 $ 211,151
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
1
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LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- ------------------------
1996 1995 1996 1995
--------- --------- --------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenue:
Software product sales . . . . . . . . . . . . . $ 18,887 $ 22,634 $ 57,623 $ 59,553
Hardware product sales . . . . . . . . . . . . . 5,875 8,368 22,155 23,611
Services . . . . . . . . . . . . . . . . . . . . 18,576 13,968 53,542 38,821
--------- --------- --------- ---------
Total revenue . . . . . . . . . . . . . . . . . 43,338 44,970 133,320 121,985
Cost of revenue:
Cost of software product sales . . . . . . . . . 2,287 2,879 7,144 7,295
Cost of hardware product sales . . . . . . . . . 5,480 6,683 19,908 19,327
Cost of services . . . . . . . . . . . . . . . . 9,823 7,850 27,237 23,220
--------- --------- --------- ---------
Total cost of revenue . . . . . . . . . . . . . 17,590 17,412 54,289 49,842
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . 25,748 27,558 79,031 72,143
Operating expenses:
Research and development . . . . . . . . . . . . 6,253 5,165 16,362 14,229
Selling, marketing and administrative . . . . . . 16,488 15,295 48,952 42,631
Acquired research and development costs . . . . . 11,250 3,700 11,250 3,700
Restructuring, merger and other costs . . . . . . 1,000 - 4,172 2,962
--------- --------- --------- ---------
Total operating expenses . . . . . . . . . . . 34,991 24,160 80,736 63,522
--------- --------- --------- ---------
Income (loss) from operations . . . . . . . . . . . (9,243) 3,398 (1,705) 8,621
Other, net . . . . . . . . . . . . . . . . . . . . 811 898 2,671 2,548
--------- --------- --------- ---------
Income (loss) before income taxes . . . . . . . . . (8,432) 4,296 966 11,169
Provision (benefit) for income taxes . . . . . . . (2,464) 1,107 261 3,189
--------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . $ (5,968) $ 3,189 $ 705 $ 7,980
========= ========= ========= =========
Income (loss) per common and common equivalent
share . . . . . . . . . . . . . . . . . . . . . . . $ (0.34) $ 0.18 $ 0.04 $ 0.46
========= ========= ========= =========
Weighted average common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . 17,426 17,370 17,854 17,416
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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LANDMARK GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------
1996 1995
-------- ---------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 705 $ 7,980
Adjustments to reconcile net income to net cash provided
by operating activities:
Acquired research and development . . . . . . . . . . . . . . . . . . . . . 11,250 3,700
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,536 6,160
Amortization of goodwill/other assets . . . . . . . . . . . . . . . . . . . 1,508 904
Amortization of capitalized software development costs . . . . . . . . . . . 2,655 2,349
Restructuring charges/asset write-downs . . . . . . . . . . . . . . . . . . 2,078 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,068 2,231
Changes in assets and liabilities, net of the effects of purchased businesses:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,740 (2,233)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (1,836)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,272) 122
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,014 (579)
Accounts payable/accrued liabilities. . . . . . . . . . . . . . . . . . . . . 3,661 3,312
Deferred maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,763 (2,015)
Deferred income taxes/income taxes payable . . . . . . . . . . . . . . . . . (2,161) 1,097
-------- ---------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 35,555 21,192
-------- ---------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,564) (10,205)
Payment for business acquisitions, net of cash acquired . . . . . . . . . . (16,159) (19,203)
Capitalized software development costs . . . . . . . . . . . . . . . . . . . (4,358) (2,501)
Payment of guaranteed purchase price . . . . . . . . . . . . . . . . . . . . (1,808) -
Investment in equity securities . . . . . . . . . . . . . . . . . . . . . . . - (6)
Proceeds from sale of property and equipment. . . . . . . . . . . . . . . . . 21 160
-------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (32,868) (31,755)
-------- ---------
Cash flows from financing activities:
Reductions of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,007) (1,443)
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 6,055 1,333
Acquisitions of treasury stock . . . . . . . . . . . . . . . . . . . . . . . (5,806) -
Distributions to pooled entities stockholders . . . . . . . . . . . . . . . . - (825)
-------- ---------
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . (11,758) (935)
-------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . (9,071) (11,498)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . 64,099 74,695
-------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . $ 55,028 $ 63,197
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
LANDMARK GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of
Landmark Graphics Corporation and subsidiaries (the "Company" or "Landmark")
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Unless the
context otherwise requires, the term "Landmark" refers to Landmark Graphics
Corporation and the term "Company" refers to Landmark and its subsidiaries.
These financial statements should be read in conjunction with the audited
financial statements and accompanying notes included in the Company's 1995
Annual Report on Form 10-K.
The consolidated financial statements for the three-month and
nine-month periods ended March 31, 1995 have been restated to give effect to
acquisitions which have been accounted for as poolings of interests (see
"Acquisitions" below).
The unaudited consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair statement of the results of the interim periods
presented. Results for the three-month and nine-month periods ended March 31,
1996, are not necessarily indicative of results for the fiscal year ending
June 30, 1996. All significant intercompany balances and transactions have been
eliminated.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
ACQUISITIONS
Western Atlas International, Inc.
On March 29, 1996, the Company purchased certain assets and assumed
certain liabilities of Western Atlas International, Inc. ("WAII") of Houston,
Texas in exchange for cash consideration of approximately $12.1 million. The
Company also incurred accounting, legal and investment banking costs of
approximately $750,000 related to the acquisition. The assets acquired
primarily consisted of oil and gas exploration and production software
applications as well as in-process research and development activities. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the acquired operations have been included in the results of
operations since the date of acquisition and were not material.
Verticomp, Inc.
In September, 1995, the Company entered into a note purchase agreement
with Verticomp, Inc. ("Verticomp"), a Houston, Texas-based company. The note
purchase agreement granted the Company the option to purchase certain assets
and assume certain liabilities of Verticomp in exchange for cash consideration
of approximately $650,000. On January 1, 1996, the Company exercised the
option. Assets acquired primarily consisted of oil and gas production software
applications as well as in-process research and development activities. The
acquisition
4
<PAGE> 7
was accounted for using the purchase method of accounting and, accordingly, the
acquired operations have been included in the results of operations since the
date of acquisition and were not material.
Tech Logic, Inc.
On September 20, 1995, the Company acquired all of the outstanding
common stock of Tech Logic, Inc. ("Tech Logic"), a Woodinville,
Washington-based company. Tech Logic has developed an interactive, integrated
3D geological modeling system known as IREX.
In connection with the acquisition, the Company issued a total of
74,637 shares of its Common Stock in exchange for all of the outstanding common
stock of Tech Logic in a transaction accounted for as a pooling of interests.
Due to the immateriality of this transaction and its effect on the historical
consolidated financial statements of the Company for prior periods, those
statements have not been restated to reflect the operating results and
financial condition of Tech Logic.
GeoGraphix, Inc.
On June 5, 1995, the Company acquired all of the outstanding common
stock of GeoGraphix, Inc. ("GeoGraphix"), a Denver, Colorado-based company, in
a transaction accounted for as a pooling of interests and, accordingly, the
consolidated financial statements for the three-month and nine-month periods
ended March 31, 1995 have been restated to include the accounts of GeoGraphix.
DRD Corporation
On February 28, 1995, the Company purchased certain assets and assumed
certain liabilities of DRD Corporation ("DRD") of Tulsa, Oklahoma in exchange
for cash consideration of approximately $5.8 million. The Company also incurred
accounting, legal and investment banking costs of approximately $600,000
related to the acquisition. The assets acquired primarily consisted of
drilling and completion engineering software applications as well as in-process
research and development activities. The acquisition was accounted for using
the purchase method of accounting and, accordingly, the acquired operations
have been included in the results of operations since the date of acquisition.
MGI Associates, Inc.
On September 29, 1994, the Company purchased all the issued and
outstanding capital stock of MGI Associates, Inc., ("MGA"), a company based in
Dallas, Texas, which develops personal computer-based economics and reservoir
engineering software products designed to aid asset teams, including production
and drilling engineers, in oil and gas exploration. The Company acquired MGA
for initial consideration of approximately $13.3 million which consisted of
cash of $10.5 million paid to acquire the stock, $1.2 million paid to retire
certain related party debt and approximately $1.6 million of acquisition
related costs. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the acquired operations have been included in the
results of operations since the date of acquisition.
5
<PAGE> 8
Under the terms of the original MGA acquisition agreement, the Company
was obligated to make earn-out payments, based upon the financial performance
of MGA, over a period of four years with a net present value (as of July 1,
1994) of up to $6.0 million. On September 29, 1995, the stock purchase
agreement was amended to guarantee a total earn-out of $6.9 million payable
over a three-year period starting September 30, 1995.
Originally, in connection with the MGA transaction, the Company
acquired an option to purchase the equity interests of a corporation owned by
certain of the former shareholders of MGA ("Argus") in exchange for a $3.0
million line of credit guarantee. On April 29, 1996, this option agreement was
terminated and the Company was assigned ownership of certain software previously
owned by Argus. The Company's guarantee of the $3.0 million line of credit
remains in effect. The Company is currently making interest payments on behalf
of Argus and could be called upon to perform on the guarantee.
Stratamodel, Inc.
On September 28, 1994, the Company acquired all of the equity
interests of Stratamodel, Inc. ("Stratamodel"), a Houston, Texas-based company,
in a transaction accounted for as a pooling of interests.
Stratamodel's reservoir characterization and modeling software
products are designed to aid geoscientists in oil and gas exploration and
production. In connection with the acquisition, the Company issued a total of
413,911 shares of its Common Stock in exchange for all of the equity interests
of Stratamodel, which included common stock, stock options and warrants. In
addition, the Company retired all of Stratamodel's outstanding debt of
approximately $510,000 and paid certain acquisition-related expenses of
Stratamodel of approximately $293,000.
SOFTWARE DEVELOPMENT COSTS
In addition to the $4.4 million of software development costs
capitalized during the nine months ended March 31, 1996, the Company recorded
approximately $1.5 million of software development costs in connection with the
Western Atlas purchase. The amounts recorded in connection with the purchase
reflect the estimated fair market value to the Company of the software
acquired.
INTANGIBLES
Intangibles consist primarily of goodwill, which represents the cost
in excess of the fair market value of the net assets of companies acquired and
is being amortized on a straight-line basis over a period of eight to twelve
years. During the nine months ended March 31, 1996, the Company recorded
goodwill in connection with Western Atlas and Verticomp acquisitions of
approximately $5.2 million and recorded $6.9 million of guaranteed purchase
payments for the MGA acquisition.
LONG-TERM DEBT
In October 1995, the Company paid in full the amounts outstanding
under its term loan and existing credit facility. On December 15, 1995, the
Company terminated its $25.0 million
6
<PAGE> 9
credit facility and entered into a $100.0 million revolving credit agreement
with a syndicate of seven banks. The term of this credit facility is three
years.
The agreement contains certain restrictive and financial covenants,
including those related to indebtedness, net worth and fixed charges, and
provides for guarantees by certain subsidiaries of Landmark. At March 31,
1996, there were $2.7 million in letters of credit and no revolving loans
outstanding under this facility, and the Company was in compliance with the
loan covenants.
ACQUIRED RESEARCH AND DEVELOPMENT
Acquired research and development costs for the three-month and
nine-month periods ended March 31, 1996 relate to in-process research and
development activities acquired in connection with the purchase of certain
assets and assumption of certain liabilities of WAII and of Verticomp. The
Company evaluated the status of those acquired development activities and
determined that certain projects require further development by the Company,
had not reached technological feasibility under the Company's software
development plans and did not have alternative future uses to the Company. The
Company performed a separate valuation of the replacement cost of these
activities and determined the replacement cost related to the activities of
WAII approximated $11.0 million. The replacement cost related to the
in-process research and development activities of Verticomp was determined to
approximate $250,000.
In the periods ended March 31, 1995, acquired research and development
costs relate to in-process research and development activities acquired in
connection with the DRD purchase. The Company determined the replacement cost
of these activities was approximately $3.7 million.
RESTRUCTURING, MERGER AND OTHER COSTS
In the three-month period ended March 31, 1996, the Company recorded
merger, restructuring and other non-recurring charges of $1.0 million. The
charge reflects the write-off of redundant assets and activities, including
capitalized software of the Company, that would be replaced by the acquired WAII
applications.
In July 1995, the Company completed a strategic planning process which
concluded with the decision to proactively realign resources. A restructuring
charge of $3.1 million is included in the results of operations for the nine
months ended March 31, 1996 to reflect severance costs for terminated
employees, facility consolidation and write-down of certain assets of the
Company.
Merger costs in the prior year of $1.2 million consisted of advisor
costs in connection with the Stratamodel acquisition. Related to the
Stratamodel acquisition, the Company adopted a restructuring plan designed to
eliminate redundancies and consolidate operations. Under the plan, the Company
recorded approximately $1.2 million in restructuring charges consisting of
severance costs for terminated employees and lease costs associated with
duplicate facilities. Additionally, non-recurring charges of approximately
$600,000 were incurred in connection with the acquisition, including relocation
and other acquisition-related costs.
7
<PAGE> 10
INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Income (loss) per common and common equivalent share is computed using
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. Common stock equivalents include
the number of shares issuable upon exercise of stock options, less the number
of shares that could have been repurchased with the exercise proceeds using the
treasury stock method. In the case of a net loss, no shares are assumed to be
issued upon exercise of stock options because such shares would have an
antidilutive effect on the calculation.
For purposes of the income per share computation, the shares issued in
exchange for the equity interests of pooled entities have been treated as if
they had been issued and outstanding for all periods presented.
CASH FLOW INFORMATION
Net cash provided by operating activities reflects cash payments for
interest and income taxes as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------
1996 1995
-------- ----------
(Restated)
<S> <C> <C>
Income taxes . . . . . . . . . . . . . . . . . . . . . . $ 1,656 $ 1,358
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 404 $ 771
</TABLE>
During the nine-month periods ended March 31, 1996 and 1995, there
were non-cash financing activities of $1.4 million and $356,000, respectively,
relating to tax benefits received from the exercise of non-qualified stock
options by employees.
TREASURY STOCK
On November 6, 1995, Landmark's Board of Directors approved a plan for
the Company to repurchase shares of its Common Stock on the open market. The
repurchase program is intended to minimize the dilutive effects of the
Company's employee stock option program on the Company's earnings per share.
During the nine-month period ended March 31, 1996, the Company repurchased
320,000 shares of its Common Stock, of which 82,000 shares have been reissued
upon the exercise of employee stock options.
OTHER
In December 1995, ten of Landmark's officers executed severance
agreements that would be invoked upon a change in control of the Company.
8
<PAGE> 11
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is the Company's analysis of its financial
performance and of significant trends which may impact future performance. It
should be read in conjunction with the consolidated financial statements of the
Company and the related notes thereto. Certain of the statements made in the
Company's MD&A are forward looking statements related to the transition to
integrated solution sales based on current expectations that involve a number of
risks and uncertainties. The factors that could cause actual results to differ
materially include the following: unanticipated delays in implementation/
transition to delivery of integrated solutions; lack of customer acceptance of
integrated solutions delivery; uncertainty in oil and gas markets; competitive
factors and pricing pressures; timing of development and acceptance of new
product/services releases; technical obsolescence of the Company's products/
services; inability to recruit required sales management, marketing and
consulting personnel; and the risks detailed from time to time in the Company's
SEC reports, including the Form 8-K filed on April 2, 1996 that identifies
certain of these important risk factors.
The Company, incorporated in 1982, designs, markets and supports
software, services and systems which are used in exploration and production
efforts of oil and gas companies worldwide. The Company derives revenue from
licensing software products, providing related professional and consulting
services, and reselling hardware. In most instances, customers pay the Company
an initial license fee for the software. Generally, revenue from software and
hardware product sales is recognized by the Company upon shipment. Customers
have the option to pay an annual maintenance fee, calculated as a percentage of
current list price, which entitles them to routine support and product updates.
The Company generally recognizes revenue related to customer support agreements
ratably over the contract period.
Many of the Company's customers are shifting from functional
organizations to interdisciplinary teams, which is creating the need for
integrated products and service sales. Accordingly, the Company's sales,
marketing and support organizations are currently being reconfigured to better
address the emerging "solutions" market. These solution sales have the longer
term potential of generating larger contracts and more recurring revenue;
however, they can also lengthen customers' decision-making processes. The
Company believes that its competitors are dealing with similar changes in their
sales and marketing organizations.
The transition of the Company's sales organization may continue
throughout the fourth quarter of fiscal year 1996 and late through the fiscal
year 1997. The transition includes recruiting additional professional sales
management, strengthening market capabilities, as well as building a
professional and technical consulting organization. This transition may have a
negative impact on the Company's growth during this period but should position
the Company for the ongoing prospects that the market has to offer over the
longer term. The Company believes it is very unlikely that it will generate
positive earnings growth for the 1996 fiscal year.
On March 29, 1996, the Company acquired the general application
software operations of Western Atlas International, Inc. ("WAII") recorded
under the purchase method of accounting. On September 20, 1995, the Company
acquired all of the outstanding common stock of Tech
9
<PAGE> 12
Logic, Inc. ("Tech Logic") in an acquisition accounted for as a pooling of
interests. On June 5, 1995, the Company acquired all of the outstanding common
stock of GeoGraphix, Inc. ("GeoGraphix") in an acquisition accounted for as a
pooling of interests. On February 28, 1995, the Company purchased certain
assets and assumed related liabilities of DRD Corporation ("DRD") in an
acquisition accounted for as a purchase. On September 29, 1994, the Company
acquired all of the outstanding common stock of MGI Associates, Inc. ("MGA") in
an acquisition accounted for as a purchase. On September 28, 1994, the Company
acquired all of the equity interests of Stratamodel, Inc. ("Stratamodel") in an
acquisition accounted for as a pooling of interests. Accordingly, the
Company's consolidated financial statements included elsewhere herein give
effect to the acquisitions accounted for as pooling of interests (other than
Tech Logic) for all periods presented and include the results of acquired
operations accounted for as purchases and Tech Logic since the dates of
acquisition. The following discussion should be read in conjunction with the
Company's consolidated financial statements and the related notes thereto.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Total revenue. Total revenue for the third quarter of fiscal 1996
("Current Quarter") decreased approximately $1.6 million, or four percent, as
compared with the third quarter of fiscal 1995 ("Comparable Quarter"). The
decrease is primarily due to a 20 percent reduction in software and hardware
product revenue, offset in part by a 33 percent increase in services revenue.
International revenue comprised 47 percent of total revenue for the Current
Quarter compared to 59 percent for the Comparable Quarter.
Software product sales. Software product sales consist of licensing
fees for the Company's proprietary and third party software. Software product
sales decreased approximately $3.7 million, or 17 percent, from the Comparable
Quarter. The decrease in software sales is mainly due to the lower revenues in
the Current Quarter from geophysical application sales. Software product
revenue as a percentage of total revenue decreased from the Comparable Quarter.
The Company expects that this revenue should continue to be a significant but
declining portion of total revenue. Future growth in software product sales is
partly dependent upon the Company's ability to bring innovative software
products to the market ahead of its competitors.
Hardware product sales. Hardware product sales relate to the resale
of third party computer hardware. Hardware product sales decreased
approximately $2.5 million, or 30 percent, from the Comparable Quarter. During
the Comparable Quarter, a large international order that contained a
significant hardware component contributed to the higher hardware product
revenue in that quarter.
Services. Services revenue relates to maintenance and support of the
Company's hardware and software products, and increasingly from revenue from a
variety of other professional services, including implementation, consulting
and integration of applications, offered to customers. Services revenue
increased approximately $4.6 million, or 33 percent, in the Current Quarter
from the Comparable Quarter. This increase is primarily attributable to a 25
percent increase in maintenance support sales and a 55 percent increase in
professional services revenue. This increase in services revenue reflects the
Company's strategy to develop additional sources of recurring revenue streams.
10
<PAGE> 13
Cost of software product sales. Cost of software product sales as a
percentage of software product sales was 12 percent in the Current Quarter as
compared with 13 percent in the Comparable Quarter. As the Company develops
and releases new products or embeds third party software within its own
software, software product costs and the related amortization may continue
to increase and could negatively affect the Company's software product margin.
Cost of hardware product sales. Cost of hardware product sales as a
percentage of hardware product sales increased to 93 percent in the Current
Quarter compared to 80 percent in the Comparable Quarter. The lower cost as
percentage of hardware product revenue in the Comparable Quarter was mainly a
result of the large international order discussed in "Hardware product sales"
above and the corresponding higher margin involved. In addition, the Company's
offering of sales discounts to customers in response to competitive pressures,
particularly in the United States market, negatively affected margins on
hardware product sales in the Current Quarter. As price competitiveness in the
computer hardware industry persists, discounts and the resulting impact on
hardware product margins may continue. Since hardware revenue now contributes
a lower margin, the Company primarily offers hardware sales to customers who
desire comprehensive system solutions.
Cost of services. Cost of services decreased as a percentage of the
related revenue from 56 percent in the Comparable Quarter to 53 percent in the
Current Quarter. This decrease in cost as a percentage of revenue is mainly
attributable to the combination of higher revenues associated with the
expanding installed base with only a minimal increase in related cost, offset
by costs from the higher revenue from professional services, which have higher
associated costs.
Research and development. Research and development ("R&D") costs
increased $1.1 million, or 21 percent, in the Current Quarter compared to the
Comparable Quarter. As a percentage of revenue, R&D costs were 14 percent for
the Current Quarter and 11 percent for the Comparable Quarter. The Company
capitalized $1.6 million, or 20 percent, of total R&D costs during the Current
Quarter, as compared to $884,000, or 15 percent, of total R&D costs during the
Comparable Quarter. The Company amortized $774,000 and $864,000 of capitalized
software costs in the Current Quarter and Comparable Quarter, respectively.
Selling, marketing and administrative. Selling, marketing and
administrative expenses increased approximately $1.2 million, or eight percent,
for the Current Quarter from the Comparable Quarter. As a percentage of total
revenue, these costs were 38 percent in the Current Quarter and 34 percent in
the Comparable Quarter. The increase is primarily a result of increased
personnel costs associated with the transition of the sales, marketing and
support organizations to facilitate the emerging solutions market.
Acquired research and development costs. Acquired research and
development costs of $11.2 million for the Current Quarter relate primarily to
the in-process research and development activities acquired in connection with
the WAII acquisition. The Company reviewed the status of the acquired research
and development activities and determined that certain projects require further
development by the Company, that technical feasibility had not been established
for certain of these activities under the Company's software development plans
and method to account for software development costs. In addition to
determining whether technological feasibility had been reached, the Company
determined that these projects did not have alternative future uses to the
Company. Therefore, a separate valuation of the replacement cost of these
activities was performed and resulted in a valuation of $11.0 million. In
accordance with generally accepted accounting principles, this amount was
expensed at the date of the WAII acquisition. The Company expects to incur
approximately $4 to $5 million during the next 12 to 18 months to document,
merge and embed the acquired code and development activities into products
expected to be released in the future.
11
<PAGE> 14
In the Comparable Quarter, $3.7 million was expensed as acquired
research and development costs as a result of a similar evaluation performed in
connection with the purchase of certain assets of DRD.
Restructuring, merger and other costs. During the Current Quarter, a
charge of $1.0 million was recorded to reflect the write-off of redundant
assets and activities as a result of the WAII acquisition. This charge
included approximately $500,000 for capitalized software that would be replaced
by acquired WAII applications and the remainder for personnel and related
costs.
Taxes. A benefit for income taxes of $2.5 million was recorded in the
Current Quarter as compared to a provision for income taxes of $1.1 million in
the Comparable Quarter. The benefit for income taxes relates primarily to the
acquired research and development costs recorded in connection with the WAII
purchase.
RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
Total revenue. Total revenue for the nine months ended March 31, 1996
("Current Period") increased approximately $11.3 million, or nine percent, as
compared with the nine months ended March 31, 1995 ("Comparable Period"). The
increase is primarily due to a 38 percent growth in services revenue.
International revenue comprised 52 percent of total revenue for the Current
Period compared to 58 percent for the Comparable Period.
Software product sales. Software product sales decreased
approximately $1.9 million, or three percent, from the Comparable Period.
Software product revenue as a percentage of total revenue decreased from the
Comparable Period. The Company expects that this revenue should continue to be
a significant but declining portion of total revenue in the future. The
decrease in software sales is mainly due to the lower revenue from geophysical
application sales offset by higher revenue from sales of production engineering
applications.
Hardware product sales. Hardware product sales relate to the resale
of third party computer hardware. Hardware product sales decreased
approximately $1.5 million, or six percent, from the Comparable Period. During
the Comparable Period, a large international order that contained a significant
hardware component contributed to the higher hardware product revenue in that
period.
Services. Services revenue increased approximately $14.7 million, or
38 percent, in the Current Period from the Comparable Period. This increase is
primarily attributable to a 30 percent increase in maintenance support sales
and a 59 percent increase in professional services revenue. This increase in
services revenue reflects the Company's strategy of developing additional
sources of recurring revenue streams.
Cost of software product sales. Cost of software product sales as a
percentage of software product sales was 12 percent in the both the Current
Period and Comparable Period.
Cost of hardware product sales. Cost of hardware product sales as a
percentage of hardware product sales increased to 90 percent in the Current
Period compared to 82 percent in the Comparable Period. The lower cost as
percentage of hardware product revenue in the Comparable Period was a partially
a result of the large international order discussed in "Hardware
12
<PAGE> 15
product sales" above and the corresponding higher margin involved. In
addition, the Company's offering of sales discounts to customers in response to
competitive pressures, particularly in the United States market, negatively
affected margins on hardware product sales in the Current Period. As price
competitiveness in the computer hardware industry persists, discounts and the
resulting impact on hardware product margins may continue. Since hardware
revenue now contributes a lower margin, the Company plans offers hardware sales
to customers who desire comprehensive system solutions.
Cost of services. Cost of services decreased as a percentage of the
related revenue from 60 percent in the Comparable Period to 51 percent in the
Current Period. This decrease in cost as a percentage of revenue is mainly
attributable to the higher revenues associated with the expanding installed
base with only a minimal increase in related cost to provide these services.
Research and development. R&D cost increased $2.1 million, or 15
percent, in the Current Period compared to the Comparable Period. As a
percentage of revenue, R&D costs were 12 percent for both the Current Period
and Comparable Period. The Company capitalized $4.4 million, or 21 percent, of
total R&D costs during the Current Period, as compared to $2.5 million, or 15
percent, of total R&D costs during the Comparable Period. The Company
amortized $2.7 million and $2.3 million of capitalized software costs in the
Current Period and Comparable Period, respectively.
Selling, marketing and administrative. Selling, marketing and
administrative expenses increased approximately $6.3 million, or 15 percent,
for the Current Period from the Comparable Period. As a percentage of total
revenue, these costs were 37 percent in the Current Period and 35 percent in
the Comparable Period. The increase is primarily a result of increased
personnel costs associated with the transition of the sales, marketing and
support organizations and higher costs related to the Company's upgrade of its
information systems. Amortization of goodwill increased $510,000 in the
Current Period compared to the Comparable Period.
Acquired research and development costs. Acquired research and
development costs of $11.2 million for the Current Quarter relate primarily to
the in-process research and development activities acquired in connection with
the WAII acquisition. The Company reviewed the status of the acquired research
and development activities and determined that certain projects require further
development by the Company, that technical feasibility had not been established
for certain of these activities under the Company's software development plans
and method to account for software development costs. In addition to
determining whether technological feasibility had been reached, the Company
determined that these projects did not have alternative future uses to the
Company. Therefore, a separate valuation of the replacement cost of these
activities was performed and resulted in a valuation of $11.0 million. In
accordance with generally accepted accounting principles, this amount was
expensed at the date of the WAII acquisition. The Company expects to incur
approximately $4 to $5 million during the next 12 to 18 months to document,
merge and embed the acquired code and development activities into products
expected to be released in the future.
In the Comparable Period, $3.7 million was expensed as acquired
research and development costs as a result of a similar evaluation in
connection with the purchase of certain assets of DRD.
Restructuring, merger and other costs. In March 1996, a charge of
$1.0 million was recorded to reflect the write-off of redundant assets and
activities as a result of the WAII acquisition. This charge included
approximately $500,000 for capitalized software that would be replaced by
acquired WAII applications and the remaining for personnel and related costs.
In July
13
<PAGE> 16
1995, the Company completed a strategic planning process which concluded with
the decision to proactively realign its resources. A restructuring charge of
$3.1 million was recorded in the Current Period to reflect severance costs for
terminated employees, facility consolidation and write-down of certain assets
of the Company.
Merger costs of $1.2 million for the Comparable Period consisted of
advisor costs related to the acquisition of Stratamodel. In connection with
the Stratamodel acquisition, the Company adopted a restructuring plan in the
Comparable Period designed to eliminate redundancies and consolidate
operations. Under the plan, the Company accrued approximately $1.2 million of
severance costs for terminated Stratamodel employees and lease costs for
Stratamodel's facilities. Additionally, $600,000 of non-recurring costs were
recorded for relocation costs and other acquisition related charges.
Other, net. Other, net increased approximately $123,000, or five
percent, from the Comparable Period to the Current Period. This increase is due
mainly to lower interest expense due to the payoff of the term loan and credit
revolver in October 1995.
Taxes. Provisions for income taxes of $261,000 and $3.2 million were
recorded in the nine months ended March 31, 1996 and 1995, respectively.
FINANCIAL CONDITION AND LIQUIDITY
Cash and cash equivalents decreased approximately $9.1 million from
June 30, 1995. Cash provided by operating activities for the nine months ended
March 31, 1996 was $35.6 million offset by cash used in investing activities of
$32.9 million and cash used in financing activities of $11.8 million.
Trade accounts receivable decreased by $5.0 million due to improved
collections and higher revenues in the fourth quarter of fiscal 1995 as
compared to the current quarter. Management continues its emphasis on
improving collections, which has impacted the trade accounts receivable balance
and reduced the significant fluctuations experienced in days sales outstanding.
Management intends to focus efforts on maintaining days sales outstanding
within a 85 to 95 day range.
Software development costs, net increased by $3.1 million from June
30, 1995 due to the $1.5 million of software development costs recorded in
connection with the WAII acquisition and the $4.1 million of costs capitalized
during the Current Period. These additions were offset by $2.7 million of
amortization of software development costs in the Current Period.
Intangibles increased approximately $10.9 million from the balance at
June 30, 1995. This increase is primarily due to the $4.6 million of goodwill
recorded from the WAII acquisition and to a guarantee of $6.9 million of
earn-out payments for the MGA acquisition. The initial MGA guaranteed payment
of $1.8 million was paid in September 1995.
Accounts payable and accrued liabilities increased approximately $6.5
million from June 30, 1995 due partially to the recording of the $2.3 million
current liability related to the second MGA guaranteed payment that is due on
September 30, 1996. The remainder of the difference was due to timing of the
receipt and payment of vendor invoices. Based on the nature of these accounts,
period to period fluctuations can be expected to continue.
14
<PAGE> 17
Current maturities of long-term debt decreased $1.0 million and
long-term debt decreased $11.0 million from the balances at June 30, 1995 due
to the payoff of the term loan and credit revolver in October 1995.
Other long-term liabilities increased approximately $2.8 million from
June 30, 1995. This increase represents the final MGA guaranteed payment of
$2.8 million which is due September 30, 1997.
During the Current Period, the Company repurchased 320,000 shares of
its Common Stock for $4.1 million and 82,000 of the shares were reissued upon
the exercise of employee stock options. The Company plans to acquire additional
shares in the future for reissuance related to employee stock option activity.
The Company's primary internal source of liquidity is cash flow
generated from operations. External sources of liquidity include debt and
equity financing. On December 15, 1995, the Company terminated its $25.0
million credit facility and entered into a $100.0 million revolving credit
agreement with a syndicate of seven banks. The agreement contains certain
restrictive and financial covenants, including those related to indebtedness,
net worth and fixed charges, and provides for guarantees by certain
subsidiaries of Landmark. At March 31, 1996 there were $2.7 million in letters
of credit, no revolving loans outstanding under this facility, and the Company
was in compliance with the aforementioned loan covenants. The Company believes
funds generated from operations will be sufficient to meet liquidity
requirements in the foreseeable future.
In connection with the MGA transaction, the Company acquired an option
to purchase the equity interests of a corporation owned by certain of the
former shareholders of MGA ("Argus") in exchange for a $3.0 million line of
credit guarantee. On April 29, 1996, this option agreement was terminated and
the Company was assigned ownership of certain software previously owned by
Argus. The Company's guarantee of the $3.0 million line of credit remains in
effect. The Company is currently making interest payments on behalf of Argus
and could be called upon to perform on the guarantee.
The Company has not paid cash dividends since its inception and does
not intend to pay cash dividends in the future. The Company presently intends
to retain earnings for use in its business, with any future decision to pay
cash dividends dependent on the Company's growth, profitability, financial
condition and other factors the Board of Directors may deem relevant.
Furthermore, certain provisions of the Company's revolving credit agreement
restrict the Company's ability to pay cash dividends.
Management continues to evaluate opportunities to acquire product
technologies or businesses. These acquisition opportunities may involve the
use of cash or, depending upon the size and terms of the acquisition, may
require debt or equity financing. Expenses associated with these potential
acquisitions and post acquisition integration issues may have an adverse impact
on the Company's results of operations in the period the transactions are
consummated or the periods shortly thereafter.
15
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Incorporation by reference from
Exhibit number and description Form Date File No. Exhibit
------------------------------ ---- ---- -------- -------
<S> <C> <C> <C> <C>
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
---------------------------------------------------------------------------
2.1 Purchase Agreement by and NA NA NA NA
between the Company and
Western Atlas International,
Inc. ("WAII") for certain
assets of WAII.
(27) Financial Data Schedule
-----------------------
27 Financial data schedule as of NA NA NA NA
and for the nine months ended
March 31, 1996.
</TABLE>
(b) Reports on Form 8-K.
Form 8-K dated April 2, 1996 which identified important factors that
could cause the Company's actual results to differ materially from
those projected in forward looking statements of the Company made by
or on behalf of the Company.
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANDMARK GRAPHICS CORPORATION
Date: May 10, 1996 By: /s/ Robert P. Peebler
-------------------------------------
Robert P. Peebler
President and Chief Executive Officer
By: /s/ William H. Seippel
-------------------------------------
William H. Seippel
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
17
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
2.1 Purchase Agreement by and between the Company and Western Atlas International, Inc. ("WAII") for certain
assets of WAII.
(27) Financial Data Schedule
27 Financial data schedule as of and for the nine months ended March 31, 1996.
</TABLE>
<PAGE> 1
PURCHASE AGREEMENT
by and between
LANDMARK GRAPHICS CORPORATION,
a Delaware corporation,
and
WESTERN ATLAS INTERNATIONAL, INC.,
a Delaware corporation
Dated as of March 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II PURCHASE AND SALE OF ASSETS; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Purchase and Sale of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 License Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 9
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 10
2.5 Items to be delivered at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 12
2.7 Manufacturer/Vendor Warranties . . . . . . . . . . . . . . . . . . . . . . . .. . . . 12
2.8 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 WAII Engagement of Landmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF WAII . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 No Conflicts; Compliance with Obligations; No Consents . . . . . . . . . . . . . . . 15
3.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Intellectual Property and Software . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.8 Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.9 Adverse Agreements and Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11 Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LANDMARK . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Authorization; Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 No Conflicts; Compliance with Obligations; No Consents . . . . . . . . . . . . . . . 21
ARTICLE V COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Use of Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Employee and Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.4 Taking of Necessary Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
- 1 -
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.6 Change of Control of Landmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7 Dispute Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.8 Agreement to Adopt Successor Tax Procedures . . . . . . . . . . . . . . . . . . . . . 32
5.9 Post-Closing Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11 Use and Removal of Trademarks, Logos, etc. . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Indemnification of Landmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Indemnification of WAII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Procedural Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . 34
6.4 Claims for Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Defense and Settlement of Third-Party Claims . . . . . . . . . . . . . . . . . . . . 35
6.6 Monetary Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.8 Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1 Effect of Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.6 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.8 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.13 ACKNOWLEDGEMENT OF LANDMARK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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<PAGE> 4
SCHEDULES:
<TABLE>
<S> <C>
Schedule 2.2(a) License Grants
Schedule 2.3(b) Certain Assumed Obligations
Schedule 2.9 Allocation of Purchase Price
Schedule 3.3 Consents, Approvals, Authorizations or Orders (WAII)
Schedule 3.4 List of Equipment
Schedule 3.5(a) Intellectual Property and Software Owned by WAII
Schedule 3.5(b) Intellectual Property and Software Used by WAII
Schedule 3.5(e) Protection of Trade Secrets
Schedule 3.6 Assumed Contracts
Section 3.8 Customer List
Schedule 4.3 Consents, Approvals, Authorizations or Orders (Landmark)
Schedule 5.2(b)(i) List of Employees
Schedule 5.2(b)(ii) List of Retained Employees
Schedule 5.2(c) List of Business Employees
</TABLE>
-3-
<PAGE> 5
EXHIBITS:
Exhibit A Assignment of Lease
Exhibit B Assignments of Intellectual Property
Exhibit C Bill of Sale and Assignment
Exhibit D [Reserved]
Exhibit E Landmark Legal Opinion
Exhibit F Non-Competition Agreement
Exhibit G [Reserved]
Exhibit H WAII Lease
Exhibit I WAII Legal Opinion
Exhibit J [Reserved]
Exhibit K Western Atlas Service Agreement
-4-
<PAGE> 6
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 29th day of March, 1996 (the "Agreement Date"), by and between Landmark
Graphics Corporation, a Delaware corporation ("Landmark"), and Western Atlas
International, Inc., a Delaware corporation ("WAII").
R E C I T A L S:
A. WAII, through the Division (as defined in Section 1.1), is carrying
on and conducting, among other activities, the business of marketing,
licensing, maintaining and supporting certain computer software, including,
without limitation, the Software (as defined in Section 1.1), that is used in
oil and gas exploration and production (such business is sometimes referred to
in this Agreement as the "Business").
B. WAII desires to sell the Assets (as defined in Section 1.1) to
Landmark and Landmark desires to acquire the Assets from WAII, subject to the
terms and conditions set forth in this Agreement.
C. WAII and Landmark desire to provide for the continued development,
marketing, maintenance and support of the Software (as defined in Section 1.1),
subject to the terms and conditions set forth in this Agreement and in the
Related Agreements (as defined in Section 1.1).
ARTICLE I
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained in this Agreement and the Related Agreements and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Landmark and WAII agree as follows:
DEFINITIONS
1.1 Terms Defined. Capitalized terms used in this Agreement and not
otherwise defined shall have the following meanings:
"Account Balances" shall have the meaning set forth in Section 5.2(i).
"Affiliate" shall mean, with respect to any Person, any other Person
which, directly or indirectly, controls, is controlled by or is under, control
with the specified Person.
"Agreement" shall mean this Purchase Agreement, including all
amendments and all Exhibits and Schedules.
"Agreement Date" shall have the meaning set forth in the first
paragraph of this Agreement.
"Assets" shall mean (i) WAII's rights under the Assumed Contracts, (ii)
the Equipment, (iii) the Intellectual Property and (iv) the Software; provided,
however, that the Assets shall not include any Excluded Assets.
<PAGE> 7
"Assignment of Lease" shall mean an Assignment of Lease substantially
in the form of Exhibit A.
"Assignments of Intellectual Property" shall mean the Assignments of
Intellectual Property substantially in the form of Exhibit B.
"Assumed Contracts" shall mean the bids, tenders and proposals and the
contracts, leases, licenses and other agreements listed in Schedule 3.6.
"Assumed Obligations" shall have the meaning set forth in Section
2.3(b).
"Assuming Party" shall have the meaning set forth in Section 5.6(b).
"Basket" shall have the meaning set forth in Section 6.6.
"Bill of Sale and Assignment" shall mean a Bill of Sale and Assignment
in substantially the form of Exhibit C.
"Business" shall have the meaning set forth in Recital A.
"Business Combination" shall have the meaning set forth in Section
5.6(b)(ii).
"Business Employees" shall have the meaning set forth in Section
5.2(c).
"Buying Interests" shall have the meaning set forth in Section 6.1.
"Change in Control" shall have the meaning set forth in Section 5.6(b)
"Closing" shall mean the consummation of the purchase and sale of the
Assets pursuant to this Agreement.
"Closing Date" shall mean the date on which the Closing occurs and with
respect to all transactions which this Agreement and the Related Agreements
state will occur on the Closing Date will be deemed to mean 11:59.59 p.m.
Houston, Texas time on such date.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall have the meaning set forth in Section
5.3(c).
"Customer List" shall have the meaning set forth in Section 3.8.
"Direct Litigation Option" shall have the meaning set forth in Section
6.5.
"Disputes" shall have the meaning set forth in Section 6.7.
"Division" shall mean the Western Atlas Software Division of WAII.
"Employee Benefit Plans" shall mean any employee benefit plan, together
with any other plan, program or arrangement to provide employee bonuses,
incentive, deferred compensation or workers compensation, including without
limitation, any stock purchase or stock option plan, stock appreciation right,
retirement, savings, medical, vacation, or similar benefit plans, trusts,
agreements or arrangements (whether or not maintained pursuant to a collective
bargaining agreement, employment contract or otherwise) applicable to
Transferring Employees and maintained, sponsored or contributed to by WAII or
any Affiliate (including, without limitation, any ERISA Affiliate) of WAII.
- 2 -
<PAGE> 8
"Employee Intellectual Property/Software" shall mean all copyrights,
patents, patent applications, trademarks or service marks and/or software
programs created in connection with or resulting from the performance of
services by the Business Employees for Landmark pursuant to Section 5.2(c).
"Entity" shall have the meaning set forth in Section 5.6(b)(i).
"Equipment" shall mean the items of computer hardware, equipment,
office furniture and similar personal property included on Schedule 3.4.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any member of a controlled group of
corporations (as defined in Section 414(b) of the Code), a group of trades or
businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c) of the Code, an affiliate service group (as defined
in Section 414(m) of the Code, or a group of entities which is otherwise
required to be aggregated with any entity pursuant to Section 414(o) of the
Code, and the regulations issued under such sections, of which WAII is a
member.
"Excluded Assets" shall mean all assets of WAII other than the Assets.
"Exhibit" shall mean any referenced exhibit which is attached to this
Agreement.
"Favorable Determination Letter" shall have the meaning set forth in
Section 5.2(i).
"Good Title" shall mean good and indefeasible title which is free and
clear of all Liens.
"Identified Landmark Patents" shall have the meaning set forth in
Section 2.2(d).
"Identified WAII Patents" shall have the meaning set forth in Section
2.2(c).
"Indemnified Party" shall have the meaning set forth in Section 6.4.
"Indemnifying Party" shall have the meaning set forth in Section 6.4.
"Investigation Period" shall have the meaning set forth in Section 6.4.
"Intellectual Property" shall mean all copyrights, patents, patent
applications, trademarks or service marks of WAII used in connection with the
Software but shall not include the name Western Atlas International, Inc.,
Western Atlas Software Division or any name which is deceptively similar to
such names or any logos of WAII or WAI.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" shall mean with respect to WAII the current actual
knowledge of any of the officers or directors of WAII or any of the officers or
product line directors of the Division.
- 3 -
<PAGE> 9
"Landmark" shall have the meaning set forth in the first paragraph of
this Agreement.
"Landmark Legal Opinion" will mean the legal opinion of Winstead
Sechrest & Minick P.C. in substantially the form of Exhibit E.
"Landmark Plan" shall have the meaning set forth in Section 5.2(i).
"Lien" shall mean any lien, pledge, mortgage, deed of trust, security
interest or encumbrance of any nature, other than liens for property taxes for
the current calendar year which are not yet due and payable and minor
imperfections of title which do not interfere with the present use or value of
the property.
"Loss" shall have the meaning set forth in Section 6.1.
"Non-Assigned Obligation" shall have the meaning set forth in Section
2.3(c).
"Non-Competition Agreement" shall mean the Non-Competition Agreement
substantially in the form of Exhibit F.
"Offerees" shall have the meaning set forth in Section 5.2(h)(i).
"Outstanding Landmark Common Stock" shall have the meaning set forth in
Section 5.6(b)(i).
"Outstanding Landmark Voting Securities" shall have the meaning set
forth in Section 5.6(b)(i).
"Party" shall mean either Landmark or WAII and "Parties" shall mean
Landmark and WAII collectively.
"Person" shall mean an individual, partnership, joint venture,
corporation, trust or other unincorporated entity or organization. "Purchase
Price" shall have the meaning set forth in Section 2.3(a).
"Records" shall mean, to the extent available, originals of (i) the
documents evidencing the Assumed Obligations, including, without limitation,
the Assumed Contracts, and (ii) the files, customer lists, vendor lists and
other records and data which relate primarily to the Assets. Without limiting
the generality of the foregoing, the term "Records" will be deemed to include,
to the extent available, all registrations, applications and other documents
evidencing the ownership of Intellectual Property.
"Related Agreements" shall mean each of the agreements and instruments
to be executed by Landmark or WAII pursuant to this Agreement, including
without limitation the Non-Competition Agreement and the Western Atlas Service
Agreement.
"Required Consent" shall have the meaning set forth in Section 2.6.
"Retained Employees" shall have the meaning set forth in Section
5.2(b).
"Seller Favorable Determination Letter" shall have the meaning set
forth in Section 5.2(i).
- 4 -
<PAGE> 10
"Schedule" shall mean any referenced schedule which is attached to this
Agreement.
"Section" shall mean, unless otherwise noted, a section or subsection
of this Agreement.
"Selling Interests" shall have the meaning set forth in Section 6.2.
"Settlement Review Period" shall have the meaning set forth in Section
6.5.
"Software" shall mean all computer software applications programs
identified in Schedule 3.5(a), together with the object codes and source codes,
including all updates, upgrades, modifications and enhancements existing as of
the Closing Date and any user and technical manuals and documentation with
respect to such Software but shall not mean the Excluded Assets.
"Third Party Claim" shall have the meaning set forth in Section 6.4.
"Transferring Employee" shall have the meaning set forth in Section
5.2(b).
"Vacation Accrual" shall have the meaning set forth in Section
5.2(h)(i).
"Vacation Period" shall have the meaning set forth in Section
5.2(h)(i).
"WAI" shall have the meaning set forth in Section 7.6.
"WAII" shall have the meaning set forth in the first paragraph of this
Agreement.
"WAII Lease" shall mean a lease in substantially the form of Exhibit H.
"WAII Legal Opinion" will mean the legal opinion of James E. Brasher,
Vice President and General Counsel to WAII, in substantially the form of
Exhibit I.
"WAII Plan" shall have the meaning set forth in Section 5.2(i).
"WAII Software" shall have the meaning set forth in Section 5.6(c).
"WARN" shall have the meaning set forth in Section 5.2(a).
"Western Atlas Service Agreement" shall mean the Western Atlas Service,
Development and Marketing Agreement substantially in the form of Exhibit K.
Number and Gender. Whenever the context requires, references in this
Agreement to the singular number shall include the plural, and the plural
number shall include the singular, and words denoting gender shall include the
masculine, feminine and neuter.
- 5 -
<PAGE> 11
ARTICLE II
PURCHASE AND SALE OF ASSETS; CLOSING
2.1 Purchase and Sale of the Assets. Subject to the terms and
conditions set forth in this Agreement and in the Related Agreements (i) WAII
shall convey, sell, transfer and assign to Landmark, and Landmark shall purchase
and acquire from WAII, at the Closing, all of WAII's right, title and interest
in and to all of the Assets and all pending applications and registrations with
respect to Intellectual Property, (ii) WAII shall grant to Landmark and Landmark
shall accept the licenses contemplated by Section 2.2(a) and (iii) Landmark
shall grant to WAII and WAII shall accept the licenses contemplated by Section
2.2(b).
2.2 License Grants.
(a) License Grant to Landmark. At Closing, WAII will be deemed to have
granted to Landmark
(i) a fully paid, perpetual, irrevocable, nonexclusive,
worldwide license to prepare derivative works based on the modules,
executables, libraries, applications and utility programs listed in
Schedule 2.2(a) for use only as part of software applications programs
designated in Schedule 2.2(a) and/or Landmark products which replace
such designated applications programs and to use, copy and distribute
such modules, executables, libraries, applications and utility programs
and derivative works, only as part of such software applications
programs and Landmark products; and
(ii) a fully paid, perpetual, irrevocable, non-exclusive,
worldwide, transferable license to prepare derivative works based on the
trade secrets embodied in or related to the Software, Intellectual
Property and Employee Intellectual Property/Software and to use, copy,
license, sub-license and distribute the trade secrets embodied in or
related to the Software, Intellectual Property and Employee Intellectual
Property/Software and such derivative works.
The license granted under Section 2.2(a)(i) for the items listed in Part C of
Schedule 2.2(a) titled "WINDlib Libraries from HALkit" may not be transferred
or extended by Landmark to any third party under any circumstances without
written authorization from WAII. The license granted under Section 2.2(a)(i)
for the other modules, executables, libraries, applications or utility programs
listed in Schedule 2.2(a) shall not be transferable or extendable by Landmark
except that the license for a specific module, executable, library, application
or utility program may be extended to a purchaser of substantially all of
Landmark's right, title and interest in a software applications program with
which the use and distribution of a specific module, executable, library,
application or utility is authorized under Section 2.2(a)(i). However,
Landmark may not extend to any such purchaser any greater rights to such
module, executable, library, application or utility than are granted to
Landmark under Section 2.2(a)(i). Subject to the license granted to Landmark
under Section 2.2(a)(i), WAII retains all right, title and interest, including
the copyright, to the modules, executables, libraries or utility programs
listed in Schedule 2.2(a). The license granted under Section 2.2(a)(ii) shall
be freely transferable by Landmark without restriction.
- 6 -
<PAGE> 12
(b) License Grant to WAII. At the Closing, Landmark will be deemed to
have granted to WAII a fully paid, perpetual, irrevocable, nonexclusive,
worldwide license with respect to the Intellectual Property and Software to the
extent provided in the Related Agreements.
(c) Grant of Patent License to Landmark. WAII grants to Landmark a
fully-paid, perpetual, irrevocable, non-exclusive license under the following
United States patent and patent application and all patents issuing pursuant to
such patent application and all divisions, reissues, continuations,
continuations-in-part, and substitutes for any such patent and patent
application as well as, all corresponding foreign patents and patent
applications (collectively "Identified WAII Patents"):
Patent:
"A Monte Carlo Method for Estimating Lithology from Seismic
Data"; Patent No. 4,926,394; issued May 15, 1990.
Patent Application:
"A Method for Generating a Three Dimensional Locally
Unstructured Hybrid Grid for Sloping Faults"; Serial No. 08/417,643;
filed April 5, 1995.
WAII, at its own expense, shall prosecute and maintain Identified WAII Patents.
If WAII elects to abandon or not to maintain one of the Identified WAII
Patents, it shall give Landmark three month's prior written notice of the
effective date of the abandonment of said patent. If Landmark desires to
prosecute or maintain that patent or patent application, Landmark shall
promptly notify WAII of its desire and WAII shall assign such patent or patent
application to Landmark (at no additional cost to Landmark). Landmark shall
give WAII prompt written notice of any infringement or potential infringement
of Identified WAII Patents of which Landmark becomes aware. Upon such notice,
WAII may elect to retain counsel of its own selection and at its own expense,
to investigate and defend against any such infringement. If WAII decides to
commence such proceedings, WAII shall be responsible for any legal costs
incurred and will be entitled to retain any damages recovered. In the event
that WAII does commence such proceedings, Landmark agrees to render all
reasonable assistance to WAII without charge to WAII. If WAII decides not to
commence proceedings against the alleged infringer within a reasonable period
of time after receiving written notice of infringement, then Landmark shall be
entitled to bring suit in its own name against the infringing party. If
Landmark elects to commence a proceeding against the infringing party, WAII
agrees to provide Landmark with all reasonable assistance (at no additional
cost to Landmark) and Landmark will be responsible for any legal costs incurred
in connection with the proceeding and will be entitled to retain any damages
recovered. In the event that WAII makes licenses available to other parties
under United States patent application serial number 08/494,603 entitled
"Bayesian Sequential Gaussian Simulation of Lithology with Non-Linear Data,"
any patent that issues therefrom, and all divisions, reissues, continuations,
continuations-in-part, and substitutes for such patent or patent application,
as well as, all corresponding foreign patents and patent applications, then
WAII shall grant to Landmark a royalty-free, perpetual, irrevocable,
non-exclusive license under such patent, patent application, and all divisions,
reissues, continuations, continuations-in-part and substitutes for such patent
or patent application, as well as, all corresponding foreign patents and patent
applications.
- 7 -
<PAGE> 13
(d) Grant of Patent License to WAII. Landmark grants to WAII and its
Affiliates a fully-paid, perpetual, irrevocable, non-exclusive license under the
following United States patent and patent application and all patents issuing
pursuant to such patent application and all divisions, reissues, continuations,
continuations-in-part, and substitutes for any such patent and patent
application as well as, all corresponding foreign patents and patent
applications (collectively "Identified Landmark Patents"):
Patent:
"Bayesian Sequential Indicator Simulator of Lithology from
Seismic Data"; Patent No. 5,416,750; issued May 16, 1995.
Patent Application:
"Method for Interacting with Computer Graphics"; Serial No.
08/393,252; filed February 23, 1995.
Landmark also grants to WAII the right to extend a fully-paid, perpetual
irrevocable, non-exclusive license to The Halliburton Company, its affiliates
and customers, under patent application Serial No. 08/393,252 and all patents
issuing pursuant to such patent application and all divisions, reissues,
continuations, continuations-in-part, and substitutes for any such patent and
patent application. Landmark, at its own expense, shall prosecute and maintain
Identified Landmark Patents. If Landmark elects to abandon or not to maintain
one of the Identified Landmark Patents, it shall give WAII three month's prior
written notice of the effective date of the abandonment of said patent. If
WAII desires to prosecute or maintain that patent or patent application, WAII
shall promptly notify Landmark of its desire and Landmark shall assign such
patent or patent application to WAII (at no additional cost to WAII). WAII
shall give Landmark prompt written notice of any infringement or potential
infringement of Identified Landmark Patents of which WAII becomes aware. Upon
such notice, Landmark may elect to retain counsel of its own selection and at
its own expense, to investigate and defend against any such infringement. If
Landmark decides to commence such proceedings, Landmark shall be responsible
for any legal costs incurred and will be entitled to retain any damages
recovered. In the event that Landmark does commence such proceedings, WAII
agrees to render all reasonable assistance to Landmark without charge to
Landmark. If Landmark decides not to commence proceedings against the alleged
infringer within a reasonable period of time after receiving written notice of
infringement, then WAII shall be entitled to bring suit in its own name against
the infringing party. If WAII elects to commence a proceeding against the
infringing party, Landmark agrees to provide WAII with all reasonable
assistance (at no additional cost to WAII) and WAII will be responsible for any
legal costs incurred in connection with the proceeding and will be entitled to
retain any damages recovered.
(e) Grant of Patent Immunities. WAII grants Landmark and its customers
a royalty-free immunity under any WAII patent or future patent, to the extent
that such patents or one or more claims of such patents are infringed, either
directly or under the doctrine of equivalents, by the "Division Software" (as
such term is defined in the Western Atlas Service Agreement).
- 8 -
<PAGE> 14
2.3 Consideration.
(a) Purchase Price. The purchase price which Landmark agrees to pay,
and which WAII agrees to accept, for the Assets, all pending applications and
registrations with respect to Intellectual Property and the licenses
contemplated by Section 2.2(a) (the "Purchase Price") is $15 million, payable by
bank cashier's check.
(b) Assumption. Landmark hereby assumes, covenants to pay, perform,
observe the terms of, satisfy and/or discharge if, as, when, and to the extent
due in accordance with the terms thereof, all obligations accruing under or
pursuant to the Assumed Contracts and the other obligations of WAII identified
on Schedule 2.3(b) (hereinafter collectively referred to as the "Assumed
Obligations"), to the extent such obligations relate to any period after the
Closing Date.
(c) Notwithstanding the provisions of Section 2.3(b), Landmark shall
not assume, and will not be deemed to have assumed, any obligations under or
related to an Assumed Obligation (hereinafter individually referred to as a
"Non-Assigned Obligation" and collectively referred to as the "Non-Assigned
Obligations") unless and until WAII delivers to Landmark any Required Consent
relating to such Non-Assigned Obligation upon which occurrence, automatically
and without any further action on the part of Landmark or WAII, Landmark shall
be deemed to have assumed such Non-Assigned Obligation and from and after the
delivery of such Required Consent to Landmark such Non-Assigned Obligation will
be deemed to be an Assumed Obligation. If any Non-Assigned Obligation
terminates prior to the delivery of a Required Consent, such Non-Assigned
Obligation will cease to constitute a Non-Assigned Obligation for purposes of
this Agreement and Landmark will not be deemed to have assumed any obligations
under, related to or arising out of such Non-Assigned Obligation.
(d) Exclusions. Notwithstanding the foregoing, Landmark does not assume
and Landmark will not be liable or responsible for any debt, liability, or
obligation of WAII not expressly assumed by Landmark in Section 2.3(b) of this
Agreement. Without limiting the generality of the foregoing, Landmark does not
assume and will not be liable or responsible for any of the following debts,
liabilities or obligations of WAII:
(i) any federal or state income or franchise tax liability of
WAII or any Affiliate of WAII;
(ii) any indebtedness for money borrowed by WAII or any
Affiliate of WAII, including, without limitation, any amounts that may
be owed to any Affiliate of WAII;
- 9 -
<PAGE> 15
(iii) any debt, liability, obligation or damages (including,
without limitation, direct, incidental, consequential, punitive or
exemplary damages) arising as a result of any violation of law or a
breach of any contract, agreement, lease, bid, proposal, tender or
license (including, without limitation, the Assumed Obligations) by WAII
or by any Affiliate of WAII; or
(iv) any monetary damages (including, without limitation,
direct, incidental, consequential, punitive or exemplary damages) or
other liabilities, obligations, losses or expenses for any personal
injury, product liability or other tort to the extent arising as a
result of acts or omissions by WAII or any Affiliate of WAII.
(c) Substitution and References. From and after the Closing Date and
subject to the provisions of Section 2.3(c), (i) Landmark will be deemed to be
substituted for WAII and its predecessors throughout each document evidencing an
Assumed Obligation, (ii) all references to WAII and its predecessors in such
documents will be deemed to be references to Landmark and (iii) Landmark will be
entitled to exercise all of the rights and shall be obligated to perform all of
the obligations of WAII and its predecessors pursuant to the Assumed
Obligations.
2.4 Closing. The Closing shall take place at the offices of Winstead
Sechrest & Minick P.C., Suite 1700, 910 Travis Street, Houston, Texas
75270-5895, or such other place as shall be agreed upon by Landmark and WAII, at
10:00 a.m. on March 29, 1996, or on such other date mutually agreed to by the
Parties.
2.5 Items to be delivered at Closing.
(a) WAII Deliverables. At the Closing, WAII will:
(i) execute and deliver to Landmark Assignments of
Intellectual Property;
(ii) execute and deliver to Landmark a Bill of Sale and
Assignment;
(iii) execute and deliver to Landmark such other
instruments of transfer as are reasonably requested by Landmark
to convey to Landmark Good Title in, possessory rights to or a
valid right to use the Assets;
(iv) execute and deliver to Landmark a Non-Competition
Agreement;
(v) deliver to Landmark possession of the Customer
List;
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<PAGE> 16
(vi) deliver or make available to Landmark possession
of the Records, the Software and the Equipment;
(vii) execute and deliver to Landmark an Assignment of
Lease (Bellevue, Washington Lease);
(viii) cause to be delivered to Landmark the WAII Legal
Opinion;
(ix) execute and deliver to Landmark the Western Atlas
Service Agreement;
(x) deliver to Landmark, by bank cashier's check, cash
in an amount equal to the maintenance and support fees with
respect to the Software which have been prepaid to WAII or its
Affiliates prior to Closing and which relate to any period after
the Closing during which Landmark will be providing maintenance
and/or support with respect to the Software pursuant to the
Assumed Contracts, this Agreement or any Related Agreement;
(xi) deliver to Landmark a certificate of existence and
good standing (or comparable certificate) of WAII issued by the
Secretary of State of the State of Delaware, dated not earlier
than ten (10) days prior to the Closing Date;
(xii) deliver to Landmark a copy of resolutions of the
Board of Directors of WAII, certified by the Secretary or
Assistant Secretary of WAII, authorizing the transactions
contemplated by this Agreement and the Related Agreements to
which it is a party; and
(xiii) execute and deliver to Landmark the WAII Lease.
Subsequent to the Closing, WAII will, upon the request of
Landmark, (i) assign Good Title to all of WAII's right, title
and interest in, to and under the Employee Intellectual
Property/Software or (ii) cooperate with Landmark , at
Landmark's expense, in any litigation or proceeding relating
to the Employee Intellectual Property/Software, including,
without limitation, preparing affidavits, instruments or other
documents necessary in connection with any (a) copyright,
trademark, service mark, or patent application filed by
Landmark in connection with or (b) attempt to enforce or
otherwise protect such Employee Intellectual
Property/Software.
(b) Landmark Deliverables. At the Closing, Landmark shall:
(i) deliver the Purchase Price to WAII in accordance
with Section 2.3;
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<PAGE> 17
(ii) execute and deliver the Assignment of Lease;
(iii) cause to be delivered to WAII the Landmark Legal
Opinion;
(iv) execute and deliver to WAII the Western Atlas
Service Agreement;
(v) deliver to WAII a certificate of existence and good
standing of Landmark issued by the Secretary of State of the
State of Delaware, dated not earlier than ten (10) days prior to
the Closing Date;
(vi) deliver to WAII a copy of resolutions of the Board
of Directors of Landmark, certified by the Secretary or
Assistant Secretary of Landmark, authorizing the transactions
contemplated by this Agreement and the Related Agreements to
which it is a party; and
(vii) execute and deliver to WAII the WAII Lease.
2.6 Required Consents. To the extent that the assignment by WAII of
any Assumed Obligation to be assigned to Landmark pursuant to this Agreement
shall require the consent or approval of any other party (a "Required Consent"),
and such Required Consent shall not have been obtained on or prior to the
Closing Date, this Agreement shall not constitute a contract to assign the same
if an attempted assignment would constitute a breach of such Assumed Obligation
or would in anyway adversely affect the rights of WAII (or Landmark as assignee)
under that Assumed Obligation. If any Required Consent is not obtained on or
prior to the Closing Date, the Parties covenant and agree that in such case, the
Parties shall deal with such Assumed Obligation pursuant to Section 2.11.
2.7 Manufacturer/Vendor Warranties. All manufacturer/vendor warranties
relating to the Assets (to the extent such warranties are transferable) shall be
deemed to be transferred to Landmark on the Closing Date pursuant to the Bill of
Sale and Assignment, without any further action on the part of Landmark or WAII.
2.8 Costs and Expenses. Except as otherwise provided in this Agreement
or any Related Agreement, all legal, accounting, brokerage, finders or other
costs or expenses incurred by Landmark or WAII in connection with the
transactions contemplated by this Agreement shall be borne by the Party who
incurs such costs.
2.9 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets and the Non-Competition Agreement as set forth on
Schedule 2.9; and Landmark and WAII covenant and agree with each other that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding, that is contrary to the allocation of the Purchase Price as set
forth on Schedule 2.9 and they each shall timely file such income tax returns,
together with all forms or statements attached to such returns related to the
allocation of the Purchase Price as set forth on Schedule 2.9, including without
limitation IRS Form 8594.
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2.10 Transfer Taxes. Landmark shall pay all sales, use, transfer,
recording, registration, stamp and value added taxes and fees arising out of the
transfer to Landmark of the Assets.
2.11 WAII Engagement of Landmark. WAII engages Landmark to perform all
of WAII's obligations which first become performable after the Agreement Date
under the documents evidencing the Non-Assigned Obligations. Landmark agrees to
timely perform or discharge the Non-Assigned Obligations evidenced by such
documents on behalf of WAII in strict accordance with the terms of such
documents.
(a) Allocation of Payments. WAII shall hold all sums received
with respect to the Non-Assigned Obligations (to the extent that such
sums relate to obligations performed after the Closing Date) for the
benefit of Landmark and shall deliver such sums to Landmark within
thirty (30) days following receipt of such funds.
(b) Assignment. WAII and Landmark agree to use all reasonable
efforts (and bear their respective costs of such efforts) without
payment of any penalty or fee to obtain and secure any and all Required
Consents that may be necessary to effect the valid sale, transfer or
assignment of the Non-Assigned Obligations to Landmark without change in
any of the material terms or conditions of such Non-Assigned
Obligations, including, without limitation, the formal assignment or
novation of such Non-Assigned Obligations, if so required. WAII and
Landmark further covenant and agree to make or complete such transfers
as soon as reasonably possible and to cooperate with each other in any
other reasonable arrangement designed to provide for Landmark the
benefits of and to such Non-Assigned Obligations (to the extent that
such benefits relate to obligations performed after the Closing Date)
and to provide for the discharge of any obligation under such
Non-Assigned Obligations (to the extent such obligations first become
performable after the Closing Date).
(c) Other Actions. WAII agrees to take, after the Closing
Date, for Landmark's benefit, such actions as Landmark, may from time to
time, reasonably request to enforce the obligations of the other parties
to the Non-Assigned Obligations, including, without limitation, any
agreements or provisions pertaining to payment, confidentiality,
nondisclosure, compliance with export laws and regulations or
restrictions on the use of any software application program(s) or other
product(s) licensed to such other parties, provided that Landmark shall
reimburse WAII for the reasonable costs and expenses of any such action.
Unless otherwise requested in writing by Landmark, WAII shall terminate
in accordance with its terms (or not renew or cause to be renewed) any
Non-Assigned Obligations which (i) requires WAII to perform ongoing
obligations and (ii) is not assigned to Landmark on or before December
31, 1996. The Parties will cooperate with each other to accomplish the
actions contemplated by this Section 2.11(c).
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(d) Termination. The provisions of this Section 2.11
shall terminate as to each of the Non-Assigned Obligations upon the
earlier to occur of (i) the expiration of such Non-Assigned Obligation
or (ii) the assignment to Landmark and assumption by Landmark of such
Non-Assigned Obligation pursuant to Section 2.3(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WAII
WAII represents and warrants to Landmark as follows:
3.1 Organization and Good Standing. WAII is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to carry on that portion of
the Business that relates to the Assets as presently conducted and to own, lease
and/or operate the Assets in the places where such portion of the Business is
now conducted.
3.2 Authorization; Enforcement. WAII has full corporate power and
authority to execute and deliver this Agreement and the Related Agreements to
which it is a party and to perform its obligations under this Agreement and such
Related Agreements in accordance with their respective terms. WAII has taken
all necessary corporate action to duly and validly authorize the execution and
delivery of this Agreement and the Related Agreements to which it is a party and
the consummation of the transactions contemplated by this Agreement and such
Related Agreements. This Agreement has been duly executed and delivered by WAII
and constitutes and, when executed, each of the Related Agreements to which WAII
is a party will be duly executed and will constitute, the valid and legally
binding obligations of WAII, enforceable against WAII in accordance with their
respective terms, except (i) to the extent that enforcement may be limited by
any bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or affecting creditors' rights generally or (ii)
as the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court or other similar person before which any equitable proceeding may
be brought.
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3.3 No Conflicts; Compliance with Obligations; No Consents. The
execution and delivery by WAII of this Agreement and the Related Agreements to
which it is a party, the performance by WAII of its obligations under this
Agreement and under such Related Agreements and the consummation of the
transactions contemplated by this Agreement or such Related Agreements will not:
(a) conflict with or constitute a breach of or a default
under, the organizational documents of WAII;
(b) conflict with, constitute a breach of or a default
(with or without notice or lapse of time or both) under, or give rise
to any right of termination or acceleration under, any loan or credit
agreement, note, indenture, mortgage, deed of trust, permit, license or
other agreement,instrument or undertaking to which WAII is a party or
by which any of the Assets are bound;
(c) constitute a violation of any law, regulation, judgment,
order or decree applicable to WAII, the Assets or the portion of the
Business related to the Assets;
(d) result in the creation or imposition of any Lien upon
any of the Assets; or
(e) except as set forth on Schedule 3.3, require any
consent, approval, authorization or order of any Person or any
governmental agency (all of which, except as noted on Schedule 3.3,
have been obtained and are in full force and effect);
except for such occurrences described in clause (b) (other than with respect to
any material loan or credit agreement, note, indenture or mortgage), (c) or (e)
that, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the Assets or that portion of the Business
which relates to the Assets or the ability of WAII to perform its obligations
under this Agreement and the Related Agreements to which it is a party or to
consummate the transactions contemplated by this Agreement and such Related
Agreements.
3.4 Title to Assets. WAII has Good Title to the Assets, or has a
valid leasehold interest in or a valid right to use, the Assets, free and clear
of any Liens and has the right to convey such rights to Landmark pursuant to
this Agreement. A complete list of all Equipment included among the Assets is
attached as Schedule 3.4.
Intellectual Property and Software.
(a) Owned. Schedule 3.5(a) contains a true and complete
list of each item of Intellectual Property or Software owned by WAII
that is to be conveyed by WAII to Landmark pursuant to this Agreement.
Except as noted on Schedule 3.5(a), and to the Knowledge of WAII with
respect to trademarks or service marks, with respect to each item of
Intellectual Property or Software:
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(i) no proceedings are pending against WAII, and WAII has not
received written notice that any proceedings are threatened against
WAII which challenge the validity, enforceability, use or ownership of
the item;
(ii) the item, as it exists on the Closing Date, (A) does not
infringe upon or otherwise violate the existing trade secret rights,
trademarks, service marks, copyrights or patents of others or the
patents of others which issue subsequent to the Agreement Date pursuant
to patent applications filed on or before the Agreement Date, (B) to
the Knowledge of WAII, is not being infringed upon by others, and (C)
is not subject to any outstanding order, decree, judgment or
stipulation;
(iii) WAII has not received any written claim or charge of
infringement with respect to the item; and
(vi) WAII has supplied or made available to Landmark true and
complete copies of all written documentation in its possession
evidencing WAII's ownership of the item and of all licenses and other
contracts in its possession related to such ownership.
(b) Used. Schedule 3.5(b) contains a true and complete list of each
item of intellectual property and each computer software applications program
which WAII does not own and which WAII practices or uses and that is material to
that portion of the Business which relates to the Assets. Except as noted on
Schedule 3.5(b), with respect to each such item:
(i) any license agreement to which WAII is named as licensee
covering the item is a valid and binding agreement;
(ii) no event has occurred which constitutes a breach by
WAII of such license agreement, WAII has not repudiated or breached and
no other party to such license agreement has repudiated, in writing to
WAII or, to the Knowledge of WAII, breached any provision of such
license agreement and there are no disputes or oral arrangements in
effect as to any such license agreement;
(iii) WAII has supplied Landmark with a true and complete
copy of all license agreements to which WAII is a party covering
such item; and
(iv) WAII has not received any written claim that the
exercise of the rights granted to WAII with respect to such item
infringes upon the intellectual property rights of any third party.
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<PAGE> 22
(c) Business Activity. WAII is not aware of any infringement,
misappropriation or violation of the proprietary rights of any third party
which will occur as a result of the transfer of the Assets pursuant to this
Agreement.
(d) Software Restrictions. To the Knowledge of WAII, each item of
Software and each other software application program listed on Schedules 2.2(a),
3.5(a) and 3.5(b) is virus-free and contains no undisclosed time control
mechanisms.
(e) Protection of Trade Secrets. Except as set forth in Schedule
3.5(e), WAII has not disclosed the information contained in the Software to
others so as to materially adversely affect the ability of Landmark to protect
such information as a trade secret. Except as set forth in Schedule 3.5(e), the
employees and consultants of WAII who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed any Software or
trade secrets embodied in or used in connection with the Software have entered
into written agreements to protect the confidentiality of such trade secrets and
the Software and to assign to WAII all proprietary rights in such trade secrets
and the Software. A copy of a form of such written agreements has been furnished
to Landmark. Except as listed in Schedule 3.5(e), all of such employees and
consultants have signed written agreements having substantially the same legal
effect as the terms and conditions contained in such form. WAII is not aware
that any employee or consultant of WAII who has signed such an agreement is in
violation of such agreement.
(f) Computer Software. Except as set forth in Schedule 2.2(a) or
Schedule 3.5(b) the use and operation of the Software does not require access to
or the use of any other software (excluding operating system software).
3.6 Contracts.
(a) Schedule of Contracts. Schedule 3.6(a) contains a true and
complete list of all the following bids, proposals, tenders, executory contracts
and written arrangements to which WAII is a party relating to the portion of the
Business which relates to the Assets, true and complete copies of which have
been delivered to Landmark:
(i) with respect to each item of Intellectual Property and
Software, all licenses, leases, sublicenses, sales, royalty,
distribution, maintenance or service agreements in effect with respect
to the item;
(ii) all contracts included in the Assumed Contracts
pursuant to which WAII leases personal or real property;
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(iii) all contracts for the sale of products (other than
Software) marketed or created by the Division or for the furnishing of
maintenance or support services by the Division, which contract calls
for performance over a period of more than six (6) months or that
reasonably could be expected to require the future payment by or to WAII
of $50,000.00 or more;
(iv) all joint venture agreements;
(v) all agreements pursuant to which any third party (other
than employees of WAII or its Affiliates) provides services as a sales
representative;
(vi) all agreements between or among one or more subsidiaries
or Affiliates of WAII, on the one hand, and the Division or WAII, on the
other hand;
(vii) all management, service, consulting, maintenance, support
or similar types of agreements or contracts to which the Division or
WAII is a party;
(viii) all bids, tenders and proposals relating to the use,
licensing, sale, leasing or sublicensing of the Software; and
(ix) any other contract or arrangement included in the Assumed
Contracts.
All contracts, leases, subleases, licenses, sublicenses, commitments and
agreements listed in Schedule 3.6 are in full force and effect and represent
valid and binding obligations of WAII and, to the Knowledge of WAII, the other
parties to such contracts, leases, subleases, licenses, sublicenses,
commitments and agreements, enforceable against such Persons in accordance with
their terms. WAII is not and, to the Knowledge of the WAII, no other party is
in breach or default, and no event has occurred on the part of WAII or, to the
Knowledge of WAII, on the part of any other party to any such contracts,
leases, subleases, licenses, sublicenses, commitments and agreements which with
notice or lapse of time would constitute a breach or default or permit
termination under any such contracts, leases, subleases, licenses, sublicenses,
commitments and agreements. None of such contracts, leases, subleases,
licenses, sublicenses, commitments and agreements will, in accordance with
their respective terms, be terminated or modified, or otherwise give any party
to such contracts, leases, subleases, licenses, sublicenses, commitments and
agreements other than WAII the right to terminate or modify any such contracts,
leases, subleases, licenses, sublicenses, commitments and agreements, by reason
of the consummation of the transactions contemplated by this Agreement. WAII
is not a party to any verbal contract or arrangement which, if reduced to
written form, would be required to be listed in Schedule 3.6 under the terms of
this Section 3.6(a).
(b) Prior Payments. Except as set forth in Schedule 3.6, there have
been no security deposits, escrow payments, prepayments, advance payments or
similar payments made by any Persons with respect to the contracts, leases,
subleases, licenses, sublicenses, commitments and agreements listed on Schedule
3.6.
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3.7 Compliance with Law. WAII has complied with all, and is not in
violation of any, statutes, laws, regulations, decrees and orders of the United
States or any state, municipality and agency (federal, state and local) or
foreign jurisdiction applicable to the Assets or that portion of the Business
which relates to the Assets, including, without limitation, safety, health and
environmental statutes, laws, regulations, decrees and orders of the United
States, and such states, municipalities, agencies and jurisdictions applicable
to the Assets or that portion of the Business which relates to the Assets,
except such failures to comply or violations which could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect upon the
Assets or that portion of the Business which relates to the Assets.
3.8 Customer List. Schedule 3.8 is a true and complete list (the
"Customer List") of all Persons who were, as of the date thereof (which shall
not be more than ten days prior to the Agreement Date), customers of WAII with
respect to that portion of the Business which relates to providing maintenance
and/or support services with respect to the Software.
3.9 Adverse Agreements and Changes. WAII is not (i) a party to any
agreement or instrument, or subject to any rule or regulation or (ii) aware of
any pending event or condition, in either case which, individually or in the
aggregate, reasonably could be expected to have a material adverse effect on
the Assets or that portion of the Business which relates to the Assets.
3.10 Litigation and Claims. There is not (a) pending or, to the
Knowledge of WAII, threatened, any litigation, action, suit, arbitration,
investigation, inquiry, audit, complaint, charge or other proceeding before or
by any court or government or regulatory agency or body to which WAII is a party
involving the Assets or that portion of the Business which relates to the
Assets, or to which the Assets or that portion of the Business which relates to
the Assets are subject, or which, individually or in the aggregate, reasonably
could be expected to have a material adverse effect on the ability of WAII to
perform its obligations under this Agreement or the Related Agreements to which
it is a party or to consummate the transactions contemplated by this Agreement
and such Related Agreements or (b) any judgment, writ, decree, injunction, rule
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator which is outstanding and binding upon or
enforceable against the Assets or that portion of the Business which relates to
the Assets or which otherwise is outstanding against WAII and relates to that
portion of the Business which relates to the Assets or which otherwise enjoins
or prohibits or restricts in any respect the ability of WAII to perform its
obligations under this Agreement or such Related Agreements or to consummate the
transactions contemplated by this Agreement or such Related Agreements.
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3.11 Absence of Certain Developments. Since December 31, 1995, WAII
has not, with respect to that portion of the Business which relates to the
Assets:
(a) suffered any damage or loss, whether or not covered by
insurance, with respect to any material Asset (including any loss of
WAII's rights to use or market any Intellectual Property or Software);
(b) sold, assigned, leased, licensed or otherwise transferred
or granted any rights in or to any Asset (other than Intellectual
Property or Software) other than in the ordinary course of business;
(c) except licenses of Software made in the ordinary course of
business consistent with practices in effect on December 31, 1995, sold,
assigned, transferred or granted any rights under any Intellectual
Property or Software;
(d) suffered any material adverse change in the Assets or that
portion of the Business which relates to the Assets;
(e) operated that portion of the Business which relates to the
Assets other than in the ordinary course of business consistent with
practices in effect on December 31, 1995; or
(f) changed its pricing, accounting or revenue recognition
policies.
3.12 Employee Benefit Plans. Neither of WAII nor any ERISA Affiliate
has, with respect to any Multiemployer Plan, as defined in Section 3(37) of
ERISA, suffered or caused or will, as a result of the consummation of the
transactions contemplated in this Agreement, suffer or cause a "complete
withdrawal" or "partial withdrawal" as such terms are respectively defined in
Sections 4203 and 4205 of ERISA.
3.13 Labor Matters. WAII (in respect of that portion of the Business
which relates to the Assets) has no collective bargaining agreements between
WAII and a labor union and there are no current negotiations between WAII and a
labor union. WAII (in respect of that portion of the Business which relates to
the Assets) is in substantial compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice. There is no
unfair labor practice complaint against WAII (in respect of that portion of the
Business which relates to the Assets) pending before the National Labor
Relations Board. There is no labor strike, dispute, slowdown or stoppage
actually pending or, to the Knowledge of WAII, threatened against or affecting
WAII (in respect of that portion of the Business which relates to the Assets).
No grievance is pending which, if determined adverse to WAII, reasonably could
be expected to have a material adverse effect on the Assets or that portion of
the Business which relates to the Assets.
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3.14 Disclaimer. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES MADE IN
THIS AGREEMENT AND THE RELATED AGREEMENTS, WAII MAKES NO REPRESENTATIONS OR
WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, AS TO THE ASSETS OR THE
BUSINESS, INCLUDING WITHOUT LIMITATION ANY WARRANTIES AS TO DESIGN,
FUNCTIONALITY, RELIABILITY, OPERABILITY OR CONDITION, MERCHANTABILITY OR
FITNESS, CAPACITY OR DURABILITY FOR ANY PARTICULAR PURPOSE OR PROFITABILITY.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LANDMARK
Landmark represents and warrants to WAII as follows:
4.1 Organization and Good Standing. Landmark is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, with full corporate power and authority to carry on its business as
presently conducted and to own, lease and/or operate its properties in the
places where such business is now conducted.
4.2 Authorization; Enforcement. Landmark has full corporate power and
authority to execute and deliver this Agreement and the Related Agreements to
which it is a party and to perform its obligations under this Agreement and such
Related Agreements in accordance with their respective terms. Landmark has
taken all necessary corporate action to duly and validly authorize its execution
and delivery of this Agreement and the Related Agreements to which it is a party
and the consummation of the transactions contemplated by this Agreement and such
Related Agreements. This Agreement has been duly executed and delivered by
Landmark and this Agreement constitutes and, when executed, each of the Related
Agreements to which Landmark is a party will be duly executed and will
constitute, the valid and legally binding obligations of Landmark, enforceable
against Landmark in accordance with their respective terms, except (i) to the
extent that enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or hereafter in effect relating
to or affecting creditors' rights generally or (ii) as the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or other similar
person before which any equitable proceeding therefor may be brought.
4.3 No Conflicts; Compliance with Obligations; No Consents. The
execution and delivery by Landmark of this Agreement and the Related Agreements
to which it is a party, the performance by Landmark of its obligations under
this Agreement and under such Related Agreements and the consummation of the
transactions contemplated by this Agreement and such Related Agreements will
not:
(a) conflict with or constitute a breach of or a default under,
the organizational documents of Landmark;
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(b) conflict with, constitute a breach of or a default (with or
without notice or lapse of time or both) under, or give rise to any
right of termination or acceleration under, any loan or credit
agreement, note, indenture, mortgage, deed of trust, permit, license or
other agreement, instrument or undertaking to which Landmark is a party;
(c) constitute a violation of any law, regulation, judgment,
order or decree applicable to Landmark; or
(d) except as set forth on Schedule 4.3, require any consent,
approval, authorization or order of any Person or any governmental
agency;
except for such occurrences described in clause (b) (other than with respect to
any material loan or credit agreement, note, indenture or mortgage), (c) or (d)
that, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the ability of Landmark to perform its
obligations under this Agreement and the Related Agreements to which it is a
party or to consummate the transaction contemplated by this Agreement and such
Related Agreements.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Use of Facilities. [Intentionally Omitted]
5.2 Employee and Labor Matters.
(a) WAII Retained Liabilities. Except to the extent of any obligations
expressly assumed by Landmark pursuant to this Agreement or any Related
Agreement, WAII is and shall remain solely liable for compensation and benefits,
including without limitation severance pay and accrued vacations, if any, to
which its employees are entitled, whether by operation of law, under employment
contracts, pursuant to any Employee Benefit Plan, or pursuant to collective
bargaining agreements or union agreements to which WAII is a party or is bound,
pursuant to any bargaining obligation that WAII may have incurred under any
applicable federal or state law or otherwise. Except to the extent of any
obligations expressly assumed by Landmark pursuant to this Agreement or any
Related Agreement, Landmark is not obligated to succeed, nor shall it be deemed
to be a successor, to any employment contract, whether express or implied,
written or oral, or any collective bargaining agreement or Employee Benefit Plan
to which WAII is a party or that otherwise is binding upon WAII. Without
limiting the generality of the foregoing, WAII agrees that: (i) Landmark shall
not be bound by any contract of employment or collective bargaining agreement
that WAII may have entered into or be bound by, (ii) WAII will be solely
responsible for providing any notice to employees of WAII which may be required
pursuant to the Federal Worker Adjustment and Retraining Notification Act of
1988 ("WARN") or any similar applicable law and (iii) WAII will be solely
responsible for any liability or obligation which may accrue under WARN or such
other law as a result of improper or untimely notice by WAII.
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(b) Solicitation of WAII Employees. Landmark shall offer employment to
a substantial number of those employees of the Division set forth on Schedule
5.2(b)(i) on compensation and benefit (including stock option program
participation) terms comparable to those afforded other potential employees of
Landmark. Landmark acknowledges and agrees that WAII shall be entitled to
retain all employees listed on Schedule 5.2(b)(ii) ("Retained Employees") and
neither Landmark nor its Affiliates shall solicit the employment of or employ
any Retained Employees (while they are employed by WAII and for a period of six
months thereafter) for a period of two (2) years after the Closing Date unless
WAII consents in writing to such employment. Subject to the proviso of the
preceding sentence (i) WAII agrees to release any Person previously employed by
WAII who is to be employed by Landmark as contemplated by this Agreement from
any obligation to continue employment with WAII and (ii) to the extent requested
by Landmark, WAII will use its commercially reasonable efforts (but shall not be
obligated to incur any expense) to assist in the transition to the employ of
Landmark of any employees of WAII hired by Landmark. All employees of WAII who
accept Landmark's offer of employment as contemplated by this Agreement are
sometimes collectively referred to as the "Transferring Employees" and such
Transferring Employees will be deemed to become employees of Landmark as of the
later of the Closing Date, the date of their acceptance of employment or such
later date as may be agreed to by both Landmark and such Transferring Employees.
Neither WAII nor its Affiliates shall solicit the employment of or employ any
Transferring Employees (while they are employed by Landmark and for six months
thereafter) for a period of two (2) years after the Closing Date unless Landmark
consents in writing to such employment.
(c) Business Employees. If any of the employees of WAII listed on
Schedule 5.2(c) to whom Landmark extends an offer of employment does not accept
Landmark's offer of employment as of the Closing, then, upon written request by
Landmark, WAII will use reasonable efforts to cause such employees who remain in
the employ of WAII after the Closing ("Business Employees") to provide services
for and at the direction of Landmark in connection with the further development
of the Software (or substantially equivalent software in replacement of such
Software) during such time as they remain employed by WAII. Landmark will
reimburse WAII during the time such Business Employees perform services for
Landmark at the rate of $540/day for United States payroll Business Employees
performing services outside of the United States in an expatriate status and at
the rate of $430/day for all other Business Employees. In addition, Landmark
will reimburse WAII for all meals, lodging and travel expenses required in
connection with the performance by such Business Employees of such duties. WAII
shall make such Business Employees available to Landmark for such period of time
as may be requested by Landmark, such period not to exceed six (6) months after
the Closing and shall not terminate any Business Employee employed by WAII as of
the Closing who is performing such services for Landmark until the expiration of
such period except for good cause as determined by WAII in good faith in its
sole discretion.
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(d) Employee Benefit Plans. WAII shall, at its sole cost and expense,
retain the responsibility for the payment of any amounts accrued, payable or
arising in connection with any Employee Benefit Plan, including, without
limitation, all obligations under Part 6 of Subtitle B of Title I of ERISA.
Landmark is not obligated to succeed, nor shall it be deemed to be a successor,
to any Employee Benefit Plan. WAII acknowledges that Landmark will establish or
maintain such employee benefit plans as it deems, in its sole discretion,
necessary or appropriate, and that Landmark's obligation and liability, if any,
to provide employee benefits in connection with or as a result of the purchase
of the Assets shall be limited to those persons employed by Landmark after the
Closing Date.
(e) Severance Payments. Each of WAII and Landmark shall remain
severally responsible for all severance pay or termination benefits payable to
any employee terminated by it on or prior to the Closing Date. Following the
Closing Date, (i) Landmark shall be responsible for all severance or termination
pay that becomes payable to any Transferring Employee with respect to any
termination of employment of such Transferring Employee by Landmark, giving full
credit for the length of service of such employee recognized by WAII on the
Closing Date and (ii) WAII shall be responsible for all severance or termination
pay that becomes payable to its employees with respect to any termination of
employment of such employees by WAII.
(f) Length of Service. For purposes of eligibility, vesting and level
of benefits under any employee benefit plan provided to the Transferring
Employees by Landmark, Landmark shall credit such Transferring Employees with
the length of service recognized by WAII under its Employee Benefit Plans under
policies in effect as of January 1, 1996. Nothing in this Agreement shall be
deemed to require Landmark to retain any Transferring Employee for any minimum
period of employment.
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(g) Treatment of Medical Benefits. Landmark agrees to waive
application of any pre-existing conditions provision of Landmark's medical
insurance plan with respect to any Transferring Employee and any covered
dependent of such Transferring Employee for any medical condition of such
Transferring Employee or covered dependent unless such medical condition was or
would have been excluded as a pre-existing condition under the medical insurance
plans of WAII. Landmark will credit each Transferring Employee in WAII's group
medical insurance plan (who will be employed by Landmark in the United States),
for the current program plan year with eligible expenses incurred by, and claims
paid on behalf of such Transferring Employee pursuant to WAII's group medical
insurance plan for purposes of satisfying the deductible provisions and the
out-of-pocket maximum provisions under Landmark's medical insurance plan, but
only to the extent the Landmark program plan year overlaps with the WAII current
plan year.
(h) Vacation for Transferring Employees.
(i) Earned Vacation. Landmark shall make available to each of
the Transferring Employees vacation that was earned but not taken by
such employee while employed by WAII. During the one-year period
following the Closing Date (the "Vacation Period"), WAII shall pay to
Landmark, on the first day of each calendar quarter during the Vacation
Period, the amount equal to one-quarter of the amount of the vacation
accrual on the books and records of WAII on the Closing Date in respect
of the Transferring Employees (the "Vacation Accrual"); provided,
however, that (i) the Vacation Accrual shall be determined in accordance
with generally accepted accounting principles consistently applied, (ii)
WAII shall update the Vacation Accrual on a monthly basis through March
31, 1996, and (iii) the Vacation Accrual for March 1996 will treat each
of the Transferring Employees as if they were employees of WAII for the
entire month; and provided further, however, that the first such
quarterly payment shall be estimated and paid based on available
information regarding those employees of WAII to whom Landmark offers
employment (the "Offerees"), and the second such quarterly payment shall
be adjusted as necessary based on the earned vacation of those Offerees
who become Transferring Employees.
(ii) Personal Leave. During the Vacation Period, Landmark
shall make available to each of the Transferring Employees personal days
equal to the number of vacation days which such Transferring Employee
would have earned during the period between his or her last employment
anniversary date and the Closing Date, if such Transferring Employee had
been covered under Landmark's vacation plan during such period. Landmark
shall not be obligated to pay a Transferring Employee for any such
personal days that are not taken during the Vacation Period.
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(i) Defined Contribution Plan. Landmark has established a defined
contribution plan ("Landmark Plan"). WAII has established that certain
Retirement/Profit Sharing Plan (the "WAII Plan") and desires to make a direct
trustee-to-trustee transfer of the Transferring Employees' vested and unvested
account balances, if any, under the WAII Plan (the "Account Balances") to the
Landmark Plan. As soon as practicable after the Closing Date, Landmark shall
either (i) provide WAII with an opinion letter of counsel reasonably acceptable
to WAII to the effect that the Landmark Plan and its related trust satisfy the
requirements for qualification under Sections 401(a) and 401(k) of the Code as
of the later of the effective date of the Landmark Plan or the Closing Date,
(ii) deliver to WAII a favorable determination letter issued by the IRS
evidencing that the Landmark Plan and its related trust satisfy the requirements
for the qualification under Sections 401(a) and 401(k) of the Code (a "Favorable
Determination Letter") as of the later of the effective date of the Landmark
Plan or the Closing Date, or (iii) provide WAII with a Favorable Determination
Letter dated within 12 months prior to the Closing Date together with a
representation to the effect that no event has occurred that would adversely
affect the qualification of the Landmark Plan under Sections 401(a) and 401(k)
of the Code. Prior to any transfer of Account Balances to the Landmark Plan,
WAII shall either (i) provide Landmark with an opinion letter of counsel
reasonably acceptable to Landmark to the effect that the WAII Plan and its
related trust satisfy the requirements for qualification under Sections 401(a)
and 401(k) of the Code - 8 - as of the later of the effective date of the WAII
Plan or the Closing Date, (ii) deliver to Landmark a Favorable Determination
Letter issued by the IRS evidencing that the WAII Plan and its related trust
satisfy the requirements for the qualification under Sections 401(a) and 401(k)
of the Code (a "Seller Favorable Determination Letter") as of the later of the
effective date of the WAII Plan or the Closing Date, or (iii) provide Landmark
with a Seller Favorable Determination Letter dated within 12 months prior to the
Closing Date together with a representation to the effect that no event has
occurred that would adversely affect the qualification of the WAII Plan under
Sections 401(a) and 401(k) of the Code. As soon as practicable following the
later of (i) December 31, 1996 or (ii) the receipt by WAII and Landmark of the
opinions or determination letters described in the preceding sentence, WAII
shall cause the trustee of the trust forming a part of the WAII Plan to transfer
the Account Balances of the Transferring Employees to the trust forming a part
of the Landmark Plan, and Landmark shall cause the trustee of the trust forming
a part of the Landmark Plan to accept the transfer of the Account Balances from
the trust forming a part of the WAII Plan, by the transfer of cash (or with
respect to participant loans granted prior to the Closing Date, if any, such
loans and any promissory notes or other documents evidencing or securing such
loans) and/or other property designated by WAII and acceptable to Landmark which
is held in the trust forming a part of the WAII Plan and which has an aggregate
value equal to the value of the Account Balances as of the date of transfer.
Upon the transfer of the Account Balances, Landmark shall cause the Landmark
Plan to discharge the obligations of the WAII Plan with respect to the Account
Balances, and the WAII Plan shall be relieved of such obligations. WAII shall
provide to Landmark copies of such records concerning the WAII Plan and the
participation of the Transferring Employees in the WAII Plan as Landmark shall
reasonably request for purposes of administering the Landmark Plan.
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5.3 Confidentiality.
(a) WAII's Covenant. WAII agrees, from and after the Closing Date, not
to disclose to any Person (other than Landmark and its representatives) or to
use, in any manner, any trade secret embodied in or used in connection with the
Intellectual Property, Software or Employee Intellectual Property/Software,
without the written consent of Landmark; provided, however, (i) WAII's use of
such trade secret under any rights retained or license or right granted to WAII
or obligations undertaken by WAII pursuant to this Agreement or any Related
Agreement and (ii) such disclosures which (A) are reasonably necessary to
exercise such licenses or rights or perform such obligations and (B) will not
materially adversely affect the value of the Software, will not be deemed to be
prohibited by this Section 5.3(a).
(b) Landmark's Covenant. Landmark agrees, from and after the Closing
Date, not to disclose to any Person (other than WAII and its representatives),
or to use in any manner, any trade secret of WAII which (i) does not pertain
directly to the Assets or that portion of the Business related to the Assets or
(ii) relates to the modules, executables, libraries, applications and utility
programs for which Landmark is granted a license or right pursuant to Section
2.2(a)(i), without, in each case, the written consent of WAII; provided,
however, (A) Landmark's use of such trade secrets under any license or right
granted to Landmark or obligation undertaken by Landmark pursuant to this
Agreement or any Related Agreement and (B) such disclosures which (1) are
reasonably necessary to exercise such license or rights or to perform such
obligations and (2) will not materially adversely affect the value of the
modules, executables, libraries, applications and utility programs, will not be
deemed to be prohibited by this Section 5.3(b).
(c) This Section 5.3 will govern the confidentiality obligations of the
Parties with respect to the subject matter of this Agreement and the Related
Agreements. "Confidential Information" shall mean, all information disclosed by
a Party to the other Party (under this Agreement or a Related Agreement) which
the disclosing Party marks as "confidential" or with a similar legend and all
information referenced in Sections 5.3(a), 5.3(b) and 5.5. Information (other
than information referenced in Sections 5.3(a), 5.3(b) and 5.5) which is not
marked in the foregoing manner will not be deemed to be "Confidential
Information." Information disclosed by a Party to the other Party orally or
visually (other than information referenced in Sections 5.3(a), 5.3(b) and 5.5)
will not be deemed to be "Confidential Information" unless the disclosing Party
informs the receiving Party at the time of disclosure that such information is
Confidential Information and furnishes the receiving Party with a written
summary of the portions of such information which are Confidential Information
within fifteen days of the disclosure. All obligations of confidentiality and
non-use (other than information referenced in Sections 5.3(a), 5.3(b) and 5.5)
will terminate seven (7) years after the initial disclosure of such Confidential
Information or two (2) years after the termination of the Western
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<PAGE> 33
Atlas Service Agreement whichever date is earlier. Any Party receiving, or
having in its possession, Confidential Information of the other Party pursuant
to this Agreement or a Related Agreement shall (i) maintain the confidential
and proprietary status of such Confidential Information, except to the extent
reasonably necessary to exercise its rights or obligations under this Agreement
or a Related Agreement, (ii) protect such Confidential Information in the same
manner as it protects its own confidential and proprietary information, which
shall not be less than reasonable care, (iii) use the Confidential Information
only in connection with the performance of its obligations or exercise of its
rights under this Agreement or a Related Agreement; provided, however, that
such restrictions shall not apply to any Confidential Information that is (a)
in the public domain on the Agreement Date or thereafter becomes part of the
public domain through no fault of the obligated Party, (b) lawfully received by
the obligated Party without an obligation of confidentiality from a third party
which the obligated Party reasonably believes has the right to disclose such
Information, (c) released from the restrictions of this Section 5.3 by the
express written consent of the Party to which such information is deemed
Confidential Information, (d) already in the possession of the receiving Party
at the time of receipt of the information from the disclosing Party, provided
the receiving Party is not obligated pursuant to Sections 5.3(a) or (b) to the
disclosing Party to keep the information confidential, or (e) developed by the
obligated Party independently of information for which the obligated Party is
under an obligation of confidentiality to the other Party to keep confidential.
Without limiting the generality of the foregoing, each Party shall use
reasonable efforts to obtain, if not already in place, confidentiality and
non-use agreements from its respective employees and independent contractors to
protect the Confidential Information of the other Party and cooperate to
enforce such agreements. In the event that disclosure by a Party of any of the
Confidential Information referred to in this Section 5.3(c) is compelled by
judicial or administrative process or by other requirements of law, such Party
shall provide the other Party with prompt prior written notice of such
requirement so that such other Party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section
5.3. In the event that such protective order or other remedy is not obtained
and such other Party does not waive compliance with the provisions of this
Section 5.3, the Party from whom the Compelled Disclosure is sought (i) shall
furnish only that portion of such Confidential Information which such Party is
advised by legal counsel is legally required, and (ii) shall cooperate with the
other Party (at the expense of the other Party) in the other Party's attempt to
contest such disclosure.
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<PAGE> 34
(d) Use of General Knowledge. With regard to Business Employees and
any other employees of WAII or its Affiliates and the Transferring Employees who
have acquired knowledge or expertise as a result of designing, developing or
utilizing the Software, this Agreement and the Related Agreements shall not
restrict the use of such acquired knowledge or expertise by such Business
Employees or other employees of WAII or its Affiliates or the Transferring
Employees. Such acquired knowledge or expertise is defined as the ability to
utilize concepts, know-how and techniques contained in the Software.
Notwithstanding the foregoing, except as expressly set forth in this Agreement
or any Related Agreement no license is given to the Business Employees or other
employees of WAII or its Affiliates to use the Intellectual Property or
Software.
(e) Enforcement. Each of the Parties agrees that (i) a violation of
the covenants set forth in this Section 5.3 regarding the disclosure of trade
secrets and confidential information will cause irreparable injury to the
non-breaching Party for which adequate remedy at law is not available; and (ii)
the non-breaching Party will be entitled, as a matter of right, to obtain an
injunction, restraining order, or other equitable relief to restrain any
threatened or further breach of such covenants.
5.4 Taking of Necessary Action. Subject to the terms and conditions of
this Agreement, the Parties agree, subject to applicable laws, to use their
commercially reasonable best efforts to promptly take or cause to be taken all
actions and to promptly do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and the Related Agreements.
Without limiting the foregoing, Landmark and WAII shall use their commercially
reasonable best efforts to maintain and make all filings with and obtain all
consents, approvals, and/or assurances from third parties and appropriate
governmental agencies and authorities necessary or advisable for the
consummation of the transactions contemplated by this Agreement. Each Party
shall cooperate with the other in good faith to help the other satisfy its
obligations set forth in this Section 5.4.
5.5 Press Releases. Neither Landmark nor WAII shall make any press
release or other public disclosure of matters related to this Agreement or the
Related Agreements without the prior written consent of the other Party as to
the form and substance of such press release or other public disclosure and the
media in which it is to be made; provided, however, that nothing in this Section
5.5 shall be deemed to prohibit any Party from making any disclosure that is
required to fulfill such Party's disclosure obligations imposed by law, or from
making such disclosure as such Party deems advisable (upon advice of such
Party's legal counsel) in connection with the requirements of any securities law
or any securities exchange on which the equity securities of such Party are
listed; provided, however, that prior written notice is given to the other Party
to the extent reasonably possible.
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<PAGE> 35
5.6 Change of Control of Landmark.
(a) Third Party Bid. If, after the Closing, any Person makes a
proposal to Landmark to acquire a majority of the outstanding voting securities
of Landmark (calculated on a fully-diluted basis after giving effect to the
exercise, exchange or conversion of all then outstanding securities exercisable,
exchangeable or convertible into voting securities of Landmark that would remain
outstanding after the consummation of such proposed offer) or to acquire more
than fifty percent (50%) (by value) of the assets of Landmark, Landmark will,
subject to entering into a confidentiality agreement with WAII in form and
substance reasonably acceptable to Landmark and WAII, (i) provide notice to WAII
of the receipt and terms of such proposal and (ii) in the event the Board of
Directors of Landmark determines to pursue proposals from other potential
purchasers, use its best efforts to enable WAII to make an acquisition proposal,
subject to the fiduciary responsibilities of the Board of Directors under
applicable law.
(b) Change of Control. If a Change in Control (as hereinafter
defined) of Landmark occurs and WAII is not the acquiring party obtaining such
control, and the separate corporate existence of Landmark ceases or Landmark
disposes of all or substantially all of its assets in conjunction with the
Change in Control or as part of a plan pursuant to which the Change in Control
occurs, then the terms and provisions of this Agreement and the Related
Agreements to which Landmark is a party shall be binding upon the Person into
which Landmark is merged, consolidated or combined or which acquired
substantially all of the assets of Landmark (the "Assuming Party") to the same
extent as such agreements would then be binding upon Landmark. A "Change in
Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an
"Entity") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 40% or more of either (A) the
then outstanding shares of common stock of Landmark (the "Outstanding
Landmark Common Stock") or (B) the combined voting power of the then
outstanding voting securities of Landmark entitled to vote generally in
the election of directors (the "Outstanding Landmark Voting
Securities"); excluding, however, the following acquisitions of
Outstanding Landmark Common Stock and Outstanding Landmark Voting
Securities: (1) any acquisition directly from Landmark or underwriters
retained by it, (2) any acquisition by Landmark, (3) any acquisition by
any Employee Benefit Plan (or related trust) sponsored or maintained by
Landmark or any corporation controlled by Landmark or (4) any
acquisition by any Entity pursuant to a transaction which complies with
clauses (1), (2) and (3) of subsection (ii) of this Section 5.6(b); or
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<PAGE> 36
(ii) Consummation by Landmark of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of Landmark ("Business Combination"); excluding, however,
such a Business Combination pursuant to which (1) all or substantially
all of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Landmark Common Stock and Outstanding
Landmark Voting Securities immediately prior to such Business
Combination own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Landmark or all
or substantially all of Landmark's assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination, of the
Outstanding Landmark Common Stock and Outstanding Landmark Voting
Securities, as the case may be, (2) no Entity (other than any Employee
Benefit Plan (or related trust) sponsored or maintained by Landmark or
any corporation controlled by Landmark or such corporation resulting
from such Business Combination) will beneficially own, directly or
indirectly, 40% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed
with respect to Landmark prior to the Business Combination and (3) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the board of directors of Landmark at the time of the execution of the
initial agreement, or of the action of the board of directors of
Landmark, providing for such Business Combination; or
(iii) The approval by the stockholders of Landmark of a
complete liquidation or dissolution of Landmark.
(c) Breach After Change in Control. If an Assuming Party becomes
bound to the terms of this Agreement and the Related Agreements pursuant to
Section 5.6(b), and thereafter fails, in any material respect, to honor or
otherwise breaches the terms of Sections 3.1, 3.2, 3.3 or Article V of the
Western Atlas Service Agreement, and such failure or breach is not cured within
30 days after written notice of such failure or breach (specifying in reasonable
detail such failure or breach) is given by WAII to the Assuming Party, then WAII
shall have the right to receive and use for its own benefit (at no cost or
charge to WAII) the source code for all Software (or software provided by
Landmark in replacement of any such Software as contemplated by the Western
Atlas Service Agreement) then used by WAII in its operations, software jointly
developed by Landmark and WAII, Landmark's Open Works software program (or any
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<PAGE> 37
successor/replacement product), and each Landmark owned software applications
program licensed by WAII from Landmark pursuant to one or more licenses which,
in the aggregate, permit the use of such software applications program by fifty
(50) or more concurrent users ("WAII Software"); provided that WAII's use of
such source code shall be limited to providing maintenance and support services
for WAII Software (either in conjunction with WAII's use of WAII Software or to
third parties to whom WAII has sold a license to use such WAII Software
pursuant to the Western Atlas Service Agreement). Such WAII Software may not be
sold, licensed or otherwise disposed of by WAII, except as permitted in this
Agreement or in a Related Agreement.
5.7 Dispute Cooperation. In the event that any Party shall
participate in any dispute, audit, suit, action, proceeding or investigation
concerning the business or affairs of that portion of the Business related to
the Assets conducted on or prior to the Closing (other than litigation between
Landmark and WAII), including without limitation investigations and the like
related to any tax audit, customer dispute or insurance claim, the other Party
shall, upon the request of such Party, cooperate fully with such Party in
connection therewith, which cooperation shall include, without limitation,
making available the relevant Transferring Employees or the relevant employees
of WAII (subject to matters involving confidential (in the sense of legal
proceedings), documents, records and privileged information of such Party and
except with respect to proceedings where the Parties may not be similarly
situated or have different defenses or cross-claims). The Party requesting
cooperation shall reimburse the Party providing assistance for reasonable
out-of-pocket expenses (excluding salaries but including reasonable attorneys
fees) incurred by the Party providing such assistance.
5.8 Agreement to Adopt Successor Tax Procedures.
(a) Remuneration Subject to Income Tax. WAII and Landmark
agree that with respect to Transferring Employees, they respectively
meet the definitions of "predecessor" and "successor" as defined in
Revenue Procedure 84-77. WAII and Landmark further agree that, for
purposes of reporting employee remuneration to the IRS on Forms W-2 and
W-3 for the calendar year 1996, they will utilize the "Standard
Procedure" described in Section 4 of Revenue Procedure 84-77.
(b) Remuneration Subject to F.I.C.A. WAII and Landmark agree
that, for purposes of reporting employee remuneration for F.I.C.A.
purposes for the calendar year 1996, WAII meets the definition of
"predecessor" and Landmark meets the definition of "successor" as
defined in IRS Regulation Section 31.3121(a)(1)-1(b). WAII agrees to
supply Landmark with respect to all Transferring Employees, all
cumulative payroll information as of the Closing Date that Landmark
shall require in order to employ IRS Regulation Section
31.3121(a)(1)-1(b).
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5.9 Post-Closing Exchanges. The Parties agree that they will
promptly transfer or deliver to each other any cash or other property received
by one Party which is the property of the other Party, including, without
limitation, any funds paid by WAII to Landmark at Closing pursuant to Section
2.5(a)(x) which WAII is obligated to refund to third parties.
5.10 Broker's or Finder's Fees. WAII shall indemnify and hold
Landmark harmless from and against any and all claims by any Person as a broker
or finder in connection with the sale and purchase of the Assets, directly or
indirectly, by reason of an agreement or understanding with WAII but not paid by
WAII. Landmark shall indemnify and hold WAII harmless from and against any
claims by any Person, as a broker or finder in connection with the sale and
purchase of the Assets, directly or indirectly, by reason of an agreement or
understanding with Landmark but not paid by Landmark.
5.11 Use and Removal of Trademarks, Logos, etc. WAII authorizes
Landmark to use the logos, service marks and trademarks of WAII which are
currently affixed to the Assets in connection with the use of such Assets by
Landmark; provided, however that Landmark shall indemnify WAII for any loss
suffered or incurred by WAII solely as a result of such use. As soon as
reasonably practicable, but, with respect to items of Software, in no event
later than the next general release of such item of Software, Landmark agrees to
remove or obliterate all corporate names, division names, copyright notices,
logos, service marks and trademarks of WAII which are included within or affixed
to the Assets but are not included among the Intellectual Property and to
replace all written documentation delivered to Landmark which references such
corporate names, division names, copyright notices, logos, service marks and
trademarks with new documentation which does not contain such references. Except
as contemplated by this Agreement or the Related Agreements, neither WAII nor
Landmark shall hold itself out to the public as representing the other Party.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of Landmark. WAII shall indemnify and hold
Landmark and its officers, directors and agents (collectively the "Buying
Interests") harmless from and against any assessment, loss, damage, liability,
cost, and expense (including, without limitation, interest, penalties,
consequential damages payable to a third party and reasonable attorneys' fees
but excluding consequential damages sustained directly by a Party to this
Agreement) (a "Loss") imposed upon or incurred by any of the Buying Interests,
or to which any such parties may be subject, resulting from:
(i) a breach of any agreement, covenant, representation
or warranty of WAII contained in this Agreement or in any Related
Agreement;
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<PAGE> 39
(ii) any breach by WAII on or prior to the Closing Date
with respect to WAII's obligations pursuant to the Assumed Obligations;
or
(iii) any indebtedness, obligation, liability, or claim of
any nature of or against WAII not specifically assumed by Landmark
pursuant to this Agreement.
6.2 Indemnification of WAII. Landmark shall indemnify and hold WAII
and its officers, directors and agents (collectively the "Selling Interests")
harmless from and against any Loss imposed upon or incurred by any of the
Selling Interests, or to which any such parties may be subject, resulting from:
(i) a breach of any agreement, covenant, representation or
warranty of Landmark contained in this Agreement or in any Related
Agreement; or
(ii) any indebtedness, obligation, liability, or claim of any
nature of or against WAII specifically assumed by Landmark pursuant to
this Agreement.
6.3 Procedural Limitations on Indemnification. Notwithstanding the
foregoing, entitlement to indemnification pursuant to this ARTICLE VI shall be
conditioned upon claims in respect of indemnification being submitted, if at
all, within two years from and after the Closing Date; provided, that the right
to indemnity in respect of matters provided for in this ARTICLE VI shall not be
barred on the basis that the amount of the claim has not been ascertained,
liquidated or reduced to final judgment on or before the expiration of the
aforesaid period so long as the claim has been identified and asserted on or
before such expiration.
6.4 Claims for Reimbursement. In the event that any of the Buying
Interests or any of the Selling Interests shall have (i) suffered any Loss or
(ii) received any notice of the commencement of any action, investigation or
other proceeding, or the making of any claim or demand by a third party (a
"Third-Party Claim") and in respect of which indemnification may be sought by
such Party pursuant to this ARTICLE VI, the Party who shall have suffered such
Loss or received such notice of such Third-Party Claim and who shall seek
indemnification in respect of such Loss or Third Party Claim (the "Indemnified
Party") shall give the Party from whom indemnification is sought (the
"Indemnifying Party") prompt written notice of such Loss or Third Party Claim,
setting forth in reasonable detail such information as it shall have pertaining
to such Third Party Claim and the Indemnified Party's demand for indemnification
in respect of such Third Party Claim. Written notice of Third-Party Claims or
Loss shall be given to the Indemnifying Party as promptly as practicable (and in
any event within 30 days after the service of the citation or summons);
provided, however, that the failure of any Indemnified Party to give timely
notice shall not affect any right to indemnification if (i) such failure to give
timely notice does not materially affect the ability or right of the
Indemnifying Party to participate in the defense of such Third-Party Claim and
(ii) to the extent that such failure to give timely notice causes the
Indemnifying Party to incur additional expense with respect to such Third-Party
Claim, the Indemnified Party promptly reimburses the Indemnifying Party for such
additional expense. The Indemnifying Party shall have 30 days from the date of
receipt of each such notice (the "Investigation Period") to investigate and
dispute the nature, validity or amount of any such Loss or Third-Party Claim.
During the Investigation period, the Indemnifying Party shall have reasonable
access, during normal business hours, to the books and records of the
Indemnified Party relating to such Third Party Claim. In
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the event that the Indemnifying Party shall dispute the nature, validity or
amount of a Third Party Claim under this Section 6.4, the Indemnifying Party
shall give the Indemnified Party written notice of such dispute within the
Investigation Period, and the Parties shall meet promptly after receipt of such
notice of dispute and in good faith attempt to resolve such dispute. In the
absence of a dispute, the Indemnifying Party shall promptly, and in any event
not later than the expiration of the Investigation Period relating to a notice
of a Loss, reimburse the Indemnified Party in full for any Loss set forth in
such notice.
6.5 Defense and Settlement of Third-Party Claims. In the event that an
Indemnifying Party acknowledges its obligation to indemnify the other Party for
a Third-Party Claim, then the Indemnifying Party shall have the option to take
control of the defense and investigation of such Third-Party Claim and to employ
and engage attorneys of its own choice (who are reasonably satisfactory to the
Indemnified Party) to handle and defend the same, at the Indemnifying Party's
sole cost, risk and expense (the "Direct Litigation Option"). The Indemnifying
Party may elect to exercise the Direct Litigation Option by giving prior written
notice of its election to the Indemnified Party. If the Indemnifying Party so
elects, the Indemnified Party shall cooperate (at the expense of the
Indemnifying Party) in all reasonable respects with the Indemnifying Party and
such attorneys in the investigation, trial and defense of such Third-Party Claim
and any appeal arising from such claim; provided, however, that the Indemnified
Party may, at its own cost, participate in (but not control) such investigation,
trial and defense of such Third-Party Claim and any appeal arising from such
claim. If the Indemnifying Party does not elect the Direct Litigation Option,
then the Indemnified Party may defend against the Third-Party Claim in the
manner it deems appropriate. The Indemnified Party (or the Indemnifying Party
if it has exercised the Direct Litigation Option) may settle a Third-Party Claim
upon 30 days prior written notice (the "Settlement Review Period") to the other
Party, and such settlement shall be binding upon all the Parties; provided,
however, that if within the Settlement Review Period the Indemnifying Party
shall have acknowledged its obligation to indemnify and objected to such
settlement, the Indemnified Party shall permit the Indemnifying Party to defend
the claim on its behalf and at its expense, provided that the Indemnifying Party
shall keep the Indemnified Party advised on a timely basis of all developments
with respect to such claim and permit the Indemnified Party to participate, at
its election and expense, in the defense of such claim; and, provided further,
that no settlement will be
- 35 -
<PAGE> 41
made by the Indemnifying Party without the consent of the Indemnified Party
unless such settlement includes a complete release of the Indemnified Party.
Any payment or settlement resulting from such contest which is made in
accordance with this Section 6.5, together with the total expenses of such
contest, shall be binding on the Parties for purposes of this Agreement. In no
event shall a Party enter into any settlement, adjustment or compromise of any
Third-Party Claim without the prior written consent of the other Party (which
consent shall not be unreasonably withheld or delayed), if as a result of such
settlement, adjustment or compromise (i) an injunction or other non-monetary
relief would be imposed against the Indemnified Party, or (ii) the Business
would suffer a material adverse effect. Notwithstanding the foregoing, in
connection with a Third Party Claim asserted against an Indemnified Party, if
(i) the Indemnified Party has available to it defenses which are in addition to
those available to the Indemnifying Party, (ii) the Indemnified Party has
available to it defenses which are inconsistent with the defenses available to
the Indemnifying Party or (iii) a conflict exists or may reasonably be expected
to exist in connection with the representation of both the Indemnified Party
and the Indemnifying Party by the legal counsel chosen by the Indemnifying
Party, the Indemnified Party will have the right to select its own legal
counsel subject to the approval of such legal counsel by the Indemnifying
Party, such approval not to be unreasonably withheld. If the Indemnified Party
selects its own legal counsel pursuant to the immediately preceding sentence
and the underlying Third Party Claim is otherwise subject to the scope of the
indemnification obligations of the Indemnifying Party pursuant to this ARTICLE
VI, the reasonable fees and expenses of such legal counsel will be included
within the indemnification obligations of the Indemnifying Party; provided that
under no circumstances will the Indemnifying Party be obligated to indemnify
the Indemnified Parties against the fees and expenses of more than one legal
counsel selected by them in connection with a single claim.
6.6 Monetary Limitations on Indemnification.
(a) Basket. Notwithstanding anything to the contrary contained
in this ARTICLE VI, neither Landmark nor WAII shall be obligated to pay
any claims for indemnification pursuant to this ARTICLE VI until the
aggregate of all Losses sustained or incurred by the other Party equals
or exceeds an amount equal to $300,000.00 (the "Basket"); provided,
however, Landmark's obligation to pay the Purchase Price shall be
absolute and cannot be offset against the Basket. After the aggregate
of all Losses sustained or incurred by a Party exceeds the Basket,
indemnification shall be paid for all additional claims incurred;
provided, however, there shall be no indemnification for claims which
comprise the Basket.
(b) Actual Knowledge. An Indemnifying Party shall not be
obligated to indemnify an Indemnified Party under this ARTICLE VIfor a
Loss resulting from any event relating to a breach of any representation
or warranty made by the Indemnifying Party if the Indemnifying Party can
establish that the Indemnified Party had actual knowledge of the breach
and the extent thereof on or before the Closing Date and proceeded to
consummate the transactions contemplated by this Agreement and the
Related Agreements.
- 36 -
<PAGE> 42
(c) Maximum Liability. The maximum aggregate liability of an
Indemnifying Party under this Article VI (regardless of whether such
action is brought in contract, in tort or pursuant to some other theory)
shall not exceed $15,000,000.00.
6.7 Arbitration.
(a) General. The Parties agree that all actions, claims,
controversies or disputes of any kind (e.g. whether in contract or in
tort, statutory or common law, legal or equitable or otherwise)
("Disputes") between them relating, directly or indirectly, to this
Agreement or the Related Agreements are to be resolved by arbitration as
provided in this Agreement. This agreement to arbitrate will survive the
termination of this Agreement. All arbitration will be conducted
pursuant to and in accordance with the following order of priority (i)
the terms of this Agreement and the Related Agreements, (ii) the
Commercial Arbitration Rules of the American Arbitration Association,
and (iii) to the extent the foregoing are inapplicable, unenforceable or
invalid, the laws of the State of Texas. The arbitrator(s) used will be
selected from a list of persons familiar with disputes regarding the
acquisition of software businesses and software licenses to be provided
by the American Arbitration Association. Any hearing regarding
arbitration will be held in Houston, Texas, or at another location
mutually acceptable to Landmark and WAII. The Parties will use
reasonable efforts to assure that the arbitrator(s) will use their best
efforts to conduct the arbitration hearing as soon as practicable.
(b) Discovery. Discovery will be conducted solely through
depositions and requests for documents and things but otherwise will be
governed by the Federal Rules of Civil Procedure. The arbitrator(s) will
resolve any discovery disputes by such prehearing conferences as may be
needed. All Parties agree that the arbitrator(s) will have the power of
subpoena process as provided by law. Disputes concerning the scope of
depositions or document production, its reasonableness and enforcement
of discovery requests will be subject to agreement by the Parties or
will be resolved by the arbitrator(s). All discovery requests will be
subject to the proprietary rights and rights of privilege and other
protections granted by applicable law to the Parties. The arbitrator(s)
will adopt procedures to protect such rights. With respect to any
Dispute, each Party agrees that all discovery activities shall be
expressly limited to matters directly relevant to the Dispute and the
arbitrator(s) will be required to fully enforce this requirement.
(c) Enforcement. The decision of the arbitrator(s) will be
final and binding on all Parties. Any judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The decision of the arbitrator(s) will be enforceable in any
court of competent jurisdiction. Except for proceedings seeking
equitable remedies, an arbitration proceeding commenced pursuant to this
Section 6.7 is a condition precedent to and is a complete defense to the
commencement of any suit, action or proceeding in any federal or state
court with respect to any Dispute. Either Party may bring an action in
court to compel arbitration. Any Party who fails or refuses to submit
to binding arbitration following demand by the other Party shall bear
all costs and expenses incurred by the opposing Party in compelling
arbitration.
- 37 -
<PAGE> 43
(d) Powers and Qualifications; Awards; Modification or Vacation
of Award. The arbitrator(s) are empowered to resolve Disputes by
summary rulings substantially similar to summary judgments and motions
to dismiss. The arbitrator(s) will resolve all Disputes in accordance
with the substantive laws of the State of Texas. The arbitrator(s) may
grant any remedy or relief deemed just and equitable and within the
scope of this Agreement and may also grant such ancillary relief as is
necessary to make effective any award. The arbitrator(s) will be
required to make specific, written findings of fact and conclusions of
law, and the Parties will have the right to seek vacation or
modification of an award only if (i) that award is based in whole, or in
part, upon fraud or (ii) failure to follow the procedures set forth in
this Section 6.7. For these purposes, the award and judgment entered by
the federal or state district court shall be considered to be the same
as the award and judgment of the arbitrator(s). To the extent permitted
by applicable law, the arbitrator(s) will have the power to award
recovery of all costs and fees (including attorneys' fees,
administrative fees, and arbitrators' fees) to the prevailing Party.
(e) Limitation on Award. The arbitrator(s) will be limited to
interpreting the applicable provisions of this Agreement and the Related
Agreements, and will not have the authority or power to alter, amend,
modify, revoke or suspend any condition or provision of this Agreement
or the Related Agreements, nor to create, draft or form a new agreement
between the Parties, nor to render an award which, by its terms, has the
effect of altering or modifying any condition or provision of this
Agreement or the Related Agreements.
(f) Provisional Remedies and Multiple Parties. No provision
of, nor the exercise of any rights under, this Agreement or the Related
Agreements will limit the right of any Party, during any Dispute, to
resort to a court of applicable jurisdiction to seek such equitable
remedies as may be available to such Party, and any such action will not
be deemed an election of remedies. Such rights will include, without
limitation, rights and remedies relating to injunctive relief. Such
rights may be exercised at any time except to the extent such action is
contrary to an award or decision of the arbitrator(s). The institution
and maintenance of an action for equitable relief will not constitute a
waiver of the right of any Party, to submit a Dispute to arbitration,
nor render inapplicable the compulsory arbitration provisions of this
Agreement.
- 38 -
<PAGE> 44
(g) Choice of Arbitrator(s). The arbitrator(s) will be chosen
by mutual agreement of Landmark and WAII. If they cannot agree within
30 days upon a single arbitrator, each will, within 15 days thereafter,
appoint an arbitrator and such arbitrators will appoint a third
impartial arbitrator. If more than one arbitrator is appointed, the
decision of a majority of such arbitrators will be binding. Subject to
the provisions of Section 6.7(d), (i) each Party will be responsible for
the expenses and fees of the arbitrator appointed by it and one-half of
the fees and expenses of the third arbitrator, (ii) if there is only one
arbitrator appointed, WAII and Landmark will each be responsible for
one-half of the fees and expenses of such arbitrator and (iii) each
Party will bear its own attorney's and expert's fees. If either Party
fails to timely appoint an arbitrator, the decision of the arbitrator
who is timely appointed will be binding.
6.8 Exclusive Remedies. Except with respect to proceedings seeking
equitable remedies to enforce the provisions of this Agreement, the
indemnification provisions of this ARTICLE VI shall be the exclusive remedy of
the Parties for any breach of the representations, warranties or covenants of
this Agreement or the Related Agreements. To the extent this Agreement permits
a Party to seek equitable remedies, the Parties acknowledge and agree that no
such proceeding may include a damages remedy.
ARTICLE VII
MISCELLANEOUS
7.1 Effect of Due Diligence. Except as noted in Section 6.6(b), no
investigation by Landmark or WAII into the business, operations and condition of
the other shall diminish in any way the effect of any representations or
warranties made by either Party in this Agreement or shall relieve such Party of
any of its obligations under this Agreement.
- 39 -
<PAGE> 45
7.2 Notices. All approvals, consents, notices, requests, demands and
other communications shall be in writing and shall be deemed to have been duly
given upon delivery, if delivered in person or by any expedited delivery service
which provides proof of delivery; when electronically confirmed, if sent by
telefacsimile; or on the third business day after mailing, if mailed by
certified mail, postage prepaid, return receipt requested:
(a) To WAII: Western Atlas International, Inc.
10205 Westheimer Road
Houston, Texas 77042
Attn: General Counsel
Telephone: (713) 972-4915
Telecopy: (713) 266-1717
With a copy (which
shall not constitute
notice) to: Western Atlas Inc.
360 North Crescent Drive
Beverly Hills, California 90210
Attn: General Counsel
Telephone: (310) 888-2700
Telecopy: (310) 888-2848
(b) To Landmark: Landmark Graphics Corporation
15150 Memorial Drive
Houston, Texas 77079
Attn: Corporate Secretary
Telephone: (713) 560-1422
Telecopy: (713) 560-1383
With a copy (which
shall not constitute
notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attn: Robert E. Crawford, Esq.
Telephone: (214) 745-5120
Telecopy: (214) 745-5390
7.3 Entire Agreement. This Agreement, the Related Agreements and the
other instruments contemplated in this Agreement and the Related Agreements
contain the entire agreement of WAII and Landmark with respect to the
transactions contemplated in this Agreement and no representation, promise,
inducement or statement or intention relating to the transactions contemplated
by this Agreement and the Related Agreements has been made by any Party which is
not set forth in this Agreement and the Related Agreements or in any Schedule or
Exhibit attached to this Agreement and the Related Agreements or any certificate
delivered in accordance with its terms.
- 40 -
<PAGE> 46
7.4 Amendments. This Agreement may not be modified or amended except
by an instrument in writing signed by each of WAII and Landmark.
7.5 Survival. Subject to the provisions of ARTICLE VI, all
representations and warranties made by WAII and Landmark in this Agreement and
all covenants and agreements contained in this Agreement to be performed after
the Closing Date shall survive after the Closing Date.
7.6 Assignments. This Agreement may not be assigned by Landmark
without the prior written consent of WAII, except that Landmark may assign this
Agreement to one or more corporations or other entities which it controls;
provided, however, that in the event of any such assignment, Landmark shall
remain primarily liable for all of its obligations under this Agreement. This
Agreement may not be assigned by WAII without the prior written consent of
Landmark, except that WAII may assign this Agreement to Western Atlas Inc.
("WAI"), the corporate parent of WAII, or to one or more corporations or other
entities which it controls or which is under common control with WAI; provided,
however, that in the event of any such assignment, WAII shall remain primarily
liable for all of its obligations under this Agreement.
7.7 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
7.8 Section Headings. The Section headings are for convenience of
reference only and shall not constitute a part of this Agreement.
7.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES AND THE STATE OF TEXAS AND
WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN
HARRIS COUNTY, TEXAS. FEDERAL AND STATE COURTS IN HARRIS COUNTY TEXAS WILL HAVE
EXCLUSIVE JURISDICTION OVER ANY EQUITABLE PROCEEDINGS BROUGHT BY A PARTY WITH
RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY RELATED AGREEMENT.
7.10 Further Assurances. At, and from time to time after the Agreement
Date, at the request of any Party, but without further consideration, each Party
requested to do so shall execute and deliver such other instruments of
conveyance, assignment, transfer and delivery and take such other action as any
other Party may reasonably request in order more effectively to consummate the
transactions contemplated by this Agreement.
7.11 No Third Party Beneficiaries. Except as expressly provided in
ARTICLE VI and in Section 2.2(e), no Person not a Party to this Agreement shall
be deemed to be a third-party beneficiary under this Agreement or entitled to
any rights under this Agreement.
- 41 -
<PAGE> 47
7.12 Severability. In the event that any provision of this Agreement,
or the application of such provision to any person or circumstance, is held by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect under present or future Laws effective during the effective term of any
such provision, such invalid, illegal or unenforceable provisions shall be fully
severable; and this Agreement shall then be construed and enforced as if such
invalid, illegal or unenforceable provision had not been contained in this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid, or unenforceable provision, there shall
be added automatically as part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid and enforceable.
7.13 ACKNOWLEDGEMENT OF LANDMARK. LANDMARK ACKNOWLEDGES THAT IT IS NOT
RELYING UPON ANY STATEMENTS, REPRESENTATIONS OR WARRANTIES OF WAII, WHETHER
WRITTEN OR ORAL, EXPRESS OR IMPLIED, OTHER THAN THE EXPRESS REPRESENTATIONS AND
WARRANTIES MADE IN THIS AGREEMENT AND THE RELATED AGREEMENTS.
- 42 -
<PAGE> 48
INDEMNIFICATION NOTICE
UNDER CERTAIN CIRCUMSTANCES, THIS AGREEMENT (PARTICULARLY ARTICLE VI OF
THIS AGREEMENT) IMPOSES INDEMNIFICATION OBLIGATIONS UPON THE PARTIES.
IN WITNESS WHEREOF, this Agreement has been executed by Landmark and
WAII as of the Agreement Date.
Landmark:
LANDMARK GRAPHICS CORPORATION,
a Delaware corporation
By: /s/ JOHN W. GIBSON, JR.
---------------------------------
Name: John W. Gibson, Jr.
Title: Executive Vice President
WAII:
WESTERN ATLAS INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ EMIL J. MATEKER, JR.
---------------------------------
Name: Emil J. Mateker, Jr.
Title: Senior Vice President
- 43 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly filing on Form 10-Q for the period ended March 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 55,028
<SECURITIES> 0
<RECEIVABLES> 49,042
<ALLOWANCES> 2,039
<INVENTORY> 4,153
<CURRENT-ASSETS> 124,824
<PP&E> 90,583
<DEPRECIATION> 42,941
<TOTAL-ASSETS> 213,382
<CURRENT-LIABILITIES> 46,547
<BONDS> 0
<COMMON> 875
0
0
<OTHER-SE> 160,427
<TOTAL-LIABILITY-AND-EQUITY> 213,382
<SALES> 79,778
<TOTAL-REVENUES> 133,320
<CGS> 27,052
<TOTAL-COSTS> 54,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,743
<INTEREST-EXPENSE> 404
<INCOME-PRETAX> 966
<INCOME-TAX> 261
<INCOME-CONTINUING> 705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
