SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 2, 1998
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-21519 06-1295986
(Commission File Number) (IRS Employer Identification No.)
225 High Ridge Road, Stamford, CT 06905
(Address of Principal Executive Offices) (Zip Code)
(203) 329-3300
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On January 2, 1998, pursuant to the terms of a Stock Purchase Agreement
dated as of December 29, 1997 (the "Stock Purchase Agreement"), among
International Telecommunication Data Systems, Inc., a Delaware corporation (the
"Company"), CSC Intelicom, Inc. (now known as ITDS Intelicom Services, Inc.), a
Delaware corporation ("Intelicom") and CSC Domestic Enterprises, Inc., a Nevada
corporation and the sole stockholder of Intelicom (the "Stockholder"), the
Company acquired all the outstanding shares of capital stock of Intelicom. As
payment to the Stockholder of the purchase price, the Company issued 404,449
shares of Common Stock of the Company and made a cash payment of $75,826,777.42.
Prior to the acquisition, the nature of the business of Intelicom was the
provision of billing and customer care software and services, and the Company
intends to continue such business.
The terms of the Stock Purchase Agreement, including the amount of the
consideration paid by the Company, were determined by the Company, Intelicom and
the Stockholder in arms length negotiations. Prior to the closing of this
transaction, there was no material relationship between the Company and
Intelicom and the Stockholder.
The cash portion of the purchase price paid by the Company was obtained
pursuant to a Credit Agreement, dated January 2, 1998 among the Company,
Intelicom, the Lenders party thereto and Lehman Commercial Paper, Inc. as
Administrative Agent and Arranger and from the cash balance of the Company.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial
statements of Intelicom at the time of the filing of this Report. Accordingly,
such financial statements will be filed as soon as practicable, but not later
than March 18, 1998.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma
financial information at the time of the filing of this Report. Accordingly,
such pro forma financial information will be filed as soon as practicable, but
not later than March 18, 1998.
(c) Exhibits
See Exhibit Index.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 13, 1998 INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
(Registrant)
By: /s/ Peter P. Bassermann
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Peter P. Bassermann, President
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EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
2.1* Stock Purchase Agreement, dated as of December 29, 1997 by and among
International Telecommunication Data Systems, Inc., CSC Intelicom,
Inc. and CSC Domestic Enterprises, Inc.
99.1 Press Release, as issued by International Telecommunication Data
Systems, Inc. on December 29, 1997.
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* Confidential treatment requested as to certain portions which have been
omitted and filed separately with the Securities and Exchange Commission. For
a list of omitted Exhibits and Schedules, see page (vi) of the Table of
Contents to the Stock Purchase Agreement. The Registrant will furnish a copy
of any omitted exhibit or schedule to the Securities and Exchange Commission
upon request.
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
STOCK PURCHASE AGREEMENT
by and among
International Telecommunication Data Systems, Inc.
and
CSC Intelicom, Inc.
and
CSC Domestic Enterprises, Inc.
dated as of
December 29, 1997
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TABLE OF CONTENTS
Page
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Table of Defined Terms ..................................................... vii
ARTICLE I
PURCHASE AND SALE OF THE COMPANY SHARES .................................... 2
1.1 Purchase of the Company Shares from the Stockholder .................... 2
1.2 Purchase Price ......................................................... 2
1.3 The Closing ............................................................ 3
1.4 Further Assurances ..................................................... 5
1.5 Assignment and Repurchase of Accounts Receivable ....................... 6
1.6 Post-Closing Adjustments ............................................... 8
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY SHARES AND
THE STOCKHOLDER ............................................................ 8
2A.1 Ownership of the Company Shares ....................................... 8
2A.2 Authority ............................................................. 9
2A.3 Noncontravention ...................................................... 9
2A.4 Investment Representations ............................................ 9
ARTICLE IIB
REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANY ................................................................ 11
2B.1 Organization and Authority ........................................... 11
2B.2 Capitalization ....................................................... 12
2B.3 Noncontravention ..................................................... 12
2B.4 Financial Statements and Information ................................. 13
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2B.5 Intellectual Property ................................................ 15
2B.6 Trademarks ........................................................... 18
2B.7 Real Property Owned and Leased ....................................... 18
2B.8 Assets ............................................................... 19
2B.9 Contracts ............................................................ 20
2B.10 Books and Records; Powers of Attorney ............................... 23
2B.11 Tax Matters ......................................................... 23
2B.12 Product and Service Warranties ...................................... 26
2B.13 Customers and Suppliers ............................................. 26
2B.14 Insurance ........................................................... 26
2B.15 Legal Compliance; Environmental Matters ............................. 26
2B.16 Permits ............................................................. 28
2B.17 Litigation .......................................................... 29
2B.18 Confidential Information ............................................ 29
2B.19 Employees ........................................................... 29
2B.20 Employee Benefits ................................................... 31
2B.21 Business Relationships With Affiliates .............................. 35
2B.22 Brokers' Fees ....................................................... 36
2B.23 Other Businesses of the Company ..................................... 36
2B.24 Subsidiaries ........................................................ 36
2B.25 Disclosure .......................................................... 36
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER ................................ 37
3.1 Organization ........................................................... 37
3.2 Capitalization ......................................................... 37
3.3 Authorization .......................................................... 37
3.4 Noncontravention ....................................................... 38
3.5 Buyer Reports and Financial Statements ................................. 38
3.6 Litigation ............................................................. 39
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3.7 Brokers' Fees .......................................................... 39
3.8 Investment Representations ............................................. 39
3.9 Disclosure ............................................................. 40
ARTICLE IV
PRE-CLOSING COVENANTS ...................................................... 40
4.1 Efforts ............................................................... 40
4.2 Notices and Consents .................................................. 41
4.3 Hart-Scott-Rodino Act ................................................. 41
4.4 Operation of Business ................................................. 41
4.5 Full Access ........................................................... 44
4.6 Notice of Breaches; Updates; Interim Financial Statements ............. 46
4.7 Exclusivity ........................................................... 47
4.8 Separation of Assets and Liabilities not relating to the Division ..... 47
4.9 Accounts Payable ...................................................... 48
4.10 Location of Assets ................................................... 48
ARTICLE V
CONDITIONS TO CLOSING ...................................................... 48
5.1 Conditions to Obligations of the Buyer ................................. 48
5.2 Conditions to Obligations of the Stockholder ........................... 52
ARTICLE VI
INDEMNIFICATION ............................................................ 53
6.1 Indemnification by the Stockholder ..................................... 53
6.2 Indemnification by the Buyer ........................................... 54
6.3 Claims for Indemnification ............................................. 55
6.4 Survival ............................................................... 57
6.5 Limitations ............................................................ 58
6.6 Exclusive Remedy ....................................................... 58
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ARTICLE VII
TERMINATION ................................................................ 58
7.1 Termination of Agreement ............................................... 58
7.2 Effect of Termination .................................................. 59
ARTICLE VIII
REGISTRATION RIGHTS ........................................................ 60
8.1 Registration of Shares ................................................. 60
8.2 Limitations on Registration Rights ..................................... 61
8.3 Registration Procedures ................................................ 62
8.4 Requirements of the Stockholder ........................................ 63
8.5 Indemnification ........................................................ 64
8.6 Rule 144 Reports ....................................................... 64
ARTICLE IX
POST-CLOSING COVENANTS ..................................................... 65
9.1 Sharing of Data ........................................................ 65
9.2 Cooperation in Litigation .............................................. 65
9.3 Enforcement of Insurance Claims ........................................ 66
9.4 Accounting Systems ..................................................... 66
9.5 Customer Retention Payments ............................................ 67
9.6 Employment Matters ..................................................... 67
9.7 Loans to Employees ..................................................... 67
9.8 Transition Contracts ................................................... 68
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ARTICLE X
TAX MATTERS ................................................................ 68
10.1 Tax Indemnification by the Stockholder ................................ 68
10.2 Tax Indemnification by the Buyer ...................................... 69
10.3 Filing Responsibility ................................................. 69
10.4 Payment of Taxes and Allocation of Certain Taxes ...................... 71
10.5 Refunds and Carrybacks ................................................ 72
10.6 Cooperation and Exchange of Information ............................... 73
10.7 Tax Sharing Agreements ................................................ 76
10.8 Certain Tax Elections and Other Covenants ............................. 76
10.9 Payments .............................................................. 79
ARTICLE XI
MISCELLANEOUS .............................................................. 79
11.1 Press Releases and Public Disclosure ................................. 79
11.2 No Third Party Beneficiaries ......................................... 80
11.3 Entire Agreement ..................................................... 80
11.4 Succession and Assignment ............................................ 80
11.5 Counterparts ......................................................... 80
11.6 Headings ............................................................. 80
11.7 Notices .............................................................. 81
11.8 Governing Law ........................................................ 82
11.9 Dispute Resolution ................................................... 82
11.10 Amendments and Waivers .............................................. 84
11.11 Severability ........................................................ 84
11.12 Specific Performance ................................................ 85
11.13 Expenses ............................................................ 85
11.14 Construction ........................................................ 85
11.15 Incorporation of Exhibits and Schedules ............................. 86
11.16 Facsimile Signature ................................................. 86
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11.17 Definitions ......................................................... 86
Disclosure Schedule
Attachments
Attachment 1.6 Post Closing Adjustments
Attachment 5.1(f) Employees to be Employed by Company at Closing
Attachment 6.1(e) Excluded Liabilities
Exhibits
Exhibit A - Guarantee and Noncompetition Agreement
Exhibit B - Master Professional Services Agreement
Exhibit C - Press Release
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TABLE OF DEFINED TERMS
Defined Term Section
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A/R Analysis 1.2(e)(i)
Affiliate 2B.9(a)(viii)
Affiliate Relationships 2B.21
Agreed Amount 6.3(b)
Assigned Receivables 5.1(a)
Average Closing Price 1.2(b)
Buyer Preamble
Buyer Activity 8.2(a)
Buyer Common Stock 1.2(a)
Buyer Reports 3.5
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.1
Closing Date 1.3(a)
Code 2B.11(c)
Collection Period 5.1(b)
Company Preamble
Company Benefit Plan 2B.20
Company Intellectual Property 2B.5(a)
Company Shares Introduction
Confidential Information 4.5(a)
Consolidated Group 10.4(c)
Contracts 2B.9(a)
CSC 4.5(a)
Customer Contracts 2B.9(a)(i)
Damages 6.1
Disclosure Schedule Article IIB
Division 2B.4(a)
Employee Benefit Plan 2B.20(a)
Environmental Law 2B.15(b)
ERISA 2B.20(a)
ERISA Affiliate 2B.20(a)
Excluded Liabilities 6.1(e)
Financial Statements 2B.4
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Governmental Entity 2A.3
Hart-Scott-Rodino Act 2A.3
Including 11.17
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Intellectual Property 2B.5(a)
Issues List 2B.9(c)
Master Professional
Services Agreement 5.1(n)
Materials of Environmental
Concern 2B.15(c)
Most Recent Balance Sheet 2B.4(a)
Nasdaq 1.2(b)
New Receivable 5.1(d)
Other Accounts Receivable 1.2(c)(ii)
Parties Preamble
Permit(s) 2B.16
Personal Property 2B.8(c)
Purchase Price Adjustment 1.2(e)
Purchase Price Shares 1.2(b)
Registration Statement 8.1
Required Consents 2B.3
Retained Receivables 5.1(b)
SEC 3.5
Section 338(h)(10) Elections 10.4(c)
Securities Act 2A.4(a)
Security Interest 2A.1
Signing Date Preamble
Specific Receivables 1.2(e)
Stockholder(s) Preamble
Tax(es) 2B.11(a)
Tax Audit 10.6(e)
Taxing Authority 2B.11(a)
Tax Returns 2B.11(a)
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Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of December 29, 1997 (the "Signing Date")
by and among International Telecommunication Data Systems, Inc., a Delaware
corporation (the "Buyer"), CSC Intelicom, Inc., a Delaware corporation formerly
known as Phoenix Telecom, Inc. (the "Company") and CSC Domestic Enterprises,
Inc. (the "Stockholder"). The Buyer, the Company and the Stockholder are
referred to collectively herein as the "Parties."
INTRODUCTION
1. The Stockholder owns all of the outstanding shares of the capital stock
(the "Company Shares") of the Company.
2. The Buyer desires to purchase from the Stockholder, and the Stockholder
desires to sell to the Buyer, the Company Shares for the consideration set forth
below, subject to the terms and conditions of this Agreement.
3. At the time of such sale of the Company Shares, the only operations of
the Company will be those currently carried on by the TRIS division of the
Company (the "Division").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties agree as
follows:
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ARTICLE I
PURCHASE AND SALE OF THE COMPANY SHARES
1.1 Purchase of the Company Shares from the Stockholder. Upon and subject
to the terms and conditions of this Agreement, at the closing of the purchase
and sale of the Company Shares contemplated by this Agreement (the "Closing"),
the Stockholder shall sell, transfer, convey, assign and deliver to the Buyer,
and the Buyer shall purchase, acquire and accept from the Stockholder, all of
the issued and outstanding Company Shares.
1.2 Purchase Price.
(a) The purchase price to be paid by the Buyer for all of the Company
Shares shall be (i) $90,000,000 less an amount equal to the Purchase Price
Adjustment (as defined below), payable by wire transfer or otherwise immediately
available funds and (ii) 404,449 shares (the "Purchase Price Shares") of common
stock, par value $0.01 per share, of the Buyer (the "Buyer Common Stock").
(b) Notwithstanding the above, the Buyer shall have the right at its
option to deliver at the Closing $10,000,000 by wire transfer or otherwise
immediately available funds in lieu of the Purchase Price Shares.
(c) The "Purchase Price Adjustment" equals the sum of
(i) the greater of (A) the face amount and the accrued but
unbilled portion of the accounts receivable of the Company relating to Nextel,
Omnipoint and Western Wireless, net of applicable reserves, (the "Specific
Receivables") at Closing Date and (B) the average of
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the Specific Receivables at (1) September 26, 1997 and (2) October 24, 1997,
which average equals $11,045,681.35; and
(ii) the greater of (A) the face amount of the accounts
receivable of the Company, net of applicable reserves, (which accounts
receivable are those listed on the Financial Statements as "A/R, Trade Other",
and does not include "A/R, Notes" or "Long Term Receivables") relating to all
customers of the Company (other than Nextel, Omnipoint and Western Wireless)
that, as of the Closing Date, have remained uncollected for at least 60 days
after the respective invoice date (the "Other Accounts Receivable") and (B) the
average of the face amount of the accounts receivable of the Company, net of
applicable reserves, (which accounts receivable are those listed on the
Financial Statements as "A/R, Trade Other", and does not include "A/R, Notes" or
"Long Term Receivables") relating to all customers of the Company (other than
Nextel, Omnipoint and Western Wireless) that were at (1) September 26, 1997 and
(2) October 24, 1997 uncollected for at least 60 days, which average equals
$470,698.90.
1.3 The Closing.
(a) Time and Location. The Closing shall take place at the offices of
the Company in El Segundo, California, commencing at 10:00 a.m., local time, on
the first business day after the date on which all of the conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
have been satisfied or waived unless a later date is mutually agreed to as soon
as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate
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the transactions contemplated hereby (the "Closing Date"). The Closing shall be
effective as of 11:59 p.m. on the Closing Date.
(b) Actions at the Closing. At the Closing:
(i) the Stockholder shall deliver (or cause to be delivered) to
the Buyer the various certificates, instruments and documents referred to in
Section 5.1;
(ii) the Buyer shall deliver (or cause to be delivered) to the
Stockholder the various certificates, instruments and documents referred to in
Section 5.2;
(iii) the Stockholder shall deliver to the Buyer one or more
certificates evidencing all of the Company Shares, duly endorsed in blank or
with stock powers duly executed by the Stockholder, with signature guaranteed;
(iv) the Stockholder shall cause the Company to deliver to the
Buyer the minute books, stock books, ledgers and registers, corporate seals and
other corporate records relating to the organization, ownership and maintenance
of the Company;
(v) the Buyer shall deliver to the Stockholder a payment of
$90,000,000 less the Purchase Price Adjustment (plus an additional $10,000,000
in the event Buyer elects to deliver $10,000,000 in lieu of Purchase Price
Shares);
(vi) the Buyer and the Stockholder shall execute and deliver a
cross-receipt evidencing the transactions referred to above;
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(vii) the Stockholder shall deliver to the Buyer a schedule of
the accounts payable relating to the Division as of the second business day
prior to the Closing Date; and
(viii) the Stockholder shall deliver to the Buyer all files
related to patents, copyrights, trademarks, service marks and tradenames, and
registrations and applications therefor, relating to the Division.
(c) Delivery of Stock Certificate. On the Closing Date, the Buyer
shall, subject to Section 1.2(b), deliver to the Stockholder a stock certificate
representing the Purchase Price Shares.
1.4 Further Assurances. At any time and from time to time after the
Closing, at the reasonable request of the Buyer and without further
consideration, the Stockholder shall promptly execute and deliver such
instruments of sale, transfer, conveyance, assignment and confirmation, and take
all such other action as the Buyer may reasonably request, more effectively to
transfer, convey and assign to the Buyer, and to confirm the Buyer's title to,
all of the Company Shares, to put the Buyer through its ownership of the Company
Shares in actual possession and operating control of the assets, properties and
business of the Company, and to carry out the purpose and intent of this
Agreement. Subject to Section 1.3(c), at any time and from time to time after
the Closing, at the reasonable request of the Stockholder and without further
consideration, the Buyer shall promptly execute and deliver such instruments of
sale, transfer, conveyance, assignment and confirmation, and take all such other
action as the Stockholder may reasonably request, more effectively to transfer,
convey and assign to the Stockholder and to confirm the Stockholder's title to,
the Purchase Price Shares, and to carry out the purpose and intent of this
Agreement.
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1.5 Assignment and Repurchase of Accounts Receivable.
(a) Prior to the Closing, the Company shall make a contribution to
capital of a subsidiary of the Company of all of the Company's rights and
interest to the Specific Receivables and Other Accounts Receivable
(collectively, the "Assigned Receivables").
(b) After the Closing Date, the Buyer shall use its commercially
reasonable best efforts to cause the Company to collect the accounts receivable,
including the accrued but unbilled portion thereof, of the Company (which
accounts receivable are those listed on the Financial Statements as "A/R, Trade
Other", and does not include "A/R, Notes" or "Long Term Receivables") existing
as of the Closing other than the Assigned Receivables (the "Retained
Receivables"). In addition, after the Closing Date, the Buyer shall cause the
Company to use its commercially reasonable best efforts, as agent for the
Stockholder, to collect the Assigned Receivables and any Retained Receivables
purchased by the Stockholder. Any out-of-pocket costs incurred in such
collection efforts (such as labor, postage, telephone charges and the like)
shall be the responsibility of the Company. In the event the Stockholder is
dissatisfied for any reason with the collection efforts of the Company with
respect to the Assigned Receivables or the Retained Receivables purchased by the
Stockholder, the Stockholder's sole remedy is to terminate, by written notice to
the Buyer, the Company as collection agent for the Stockholder. In its own
discretion, the Company may, but shall not be obligated to, use a collection
agency or commence legal actions in connection with such collection efforts.
From time to time after the Closing, the Buyer shall give notice to the
Stockholder designating those Retained Receivables which have not been collected
as of the date 90 days after the invoice date of such receivable and which the
Buyer wishes the Stockholder to purchase. Within ten days after receipt of each
such notice from the Buyer, the Stockholder shall purchase (without recourse to
the Buyer) such designated Retained
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Receivables then remaining unpaid for a purchase price in cash equal to the face
amount thereof payable to the Company within such 10-day period.
(c) Upon any termination of the Company as collection agent with
respect to the Assigned Receivables and the Retained Receivables purchased by
the Stockholder, (i) the Buyer shall promptly deliver to the Stockholder any
tangible evidence of such receivable then in the possession of the Buyer or
under its control, and (ii) the Stockholder shall be entitled to such customary
and reasonable actions as it deems necessary or desirable in order to collect
such unpaid receivable; provided, that the Stockholder shall consult with the
Buyer prior to taking any collection action which might reasonably be expected
to jeopardize the Buyer's relationship with such customer. The Buyer will, from
time to time after any such termination of the Company as collection agent,
execute and deliver to the Stockholder such instruments and other documents as
the Stockholder may reasonably request to assist the Stockholder in its
collection efforts.
(d) After any such termination of the Company as collection agent, the
Buyer and the Company will cooperate, at the Stockholder's expense, with the
Stockholder in collecting any accounts receivable that are purchased by or
assigned to the Stockholder pursuant to this Section 1.5; provided, however,
that the foregoing shall not require the Buyer or the Company to be a party to
any action brought by the Stockholder to collect such accounts receivable.
(e) The Buyer agrees that it will issue an invoice for any unbilled
portion of the Assigned Receivables in the normal course and consistent with the
past practice of the Company and that it will forward promptly to the
Stockholder any monies, checks or instruments received by the Buyer or the
Company after the Closing Date with respect to any Assigned Receivables or
Retained Receivables purchased by the Stockholder. The Stockholder agrees that
it will forward promptly to the Buyer any monies, checks or instruments received
by the Stockholder after the
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Closing Date with respect to any accounts receivable of the Company other than
Assigned Receivables or the Retained Receivables purchased by Stockholder.
1.6 Post-Closing Adjustments. No later than 30 days after the Closing Date,
the Buyer shall deliver to the Stockholder a statement setting forth the
aggregate amount due from the Stockholder to the Buyer with respect to each of
the adjustments described on Attachment 1.6 hereto. To the extent such amount is
not disputed, the Stockholder shall pay to the Buyer such undisputed amount
within 30 days after receipt of such statement. Within such 30-day period, any
such disputed amount shall be identified in writing in reasonably specific
detail to the Buyer and the Parties shall resolve such dispute in accordance
with Section 11.9 hereof.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY SHARES AND THE STOCKHOLDER
The Stockholder represents and warrants to the Buyer as follows:
2A.1 Ownership of the Company Shares. The Stockholder has good and
marketable title, free and clear of any and all Security Interests (as defined
below), conditions, restrictions and voting trust arrangements, to all of the
Company Shares. The Stockholder has the full right, power and authority to sell,
transfer, convey, assign and deliver to the Buyer at the Closing the Company
Shares and, upon consummation of the purchase and sale contemplated hereby, the
Stockholder will deliver to the Buyer good and marketable title to the Company
Shares, free and clear of all Security Interests, conditions, restrictions and
voting trust arrangements. "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge, lien, contractual restriction or
covenant, option or other adverse claim (whether arising by contract or by
operation of law).
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2A.2 Authority. The Stockholder has all requisite power and authority to
execute and deliver this Agreement and to perform the Stockholder's obligations
hereunder. This Agreement has been duly and validly executed and delivered by
the Stockholder, and constitutes a valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms.
2A.3 Noncontravention. Subject to the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act"), neither the execution and delivery of this Agreement
by the Stockholder nor the consummation by the Stockholder of the transactions
contemplated by this Agreement will: (i) conflict with or violate any provision
of the Certificate of Incorporation or bylaws of the Stockholder; (ii) require
on the part of the Stockholder any filing with, or any permit, authorization,
consent or approval of, any court, arbitrational tribunal, administrative agency
or commission or other governmental or regulatory authority or agency (a
"Governmental Entity"); (iii) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any agreement,
instrument, contract or arrangement to which the Stockholder is a party or by
which the Stockholder or any of its properties is bound; (iv) result in the
imposition of any Security Interest upon the Company Shares or any assets or
properties of the Stockholder; or (v) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Stockholder or to the
Company Shares.
2A.4 Investment Representations.
(a) The Stockholder is acquiring the Purchase Price Shares for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of such Purchase Price Shares in violation of the
Securities Act
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of 1933, as amended (the "Securities Act") or any rule or regulation under the
Securities Act.
(b) The Stockholder has had adequate opportunity to obtain from
representatives of the Buyer such information, in addition to the
representations set forth in the Agreement, as is necessary to evaluate the
merits and risks of its investment in the Buyer.
(c) The Stockholder has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the
acquisition of the Purchase Price Shares and to make an informed investment
decision with respect to such investment.
(d) The Stockholder understands that the Purchase Price Shares have
not been registered under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act; and that until such
shares are registered pursuant to Section 8.1, the Purchase Price Shares cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
(e) The Stockholder agrees and understands that until the Purchase
Price Shares are sold under an effective registration statement pursuant to
Section 8.1, a legend substantially in the following form will be placed on the
certificate representing the Purchase Price Shares to be issued to the
Stockholder:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
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satisfactory to the corporation to the effect that such registration
is not required."
ARTICLE IIB
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Stockholder and the Company, jointly and severally, represent and
warrant to the Buyer that the statements contained in this Article IIB are true
and correct except as set forth in the disclosure schedule attached hereto (the
"Disclosure Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IIB, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify the corresponding paragraph in this Article IIB and all other paragraphs
in this Article IIB to which it is reasonably apparent that such disclosures
relate.
2B.1 Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing (corporate and tax) under the
laws of the State of Delaware, and has all requisite power and authority to own
and use its properties and to carry on its business as now being conducted.
Immediately prior to the Closing, the Company will be qualified to transact
business as a foreign corporation and will be in good standing (corporate and
tax) under the laws of each jurisdiction in which the nature of its business or
the ownership or leasing of its properties requires such qualification.
Immediately prior to the Closing, the Company will not control, directly or
indirectly, or have any direct or indirect equity participation in, any
corporation, limited liability company, partnership, trust or other business
association. The Company has all requisite power and authority to own its
properties and to carry on its business as now being conducted, to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery by the Company of this Agreement and the consummation by the
Company
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of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
2B.2 Capitalization. The authorized capital stock of the Company consists
of 1,000 shares of common stock, par value $1.00 per share, of which 100 shares
are outstanding as of the date of this Agreement, and no shares are held in the
treasury of the Company (all of which outstanding shares are owned of record and
beneficially by the Stockholder). All of the issued and outstanding Company
Shares are duly authorized, validly issued, fully paid, nonassessable and issued
without violation of any preemptive rights. Except as otherwise contemplated
hereby, there are no outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition,
contingent or otherwise, of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Company. There are no agreements, voting trusts, proxies or
understandings with respect to the voting, or registration under the Securities
Act of any capital stock of the Company. All of the issued and outstanding
Company Shares were issued in compliance with applicable federal and state
securities laws.
2B.3 Noncontravention. Subject to the applicable requirements of the
Hart-Scott-Rodino Act, neither the purchase and sale of the Company Shares nor
the consummation of the other transactions contemplated by this Agreement will:
(i) conflict with or violate any provision of the Certificate of Incorporation
or bylaws of the Company; (ii) require on the part of the Company any filing
with, or any permit, authorization, consent or approval of, any Governmental
Entity; (iii) conflict with, result in a breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to
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accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any agreement, instrument, contract or arrangement to which the
Company is a party or by which the Company or any of its assets or properties is
bound; (iv) result in the imposition of any Security Interests upon any assets
or properties of the Company; or (v) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
properties or assets. Section 2B.3 of the Disclosure Schedule sets forth a list
of any notice, consent or waiver (i) required in order to effect the purchase
and sale of the Company Shares contemplated by this Agreement and (ii) required
under any agreement, instrument contract or arrangement of the Company or by
which the Company or any of its assets is bound as a result of the purchase and
sale of the Company Shares (collectively, the "Required Consents").
2B.4 Financial Statements and Information.
(a) Financial Statements. The Company has previously delivered to the
Buyer copies of (a) the unaudited balance sheets and statements of income
relating to the Division for each of the last three fiscal years; and (b) the
unaudited balance sheet of the Division as of September 26, 1997 (the "Most
Recent Balance Sheet") and the unaudited statement of income relating to the
Division for the six-month period ended as of the date of the Most Recent
Balance Sheet. The Company has previously delivered to the Buyer copies (a) the
unaudited balance sheets and statements of income of the Company for each of the
last three fiscal years; and (b) the unaudited balance sheet of the Company
dated as of September 26, 1997 and the unaudited statement of income relating to
the Company for the six-month period ended as of September 26, 1997. Such
financial statements (collectively, the "Financial Statements") have been
prepared on a consistent basis throughout the periods covered thereby, fairly
present the financial condition and results of operations of the Division and
the Company, respectively, as of the respective dates thereof and for the
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periods referred to therein and are consistent with the books and records of the
Division and the Company, respectively, provided, however, that the Financial
Statements are subject to normal recurring year-end adjustments (which will not
be material) and do not include footnotes. To the knowledge of the Stockholder
the historical financial information of the Division previously delivered to the
Company is true and correct in all material respects. Section 2B.4 of the
Disclosure Schedule contains disclosure regarding "A/R Notes" and "Long Term
Receivables" contained on the Financial Statements.
(b) Absence of Undisclosed Liabilities. Except as otherwise disclosed
in this Agreement or the Disclosure Schedule, immediately prior to the Closing,
the Company will have no liability or commitment (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), other than (i) the liabilities shown on the Most Recent
Balance Sheet, and (ii) liabilities of the Division, similar in nature to those
shown on such balance sheet, which have arisen after the date of the Most Recent
Balance Sheet in the ordinary course of business of the Division consistent with
past practice (including with respect to amount).
(c) Absence of Certain Changes. Since the date of the Most Recent
Balance Sheet, (i) there has been no material adverse change in the Division or
the business, properties, operations, condition (financial or otherwise), assets
or liabilities of the Division, and there has occurred no event or development
which may reasonably be foreseen to have in the future a material adverse effect
on the Division or the business, properties, operations, condition (financial or
otherwise), assets or liabilities of the Division, and (ii) the Company has not
taken any of the actions set forth in clauses (i) through (xvi) of Section
4.4(a), except as contemplated in Sections 4.4(b) and 4.8 of this Agreement.
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(d) Accounts Receivables. The Company has delivered to the Buyer true
and correct lists of all accounts receivable as of each of September 26, 1997
and October 24, 1997 relating to the Division (and two accounts receivable
relating to [BillPro]), including the accrued but unbilled portion thereof,
including an aging thereof. All accounts receivable relating to the Division
arose out of the sales of products or provisions of services in the ordinary
course of business.
2B.5 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual Property
(as defined below) used or necessary for the operation of the businesses of the
Division as presently conducted or presently proposed to be conducted (the
"Company Intellectual Property"). Except as set forth in Attachment A to Section
2B.5(c) of the Disclosure Schedule and Attachment A to Section 2B.9(b) of the
Disclosure Schedule, each item of Company Intellectual Property used in, or
necessary for, the operation of the business of the Division since July 1, 1997
will be owned or available for use by the Company on identical terms and
conditions immediately following the Closing as it was since July 1, 1997. The
Company has taken all reasonable measures to protect the proprietary nature of
each item of Company Intellectual Property, and to maintain in confidence all
trade secrets and confidential information, that it owns or uses. Except as
disclosed in Section 2B.5(a) of the Disclosure Schedule, no other person or
entity owns or has any rights to any of the Company Intellectual Property
(except pursuant to agreements or licenses specified in Section 2B.5(c) or
2B.5(d) of the Disclosure Schedule), and, to the best knowledge of the
Stockholder or the Company, no other person or entity is infringing, violating
or misappropriating any of the Company Intellectual Property. The Company has
delivered to the Buyer correct and complete copies of all written documentation
evidencing ownership of, each item of Company Intellectual Property.
"Intellectual Property" means all (i) patents and patent applications, (ii)
copyrights
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and registrations thereof, (iii) computer software, source code, data and
documentation (excluding, in each case, commercially available "off the shelf"
software), (iv) trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
research and development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (v) trademarks, service marks,
trade names and registrations and applications therefor, and (vi) other tangible
or intangible proprietary rights or information relating to any of the
foregoing.
(b) None of the activities or business presently conducted by the
Company or conducted by the Company at any time within six years prior to the
date of this Agreement infringes or violates, or constitutes a misappropriation
of, any Intellectual Property rights of any other person or entity. The Company
has not received any claim or notice alleging any such infringement, violation
or misappropriation.
(c) Section 2B.5(c) of the Disclosure Schedule identifies each item of
Company Intellectual Property that is owned by a party other than the Company,
and the license or agreement pursuant to which the Company uses it. With respect
to each such item of Company Intellectual Property:
(i) the license, sublicense or other agreement, covering such
item is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will continue to
be legal, valid, binding, enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing;
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(iii) with respect to such license, sublicense or other
agreement, neither the Company, nor to the knowledge of the Company or the
Stockholder, any other party thereto, is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration thereunder by the Company or
to the knowledge of the Company or the Stockholder, by any other party thereto;
and
(iv) the underlying item of Intellectual Property is not subject
to any outstanding judgment, order, decree, stipulation or injunction.
(d) Section 2B.5(d) of the Disclosure Schedule identifies each patent
or registration which has been issued to the Company or any affiliate relating
to the business of the Division, identifies each pending patent application or
application for registration which the Company or any affiliate has made with
respect to Company Intellectual Property relating to the Division,
and identifies each license or other agreement pursuant to which the Company or
any affiliate has granted any rights to any third party with respect to any
Intellectual Property relating to the Division. The Company has delivered to the
Buyer correct and complete copies of all such patents and registrations (as
amended to date) and have made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership of, and any
claims or disputes relating to, each such item. Except as set forth in Section
2B.5(d) of the Disclosure Schedule, with respect to each item of Company
Intellectual Property that the Company owns relating to the business of the
Division:
(i) the Company possesses all right, title and interest in
and to such item; and
(ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction.
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(e) The Company has supplied the Buyer with correct and complete
copies of all licenses, sublicenses or other agreements (as amended to date)
pursuant to which the Company uses Intellectual Property owned by a party other
than the Company, all of which are listed on Section 2B.5(c) of the Disclosure
Schedule.
2B.6 Trademarks. With respect to the Division, (a) the Company has used the
trademarks listed in Section 2B.6 of the Disclosure Schedule since the dates set
forth in such Section, (b) the Company has not licensed or granted any right to
use any such trademark to any other person or entity and (c) the Company does
not use, and since January 1, 1993 has not used, any other trademarks or trade
names other than those listed in Section 2B.6 of the Disclosure Schedule.
2B.7 Real Property Owned and Leased.
(a) Immediately prior to the Closing, the Company will not own
any real property.
(b) Section 2B.7(b) of the Disclosure Schedule lists and briefly
identifies all real property owned by the Company at any time since January 1,
1997.
(c) Section 2B.7(c) of the Disclosure Schedule lists and briefly
identifies all real property that will be leased or subleased to the Company at
the time of the Closing; lists the term of such lease or sublease, any extension
and expansion options, and the rent payable thereunder. The Company has
delivered to the Buyer correct and complete copies of the leases and subleases
(as amended to date) listed in Section 2B.7(c) of the Disclosure Schedule. With
respect to each lease and sublease listed in Section 2B.7(c) of the Disclosure
Schedule:
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(i) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) the Company is not, and to the knowledge of the Company or
the Stockholder, no other party to the lease or sublease is, in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease; and
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold.
2B.8 Assets.
(a) The Company owns or leases all tangible assets necessary for the
conduct of the business of the Division as presently conducted by the Company.
Each such tangible asset is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used. All such tangible assets are located at one or more of the locations
identified in Section 2B.8(a) of the Disclosure Schedule.
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(b) No asset of the Company (tangible or intangible) is subject to any
Security Interest.
(c) Section 2B.8(c) of the Disclosure Schedule sets forth (i) a true,
correct and complete list of all items of tangible personal property, including
without limitation purchased and capitalized software, owned by the Company and
used in connection with the business of the Division as of the date hereof, or
not owned by the Company but in the possession of or used in the business of the
Division (the "Personal Property"), other than individual assets with a book
value of less than $1,000; and (ii) a description of the owner of, and any
agreement relating to the use of, each item of Personal Property with an
estimated fair market value in excess of $15,000 and not owned by the Company.
The Company has good and marketable title to each item of Personal Property
owned by the Company and used in connection with the business of the Division.
Each item of Personal Property not owned by the Company is in such condition
that upon the return to its owner of such property in its condition as of the
date hereof at the end of the relevant lease term or other period contemplated
by the applicable agreement), the obligations of the Company to such owner or
lessor will be discharged.
2B.9 Contracts.
(a) Section 2B.9(a) of the Disclosure Schedule contains a true,
complete and correct list and description of the following contracts and
agreements, whether written or oral to which the Company will be a party or by
which the Company or its assets will be bound immediately prior to the Closing
after consummation of the transactions contemplated by Section 4.8 (the
"Contracts"):
(i) any arrangement (or group of related written arrangements)
for the licensing of the Division's billing and customer care software
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and/or the provision of related services by the Division to any person or entity
(the "Customer Contracts");
(ii) any arrangement (or group of related written arrangements)
for the lease of personal property from or to third parties;
(iii) any arrangement (or group of related arrangements) for the
purchase of products or other personal property by the Company or for the
furnishing to, or receipt of services by, the Company (A) which calls for
performance over a period of more than one year or (B) in which the Company has
agreed to purchase a minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain party;
(iv) any arrangement establishing a partnership or joint venture;
(v) any arrangement (or group of related arrangements) under
which it has created, incurred, assumed, or guaranteed (or may create, incur,
assume, or guarantee) indebtedness (including capitalized lease obligations) or
under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(vi) any arrangements (or group of related arrangements) relating
to employment, or engagement, of any person as an employee or a consultant;
(vii) any arrangement concerning confidentiality or
noncompetition other than any such arrangements included in Customer Contracts;
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(viii) any arrangement involving any affiliate, as defined in
Rule 12b-2 under the Securities Exchange Act of 1934 (an "Affiliate"), of the
Company;
(ix) any other arrangement under which the consequences of a
default or termination could have a material adverse effect on the assets,
business, financial condition, results of operations or prospects of the
Division as currently conducted; and
(x) any other arrangement (or group of related arrangements)
either involving more than $100,000 or not entered into in the ordinary course
of business.
(b) The Company has made available to the Buyer a correct and complete
copy of each written Contract (as amended to date). With respect to each
Contract: (i) the arrangement is legal, valid, binding and enforceable and in
full force and effect and except as set forth in Section 2B.9(b) of the
Disclosure Schedule, the Contract will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing; and (ii)
except as set forth in Section 2B.9(b) of the Disclosure Schedule, neither the
Company nor, to the knowledge of the Company or the Stockholder, any other
party, is in breach or default, all material terms and conditions have been
complied with, no claim of default has been made, and no event has occurred
which with notice or lapse of time would constitute a breach or default by the
Company, or to the knowledge of the Company or the Stockholder, by any other
party thereto, or permit termination, modification, or acceleration, under the
Contract.
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(c) Section 2B.9(c) of the Disclosure Schedule contains lists setting
forth all of the current material issues associated with each of the Customer
Contracts other than the Customer Contracts with Nextel, Omnipoint and Western
Wireless (the "Issues Lists"), including, but not limited to, claims made by
customers regarding the breach of a Customer Contract, material outstanding
obligations and commitments (including work in process) of the Company under the
respective Customer Contract, the failure of the Company to fulfill its
obligations under the respective Customer Contract or to meet the expectations
of such customer, whether or not such failure constitutes a technical breach of
such customer Contract. The Issues Lists fairly and accurately represent
complete and accurate accounts of such open issues.
2B.10 Books and Records; Powers of Attorney.
(a) The corporate minute books, financial and accounting records and
other business records of the Company, as furnished to the Buyer, are accurate
and complete in all material respects for the period after January 12, 1992 and
to the knowledge of the Company or the Stockholder are accurate and complete in
all material respects prior to such date.
(b) There are no outstanding powers of attorney executed on behalf of
the Company.
2B.11 Tax Matters.
(a) The Company has timely filed all material Tax Returns (as defined
below) that it was required to file and all such Tax Returns were correct and
complete in all material respects. The Company has paid all Taxes (as defined
below) relating to the Company that are shown to be due on any such Tax Returns.
The unpaid Taxes of the Company for tax periods through the date of the Most
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Recent Balance Sheet do not exceed the accruals and reserves (excluding the
reserve or tax asset for deferred taxes) for Taxes set forth on the Most Recent
Balance Sheet. All material Taxes that either the Company or its affiliates is
or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Taxing
Authority (as defined below). For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government (a "Taxing Authority"), and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof. For purposes of this
Agreement, "Tax Returns" means all reports, returns, declarations, statements or
other information required to be supplied to a taxing authority in connection
with Taxes.
(b) The Company has made available to the Buyer correct and complete
copies of the relevant portions of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company or any affiliate since March 31, 1993 to the extent they relate to the
operations of the Company. The federal income Tax Returns relating to the
Company have been audited by the Internal Revenue Service or are closed by the
applicable statute of limitations for all taxable years through 1991.
(c) Neither the Company nor the Stockholder is a "consenting
corporation" within the meaning of Section 341(f) of the Internal Revenue Code
of 1986, as amended (the "Code") and none of the assets of the Company are
subject to an election under Section 341(f) of the Code. Neither the Company or
any affiliate
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has waived any statute of limitations with respect to Taxes related to the
Company or agreed to an extension of time with respect to a Tax assessment or
deficiency related to the Company.
(d) The Stockholder is not a person other than a United States person
within the meaning of the Code.
(e) The Company is not and has not been a United States real property
holding company within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Stockholder has filed a consolidated federal income tax return
for the taxable year immediately preceding the current taxable year which
included the Company, and the Stockholder is eligible to make an election under
Section 338(h)(10) of the Code (and any comparable available election under
state, local or foreign tax law) with respect to the Company.
(g) The Company is not a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(h) Section 2B.11 of the Disclosure Schedule sets forth (i) those
jurisdictions in which the Company files Tax Returns or pays Tax, and the
apportionment factor, if any, used for such jurisdictions for the last period
prior to the date of this Agreement for which a Tax Return was filed by or
including the Company, (ii) the nature of the Tax, and (iii) those taxable years
for which the Tax Returns of the Company are being reviewed or audited by
applicable federal, state, local and foreign Taxing Authorities or are subject
to pending proceedings.
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2B.12 Product and Service Warranties. Except as set forth in Section 2B.12
of the Disclosure Schedule, no product sold or licensed by the Division, and no
service provided by the Division to a party to a Customer Contract, is subject
to any guaranty, warranty, right of return or other indemnity beyond the terms
which are set forth in the Customer Contracts.
2B.13 Customers and Suppliers. Except as set forth in Section 2B.13 of the
Disclosure Schedule, with respect to the Division: (a) the Company has good
relations with its customers and suppliers and no significant customer or
prospective customer has indicated to the Company that it will not purchase any
products or services from the Company in the future or that it wishes to return
or receive a refund for any products or services previously purchased from the
Company and (b) no supplier has indicated that it will not sell materials,
products or services to the Company in the future or that it will only continue
to sell materials, products or services to the Company on terms that are
materially more adverse than in the past.
2B.14 Insurance. The Company maintains, with financially sound insurers of
nationally recognized stature and responsibility, insurance with respect to its
properties and operations of such a nature, with such terms and in such amounts
as it deems prudent. The Company has not agreed to modify or cancel any of such
insurance, nor has the Company received notice of any actual or threatened
modification or cancellation of such insurance; however, all insurance coverages
will cease effective as of the Closing Date, and Buyer is responsible to procure
insurance coverage as Buyer deems appropriate.
2B.15 Legal Compliance; Environmental Matters.
(a) The Company, and the conduct and operations of the Company's
business, are in compliance with each applicable law (including rules,
regulations,
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ordinances and codes thereunder) of any federal, state, local or foreign
government or governmental authority (including without limitation any relating
to public and employee health and safety, environmental protection, hazardous
waste or applicable building, zoning and other laws) and any judgment, decree or
order of any Governmental Entity, except for any violation or default which will
not result in a material adverse effect on either (i) the Company or its
business, assets, financial condition or prospects or (ii) the Division or its
business, assets, financial condition or prospects.
(b) The Company has complied with all applicable Environmental Laws
(as defined below). There is no pending, or, to the knowledge of the Company,
threatened, civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any governmental entity, relating to any Environmental Law involving the
Company. "Environmental Law" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic
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or hazardous substances or oil or petroleum products or solid or hazardous
waste. As used above, the terms "release" and "environment" shall have the
meaning set forth in the federal Comprehensive Environmental Compensation,
Liability and Response Act of 1980 (CERCLA).
(c) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by the
Company. Neither the Company nor the Stockholder is aware of any releases of
Materials of Environmental Concern at parcels of real property or facilities
other than those owned, operated or controlled by the Company that could
reasonably be expected to have an impact on the real property or facilities
owned, operated or controlled by the Company. "Materials of Environmental
Concern" means any chemicals, pollutants or contaminants, hazardous substances
(as such term is defined under CERCLA), solid wastes and hazardous wastes (as
such terms are defined under the federal Resources Conservation and Recovery
Act), toxic materials, oil or petroleum and petroleum products.
(d) To the knowledge of the Company or the Stockholder, there are no
environmental reports, investigations or audits relating to premises currently
or previously owned or operated by the Company.
2B.16 Permits. The Company possesses all material permits, licenses,
registrations, certificates, orders, approvals, franchises, variances and
similar rights issued by or obtained from any Governmental Entity or any other
third party, that are required to conduct the business of the Division, each of
which is listed in Section 2B.16 of the Disclosure Schedule (collectively, the
"Permits"). Each Permit will be in full force and effect immediately following
the Closing and will not expire or terminate as a result of the transactions
contemplated by this Agreement.
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2B.17 Litigation. Section 2B.17 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator as mediator relating to the Company to which the Company or the
Stockholder is a party or, to the knowledge of either the Company or the
Stockholder, is threatened to be made a party. Except as set forth in Section
2B.17 of the Disclosure Schedule, there is no pending or, to the knowledge of
the Company or the Stockholder, threatened complaint, action, suit, proceeding,
hearing or investigation against the Company or the Stockholder.
2B.18 Confidential Information. To the knowledge of the Company or the
Stockholder, the Company has not disclosed any information of a proprietary or
confidential nature relating to the Division or the Division's business,
products, technology or financial condition to any person or entity, except, in
the ordinary course of business, to customers of the Company who have signed
confidentiality agreements, to the legal and financial advisors of the Company,
to the Affiliates of the Company, and to the Buyer and its legal and financial
advisors.
2B.19 Employees.
(a) (i) Section 2B.19(a)(i) of the Disclosure Schedule contains a list
of all of the employees of the Company whose employment relates primarily to the
operations of the Division on the date hereof; (ii) Section 2B.19(a)(ii) of the
Disclosure Schedule contains a list of all employees of any Affiliate of the
Company (including the Stockholder and CSC (as defined below)) whose duties
relate in any way to the operations of the Division; and (iii) Section
2B.19(a)(iii) contains a list of any person who is employed or retained by an
entity other than the Company or any Affiliate of the Company and has provided
employment or consulting services to the Company
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at any time within the three month period prior to the Signing Date. Sections
2B.19(a)(i), (ii) and (iii) of the Disclosure Schedule (collectively, "Section
2B.19(a) of the Disclosure Schedule") each contain the job title and the annual
rate of compensation of each person listed on such Schedule. Each person listed
on Section 2B.19(a) of the Disclosure Schedule has entered into a
confidentiality/assignment of inventions agreement with the Company or such
Affiliate, as appropriate, a copy of which is available in the human resources
records of the Company. To the knowledge of the Company or the Stockholder,
except as disclosed on Section 2B.19 of the Disclosure Schedule no key employee
or group of employees listed on Section 2B.19(a) of the Disclosure Schedule has
any plans to terminate his or their employment (other than for the purpose of
accepting employment with the Buyer following the Closing). Neither the Company
nor any employee of the Company listed in Section 2B.19(a) of the Disclosure
Schedule is a party to or bound by any collective bargaining agreement. The
Company has not experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. Neither the Company nor the
Stockholder has any knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to the employees
listed in Section 2B.19(a) of the Disclosure Schedule.
(b) The persons listed on Section 2B.19(a)(ii) of the Disclosure
Schedule, other than Paul Derby, shall become consultants to the Division,
effective upon the Closing, pursuant to the Master Professional Services
Agreement (as defined below).
(c) Except as set forth in Section 2B.19(c) of the Disclosure
Schedule, the Company and the Stockholder believe that the list of job titles
and personnel requirements contained in Section 2B.19(a) of the Disclosure
Schedule represents a complete and accurate list of those job functions that are
necessary in order to properly operate the business of the Division.
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2B.20 Employee Benefits.
(a) Section 2B.20(a) of the Disclosure Schedule contains a complete
and accurate list of all Company Benefit Plans. A "Company Benefit Plan" is an
Employee Benefit Plan (as defined below) which is maintained, or contributed to,
by the Company or any ERISA Affiliate (as defined below) for the benefit of
employees of the Company. "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation. "ERISA Affiliate" means any entity which is or at any applicable
time was a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes or included the
Company. Complete and accurate copies of (i) all Company Benefit Plans which
have been reduced to writing, (ii) written summaries of all unwritten Company
Benefit Plans, (iii) all related trust agreements, insurance contracts and
summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500,
5500C or 5500R for each Company Benefit Plan for the most recent three plan
years, have been made available to the Buyer. Each Employee Benefit Plan has
been administered in all material respects in accordance with its terms and the
Company and each ERISA Affiliate have in all material respects met their
obligations with respect to such Employee Benefit Plan and have made all
required contributions thereto. The Company and all Company Benefit Plans are in
compliance in all material respects
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with the currently applicable provisions of ERISA and the Code and the
regulations thereunder.
(b) There are no known investigations by any governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Company Benefit Plans and proceedings with respect
to qualified domestic relations orders), suits or proceedings against or
involving any Company Benefit Plan or asserting any rights or claims to benefits
under any Company Benefit Plan that could give rise to any material liability to
the Company.
(c) All the Company Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
manner that would adversely affect the qualified status of such Company Benefit
Plan.
(d) Neither the Company nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan that has an "accumulated funding deficiency" (whether or
not waived) as defined in Section 412 of the Code. No Employee Benefit Plan ever
maintained by the Company or an ERISA Affiliate which is subject to Title IV of
ERISA has any "amount of unfunded benefit liabilities" within the meaning of
Section 4001(a)(18) of ERISA.
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(e) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Company Benefit Plan
providing benefits after termination or employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code and
insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan ever maintained by the Company or any ERISA
Affiliate that would subject the Company or any ERISA Affiliate to (i) any
material fine, penalty, tax or liability of any kind imposed under ERISA or the
Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(h) No Company Benefit Plan is funded by, associated with, or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code, except the medical/dental plan and the retiree
medical plan.
(i) Each Company Benefit Plan is amendable and terminable unilaterally
by the Company at any time without liability to the Company and no Employee
Benefit Plan, plan documentation or agreement, summary plan description or other
written communication distributed generally to employees by its terms prohibits
the Company from amending or terminating any such Company Benefit Plan.
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(j) Each Company Benefit Plan which is required to satisfy Section
401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with,
and has satisfied the requirements of, Section 401(k)(3) and Section 401(m)(2)
of the Code for each plan year ending prior to the Closing Date.
(k) The assets of each Company Benefit Plan which is funded are
reported at their fair market value on the books and records of such Employee
Benefit Plan.
(l) The Company and all ERISA Affiliates have complied in all material
respects with the continuation of health coverage requirements of Section 4980B
of the Code and Sections 601 through 608 of ERISA and the portability, access
and renewability provisions of Subtitle K, Chapter 100 of the Code and Section
701 et seq. of ERISA.
(m) All filings and reports as to each Company Benefit Plan required
to have been made on or before the Closing Date to the Internal Revenue Service
or to the United States Department of Labor have been or will be duly made by
that date.
(n) Section 2B.20(n) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from the Company
that may be subject to the tax imposed by
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Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code; and (iii) agreement or plan
binding the Company, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(o) Section 2B.20(o) of the Disclosure Schedule sets forth the
Company's policy with respect to accrued vacation liability, accrued sick time
and earned time-off liability and the amount of such liabilities as of the date
of the Most Recent Balance Sheet, including a list of Company employees who have
been authorized to carry 1997 accrued vacation time into 1998 and the length of
such carry-over vacation time.
2B.21 Business Relationships With Affiliates. Section 2B.21 of the
Disclosure Schedule lists any agreements, arrangements or relationships whereby
any officer or director of the Company or the Stockholder or any other Affiliate
of the Company (a) owns any property or right, tangible or intangible, which is
used in the business of the Company, (b) has asserted any claim which is still
pending or, to the knowledge of the Company, has any claim or cause of action
against the Company, (c) owes any money to the Company or is owed any money by
the Company other than the payment of wages in the ordinary course of business,
or (d) has any other business relationship with the Company other than in the
capacity as an officer, director, stockholder or employee (any relationships
shall be referred to herein as "Affiliate Relationships").
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2B.22 Brokers' Fees. No financial advisor, broker, agent or finder was
utilized by the Company, the Stockholder or any Affiliate of the Company in
connection with the transactions contemplated by this Agreement and no fees are
due or owing to any financial advisor, broker, finder or agent. The Stockholder
agrees to pay all fees, commissions, expenses or other compensation due or owing
to any financial advisor, broker, finder, or agent utilized or engaged by the
Company, the Stockholder or any Affiliate of the Company in connection with the
transactions contemplated hereby.
2B.23 Other Businesses of the Company. Section 2B.23 of the Disclosure
Schedule contains a list and brief description of all businesses in which the
Company was or has been engaged since January 12, 1992, the principal locations
where each such business was conducted and the approximate periods when the
Company conducted each such business.
2B.24 Subsidiaries. Effective no later than as of the Closing Date, the
Company will not control directly or indirectly, or have any direct or indirect
equity participation in any corporation, limited liability company, partnership,
trust or other business association.
2B.25 Disclosure. No representation or warranty by the Company or the
Stockholder contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered to the Buyer by or on behalf of the Stockholder
or the Company pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Stockholder as follows:
3.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Buyer
has qualified to transact business as a foreign corporation and is in good
standing under the laws of Connecticut and Texas. The Buyer has all requisite
power and authority to own its properties and to carry on its business as now
being conducted, to execute and deliver this Agreement and to perform its
obligations hereunder.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
(a) 40,000,000 shares of Buyer Common Stock, of which 8,521,718 shares were
issued and outstanding as of October 24, 1997 and (b) 2,000,000 shares of
Preferred Stock, $.01 par value per share, none of which are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable, and free of all
preemptive rights. All of the Purchase Price Shares will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully paid,
nonassessable, and free of all preemptive rights.
3.3 Authorization. The execution and delivery by the Buyer of this
Agreement, and the consummation by the Buyer of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of the Buyer. This Agreement constitutes a valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms.
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3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Hart-Scott-Rodino Act, the Securities Act and any applicable
state securities laws, neither the execution and delivery of this Agreement by
the Buyer nor the consummation by the Buyer of the transactions contemplated by
this Agreement will: (i) conflict with or violate any provision of the
Certificate of Incorporation or bylaws of the Buyer; (ii) require on the part of
the Buyer any filing with, or any permit, authorization, consent or approval of,
any Governmental Entity; (iii) conflict with, result in the breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any agreement, instrument, contract or arrangement to which the
Buyer is a party or by which the Buyer or any of its assets or properties is
bound; or (iv) violate any order, writ, injunction, decree, law, statute, rule
or regulation applicable to the Buyer or any of its properties or assets.
3.5 Buyer Reports and Financial Statements. The Buyer has previously
furnished to the Stockholder (i) its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, as filed with the Securities and Exchange
Commission (the "SEC"), (ii) its Quarterly Report on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 (collectively, the
"Buyer Reports"), and (iii) its Certificate of Incorporation and bylaws, as
amended to date. As of their respective dates, the Buyer Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Buyer included in the Buyer Reports (i) comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and (ii) fairly
present the consolidated financial condition, results of operations and cash
flows of the Buyer as of the respective dates thereof and for the periods
referred to therein.
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3.6 Litigation. There are no actions, suits, or claims or legal,
administrative or arbitratorial proceeding pending against, or, to the Buyer's
knowledge, threatened against, the Buyer which would adversely affect the
Buyer's performance under this Agreement or the consummation of the transactions
contemplated by this Agreement.
3.7 Brokers' Fees. No broker, agent or finder was utilized by the Buyer in
connection with the transactions contemplated by this Agreement and no fees are
due or owing by the Buyer to any broker, finder or agent other than to Lehman
Brothers. The Buyer agrees to pay all fees, commissions, expenses or other
compensation to Lehman Brothers and to any other broker, finder or agent
utilized or engaged by the Buyer with respect to the transactions contemplated
hereby.
3.8 Investment Representations.
(a) The Buyer is acquiring the Company Shares for its own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of such Company Shares in violation of the Securities Act or any
rule or regulation under the Securities Act.
(b) The Buyer has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the acquisition
of the Company Shares and to make an informed investment decision with respect
to such investment.
(c) The Buyer understands that the Company Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act; and that the Company Shares cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
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(d) The Buyer agrees and understands that a legend substantially in
the following form is on the certificate representing the Company Shares to be
transferred to the Buyer:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
3.9 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and, subject to the second sentence of Section 3.5 above, no
statement contained in any other document, certificate or other instrument
delivered to or to be delivered to the Stockholder by or on behalf of the Buyer
pursuant to this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 Efforts. Each of the Parties shall use its best efforts to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
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4.2 Notices and Consents. Each of the Stockholder and the Company shall use
its best efforts to obtain, at its expense, all waivers, permits, consents,
approvals or other authorizations from third parties and Governmental Entities,
and to effect all such registrations, filings and notices with or to third
parties and Governmental Entities, as listed on Schedule 4.2 hereto. The
Stockholder represents and warrants to the Buyer that Schedule 4.2 represents
all of such waivers, permits, consents, approvals, authorizations, filings,
registrations and notices to be obtained or effected by the Stockholder or the
Company necessary or required (in accordance with the provisions of any
applicable agreement) in connection with the transactions contemplated by this
Agreement.
4.3 Hart-Scott-Rodino Act. Each Party has filed a Notification and Report
Forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, and shall make any further filings or
information submissions pursuant thereto that may be necessary, proper or
advisable.
4.4 Operation of Business.
(a) Except as otherwise contemplated by this Agreement, during the
period from the date of this Agreement until the Closing, the Stockholder shall
cause the Company to conduct its operations with respect to the Division in the
ordinary course of business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use all reasonable efforts
to preserve intact its current business organization with respect to the
Division, to keep its physical assets used or useful in the Division in good
working condition, to keep available the services of its current officers and
employees and to preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business with respect to the Division shall not be impaired in any material
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respect. Without limiting the generality of the foregoing, the Stockholder shall
cause the Company not to, without the written consent of the Buyer:
(i) issue, grant or sell any shares of capital stock of the Company or
any rights, warrants or options to acquire any such shares;
(ii) pay any dividend or other distribution in cash or property in
respect of capital stock or redeem or repurchase any shares of capital stock;
(iii) create, incur or assume any debt not currently outstanding
(including capital leases obligations, but excluding accounts payable incurred
in the ordinary course of business); assume, guarantee, endorse or otherwise
become liable for the obligations of any other person; or make any loans,
advances or capital contributions to, or investments in, any other person;
(iv) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement; or increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, or pay any bonuses or benefits not required by the terms in effect on the
date hereof of any Employee Benefit Plan to, its employees; or hire or terminate
any employee other than in the ordinary course of business;
(v) except for the acquisitions set forth on Section 4.4(a)(v) of the
Disclosure Schedule, acquire any assets or make any capital expenditures for an
amount of over $10,000 in any one instance or $50,000 in the aggregate;
(vi) pay any obligation or liability other than in the ordinary course
of business;
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(vii) sell, lease, encumber, dispose of, assign, transfer or license
any assets or Company Intellectual Property, other than in the ordinary course
of business;
(viii) acquire, sell, lease, encumber or dispose of any assets
relating to the Division, other than purchases and sales of assets in the
ordinary course of business;
(ix) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract;
(x) amend its Certificate of Incorporation or bylaws, except in
connection with the change of the Company's name to a name designated by the
Buyer;
(xi) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in generally accepted accounting principles;
(xii) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties set forth in Article IIB
becoming materially untrue or (ii) any of the conditions set forth in Article V
not being satisfied;
(xiii) except for the Customer Contracts with each of Nextel and
Western Wireless, modify or amend in any way any material term or condition of
any Customer Contract;
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(xiv) modify or amend in any way any nonmaterial term or condition of
any Customer Contract without prior notice to the Buyer;
(xv) except as otherwise specifically set forth in Section 4.4(a)(xv)
of the Disclosure Schedule, forgive, discount or make any other arrangement not
in the ordinary course with respect to any accounts receivable of the Company
related to the Division; or
(xvi) agree in writing or otherwise to take any of the foregoing
actions.
(b) Notwithstanding Section 4.4(a), the Company may take such actions as
are necessary to comply with its obligations under Section 4.8 of this
Agreement.
4.5 Full Access.
(a) The Stockholder and the Company shall permit representatives of
the Buyer to have full access (at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company) to all
premises, properties, technology, financial and accounting records, contracts,
other records and documents, personnel, counsel and auditors of or pertaining to
the Company. The Stockholder and the Company shall provide reasonable assistance
to the Buyer in connection with the conduct of an audit of the Company by the
Buyer's independent accountants and the preparation by the Buyer of documents
necessary for a bank financing to be undertaken by the Buyer. In addition to its
obligations under that certain Non-Disclosure Agreement with Computer Sciences
Corporation ("CSC"), dated July 15, 1997, the Buyer (i) shall treat and hold as
confidential any Confidential Information (as defined below), (ii) shall not use
any of the Confidential Information except in connection with this Agreement,
and (iii) if this Agreement is terminated for any reason whatsoever, shall
return to the Company all tangible embodiments
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(and all copies) thereof which are in its possession. For purposes of this
Agreement, "Confidential Information" means any confidential or proprietary
information of the Company or the Stockholder that is furnished in writing to
the Buyer by the Company or the Stockholder in connection with this Agreement
and is labelled confidential or proprietary; provided, however, that it shall
not include any information (i) which, at the time of disclosure, is available
publicly, (ii) which, after disclosure, becomes available publicly through no
fault of the Buyer, or (iii) which the Buyer knew or to which the Buyer had
access prior to disclosure.
(b) The Buyer shall not solicit to hire, directly or indirectly, or
hire, any of the employees of the Company, or any contractors to the Company, or
any of the employees of CSC or its Affiliates including those who are
contractors or consultants providing services to the Company, prior to the
Closing of the transactions contemplated hereby, and shall not solicit to hire,
directly or indirectly, or hire, any of the employees of CSC or its Affiliates
including those who are contractors or consultants providing services to the
Company for a period of eighteen (18) months following the Closing or such
longer period as applicable under any other agreement entered into by Buyer or
the Company relating thereto. Notwithstanding the foregoing, the parties
acknowledge and agree that following the Closing, the Company may hire the
particular CSC employee discussed on Friday, November 21, 1997 by Messrs. L.
Bakes and Tucker.
(c) The Stockholder shall engage the Buyer in internal and customer
discussions as an advising party to further negotiations on any customer
contract changes. The Stockholder agrees that the Buyer may begin transition
preparation efforts prior to the Closing by meeting with customers of the
Division and working with the management of CSC and its affiliates, including
the Company and the Division. In no event shall the Stockholder transfer from
the Company prior to the Closing any assets related to the Division.
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4.6 Notice of Breaches; Updates; Interim Financial Statements.
(a) The Stockholder shall promptly deliver to the Buyer written notice
of any event or development that (i) renders any statement, representation or
warranty of the Stockholder or the Company in this Agreement (including
exceptions set forth in the Disclosure Schedule) inaccurate or incomplete in any
material respect, or (ii) constitutes or results in a breach by the Stockholder
or the Company of, or a failure by the Stockholder or the Company to comply
with, any agreement or covenant in this Agreement applicable to the Stockholder
or the Company. No such disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
(b) The Buyer shall promptly deliver to the Stockholder written notice
of any event or development that (i) renders any statement, representation or
warranty of the Buyer in this Agreement inaccurate or incomplete in any material
respect, or (ii) constitutes or results in a breach by the Buyer of, or a
failure by the Buyer to comply with, any agreement or covenant in this Agreement
applicable to the Buyer. No such disclosure shall be deemed to avoid or cure any
such misrepresentation or breach.
(c) The Company shall deliver to the Buyer, as promptly as practicable
following the end of each accounting month ending after the date of this
Agreement (and in any event no later than 15 days after the end of each such
month), an unaudited balance sheet of the Division as of the end of such month
and an unaudited statement of income of the Division for such month and for the
portion of the fiscal year ending as of the end of such month, in each case
prepared on a basis consistent with the preparation of the Financial Statements.
(d) The Stockholder shall deliver to the Buyer, as promptly as
practicable following the end of each accounting month ending after the date of
this
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Agreement (and in any event no later than 15 days after the end of each such
month), an unaudited balance sheet of the Company as of the end of such month
and an unaudited statement of income of the Company for such month and for the
portion of the fiscal year ending as of the end of such month, in each case
prepared on a basis consistent with the preparation of the Financial Statements.
4.7 Exclusivity. Each of the Company and the Stockholder shall not, and
each of the Company and the Stockholder shall use its best efforts to cause its
affiliates and each of its officers, directors, employees, representatives and
agents not to, directly or indirectly, (a) encourage, solicit, initiate, engage
or participate in discussions or negotiations with any person or entity (other
than the Buyer) concerning any merger, consolidation, sale of material assets,
tender offer, recapitalization, of the Division, other business combination
involving the Division, or (b) provide any non-public information concerning the
business, properties or assets of the Division to any person or entity (other
than the Buyer). The Stockholder and the Company shall promptly notify the Buyer
of any inquiries, discussions or negotiations of the nature described in the
first sentence of this Section 4.7.
4.8 Separation of Assets and Liabilities not relating to the Division. The
Stockholder shall transfer from the Company those assets and liabilities of the
Company (including without limitation the lease for real property in Bethesda,
Maryland and any agreement or arrangement with third parties or employees of or
consultants to the Company) (i) that are not related to the operation of the
business of the Division, or (ii) that are located in Bethesda and shared by the
Division with other non-Division units of the Company, such that substantially
all of such assets and liabilities are transferred from the Company prior to the
Closing, provided that the videoconferencing unit located in Bethesda, Maryland,
shall be retained by the Company at the Closing. The Stockholder will be
responsible for all assets and liabilities of the Company not related to the
operation of the business of the Division
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existing prior to Closing or arising after the Closing, including all recoveries
under insurance coverage and litigation. In addition, the lawsuit against AT&T
described in Section (B)(1) of Attachment A to Schedule 2B.17 shall be deemed to
be an asset covered by this Section 4.8, and following the Closing neither
Company nor the Buyer shall be entitled to any recovery relating thereto.
Following the Closing, Company and Buyer shall provided all cooperation and
assistance with respect to litigation relating to items which are the subject of
this Section 4.8, on the same terms as would apply to cooperation and assistance
of an Indemnified Party under Section 6.3(b).
4.9 Accounts Payable. The Stockholder shall cause the Company to have no
more than $2,500,000 of accounts payable relating to the Division as at the
Closing.
4.10 Location of Assets. Prior to the time of the Closing, all assets of
the Company that will be assets of the Company at the time of the Closing will
be located at the location set forth in Section 2B.8(c) of the Disclosure
Schedule, except that (a) portable assets such as laptop computers may be in the
possession of the Company's employees and (b) assets solely utilized by the
Company's employee in Colorado may be in Colorado.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or waiver by the Buyer) of the following conditions:
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(a) The Company and the Stockholder shall have obtained all Required
Consents and any additional waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
referred to in Section 4.2, except for any which if not obtained or effected
would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company or the
Division or on the ability of the Parties to consummate the transactions
contemplated by this Agreement (which shall be identified to the Buyer in
writing at the Closing);
(b) no action, suit or proceeding shall be pending or threatened
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) affect adversely the right of the
Buyer to own, operate or control any of the assets and operations of the
Division following the Closing, and no such judgment, order, decree, stipulation
or injunction shall be in effect;
(c) the representations and warranties set forth in Articles IIA and
IIB shall be true and correct when made on the date hereof and shall be true and
correct in all material respects (or in all respects in the case of any
representation or warranty which includes a concept of materiality) as of the
Closing as if made as of the Closing (except for representations and warranties
made as of a specific date, which shall be true and correct as of such date);
(d) the Stockholder and the Company shall have performed or complied
in all material respects with all agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Closing;
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(e) each customer of the Division's billing and customer care software
and related services (other than Nextel, Omnipoint and Western Wireless) shall
have executed the Issues List relating to such customer's Customer Contract;
(f) at the Closing, each of those employees listed on Attachment
5.1(f) shall be employed by the Company and shall not have indicated to the
Company his or her intention to terminate his or her relationship with the
Company;
(g) any amendment or modification to the Company's agreements with
each of Nextel and Western Wireless shall be satisfactory to the Buyer in its
sole discretion;
(h) all intercompany payables, obligations or receivables between the
Company, on the one hand, and CSC and its Affiliates (including the
Stockholder), on the other hand, shall have been terminated;
(i) the Stockholder shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified in clauses (a) through (h) of
this Section 5.1 is satisfied;
(j) each director and officer of the Company shall have signed and
delivered to the Company a resignation from their current positions as directors
and officers;
(k) each employee of the Company identified on Attachment 5.1(f) as a
member of the Executive Management Team shall be a party to a valid Assignment
of Inventions and Covenants Against Disclosure Agreement with the Company;
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(l) CSC shall have executed and delivered to the Buyer a Guarantee and
Noncompetition Agreement in the form attached hereto as Exhibit A;
(m) the Buyer shall have received from Counsel of the Company an
opinion with respect to the matters that are the subject of Sections 2A.2, 2A.3,
2B.1 and 2B.3, addressed to the Buyer and dated as of the Closing Date;
(n) CSC Consulting, Inc. shall have executed and delivered to the
Buyer the Master Professional Services Agreement in the form attached hereto as
Exhibit B (the "Master Professional Services Agreement");
(o) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
(p) the Company shall have received a royalty-free, perpetual,
non-exclusive license to use ISIS Reformatter, limited to use by the Company in
support of the business of the Company after the Closing; and
(q) the Stockholder shall have delivered to the Buyer an updated
accounts receivable aging report, an updated accounts payable report and an
unaudited balance sheet, in each case with respect to each of the Company and
the Division, and in each case estimated as of the Closing Date, and such
reports and balance sheets shall not reflect the occurrence of any transactions
outside of the ordinary course of business with respect to the subject matter
thereof, other than as contemplated by Section 4.8 of this Agreement, since the
date of the respective reports and balance sheet previously delivered to the
Buyer pursuant to the terms hereof.
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5.2 Conditions to Obligations of the Stockholder. The obligation of the
Stockholder to consummate the sale of the Company Shares contemplated hereby is
subject to the satisfaction (or waiver by the Stockholder) of the following
conditions:
(a) the representations and warranties of the Buyer set forth in
Article III shall be true and correct when made on the date hereof and shall be
true and correct in all material respects (or in all respects in the case of any
representation or warranty which includes a concept of materiality) as of the
Closing as if made as of the Closing (except for representations and warranties
made as of a specific date, which shall be true and correct as of such date);
(b) the Buyer shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;
(c) no action, suit or proceeding shall be pending or threatened
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(d) the Buyer shall have delivered to the Stockholder a certificate to
the effect that each of the conditions specified in clauses (a) through (c) of
this Section 5.2 is satisfied;
(e) the Stockholder shall have received from counsel to the Buyer an
opinion with respect to the matters that are the subject of Sections 3.1, 3.2
and 3.3, addressed to the Stockholder and dated the Closing Date; and
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(f) all applicable waiting period (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Stockholder. The Stockholder shall indemnify the
Buyer and the Company in respect of, and hold the Buyer and the Company harmless
against, any and all debts, obligations and other liabilities, monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses, costs and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) (collectively, "Damages") incurred or suffered by the Buyer or the
Company resulting from, relating to or constituting:
(a) any misrepresentation or breach of warranty by the Stockholder or
failure to perform any covenant or agreement of the Stockholder contained in
this Agreement or in the certificate delivered pursuant to Section 5.1(i);
(b) any misrepresentation or breach of warranty by the Company or
failure by the Company to perform any covenant or agreement intended to be
performed prior to the Closing contained in this Agreement or in the certificate
delivered pursuant to Section 5.1(i);
(c) the termination of employment of employees of the Company prior to
the Closing that arose under any federal or state law or under any Employee
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Benefit Plan established or maintained by the Company or any Affiliate, or any
workplace conditions of the Company existing prior to the Closing;
(d) any claim by the Stockholder or any former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company or
options therefor; (ii) any rights of a stockholder, including any option or
preemptive rights or rights to notice or to vote; (iii) any rights under the
Certificate of Incorporation, bylaws or other organizational document of the
Company; or (iv) any claim that his, her or its shares were wrongfully
repurchased by the Company; or
(e) any claim by any person or entity, seeking to assert, or based
upon: (i) any liability or obligation, whether or not disclosed to the Buyer on
the Disclosure Schedule or otherwise, not relating to the Division, arising from
the operations, acts or omissions of the Company, the Stockholder, CSC or any
Affiliate of the Company; (ii) those liabilities of the Company set forth on
Attachment 6.1(e) to this Agreement, whether or not disclosed to the Buyer on
the Disclosure Schedule or otherwise (the "Excluded Liabilities"); and (iii) all
liabilities of the Company, whether or not disclosed to the Buyer on the
Disclosure Schedule or otherwise, relating to the transfer from the Company of
the assets and liabilities not related to the Division, as set forth in Section
4.8 of this Agreement.
6.2 Indemnification by the Buyer. The Buyer shall indemnify CSC and the
Stockholder in respect of, and hold CSC and the Stockholder harmless against,
any and all Damages incurred or suffered by CSC or the Stockholder (i) resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer contained in this
Agreement or in the certificate delivered pursuant to Section 5.2(d), (ii) to
the extent arising from the operation of the business of the Division after the
Closing by the Buyer or (iii) to the
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extent arising from CSC's guaranty of the Company's post-Closing obligations
under the three leases between the Company and Par 3 Development, L.L.C., dated
January __, 1996, September 19, 1997 and September 19, 1997, respectively.
6.3 Claims for Indemnification
(a) Claims for Indemnity. Whenever a claim for Damages shall arise for
which one party ("Indemnified Party") shall be entitled to indemnification under
this Article VI, the Indemnified Party shall notify the other party
("Indemnifying Party") in writing within ten (10) days of the first receipt of
notice of such claim, and in any event, if practicable, within such shorter
period as may be necessary for the Indemnifying Party to take appropriate action
to respond to such claim; provided, however, that the failure of the Indemnified
Party to provide notice as stated above shall be prejudicial to the rights of
the Indemnified Party hereunder only to the extent it is prejudicial to the
Indemnifying Party. Such notice shall specify all facts known to the Indemnified
Party giving rise to such indemnity rights and shall estimate the amount of the
liability arising therefrom. The right of the Indemnified Party to
indemnification as set forth in such notice shall be deemed agreed to by the
Indemnifying Party unless, within twenty (20) days after the mailing of such
notice (or, if practicable, within such shorter period as may be necessary for
the Indemnified Party to take appropriate action to respond to such claim), the
Indemnifying Party shall notify the Indemnified Party in writing that it
disputes the right of the Indemnified Party to indemnification, or that the
Indemnifying Party elects to defend such claim in the manner provided in Section
6.3(b). If the Indemnifying Party notifies the Indemnified Party that the
Indemnifying Party disputes its obligation to indemnify the Indemnified Party,
the Indemnifying Party and the Indemnified Party shall attempt to settle such
dispute, or if unable to do so within thirty days of the Indemnifying Party's
delivery of notice of a dispute (or, if practicable, within such shorter period
as may be necessary for the Indemnified Party to take appropriate
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action to respond to such claim), such dispute shall be settled by binding
arbitration in accordance with Section 11.9.
(b) Defense of Claims. Upon receipt by the Indemnifying Party of a
notice from the Indemnified Party with respect to any claim of a third party
against the Indemnified Party, and acknowledgment by the Indemnifying Party
(whether after resolution of a dispute or otherwise) of the Indemnified Party's
right to indemnification under this Article VI with respect to such claim, the
Indemnifying Party shall assume control of the defense of such claim with
counsel selected by the Indemnifying Party in its sole discretion and the
Indemnified Party shall cooperate with the Indemnifying Party at the expense of
the Indemnifying Party to the extent reasonably requested by the Indemnifying
Party in defense or prosecution thereof and at the expense of the Indemnifying
Party shall furnish such records, information and testimony and attend all such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by Indemnifying Party in connection therewith. Such
expenses to be borne by the Indemnifying Party shall be the Indemnified Party's
reasonable costs and expenses in so cooperating. If the Indemnifying Party shall
acknowledge the Indemnified Party's right to indemnification and elect to assume
the defense of such claim, the Indemnified Party shall have the right to employ
its own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party. If the Indemnifying Party has
assumed the defense of any claim against the Indemnified Party, the Indemnifying
Party shall have the right to settle any claim for which indemnification has
been sought and is available hereunder; provided that, to the extent that such
settlement required the Indemnified Party to take, or prohibits the Indemnified
Party from taking, any action or purports to obligate the Indemnified Party,
then the Indemnifying Party shall not settle such claim without the prior
written consent of the Indemnified Party. If the Indemnifying Party does not
assume the defense of a third party claim and disputes the Indemnified Party's
right to
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Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
indemnification, the Indemnifying Party shall have the right to participate in
the defense of such claim through counsel of its choice, at the Indemnifying
Party's expense, and the Indemnified Party shall have control over the
litigation and authority to reasonably resolve such claim subject to this
Article VI. When the Indemnifying Party has assumed the defense and the
Indemnifying Party and the Indemnified Party have conflicting interests with
respect to the matter, then the Indemnified Party shall at the Indemnifying
Party's expense be entitled to independent legal counsel of its choice.
6.4 Survival.
(a) The representations and warranties of the Parties set forth in
this Agreement shall survive the execution and delivery hereof and the Closing
and continue for the ******* period after the Closing Date except that the
representations and warranties of the Stockholder and the Company to the extent
related to Taxes or Environmental Laws shall survive indefinitely and to the
extent related to matters other than the Division or the operation of the
Division shall survive and continue for the ******* period after the Closing
Date and shall not be affected by an examination made for or on behalf of the
Buyer or the knowledge of any of the Buyer's officers, directors, stockholders,
employees or agents. Notwithstanding the above, the Buyer may not seek
indemnification under this Article VI for a breach or failure by the Company or
the Stockholder of a representation or warranty or a condition to Closing if (i)
any of Peter Masanotti, Lewis Bakes, Alan Greene or Peter Bassermann were
consciously aware of the existence or absence of any facts that constituted such
a breach or failure as of the Closing and were consciously aware that such facts
constituted such a breach or failure and (ii) none of the Company, the
Stockholder or CSC (or any of their affiliates, directors or employees) were
aware of such misrepresentation or failure as of the Closing.
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Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
(b) Any claim asserted in writing prior to the expiration as provided
in Section 6.4(a) of the representation or warranty that is the basis for such
claim shall survive until such claim is finally resolved and satisfied.
6.5 Limitations. The Stockholder shall not have any right of contribution
against the Company with respect to any breach of any of the representations,
warranties, covenants or agreements under this Agreement relating to the
Company. Notwithstanding anything to the contrary herein, neither the Buyer nor
the Stockholder shall be obligated to pay the first $******* in the aggregate of
indemnity obligations otherwise payable by the Buyer or Stockholder hereto and
the minimum amount of any individual claim or series of related claims hereunder
shall be $*****. The maximum liability of the Stockholder under this Article VI
with respect to the Damages related to the Division or the operation of the
business of the Division other than claims made by Omnipoint or Mutiara Telecom
shall be limited to $*******. There shall be no limit of liability of the
Stockholder under this Article VI with respect to Damages related to claims by
Omnipoint or Mutiara Telecom and with respect to Damages related to any matter
not related to the Division or the operation of the business of the Division.
6.6 Exclusive Remedy. Except with respect to matters involving fraud, the
provisions of Section 11.9, Section 11.12, this Article VI and, as applicable,
the provisions of the Guarantee and Non-Competition Agreement shall be the
Parties' sole and exclusive remedy for any breach of this Agreement.
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ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent; or
(b) the Buyer may terminate this Agreement by giving written notice to
the Stockholder in the event the Stockholder is in material breach, and the
Stockholder may terminate this Agreement by giving written notice to the Buyer
in the event the Buyer is in material breach, of any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not
remedied within 10 days of delivery of written notice thereof; or
(c) the Buyer may terminate this Agreement by giving written notice to
the Stockholder if the Closing shall not have occurred on or before January 2,
1998 by reason of the failure of any condition precedent under Section 5.1
hereof (unless the failure results primarily from a breach by the Buyer of any
representation, warranty, covenant or agreement contained in this Agreement); or
(d) the Stockholder may terminate this Agreement by giving written
notice to the Buyer if the Closing shall not have occurred on or before January
2, 1998 by reason of the failure of any condition precedent under Section 5.2
hereof (unless the failure results primarily from a breach by the Stockholder of
any representation, warranty, covenant or agreement contained in this
Agreement).
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7.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to the other Parties (except for any liability of a
Party for breaches of this Agreement).
ARTICLE VIII
REGISTRATION RIGHTS
8.1 Registration of Shares. After the Closing, the Buyer shall file with
the SEC a registration statement covering the resale to the public by the
Stockholder of all of the Purchase Price Shares (the "Registration Statement")
and shall use its best efforts to cause the Registration Statement to be
declared effective by the SEC on or before July 1, 1998. The Buyer shall use its
best efforts to cause the Registration Statement to remain effective until the
earlier of (i) the second anniversary of the Closing Date and (ii) such time as
all of the Purchase Price Shares covered by the Registration Statement have been
sold. The Stockholder agrees that it shall not sell more than 50% of the
Purchase Price Shares pursuant to the Registration Statement before the
expiration of the six-month period commencing six months after the Closing Date.
Beginning one year after the Closing Date, the Stockholder shall be permitted to
sell additional Purchase Price Shares pursuant to the Registration Statement
such that the aggregate number of such shares sold at any time shall not exceed
(unless otherwise agreed to by the Buyer in writing) the sum of (i) 50% of the
Purchase Price Shares and (ii) such number of Purchase Price Shares that the
Stockholder would otherwise have been entitled to sell under Rule 144 of the
Securities Act if the Stockholder had been selling the maximum permissible
amount of shares under Rule 144 through the period ending at such time.
Beginning 18 months after the Closing the Stockholder may sell any remaining
Purchase Price Shares pursuant to the Registration Statement.
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8.2 Limitations on Registration Rights.
(a) The Buyer may, no more than one time in any 12-month period by
written notice to the Stockholder, (i) delay the filing or effectiveness of the
Registration Statement or (ii) suspend the Registration Statement after
effectiveness and require that the Stockholder immediately cease sales of shares
pursuant to the Registration Statement, in the event that:
(A) the Buyer is engaged in any activity or transaction or preparations or
negotiations for any activity or transaction ("Buyer Activity") which the Buyer
desires to keep confidential and the Board of Directors of the Buyer determines
in good faith that it would be detrimental to the Buyer for such registration to
be effected at such time; or
(B) the Buyer files a registration statement (other than a registration
statement on Form S-4 or S-8 or any successor form) with the SEC for the purpose
of registering under the Securities Act any securities to be publicly offered
and sold by the Buyer and the Buyer pursues the preparation, filing and
effectiveness of such registration statement with diligence;
provided, however, that the maximum period of delay or suspension shall be 90
days in any 12-month period under clause (A) and 120 days in any 12-month period
under clause (B).
(b) If the Buyer delays or suspends the Registration Statement or
requires the Stockholder to cease sales of shares pursuant to paragraph (a)
above, the Buyer shall, as promptly as practicable following the termination of
the circumstance which entitled the Buyer to do so, take such actions as may be
necessary to file or reinstate the effectiveness of the Registration Statement
and/or give written notice to
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the Stockholder authorizing them to resume sales pursuant to the Registration
Statement. If as a result thereof the prospectus included in the Registration
Statement has been amended to comply with the requirements of the Securities
Act, the Buyer shall enclose such revised prospectus with the notice to the
Stockholder given pursuant to this paragraph (b), and the Stockholder shall make
no offers or sales of shares pursuant to the Registration Statement other than
by means of such revised prospectus.
8.3 Registration Procedures.
(a) In connection with the filing by the Buyer of the Registration
Statement, the Buyer shall furnish to the Stockholder a copy of the prospectus
included therein in conformity with the requirements of the Securities Act.
(b) The Buyer shall use its best efforts to register or qualify the
Purchase Price Shares covered by the Registration Statement under the securities
laws of New York, California and such other states as the Stockholder shall
reasonably request; provided, however, that the Buyer shall not be required in
connection with this paragraph (b) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Stockholder and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Buyer shall promptly notify the
Stockholder and, if requested by the Buyer, the Stockholder shall immediately
cease making offers or sales of shares under the Registration Statement and
return all prospectuses to the Buyer. The Buyer shall promptly provide the
Stockholder with revised prospectuses and, following receipt of the revised
prospectuses, the Stockholder shall be free to resume making offers and sales
under the Registration Statement.
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(d) The Buyer shall pay the costs and expenses incurred by it in
complying with its obligations under this Article VIII, including all
registration and filing fees, Nasdaq listing fees, fees and expenses of counsel
for the Buyer, and fees and expenses of accountants for the Buyer, but excluding
(i) any brokerage fees, selling commissions or underwriting discounts incurred
by the Stockholder in connection with sales under the Registration Statement and
(ii) the fees and expenses of any counsel or accountants retained by the
Stockholder.
(e) The Stockholder shall have the right to select one or more
nationally recognized underwriters to underwrite any offering under the
Registration Statement subject to the approval of the Buyer, which approval
shall not be unreasonably withheld.
8.4 Requirements of the Stockholder. The Buyer shall not be required to
include any Purchase Price Shares in the Registration Statement unless:
(a) the Stockholder furnishes to the Buyer in writing such information
regarding the Stockholder and the proposed sale of Purchase Price Shares by the
Stockholder as the Buyer may reasonably request in writing or as shall be
required in connection therewith by the SEC or any state securities law
authorities;
(b) the Stockholder shall have provided to the Buyer its written
agreement:
(i) to indemnify the Buyer and each of its directors and officers
against, and hold the Buyer and each of its directors and officers harmless
from, any losses, claims, damages, expenses or liabilities (including reasonable
attorneys fees) to which the Buyer or such directors and officers may become
subject by reason of any statement or omission in the Registration Statement
made in
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reliance upon, or in conformity with, a written statement by the Stockholder
furnished pursuant to this Section 8.4; and
(ii) to report to the Buyer sales made pursuant to the
Registration Statement; and
(c) in the event of an underwritten offering, the Stockholder agrees
to execute and deliver an underwriting agreement approved by the Buyer;
8.5 Indemnification. The Buyer agrees to indemnify and hold harmless the
Stockholder against any losses, claims, damages, expenses or liabilities to
which the Stockholder may become subject by reason of any untrue statement of a
material fact contained in the Registration Statement or any omission to state
therein a fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon information furnished to the Buyer
by or on behalf of the Stockholder for use in the Registration Statement. The
Buyer shall have the right to assume the defense and settlement of any claim or
suit for which the Buyer may be responsible for indemnification under this
Section 8.5.
8.6 Rule 144 Reports. During the period from the Closing until the second
anniversary of the Closing Date, the Buyer will file on a timely basis all
reports required to be filed by it and referred to in paragraph (c)1 of Rule 144
under the Securities Act or any similar successor provisions.
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ARTICLE IX
POST-CLOSING COVENANTS
9.1 Sharing of Data.
(a) The Buyer shall have the right for a period of seven years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records that are retained by the
Stockholder to the extent that any of the foregoing is needed by the Buyer in
order to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Stockholder shall
not destroy any such books, records or accounts retained by it without first
providing the Buyer with the opportunity to obtain or copy such books, records,
or accounts.
(b) Promptly upon request by the Buyer made at any time during the
three-year period following the Closing Date, the Stockholder shall authorize
the release to the Buyer of all files relating to the Company or the business or
operations of the Company held by any federal, state, county or local
authorities, agencies or instrumentalities.
9.2 Cooperation in Litigation. From and after the Closing Date, each Party
shall fully cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such other Party relating to or arising out of the conduct of the
business of the Division by the Stockholder prior to the Closing or the Buyer
after the Closing (other than litigation between the Parties arising out the
transactions contemplated by this Agreement). The Party requesting such
cooperation shall pay the reasonable out-of-
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pocket expenses incurred in providing such cooperation (including legal fees and
disbursements) by the Party providing such cooperation and by its officers,
directors, employees and agents, but shall not be responsible for reimbursing
such Party or its officers, directors, employees and agents, for their time
spent in such cooperation.
9.3 Enforcement of Insurance Claims. The Stockholder hereby assigns to the
Buyer the right to pursue and enforce, and hereby irrevocably appoints the Buyer
as its true and lawful attorney-in-fact with full power in the name of and on
behalf of the Stockholder for the purpose of pursuing and enforcing, any and all
rights of the Stockholder or CSC under any insurance policies of the Stockholder
or CSC with respect to any occurrence, claim or loss (including without
limitation any product liability claim) which is the subject of an indemnity
obligation by the Stockholder to the Buyer under Article VI of this Agreement;
provided that the Buyer may not exercise such right or power unless the
Stockholder or CSC fails to promptly and expeditiously pursue and enforce their
rights under their insurance policies with respect to such occurrence, claim or
loss. The power of attorney conferred upon the Buyer by the Stockholder pursuant
to this Section 9.3 is an agency coupled with an interest and all authority
conferred hereby shall be irrevocable, and shall not be terminated by the
dissolution or the liquidation of the Stockholder or any other act of the
Stockholder.
9.4 Accounting Systems.
(a) Subject to mutual agreement, the Buyer shall have access to and
use of the accounting systems of the Stockholder and CSC as reasonably necessary
to continue the maintenance of the accounts of the Company, at a cost to the
Buyer of $125,000, for the period commencing at the time of the Closing and
ending at midnight on February 28, 1998. The Stockholder and CSC shall cooperate
with the
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Confidential Materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.
Buyer to train the proper personnel of the Buyer with respect to the maintenance
of such systems.
(b) Subject to mutual agreement, CSC shall provide other transition
services and assistance on terms as mutually agreed.
9.5 Customer Retention Payments. On January 1, 1999, the Buyer shall pay to
the Stockholder *******, by wire transfer, for each of ************************
that remains a current and active customer of the Company (or other Affiliate of
the Buyer) for customer care and billing services on such date, resulting in a
total possible payment of $6 million.
9.6 Employment Matters. Immediately following the Closing Date, all
employees of the Company related to the TRIS Division will be eligible for
benefits under benefit plans of the Company and/or the Buyer, including group
health plan coverage, and thereafter will not be eligible for benefits under the
benefit plans described in Section 2B.20, except with respect to continued
benefits in accordance with the terms of the Consolidated Omnibus Budget
Reconciliation Act ("COBRA"). Any otherwise applicable waiting periods under the
Buyer's benefit plans shall be waived, and the employees shall be granted prior
service credit, for purposes of eligibility and vesting, under Buyer's 401(k)
plan, for all periods of prior service of the employee with the Company and/or
Affiliates of CSC prior to the Closing. Further to Section 1.6, Buyer shall
carry-over the existing vacation balances of the employees and be responsible
therefor.
9.7 Loans to Employees. Within five business days after the Closing Date,
the Buyer shall pay to the Stockholder or CSC an amount equal to the net present
value calculated at a discount rate of 6%, of any outstanding amounts pursuant
to loans provided to employees of the Division by CSC relating to the purchase
by such
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employees of personal computers, and the Buyer shall obtain at the time of such
payment all of the Stockholder's and CSC's rights and obligations under such
loans.
9.8 Transition Contracts. To the extent that the Buyer has been unable to
obtain agreements to replace those agreements listed on Attachment A to Section
2B.9(b) of the Disclosure Schedule to which the Company is a party, and to the
extent CSC is able to do so pursuant to the terms of such agreements, CSC shall
allow such agreements to extend until such reasonable time as the Buyer has been
able to enter into replacement agreements, provided that the Buyer shall
reimburse CSC for any reasonable costs and expenses related to such extension of
the agreements.
ARTICLE X
TAX MATTERS
10.1 Tax Indemnification by the Stockholder.
(a) The Stockholder shall indemnify and hold the Buyer and the Company
and any successor corporations thereto or Affiliates thereof (including future
Affiliates) harmless, from and against any and all Taxes for any taxable period
ending (or deemed, pursuant to Section 10.4, to end) on or before the Closing
Date), and any liability of the Company under Treasury Regulation Section
1.1502-6 or under any comparable or similar provision under state, local or
foreign laws or regulations.
(b) Amounts payable pursuant to this Section 10.1 shall be paid in
accordance with Section 6.3 of this Agreement. The parties agree that to the
maximum extent allowable under applicable Tax laws, amounts payable to the Buyer
pursuant to this Section 10.1 shall be treated (and reported on all applicable
Tax
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Returns) as adjustments to the purchase price payable by the Buyer to the
Stockholder for the Company Shares.
10.2 Tax Indemnification by the Buyer.
(a) The Buyer shall indemnify and hold the Stockholder and any
successor corporations thereto and any Affiliates thereof harmless, from and
against any and all Taxes with respect to the Company for any taxable period
beginning (or deemed pursuant to Section 10.4 to begin) after the Closing Date.
(b) Amounts payable pursuant to this Section 10.2 shall be paid in
accordance with Section 6.3 of this Agreement. The parties agree that to the
maximum extent allowable under applicable Tax laws, amounts payable to the
Seller pursuant to this Section 10.2 shall be treated (and reported on all
applicable Tax Returns) as adjustments to the purchase price payable to the
Stockholder by the Buyer for the Company Shares.
10.3 Filing Responsibility.
(a) The Stockholder shall prepare and file or shall cause the Company
to prepare and file the following Tax Returns with respect to the Company:
(i) All Income Tax Returns for any taxable period actually ending
on or before the Closing Date;
(ii) All other Tax Returns required to be filed (taking into
account extensions) prior to the Closing Date.
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If any Tax Returns for which the Stockholder shall have filing responsibility
under this Section 10.3(a) are filed after the Closing Date, the Buyer shall
where required cause the relevant officers of the Company to sign such Tax
Returns unless it is advised in writing by counsel acceptable to the Stockholder
that the execution of the Tax Returns would subject the officers, the Buyer, the
Company or any affiliate to any penalty, fine or other sanctions.
(b) The Buyer or the Company shall, subject to the provisions of
Section 10.3(c), file all other Tax Returns with respect to the Company.
(c) With respect to any Tax Return for a taxable period beginning
before the Closing Date and ending after the Closing Date, the Buyer shall
consult with the Stockholder concerning each such Tax Return and report all
items with respect to the period ending on or prior to the Closing Date in
accordance with the instructions of the Stockholder (which shall be consistent
with past practice), unless otherwise agreed by the Stockholder and the Buyer;
provided, however, that if the Buyer is advised in writing by counsel acceptable
to the Stockholder that the filing of any Tax Return and the reporting on such
Tax Return of any item in accordance with the instructions of the Stockholder
may subject the Buyer, the Company or any affiliate to any penalties or fines,
the Buyer may file such Tax Return without regard to the Company's instructions
relating to such item. The Buyer shall cause the Company to provide the
Stockholder with a copy of each proposed Tax Return (other than withholding,
payroll or employment Tax Returns, copies of which will be furnished to the
Stockholder after filing) at least 30 days prior to the filing of such Tax
Return, and the Stockholder may provide comments thereon, which comments shall
be delivered within 15 days of receiving such copies.
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10.4 Payment of Taxes and Allocation of Certain Taxes.
(a) The Stockholder shall pay or cause to be paid when due all Taxes
due with respect to the Tax Returns for which it has filing responsibility under
Section 10.3(a).
(b) The Buyer or the Company shall pay when due all Taxes with respect
to the Tax Returns for which they have filing responsibility under Section
10.3(b) of this Agreement, and the Stockholder shall promptly pay or reimburse
the Buyer or the Company to the extent required by Section 10.1(a) above.
(c) The Buyer and the Stockholder agree to treat the Company as if
they ceased to be part of each Consolidated Group (as defined below) in which
the Stockholder is also currently a member as of 11:59 p.m. on the Closing Date
and to treat the Closing Date as the last day of the taxable period of the
Company in all Taxing jurisdictions where such treatment is required or
permitted. If the Closing Date is the last day of a taxable period, the Buyer
and the Stockholder agree (i) to determine the taxable income of the taxable
period then ended by including in it (x) all taxable income and loss from actual
operations and transactions through 11:59 p.m. on the Closing Date and (y) gain
from the deemed sale of assets pursuant to any elections made under Section
338(h)(10) of the Code (and any comparable election under state, local or
foreign tax law) with respect to the purchase of the Company Shares by the Buyer
from the Stockholder (the "Section 338(h)(10) Elections") and (ii) to determine
the taxable income of the next taxable period by including in it all taxable
income and loss from actual operations and transactions after 11:59 p.m. on the
Closing Date through the end of the taxable period. For purposes of this
Agreement "Consolidated Group" means, with respect to any Tax period, any
affiliated group of corporations of which the Company is or has been a member
(within the meaning of Section 1504 of the Code) which has elected to file a
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consolidated income tax return, and any comparable group for state, local or
foreign tax purposes which has filed a consolidated, combined, or unitary
return.
(d) Any Taxes for a taxable period beginning before the Closing Date
and ending after the Closing Date with respect to the Company for which it is
not required or permitted to treat the Closing Date as the last day of the
taxable period shall be apportioned for purposes of this Section 10.4 and
Sections 10.1, 10.2, and 10.5 between the Stockholder and the Buyer for the
period though the Closing Date and the period after the Closing Date in the same
manner as if the Closing Date were required or permitted to be the last day of a
taxable period as set forth in Section 10.4(c).
10.5 Refunds and Carrybacks.
(a) The Stockholder shall be entitled to an amount equal to any
refunds or credits of Taxes attributable to taxable periods (or portions
thereof, determined in accordance with Section 10.4) ending on or before the
Closing Date except to the extent that such refunds or credits are due directly
from any Taxing Authority and are reflected as assets in the Most Recent Balance
Sheet.
(b) The Buyer and the Company and/or their Affiliates, as the case may
be, shall be entitled to any refunds or credits of Taxes attributable to taxable
periods (or portions thereof determined in accordance with Section 10.4)
beginning after the Closing Date.
(c) The Buyer shall or shall cause the Company promptly to forward to
the Stockholder or reimburse the Stockholder for any refunds or credits,
including interest received thereon, due the Stockholder (pursuant to the terms
of this Agreement) after receipt thereof, and the Stockholder shall promptly
forward to the
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Buyer (pursuant to the terms of this Agreement) or reimburse the Buyer for any
refunds or credits including interest received thereon, due the Buyer after
receipt thereof.
10.6 Cooperation and Exchange of Information.
(a) The Buyer shall provide the Stockholder with such cooperation and
shall deliver to the Stockholder such information and data concerning the
pre-Closing operations of the Company and make available such knowledgeable
employees of such entities as the Stockholder may reasonably request, in order
to enable the Stockholder to complete and file all Tax Returns which it may be
required to file with respect to the operations and business of the Company
through the Closing Date or to respond to audits by any Taxing Authorities with
respect to such operations and to otherwise enable the Stockholder to satisfy
its internal accounting, tax and other legitimate requirements.
(b) For a period of ten (10) years after the Closing Date or such
longer period as may be required by law, the Buyer shall, and shall cause the
Company to, retain and not destroy or dispose of all Tax Returns (including
supporting materials), books and records (including computer files) of, or with
respect to the activities or Taxes of, such entities for all taxable periods
ending on or prior to, or which include, the Closing Date to the extent the
Buyer or the Company received or had possession of such records on the Closing
Date. Thereafter, the Buyer shall not destroy or dispose of any such Tax
Returns, books or records unless it first offers such Tax Returns, books and
records to the Stockholder in writing and the Stockholder fails to accept such
offer within sixty (60) days of its being made.
(c) For a period of ten (10) years after the Closing Date or such
longer period as may be required by law, the Stockholder (or its Affiliates)
shall
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retain and not destroy or dispose of all Tax Returns (including supporting
materials), books and records (including computer files) of, or with respect to
the activities or Taxes of, the Company for all taxable periods ending on or
prior to, or which include, the Closing Date to the extent the Stockholder did
not deliver such records to the Buyer or the Company. Thereafter, the
Stockholder shall not destroy or dispose of any such Tax Returns, books or
records unless it first offers such Tax Returns, books and records to the Buyer
in writing and the Buyer fails to accept such offer within sixty (60) days of
its being made.
(d) The Buyer and the Stockholder and their respective Affiliates
shall cooperate in the preparation of all Tax Returns for any Tax periods for
which one party could reasonably require the assistance of the other party in
obtaining any necessary information. Such cooperation shall include, but not be
limited to, furnishing prior years' Tax Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Tax Returns, and furnishing such other
information within such party's possession requested by the party filing such
Tax Returns as is relevant to their preparation. Such cooperation and
information also shall include without limitation provision of powers of
attorney for the purpose of signing Tax Returns and defending audits and
promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Taxing Authority which relate to the
Company, and providing copies of all relevant Tax Returns, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by any Taxing Authority and records concerning the
ownership and tax basis of property, which the requested party may possess. The
Buyer and the Company and their respective Affiliates or the Stockholder and its
Affiliates shall make their respective employees and facilities available on a
mutually convenient basis to provide explanation of any documents or information
provided hereunder.
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(e) The Stockholder shall have the right, at its own expense, to
control any audit or examination by a Taxing Authority ("Tax Audit"), initiate
any claim for refund, contest, resolve and defend against any assessment, notice
of deficiency, or other adjustment or proposed adjustment relating to any and
all Taxes for any taxable period ending on or before the Closing Date with
respect to the Company. The Buyer or Company shall promptly notify the
Stockholder of the initiation of any such Tax Audit, shall supply the
Stockholder with all written communications it receives with respect to such Tax
Audit and shall periodically report to the Stockholder any other developments of
which it becomes aware during the course of the Tax Audit. The Buyer shall have
the right, at its own expense, to control any other Tax Audit, initiate any
other claim for refund, and contest, resolve and defend against any other
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to Taxes with respect to the Company; provided that, with respect to
(i) any state, local or foreign Taxes for, or determined by reference to, any
taxable period beginning before the Closing Date and ending after the Closing
Date and (ii) any item the adjustment of which may cause the Stockholder to
become obligated to make an indemnity payment pursuant to Section 10.1 hereof,
(w) the Buyer shall provide Stockholder with the same information it would
receive if it had the right to control the resolution of Tax Audit, (x) the
Stockholder shall have the right to have a representative present throughout the
Tax Audit and any subsequent proceeding, (y) the Stockholder shall have the
right to control the resolution of all questions having to do with the effect of
the Section 338(h)(10) Elections which could have an adverse effect on the
Stockholder unless it also has an adverse effect on the Buyer or the Company, in
which event, the Stockholder shall not settle such an issue without the consent
of the Buyer, which consent shall not be unreasonably withheld, and (z) the
Buyer shall consult with the Stockholder with respect to the resolution of any
other issue that would affect the Stockholder, and not settle any such issue, or
file any amended return relating to such issue, without the consent of the
Stockholder, which consent shall not unreasonably be withheld.
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(f) If the Buyer or the Company (as the case may be) on the one hand,
or the Stockholder or its Affiliates on the other, fails to provide any
information requested by the other party in the time specified herein, or if no
time is specified pursuant to this Section 10.6, within a reasonable period, or
otherwise fails to do any act required of it under this Section 10.6, then the
party failing to so provide the information or do such act shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the party
requesting the information or act and shall so indemnify the requesting party
and hold such party harmless from and against any and all costs, claims or
damages, including, without limitation, all Taxes or deficiencies thereof,
payable as a result of such failure. Notwithstanding the foregoing, the party
that failed to deliver the information or do the act requested, shall in no
event be obligated to make any payments pursuant to this Section 10.6(f) or
otherwise be liable, if such party used all reasonable commercial efforts to
provide the requested information or perform the requested act on a timely
basis.
10.7 Tax Sharing Agreements. The Stockholder agrees that all existing tax
sharing agreements or arrangements binding or benefiting the Company, other than
this Agreement, shall be terminated prior to the Closing Date and the Parties
shall take such actions necessary to terminate any such agreements.
10.8 Certain Tax Elections and Other Covenants.
(a) The Stockholder will join with the Buyer in making Section
338(h)(10) Elections with respect to the Company. The Buyer and the Stockholder
shall cooperate fully with each other in the making of such Section 338(h)(10)
Election. In particular, and not by way of limitation, in order to effect such
Section 338(h)(10) Election, the Buyer and the Stockholder shall jointly execute
Internal Revenue Service Form 8023 and all attachments required to be filed
therewith pursuant to applicable Treasury Regulations (the "Attachments"). No
later than 75
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days before the last day prescribed for filing the Section 338(h)(10) Election,
the Stockholder shall prepare and submit to the Buyer the Form 8023 and the
Attachments to Form 8023 for the Buyer's approval. The Buyer and Stockholder
shall use their best good faith efforts to agree on the Form 8023 and the
Attachments. If the Buyer and Stockholder are unable to agree on the Form 8023
and the Attachments, the Buyer shall submit the matter to arbitration, in
accordance with the procedures contained in Sections 10.8(b) through 10.8(g)
below, by giving the Stockholder written notice within 15 days after receipt by
the Buyer of the Form 8023 and the Attachments. Such notice shall specify, in
reasonable detail, the nature and extent of the Buyer's disagreement with the
Form 8023 and the Attachments. Prior to the required filing deadline, the Buyer
will file with the Internal Revenue Service the Form 8023 and the Attachments as
agreed to by the Buyer and the Stockholder or as determined pursuant to
arbitration.
(b) Any matter submitted to arbitration hereunder shall be arbitrated
by an arbitrator who shall be a certified public accountant with a national firm
of independent public accountants and who is currently a tax partner of such
national firm and shall not be an employee, consultant, auditor, officer,
director or stockholder of any party hereto or any affiliate of any party to
this Agreement. Within 10 days after receipt of the written notice specified in
Section 10.8(a), the Buyer and the Stockholder shall agree upon the person to
act as arbitrator. In the event that the Buyer and the Stockholder cannot agree
on an arbitrator within the 10-day period, the arbitrator shall be selected by
the American Arbitration Association.
(c) Within 15 days after the designation of the arbitrator, the
arbitrator, the Buyer and the Stockholder shall meet, at which time the Buyer
and the Stockholder shall be required to set forth in writing all disputed
issues and a proposed ruling on each such issue.
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(d) The arbitrator shall set a date for a hearing, which shall be no
later than 15 days after the submission of written proposals pursuant to
paragraph (c) above, to discuss each of the issues identified by the Buyer and
the Stockholder. Each such party shall have the right to be represented by
counsel. The arbitration shall be governed by the rules of the American
Arbitration Association; provided, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(e) The arbitrator shall use his/her best efforts to rule on each
disputed issue within 15 days after the completion of the hearings described in
paragraph (d) above. The determination of the arbitrator as to the resolution of
any dispute shall be binding and conclusive upon all parties hereto. All rulings
of the arbitrator shall be in writing and shall be delivered to the parties
hereto.
(f) The Buyer and the Stockholder shall share equally the costs and
expenses of the arbitrator.
(g) Any arbitration hereunder shall be conducted in Stamford,
Connecticut, or such other location acceptable to the parties hereto. Any
arbitration award may be entered in and enforced by any court having
jurisdiction thereover and the parties hereby consent and commit themselves to
the jurisdiction of the courts of the jurisdiction in which the arbitration was
conducted and the United States District Court for the jurisdiction in which the
arbitration was conducted for purposes of the enforcement of any arbitration
award.
(h) The Buyer and the Stockholder agree to report the transaction for
tax purposes in a manner consistent with the making of the Election 338(h)(10)
and with the Form 8023 and the Attachments in each of their respective Income
Tax Returns. If the Buyer elects, the Stockholder agrees to join, in accordance
with the
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foregoing procedures, in any similar election under the law of any state in
which the Company now files an Income Tax Return or is included in a
consolidated, combined or unitary state Income Tax Return.
(i) No new elections with respect to Taxes, or any changes in current
elections with respect to Taxes, affecting the Company and which will bind them
after the Section 338(h)(10) Election, shall be made after the date of this
Agreement without the prior written consent of the Buyer.
(j) The Stockholder shall furnish the Buyer an affidavit, stating,
under penalty of perjury, the transferor's United States taxpayer identification
number and that the transferor is not a foreign person pursuant to Section
1445(b)(2) of the Code.
10.9 Payments. All payments to be made under this Article X shall be made
in immediately available funds. Unless otherwise provided herein, any payment
not made when due hereunder shall bear interest from the due date at an annual
rate equal to the BankBoston so called "base" rate as announced from time to
time.
ARTICLE XI
MISCELLANEOUS
11.1 Press Releases and Public Disclosure. The Parties shall issue the
press release attached hereto as Exhibit C immediately after the signing of this
Agreement. No Party shall issue any other press release or other public
disclosure relating to the subject matter of this Agreement without the prior
written approval of the other Parties; provided, however, that the Buyer may
make any public disclosure it believes in good faith is required by law,
regulation or stock market rules (in which case the
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Buyer shall use reasonable efforts to advise the Stockholder of the proposed
disclosure prior to making the disclosure and the Stockholder shall cooperate
with the Buyer with respect to such disclosure).
11.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that the provisions of
Article VI are intended for the benefit of the persons specified therein and the
respective legal representatives, successors and assigns.
11.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations among the Parties, written
or oral, that may have related in any way to the subject matter hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that after the Closing no such consent shall be
required for such an assignment by the Buyer to a purchaser of all or
substantially all of the business of the Buyer or to an affiliated entity of the
Buyer.
11.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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11.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Stockholder:
CSC Domestic Enterprises, Inc.
2100 East Grand Ave.
El Segundo, CA 90245
Attn: President
Telecopy: (310) 322-9767
With a copy to:
Computer Sciences Corporation
2100 East Grand Ave.
El Segundo, CA 90245
Attn: General Counsel and
Attn: Vice President Corporate Development
Telecopy: (310) 322-9769
If to the Buyer:
International Telecommunication Data Systems, Inc.
225 High Ridge Road
Stamford, CT 06905
Telecopy: (203) 316-4887
Attn: Peter L. Masanotti, Esq.
General Counsel
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With a copy to:
John H. Chory, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy: (617) 526-5000
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdiction other than those of the State of Delaware.
11.9 Dispute Resolution.
(a) General. In the event that any dispute should arise among the
Parties with respect to any matter covered by this Agreement or the
interpretation of this Agreement, the Parties shall resolve such dispute in
accordance with the procedures set forth in this Section 11.9.
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(b) Arbitration.
(i) Subject to first satisfying the requirements of Section
6.3(a), if applicable, either Party may submit any matter referred to in Section
11.9(a) to arbitration by notifying the other Party, in writing, of such
dispute. Within 10 days after receipt of such notice, the Parties shall
designate in writing one arbitrator to resolve the dispute; provided, that if
the Parties cannot agree on an arbitrator within such 10-day period, the
arbitrator shall be selected by the New York, New York office of the American
Arbitration Association. The arbitrator so designated shall not be an Affiliate,
employee, consultant, officer, director or stockholder of any Party.
(ii) Within 15 days after the designation of the arbitrator, the
arbitrator, the Buyer and the Stockholder shall meet, at which time the Buyer
and the Stockholder shall be required to set forth in writing all disputed
issues and a proposed ruling on each such issue.
(iii) The arbitrator shall set a date for a hearing, which shall
be no later than 30 days after the submission of written proposals pursuant to
Section 11.9(b)(ii), to discuss each of the issues identified by the Parties.
Each Party shall have the right to be represented by counsel. The arbitration
shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association; provided, however, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(iv) The arbitrator shall use his or her best efforts to rule on
each disputed issue within 30 days after the completion of the hearings
described in Section 11.9(b)(iii). The determination of the arbitrator as to the
resolution of any
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dispute shall be binding and conclusive upon all parties hereto. All rulings of
the arbitrator shall be in writing and shall be delivered to the Parties.
(v) The (1) attorneys' fees of the Parties in any arbitration,
(2) fees of the arbitrator, and (3) costs and expenses of the arbitration shall
be borne by the Parties as determined by the arbitrator.
(vi) Any arbitration pursuant to this Section 11.9 shall be
conducted in New York, New York. Any arbitration award may be entered in and
enforced by any court having jurisdiction there over and shall be final and
binding upon the parties.
(vii) Notwithstanding the foregoing, nothing in this Section 11.9
shall be construed as limiting in any way the right of a party to seek
injunctive relief with respect to any actual or threatened breach of this
Agreement from a court of competent jurisdiction.
11.10 Amendments and Waivers. The Parties may mutually amend or waive any
provision of this Agreement at any time. No amendment or waiver of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by each of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty, covenant or agreement hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty, covenant or agreement
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
11.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforce-
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ability of the offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of competent jurisdiction
or an arbitration proceeding conducted pursuant to Section 11.9 declares that
any term or provision hereof is invalid or unenforceable, the Parties agree that
the body making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
11.12 Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof.
11.13 Expenses. Except as otherwise provided in this Agreement, each Party
shall bear its own costs and expenses (including legal and other professional
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby (it being understood that any such costs and
expenses incurred by the Company prior to the Closing shall be paid by the
Stockholder).
11.14 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against either Party. Any
reference to any
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federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise.
11.15 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.16 Facsimile Signature. This Agreement may be executed by facsimile
signature.
11.17 Definitions. The term "including," as used in this Agreement, shall
be deemed to mean "including but not limited to."
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
By: /s/ Peter P. Basserman
Title: President
CSC INTELICOM, INC.
By: Paul T. Tucker
Title: Vice President
CSC DOMESTIC ENTERPRISES, INC.
By: Paul T. Tucker
Title: Vice President
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[logo]
INTERNATIONAL 225 High Ridge Road
TELECOMMUNICATION Stamford, CT 06905
DATA SYSTEMS
203/329/3300 Telephone
203/323/1314 FAX
FOR IMMEDIATE RELEASE
For Further Information, Contact:
Peter Bassermann, Chief Executive Officer, ITDS, (203) 329-3300
Peter Holmberg, Dewe Rogerson Inc., (212) 688-6840
ITDS TO BUY CELLULAR TELEPHONE BILLING UNIT
FROM COMPUTER SCIENCES CORPORATION FOR $100 MILLION
Stamford, Connecticut, December 29, 1997 -- International Telecommunication
Data Systems, Inc. (Nasdaq: ITDS), and Computer Sciences Corporation (NYSE:
CSC) announced today that ITDS will buy TRIS, a cellular telephone billing
unit of CSC, for $100 million.
Under the terms of the agreement, ITDS will pay CSC $90 million in cash and the
remainder in ITDS common stock, which will give CSC approximately a 4% interest
in ITDS. This sale, which is expected to be completed by the January 2, 1998, is
subject to regulatory approval.
TRIS is a leading provider of transactional billing solutions to the wireless
telecommunications industry. With revenue for the fiscal year ended March 31,
1997, in excess of $40 million, TRIS currently serves more than 350 markets in
the United States and processes over 400 million call data records monthly.
<PAGE>
ITDS--Page 2
Peter P. Bassermann, chief executive officer of ITDS, said, "Today's
announcement marks the culmination of many months of effort by ITDS and CSC.
ITDS's acquisition of TRIS represents a unique opportunity, and will position
ITDS as the number two billing service bureau provider for wireless carriers and
resellers in the world, servicing 29 of the top 30 markets in the United States.
The acquisition will be accretive to our earnings and will more than double our
revenue in our fiscal year 1998."
"The acquisition will also propel ITDS forward in achieving its strategic goals
of being the premier billing and customer service enterprise for the wireless
community," Bassermann continued. "The new combined company will provide
customers with multiple billing platforms, significant R&D investment, industry
leadership and a proven professional management team. The acquisition will
greatly enhance ITDS's ability to integrate information solutions into its
product line and into the global marketplace. With its entrepreneurial roots and
comprehensive information software, ITDS is well poised to support the dynamic
growth of the telecommunications industry."
"This is a beneficial transaction for both parties," said Van B. Honeycutt,
chairman, president and chief executive of CSC. "CSC has over $300 million
annual revenue in the telecommunications area, but the provision of cellular
billing systems is not central to the consulting, systems integration and
outsourcing services we offer the industry. It is, however, ITDS's core
business."
<PAGE>
ITDS--Page 3
Mr. Honeycutt said the sale will not effect CSC's earnings.
CSC had annual revenue of $6 billion for the 12 months ended September 26, 1997.
Headquartered in El Segundo, California, the Company has nearly 44,000 employees
in more than 600 offices worldwide and provides clients with a wide range of
professional services, including management consulting, information systems
consulting and integration, and operations support. More information about CSC
is available at http://www.csc.com.
Based in Stamford, Connecticut, ITDS provides comprehensive transactional
billing and management information solutions to providers of wireless, long
distance and satellite telecommunication services. The Company's newest release,
version 4.0 of the ITDS 10X System, forms the foundation for its integrated
suite of applications that provide not only subscriber billing and service
support, but also the means to automate subscriber activation, remittance
processing, collections, data retrieval and reporting, electronic funds
transfer, credit management, inventory management and data archiving. ITDS also
maintains offices in Texas, Florida and Illinois.
ITDS and 10X are registered trademarks of International Telecommunication Data
Systems, Inc. Comprehensive information about International Telecommunication
Data Systems, Inc. (Nasdaq: ITDS) can be obtained via the worldwide web at
http://www.itds.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are delays in product development, undetected errors or bugs in
software, changes in product pricing policies, competitive pressures,
lower-than-expected demand for telecommunications billing solutions, general
conditions and risk factors detailed from time to time in the Company's periodic
reports and registration statements filed with the Securities and Exchange
Commission.
