FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
DATE OF REPORT - APRIL 6, 1998
(Date of earliest event reported)
WATSON WYATT & COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 0-20724
(State of incorporation) (Commission file number)
53-0181291
(IRS employer identification number)
6707 DEMOCRACY BLVD., SUITE 800, BETHESDA, MD 20817
(Address of principal executive offices, zip code)
AREA CODE (301) 581-4600
(Telephone number)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On April 6, 1998, the Registrant ("Company") entered into a Redemption,
Restructuring, and Indemnity Agreement ("the Restructuring Agreement") with
State Street Bank and Trust Co. ("State Street") and Wellspring Resources, LLC
("Wellspring") by which Wellspring redeemed the Company's 50% interest in
Wellspring effective April 1, 1998. The restructuring effected pursuant to the
Agreement implements a Discontinuation Plan approved by the Company's Board of
Directors on February 18, 1998 which provided for the Company's exit from the
Benefits Administration Outsourcing Business ("Outsourcing Business").
Following the redemption of the Company's interest in Wellspring,
Wellspring will continue to operate as a wholly-owned subsidiary of State
Street. Certain outsourcing contracts retained by the Company when Wellspring
was initially formed in 1996 ("Retained Clients"), will continue to be performed
by the Company until their respective contract expirations. Two of the three
Retained Clients' contracts expire within the next year. The Company has
identified alternative resolutions for the contractual relationship with the
third client. The Company and the client are in discussion as to which
alternative is mutually advantageous. The Company will continue to provide
services under these agreements using facilities and personnel provided by
Wellspring until these arrangements expire.
In connection with the restructuring transactions, the Company has
agreed to indemnify Wellspring for certain costs and losses incurred as a result
of services provided by Wellspring on the Company's behalf. Further, the Company
has been released from certain liabilities relating to the Wellspring business
in connection with the redemption.
The discontinuation of the Company's Outsourcing Business results in
the write-off of the Company's investment in Wellspring, which had a book value
at the disposal date of $45 million. In addition, the Company is writing off
$14 million in unamortized deferred software and development costs net of
related deferred revenues related to the Retained Clients. Further, a provision
of $61 million has been recorded for contract termination expenses, lease
guarantees, potential severance and other expenses related to the Company's exit
from the Outsourcing Business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Pro Forma Financial Information
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The Securities and Exchange Commission requires the pro forma restatement
of certain previously released financial statements. The following unaudited pro
forma balance sheet as of December 31, 1997 and unaudited pro forma statements
of operations for the years ended June 30, 1997, 1996, and 1995 and the six
months ended December 31, 1997 give effect to the Company's exit from the
Outsourcing Business. The pro forma adjustments to each financial statement are
explained and cross-referenced to the statement on a page immediately following
each of the pro forma financial statements. As a result of such adjustments, the
unaudited pro forma financial information reflects primarily the operations of
the Company's core consulting businesses.
The pro forma adjustments included in the following pro forma financial
statements reflect the Company's investment in Wellspring and unamortized
deferred software and development costs as of the dates of the respective
financial statement. Such amounts, therefore, differ from the investment amounts
at April 1, 1998 when the transaction was consummated.
<TABLE>
<CAPTION>
Watson Wyatt & Company
Pro Forma Unaudited Consolidated Balance Sheet
as of December 31, 1997
dollars in thousands
Pro Forma Adjustments Proforma
Historical Adjustments for Continuing
Consolidated Assets Disposed (1) disposition(2) Operations
<S> <C> <C> <C> <C>
Assets
Current Assets $ 156,561 - - a $ 156,561
Income Taxes - $52,228 b 52,228
Fixed Assets 36,433 36,433
Investment in Affiliates 59,063 $(40,865) 18,198
Deferred Software& Dev. Costs 30,101 (21,489) 8,612
Deferred Income Taxes 39,025 39,025
Other assets 11,653 - - 11,653
---------- --------- ------- ---------
Total assets $ 332,836 $(62,354) $52,228 $ 322,710
========== ========= ======= =========
Liabilities & Permanent Shareholders' Equity
AP & Accrued Expenses $ 91,393 $ (4,071) $60,800 c $ 148,122
Income Taxes Payable 5,110 5,110
Deferred Income Taxes Payable 28,612 28,612
Other current liabilities 17,597 (3,021) 14,576
Accrued retirement liabilities 88,576 88,576
Other non current liabilities 20,187 20,187
Redeemable Common Stock 92,901 92,901
Permanent Shareholders' Equity (11,540) - (63,834) d (75,374)
-------- --------- -------- ----------
Total Liabilities &
Permanent Shareholders' Equity$ 332,836 $ (7,092) (3,034) $ 322,710
========== ========= ======== ==========
(1) & (2) - See Notes to Pro Forma Unaudited Balance Sheet
</TABLE>
<PAGE>
NOTES TO PRO FORMA UNAUDITED BALANCE SHEET AND ADJUSTMENTS
(1) The unaudited balance sheet as of December 31, 1997 gives effect to the
disposition of the Company's interest in the Outsourcing Business, as if it had
been disposed of at that date. Net assets shown include the following:
Investment in Wellspring LLC $ 40,865
Retained Clients- deferred software 21,489
Retained Clients - deferred implementation fees (7,092)
-------
$ 55,262
=======
(2) Gives effect to loss on disposition of assets related to Outsourcing
Business, as follows:
Proceeds from disposition $ - a
Less: Net assets disposed 55,262
Less: Additional liabilities assumed to exit Outsourcing Business 60,800 c
----------
Pretax loss (116,062)
Tax benefit at 45% 52,228 b
----------
After tax loss $ (63,834)d
==========
The additional liabilities assumed to exit Outsourcing Business include contract
termination penalties, lease guarantees, severance payments and other expenses.
<PAGE>
<TABLE>
<CAPTION>
Watson Wyatt & Company
Pro Forma Unaudited Consolidated Statement of Operations
for the six months ended December 31, 1997
dollars in thousands
Pro Forma Adjustments Proforma
Historical Adjustments for Continuing
Consolidated Disposition (1) disposition Operations
<S> <C> <C> <C> <C>
Fees $ 269,063 $ (15,793) $ 253,270
Costs of providing services 221,194 (19,035) 202,159
General & administrative 22,718 22,718
Depreciation and amortization 13,514 (4,293) 9,221
---------- ------------ ----------
Income from Operations 11,637 7,535 19,172
Other:
Interest Income 486 486
Interest expense (1,426) (1,426)
Loss from affiliates (784) 780 (4)
----------- ------------ -----------
Income from continuing
operations before income
taxes and minority interest 9,913 8,315 18,228
Provision for income taxes 5,606 3,742 9,348
----------- ------------ ----------
Income from continuing
operations before minority
interest 4,307 4,573 8,880
Minority interest in net income (141) - (141)
----------- ------------ ----------
Net income from continuing
operations $ 4,166 $ 4,573 $ 8,739
============ ============ ==========
Earnings per share $ 0.23 $ 0.49
Avg. shares outstanding 17,831 17,831
(1) See notes to Pro Forma Unaudited Statement of Operations
</TABLE>
<PAGE>
NOTES TO PRO FORMA UNAUDITED STATEMENT OF OPERATIONS AND ADJUSTMENTS
(1) The unaudited statement of operations gives effect to the disposition of the
Company's interest in the Outsourcing Business as if it had been disposed of at
the beginning of the period presented. The results of operations for the
Company's investment in Wellspring and the results of the Retained Clients have
been eliminated.
Those results are:
50% share of losses of Wellspring $ 780
Operating loss for Retained Clients 7,535
------
Pretax operations of Outsourcing Business 8,315
Tax benefit from losses of Outsourcing Business (3,742)
-------
Net improvement in income from continuing operations $ 4,573
=======
The results of the discontinued operations ($4,573) would be presented in the
caption Discontinued Operations, which is not included in the above Statement of
Operations.
Also not included in the above Statement of Operations is the net loss arising
from the assumed disposition of the Company's net assets related to the
Outsourcing Business. The loss would be presented in the caption Discontinued
Operations. The loss on disposition of assets related to Outsourcing Business is
as follows:
Proceeds from disposition $ -
Less: Net assets disposed 55,262
Less: Additional liabilities assumed to exit Outsourcing Business 60,800
---------
Pretax loss (116,062)
Tax benefit at 45% 52,228
---------
After tax loss $ (63,834)
=========
<PAGE>
<TABLE>
Watson Wyatt & Company
Pro Forma Unaudited Consolidated Statement of Operations
for the year ended June 30, 1997
dollars in thousands
Pro Forma Adjustments Proforma
Historical Adjustments Continuing
Consolidated Disposition (1) for disposition Operations
<S> <C> <C> <C> <C>
Fees $ 510,998 $ (24,496) $ 486,502
Costs of providing services 433,496 (33,982) 399,514
General & administrative 43,337 43,337
Depreciation and amortization 25,993 (3,899) 22,094
----------- -------------- -----------
Income from Operations 8,172 13,385 21,557
Other:
Interest Income 1,462 1,462
Interest expense (1,506) (1,506)
Loss from affiliates (6,174) 6,279 105
----------- -------------- ----------
Income from continuing
operations before income
taxes and minority interest 1,954 19,664 21,618
Provision for income taxes 889 8,849 9,738
----------- -------------- ----------
Income from continuing operations
before minority interest 1,065 10,815 11,880
Minority interest in net income (167) - (167)
----------- -------------- ----------
Net income from continuing
operations $ 898 $ 10,815 $ 11,713
=========== ============== ==========
Earnings per share $ 0.05 $ 0.65
Avg. shares outstanding 18,130 18,130
(1) See notes to Pro Forma Unaudited Statement of Operations
</TABLE>
<PAGE>
NOTES TO PRO FORMA UNAUDITED STATEMENT OF OPERATIONS AND ADJUSTMENTS
(1) The unaudited statement of operations gives effect to the disposition of the
Company's interest in the Outsourcing Business as if it had been disposed of at
the beginning of the period presented. The results of operations for the
Company's investment in Wellspring and the results of the Retained Clients have
been eliminated.
Those results are:
50% share of losses of Wellspring $ 6,279
Operating loss for Retained Clients 13,385
-------
Pretax operations of Outsourcing Business 19,664
Tax benefit from losses of Outsourcing Business (8,849)
-------
Net improvement in income from continuing operations $ 10,815
=======
The results of the discontinued operations ($10,815) would be presented in the
caption Discontinued Operations, which is not included in the above Statement of
Operations.
Also not included in the above Statement of Operations is the net loss arising
from the assumed disposition of the Company's net assets related to the
Outsourcing Business. The loss would be presented in the caption Discontinued
Operations.
<PAGE>
<TABLE>
Watson Wyatt & Company
Pro Forma Unaudited Consolidated Statement of Operations
for the year ended June 30, 1996
dollars in thousands
Pro Forma Adjustments Proforma
Historical Adjustments Continuing
Consolidated Disposition (1) for disposition Operations
<S> <C> <C> <C> <C>
Fees $ 492,513 $ (17,215) $ 475,298
Costs of providing services 407,057 (30,301) 376,756
General & administrative 38,656 38,656
Depreciation and amortization 26,348 (807) 25,541
------------ ------------- -----------
Income from Operations 20,452 13,893 34,345
Other:
Interest Income 1,441 1,441
Interest expense (930) (930)
Loss from affiliates (2,275) 1,455 (820)
------------ ------------- -----------
Income from continuing
operations before income
taxes and minority interest 18,688 15,348 34,036
Provision for income taxes 9,203 6,907 16,110
------------ ------------- -----------
Income from continuing
operations before minority interest 9,485 8,441 17,926
Minority interest in net income (130) - (130)
------------ ------------- -----------
Net income from continuing
operations $ 9,355 $ 8,441 $ 17,796
============ ============= ===========
Earnings per share $ 0.51 $ 0.97
Avg. shares outstanding 18,262 18,262
(1) See notes to Pro Forma Unaudited Statement of Operations
</TABLE>
<PAGE>
NOTES TO PRO FORMA UNAUDITED STATEMENT OF OPERATIONS AND ADJUSTMENTS
(1) The unaudited statement of operations gives effect to the disposition
of the Company's interest in the Outsourcing Business as if it had been disposed
of at the beginning of the period presented. The results of operations for the
Company's investment in Wellspring and the results of the Retained Clients have
been eliminated.
Those results are:
50% share of losses of Wellspring $ 1,455
Operating loss for Retained Clients 13,893
-------
Pretax operations of Outsourcing Business 15,348
Tax benefit from losses of Outsourcing Business (6,907)
-------
Net improvement in income from continuing operations $ 8,441
=======
The results of the discontinued operations ($8,441) would be presented in
the caption Discontinued Operations, which is not included in the above
Statement of Operations.
Also not included in the above Statement of Operations is the net loss
arising from the assumed disposition of the Company's net assets related to the
Outsourcing Business. The loss would be presented in the caption Discontinued
Operations
<PAGE>
<TABLE>
Watson Wyatt & Company
Pro Forma Unaudited Consolidated Statement of Operations
for the year ended June 30, 1995
dollars in thousands
Pro Forma Adjustments Proforma
Historical Adjustments Continuing
Consolidated Disposition (1) for disposition Operations
<S> <C> <C> <C> <C>
Fees $ 474,521 $ (8,733) $ 465,788
Costs of providing services 405,401 (14,973) 390,428
General & administrative 41,313 41,313
Depreciation and amortization 21,442 (339) 21,103
----------- ------------- -----------
Income from Operations 6,365 6,579 12,944
Other:
Interest Income 1,343 1,343
Interest expense (1,507) (1,507)
Loss from affiliates (576) - (576)
----------- ------------- -----------
Income from continuing
operations before income
taxes and minority interest 5,625 6,579 12,204
Provision for income taxes 3,849 2,961 6,810
----------- ------------- -----------
Income from continuing
operations before minority
interest 1,776 3,618 5,394
Minority interest in net income (127) - (127)
----------- ------------- -----------
Net income from continuing
operations before acctg. change $ 1,649 $ 3,618 $ 5,267
=========== ============= ===========
Earnings per share $ 0.09 $ 0.28
Avg. shares outstanding 19,130 19,130
(1) See notes to Pro Forma Unaudited Statement of Operations
</TABLE>
<PAGE>
NOTES TO PRO FORMA UNAUDITED STATEMENT OF OPERATIONS AND ADJUSTMENTS
(1) The unaudited statement of operations gives effect to the disposition
of the Company's interest in the Outsourcing Business as if it had been disposed
of at the beginning of the period presented. The results of operations for the
Company's investment in Wellspring and the results of the Retained Clients have
been eliminated.
Those results are:
50% share of losses of Wellspring $ -
Operating loss for Retained Clients 6,579
------
Pretax operations of Outsourcing Business 6,579
Tax benefit from losses of Outsourcing Business (2,961)
------
Net improvement in income from continuing operations $ 3,618
======
The results of the discontinued operations ($3,618) would be presented in
the caption Discontinued Operations, which is not included in the above
Statement of Operations.
Also not included in the above Statement of Operations is the net loss arising
from the assumed disposition of the Company's net assets related to the
Outsourcing Business. The loss would be presented in the caption Discontinued
Operations.
<PAGE>
(c) Exhibits
(2a) Redemption, Restructuring, and Indemnification Agreement by
and among State Street Bank & Trust Company, Wellspring
Resources, LLC and Watson Wyatt & Company
<PAGE>
CONTENTS OF SCHEDULES TO THE REDEMPTION, RESTRUCTURING, AND
INDEMNITY AGREEMENT
Schedule 3.3.3 Terminated Employees and Contractors and Employment Contracts
This schedule lists the employees of Wellspring whose
termination resulted from the restructuring. Also included are
severance terms.
Schedule 3.7 Known Claims Involving Wellspring Resources, LLC.
The schedule summarizes specific claims existing on the date
of the restructuring.
Schedule 4.1 Existing Letter Agreement re: State Street Provision of
Pension Payroll Services
This schedule is the fee schedule from State Street Global
Advisors to Wellspring Resources for pension payroll services.
Schedule 9.8A Preliminary Balance Sheet
The preliminary Wellspring Resources, LLC balance sheet dated
March 31, 1998 is included in this schedule.
Schedule 9.8B Balance Sheet Adjustments
The schedule shows the calculation to divide the March 31,
1998 balance sheet between the parties.
The Registrant undertakes to provide, supplementally to the
Commission upon request, a copy of the above-referenced
schedules.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on behalf
of the undersigned, thereunto duly authorized.
Watson Wyatt & Company
/S/ Barbara L. Landes April 21, 1998
- --------------------- --------------
Name: Barbara L. Landes Date
Title: Vice President, Finance and
Chief Financial Officer
Execution Copy
REDEMPTION, RESTRUCTURING
AND INDEMNIFICATION AGREEMENT
BY AND AMONG
STATE STREET BANK & TRUST COMPANY
WELLSPRING RESOURCES, LLC
AND
WATSON WYATT & COMPANY
DATED AS OF APRIL 1, 1998
.
<PAGE>
REDEMPTION, RESTRUCTURING
AND INDEMNIFICATION AGREEMENT
THIS REDEMPTION, RESTRUCTURING AND INDEMNIFICATION AGREEMENT (this
"Agreement") is made and entered into effective as of April 1, 1998 by and among
State Street Bank and Trust Company, a Massachusetts bank and trust company
(together with its successors and assigns, "State Street"), Wellspring
Resources, LLC, a Delaware limited liability company (together with its
successors and assigns, "Wellspring"), and Watson Wyatt & Company, f/k/a The
Wyatt Company, a Delaware corporation (together with its successors and assigns,
"Wyatt"). From time to time, State Street, Wellspring and Wyatt are referred to
collectively herein as the "Parties."
W I T N E S S E T H
WHEREAS, pursuant to the terms of the Master Transaction Agreement and
the Transaction Documents referred to therein, State Street, Wyatt and Wyatt's
indirect, wholly owned subsidiary Wyatt Preferred Choice, L.L.C. agreed to
create Wellspring and to combine certain of their assets therein to allow
Wellspring to develop the employee benefits outsourcing business and proceed
toward marketing, in connection with such outsourcing, a comprehensive array of
benefit and pension services to the United States market;
WHEREAS, immediately prior to the transfer referred to below, State
Street and Wyatt each owned 50% of the Membership Interests in Wellspring and
were the sole Members of Wellspring;
WHEREAS, immediately prior to the execution and delivery of this
Agreement, State Street transferred a 1/2 of one percent Membership Interest in
Wellspring to State Street Retirement Services, Inc., a Massachusetts
corporation;
WHEREAS, Wyatt has advised State Street and Wellspring that Wyatt
wishes to sell its Membership Interest in Wellspring, terminate its involvement
in Wellspring's day-to-day affairs and enter into the Retained Client Services
and Protection Agreement referred to below so that Wyatt may provide services to
the Retained Clients; and
WHEREAS, Wellspring has agreed to redeem Wyatt's Membership Interest in
Wellspring and Wellspring has consented to Wyatt's utilization of certain of
Wellspring's employees pursuant to the terms of the Retained Client Services and
Protection Agreement;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, which the Parties acknowledge is
sufficient for them to be legally bound by this Agreement in accordance with its
terms, the Parties agree as follows:
Article I
Definitions and Rules of Construction
1.1 Definitions. The following terms used in this Agreement shall have
the following meanings (unless otherwise expressly provided herein):
1.1.1 "Affiliate" shall mean, with respect to any Person, any
other Entity directly or indirectly controlling, controlled by, or under direct
or indirect common control of, such Person. A Person shall be deemed to control
an Entity if such Person possesses, directly or indirectly, the power to direct
or cause direction of the management and policies of such Entity, whether
through ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, an Entity of which Wyatt or State Street owns
securities or other ownership interests representing less than fifty percent
(50%) of the ordinary voting power of all of the issued and outstanding
securities or other ownership interests of such Entity shall not be deemed an
Affiliate of Wyatt or State Street, respectively.
1.1.2 "Affiliated Party" shall mean State Street or any Entity
in which State Street or an Affiliate of State Street owns securities or other
ownership interests representing thirty-three percent (33%) or more of the
ordinary voting power of all of the issued and outstanding securities or other
ownership interests of such Entity.
1.1.3 "Agreement" shall mean this Agreement, together with the
Exhibits and Schedules hereto, as the same may be amended from time to time.
1.1.4 "Allegheny Contract" shall mean, collectively, that
certain Letter Agreement dated as of July 14, 1997 and that certain draft
Administrative Services Agreement by and between Allegheny and Wellspring, and
any course of dealing with respect thereto established between Wellspring and
Allegheny.
1.1.5 "Amended and Restated Software License and Services
Agreement" shall mean that certain Amended and Restated Software License and
Services Agreement dated as of the date hereof, by and between Wyatt and
Wellspring, in the form attached hereto as Exhibit E pursuant to which Wyatt
granted to Wellspring certain rights to use, modify, license and transfer
certain Software and to which Wyatt agreed to provide certain support services
with respect to such Software.
1.1.6 "Ancillary Agreements" shall mean the Agreements attached
hereto as Exhibits.
1.1.7 "Assigned Property" shall have the meaning set forth in
Section 3.6.3.
1.1.8 "Assigned Property Liabilities" shall have the meaning set
forth in Section 3.6.3.
1.1.9 "Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to be
closed in New York, New York, Boston, Massachusetts, or Washington, D.C.
1.1.10 "CPR" shall have the meaning set forth in Section 11.1.2.
1.1.11 "CPR Rules"shall have the meaning set forth in Section 11.1.2.
1.1.12 "Capital Contribution" shall have the meaning set forth in
the LLC Agreement.
1.1.13 "Claimant" shall have the meaning set forth in Section 11.1.1.
1.1.14 "Closing" shall have the meaning set forth in Section 2.2.
1.1.15 "Closing Date" shall have the meaning set forth in Section
2.2.
1.1.16 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or corresponding provisions of subsequent superseding Federal
revenue laws.
1.1.17 "Contemplated Transactions" shall mean the transactions described
in Section 2.1 of this Agreement and all other transactions contemplated by the
Transaction Documents.
1.1.18 "Copyrights" shall mean all United States and foreign copyright
registrations and applications therefor and unregistered copyrights.
1.1.19 "Dispute Notice" shall have the meaning set forth in
Section 11.1.1.
1.1.20 "Effective Closing Time" shall have the meaning set forth in
Section 2.2.
1.1.21 "Employment Contracts" shall mean, collectively, all written and
oral contracts between Wellspring and any of its officers, employees,
contractors or agents.
1.1.22 "Entity" shall mean any general partnership, limited partnership,
limited liability partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative, association, foreign trust or
foreign business organization.
1.1.23 "FedEx Contract shall mean that certain Benefits Administration
Agreement effective as of April 30, 1997, by and between Wellspring and FedEx.
1.1.24 "Fee Allocation and Indemnity Agreement" shall mean that certain
Fee Allocation and Indemnity Agreement dated as of March 12, 1996, by and
between Wyatt and Wellspring.
1.1.25 "Final Balance Sheet" shall have the meaning set forth in
Section 9.8.2.
1.1.26 "GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
1.1.27 "Governmental Authority" shall mean any nation or government, any
foreign or domestic federal, state, county, municipal or other political
instrumentality or subdivision thereof and any foreign or domestic entity or
body exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.1.28 "HR Edge(R) Choice Software" shall have the meaning set forth in
the Amended and Restated Software License and Services Agreement.
1.1.29 "HR Edge(R) Pensions Software" shall have the meaning set forth in
the Amended and Restated Software License and Services Agreement.
1.1.30 "Indemnitee" shall have the meaning set forth in Section
10.2.3.
1.1.31 "Indemnitor" shall have the meaning set forth in Section
10.2.3.
1.1.32 "Intangible Property Rights" shall mean rights that exist under
Laws respecting Copyrights, Trademarks, Patents and Trade Secrets.
1.1.33 "Intellectual Property" shall mean Software, Technology,
Copyrights, Trademarks and Trade Secrets.
1.1.34 "Joint Miscellaneous Liabilities" shall have the meaning set
forth in Section 3.7.
1.1.35 "Joint Terminated Employee Liabilities" shall have the
meaning set forth in Section 3.3.3.
1.1.36 "Laws" shall mean any or all of the following: (a) all
constitutions, treaties, laws, statutes, codes, regulations, ordinances, orders,
decrees, rules, or other requirements with similar effect of any Governmental
Authority, (b) all judgments, orders, writs, injunctions, decisions, rulings,
decrees and awards of any Governmental Authority, and (c) all provisions of the
foregoing, in each case binding on or affecting the Person referred to in the
context in which such word is used; "Law" means any one of the foregoing Laws.
1.1.37 "Leased Personal Property" shall mean all equipment, furniture and
other personal property leased by Wellspring as of the Effective Closing Time.
1.1.38 "Lien" shall mean any lien, statutory or otherwise, security
interest, mortgage, deed or trust, priority, pledge, charge, conditional sale,
title retention agreement, financing lease, title defect or other encumbrance or
similar right of others, or any agreement to give any of the foregoing.
1.1.39 "LLC Agreement" shall mean that certain Limited Liability Company
Agreement of Wellspring Resources dated March 12, 1996, by and between Wyatt and
State Street.
1.1.40 "LLC Client Contracts" shall have the meaning set forth in
Section 3.1.1.
1.1.41 "LLC Clients" shall mean, collectively, Allegheny Teledyne,
Inc. ("Allegheny"), AT&T Corp. ("AT&T"),
Federal Express Corporation ("FedEx"), Sears, Roebuck & Co. ("Sears") and U S
West, Inc. ("US West").
1.1.42 "Losses" shall have the meaning set forth in Section 3.1.1.
1.1.43 "Management Meeting" shall have the meaning set forth in
Section 11.1.1.
1.1.44 "Master Transaction Agreement" shall mean that certain Master
Transaction Agreement dated March 12, 1996, by and among State Street, Wyatt and
Wyatt Preferred Choice, L.L.C. together with the exhibits and schedules thereto.
1.1.45 "Member" shall have the meaning set forth in the LLC Agreement.
1.1.46 "Membership Interest" shall have the meaning set forth in the
LLC Agreement.
1.1.47 "NextGen Assets" shall mean all of the Software, Technology,
Trade Secrets, and related Intangible Property Rights, developed,
owned or licensed by or to Wellspring generally pertaining to the outsourcing
of event driven, integrated employee benefits, and the administration thereof,
except for the HR Edge(R) Choice Software, the HR Edge(R) Pensions Software, the
On Demand Software and that certain Software known as WyStar.
1.1.48 "NextGen Expenses" shall mean those software
development costs and expenses accrued or incurred by Wellspring or any other
owner of the NextGen Assets after the Effective Closing Time in connection with
the development and implementation of the NextGen Assets, including the related
Software (other than the HR Edge(R) Choice Software, the HR Edge(R) Pensions
Software, the On Demand Software and that certain Software known as WyStar).
1.1.49 "NextGen Proceeds" shall mean, in the case of a license
of the NextGen Assets consummated prior to April 1, 2002, the total value of the
consideration received by Wellspring as a license fee with respect to such
license, regardless of when such consideration is received, but shall not
include any consideration received by Wellspring for support or maintenance or
any other services provided in connection with such license.
1.1.50 "On Demand Software" shall have the meaning set forth
in the Amended and Restated Software License and Services Agreement.
1.1.51 "Owned Personal Property" shall mean all equipment,
furniture and other personal property owned by Wellspring as of the Effective
Closing Time.
1.1.52 "Patents" shall mean all patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.1.53 "Person" shall mean any individual, person, Entity or
Governmental Authority, and the heirs, executors, administrators, legal
representatives, successors and assigns of the "Person" when the context so
permits.
1.1.54 "Personal Property Guaranties" shall mean, collectively, the State
Street Personal Property Guaranties and the Wyatt Personal Property Guaranties.
1.1.55 "Preliminary Balance Sheet" shall have the meaning set forth in Section
9.8.1.
1.1.56 "Protected Parties" shall have the meaning set forth in Section 10.3.5.
1.1.57 "Protecting Party" shall have the meaning set forth in Section 10.3.5.
1.1.58 "Real Property Guaranties" shall mean, collectively, the State Street
Real Property Guaranties and the Wyatt Real Property Guaranties.
1.1.59 "Respondent" shall have the meaning set forth in Section 11.1.1.
1.1.60 "Responsible Party" shall have the meaning set forth in Section 3.6.3.
1.1.61 "Retained Client Contracts" shall have the meaning set forth in Section
3.2.
1.1.62 "Retained Client Employees" shall have the meaning set forth in the
Retained Client Services and Protection Agreement.
1.1.63 "Retained Client Property" shall have the meaning set forth in Section
3.4.1(C).
1.1.64 "Retained Client Services and Protection Agreement" shall mean that
certain Retained Client Services and Protection Agreement dated as of the date
hereof by and between Wellspring and Wyatt, the form of which is attached hereto
as Exhibit C.
1.1.65 "Retained Clients" shall mean, collectively,
International Business Machines Corporation ("IBM"), NYNEX Corporation
("NYNEX"), Westinghouse Electric Company ("Westinghouse"), Rockwell
International Corporation ("Rockwell"), Boeing Corporation ("Boeing") and
Meritor Automotive, Inc. ("Meritor").
1.1.66 "Retirement Services" shall mean State Street Retirement
Services, Inc., a Massachusetts corporation.
1.1.67 "RIC" shall mean Wyatt's Research and Information Center.
1.1.68 "Shared Services Employees" shall have the meaning set
forth in the Retained Client Services and Protection Agreement.
1.1.69 "Shared Services Property" shall have the meaning set forth in
Section 3.4.1(D).
1.1.70 "Software" shall mean the manifestation, in tangible or physical
form, including, but not limited to, in magnetic media, firmware and
documentation, of computer programs and databases, such computer programs and
databases to include, but shall not be limited to, management information
systems, machinery control programs and personal computer programs. The tangible
manifestation of such programs may be in the form of, including, but not limited
to, source code, flow diagrams, listings, object code and microcode. Software
does not include any Technology, Trade Secrets, Intangible Property Rights, or
any Software defined in and licensed under the Software License and Services
Agreement or the WyStar License and Services Agreement.
1.1.71 "State Street FedEx Guaranty" shall mean that certain
Guaranty of Certain Obligations of Wellspring Resources, LLC dated April 25,
1997, executed and delivered by State Street to FedEx.
1.1.72 "State Street Guaranty" shall mean that certain
Guaranty Agreement by State Street in favor of Wyatt dated as of April 1, 1998,
in the form attached as Exhibit A.
1.1.73 "State Street Personal Property Guaranties" shall mean
any and all guaranty agreements, surety agreements, indemnification agreements
or similar instruments or agreements executed and delivered by State Street in
connection with a lease of equipment, fixtures, software, hardware, furniture
and other personal property by Wellspring.
1.1.74 "State Street Real Property Guaranties" shall mean,
collectively, the guaranties executed and delivered by State Street to the
Wellspring Landlords in connection with the Wellspring Real Property Leases.
1.1.75 "State Street/Wellspring Indemnitees" shall have the
meaning set forth in Section 10.2.1.
1.1.76 "Taxes" shall mean any foreign or domestic federal,
state or local income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation premium, windfall profits, environmental, customs,
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, ad valorem, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax or any kind whatsoever, including any interest,
penalty, or addition thereto.
1.1.77 "Technology" shall mean all types of technical
information and data, whether or not reduced to tangible or physical form,
including, but not limited to: know-how; product definitions and designs;
research and development, procurement and service specifications, procedures,
standards, and reports; catalogs; technical information and data relating to
marketing and sales activity; and formulae. Technology does not include any
Software or any Intangible Property Rights.
1.1.78 "Terminated Employees" shall have the meaning
set forth in Section 3.3.3.
1.1.79 "Trade Secrets" shall mean information relating to
Technology or Software that is considered to be proprietary information by the
owner, is maintained on a confidential or secret basis by the owner and
generally is not know to other parties.
1.1.80 "Trademarks" shall mean trademarks, service marks,
trade dress, trade names, designs and logos, whether registered or unregistered,
all registrations and applications for registration thereof and all goodwill
associated therewith.
1.1.81 "Transaction Documents" shall mean this Agreement, and
the Ancillary Agreements, and any annexes, schedules, attachments or exhibits to
the foregoing.
1.1.82 "Unaffiliated Party" shall mean any Person other than
State Street, Wellspring and their respective Affiliates and any Affiliated
Party.
1.1.83 "Unrecovered NextGen Expenses" shall mean the NextGen
Expenses that have not been recovered by Wellspring and/or its successors and
assigns from receipt of NextGen Proceeds, or from a sale of the NextGen Assets
(in whole or in part), after the Effective Closing Time.
1.1.84 "Unused Property" shall have the meaning set forth in Section 3.4.1(E).
1.1.85 "WARN" shall mean the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. ss.2101 et seq., as amended from time to time, and all
regulations promulgated thereunder.
1.1.86 "Wellspring Client Service Agreement" shall mean that certain
Client Service Agreement dated as of March 12, 1996, by and between
Wellspring and Wyatt.
1.1.87 "Wellspring Employees" shall have the meaning set forth in Section
3.3.2.
1.1.88 "Wellspring Landlords" shall mean, collectively, BellSouth
Telecommunications, Inc., a Georgia corporation ("BellSouth"), Koger Equity,
Inc., a Florida corporation ("Koger") and One Rockledge Associates, a
Massachusetts Limited Partnership ("Rockledge Associates").
1.1.89 "Wellspring Property" shall have the meaning set forth in Section 3.4.1.
1.1.90 "Wellspring Real Property" shall mean the real property and
improvements thereon leased by Wellspring pursuant to the Wellspring Real
Property Leases.
1.1.91 "Wellspring Real Property Leases" shall mean,
collectively, (i) that certain Office Lease Agreement dated June 11, 1996 by and
between Wellspring and BellSouth, and any amendments, modifications or
supplements thereto; (ii) that certain Lease Agreement dated August 23, 1996 by
and between Wellspring and Koger, and any amendments, modifications or
supplements thereto; and (iii) that certain lease dated August 29, 1996 by and
between Wellspring and Rockledge Associates, and any amendments, modifications
or supplements thereto.
1.1.92 "Wellspring Retained Property" shall have the meaning set forth in
Section 3.4.1(A).
1.1.93 "Wyatt Assigned Property" shall have the meaning set forth in Section
3.4.1(B).
1.1.94 "Wyatt FedEx Guaranty" shall mean that certain Guaranty of Certain
Obligations of Wellspring Resources, LLC dated April 30, 1997 executed and
delivered by Wyatt to FedEx.
1.1.95 "Wyatt Indemnitees" shall have the meaning set forth in Section 3.1.1.
1.1.96 "Wyatt Personal Property Guaranties" shall mean, collectively, any and
all guaranty agreements, surety agreements, indemnification agreements or
similar instruments or agreements executed and delivered by Wyatt in connection
with a lease of equipment, fixtures, software, hardware, furniture and other
personal property by Wellspring.
1.1.97 "Wyatt Real Property Guaranties" shall mean,
collectively, the guaranties executed and delivered by Wyatt to the Wellspring
Landlords in connection with the Wellspring Real Property Leases.
1.2. Rules of Construction. Unless the context otherwise requires:
1.2.1. A term has the meaning assigned to it;
1.2.2. An accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
1.2.3. References in the singular or to "him," "her," "it,"
"itself," or other like references, and references in the plural or the feminine
or masculine reference, as the case may be, shall also, when the context so
requires, be deemed to include the plural or singular, or the masculine or
feminine reference, as the case may be;
1.2.4. Reference to Articles and Sections shall refer
to articles and sections of this Agreement, unless otherwise specified;
1.2.5. The headings in this Agreement are for
convenience and identification only and are not intended to describe,
interpret, define or limit the scope, extent, or intent of this Agreement
or any provision hereof; and
1.2.6. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party or parties
that drafted or caused this Agreement to be drafted.
Article II
Basic Transactions and Closing
The following events shall take place as of the Effective Closing Time:
2.1 Redemption of Membership Interests; Licenses ; Release
and Waiver; Etc.
2.1.1 Basic Transactions. Upon and subject to the terms and conditions
of this Agreement, (i) Wellspring shall, as of the Effective Closing Time,
redeem from Wyatt all of Wyatt's right, title and interest in and to its
Membership Interest in Wellspring, and (ii) Wellspring shall distribute to
Wyatt, in complete liquidation of Wyatt's Membership Interest in Wellspring: (x)
the Wyatt Assigned Property and (y) the royalty rights with respect to the
NextGen Assets described in Section 2.1.2 of this Agreement. Upon and subject to
the terms and conditions of this Agreement, Wyatt will be deemed to have
withdrawn as a Member of Wellspring, effective as of the Effective Closing Time.
The Parties agree (a) that for federal income tax purposes Wyatt shall treat all
payments made in liquidation of Wyatt's Membership Interest in Wellspring as
payments subject to Section 736(b) of the Code and that neither State Street nor
Wellspring shall take a reporting position inconsistent with such treatment by
Wyatt and (b) that Wyatt's distributive share of items of income, gain, loss,
deduction or credit with respect to the portion of Wellspring's taxable year in
which the redemption occurs shall be determined using an interim closing of the
books based on the Preliminary Balance Sheet referred to in Section 9.8.1 of
this Agreement. After giving effect to the redemption of Wyatt's Membership
Interest, as described in this Section 2.1, the Membership Interests of State
Street and Retirement Services will increase proportionately.
2.1.2 Royalty Rights. In consideration of Wyatt's agreements in Section
2.1.1, and upon and subject to the terms and conditions of this Agreement, State
Street and Wellspring agree that upon a license of all or any portion of the
NextGen Assets to an Unaffiliated Party consummated on or before April 1, 2002,
Wyatt shall receive a royalty equal in amount to (but not less than zero): (a)
50% of the NextGen Proceeds of such license, if such license is consummated on
or before April 1, 1999, less 50% of the Unrecovered NextGen Expenses incurred
after the Effective Closing Time; (b) 33% of the NextGen Proceeds, if such
license is consummated after April 1, 1999 and on or before April 1, 2001, less
50% of the Unrecovered NextGen Expenses incurred after the Effective Closing
Time; or (c) 25% of NextGen Proceeds of such license, if such license is
consummated after April 1, 2001 and on or before April 1, 2002, less 50% of the
Unrecovered NextGen Expenses incurred after the Effective Closing Time. Wyatt
shall not be entitled to receive any royalty from: (x) a license of the NextGen
Assets granted by Wellspring to an Unaffiliated Party at any time after the
Effective Closing Time pursuant to an administrative services contract between
Wellspring and such Unaffiliated Party, if such license is to be used by the
Unaffiliated Party (or by another Person on behalf of the Unaffiliated Party)
solely in connection with the administration of an employee benefit plan or
plans maintained by the Unaffiliated Party, notwithstanding any other provision
of this Section 2.1.2; (y) a license of the NextGen Assets to an Unaffiliated
Party consummated after April 1, 2002; or (z) a license of the NextGen Assets to
an Affiliate or Affiliated Party consummated at any time after the Effective
Closing Time, provided that a royalty shall be payable in accordance with this
Section 2.1.2 in the event any such Affiliate or Unaffiliated Party ceases to be
an Affiliate or Unaffiliated Party, as the case may be, at any time prior to
April 1, 2002.
Wellspring shall provide Wyatt with reasonable notice of any
transaction which shall give rise to NextGen Proceeds, and Wyatt shall have
reasonable audit rights with respect to any such transaction, provided that any
audit shall be at Wyatt's sole cost and expense. Amounts payable to Wyatt
hereunder shall be paid within thirty (30) days after receipt by Wellspring of
the NextGen Proceeds from which Wyatt's royalty is to be paid in accordance with
this Section 2.1.2. Any sale, license or transfer of all or any portion of the
NextGen Assets (including to an Affiliate or Affiliated Party) shall be subject
to the requirement that the purchaser, licensee or transferee shall be bound by
the provisions of this Section 2.1.2 in the event of a subsequent sale, transfer
or license of the Next Gen Assets by such purchaser, licensee or transferee.
Except as provided in the immediately preceding sentence, nothing contained in
this Section 2.1.2 shall limit or restrict Wellspring's right to license the
NextGen Assets to any Person on terms and conditions agreed to by Wellspring in
its sole and absolute discretion.
Wyatt, to allow for the license of the NextGen Assets after the
Effective Closing Time, shall grant the license rights to Wellspring provided
for in the Amended and Restated Software License and Services Agreement.
2.1.3 Acknowledgment and Release by Wyatt. Wyatt acknowledges
and agrees that, other than as set forth above in Sections 2.1.1 and 2.1.2, it
shall not be entitled to any payment, distribution or consideration on account
of the redemption by Wellspring of all of Wyatt's right, title and interest in
and to its Membership Interest in Wellspring. The Parties hereto wish to
eliminate any possibility that any past circumstances, conditions, acts,
omissions or events would entitle Wyatt to any further payment or consideration
on account of its former status as the owner of a Membership Interest in, and a
Member of, Wellspring. Accordingly, subject to the specific provisions of
Section 2.1.2 of this Agreement, by its execution hereof Wyatt shall be deemed
to have irrevocably released, waived and forever discharged Wellspring and State
Street, together with their respective successors and assigns, officers,
directors, managers, attorneys, subsidiaries and Affiliates, from any and all
claims, offsets, causes of action, liabilities, promises or indebtedness (if
any), in law or in equity, arising on account of or in connection with Wyatt's
Membership Interest in Wellspring or its status as a Member of Wellspring,
including, without limitation of any kind, any claim or right of Wyatt under the
LLC Agreement or applicable law to any regular or special distribution (whether
in cash or in property) by Wellspring, to interest on or to return of any
Capital Contribution by Wyatt to Wellspring or to any valuation or appraisal of
Wyatt's Membership Interest in Wellspring. Wyatt specifically acknowledges and
agrees that its acknowledgments and releases set forth in this Section 2.1.3 are
given for and in consideration of the various agreements and covenants set forth
in this Agreement and for other good and valuable consideration and that it
intends such acknowledgments and releases to be legally binding from and after
the Effective Closing Time. Nothing in this Section 2.1.3 shall affect or impair
the obligations of State Street and Wellspring to Wyatt under this Agreement and
the other Transaction Documents.
2.1.4 Acknowledgment and Release by State Street and
Wellspring. State Street and Wellspring by their execution hereof shall be
deemed to have irrevocably released Wyatt and its successors, assigns, officers,
directors, attorneys, subsidiaries, and Affiliates, from any and all claims,
offsets, causes of actions, liabilities, promises, or indebtedness (if any), in
law or inequity, arising on account of or in connection with Wyatt's Membership
Interest in Wellspring or its status as a Member of Wellspring. State Street and
Wellspring each hereby acknowledge and agree that its acknowledgments and
releases set forth in this Section 2.1.4 are given for and in consideration of
the various agreements and covenants set forth in this Agreement and for other
good and valuable consideration and that it intends such acknowledgments and
releases to be legally binding from and after the Effective Closing Time.
Nothing in this Section 2.1.4 shall affect or impair Wyatt's obligations to
State Street and Wellspring under this Agreement and the other Transaction
Documents.
2.2 The Closing. The closing shall take place at the offices of Choate,
Hall & Stewart, 53 State Street, Exchange Place, Boston, Massachusetts, or at
such place as the parties may mutually agree upon (the date of such closing
being herein referred to as the "Closing Date"). Upon release of this Agreement
and the other Transaction Documents, duly completed and executed, the closing of
the Contemplated Transactions shall be effective as of 12:01 a.m. on April 1,
1998 (the "Effective Closing Time").
Article III
Client Contracts; Personnel Matters; Properties; Liabilities
and Indemnifications
In addition to the transactions described in Article II above, the
following agreements, covenants and events shall take effect or occur as of the
Effective Closing Time:
3.1 LLC Clients.
3.1.1 LLC Client Contracts. Subject to Section 3.1.2 and
Section 3.1.3 below, the Parties agree and covenant that after the Effective
Closing Time Wellspring shall retain and/or assume all rights, benefits, duties,
obligations and liabilities under or related to all written and oral contracts
between Wellspring and the LLC Clients (the "LLC Client Contracts"). Subject to
Section 3.1.2 and Section 3.1.3, Wellspring shall protect, defend, indemnify and
hold harmless Wyatt and its Affiliates, officers, directors, employees, agents,
representatives, successors and assigns (the "Wyatt Indemnitees") from and
against any losses, damages and expenses (including, without limitation,
reasonable counsel fees, costs and expenses incurred in investigating and
defending against the assertion of such liabilities) (collectively "Losses")
which may be sustained, suffered or incurred by the Wyatt Indemnitees and which
arise under the LLC Client Contracts or out of any claims, causes of action,
suits or proceedings based on services provided by Wellspring to the LLC Clients
either before or after the Effective Closing Time.
3.1.2 Exception. Notwithstanding the terms of Section 3.1.1
above, Wyatt agrees and covenants that from and after the Effective Closing Time
it shall be jointly liable with Wellspring for all debts, obligations and
liabilities of Wellspring existing as of the Effective Closing Time, whether
fixed or contingent, liquidated or unliquidated known or unknown, arising under
the FedEx Contract and the Allegheny Contract or out of any claims, causes of
action, suits or proceedings based on services provided by Wellspring to FedEx
or Allegheny before the Effective Closing Time.
3.1.3 FedEx Guaranties. Nothing contained in this Agreement
shall affect, transfer or reduce Wyatt's obligations and liabilities under the
Wyatt FedEx Guaranty or State Street's obligations and liabilities under the
State Street FedEx Guaranty, all of which shall remain in full force and effect
after the Effective Closing Time, unless discharged by FedEx.
3.2 Retained Clients. The Parties agree and covenant that after the
Effective Closing Time Wyatt shall retain and/or assume all rights, benefits,
duties, obligations and liabilities under or related to all written and oral
contracts by and between Wyatt and the Retained Clients and all written and oral
contracts by and between Wellspring and the Retained Clients (all such contracts
being referred to herein as the "Retained Client Contracts"), and that the Fee
Allocation and Indemnity Agreement and the Wellspring Client Service Agreement
shall be superseded as of the Effective Closing Time, in each case in accordance
with the Retained Client Services and Protection Agreement.
3.3 Personnel Matters.
3.3.1 Retained Client Services and Protection Agreement.
Wellspring and Wyatt shall enter into the Retained Client Services and
Protection Agreement as of the Effective Closing Time. The Retained Client
Employees and the Shared Services Employees shall continue their employment
subject to the Retained Client Services and Protection Agreement after the
Effective Closing Time.
3.3.2 WARN. Each of the Parties represents to one another that
it does not intend to make any large-scale layoffs of the employees of
Wellspring as of the date of this Agreement ("Wellspring Employees") or to
implement a "plant closing" or "mass layoff," as those terms are defined in
WARN, in respect of Wellspring Employees, within ninety (90) days of the
Effective Closing Time. The Parties will cooperate with one another in
implementing such intent, including avoiding the creation of circumstances that
would give rise to any such "plant closing" or "mass layoff." Wellspring shall
have the right to refuse to take any action, at the request of Wyatt or
otherwise, with respect to the employees of Wellspring that, in Wellspring's
reasonable judgment, would, or could reasonably be expected to, give rise to a
violation of WARN. To the extent that, during any month, Wyatt requests
Wellspring to terminate a Retained Client Employee or Shared Service Employee
and Wellspring concludes that such termination cannot be effected without a
violation of WARN, Wellspring shall effect such termination (subject to the
terms of the Retained Client Services and Protection Agreement) at the earliest
time practicable consistent with WARN. For this purpose, the number of employees
of Wellspring who may be terminated at the time of or following any such request
by Wyatt consistent with WARN shall be allocated pro rata among Retained Client
Employees, Shared Service Employees and other employees of Wellspring in
accordance with the number of employees in each such category sought to be
terminated. To the extent necessary under WARN, the Parties shall cooperate with
one another in giving any notices required by WARN. To the extent any Party is
responsible for facts and circumstances that cause a violation of WARN, such
Party shall assume liability for any alleged failure to give a WARN notice, and
shall indemnify and hold harmless the other Parties from and against any Losses
which may be sustained, suffered or incurred by such other Parties which arise
under or relate to any claims asserted under WARN because of a "plant closing"
or "mass layoff" caused by such Party after the Effective Closing Time. The
obligations of the Parties under this Section 3.3.2 shall continue in effect
until the final termination of the Retained Client Services and Protection
Agreement.
3.3.3 Terminated Employees. Schedule 3.3.3 lists the employees
and contractors of Wellspring whose employment shall be terminated as of the
Effective Closing Time (the "Terminated Employees"). Wellspring and Wyatt shall
be jointly liable and responsible for any and all severance, employment
termination payments, COBRA or other employment-related obligations owed to the
Terminated Employees, including, without limitation, any claim, cause of action,
suit or proceeding brought by a Terminated Employee, Governmental Authority or
other Person for severance payments or benefits, discrimination under state or
federal law, retention bonuses or similar compensation, guaranteed bonuses,
employee benefits (including paid time off benefits), accrued matching
contributions and pension obligations or any payment or benefit owed under WARN
or other Laws (the "Joint Terminated Employee Liabilities"). In connection with
the preliminary balance sheet adjustment required under Section 9.8.1 of this
Agreement, Wyatt shall deliver to Wellspring on the Closing Date readily
available funds in an amount equal to fifty percent (50%) of the Joint
Terminated Employee Liabilities identified by the Parties as of the Effective
Closing Time.
The Joint Terminated Employee Liabilities shall include, but shall not
in any way be limited to, any obligations arising under the Employment Contracts
listed on Schedule 3.3.3 between Wellspring and a Terminated Employee. In
addition, the Joint Terminated Employee Liabilities shall include any and all
claims, causes of action, debts, and obligations arising as a result of the
termination of the Employment Contract between Wellspring and its President
during the one year period ending on April 1, 1999. Nothing in this Section 3.3
or in any other provision of this Agreement shall be construed as limiting
Wellspring's right, in its sole and absolute discretion, to terminate or alter
the employment of any party to an Employment Contract after the Effective
Closing Time.
3.3.4 Non-Solicitation. The Parties covenant and agree that,
for a period of two years after the Effective Closing Time Wyatt will not, for
its own benefit or the benefit of any other Person, solicit for employment any
employee or contractor of Wellspring (excluding the Retained Client Employees),
or any employee or contractor of an Affiliated Party formerly affiliated with
Wellspring, without the prior consent of Wellspring or such Affiliated Party, as
the case may be. The Parties further covenant and agree that, for a period of
two years after the Effective Closing Time Wellspring will not, for its own
benefit or the benefit of any other Person, solicit for employment any employee
or contractor of Wyatt, or any employee or contractor of an Affiliated Party
formerly associated with Wyatt, without the prior consent of Wyatt or such
Affiliated Party, as the case may be.
3.4 Wellspring Property.
3.4.1 Categories of Real and Personal Property. The Parties
have agreed that the Wellspring Real Property, Owned Personal Property and
Leased Personal Property (collectively, "Wellspring Property") shall be divided
into five categories as follows:
(A) Wellspring Property that will be used exclusively by
Wellspring in connection with the delivery of services to the LLC Clients
following the Effective Closing Time ("Wellspring Retained Property");
(B) Wellspring Property that will be distributed to Wyatt as
of the Effective Closing Time ("Wyatt Assigned Property"), none of which shall
include all or any portion of the NextGen Assets;
(C) Wellspring Property that will be used exclusively in
connection with the delivery of services to the Retained Clients following the
Effective Closing Time ("Retained Client Property");
(D) Wellspring Property that will be used in part by
Wellspring for the delivery of services to the LLC Clients and in part for the
delivery of services to the Retained Clients ("Shared Services Property"); and
(E) Wellspring Property that will not fall into any of the
foregoing categories ("Unused Property").
3.4.2 Allocation of Wellspring Property. As soon as
practicable after the Effective Closing Time, the Parties shall inventory and
agree on the allocation of the Wellspring Real Property, Owned Personal Property
and Leased Personal Property in accordance with Section 3.4.1. Such
categorization shall be effective as of the Effective Closing Time.
3.4.3 Unused Property. The Parties shall agree as soon
as practicable after the Effective Closing Time as to the disposition of
the Unused Property. The net proceeds of any such disposition shall be
paid 50% to each of Wyatt and State Street.
3.5 Wellspring Property Responsibility and Guaranties.
3.5.1 Wellspring Responsibility. Nothing in this Agreement
shall affect, transfer or reduce Wellspring's obligations and liabilities in
respect of the Wellspring Retained Property, Shared Services Property and
Wellspring Real Property Leases following the Effective Closing Time.
3.5.2 Shared Services Property. Wyatt shall reimburse
Wellspring for the use of Shared Services Property in accordance with the
Retained Client Services and Protection Agreement.
3.5.3 Real Property Guaranties. Nothing contained in this
Agreement shall affect, transfer or reduce Wyatt's and State Street's respective
obligations and liabilities under the Wyatt Real Property Guaranties and the
State Street Real Property Guaranties, which shall remain in full force and
effect after the Effective Closing Time unless released and discharged by one or
more of the Wellspring Landlords, subject to Section 10.3 of this Agreement.
Wellspring covenants and agrees that it will not amend, modify, sublease or
assign any of the Wellspring Real Property after the Effective Closing Time
without the prior written consent of Wyatt and State Street, which consent shall
not be unreasonably withheld or delayed.
3.5.4 Personal Property Guaranties. Nothing contained in this
Agreement shall affect, transfer or reduce Wyatt's and State Street's respective
obligations and liabilities under the Wyatt Personal Property Guaranties and the
State Street Personal Property Guaranties, which shall remain in full force and
effect after the Effective Closing Time unless released and discharged by one or
more lessor, subject to Section 10.3 of this Agreement. Wellspring covenants and
agrees that, after the Effective Closing Time, it will not amend, modify,
sublease or assign any Leased Personal Property subject to a lease under which
Wellspring's obligations are guaranteed by Wyatt and/or State Street without the
prior written consent of Wyatt and/or State Street (as the case may be), which
consent shall not be unreasonably withheld or delayed.
3.6 Allocation of Obligations in Respect of Property.
3.6.1 Assignment of Responsibilities. The Parties
have agreed to assume responsibility
for certain categories of the Wellspring Property as follows:
Property Responsible Party
Wyatt Assigned Property Wyatt
Retained Client Property Wyatt
Unused Property Wyatt 50% / Wellspring 50%
3.6.2. Advance of Cost of Retained Client Property and Unused
Property. On or before the Closing Date, and on or before the end of each
calendar month thereafter until all of the leases relating to the Retained
Client Property and the Unused Property have expired or terminated, Wellspring
shall provide to Wyatt a reasonable estimate of the charges for the Retained
Client Property and Unused Property for which Wyatt is responsible as set forth
in Section 3.6.1. Within five Business Days after its receipt of such estimate,
Wyatt shall advance to or as directed by Wellspring an amount in cash equal to
such estimate. Such estimated payments shall be reflected on, and reduce the
amounts due under, the invoices issued pursuant to this Section 3.6.2.
Wellspring shall prepare and submit invoices to Wyatt on a monthly
basis for the actual costs of the Retained Client Property and Unused Property
for which Wyatt is responsible as set forth in Section 3.6.1. To the extent any
such invoice reflects charges in excess of the estimate and advance made in
respect of such charges, Wyatt shall pay the excess charges to Wellspring within
fifteen (15) days of receipt of the invoice. To the extent any estimated payment
exceeds the amount actually due for the month as to which the estimated payment
was made, such excess shall be applied first to reduce the estimated payment
required for the first month following the issuance of the invoice and then to
reduce subsequent estimated payments. Any estimated payments remaining
thereafter shall be refunded to Wyatt.
If Wyatt shall object to any individual charge invoiced by Wellspring,
Wyatt shall, within fifteen (15) days of receipt of the invoice containing such
charge, provide to Wellspring a written statement identifying the objectionable
charge and specifying in detail the reasons for such objection. Objection to any
particular charge shall not, however, relieve Wyatt of the obligation to remit
payment of any invoiced charges not so objected to by Wyatt. The Parties shall
make reasonable attempts to resolve such disputes. If the Parties cannot so
resolve such a dispute, such dispute shall be resolved in accordance with
Article XI.
3.6.3 Indemnity by Responsible Parties. As of the Effective
Closing Time, each of the responsible parties referred to in Section 3.6.1 (each
a "Responsible Party") shall assume and shall be solely responsible and liable
for any and all debts, obligations and liabilities (other than Taxes based on or
measured by income) arising from or relating to the property referred to in
Section 3.6.1 for which such party is responsible (the "Assigned Property") and
the transfer and assignment thereof to the Responsible Party (the "Assigned
Property Liabilities"), whether arising before or after the Effective Closing
Time, including, without limitation, any liability of Wellspring or the
Responsible Party for Taxes payable in connection with the transfer of the
Assigned Property, or any liability under the leases to which any Assigned
Property is subject. The Responsible Party shall protect, defend, indemnify and
hold harmless the other Parties from and against any Losses which may be
sustained, suffered or incurred by the other Parties and which arise under or
out of any claims, causes of action, suits or proceedings related to the
Responsible Party's respective Assigned Property and the assignment and transfer
thereof to the Responsible Party, including, without limitation, any Losses
arising under any guaranties with respect to such Assigned Property.
3.7 Other Liabilities of Wellspring. Wellspring agrees and covenants
that, except with respect to the liabilities of Wellspring otherwise allocated
among the Parties pursuant to this Agreement and the Retained Client Services
and Protection Agreement, and with respect to the liabilities set forth on
Schedule 3.7 (the "Joint Miscellaneous Liabilities"), Wellspring shall be solely
liable for the liabilities, debts and obligations of Wellspring that are unknown
to Wellspring as of the Effective Closing Time. Wyatt and Wellspring shall be
jointly liable for the Joint Miscellaneous Liabilities regardless of whether
such liabilities are fixed or contingent or liquidated or unliquidated as of the
Effective Closing Time. In exchange for Wellspring's agreement to accept sole
liability for such unallocated liabilities, debts and obligations, Wyatt shall
deliver to Wellspring on the Closing Date the sum of $100,000 in immediately
available U.S. federal funds by wire transfer in accordance with instructions
provided by Wellspring.
Article IV
Pension Payroll Services
4.1 Pension Payroll Services. From and after the Effective Closing
Time, State Street will continue to provide pension payroll services in support
of Westinghouse, Rockwell, Boeing and Meritor on the same terms and conditions
provided to Wellspring pursuant to the letter agreement attached hereto as
Schedule 4.1. Wyatt covenants that it shall pay the charges for such services
directly to State Street as and when due.
Article V
Conditions Precedent to Closing; Deliveries
5.1 Conditions Precedent to Obligations of State Street and Wellspring.
The obligations of State Street and Wellspring to consummate the Contemplated
Transactions are subject to the satisfaction by Wyatt prior to or at the Closing
of each of the conditions listed in this Section 5.1 (any or all of which may be
waived by State Street) and none of the Contemplated Transactions shall occur
unless all such transactions occur.
5.1.1 Conditions Relating to the Contemplated Transactions.
(A) Amended and Restated Software License and Services
Agreement. Wyatt shall have executed and delivered the Amended and Restated
Software License and Services Agreement, in the form attached hereto as Exhibit
E.
(B) Source Codes. Wyatt shall have delivered to Wellspring the
source codes for each of HR Edge(R) Choice Software and HR Edge(R) Pensions
Software.
(C) Retained Client Services and Protection Agreement. Wyatt
shall have executed and delivered the Retained Client Services and Protection
Agreement, in the form attached hereto as Exhibit C, and shall have made the
Closing Date payments required thereunder.
(D) Payment to Wellspring. Wyatt shall have delivered to
Wellspring the sum of $100,000 in cash, in the manner provided for in Section
3.7 of this Agreement.
(E) Regulatory Approvals. State Street shall have
received all necessary regulatory approvals to consummate the Contemplated
Transactions.
5.1.2 General Conditions.
(A) Performance; Representations and Warranties; and Officer's
Certificate. (i) Wyatt shall have performed, or caused to be performed, in all
material respects, all of its obligations under the Transaction Documents
required to be performed by it on or prior to the Effective Closing Time; (ii)
the representations and warranties of Wyatt contained in the Transaction
Documents shall be true and accurate in all material respects at and as of the
Closing Date; and (iii) Wyatt shall have delivered to State Street and
Wellspring a certificate signed by an officer of Wyatt to the foregoing effect.
(B) No Restrictions. No injunction or order of any court or
administrative agency will be in effect, and no statute, rule or regulation of
any Governmental Authority shall exist, that restricts, prohibits or prevents
the consummation of the Contemplated Transactions.
(C) Resignation of Wyatt Designated Managers.
John J. Haley, Paul V. Mee, and A.W. Smith, Jr., and any other Person
selected by Wyatt as a Manager of Wellspring who has not previously resigned,
shall have resigned as Managers of Wellspring in accordance with the terms of
the LLC Agreement.
(D) Further Instruments. Wyatt shall have delivered such
instruments of conveyance or transfer or other documents of further assurance
with respect to the Contemplated Transactions as State Street may reasonably
request.
(E) Settlement. State Street and Wellspring shall have
received any net amounts payable to them as a result of the preliminary balance
sheet adjustment required by Section 9.8.1 hereof.
(F) Consent. Wyatt shall have executed and delivered a consent
in the form attached hereto as Exhibit B.
5.2 Conditions Precedent to Obligations of Wyatt. The obligation of
Wyatt to consummate the Contemplated Transactions is subject to the satisfaction
by State Street and/or Wellspring, as the case may be, prior to or at the
Closing of each of the conditions listed in this Section 5.2 (any or all of
which may be waived by Wyatt) and none of the Contemplated Transactions shall
occur unless all such transactions occur.
5.2.1 Conditions Relating to the Contemplated Transactions.
(A) Amended and Restated Software License and Services
Agreement. Wellspring shall have executed and delivered the Amended and Restated
Software License and Services Agreement, in the form attached hereto as Exhibit
E.
(B) Retained Client Services and Protection Agreement.
Wellspring shall have executed and delivered the Retained Client Services and
Protection Agreement, in the form attached hereto as Exhibit C.
(C) State Street Guaranty. State Street shall have
executed and delivered the State Street Guaranty in the form attached hereto
as Exhibit A.
(D) Wellspring shall have executed and delivered a bill of
sale for the Wyatt Assigned Property in the form attached hereto as Exhibit D.
(E) Wyatt shall be reasonably satisfied that the transfer of a
Membership Interest in Wellspring from State Street to Retirement Services has
been completed.
5.2.2 General Conditions.
(A) Performance; Representations and Warranties; and Officer's
Certificate. (i) State Street and Wellspring shall have performed, or caused to
be performed, in all material respects, all of their respective obligations
under the Transaction Documents required to be performed by them on or prior to
the Closing Date; (ii) the representations and warranties of State Street and
Wellspring contained in the Transaction Documents shall be true and accurate in
all material respects at and as of the Closing Date; and (iii) State Street and
Wellspring shall have delivered to Wyatt a certificate signed by an officer of
each of State Street and Wellspring, respectively, to the foregoing effect.
(B) No Restrictions. No injunction or order of any court or
administrative agency will be in effect, and no statute, rule or regulation of
any Governmental Authority shall exist, that restricts, prohibits or prevents
the consummation of the Contemplated Transactions.
(C) Further Instruments. Wellspring shall have delivered such
instruments of conveyance or transfer or other documents of further assurance
with respect to the Contemplated Transactions as Wyatt may reasonably request.
(D) Settlement. Wyatt shall have received any net amount
payable to it as a result of the preliminary balance sheet adjustment required
by Section 9.8.1 hereof.
Article VI
Representations and Warranties
6.1 Existence and Power. Each of the Parties is duly organized, validly
existing and in good standing under the laws of the state of its organization
and has all power and authority and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals would not, individually or in the aggregate, have a material adverse
effect on that party or adversely affect its ability to consummate the
Contemplated Transactions in accordance with the Transaction Documents. Each
party is duly qualified to do business in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on that party
or adversely affect its ability to consummate the Contemplated Transactions in
accordance with the Transaction Documents.
6.2 Authorization; Enforceability. The execution, delivery and
performance by each party of each of the Transaction Documents to which it is or
will be a party and the consummation by such party of the Contemplated
Transactions are within its powers and have been duly authorized by all
necessary action on its part. Each of the Transaction Documents to which it is
or will be a party constitutes a legal, valid and binding agreement of such
party enforceable against such party in accordance with its terms, (a) except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, and (b) subject to the limitations imposed by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
6.3 Governmental Authorization. The execution, delivery and
performance by each party of the Transaction Documents to which it is a
party require no action by or in respect of, or consent or approval of, or
filing with, any Governmental Authority other than:
(A) any actions, consents, approvals or filings otherwise
expressly referred to in the Transaction Documents, including the approval of
the Massachusetts Banking Commissioner requested by State Street;
(B) where the failure to take any such actions, obtain any
such consents or approvals or make any such filing would not, individually or in
the aggregate, have a material adverse effect on that party or adversely affect
its ability to consummate the Contemplated Transactions in accordance with the
Transaction Documents.
6.4 Non-Contravention. The execution, delivery and performance by each
party of the Transactions Documents to which it is or will be a party and its
completion of the Contemplated Transactions do not and will not: (a) contravene
or conflict with such party's organizational documents; (b) assuming compliance
with the matters referred to in Section 6.3 of this Agreement, contravene or
conflict with or constitute a violation of any provision of any Law; or (c)
assuming compliance with the matters referred to in Section 6.3 of this
Agreement, constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such party, or to a
loss of any benefit to which such party is entitled under, any agreement,
contract or instrument binding upon such party or by which any of its properties
or assets is or may be bound or any license, franchise, permit or similar
authorization held by such party except, in the case of clauses (b) and (c), for
any such contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that would not, individually or in the aggregate, have a
material adverse effect on such party or adversely affect its ability to
consummate the Contemplated Transactions in accordance with the Transaction
Documents.
6.5 Wyatt's Membership Interest. Wyatt owns beneficially its Membership
Interest free and clear of any restrictions on redemption, or transfer, Taxes,
Liens, options, warrants, purchase rights, contracts, commitments, equities,
claims and demands, except as provided in the LLC Agreement. Other than this
Agreement and the LLC Agreement, Wyatt is not a party to any option, warrant,
purchase right or other contract or commitment that could require Wyatt to sell,
transfer or otherwise dispose of its Membership Interest in Wellspring, in whole
or in part.
6.6 Investment Representation. State Street is acquiring
Wyatt's Membership Interest in Wellspring solely for investment purposes and
not with a view for distribution or resale thereof.
6.7 Wyatt Selected Managers. Wyatt represents and warrants
that John J. Haley, Paul V. Mee, and A.W. Smith, Jr. are the only current
Managers of Wellspring who were selected by Wyatt.
Article VII
Certain Covenants of Wyatt
7.1 Retained Client Services and Protection Agreement. Wyatt shall
provide to Wellspring certain services in accordance with the Retained Client
Services and Protection Agreement, the form of which is attached hereto as
Exhibit C.
7.2 Payments Pursuant to Retained Client Services Agreement.
Wyatt shall pay all amounts payable pursuant to the Retained Client Services
Agreement, as and when due.
7.3 Assigned Property Liabilities. Wyatt shall pay its Assigned
Property Liabilities, as and when due.
7.4 Joint Terminated Employee Liabilities. Wyatt shall pay
one-half of the Joint Terminated Employee Liabilities, as and when due.
7.5 Joint Miscellaneous Liabilities. Wyatt shall pay
one-half of the Joint Miscellaneous Liabilities, as and when due.
7.6 Payment of Performance Bonuses. Wyatt shall deliver to Wellspring,
as part of the advance by Wyatt required for the month of October, 1998, under
Section 5.4 of the Retained Client Services and Protection Agreement for
expenses to be incurred by Wellspring during the month of October, 1998, readily
available funds in an amount equal to fifty percent (50%) of seventy-five (75%)
of the total amount of the performance bonuses to be paid in October, 1998 to
the then employees of Wellspring (other than the Retained Client Employees) who
were employees of Wellspring as of the Effective Closing Time.
7.7 Payment of Retention Bonuses. Wyatt shall deliver to Wellspring, as
part of the advance by Wyatt required for the month of April, 1999, under
Section 5.4 of the Retained Client Services and Protection Agreement for
expenses to be incurred by Wellspring during the month of April, 1999, readily
available funds in an amount equal to fifty percent (50%) of 66 and 2/3 percent
(66.667%) of the total amount of the retention bonuses to be paid in April, 1999
to the then employees of Wellspring (other than the Retained Client Employees)
who were employees of Wellspring as of the Effective Closing Time.
7.8 RIC. At Wellspring's request, Wyatt shall continue to provide to
Wellspring RIC services after the Effective Closing Time on market terms and
conditions.
7.9 License of HR Online Software. Wyatt hereby grants to Wellspring a
perpetual, irrevocable, royalty-free, fully paid-up, worldwide, non-exclusive
license to use, execute, reproduce, modify, display, perform, sublicense and
prepare derivative works based upon the Wyatt proprietary Software known as HR
Online and all materials previously delivered to Wellspring using such Software.
Wyatt shall no have obligation to support or maintain such Software.
Article VIII
Certain Covenants of Wellspring and State Street
8.1 Post-Closing Services. Wellspring shall provide to Wyatt
certain services pursuant to the Retained Client Services and Protection
Agreement, the form of which is attached hereto as Exhibit D.
8.2 Joint Terminated Employee Liabilities. Wellspring shall
pay one-half of the Joint Terminated Employee Liabilities, as and when due.
8.3 Assigned Property Liabilities. Wellspring shall pay its
Assigned Property Liabilities, as and when due.
8.4 Joint Miscellaneous Liabilities. Wellspring shall pay
one-half of the Joint Miscellaneous
Liabilities, as and when due.
8.5 Existence of Wellspring. State Street and Wellspring shall cause
Wellspring to continue its legal existence at least until April 1, 2001.
Wellspring shall not distribute the NextGen Assets to a Member of Wellspring at
any time before April 1, 2001.
8.6 Tax Election. Prior to April 1, 2001, Wellspring will
not elect to be taxed as a corporation pursuant to Treas. Reg. ss.1.7701-3(c)
or successor law or regulation.
8.7 Members. State Street covenants that from the Effective Closing
Time until April 1, 2001, Wellspring at all times shall have at least two
Members.
8.8 Certain Contracts. Wellspring shall not amend or modify the
Allegheny Contract or the FedEx Contract, or enter into new contracts with
Allegheny or FedEx, that modifies the Parties' respective obligations to
Allegheny or FedEx with respect to periods prior to the Effective Closing Time
without the prior written consent of State Street and Wyatt, which consents
shall not be unreasonably withheld or delayed.
8.9 License of Request Software. Wellspring hereby grants
to Wyatt a perpetual, irrevocable, royalty-free, fully paid-up, worldwide,
non-exclusive license to use, execute, reproduce, modify, display, perform,
sublicense and prepare derivative works based upon the Wellspring Software known
as Request. Wellspring shall have no obligation to support or maintain such
Software.
Article IX
Mutual Covenants
9.1 Litigation; Other Proceedings. After the Effective Closing Time, a
party so requested (the "Requested Party"), will give, or cause to be given, to
a party requesting such access (the "Requesting Party"), their Affiliates and
representatives, during normal business hours at the premises of the Requested
Party, and at the Requesting Party's expense, such reasonable access to
personnel, properties, contracts, books, records, files and documents of the
Requested Party with respect to the Contemplated Transactions, as the case may
be, and copies (at the expense of the Requesting Party) of contracts, books,
records, files and documents as are necessary to allow the Requesting Party to
obtain information in connection with the preparation of any audit of the tax
returns of the Requesting Party and their Affiliates, and any claims, demands,
other audits, suits, actions or proceedings by or against the Requesting Party
or any of their Affiliates or for which the Requesting Party must indemnify the
Requested Party pursuant to Section 11.2.
9.2 Confidentiality. This Agreement contemplates that the Parties may
make available to one another information relating to technical information,
Intangible Property Rights, Intellectual Property, Trade Secrets and other
similar confidential information (collectively, "Confidential Information").
Each of the Parties agrees to receive and maintain all Confidential Information
in confidence and to disclose Confidential Information only to those employees,
agents and representatives to whom it is necessary to make such disclosure in
connection with that Party's involvement with such businesses. Disclosure of
Confidential Information to such employees, agents and representatives shall be
on a confidential basis. Each of the Parties further agrees that any
Confidential Information received from one of the other parties hereto shall (a)
be used, duplicated and/or disclosed by it solely for purposes of activities
related to such businesses, (b) not be used, duplicated and/or disclosed for any
other purpose whatsoever, and (c) not be reproduced or copied, in whole or in
part, unless the reproduction or copy is prominently marked as "Confidential."
Notwithstanding the foregoing, none of the parties hereto shall be liable for
the use, duplication or disclosure of any part of the Confidential Information
to the extent the Confidential Information (x) now or hereafter comes into the
public domain without breach of this Agreement, (y) is demonstrated by the party
in question to be previously known to or developed by such party prior to the
disclosure of said Confidential Information, or (z) is demonstrated by the party
in question to have been received from a third party not subject to similar
restrictions and without breach of this Agreement. Each of the parties shall use
at least the same degree and standard of care to protect the Confidential
Information as it uses to preserve, protect and safeguard its own proprietary
information from unauthorized use, duplication, or disclosure.
9.3 Expenses. Except as otherwise specifically provided herein, each of
the Parties to this Agreement shall bear all expenses incurred by it in
connection with the negotiation of this Agreement and in the consummation of the
transactions provided for herein and the preparation therefor.
9.4 Performance Under Transaction Documents. Each party shall
duly perform and observe all of the covenants, agreements, and conditions on
its part to be performed and observed under this Agreement and the other
Transaction Documents.
9.5 Post-Closing Securities Exchange Act Filings. Wyatt and State
Street shall cooperate fully with each other for the purpose of preparing and
filing each party's post-closing Securities Exchange Act filing (to the extent
that the respective parties deem such filing necessary) with the Securities and
Exchange Commission, pursuant to Section 13 of the Securities Exchange Act of
1934, as amended.
9.6 No Injunctions. None of the Parties hereto shall seek an
injunction that would restrict, prohibit or prevent the consummation of the
Contemplated Transactions.
9.7 Further Assurances. From and after the Effective Closing Time, the
Parties hereto agree to execute and deliver such further documents and
instruments and to do such other acts and things as the parties hereto may
reasonably request in order to effectuate the Contemplated Transactions.
9.8 Preliminary and Final Balance Sheets and Adjustments.
9.8.1 Preliminary Balance Sheet; Payments on Closing Date.
Prior to the date hereof, Wellspring prepared and provided to Wyatt a
preliminary balance sheet of Wellspring as of the Effective Closing Time (the
"Preliminary Balance Sheet"). Such Preliminary Balance Sheet is attached as
Schedule 9.8A. On the Closing Date an amount equal to 50% of Wellspring's net
current assets as reflected on the Preliminary Balance Sheet shall be paid to
each of State Street and Wyatt, provided that amounts due to and from
Wellspring, on the one hand, and State Street and Wyatt, on the other hand, as
reflected on the Preliminary Balance Sheet, shall be adjustments to the amounts
that would otherwise be payable to State Street and Wyatt as outlined on
Schedule 9.8B. To the extent that there is a net amount due to Wellspring from
either State Street or Wyatt following such adjustments, such net amount shall
be paid to Wellspring on the Closing Date.
9.8.2 Final Balance Sheet; Adjustments. On or before December
31, 1998 Wyatt and State Street shall agree on a final balance sheet of
Wellspring as of March 31, 1998, which shall be prepared in a manner consistent
with the Preliminary Balance Sheet and take into account the formula reflected
in Schedule 9.8B and adjustments made to the Preliminary Balance Sheet and the
cash payments made on the Closing Date in accordance with such formula (the
"Final Balance Sheet"). The Parties covenant that the adjustments outlined in
Schedule 9.8B shall be reflected in the Final Balance Sheet. The Final Balance
Sheet shall not reflect matters listed on Schedule 3.7.
9.8.3 Disputes. The Parties shall use good faith efforts to
agree on the Final Balance Sheet, the adjustments referred to above, and the
payments due to and from Wellspring, on the one hand, and Wyatt and State
Street, on the other hand, on or before December 31, 1998. In the absence of
complete agreement as to such matters on December 31, 1998, the Parties covenant
that payments resulting from non-disputed matters shall be made as of such date
and disputed matters shall be resolved as provided in Article XI.
Article X
Survival; Certain Indemnification Obligations; Procedure and Limitations
10.1 Survival of Representations and Warranties. The representations
and warranties of the Parties in this Agreement or in any certificate or
document delivered on or before the Closing Date shall remain effective for a
period of two years after the Effective Closing Time. After the expiration of
such period, such representations and warranties shall expire and be of no
further force and effect unless a claim or claims shall have been asserted by
Wyatt, Wellspring or State Street, as the case may be, with respect thereto on
or before the expiration of such period.
10.2 Certain Indemnification Obligations; Joint Liabilities;
Notice of Breach.
10.2.1 By Wyatt to State Street and Wellspring. In addition to
any other obligation of Wyatt to indemnify the State Street/Wellspring
Indemnitees under this Agreement or under the other Transaction Documents, and
subject to Section 10.2.4, Wyatt shall protect, defend, indemnify and hold
harmless State Street and Wellspring, and their respective Affiliates, officers,
directors, managers, employees, agents, representatives, successors and assigns
(the "State Street/Wellspring Indemnitees") from and against any Losses which
may be sustained, suffered or incurred by the State Street/Wellspring
Indemnitees and which are related to (a) any breach by Wyatt of its
representations and warranties in this Agreement; or (b) any breach by Wyatt of
its covenants in this Agreement, including, without limitation of any kind, the
covenants of Wyatt set forth in Article III and Article VII of this Agreement.
10.2.2 By Wellspring to Wyatt. In addition to any other
obligation of Wellspring to indemnify the Wyatt Indemnitees under this Agreement
or under the other Transaction Documents, and subject to Section 10.2.4,
Wellspring shall protect, defend, indemnify and hold harmless the Wyatt
Indemnitees from and from and against any Losses which may be sustained,
suffered or incurred by the Wyatt Indemnitees and which are related to (a) any
breach by State Street or Wellspring of their respective representations and
warranties in this Agreement; or (b) any breach by State Street or Wellspring of
their respective covenants in this Agreement.
10.2.3 Procedure - Indemnification. If any action, suit or
proceeding shall be commenced, or any claim or demand shall be asserted, the
payment of which would constitute a Loss, in respect of which one party (the
"Indemnitee") proposes to demand indemnification under Section 10.2.1 or Section
10.2.2, or any other term or provision of this Agreement or the other
Transaction Documents, the party from which indemnification is sought (the
"Indemnitor") shall be notified in writing to that effect with reasonable
promptness and shall have the right to assume entire control of the defense,
compromise or settlement thereof (including the selection of counsel), subject
to the right of the Indemnitee to participate with counsel of its choice, but
the fees and expenses of such additional counsel shall be at the expense of the
Indemnitee (subject to Section 6.2 of the Retained Client Services and
Protection Agreement, to the extent applicable). The Indemnitee shall reasonably
cooperate with the Indemnitor in any such defense, compromise or settlement,
including without limitation of any kind, by making available all pertinent
information and personnel under its control to the Indemnitor. The Indemnitor
will not compromise or settle any such action, suit, proceeding, claim or demand
(other than, after consultation with the Indemnitee, an action, suit,
proceeding, claim or demand to be settled by the payment of money damages and/or
the granting of releases) without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld or delayed.
This Section 10.2.3 shall not apply to direct claims hereunder of the
State Street/Wellspring Indemnitees or the Wyatt Indemnitees against Wyatt or
State Street and Wellspring, as the case may be, that are not based upon claims
asserted by third parties; such direct claims shall be resolved as provided in
Article XI.
10.2.4 Limitation on Rights of Indemnitees. The rights of the
State Street/Wellspring Indemnitees or the Wyatt Indemnitees, as appropriate, to
indemnification under this Agreement shall be subject to the limitation that a
particular Indemnitor shall have no liability to such Indemnitees, respectively,
until such time, if any, as the aggregate amount of all claims of such
Indemnitees, respectively, against such Indemnitor exceeds the sum of $25,000,
in which event such Indemnitees shall be entitled to indemnification for all
claims for indemnity against such Indemnitor.
10.3 Joint Obligations.
10.3.1 Definitions. The following terms used in this Section
10.3 shall have the following meanings (unless otherwise expressly provided
herein):
10.3.1.1 "Joint Obligations" means the Joint Obligations of Wyatt, on
the one hand, and Wellspring or State Street, on the other hand, under this
Agreement, the Retained Client Services and Protection Agreement, and the State
Street Guaranty Agreement, including, without limitation, Sections 3.1.2
(Federal Express and Allegheny), 3.3.3 (Joint Terminated Employee Liabilities),
and 3.7 (Joint Miscellaneous Liabilities) of this Agreement, liabilities of
Wyatt under the FedEx Guaranty and of State Street under the State Street FedEx
Guaranty, and liabilities arising out of the Real Property Guarantees and the
Personal Property Guarantees.
10.3.1.2 "Joint Obligated Party" means the Parties
who are jointly obligated for a
Joint Obligation. To the extent that both Wellspring and State Street are
obligated in respect of a Joint Obligation as a result of this Agreement, the
Retained Client Services and Protection Agreement, and the State Street Guaranty
Agreement, they shall be treated as a single Joint Obligated Party for purposes
of the definition of Joint Obligated Party.
10.3.2 Allocation of Responsibility for Joint Obligation. Each of
the Joint Obligated Parties shall be responsible for 50% of each of the Joint
Obligations.
10.3.3 Cooperation in Respect of Joint Obligations. The
Joint Obligated Parties will cooperate with one another, and use all
commercially reasonable efforts, to minimize their joint obligations in respect
of each of the Joint Obligations. Without limiting the generality of the
foregoing, the Joint Obligated Parties will cooperate in the development of
plans for the subleasing, sale or other appropriate distribution of the
Wellspring Property, subject to the Real Property Guarantees and the Personal
Property Guarantees.
10.3.4 Coordination of Payments in Respect of Joint
Obligations. Except as set forth in Section 10.3.6, to the extent that a payment
or other obligation is due in respect of a Joint Obligation, each Joint
Obligated Party shall be responsible for 50% of such payment or obligation, and
the Joint Obligated Parties shall coordinate their making of such payment, or
satisfaction of such obligation, as the case may be, in a manner such that any
adverse impact on the Joint Obligated Parties of any Joint Obligation is shared
equally.
10.3.5 Protection. Each Joint Obligated Party (the
"Protecting Party") shall protect, defend and hold harmless the other Joint
Obligated Party and its Affiliates, officers, directors, members, managers,
employees, agents, representatives, successors and assigns (the "Protected
Parties") from and against any Losses which may be sustained, suffered, or
incurred by the Protected Parties as result of any (a) breach by the Protecting
Party of its obligations under this Section 10.3 or (b) bearing more than 50% of
any Joint Obligation.
10.3.6 Procedure - Joint Liabilities. In the event a third
party commences an action, suit, proceeding or alternative dispute resolution
procedure (a "proceeding") in respect of a Joint Obligation, then regardless of
whether State Street, Wyatt and/or Wellspring are named as parties to such
proceeding, the Parties shall agree (including, without limitation, entry into
mutually acceptable joint defense agreements as appropriate) with respect to the
investigation, defense, compromise and settlement of such proceeding, including
the Party that will be primarily responsible for the investigation and defense
of such proceeding and selection of counsel. The Parties shall cooperate fully
in all respects in any such defense, compromise or settlement, including,
without limitation, by making available all pertinent information and personnel
under their control. Subject to the rights of the rights of the Parties under
this Section 10.3.6, no Party will compromise or settle any such proceeding
without the prior written consent of the other Parties, which consent shall not
be unreasonably withheld, conditioned or delayed.
In the event of a dispute between the Parties as to whether an
obligation is an obligation for which Wellspring and Wyatt are jointly liable
under this Agreement, the Parties shall negotiate in good faith as to their
joint and respective obligations in relation to such Joint Obligation. In the
event that the Parties are unable to reach agreement on such matter, such
dispute shall be subject to the dispute resolution provisions of Article XI of
this Agreement.
In the event of a dispute between the Parties, if any Party believes in
good faith that, in order to minimize the Parties' joint or respective
obligation to a third party in respect of an actual or alleged obligation for
which Wellspring and Wyatt are jointly liable, action is required to be taken
prior to resolution of any such dispute, such Party may, at its election,
satisfy the obligation to the third party in whole or in part on behalf of the
Parties. To the extent that, as a result of such action, either Wellspring or
Wyatt bears in excess of 50% of an obligation for which they are jointly liable
under this Agreement (taking into account for this purpose considerations such
as the reasonable time value of funds), such Party shall be entitled to be
protection from liability by the other Party to the extent of such excess.
In the event that a Joint Obligated Party refuses to consent to the
compromise or settlement of a Joint Obligation by payment of a fixed sum of
money damages (a "Proposed Settlement Amount") proposed by the other Joint
Obligated Party, and the actual aggregate liability of the Joint Obligated
Parties (the "Actual Liability Amount") on account of such Joint Obligation
(including attorneys' fees and expenses and assessed interest and penalties, if
any) exceeds the Proposed Settlement Amount, the Joint Obligor who refused to
consent to payment of the Proposed Settlement Amount shall be solely liable for
the difference between the Actual Liability Amount and the Proposed Settlement
Amount and shall protect the other Joint Obligor against liability for such
difference.
This Section 10.3.6 shall not apply to direct claims hereunder of
Wellspring against Wyatt or Wyatt against Wellspring, as the case may be, that
are not based upon claims asserted by third parties; such direct claims shall be
resolved as provided in Article XI.
Article XI
Dispute Resolution
11.1 Dispute Resolution and Arbitration. In the event that any dispute
arises between the Parties to this Agreement pertaining to the subject matter
herein, or to the other Transaction Documents, and the Parties are unable to
resolve such dispute within a reasonable time through negotiations, such dispute
shall be resolved as set forth in this Section 11.1.
11.1.1 The procedures of this Section 11.1.1 may be
initiated by a written notice ("Dispute Notice") given by one party ("Claimant")
to the other. The Dispute Notice shall be accompanied by (a) a statement of the
Claimant describing the dispute in reasonable detail and (b) documentation
supporting the Claimant's position on the dispute. Within twenty days after the
other party's ("Respondent") receipt of the notice and accompanying materials, a
member of senior management representing each of the Parties, each with full
authority to settle the dispute, shall meet (the "Management Meeting") in a
mutually agreeable location to resolve the dispute. If the Parties cannot agree
on a time or location for the Management Meeting, (x) the meeting shall be held
at 10:00 a.m., local time, on the twentieth day after the Respondent's receipt
of the Dispute Notice, (y) the location of such meeting shall be in a hotel
suite identified and paid for by the Claimant, and (z) the location in which the
meetings shall take place shall alternate between Boston, Massachusetts and
Washington, D.C. If the representative of either party intends to be accompanied
at the Management Meeting by an attorney, the other party shall be given at
least four days' notice of such intention and may also be accompanied by an
attorney. All negotiations pursuant to this Section 11.1.1 shall be confidential
and treated as compromise and settlement negotiations and shall not be
admissible in any arbitration or other proceeding.
11.1.2 If the dispute is not resolved as provided in Section
11.1.1 on the date of the Management Meeting, the dispute shall be resolved by
binding arbitration. The representatives of each of the parties attending the
Management Meeting shall bring to the meeting a list of three arbitrators
acceptable to the party and provide the other party with such list if the
dispute is not resolved at the conclusion of the Management Meeting. Such list
shall include the names, addresses and summaries of the business backgrounds of
each of the three arbitrators. Within seven days after the date of the
Management Meeting, the parties shall agree on a single arbitrator to resolve
the dispute, which arbitrator may, but need not be, identified on the list of
acceptable arbitrators delivered at the conclusion of the Management Meeting. If
the parties fail to agree on the designation of an arbitrator within seven days
after the date of the management Meeting, the Center for Public Resources
("CPR") shall designate the single arbitrator in accordance with Rule 6 of the
CPR Rules for Non-Administered Arbitration of Business Disputes (Amended 1993)
(the "CPR Rules"). If the arbitrator becomes disabled, resigns or is otherwise
unable to discharge the arbitrator's duties, the arbitrator's successor shall be
appointed in the same manner as the arbitrator was appointed.
11.1.3 Except as otherwise provided in this Section 11.1,
the arbitration shall be conducted in accordance with the CPR Rules, provided
that:
(A) the arbitration shall be deemed to have commenced in
accordance with Rule 3 of the CPR Rules at the conclusion of the Management
Meeting and the Dispute Notice shall constitute the notice of arbitration and
shall be deemed to have been delivered on the date of the Management Meeting;
(B) the location of the arbitration hearings shall be
determined by the arbitrator; (C) the arbitrator shall not have the authority
to award punitive or trebled damages, equitable relief, or attorneys' fees or
to reform the Agreement; and
(D) the Claimant and the Respondent shall share equally all
costs (other than costs incurred by the parties themselves) related to the
arbitration, including the reasonable fees and expenses of the arbitrator.
11.1.4 Any determination of the arbitrator shall be binding
and conclusive upon the parties. Application may be made by either party to any
court having jurisdiction thereof for judicial confirmation of any determination
by the arbitrator and for an order of enforcement of any such decision.
Article XII
Miscellaneous
12.1 Public Announcements. Neither Wyatt, Wellspring nor State Street
shall, nor shall any of them cause any other Person to, make any public
announcement or filing with respect to the Contemplated Transactions without
providing to the other a copy of such public announcement or filing at least
twenty-four (24) hours prior to the announcement or filing. Except as may be
required by law, applicable regulations or stock exchange rules, neither Wyatt,
Wellspring nor state Street shall, nor shall any of them cause any other Person
to, make any public announcement or filing with respect to the Contemplated
Transactions without the prior consent of the other.
12.2 Successors and Assigns; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of Wyatt, Wellspring and State
Street, and each of their respective successors and assigns. No other person
shall have any right or obligation hereunder. This Agreement shall not be
assigned by any party without the prior written consent of the other parties,
provided that State Street and Wellspring may assign their respective rights
hereunder to each other or to their respective Affiliates.
12.3 Limitation on Rights of Others. Nothing in this Agreement, whether
expressed or implied, shall be construed to give any Person (other than the
parties hereto and their respective permitted successors and assigns), any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
covenants, conditions or provisions contained herein, as a third party
beneficiary or otherwise.
12.4 No Other Duties. The only duties and obligations of the parties
are as specifically set forth in this Agreement and the other Transaction
Documents, and no other duties or obligations shall be implied in fact, law or
equity, or under any principle of fiduciary obligation.
12.5 Amendment and Waiver. This Agreement may not be amended, and no
provision of this Agreement may be waived, unless such amendment or waiver is
set forth in a writing and signed, in the case of an amendment, by the Parties
hereto, or in the case of a waiver, by the party against whom such waiver is to
be effective. The waiver by any of the Parties of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any other
breach.
12.6 Rights and Remedies Cumulative. The rights and remedies provided
by this Agreement, including the rights and remedies set forth in Article X of
this Agreement, are cumulative, and the sue of any one right or remedy by any
Party shall not preclude or waive the right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the Parties
may have by law, statute, ordinance, or otherwise.
12.7 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the Parties to the extent possible.
In any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
12.8 Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the possible application of any governing principles of conflict
of laws.
12.9 Notices. All necessary notices, demands and requests required or
permitted to be given hereunder shall be in writing, and, subject to the
subsequent designation of another address, addressed as follows:
If to Wyatt: Watson Wyatt & Company
6707 Democracy Boulevard
Bethesda, Maryland 20817-1129
Attention: Office of the General Counsel
Facsimile: (301) 581-4935
With a copy to: Crowell & Moring LLP
101 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2595
Attention: James J. Maiwurm
Facsimile: (202) 628-5116
If to State Street State Street Global Advisors
or Wellspring: Batterymarch Park III
Three Pine Hill Drive
Quincy, MA 02169
Attention: James S. Phalen
Facsimile: (617) 376-4933
With a copy to: Choate, Hall & Stewart
Exchange Place, 53 State Street
Boston, Massachusetts 02110
Attention: Charles L. Glerum, P.C.
Facsimile: (617) 248-4000
Notices shall be deemed effective if properly addressed as follows:
12.9.1 if given by mail, three Business Days after
deposit in the mails with first class postage prepaid, addressed as
aforesaid;
12.9.2 if given by overnight courier service, on the Business
Day following delivery of the notice to a recognized courier service before the
deadline for delivery on the following business day, delivery costs prepaid,
addressed as aforesaid;
12.9.3 if given by facsimile transmission, on the date of
delivery if delivered during normal business hours, and otherwise on the next
Business Day, provided that the facsimile transmission is confirmed on the date
of transmission by sending a copy of the notice to the addresses by mail or
courier service as provided in clause (a) or (b); or
12.9.4 if given by hand delivery, addressed as aforesaid, on
the date of delivery if so delivered during normal business hours on a Business
Day, otherwise on the next Business Day following the date of delivery.
12.10 Waiver of Bulk Sales Laws. The parties hereby expressly
waive compliance with any applicable bulk sale provisions of the Uniform
Commercial Code, as amended.
12.11 Further Assurances. At any time and from time to time after the
Effective Closing Time, Wyatt, Wellspring and State Street will, upon request,
perform, execute, acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as many
be reasonably required by the other to erect or evidence the Contemplated
Transactions.
12.12 Facsimiles. For purposes of this Agreement, any copy, facsimile
telecommunication or other reliable reproduction of writing, transmission or
signature may be substituted or used in lieu of the original writing,
transmission or signature could be used; provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing, transmission or signature, as the case may be.
12.13 Entire Agreement. This Agreement, the Annexes, Exhibits and
Disclosure Schedules, together with the other Transaction Documents and
Ancillary Agreements, contain all of the terms agreed upon by the parties with
respect to the subject matter hereof and, except as otherwise provided in this
Agreement and the Exhibits and Schedules hereto, together with the other
Transaction Documents and Ancillary Agreements, supersede all prior agreements,
representations and warranties of the Parties, including, without limitation of
any kind, the Master Transaction Agreement and the LLC Agreement.
12.14 Membership Interest. The Parties hereto agree that State Street's
Membership Interest in Wellspring shall be freely transferable after the Closing
Date, subject to the covenants of State Street set forth in Sections 8.5 and 8.7
hereof, and provided that such covenants shall be expressly assumed by any
transferee.
12.15 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
under seal as of the date first above written.
STATE STREET BANK AND TRUST
COMPANY
By: /s/ James S. Phalen
Name: James S. Phalen
Title: Senior Vice President and
Managing Director
WELLSPRING RESOURCES, LLC
By: /s/ Jonathan J. Palmer
Name: Jonathan J. Palmer
Title: President and Chief Executive
Officer
WATSON WYATT & COMPANY
By: /s/ John J. Haley
Name: John J. Haley
Title: Vice President
