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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PRIMARK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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PRELIMINARY COPY -- SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1998
February , 1998
PRIMARK LOGO
SALE OF SUBSIDIARIES -- YOUR VOTE IS VERY IMPORTANT
Dear Shareholders:
We have agreed to sell most of our "applied technology" business to Litton
Industries, Inc., if our shareholders approve the sale. Our applied technology
business provides a broad spectrum of information technology services and
products:
- primarily to United States government agencies involved in national
security and intelligence related activities, and
- to customers of real-time and historical weather information.
In exchange for this business, Litton has agreed to pay us a total of $432
million, subject to certain adjustments. We believe this is a fair and
attractive price.
After this sale, we can sharpen our focus on financial, economic and market
research information. We currently provide such information through a number of
well-known companies, including:
- Baseline Financial Services
- Datastream International
- Disclosure
- I/B/E/S International
- ICV Limited
- Vestek Systems
- WEFA
- Yankee Group Research
To achieve this concentration in our strategic focus, we would sell to
Litton all of the stock of our indirect subsidiaries TASC, Inc. and The Analytic
Sciences Corporation Limited. This sale would take place under a stock purchase
agreement dated as of December 8, 1997. The full text of the stock purchase
agreement is included at the back of this document as Annex A.
As an essential part of the proposed sale, TASC will enter into an
agreement to continue to provide us with information technology services.
The sale will not be completed unless it is approved by holders of a
majority of our outstanding shares of common stock. We have scheduled a special
meeting of our shareholders for this vote. YOUR VOTE IS VERY IMPORTANT.
Under voting agreements with Litton, certain executive officers of the
Company are required to vote for the proposed sale. These executive officers own
approximately 5.13% of our common stock entitled to vote at the special meeting.
PRIMARK'S BOARD OF DIRECTORS UNANIMOUSLY DETERMINED THAT THE SALE IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. THE BOARD UNANIMOUSLY
APPROVED THE SALE AND THE STOCK PURCHASE AGREEMENT, AND RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSED SALE.
Whether or not you plan to attend the meeting, please take the time to vote
by completing the enclosed proxy card and mailing it to us. A postage paid
envelope is provided for your convenience. If you sign, date and mail your proxy
card without indicating how you want to vote, your proxy will be counted as a
vote in favor of the proposed sale. If you fail to return your card and do not
vote at the meeting, it will have the same effect as a vote against the proposed
sale.
Only shareholders of record as of February 23, 1998 are entitled to attend
and vote at the meeting.
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The date, time and place of the meeting is as follows:
Monday, March 30, 1998
10:00 a.m.
Burlington Marriott Hotel
1 Mall Road
Burlington, Massachusetts
This document provides you with detailed information about the proposed
sale. In addition, you may obtain information about us from documents that we
have filed with the Securities and Exchange Commission. We encourage you to read
this entire document carefully.
On behalf of your Board of Directors, we thank you for your continued
support, and again urge you to vote FOR approval of the proposed sale.
Sincerely,
Joseph E. Kasputys
Chairman, President and
Chief Executive Officer
Proxy Statement dated February , 1998 and first mailed to shareholders on
February , 1998.
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PRELIMINARY COPY -- SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1998
PRIMARK LOGO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 30, 1998
To the Primark Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of Primark
Corporation, a Michigan corporation, will be held on Monday, March 30, 1998 at
the Burlington Marriott Hotel, 1 Mall Road, Burlington, Massachusetts, at 10:00
a.m. A Proxy Card and Proxy Statement for the Special Meeting are enclosed.
The Special Meeting is for the purpose of:
1. Considering and voting upon a proposal to sell the Company's
indirect subsidiary TASC, Inc. to Litton Industries, Inc. and to sell the
Company's indirect subsidiary The Analytic Sciences Corporation Limited to
Litton U.K. Limited, in each case pursuant to the terms of the Stock
Purchase Agreement dated as of December 8, 1997. A copy of the Stock
Purchase Agreement is attached as Annex A to the accompanying Proxy
Statement.
2. Transacting such other business as may properly come before the
Special Meeting and any adjournment thereof. The Board of Directors is not
aware of any other business that will be presented for consideration at the
Special Meeting.
THE PRIMARK BOARD OF DIRECTORS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE
PROPOSED SALE ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED SALE.
Only holders of Primark common stock of record as of the close of business
on February 23, 1998 are entitled to notice of and to vote at the Special
Meeting.
The sale will not be completed unless it is approved by the affirmative
vote of the holders of a majority of the shares of common stock entitled to vote
at the Special Meeting. Executive officers of the Company have entered into
agreements with Litton to vote their shares in favor of the proposed sale. These
executive officers own approximately 5.13% of the shares entitled to vote at the
Special Meeting.
Under Michigan law, you are not entitled to dissenters' rights of
appraisal.
Your vote is important. Whether or not you plan to attend the Special
Meeting, please complete, date and sign the enclosed proxy and return it in the
enclosed envelope. If you attend the Special Meeting you may revoke your proxy
and vote personally on each matter brought before the Special Meeting.
By Order of the Board of Directors,
Michael R. Kargula
Executive Vice President, General
Counsel and Secretary
Waltham, Massachusetts
February , 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY.
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TABLE OF CONTENTS
DESCRIPTION PAGE
- -------------------------------------- ----
QUESTIONS AND ANSWERS ABOUT THE
PROPOSED SALE....................... 1
SUMMARY............................... 2
The Company......................... 2
The Proposed Transaction............ 2
Our Reasons for the Proposed
Transaction...................... 3
The Special Meeting................. 3
Record Date; Shares Entitled to
Vote............................. 3
Vote Required....................... 3
Our Recommendation to
Shareholders..................... 4
Opinion of Financial Advisor........ 4
The Stock Purchase Agreement........ 4
Interests of Certain Persons in the
Proposed Transaction............. 4
Regulatory Approvals................ 4
Accounting Treatment................ 5
Certain Income Tax Consequences..... 5
No Dissenters' Rights............... 5
RISK FACTORS.......................... 6
Loss of TASC........................ 6
Foreign Currency Exchange Rate
Risk............................. 6
Technological Changes............... 6
Level of Indebtedness............... 6
SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND
OPERATING DATA...................... 7
INTRODUCTION.......................... 10
THE COMPANY........................... 10
THE SPECIAL MEETING................... 11
Date, Time and Place................ 11
Matters to be Considered............ 11
Record Date; Shares Outstanding and
Entitled to Vote................. 11
Quorum; Vote Required............... 12
Voting and Revocation of Proxies.... 12
Proxy Solicitation.................. 13
THE PROPOSED TRANSACTION.............. 13
General............................. 13
Description of the TASC Entities'
Business......................... 14
Background of the Proposed Sale..... 14
Reasons for the Proposed
Transaction...................... 15
Recommendation of the Primark
Board............................ 16
DESCRIPTION PAGE
- -------------------------------------- ----
Opinion of Financial Advisor........ 16
Use of Proceeds..................... 21
Redemption of Senior Notes.......... 21
Accounting Treatment for the
Proposed Transaction............. 21
Certain Income Tax Consequences..... 21
Dissenters' Rights.................. 22
Regulatory Filings and Approvals.... 22
Interests of Certain Persons........ 22
Voting Agreements................... 23
Information Technology Services
Agreement........................ 23
TERMS OF THE STOCK PURCHASE
AGREEMENT........................... 24
Purchase Price...................... 24
The Closing......................... 24
Representations and Warranties...... 24
Certain Covenants................... 25
No Solicitation..................... 25
Employment and Employee
Benefit Plans.................... 25
Non-Competition Agreement........... 26
Conditions.......................... 27
Termination......................... 28
Termination Fees.................... 28
Survival of Representations and
Warranties; Indemnification...... 28
Expenses............................ 29
Intellectual Property............... 30
MARKET PRICE DATA; DIVIDENDS.......... 30
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION............... 31
SECURITY OWNERSHIP.................... 39
Security Ownership of Management.... 39
Security Ownership of Certain
Beneficial Owners................ 40
INDEPENDENT PUBLIC ACCOUNTANT......... 40
SHAREHOLDER PROPOSALS................. 40
WHERE YOU CAN FIND MORE INFORMATION... 41
ANNEX A -- Stock Purchase Agreement
ANNEX B -- BT Alex. Brown Opinion
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QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE
Q: WHY IS PRIMARK SELLING MOST OF ITS APPLIED TECHNOLOGY BUSINESS?
A: Primark's Board of Directors believes that TASC will have greater
success in the future as part of a large integrated national security contractor
such as Litton and that the price Litton is paying for this business is both
fair and attractive. After the sale, we can concentrate our focus on our
financial, economic and market research information services business. Primark
also believes that after the sale the financial markets should more accurately
value our remaining business.
Q: WHY IS PRIMARK ASKING FOR A SHAREHOLDER VOTE? WHAT VOTE IS REQUIRED?
A: Michigan counsel advised us that the proposed sale might be a sale of
"substantially all" of the assets under Michigan corporate law. If so, the sale
requires approval by the holders of a majority of Primark's common stock. Since
it is not clear whether this transaction requires shareholder approval, we have
decided to put the transaction to a shareholder vote to avoid any uncertainty
and we will not complete the sale unless it is approved by the affirmative vote
of holders of a majority of Primark's outstanding common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon
as possible, so that your shares may be represented at the Special Meeting. The
meeting will take place on March 30, 1998. Primark's Board of Directors
unanimously recommends that you vote in favor of the proposed sale.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before we vote your proxy at
the Special Meeting. You can do so in one of three different ways. First, you
can send a written notice stating that you would like to revoke your proxy to
the Secretary of Primark at the address given below. Second, you can complete a
new proxy card and send it to the Secretary of Primark at the address given
below. Third, you can attend the Special Meeting and vote in person.
You should send any written notice or new proxy card to the Secretary of
Primark at the following address: Primark Corporation, 1000 Winter Street, Suite
4300N, Waltham, Massachusetts 02154, Attention: Secretary.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should instruct your broker to vote your shares, following the
directions provided by your broker. Without instructions, your shares will not
be voted.
Q: WHEN DO YOU EXPECT THE SALE TO BE COMPLETED?
A: We are working to complete the transaction as quickly as possible,
hopefully within a day or two after the Special Meeting.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If you have more questions about the proposed sale, you should contact:
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
(781) 466-6611
Attention: Investor Relations
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
proposed sale more fully and for a complete description of the legal terms of
the proposed sale you should read carefully this entire document and the
documents we have referred to you. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 41. We have included page references parenthetically to direct you to a
more complete description of the topics presented in the summary.
THE COMPANY
Primark is primarily an information services company serving the financial
information market and the applied technology market. The Company's financial
information business provides database, information products and software
relating to financial, economic and market research information for investment
and financial professionals. The applied technology business provides a broad
spectrum of information technology services and products primarily to United
States government agencies involved in national security and intelligence
related activities, as well as to customers of real-time and historical weather
information.
THE PROPOSED TRANSACTION
THE SALE OF THE TASC ENTITIES (SEE PAGE 13)
We have agreed to sell most of our applied technology business to Litton
Industries, Inc. Specifically, we will sell to Litton all of the stock of our
indirect subsidiaries TASC, Inc. and The Analytic Sciences Corporation Limited
(together, the "TASC Entities") for $432 million, subject to adjustment for
changes in shareholders' equity between September 30, 1997 and the date on which
the proposed sale is completed. The adjustment is without limit and provides for
additional consideration to Primark or reimbursement to Litton, to the extent
the shareholders' equity account increases or decreases, respectively, from the
September 30, 1997 balance. The shareholders' equity account will be adjusted
for certain negotiated items. Had the transaction concluded as of December 31,
1997 Litton would have paid to Primark approximately $1.5 million in accordance
with this provision.
On a combined basis, the TASC Entities had revenues of $387.0 million for
1996 and $324.8 million for the nine months ended September 30, 1997 and
operating income of $32.4 million and $27.9 million, respectively, for the same
periods. The TASC Entities constituted about 22% of the Company's total assets
as of December 31, 1996 and about 21% of the Company's total assets as of
September 30, 1997. Upon the sale of the TASC Entities, the Company's primary
strategic focus will be the financial, economic and market research information
services business.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
(SEE PAGE 23)
As an essential part of the proposed transaction, TASC and Primark will
enter into an information technology services agreement. Under this agreement,
TASC will continue to provide Primark with information technology research and
development, planning, and technical assistance. TASC will also continue to
manage the Primark Telecommunications Network and supply professional
information technology services to the business units of Primark and their
customers.
USE OF PROCEEDS (SEE PAGE 21)
After-tax proceeds from the proposed sale should be about $345 million. We
will use part of the proceeds to redeem in full our $112 million of 8.75% Senior
Notes due October 15, 2000. The redemption of the Senior Notes will require
payment of a 4.375% call premium and will cost the Company $4.9 million in
addition to the $112 million principal amount of the Senior Notes. We will also
repay the Company's existing revolving credit and term loan facilities. As of
December 31, 1997 these facilities amounted to $247.6 million and are
anticipated to be no less than $220 million as of the completion of the proposed
sale. Any remaining proceeds will be used for general corporate purposes.
Further, we are in negotiations with the commercial banks that have lent
funds under the current revolving credit and term loan facilities. In on-going
discussions with these commercial banks, we are negotiating the expansion of our
revolving credit facility from $75 million to $225 million to be
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effective promptly following the closing of the proposed transaction. This new
arrangement would allow us to use a portion of the proceeds to repay all
outstanding bank debt at the closing of the proposed transaction, and to have
the flexibility to subsequently borrow amounts either for stock repurchases
and/or acquisitions. The proposed new revolving credit agreement also would
allow us to repurchase up to $100 million of our common stock. The extent to
which we will repurchase stock or participate in acquisitions is entirely
dependent on market conditions and opportunities that are present after the
closing of the proposed sale.
REDEMPTION OF SENIOR NOTES (SEE PAGE 21)
The indenture relating to the Senior Notes requires that if the Company
sells substantially all of its assets, then the purchaser must assume the
obligations owed to noteholders. Legal counsel advised the Company that the
proposed transaction might be a sale of substantially all of the Company's
assets, although the law is not clear. To avoid any uncertainty, at the same
time as the proposed sale is completed, the Company will take the steps
necessary to redeem the outstanding Senior Notes. At that time, under the
indenture, the call price of the Senior Notes will be 104.375% of the principal
amount.
OUR REASONS FOR THE PROPOSED TRANSACTION
Primark has been engaged in two primary businesses, financial information
and applied technology. The Primark Board believes that the investor and
financial community views these businesses as serving two very different markets
and that this viewpoint has had a negative impact on the price of the Company's
common stock. In addition, consolidation in the national security industry and
trends in government procurement have increased the need for greater size and
scope in the government information technology area, TASC's main business.
The Board believes that by separating the two businesses, Primark's
shareholders may realize greater value. The proposed sale allows the Company to
focus its resources primarily on its existing financial, economic and market
research information services business and new growth opportunities in this
market.
In reaching its recommendation in favor of the proposed sale, the Board
also considered the following principal uncertainties:
- After the sale, the Company's sole strategic business will be the
financial, economic and market research information services business;
- After the sale, the Company will principally serve customers whose
businesses are dependent on the financial markets. As a result, a
downturn in the financial markets could have a greater adverse impact on
the Company's revenues and profits; and
- After the sale, more of the Company's revenues and profits will originate
outside the U.S., exposing the Company to greater foreign currency risks.
To review the background and reasons for the proposed sale in more detail,
as well as the risks of the sale, see pages 14 through 16.
THE SPECIAL MEETING
The Special Meeting will be held at the Burlington Marriott Hotel, at 10:00
a.m. on Monday, March 30, 1998. Shareholders will be asked to consider and vote
upon the proposed transaction and to transact such other business as may
properly come before the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE
You are entitled to vote at the meeting if you owned shares as of the close
of business on February 23, 1998, the Record Date.
On the Record Date, there were 26,963,580 shares of Primark common stock
allowed to vote at the Special Meeting. Shareholders will have one vote at the
Special Meeting for each share of Primark common stock owned on the Record Date.
VOTE REQUIRED
Michigan counsel advised the Company that the proposed transaction might be
a sale of "substantially all" of the assets of the Company under Michigan
corporate law. If so, the proposed transaction requires approval by a majority
of the shares of Primark common stock outstanding on the Record Date. Since it
is not clear whether this transaction
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requires shareholder approval, the Company is
submitting the proposed transaction to a shareholder vote to avoid any
uncertainty and will not complete the transaction unless it is approved by the
affirmative vote of a majority of the shares of common stock entitled to vote at
the Special Meeting.
VOTING AGREEMENT
Litton required executive officers of the Company to agree to vote their
shares in favor of the proposed transaction. These executive officers
collectively own approximately 5.13% of the Company's outstanding common stock
entitled to vote at the Special Meeting.
OUR RECOMMENDATION TO SHAREHOLDERS
The Primark Board believes that the proposed transaction is in the
Company's best interests and unanimously recommends that you approve the
proposed transaction.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 16)
In deciding to approve the proposed transaction, the Primark Board
considered the opinion of BT Alex. Brown, its financial advisor, that the
consideration to be received by Primark in the proposed transaction is fair to
the holders of Primark common stock from a financial point of view. The opinion
is attached as Annex B to this Proxy Statement. We encourage you to read this
opinion.
THE STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement is attached as Annex A to this Proxy
Statement. We encourage you to read the Stock Purchase Agreement as it is the
legal document that governs the proposed transaction.
CONDITIONS TO THE STOCK PURCHASE AGREEMENT
(SEE PAGE 27)
The completion of the proposed transaction depends upon meeting a number of
conditions, including the following:
(1) approval by a majority vote of Primark's shareholders,
(2) release of the lien on shares of the TASC Entities held by Mellon
Bank, N.A.,
(3) there being no material adverse change in the business of the TASC
Entities,
(4) obtaining required governmental approvals, and
(5) entering into employment agreements with certain TASC employees.
TERMINATION OF THE STOCK PURCHASE AGREEMENT (SEE PAGE 28)
The Stock Purchase Agreement may be terminated at any time by agreement of
Primark and Litton. In addition, either Primark or Litton may terminate the
Stock Purchase Agreement in certain circumstances including if:
(1) the proposed transaction has not been completed by April 30, 1998;
or
(2) a court or other governmental authority prohibits the proposed
transaction; or
(3) it becomes impossible to satisfy a condition to the Stock Purchase
Agreement.
TERMINATION FEES (SEE PAGE 28)
The Stock Purchase Agreement requires Primark to pay Litton a termination
fee of $12 million plus expenses if the agreement is terminated under certain
circumstances.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTION (SEE PAGE 22)
In considering the Primark Board's recommendation that you vote in favor of
the proposed transaction, you should be aware that certain directors and
executive officers of the Company have interests in the proposed transaction as
employees and/or directors that are different from, or in addition to, yours as
a shareholder. Please refer to page 22 for more information concerning these
interests.
REGULATORY APPROVALS
The Hart-Scott-Rodino Act prohibits Primark and Litton from completing the
proposed transaction until each has furnished certain information to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and a required waiting period has expired. Primark and Litton each filed the
required notification and report forms with
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the Antitrust Division and the FTC. The required waiting period expired on
February 13, 1998.
ACCOUNTING TREATMENT
After the sale, the TASC Entities and their respective subsidiaries will be
treated for accounting purposes as a discontinued operation of the Company. This
means that financial statements for all prior periods will be redone to show the
operations of the TASC Entities and their respective subsidiaries separately
from the Company's continuing operations.
The gain on the sale of the TASC Entities will be the amount paid by Litton
in excess of the net book value of the assets sold reduced by transaction costs
and applicable income taxes. The gain will be recorded as a separate component
of discontinued operations in the Company's financial statements.
CERTAIN INCOME TAX CONSEQUENCES
There will not be any federal income tax consequences for you. However, the
proposed sale will be a taxable event to the Company for federal, state and U.K.
income tax purposes. The Company expects to realize a gain on the sale of the
TASC Entities for federal, state and U.K. income tax purposes, the amount of
which has not yet been finally determined. Based upon estimates of the cash
proceeds of approximately $432,000,000, the Company will be responsible for
income taxes associated with the sale of the TASC Entities of approximately
$94,061,000.
NO DISSENTERS' RIGHTS
Under Michigan law, Primark shareholders are not entitled to dissenters'
rights of appraisal or other dissenters' rights with respect to the proposed
transaction or any transactions contemplated by the Stock Purchase Agreement.
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RISK FACTORS
In considering whether to approve the proposed transaction, Primark
shareholders should consider, in addition to the other information contained in
this document, the following matters.
LOSS OF TASC
Following the sale of the TASC Entities, the Company's business will
principally serve institutions and professionals in the financial markets,
although the Company will also have corporate and government customers in both
the United States and other countries. As a result, any downturn in the
financial markets could adversely affect to a greater degree the Company's
overall revenues and profits.
FOREIGN CURRENCY EXCHANGE RATE RISK
Since not all of the Company's revenues and expenses are incurred in U.S.
dollars, the Company's operations have been and may continue to be affected by
fluctuations in currency exchange rates. Further, following the sale of the TASC
Entities, the Company will have a greater percentage of its total revenues and
profits originating outside the U.S., and thus will be more exposed to adverse
foreign currency movements. The Company's 1997 revenues, excluding its
discontinued operation TIMCO (as defined below), but including the operations of
the TASC Entities, were $835.8 million with operating income of $67.5 million.
International revenues for 1997 were $207.1 million or 25% and international
operating income was $18.0 million or 27%. When the TASC Entities are excluded
the percentage of international revenues and operating income increases to 52%
and 56% respectively.
The Company engages in hedging activities, including foreign currency
options and forward contracts, in order to minimize the ongoing exposure to
foreign currency exchange risk with respect to its foreign operating income and
cash flows. In 1996, the Company recorded a $1.9 million gain before income
taxes for foreign currency transactions. With regard to foreign currency, the
Company does regularly have substantial foreign currency expenses, especially in
the U.K., which in part offset revenue losses due to currency fluctuations. In
addition, the Company typically maintains foreign currency hedges for its
significant foreign currency exposures.
TECHNOLOGICAL CHANGES
The Company operates principally in the information services industry,
which changes rapidly and is highly competitive. Even if the Company remains
abreast of the latest developments and available technology, technological
advances and/or the introduction of new products and services in the information
services industry could adversely affect the Company. There are many large and
successful companies in the information services industry, many of which have
greater resources than the Company. The Company's future success will depend
significantly on its ability to develop and deliver technologically advanced
quality products and services. The cost of developing such products and services
could adversely affect the Company's future results of operations.
LEVEL OF INDEBTEDNESS
The Company has substantial indebtedness. At September 30, 1997, the
Company had consolidated total debt of $350.4 million and consolidated common
shareholders' equity of $462.8 million. The Company and its subsidiaries may
incur additional indebtedness from time to time for general corporate purposes,
including acquisitions and capital expenditures, subject to certain restrictions
on the Company and certain subsidiaries, including the satisfaction of certain
debt coverage tests. In the past, cash generated from operating activities,
together with borrowings and proceeds from equity issuances, has been sufficient
to meet the Company's debt service, acquisition, investment and capital
expenditure requirements. The Company believes that cash generated from
operating activities, together with borrowings from existing and future credit
facilities and proceeds from future equity issuances, will be sufficient to meet
its future debt service requirements and to make anticipated acquisitions,
investments and capital expenditures. However, there can be no assurances in
this regard.
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Following completion of the proposed transaction, the Company will redeem
its $112 million of 8.75% Senior Notes due October 15, 2000 together with
repayment of existing revolver and term loans thereby reducing indebtedness and
fixed charges. The redemption of the Senior Notes will require payment of a
4.375% call premium and will cost the Company $4.9 million in addition to the
$112 million principal amount of the Senior Notes. The Company will also repay
its existing revolving credit and term loan facilities. As of December 31, 1997
these facilities amounted to $247.6 million and are anticipated to be no less
than $220 million as of the close of the proposed transaction. Any remaining
proceeds will be used for general corporate purposes. Further, the Company is in
negotiations with the commercial banks that have lent funds under the current
revolving credit and term loan facilities. In on-going discussions with these
commercial banks, the Company is negotiating the expansion of its revolving
credit facility from $75 million to $225 million to be effective promptly
following the closing of the proposed transaction. This new arrangement would
allow the Company to use a portion of the proceeds to repay all outstanding bank
debt at the closing of the proposed transaction, and to have the flexibility to
subsequently borrow amounts either for stock repurchases and/or acquisitions.
The proposed new revolving credit agreement also would allow Primark to
repurchase up to $100 million of its common stock. The extent to which the
Company will repurchase stock or participate in acquisitions is entirely
dependent on market conditions and opportunities that are present after the
closing of the proposed transaction.
SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND OPERATING DATA
We are providing the following financial and operating data to aid you in
your analysis of the financial aspects of the proposed sale. With the exception
of (i) the selected data as of September 30, 1997 and for the nine months ended
September 30, 1997 and 1996, and (ii) the pro forma data for the nine months
ended September 30, 1997, and the fiscal year ended December 31, 1996, we
derived this information from historical consolidated financial statements of
the Company restated to present the results of operations of Triad International
Maintenance Corporation ("TIMCO") as a discontinued operation. The Company's
consolidated financial statements as of December 31, 1996 and 1995, and for each
of the three years in the period ended December 31, 1996, are incorporated by
reference in this Proxy Statement and have been audited by Deloitte & Touche
LLP, independent auditors, whose report thereon is also incorporated by
reference herein. The selected financial data as of September 30, 1997, and for
the nine months ended September 30, 1997 and 1996, have been derived from the
unaudited interim consolidated financial statements of the Company incorporated
by reference in this Proxy Statement. The selected pro forma data are derived
from the Unaudited Pro Forma Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Proxy Statement. The selected financial data should
be read in conjunction with the Unaudited Pro Forma Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Proxy Statement and the
Consolidated Financial Statements of the Company and Notes thereto and the
information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the annual reports and other
information that we have filed with the SEC. See "Where You Can Find More
Information" on page 41.
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SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND OPERATING DATA
(CONTINUED)
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------- --------------------------------
HISTORICAL(1)(2) PRO FORMA HISTORICAL(1)(2) PRO FORMA
------------------------------------------------------- (2)(3) -------------------- (2)(3)
1992 1993 1994 1995 1996 1996 1996 1997 1997
--------- -------- -------- --------- --------- --------- -------- --------- ---------
(IN THOUSANDS EXCEPT STATISTICAL DATA AND PER SHARE DATA)
INCOME STATEMENT DATA:
Operating revenues..... $ 298,721 $395,054 $423,193 $ 530,979 $ 660,763 $ 277,063 $478,322 $ 617,468 $ 294,725
Cost of services....... 268,648 259,705 236,903 297,968 368,749 113,125 255,962 342,830 117,996
Selling, general and
administrative....... 5,406 78,864 128,955 150,840 189,721 102,817 146,577 179,905 115,043
Depreciation........... 5,656 10,266 11,469 14,137 18,241 12,318 12,348 16,963 13,108
Amortization of
goodwill and other
intangible assets.... 5,496 15,287 15,361 21,203 23,909 19,800 17,118 26,081 23,287
Restructuring charge... -- -- -- -- -- -- -- 6,800 6,800
--------- -------- -------- --------- --------- --------- -------- --------- ---------
Operating income....... 13,515 30,932 30,505 46,831 60,143 29,003 46,317 44,889 18,491
Interest expense
(income) -- net...... 2,909 10,174 9,853 15,084 15,950 (2,675) 10,625 17,021 804
Foreign currency
transaction loss
(gain) -- net........ (1,130) 1,477 1,329 2,620 (1,864) (1,836) (1,487) (2,327) (2,325)
Other expense
(income)............. 2,266 33 (533) 807 1,294 (66) 735 (1,646) (1,679)
Income tax expense..... 5,034 9,059 8,988 13,190 19,219 12,612 16,859 18,537 13,093
--------- -------- -------- --------- --------- --------- -------- --------- ---------
Income from continuing
operations........... $ 4,436 $ 10,189 $ 10,868 $ 15,130 $ 25,544 $ 20,968 $ 19,585 $ 13,304 $ 8,598
========= ======== ======== ========= ========= ========= ======== ========= =========
Earnings per share from
continuing
operations(4)........ $ 0.16 $ 0.44 $ 0.47 $ 0.66 $ 0.95 $ 0.78 $ 0.75 $ 0.48 $ 0.31
Net income (loss)
applicable to Common
Stock................ $ 5,821 $ 4,087 $ 12,316 $ 16,882 $ 36,749 $ 20,609 $ 30,019 $ 10,797 $ 8,641
Weighted average shares
of Common Stock
outstanding.......... 19,388 19,805 19,909 20,602 26,555 26,555 25,807 27,577 27,577
OTHER OPERATING AND
FINANCIAL DATA:
Net cash provided from
operating
activities........... $ 32,061 $ 48,386 $ 40,268 $ 48,569 $ 68,225 $ 43,842 $ 48,291 $ 38,577 $ 31,314
Net cash (used by)
provided from
financing
activities........... $ 93,129 $(41,663) $(19,292) $ 220,355 $ 4,750 $(240,787) $ 3,715 $ 77,415 $(243,922)
Net cash used for
investing
activities........... $(146,152) $(15,473) $(10,280) $(226,708) $(108,183) $ 232,342 $(53,424) $(124,611) $ 204,267
Effect of currency on
cash................. (626) (290) 477 57 927 (235) (458)
EBITDA(5).............. $ 24,667 $ 56,485 $ 57,335 $ 82,171 $ 102,293 $ 61,121 $ 75,783 $ 87,933 $ 54,886
EBITDA as a % of
operating revenue.... 8.3% 14.3% 13.5% 15.5% 15.5% 22.1% 15.8% 14.2% 18.6%
Capital expenditures
and capitalized
software............. $ 7,294 $ 16,183 $ 22,464 $ 21,499 $ 40,406 $ 36,328 $ 26,328 $ 38,844 $ 31,697
Book value per share... $ 11.08 $ 11.33 $ 12.14 $ 15.19 $ 17.59 N/A $ 17.79 $ 19.15 $ 24.51
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YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------- ---------------------------------
HISTORICAL(1)(2) HISTORICAL(1)(2) PRO FORMA
---------------------------------------------------- --------------------- (2)(3)
1992 1993 1994 1995 1996 1996 1997 1997
-------- -------- -------- -------- -------- -------- ---------- ---------
(IN THOUSANDS EXCEPT STATISTICAL DATA AND PER SHARE DATA)
BALANCE SHEET DATA:
Current assets...................... $116,346 $110,927 $121,145 $188,140 $201,552 $206,029 $ 243,141 $117,152
Goodwill and other
intangibles -- net................ 301,151 297,863 296,097 485,953 665,560 505,168 745,917 647,148
Property, plant and
equipment -- net.................. 24,102 25,620 30,534 41,747 53,417 45,287 58,318 46,576
Net assets of discontinued
operations........................ 17,290 6,769 10,639 32,428 39,930 33,463 16,609 44,864
Other noncurrent assets............. 16,284 10,804 6,508 11,156 11,124 38,848 7,680 7,361
-------- -------- -------- -------- -------- -------- ---------- ---------
Total assets........................ $475,173 $451,983 $464,923 $759,424 $971,583 $828,795 $1,071,665 $863,101
======== ======== ======== ======== ======== ======== ========= ========
Accounts payable and other current
liabilities....................... $ 65,434 $ 64,083 $ 72,969 $100,022 $210,271 $121,418 $ 222,994 $117,246
Total debt and capital lease
obligations (including current
maturities)....................... 161,088 130,386 115,573 239,476 248,340 240,091 350,374 29,037
Other noncurrent liabilities........ 30,574 32,506 34,726 48,923 36,490 58,783 34,636 79,983
Minority Interest................... -- -- -- -- 265 -- 907 907
Series A Preferred Stock............ 16,522 16,874 16,874 16,874 -- -- -- --
Common shareholders' equity......... 201,555 208,134 224,781 354,129 476,217 408,503 462,754 635,928
-------- -------- -------- -------- -------- -------- ---------- ---------
Total liabilities and shareholders'
equity............................ $475,173 $451,983 $464,923 $759,424 $971,583 $828,795 $1,071,665 $863,101
======== ======== ======== ======== ======== ======== ========= ========
- ---------------
(1) In June of 1997, the Company adopted a formal plan to sell TIMCO.
Accordingly, the historical financial statement data presented herein has
been restated to present the operations of TIMCO separately as a
discontinued operation.
(2) The historical and pro forma financial information includes the operations
of the following companies from their respective dates of acquisition:
Datastream International Limited and affiliates acquired September 25, 1992;
Vestek Systems, Inc. acquired June 30, 1994; Disclosure Incorporated and
I/B/E/S International, Inc. acquired June 29, 1995; Groupe DAFSA S.A.
acquired June 18, 1996; Yankee Group Research, Inc. acquired August 9, 1996;
Worldscope/Disclosure LLC acquired October 15, 1996; ICV Limited acquired
October 24, 1996; Baseline Financial Services, Inc. acquired January 6,
1997; and WEFA Holdings, Inc. acquired February 7, 1997.
(3) Gives effect to the Proposed Transaction for the sale of the TASC Entities
assuming the transaction occurred on January 1 of the period presented. See
"Unaudited Pro Forma Consolidated Financial Information."
(4) Earnings per share represent earnings per common and common share equivalent
before discontinued and extraordinary items.
(5) EBITDA represents operating income plus depreciation and amortization
expense and should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flows from operating activities
computed in accordance with generally accepted accounting principles. While
not computed in accordance with generally accepted accounting principles,
EBITDA is a widely used measure of a company's performance in its industry
because it assists in comparing performance on a consistent basis without
regard to depreciation and amortization, which may vary significantly
depending on accounting methods (particularly where acquisitions are
involved). Management of the Company believes that EBITDA is a meaningful
measure given the widespread industry acceptance as a basis for financial
analysis. Further, certain of the Company's debt agreements include
financial covenants that are based upon EBITDA, as defined above. Due to the
variety of methods that may be used by companies and analysts to calculate
EBITDA, the EBITDA measures presented herein may not be comparable to that
presented by other companies.
N/A Not Applicable.
9
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INTRODUCTION
This Proxy Statement (the "Proxy Statement") and the accompanying form of
proxy are being furnished to the holders of shares of common stock, no par value
(the "Common Stock") of Primark Corporation, a Michigan corporation ("Primark"
or the "Company") in connection with the solicitation of proxies by the Board of
Directors of Primark (the "Primark Board") for use at the Special Meeting of the
Shareholders of the Company to be held on Monday, March 30, 1998 at the
Burlington Marriott Hotel, 1 Mall Road, Burlington, Massachusetts, at 10:00 a.m.
local time (the "Special Meeting") and any adjournments thereof.
THE COMPANY
The Company is a Michigan corporation organized in 1981. The Company is
engaged principally in the information services industry serving two primary
markets, financial information ("Financial Information") and applied technology
("Applied Technology"). The Company's Financial Information businesses consist
of the operations of Datastream International Limited and affiliates, Disclosure
Incorporated, Groupe DAFSA S.A., I/B/E/S International, Inc., ICV Limited,
Vestek Systems, Inc., Worldscope/Disclosure LLC, Baseline Financial Services,
Inc. and WEFA, Inc. Primark also has an equity interest in Primark Decision
Economics, Inc. Primark develops and markets "value-added" database and
information products that cover established and emerging markets worldwide, as
well as proprietary analytical software for the analysis and presentation of
financial and economic information. Customers include investment managers,
investment bankers, financial market traders, analysts, accounting and legal
professionals and information and reference service providers. The Applied
Technology activities, conducted through TASC (as defined below), Yankee Group
Research, Inc. ("Yankee") and WSI Corporation ("WSI"), provide a broad spectrum
of information technology services and products primarily to United States
government agencies principally involved in national security and intelligence
related activities, as well as customers of real-time and historical weather
information. Within Applied Technology, Yankee supplies market research to
vendors and users of telecommunications and computing. Consummation of the
Proposed Transaction (as defined below) will result in the disposition of all of
the Company's Applied Technology business except for the business of Yankee.
Yankee was originally acquired, in part, to be the market research arm of
the Applied Technology segment of the Company's business, focusing on
identifying current trends and future directions in communications and computer
industries for commercial, industrial and consumer markets. With the planned
disposition of TASC, which accounted for over 95% of the Applied Technology
segment, management of the Company is currently evaluating the appropriateness
of placing Yankee within the Financial Information segment of the Company, the
only remaining segment of the Company after the dispositions of the TASC
Entities and TIMCO. The Company currently has no intention to dispose of Yankee,
but rather is considering various alternatives, which include the application
and integration of the market research capabilities of Yankee within the
Financial Information segment.
The review currently being conducted of Yankee's operation with the
Financial Information services segment is part of a larger project to review the
benefits and costs of further integration of the various operational units
within Primark. Such integration could involve sales forces, administrative
functions, software development, production platforms and delivery systems. The
review will also consider changes in organizational structure. This review was
undertaken in recognition of the anticipated sale of TASC and addresses the best
way to manage the business without technology and administrative support by TASC
as an integrated ongoing part of Primark. This review will require examination
of all tangible and intangible assets of the Company for possible adjustment. No
adjustments would be required should the Company's shareholders not approve the
Proposed Transaction.
In June of 1997, the Company adopted a formal plan to sell its non-core
transportation services segment, TIMCO. The financial results of TIMCO (a net
loss of $552,000 for the nine months ended September 30, 1997) have been
accounted for within discontinued operations. The Company anticipates the sale
of TIMCO by June 1998 at a price in excess of Net Book Value.
At December 31, 1997, the Company and its subsidiaries employed 6,355
persons.
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16
Following consummation of the Proposed Transaction, the Company's
management will focus its resources primarily on the Company's financial,
economic and market research information services businesses. The Company will
also focus its resources on opportunities for growth in the global market for
information content. The Company's management intends to consider new approaches
to its business systems and organizational structure to achieve efficiencies,
improve profitability and customer service, and accelerate new product
development. The Company's information content businesses will continue to
receive information technology support from TASC through a three-year
Information Technology Services Agreement (the "IT Services Agreement"), which
is a part of the Proposed Transaction. The Company also continues to engage BT
Alex. Brown Incorporated ("BT Alex. Brown") to assist the Company in evaluating
strategic alternatives that could increase shareholder value. As part of this
process, BT Alex. Brown has assisted the Company in the preparation of
information to be furnished to parties that indicate an interest in acquiring
the Company or key businesses other than those being disposed of in the Proposed
Transaction and is assisting the Company in disseminating such information to
interested parties. BT Alex. Brown had been initially retained earlier in 1997
when the Company was approached by various third parties regarding a possible
sale of the Company. The Company, with BT Alex. Brown's assistance, is exploring
various strategic alternatives, which could include, among other things, a sale
of the Company, repurchases of Common Stock or acquisitions in the financial,
economic and market research information services sector. It should be
emphasized that, at this time, the Company has not made a decision to pursue any
particular alternative, including without limitation a sale of the Company. In
response to its information memorandum, the Company has received indications of
interest regarding the possible sale of the Company. The Company expects to
conduct negotiations shortly with interested parties. However, there can be no
assurance that such a sale will occur.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting is scheduled to be held at the Burlington Marriott
Hotel, located at 1 Mall Road, Burlington, Massachusetts, on Monday, March 30,
1998, beginning at 10:00 a.m., local time.
MATTERS TO BE CONSIDERED
At the Special Meeting, Primark shareholders will be asked to consider and
vote upon a proposal to approve and adopt the Stock Purchase Agreement, dated as
of December 8, 1997 (the "Stock Purchase Agreement") by and among the Company,
Primark Holding Corporation, a Delaware corporation and a wholly owned
subsidiary of the Company ("Holding Corp."), Primark Information Services UK
Limited, a company incorporated under the laws of England and Wales and a wholly
owned subsidiary of Holding Corp. ("Primark U.K."), Litton Industries, Inc., a
Delaware corporation ("Litton"), and Litton U.K. Limited, a corporation
incorporated under the laws of England ("Litton U.K.," collectively with Litton,
the "Buyer"), providing for the sale to Buyer (the "Proposed Transaction") of
(i) all of the issued and outstanding shares of TASC, Inc., a Massachusetts
corporation and a wholly owned subsidiary of Holding Corp. ("TASC"), and (ii)
the entire issued share capital of The Analytic Sciences Corporation Limited, a
company incorporated under the laws of England and Wales and a wholly owned
subsidiary of Primark U.K. ("TASC U.K.," and together with TASC, the "TASC
Entities"), and to approve the transactions contemplated thereby. See "THE
PROPOSED TRANSACTION" and "TERMS OF THE STOCK PURCHASE AGREEMENT." The Primark
Board knows of no matters that will be presented for consideration at the
Special Meeting other than the matters described in this Proxy Statement. If any
other matters properly come before the Special Meeting, the persons named in the
enclosed form of proxy or their substitutes will vote in accordance with their
best judgment on such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The Primark Board has fixed the close of business on February 23, 1998 as
the record date (the "Record Date") for the determination of the holders of the
Company's Common Stock entitled to notice of and to vote at the Special Meeting.
11
17
Only holders of record of Common Stock as of the close of business on the
Record Date will be entitled to notice of and to vote at the Special Meeting. As
of the Record Date, there were 26,963,580 shares of Common Stock outstanding and
entitled to vote at the Special Meeting, held by approximately 8,314
shareholders of record, with each share entitled to one vote.
QUORUM; VOTE REQUIRED
The presence, in person or represented by proxy, of the holders of a
majority of the shares of Common Stock issued and outstanding and entitled to
vote at the Special Meeting will constitute a quorum.
The Company has been advised by Michigan counsel that the Proposed
Transaction could constitute a sale of "substantially all" of the assets of the
Company for purposes of the Michigan Business Corporation Act (the "Michigan
BCA") although existing legal precedent does not provide a definitive conclusion
on this point. A sale of substantially all of a company's assets requires for
approval under the Michigan BCA the affirmative vote of the holders of a
majority of the shares of Common Stock entitled to vote. Since the issue of
whether the Proposed Transaction constitutes a sale of "substantially all" of
the Company's assets is not clear, the Company has determined to submit the
Proposed Transaction to shareholders to avoid any uncertainty. Accordingly, the
Proposed Transaction will not be consummated unless it receives the affirmative
vote of a majority of the shares of Common Stock entitled to vote at the Special
Meeting.
As part of its willingness to enter into the Stock Purchase Agreement, the
Buyer has required that Messrs. Kasputys, Curran, Holt, Kargula, Richmond and
Swift, who are executive officers of the Company and collectively own as of the
Record Date approximately 5.13% of the Company's outstanding Common Stock
entitled to vote at the Special Meeting, enter into agreements with Litton, each
dated December 8, 1997 (the "Voting Agreements") that require them to vote their
shares in favor of the Proposed Transaction and against any competing
transactions or other actions that would interfere with the Proposed
Transaction.
VOTING AND REVOCATION OF PROXIES
Shareholders are requested to complete, date, sign and promptly return the
accompanying form of proxy in the enclosed envelope. Shares of Common Stock
represented by properly executed proxies received by the Company and not revoked
will be voted at the Special Meeting in accordance with the instructions
contained therein. If instructions are not given, proxies will be voted FOR
approval and adoption of the Stock Purchase Agreement. However, brokers do not
have discretionary authority to vote shares held in street name. Therefore, the
failure of beneficial owners of such shares to give voting instructions to such
broker will result in a broker non-vote. Broker non-votes, abstentions and the
failure to vote will have the same affect as votes cast against approval of the
Proposed Transaction.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the enclosed form of proxy and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment. As the Company's By-laws limit the business transacted at a
special meeting to that stated in the notice, the Company does not expect any
other matters to be presented at the Special Meeting and the persons named in
the enclosed form of proxy will not use their discretionary authority to present
any material matters not discussed in this Proxy Statement. In addition, the
Company does not expect any changes to the terms of the Proposed Transaction
described in this Proxy Statement and the persons named in the enclosed form of
proxy will not use their discretionary authority to enact any changes to the
Proposed Transaction that are materially different than the terms of the
Proposed Transaction described in this Proxy Statement without giving
shareholders an opportunity to change their vote.
Any proxy signed and returned by a shareholder may be revoked at any time
before it is voted by filing with the Secretary of the Company, at the address
of the Company set forth herein, written notice of such revocation or a duly
executed proxy bearing a later date or by attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy.
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PROXY SOLICITATION
The Company will bear the costs of solicitation of proxies for the Special
Meeting. In addition to solicitation by mail, directors, officers and regular
employees of the Company may solicit proxies from shareholders by telephone,
telegram, personal interview or otherwise. Such directors, officers and
employees will not receive additional compensation, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. In addition to
solicitation by directors, officers and regular employees of the Company, the
Company has retained Corporate Investor Communications, Inc. to aid in the
solicitation of proxies for the Special Meeting. The fee for such services is
not expected to exceed $6,000, which will be borne by the Company. Brokers,
nominees, fiduciaries and other custodians have been requested to forward
soliciting material to the beneficial owners of shares of Common Stock held of
record by them, and such custodians will be reimbursed for their reasonable
expenses.
THE PROPOSED TRANSACTION
GENERAL
Pursuant to the terms of the Stock Purchase Agreement, Primark, through
Holding Corp., proposes to sell to Litton all of the issued and outstanding
capital stock of TASC and, through Primark U.K., proposes to sell to Litton U.K.
the entire issued share capital of TASC U.K. The purchase price for the TASC
Entities is $432 million, subject to adjustment for changes in the TASC
consolidated shareholders' equity account from September 30, 1997 to the date of
the Closing (as defined below). The adjustment is without limit and provides for
additional consideration to Primark or reimbursement to Litton, to the extent
the shareholders' equity account increases or decreases, respectively, from the
September 30, 1997 balance. The shareholders' equity account will be adjusted
for certain negotiated items. Had the transaction concluded as of December 31,
1997 Litton would have paid to Primark approximately $1.5 million in accordance
with this provision. Of the total purchase price, the parties agreed to allocate
$85 million as consideration for the covenants by the Company, Holding Corp. and
Primark U.K. not to compete with the TASC Entities. As an essential part of the
transaction, TASC, Primark and Litton will enter into a three year Information
Technology Services Agreement (the "IT Services Agreement"). Under this
agreement, TASC will continue to provide Primark with information technology
research and development, planning, and technical assistance. TASC will also
continue to manage the Primark Telecommunications Network and supply
professional information technology services to the business units of Primark
and their customers.
Consummation of the Proposed Transaction will permit the Company's
management to focus its resources primarily on the Company's financial, economic
and market research information services businesses and opportunities for growth
in the global market for information content. The Company's management intends
to consider new approaches to its business systems and organizational structure
to achieve efficiencies, improve profitability and customer service, and
accelerate new product development. The Company also announced on December 8,
1997 that it continues to engage BT Alex. Brown to assist the Company in
evaluating strategic alternatives that could increase shareholder value. As part
of this process, BT Alex. Brown has assisted the Company in the preparation of
information to be furnished to parties that indicate an interest in acquiring
the Company or key businesses other than those being disposed of in the Proposed
Transaction and is assisting the Company in disseminating such information to
interested parties. BT Alex. Brown had been initially retained earlier in 1997
when the Company was approached by various third parties regarding a possible
sale of the Company. The Company, with BT Alex. Brown's assistance, is exploring
various strategic alternatives, which could include, among other things, a sale
of the Company, repurchases of Common Stock or acquisitions in the financial,
economic and market research information services sector. It should be
emphasized that, at this time, the Company has not made a decision to pursue any
particular alternative, including without limitation a sale of the Company. In
response to its information memorandum, the Company has received indications of
interest regarding the possible sale of the Company. The Company expects to
conduct negotiations shortly with interested parties. However, there can be no
assurance that such a sale will occur.
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DESCRIPTION OF THE TASC ENTITIES' BUSINESS
TASC, its principal subsidiary WSI, and TASC U.K. constitute 98% and 96% of
the Company's Applied Technology business for the year ended December 31, 1996
and the nine-month period ended September 30, 1997, respectively. TASC provides
a broad spectrum of technology based information services and products primarily
to United States government agencies principally involved in national security
and intelligence related activities. WSI provides real-time and historical
weather information, together with related software, primarily to customers in
the media, aviation, agriculture, utility and government markets. On a combined
basis, the TASC Entities had revenues in 1996 of $387.0 million and $324.8
million for the nine months ended September 30, 1997, and operating income of
$32.4 million and $27.9 million, respectively, for the same periods.
TASC expanded its weather operations in 1993, forming TASC U.K. The Company
also purchased two U.K.-based weather forecasting and systems companies -- The
Weather Department Ltd. and The Computer Department Ltd.
TASC's principal commercial product is Computer Output to Laser Disk (COLD)
software used in document management systems. TASC recently initiated a business
in precision imaging, primarily for the agricultural market.
BACKGROUND OF THE PROPOSED SALE
The Company on an on-going basis considers various alternatives to maximize
shareholder value. As part of this process, and in response to several
unsolicited indications of interest by third parties for the Company in the
spring of 1997, the Company engaged Alex. Brown & Sons Incorporated (which
subsequently became BT Alex. Brown) in June 1997 to provide investment banking
advice to the Company. Over the following three months, information was
furnished to, and discussions were held with, those parties that had contacted
the Company together with a limited number of other parties with interests in
the same industries. No agreement or transaction resulted from these
discussions. During these discussions, several of the parties expressed interest
in the Company's financial services businesses, but did not have an interest in
acquiring TASC, largely because of its concentration in the national security
market and because more than half of its revenues are from classified contracts.
Following the summer of 1997, the Company, with assistance from BT Alex.
Brown, considered whether enhancing shareholder value might require a separation
of the Company's information services businesses and the TASC Entities, since
otherwise interested third parties did not appear to view these businesses as
synergistic. The Company also noted that the relatively high valuations of
information technology companies serving primarily government markets and of
information content companies serving primarily commercial markets did not
appear to be reflected in the valuations given to the Company's Common Stock.
Finally, trends in national security, including declining customer budgets,
increased competition, larger procurements and industry consolidation, all
favored firms larger than TASC.
Accordingly, at a Primark Board meeting held on September 29, 1997, the
Primark Board determined to emphasize its global financial, economic and market
research information services businesses and to seek a buyer for TASC.
Thereafter, six companies, including the Buyer, executed confidentiality
agreements and received a detailed offering memorandum describing the business
and financial position of the TASC Entities and commenced due diligence reviews
of the operations of the TASC Entities. The Company also considered the sale of
WSI and the U.K. weather information companies separately. A separate offering
memorandum was prepared covering these companies and distributed to several
potentially interested parties. During the first half of November 1997, the
Company received written and oral indications of interest from potential buyers
including the Buyer. Of these indications of interest, one was for WSI and the
U.K. weather information companies. The Company concluded that it would be more
favorable to the Company to sell the TASC Entities as an entirety as opposed to
piecemeal. Of the indications of interest for the TASC Entities in their
entirety, both written and oral, the highest price was offered by the Buyer. As
a result of the Buyer's bid for the TASC Entities in their entirety and for a
price higher than the price contained in other indications of interest, on
November 25, 1997 the Primark Board determined to pursue the Buyer's bid. Over
the next week,
14
20
representatives of the Company and the Buyer, assisted at various times by their
respective legal and financial advisors, commenced negotiation of the Stock
Purchase Agreement and various terms of the Proposed Transaction. The Primark
Board was apprised of the status of these negotiations on December 1 and 2,
1997. After the close of business on December 5, 1997, the Primark Board met and
discussed the terms of the Stock Purchase Agreement, and received a financial
presentation from BT Alex. Brown. The Primark Board approved the Proposed
Transaction, subject to such final changes in the Stock Purchase Agreement and
related documents that the appropriate officers of the Company shall approve.
Such final changes included reaching agreement on the form of employment
agreement for certain TASC employees, whose continued employment is a condition
to the Buyer's consummation of the Proposed Transaction. BT Alex. Brown also
delivered its oral opinion (later confirmed in writing) that the Proposed
Transaction was fair, from a financial point of view, to the Company's
shareholders. During December 6 and 7, 1997, the terms of the Proposed
Transaction, including the employment agreements, were finalized. On December 8,
1997, the Stock Purchase Agreement was executed and the Proposed Transaction was
publicly announced.
REASONS FOR THE PROPOSED TRANSACTION
In reaching its decision to recommend and approve the Stock Purchase
Agreement, the Primark Board consulted with its advisors and considered the
material factors described below. Based upon its review of such factors, the
Primark Board approved the Stock Purchase Agreement.
The Primark Board considered the following factors in reaching the
conclusion to approve the Stock Purchase Agreement and the transactions
contemplated thereby:
- The belief of the Company's management, which was adopted by the Primark
Board, that the financial and investor community viewed the business of
TASC and the Financial Information businesses of the Company as serving
very different markets, and that this viewpoint has had a negative impact
on the price of the Company's Common Stock. The Primark Board therefore
believed that the Proposed Transaction may allow shareholders to realize
greater value.
- The Primark Board's belief that the ongoing consolidation in the national
security industry and trends in government procurement have made size and
scope key success factors in the markets served by TASC, and that TASC's
long-term success in the government information technology area may
require that TASC become part of a large, integrated defense contractor,
such as the Buyer.
- While no decision has been made by the Primark Board to sell the Company,
the outcome of discussions held over the summer of 1997 has made it clear
that there are no strategic buyers with interest in both TASC and the
Financial Information businesses. This fact may be a negative influence on
the valuation of the Common Stock.
- The sale of TASC will allow the Company's management to focus its
resources primarily on the financial, economic and market research
information services businesses and growth opportunities in these
businesses.
- The IT Services Agreement entered into as a part of the Proposed
Transaction provides for a continuation for three years of the information
technology research and development, planning and technical assistance
TASC has provided to the Company's Financial Information businesses.
- The consideration to be paid by the Buyer to the Company consists
entirely of cash thereby enabling the Company to reduce indebtedness and
providing funds for the operations and growth of the Financial Information
group.
- The Stock Purchase Agreement does not contain a financial condition for
the Buyer and, accordingly, the Company is not taking the risk that the
Buyer will be unable to obtain financing for the Proposed Transaction.
- The Primark Board's determination that the consideration to be received
for the TASC Entities was fair, which determination was based on the
Primark Board's assessment of the business and financial results of the
TASC Entities as well as the opinion of BT Alex. Brown, the Company's
financial
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advisor, that the consideration to be received by the Company in the
Proposed Transaction is fair to the Company's shareholders from a
financial point of view.
The Primark Board also considered the following risks and uncertainties
associated with consummation of the Proposed Transaction:
- Following consummation of the Proposed Transaction, the Company's sole
remaining strategic business (other than TIMCO, which is being accounted
for as a discontinued operation) will be the Financial Information group.
- The terms of the Stock Purchase Agreement provide that, should the
Primark Board change its recommendation to vote for the Proposed
Transaction, the Company would be obligated to pay Litton $12 million plus
costs and expenses.
- Following consummation of the Proposed Transaction, the Company will have
a greater percentage of its total revenues and profits originating outside
the United States, and thus is more exposed to adverse foreign currency
movements.
- Following consummation of the Proposed Transaction, the Company's
business will principally serve institutions and professionals in the
financial markets, and thus the Company's overall revenues and profits
could be adversely affected to a greater degree by any downturn in the
financial markets.
In analyzing the Proposed Transaction and related transactions and in its
deliberations regarding the recommendation of the Stock Purchase Agreement, the
Primark Board also considered a number of other factors, including (i) its
knowledge of the business, operations, properties, assets, financial condition
and operating results of the TASC Entities; (ii) judgments as to Primark's
future prospects with and without the TASC Entities; and (iii) the terms of the
Stock Purchase Agreement, which were the product of extensive arm's length
negotiations. The Primark Board did not find it practical to and did not
quantify or attempt to attach relative weight to any of the specific factors
considered by it. The Primark Board did, however, find that the positive factors
listed above outweighed the potential risks of the Proposed Transaction, and
found the opportunity to generate increased shareholder value through the
separation of the Financial Information group and Applied Technology business
compelling.
Notwithstanding expectations of the Company's senior management regarding
the benefits to be realized from the Proposed Transaction, no assurance can be
given that Primark will be able to realize such benefits or compete effectively
against certain other competitors that possess significantly greater resources
and marketing capabilities.
RECOMMENDATION OF THE PRIMARK BOARD
At the meeting of Primark's Board held December 5, 1997 to consider the
Stock Purchase Agreement, the Primark Board unanimously approved the Proposed
Transaction as being in the best interests of the Company and its shareholders.
FOR THE REASONS DISCUSSED ABOVE, THE PRIMARK BOARD UNANIMOUSLY RECOMMENDS THAT
PRIMARK SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE PROPOSED TRANSACTION.
OPINION OF FINANCIAL ADVISOR
Primark retained BT Alex. Brown on June 10, 1997 to act as Primark's
financial advisor. In connection with the Proposed Transaction, the Primark
Board requested that BT Alex. Brown render its opinion to the Primark Board as
to the fairness, from a financial point of view, of the consideration to be
received by Primark in the Proposed Transaction to the holders of Common Stock.
At the December 5, 1997 meeting of the Primark Board, representatives of BT
Alex. Brown made a presentation with respect to the Proposed Transaction, and on
December 8, 1997, BT Alex. Brown rendered to the Primark Board its written
opinion to the effect that, as of such date, and subject to the assumptions
made, matters considered and limitations set forth in such opinion and
summarized below, the consideration was fair, from a financial point of view, to
the holders of Common Stock. Except for certain constraints imposed by the
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classified nature of certain of TASC's government contracts, no limitations were
imposed by the Primark Board upon BT Alex. Brown with respect to the
investigations made or procedures followed by it in rendering its opinion.
The full text of BT Alex. Brown's written opinion dated December 8, 1997
(the "BT Alex. Brown Opinion"), which sets forth, among other things,
assumptions made, matters considered and limitations on the review undertaken,
is attached hereto as Annex B and is incorporated herein by reference. Primark
shareholders are urged to read the BT Alex. Brown Opinion in its entirety. The
BT Alex. Brown Opinion is directed to the Primark Board, addresses only the
fairness to Primark's shareholders of the consideration to be received by
Primark from a financial point of view and does not constitute a recommendation
to any Primark shareholder as to how such shareholder should vote at the Special
Meeting. The BT Alex. Brown Opinion was rendered to the Primark Board for its
consideration in determining whether to approve the Stock Purchase Agreement.
The discussion of the BT Alex. Brown Opinion in this Proxy Statement is
qualified in its entirety by reference to the full text of the BT Alex. Brown
Opinion.
In connection with the BT Alex. Brown Opinion, BT Alex. Brown reviewed
certain publicly available financial information and other information
concerning Primark and the TASC Entities and reviewed certain internal financial
analyses and other information furnished to it by Primark. As a result of the
classified nature of certain of TASC's government contracts, BT Alex. Brown
relied on disclosure by management as to the financial results of those
contracts and the representations of management that all such contracts were in
full force and effect, but was not able to verify such information. BT Alex.
Brown also held discussions with members of the senior management of Primark
regarding the business and prospects of Primark and TASC. In addition, BT Alex.
Brown (i) reviewed the reported price and trading activity for the Common Stock,
(ii) analyzed selected recently completed and pending mergers and acquisitions
in the applied technology industry, (iii) reviewed certain financial and stock
market information for companies in the applied technology and information
industries whose securities are publicly traded, (iv) performed a discounted
cash flow analysis, (v) reviewed the terms of the Stock Purchase Agreement and
certain related documents, and (vi) performed such other studies and analyses
and considered such other factors as it deemed appropriate. In conducting its
review and arriving at its opinion, BT Alex. Brown assumed and relied upon,
without independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with it for
purposes of rendering its opinion. With respect to the financial information
relating to Primark and TASC provided to BT Alex. Brown, BT Alex. Brown assumed
that such information was reasonably prepared and reflected the best currently
available estimates and judgments of the management of Primark as to the
financial performance of Primark and TASC. BT Alex. Brown did not make, did not
request and was not provided with an independent evaluation or appraisal of the
assets of Primark or TASC, nor has BT Alex. Brown been furnished with any such
evaluations or appraisals. The BT Alex. Brown Opinion is based on market,
economic and other conditions as they existed and could be evaluated as of the
date of the opinion letter.
The following is a summary of the analyses performed and factors considered
by BT Alex. Brown in connection with the rendering of the BT Alex. Brown
Opinion.
Historical Financial Position. In rendering its opinion, BT Alex. Brown
reviewed and analyzed the historical and current financial condition of TASC
which included (i) an assessment of TASC's recent financial statements; (ii) an
analysis of TASC's revenue, growth and operating performance trends; and (iii)
an assessment of TASC's margin changes, market share and access to markets.
Historical Stock Price Performance. BT Alex. Brown reviewed and analyzed
the daily closing per share market prices and trading volume for the Common
Stock from December 5, 1995 to December 4, 1997 and compared the movement of
such daily closing prices with the movement of the Standard & Poor's 500
composite average (the "S&P 500") over the same period. BT Alex. Brown noted
that, on a relative basis, the Common Stock performed below the S&P 500 over the
same period. BT Alex. Brown also reviewed the daily closing per share market
prices of the Common Stock and compared the movement of such closing prices with
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the movement of (i) an applied technology composite average (consisting of
American Management Systems, Incorporated, CACI International Inc, Computer
Sciences Corporation and Tracor, Inc.) and (ii) an information services industry
composite average (consisting of Automatic Data Processing, Inc., Dun &
Bradstreet Corporation, Equifax Inc., Harcourt General, Inc. and The McGraw Hill
Companies, Inc.) over the period from December 5, 1995 to December 4, 1997. On a
relative basis, the Common Stock performed below both the applied technology
composite average and the information services composite average. This
information was presented to give the Primark Board background information
regarding the stock price of Primark over the period indicated.
Analysis of Certain Publicly Traded Companies. This analysis examines a
company's valuation in the public market as compared to the valuation in the
public market of other selected publicly traded companies. BT Alex. Brown
compared certain financial information (based on the valuation measurements
described below) relating to Primark to certain corresponding information
relating to a group of ten publicly traded companies in the information services
industry (consisting of Automatic Data Processing, Inc., Dun & Bradstreet
Corporation, Equifax Inc., FactSet Research Systems Inc., Harcourt General,
Inc., PRIMEDIA Inc., The McGraw Hill Companies, Inc., Pearson plc, Reuters
Holdings plc and Thomson Corp. (collectively, the "Information Companies")).
Such financial information included, among other things, (i) common equity
market valuation; (ii) operating performance; (iii) ratios of common equity
market value as adjusted for debt and cash ("Enterprise Value") to revenues and
earnings before interest expense, income taxes and depreciation and amortization
("EBITDA"); and (iv) ratios of common equity market value ("Equity Value") to
after-tax cash flow ("ATCF") and earnings per share ("EPS"). The financial
information used in connection with the multiples provided below with respect to
Primark and the Information Companies was based on the latest reported twelve
month period as derived from publicly available information, estimated EBITDA
for calendar year 1997 as derived from publicly available research reports for
the Information Companies and the management plan for Primark and estimated EPS
for calendar years 1997 and 1998 as reported by I/B/E/S International ("IBES"),
an indirect wholly-owned subsidiary of the Company. BT Alex. Brown noted that
the multiple of Enterprise Value to trailing twelve month revenues was 1.7x for
Primark, compared to a range of 1.5x to 4.2x, with a mean of 2.8x, for the
Information Companies; the multiple of Enterprise Value to trailing twelve month
EBITDA was 11.0x for Primark, compared to a range of 7.9x to 14.6x, with a mean
of 12.4x, for the Information Companies; and the multiple of Enterprise Value to
estimated calendar year 1997 EBITDA was 10.1x for Primark, compared to a range
of 7.6x to 15.1x, with a mean of 12.2x, for the Information Companies. BT Alex.
Brown further noted that the multiple of Equity Value to trailing twelve month
EPS was 38.2x for Primark, compared to a range of 16.3x to 30.6x, with a mean of
25.4x, for the Information Companies; the multiple of Equity Value to calendar
year 1997 EPS was 34.9x for Primark, compared to a range of 15.3x to 30.7x, with
a mean of 25.6x, for the Information Companies; the multiple of Equity Value to
calendar year 1998 EPS was 25.6x for Primark, compared to a range of 14.1x to
26.6x, with a mean of 22.2x, for the Information Companies; and the multiple of
Equity Value to trailing twelve month ATCF was 12.5x for Primark, compared to a
range of 10.6x to 22.1x, with a mean of 16.4x, for the Information Companies. As
a result of the foregoing procedures, BT Alex. Brown noted that the Enterprise
Value multiples for Primark were generally within the range, but below the mean,
of the multiples for the Information Companies, and the Equity Value multiples
of EPS were generally within or above the range, and above the mean, of the
multiples for the Information Companies. As noted above, EPS projections for
Primark and the Information Companies were based on IBES estimates. The IBES EPS
estimates, as of December 5, 1997, for the calendar years 1997 and 1998 for
Primark were $0.99 and $1.35, respectively.
BT Alex. Brown also analyzed certain financial information relating to a
group of six companies filing reports with the Securities and Exchange
Commission in the applied technology industry (consisting of American Management
Systems, Incorporated, CACI International Inc, Computer Sciences Corporation,
Electronic Data Systems Corporation, Science Applications International Corp.
and Tracor, Inc. (collectively, the "Applied Technology Companies")) and
compared such information to certain corresponding financial information for the
Proposed Transaction. Such financial information included, among other things,
(i) common equity market valuation; (ii) operating performance; (iii) ratios of
Enterprise Value to revenues, EBITDA and earnings before interest expense and
income taxes ("EBIT"); and (iv) ratios of Equity Value to common equity book
value ("Book Value") and EPS. The financial information used in connection with
the
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multiples provided below with respect to the Applied Technology Companies was
based on the latest reported twelve month period as derived from publicly
available information. BT Alex. Brown noted that the multiple of Enterprise
Value to trailing twelve month revenues was 1.1x for the Proposed Transaction
compared to a range of 0.5x to 1.5x, with a mean of 1.0x, for the Applied
Technology Companies; the multiple of Enterprise Value to trailing twelve month
EBITDA was 10.1x for the Proposed Transaction, compared to a range of 6.9x to
11.6x, with a mean of 8.7x, for the Applied Technology Companies; and the
multiple of Enterprise Value to trailing twelve month EBIT was 12.4x for the
Proposed Transaction compared to a range of 9.7x to 20.6x, with a mean of 14.2x
for the Applied Technology Companies. BT Alex. Brown further noted that the
multiple of Equity Value to trailing twelve month EPS was 22.1x for the Proposed
Transaction, compared to a range of 18.2x to 37.6x, with a mean of 25.3x, for
the Applied Technology Companies; and the multiple of Equity Value to Book Value
was 3.0x for the Proposed Transaction, compared to a range of 2.5x to 4.4x, with
a mean of 3.5x, for the Applied Technology Companies. As a result of the
foregoing procedures, BT Alex. Brown noted that the Enterprise Value multiples
for the Proposed Transaction were generally within the range of the multiples
for the Applied Technology Companies.
Analysis of Selected Mergers and Acquisitions. BT Alex. Brown reviewed the
financial terms, to the extent publicly available, of 13 proposed, pending or
completed mergers and acquisitions since May 1, 1988 in the applied technology
industry (the "Selected Transactions"). The Selected Transactions included: the
acquisition of BDM International, Inc. by TRW Inc. (announced 11/21/97), the
acquisition of Computer Data Systems, Inc. by Affiliated Computer Services, Inc.
(announced 9/21/97), the acquisition of Logicon, Inc. by Northrop Grumman
Corporation (announced 5/5/97), the acquisition of the defense business of
Hughes Electronics Corp. from General Motors Corp. by Raytheon Company
(announced 1/16/97), the acquisition of the information systems and services
business of TRW Inc. by private investors (announced 2/9/96), the acquisition of
PRC Inc. from The Black & Decker Corp. by Litton (announced 12/13/95), the
acquisition of SHL Systemhouse, Inc. by MCI Communications Corp. (announced
9/20/95), the acquisition of E-Systems, Inc. by Raytheon Company (announced
4/3/95), the acquisition of Syscon Corp. from Harnischfeger Industries, Inc. by
Logicon, Inc. (announced 1/20/95), the acquisition of the Federal Systems
Company division of International Business Machines Corp. by Loral Corp.
(announced 12/12/93), the acquisition of ARC Professional Services Group from
Sequa Corp. by Computer Sciences Corp. (announced 12/2/93), the acquisition of
Vitro Corp. from Penn Central Corp. by Tracor, Inc. (announced 6/10/93) and the
acquisition of BDM International, Inc. by Ford Aerospace Corp. (announced
5/24/88). BT Alex. Brown calculated various financial multiples based on certain
publicly available information for each of the Selected Transactions and
compared them to corresponding financial multiples for the Proposed Transaction.
Multiples paid in the four Selected Transactions announced prior to January 1,
1995 were excluded for purposes of calculating the mean multiples for the
Selected Transactions. BT Alex. Brown noted that the multiple of adjusted
purchase price (value of consideration paid for common equity ("Equity Purchase
Price") adjusted for debt, preferred stock and cash) to trailing twelve month
revenues was 1.1x for the Proposed Transaction versus a range of 0.3x to 1.9x,
with a mean of 1.1x, for the Selected Transactions; the multiple of adjusted
purchase price to trailing twelve month EBITDA was 10.1x for the Proposed
Transaction versus a range of 9.7x to 13.7x, with a mean of 11.5x, for the
Selected Transactions; and the multiple of adjusted purchase price to trailing
twelve month EBIT was 12.4x for the Proposed Transaction versus a range of 12.2x
to 34.8x, with a mean of 17.3x, for the Selected Transactions. BT Alex. Brown
further noted that the multiple of Equity Purchase Price to trailing twelve
month net income was 22.1x for the Proposed Transaction versus a range of 17.2x
to 36.2x, with a mean of 25.4x, for the Selected Transactions and the multiple
of Equity Purchase Price to Book Value was 3.0x for the Proposed Transaction
versus a range of 1.0x to 7.3x, with a mean of 3.5x, for the Selected
Transactions. All multiples for the Selected Transactions were based on public
information available at the time of announcement of such transaction, without
taking into account differing market and other conditions during the seven-year
period during which the Selected Transactions occurred.
Discounted Cash Flow Analysis. BT Alex. Brown performed a discounted cash
flow analysis for TASC. Discounted cash flow analysis values a business based on
the current value of the future cash flow that the business is expected to
generate. To establish a current value under this approach, future cash flow
must be estimated and an appropriate discount rate determined. BT Alex. Brown
used estimates of projected financial performance for TASC for the years 1998
through 2001 that were prepared by the managements of Primark
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and TASC. BT Alex. Brown aggregated the present value of the cash flows through
2001 with the present value of a range of terminal values. The terminal values
were computed based on projected EBITDA in calendar year 2001 and a range of
terminal multiples of 8.0x to 10.0x. BT Alex. Brown discounted these cash flows
at discount rates ranging from 13.0% to 15.0%. BT Alex. Brown arrived at such
discount rates based on its judgment of the weighted average cost of capital of
the Applied Technology Companies, and arrived at such terminal value multiples
based on its review of the trading characteristics of the common stock of the
Applied Technology Companies. This analysis indicated a range of values of
$371.2 million to $479.2 million.
Relevant Market and Economic Factors. In rendering its opinion, BT Alex.
Brown considered, among other factors, the condition of the U.S. stock markets,
particularly in the information services and applied technology sectors, and the
current level of economic activity. No company used in the analyses of other
publicly traded companies nor any transaction used in the analysis of selected
mergers and acquisitions summarized above is identical to Primark, TASC or the
Proposed Transaction. Accordingly, such analyses must take into account
differences in the financial and operating characteristics of the Information
Companies, the Applied Technology Companies and the companies in the Selected
Transactions and other factors that would affect the public trading value and
acquisition value of the Information Companies, the Applied Technology Companies
and the companies in the Selected Transactions, respectively.
While the foregoing summary describes all analyses and factors that BT
Alex. Brown deemed material in its presentation to the Primark Board, it is not
a comprehensive description of all analyses and factors considered by BT Alex.
Brown. The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the applications of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. BT Alex. Brown believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, would
create an incomplete view of the evaluation process underlying the BT Alex.
Brown Opinion. In performing its analyses, BT Alex. Brown considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of Primark and TASC. The analyses performed by BT Alex. Brown
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Additionally, the analyses performed by BT Alex. Brown relating to
the value of a business do not purport to be appraisals or to reflect the prices
at which the business actually may be sold. Furthermore, no opinion is being
expressed as to the prices at which shares of Common Stock may trade at any
future time.
Pursuant to a letter agreement dated June 10, 1997 between Primark and BT
Alex. Brown, the fees to date payable to BT Alex. Brown for its financial
advisory services, including rendering the BT Alex. Brown Opinion, are $1.0
million, which amount will be credited against the final fee of approximately
$2.3 million, payable upon consummation of the Proposed Transaction. In
addition, Primark has agreed to reimburse BT Alex. Brown for its reasonable
out-of-pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel. Primark has
agreed to indemnify BT Alex. Brown and its directors, officers, agents,
employees and controlling persons, for certain costs, expenses, losses, claims,
damages and liabilities related to or arising out of its rendering of services
under its engagement as financial advisor.
The Primark Board retained BT Alex. Brown to act as its advisor based upon
BT Alex. Brown's previous financial advisory services to Primark in conjunction
with various capital raising transactions and advisory assignments and based
upon BT Alex. Brown's qualifications, reputation, experience and expertise. BT
Alex. Brown is an internationally recognized investment banking firm and, as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwriting, private placements and valuations for corporate and
other purposes. BT Alex. Brown may actively trade the equity securities of
Primark and Litton for its own account and for the account of its customers and
accordingly may at any time hold a long or short position in such securities. BT
Alex. Brown regularly publishes research reports regarding the information
services industry and the businesses and securities of Primark and other
publicly traded companies in the information services industry.
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USE OF PROCEEDS
The Company estimates that it will obtain after-tax proceeds of
approximately $345 million (before closing costs) upon consummation of the
Proposed Transaction. The Company will use a percentage of the proceeds to
redeem in full its $112 million of 8.75% Senior Notes due October 15, 2000 (the
"Senior Notes"). The redemption of the Senior Notes will require payment of a
4.375% call premium and will cost the Company $4.9 million in addition to the
$112 million principal amount of the Senior Notes. The Company will also repay
its existing revolving credit and term loan facilities. As of December 31, 1997
these facilities amounted to $247.6 million and are anticipated to be no less
than $220 million as of the close of the Proposed Transaction. Any remaining
proceeds will be used for general corporate purposes. Further, the Company is in
negotiations with the commercial banks that have lent funds under the current
revolving credit and term loan facilities. In on-going discussions with these
commercial banks, the Company is negotiating the expansion of its revolving
credit facility from $75 million to $225 million to be effective promptly
following the closing of the Proposed Transaction. This new arrangement would
allow the Company to use a portion of the proceeds to repay all outstanding bank
debt at the closing of the Proposed Transaction, and to have the flexibility to
subsequently borrow amounts either for stock repurchases and/or acquisitions.
The proposed new revolving credit agreement also would allow Primark to
repurchase up to $100 million of its Common Stock. The extent to which the
Company will repurchase stock or participate in acquisitions is entirely
dependent on market conditions and opportunities that are present after the
closing of the Proposed Transaction.
REDEMPTION OF SENIOR NOTES
The Indenture, dated as of October 18, 1993, between the Company and The
First National Bank of Boston, as trustee (the "Indenture") related to $112
million of Senior Notes requires that in the event of a sale of substantially
all of the Company's assets, the Indenture and the obligations owed to
noteholders must be assumed by the purchaser of all, or substantially all, of
the assets. The Company has been advised by legal counsel that the Proposed
Transaction could be interpreted as a sale of substantially all of the Company's
assets under the Indenture, although existing legal precedent does not provide a
definitive conclusion in this regard. To avoid any uncertainty regarding this
issue, the Company has agreed, simultaneously with the Closing of the Proposed
Transaction, to call for redemption all of the outstanding Senior Notes at
104.375% of their principal amount because the Buyer is not assuming these
obligations. Pursuant to the Indenture, the call price of the Senior Notes is
104.375% of the principal amount in the period from October 15, 1997 through
October 14, 1998.
ACCOUNTING TREATMENT FOR THE PROPOSED TRANSACTION
Upon shareholder approval of the Proposed Transaction, the TASC Entities
and their respective subsidiaries will be treated as a discontinued operation of
the Company. All prior periods will be restated to show the operations of the
TASC Entities and their respective subsidiaries separately from the continuing
operations of the Company. The gain on the sale will be calculated as the excess
of consideration received by the Company plus liabilities assumed by the Buyer
over the net book value of the assets sold, net of transaction costs and
applicable income taxes. The gain will be recorded as a separate component of
discontinued operations in the financial statements of the Company.
CERTAIN INCOME TAX CONSEQUENCES
The consummation of the Proposed Transaction will not be a taxable event
for federal income tax purposes for the shareholders of the Company. The
proposed sale will, however, be a taxable event to the Company for federal,
state and U.K. income tax purposes. The Company expects to realize a gain on the
sale for federal, state and U.K. income tax purposes, the amount of which has
not yet been finally determined. Based upon estimates of the cash proceeds of
approximately $432,000,000, the Company will be responsible for income taxes
associated with the sale of the TASC Entities of approximately $94,061,000.
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DISSENTERS' RIGHTS
Primark shareholders are not entitled to dissenter's rights of appraisal or
other dissenter's rights under the Michigan BCA with respect to the Proposed
Transaction or any other transactions contemplated by the Stock Purchase
Agreement.
REGULATORY FILINGS AND APPROVALS
Pursuant to the Stock Purchase Agreement, the parties have made the
appropriate filings required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Hart-Scott-Rodino Act") in connection with the
transactions contemplated by the Stock Purchase Agreement and the consummation
of the Proposed Transaction is subject to the expiration or early termination of
the waiting period prescribed under the Hart-Scott-Rodino Act. The applicable
waiting period under the Hart-Scott-Rodino Act expired on February 13, 1998.
INTERESTS OF CERTAIN PERSONS
Shareholders should consider the following interests of Company directors
and executive officers, which may have presented such directors and executive
officers with conflicts of interest in connection with the negotiation and
approval of the Proposed Transaction.
Primark, TASC and the Buyer will enter into severance and related
arrangements with John C. Holt, executive vice president and a director of the
Company and the President and Chief Executive Officer of TASC, on terms and
conditions reasonably acceptable to Primark and the Buyer, including: (i) the
cancellation of all existing agreements between the TASC Entities and their
subsidiaries, on the one hand, and Mr. Holt, on the other, (ii) if requested by
the Buyer, Mr. Holt entering into a written consulting agreement with the Buyer
to provide a reasonable level of consulting services, as an independent
contractor through December 31, 1998, (iii) TASC paying to Mr. Holt, immediately
following the Closing, all amounts owed to Mr. Holt through the Closing Date
pursuant to the Long Term Incentive Agreement ("EVA") between TASC and Mr. Holt
dated as of February 29, 1996 and (iv) with respect to payments to Mr. Holt
other than pursuant to clause (iii) above that may be negotiated in such
severance and related arrangements, TASC shall be responsible for up to
$1,000,000 of such payments and Primark shall be responsible for any amounts in
excess thereof. Mr. Holt's participation in the negotiations relating to the
Proposed Transaction was limited to soliciting input from certain key employees
of TASC, none of whom are directors or executive officers of Primark, regarding
the form of employment agreement to be entered into between TASC and such
employees. While Mr. Holt voted in favor of the Proposed Transaction in his
capacity as a director of Primark, Mr. Holt's interest in the Proposed
Transaction was disclosed to the other directors of Primark prior to the Primark
Board's approval of the Proposed Transaction.
In addition, the Buyer has agreed to indemnify Primark and its directors
and officers, both in their official capacities and as individuals, against all
liability arising out of the acquisition of TASC by Primark and which was or is
the subject matter of the Bradley v. Gelb et al. litigation (the "Bradley
Litigation"). See "TERMS OF THE STOCK PURCHASE AGREEMENT -- Survival of
Representations and Warranties; Indemnification." The Bradley Litigation was
brought by a former employee regarding a TASC stock transaction which took place
in 1976, prior to the Company's acquisition of TASC in 1991. The defendants in
the Bradley Litigation, the two founders of TASC, have settled the lawsuit for
$4,000,000 plus an additional amount of up to $8,500,000 that was conditioned on
the outcome and reasoning of a then-pending motion for a directed verdict and
new trial. TASC has been advised that the founders are disputing with the
plaintiff whether any additional amount is owing under the terms of the
settlement, and it appears that those parties will proceed to arbitration of
that dispute. Also, the founders settled a related claim for $600,000. The
founders have demanded that TASC indemnify them for amounts paid in such
settlements and associated expenses. TASC has advised counsel for the founders
that their settlement agreements do not appear to satisfy by-law requirements
(including prior company approval) and has requested clarification of the basis
for the founders' indemnification claims. Neither Primark, nor any of its
directors or officers, was a party to the Bradley Litigation. In the event that
any claim related to the Bradley Litigation is made against Primark, or its
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directors or officers, the Buyer has agreed to indemnify the Company and its
directors and officers. The Primark Board viewed the Buyer's indemnification
obligation in connection with the Bradley Litigation as favorable to the Company
and a positive factor in evaluating the terms of the Proposed Transaction.
VOTING AGREEMENTS
As part of its willingness to enter into the Stock Purchase Agreement, the
Buyer has required that Messrs. Joseph E. Kasputys, Stephen H. Curran, John C.
Holt, Michael R. Kargula, Patrick G. Richmond and William J. Swift, who are
executive officers of the Company and collectively own as of the Record Date
approximately 5.13% of the Company's outstanding Common Stock entitled to vote
at the Special Meeting, enter into the Voting Agreements that require them to
vote their shares in favor of the Proposed Transaction and against any competing
transactions or other actions that would interfere with the Proposed
Transaction.
The Voting Agreements provide that the executing shareholders may not,
among other things, (i) transfer to any person any or all Owned Shares; or (ii)
grant any proxies or powers of attorney, deposit any Owned Shares into a voting
trust or enter into a voting agreement, understanding or arrangement with
respect to such Owned Shares; provided that such shareholders are entitled to
(x) deliver or sell to Primark Owned Shares for the purpose of satisfying all or
a portion of the exercise price or related tax liabilities incurred upon
exercise of options or rights currently held by such shareholder to acquire
Common Stock which, upon such acquisition, will become Owned Shares; (y)
transfer by gift not more than 10,000 Owned Shares; and (z) transfer any number
of Owned Shares to one or more third parties provided that such transferees
agree to the terms of the Voting Agreement. "Owned Shares" is defined as the
shares of Primark Common Stock owned by such shareholder on December 8, 1997,
together with any other shares of Primark Common Stock or other securities of
Primark, which may be entitled to vote generally in the election of directors
and any securities convertible into or exercisable or exchangeable for such
securities whether beneficially owned by such shareholder on December 8, 1997 or
thereafter.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
Pursuant to the Stock Purchase Agreement, Primark, TASC and the Buyer at
the Closing will enter into the IT Services Agreement, whereby TASC will
continue to provide Primark with information technology research and
development, planning, and technical assistance. TASC will also continue to
manage the Primark Telecommunications Network and supply professional
information technology services to the business units of Primark and their
customers. Primark will own the intellectual property rights in the work product
produced by TASC pursuant to the IT Services Agreement.
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TERMS OF THE STOCK PURCHASE AGREEMENT
The following discussion of the terms and conditions of the Stock Purchase
Agreement, while materially complete, is qualified in its entirety by reference
to the provisions of the Stock Purchase Agreement, which is attached to this
Proxy Statement as Annex A and incorporated herein by reference. Terms which are
not otherwise defined in this summary have the meaning set forth in the Stock
Purchase Agreement, or an Exhibit thereto, as the case may be.
PURCHASE PRICE
The aggregate purchase price for the stock of the TASC Entities is $432
million in cash subject to adjustment as described below. Primark, Holding Corp.
and Primark U.K. will prepare consolidated financial statements ("Closing
Financial Statements") of the TASC Entities as of the Closing Date (as defined
below) and will deliver them to the Buyer within sixty days after the Closing
Date. The "Shareholders' Equity" reflected in the Closing Financial Statements
will be used in computing an amount (which may be a positive or negative number)
equal to (x) "Shareholders' Equity" as of the Closing Date, minus the balance of
the intercompany accounts as of the Closing Date and minus all Income Tax
liabilities due Primark or governmental authorities as of the Closing Date, and
minus any cash balance as of the Closing Date, minus (y) "Shareholders' Equity"
as of September 30, 1997, minus the balance of the intercompany accounts as of
September 30, 1997 and minus all Income Tax liabilities due Primark or
governmental authorities as of September 30, 1997, and minus any cash balance as
of September 30, 1997 (the "Adjustment Amount"). The Buyer has an opportunity to
object to the Closing Financial Statements and the Stock Purchase Agreement
contains a dispute resolution procedure in the event the Buyer does so object.
On the tenth business day following the final determination of the Adjustment
Amount, if the Adjustment Amount is a positive number, the Buyer will pay the
Adjustment Amount to Primark, and if the Adjustment Amount is a negative number,
Primark will pay the Adjustment Amount to the Buyer.
THE CLOSING
Upon the terms and subject to the conditions of the Stock Purchase
Agreement, the closing of the transactions contemplated by the Stock Purchase
Agreement (the "Closing") will take place on the first business day following
the date on which all of the conditions to each party's obligations hereunder
have been satisfied or waived, or at such other date as the parties may agree
(the "Closing Date").
REPRESENTATIONS AND WARRANTIES
The Stock Purchase Agreement contains various representations and
warranties by Primark, Holding Corp., Primark U.K. and the Buyer. These include
representations and warranties by Primark, Holding Corp. and Primark U.K. as to
(i) the organization, good standing, and capitalization of Primark, Holding
Corp. and Primark U.K. and their respective subsidiaries, (ii) proper corporate
authority, no conflicts, no violations and requisite approvals, (iii) ownership
of the Shares, (iv) accuracy of financial statements, books and records, (v)
absence of undisclosed liabilities and absence of material adverse change, (vi)
material litigation, (vii) compliance with law, (viii) employee benefit plans
and employee matters, (ix) tax matters, (x) title to and condition of assets,
(xi) leases, (xii) certain contracts and arrangements, (xiii) intellectual
property matters, (xiv) computer software, (xv) brokers, finders and fees, (xvi)
permits and security clearances, (xvii) government contracts, (xviii)
environmental matters, (xix) insurance, (xx) intercompany transactions and (xxi)
powers of attorney.
The Stock Purchase Agreement also contains representations and warranties
of the Buyer, including representations and warranties as to: (i) the
organization and good standing of the Buyer, (ii) proper corporate authority, no
conflicts, no violations and requisite approvals, (iii) acquisition of the
Shares for investment, (iv) availability of funds, (v) material litigation, (vi)
investigation by the Buyer, and (vii) brokers, finders and fees.
For a description of the survivability of the representations and
warranties and related indemnification, see "Survival of Representations and
Warranties; Indemnification."
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CERTAIN COVENANTS
The Stock Purchase Agreement also contains various covenants of Primark,
Holding Corp. and Primark U.K. During the period from the date of the Stock
Purchase Agreement to the Closing Date, Primark, Holding Corp. and Primark U.K.
will cause the TASC Entities and each of their subsidiaries to conduct their
businesses and operations in the ordinary course consistent with past practice
to preserve the businesses of the TASC Entities and their subsidiaries and to
preserve the goodwill of customers, suppliers and others having business
relations with the TASC Entities and their subsidiaries. Primark, Holding Corp.
and Primark U.K. will also provide the Buyer access to information subject to
the terms of the Confidentiality Agreement. Each of the parties agrees to use
commercially reasonable efforts to make all filings and obtain all licenses,
consents and approvals of governmental authorities and other third parties
necessary to consummate the Proposed Transaction. In addition, Primark will
obtain a release of any Liens on the Shares and the Intellectual Property assets
of the TASC Entities and their subsidiaries. The parties also agreed with
respect to certain tax matters.
The Primark Board may, in accordance with its fiduciary obligations under
applicable law as advised by independent counsel, change its recommendation to
the Primark shareholders to vote in favor of the Proposed Transaction.
Primark agrees that simultaneously with the Closing, it will cause to be
issued a notice of redemption of all of its outstanding Senior Notes and shall
redeem all such Senior Notes in accordance with the terms of the Indenture.
NO SOLICITATION
Pursuant to the Stock Purchase Agreement, Primark, Holding Corp. and
Primark U.K. have agreed that, prior to the Closing, they will not, and will use
their best efforts to cause their respective officers, directors, employees and
agents not to, directly or indirectly, initiate, solicit or encourage an
inquiry, offer or proposal with respect to, or participate in discussions or
negotiations concerning or provide any information relating to, an acquisition,
merger, tender or exchange offer or other form of business combination involving
any TASC Entities or any of their subsidiaries, the acceptance of which would be
inconsistent with the consummation of the Proposed Transaction.
EMPLOYMENT AND EMPLOYEE BENEFIT PLANS
On and after the Closing for a period of one year, the Buyer will cause the
TASC Entities to provide their respective employees with salary and benefit
plans, programs and arrangements no less favorable in the aggregate than those
currently provided by the Buyer to its current employees in comparable lines of
business with commensurate service and position. In addition, the Buyer shall
cause each TASC Entity to honor all employment agreements entered into by such
TASC Entity, except as otherwise provided in the Stock Purchase Agreement.
The Buyer agrees to comply with the notice requirements set forth in the
Worker Adjustment and Retraining Notification Act ("WARN Act") prior to
effectuating within ninety (90) days of the Closing (i) a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment of the TASC
Entities, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment of the TASC Entities.
To protect the Buyer against any efforts by Primark, Holding Corp., Primark
U.K. or any of their affiliates to cause employees of the TASC Entities or their
subsidiaries to terminate their employment, each of Primark, Holding Corp. and
Primark U.K. agrees that for a period of two years following the Closing Date,
neither Primark, Holding Corp., Primark U.K. nor any of their affiliates will,
directly or indirectly (i) induce any employee of the TASC Entities or their
subsidiaries with a then current compensation of more than $50,000 annually to
leave any of the TASC Entities or their subsidiaries or to accept any other
employment or position, (ii) solicit or hire any such employee, unless such
employee's employment with the TASC Entities or their subsidiaries is terminated
by the TASC Entities or their subsidiaries; provided that nothing in the
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Stock Purchase Agreement will prevent Primark, Holding Corp. or Primark U.K.
from soliciting and hiring such employees pursuant to a general solicitation not
specifically directed at such employees, or (iii) assist any other entity in
hiring any such employee.
Primark, Holding Corp. and Primark U.K. will deliver to the Buyer a list of
100 to 150 key employees of the TASC Entities. The parties thereafter will work
together to develop an incentive compensation arrangement for such employees
that is designed to encourage them to remain with the TASC Entities after the
Closing. Once the parties have agreed upon such arrangement, Primark, Holding
Corp. and Primark U.K. agree, and shall cause the TASC Entities, to assist the
Buyer in conveying and promoting the Buyer's incentive compensation offers to
the individuals identified on such list.
Primark will be responsible for the payment to employees of the TASC
Entities (who are not executive officers of Primark) of any "success fees" in
connection with the transactions contemplated by the Stock Purchase Agreement
which will be paid on the Closing Date, but will not be obligated to pay any
severance or other change of control fees to such employees.
Primark, TASC and the Buyer will enter into severance and related
arrangements with John C. Holt, effective as of the Closing Date, on terms and
conditions reasonably acceptable to Primark and the Buyer, which terms will
include the following: (i) the cancellation of all existing agreements between
the TASC Entities and their subsidiaries, on the one hand, and Mr. Holt, on the
other (including Mr. Holt's employment agreement with TASC and Primark), (ii) if
requested by the Buyer, Mr. Holt entering into a written consulting agreement
with the Buyer to provide a reasonable level of consulting services, as an
independent contractor, (but in any event not to exceed three days per week in
the first 90 days after Closing and five days per month thereafter) to the Buyer
through December 31, 1998, (iii) TASC paying to Mr. Holt, immediately after the
Closing (with any deduction with respect thereto allocated to a Post-Closing
Period), all amounts owed to Mr. Holt through the Closing Date pursuant to EVA,
and (iv) with respect to payments to Mr. Holt other than pursuant to clause
(iii) above that may be negotiated in such severance and related arrangements,
whether for services as a consultant to the Buyer or for salary, bonus, EVA or
otherwise, TASC shall be responsible for (and the Buyer will cause TASC to pay)
up to $1 million of such payments (to be made immediately after the Closing) and
Primark shall be responsible for (and will pay) any amounts in excess thereof.
After the Closing Date, Mr. Holt will become an employee of Primark and remain a
member of the Primark Board.
NON-COMPETITION AGREEMENT
As an inducement to the Buyer to enter into the Stock Purchase Agreement,
Primark, Holding Corp. and Primark U.K. each agreed that for a period of three
years after the Closing Date none of them will, directly or indirectly, for its
own benefit or as agent for another, carry on or participate in the ownership,
management or control of, or the financing of, or be employed by, or consult for
or otherwise render services (in the same lines of business in which the TASC
Entities or their subsidiaries are in as of the Closing Date) to, or allow its
name or reputation to be used in or by any other present or future business
enterprise that competes with the Buyer or the TASC Entities or their
subsidiaries in activities in which any of the TASC Entities or their
subsidiaries is engaged as of the Closing Date; provided, however, that nothing
in the Stock Purchase Agreement shall prohibit Primark, Holding Corp. and
Primark U.K. and their subsidiaries other than the TASC Entities and their
subsidiaries from engaging in any businesses in which they are involved in as of
the Closing Date or from providing information technology services to the
financial industry.
Nothing contained in the Stock Purchase Agreement limits the right of each
of Primark, Holding Corp. or Primark U.K. as an investor to hold and make
investments in securities of any corporation or limited partnership that is
registered on a national securities exchange or admitted to trading privileges
thereon or actively traded in a generally recognized over-the-counter market,
provided the equity interest of Primark, Holding Corp. and Primark U.K. therein
in the aggregate does not exceed 5% of the outstanding shares or interests in
such corporation or partnership.
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CONDITIONS
General Closing Conditions. The respective obligations of each party to
consummate the transactions contemplated by the Stock Purchase Agreement are
subject to the satisfaction or waiver at or prior to the Closing Date of certain
conditions, including the following: (i) the approval and adoption by the
holders of a majority of the Common Stock; (ii) no statute, rule, regulation,
executive order, decree, or injunction having been enacted, entered, promulgated
or enforced by any court or governmental or regulatory entity which prohibits
the consummation of the Proposed Transaction; (iii) the absence of any suit,
action, investigation, inquiry or other proceeding instituted, pending or
threatened by any governmental or other regulatory or administrative agency or
commission (a) challenging or seeking to make illegal or otherwise directly or
indirectly restrain or prohibit or make materially more costly the consummation
of the transactions contemplated by the Stock Purchase Agreement, or seeking to
obtain material damages in connection with such transactions; or (b) which
constitutes a Company Material Adverse Effect, and there not having been issued
an order which would have the effect of or require anything set forth in clause
(a) or clause (b) above; (iv) any waiting periods applicable to the transactions
contemplated by the Stock Purchase Agreement under applicable U.S. antitrust or
trade regulation laws and regulations, including, without limitation, under the
Hart-Scott-Rodino Act, having expired or been terminated; and (v) all consents,
approvals, orders and Permits of, and registrations, declarations and filings
with, any governmental authority that shall be legally required in order to
enable Primark, Holding Corp. and Primark U.K. and the Buyer to consummate the
transactions contemplated by the Stock Purchase Agreement, including under the
Hart-Scott-Rodino Act, the Exon-Florio Provisions and the NISPOM, having been
made or obtained.
Primark, Holding Corp. and Primark U.K.'s Closing Conditions. The
obligation of Primark, Holding Corp. and Primark U.K. to consummate the
transactions contemplated by the Stock Purchase Agreement are further subject to
satisfaction or waiver of the following conditions: (i) the representations and
warranties of the Buyer contained in Article III of the Stock Purchase Agreement
being true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except for representations and warranties which are as of a different date or
period having been true and correct in all material respects as of such other
date or period; (ii) the Buyer having performed and complied in all material
respects with all agreements and obligations required by the Stock Purchase
Agreement to be performed or complied with by it on or prior to the Closing;
(iii) Primark, Holding Corp. and Primark U.K. having received a certificate of
an authorized officer of the Buyer to the effect that the conditions in
paragraphs (i) and (ii) have been satisfied; and (iv) the IT Services Agreement
having been entered into by the parties thereto.
Buyer's Closing Conditions. The obligation of the Buyer to consummate the
transactions contemplated by the Stock Purchase Agreement are further subject to
the satisfaction or waiver at or prior to the Closing Date of the following
conditions: (i) the representations and warranties of Primark, Holding Corp. and
Primark U.K. contained in Article II of the Stock Purchase Agreement being true
and correct in all material respects at and as of the Closing Date as though
such representations and warranties were made at and as of such date, except for
representations and warranties which are as of a different date or period having
been true and correct in all material respects as of such other date or period;
(ii) Primark, Holding Corp. and Primark U.K. having performed and complied in
all material respects with all agreements and obligations required by the Stock
Purchase Agreement to be performed or complied with by it on or prior to the
Closing; (iii) releases having been obtained with respect to any Liens on the
Shares or the shares of capital stock of the TASC Entities' respective
subsidiaries as well as a release of any Liens on the Intellectual Property
assets of the TASC Entities and their subsidiaries; (iv) Primark, Holding Corp.
and Primark U.K. having obtained all material third-party consents required for
the consummation of the transactions contemplated by the Stock Purchase
Agreement; (v) Primark, Holding Corp. and Primark U.K. having provided the Buyer
with all of the documents required by the Stock Purchase Agreement to be
delivered at Closing by Holding Corp. and Primark U.K.; (vi) the Buyer having
entered into employment agreements with R. Evan Hineman and with at least five
of the other seven key employees of TASC listed in the Stock Purchase Agreement;
(vii) since the date of the Stock Purchase Agreement, none of the TASC Entities
nor their subsidiaries having suffered a change or changes in its business or
financial condition that has had or would reasonably be expected to have,
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individually or in the aggregate, a Company Material Adverse Effect; (viii)
Primark, TASC and John C. Holt having entered into severance arrangements upon
the terms set forth in the Stock Purchase Agreement; and (ix) the Buyer having
received a certificate of an authorized officer of each of Primark, Holding
Corp. and Primark U.K. to the effect that the conditions in paragraphs (i),
(ii), (iii), (iv) and (vii) above have been satisfied.
The Stock Purchase Agreement provides that no condition involving
performance of agreements by Primark, Holding Corp., Primark U.K. or the TASC
Entities or by the Buyer, or the accuracy of the representations and warranties,
shall be deemed not fulfilled and shall not entitle the parties to fail to
consummate the Proposed Transaction on such basis, if (i) the nonperformance of
such agreements was unintentional and (ii) if the respect in which such
agreements have not been performed or the representations and warranties are
untrue, would not, individually or in the aggregate, have or reasonably be
expected to have a Company Material Adverse Effect or a Buyer Material Adverse
Effect, as the case may be.
TERMINATION
The Stock Purchase Agreement may be terminated (subject to a termination
fee under certain circumstances as described below) and the transactions
contemplated by the Stock Purchase Agreement may be abandoned at any time prior
to the Closing Date: (i) by mutual written consent of the parties; (ii) by
Primark, Holding Corp., Primark U.K. or the Buyer at any time after April 30,
1998 if the Closing shall not have occurred by such date, provided that this
right to terminate is not available to any party whose failure to fulfill any
obligation under the Stock Purchase Agreement, was the cause of the failure to
consummate the Proposed Transaction; (iii) by Primark, Holding Corp., Primark
U.K. or the Buyer, if any governmental entity of competent jurisdiction shall
have issued an order, decree or ruling or taken other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by the Stock
Purchase Agreement and such order, decree, ruling or other action shall have
become final and nonappealable; (iv) by the Buyer by written notice to Holding
Corp. and Primark U.K. if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the obligations
of the Buyer to consummate the transactions contemplated by the Stock Purchase
Agreement; or (v) by Holding Corp. and Primark U.K. by written notice to the
Buyer if any event occurs or condition exists which would render impossible the
satisfaction of one or more conditions to the obligations of Holding Corp. and
Primark U.K. to consummate the transactions contemplated by the Stock Purchase
Agreement.
In the event of termination of the Stock Purchase Agreement, there shall be
no liability or obligation on the part of Primark, Holding Corp., Primark U.K.
or the Buyer or any of their respective directors, officers, employees,
affiliates, agents or representatives, except that a party may have liability to
the other parties if the basis of termination is a breach by such party of the
provisions of the Stock Purchase Agreement and, except that, certain provisions
of the Stock Purchase Agreement including, among others, the provisions
regarding public announcements, fees and expenses, governing law and arbitration
will survive termination.
TERMINATION FEES
If the Stock Purchase Agreement is terminated because (i) Primark failed to
obtain a release of any Lien on the Shares or the Intellectual Property assets
of the TASC Entities and their subsidiaries or (ii) the Primark Board changed
its recommendation to the Primark shareholders pursuant to the Primark Board's
fiduciary duties, then Holding Corp. must pay to the Buyer a fee of $12 million
plus all reasonable out-of-pocket expenses and fees within five (5) days
following such event.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
All representations and warranties of the parties contained in the Stock
Purchase Agreement will survive the Closing until eighteen (18) months following
the Closing Date (the "Survival Period") except that representations and
warranties made by Primark, Holding Corp. and Primark U.K. relating to income
taxes will survive the Closing Date until expiration of applicable statutes of
limitations. The parties agree that no claims or causes of action may be brought
against Primark, Holding Corp., Primark U.K. or the Buyer based
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upon, directly or indirectly, any of the representations, warranties or
agreements contained in the Stock Purchase Agreement after the Survival Period
or, except as otherwise provided therein, any termination of the Stock Purchase
Agreement.
Primark, Holding Corp. and Primark U.K. will jointly and severally
indemnify the Buyer and its directors, officers, employees, affiliates,
controlling persons, agents and representatives and their successors and assigns
from and against all liability resulting from or relating to (i) any breach by
Primark, Holding Corp. or Primark U.K. of any representation or warranty
contained in the Stock Purchase Agreement, (ii) the merger of Westmark Insurance
Services, Inc. ("Westmark") into TASC (including the liabilities of Westmark),
and (iii) the conduct of business of Primark, Holding Corp. or Primark U.K. and
their subsidiaries other than the TASC Entities and their subsidiaries as
conducted on the Closing Date. Such liability is limited to damages in the
aggregate exceeding $1.5 million (and only to the extent that such damages
exceed such amount); provided, however, that the indemnity provided for in (ii)
and (iii) above is not subject to this limitation or any time limitation. The
obligation of Primark, Holding Corp. and Primark U.K. to indemnify the Buyer
will not exceed $100 million in the aggregate. Westmark, a shell corporation
with minimal assets and liabilities and no operations, was merged into TASC so
that TASC could take advantage of certain tax attributes of Westmark.
The Buyer will indemnify Primark, Holding Corp. and Primark U.K. and their
directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns from all liability resulting
from or relating to any breach of any representation or warranty of the Buyer
contained in the Stock Purchase Agreement. Such liability is limited to damages
in the aggregate exceeding $1.5 million (and only to the extent that such
damages exceed such amount). The obligation of the Buyer to indemnify Primark,
Holding Corp. and Primark U.K. will not exceed $100 million in the aggregate.
In addition, from and after the Closing, the Buyer will indemnify and hold
harmless, to the fullest extent permitted by law, Primark, the directors and
officers of Primark, both in their capacities as directors and/or officers of
Primark, or any TASC Entities or affiliates of Primark and as individuals and
the successors and assigns of the above (the "Bradley Indemnitees"), from and
against all liability, demands, claims, actions or causes of action, assessment,
losses, damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) asserted against or incurred by any Bradley
Indemnitee as a result of or arising out of the acquisition of TASC by Primark
and which was or is the subject matter of the Bradley Litigation or the
settlement thereof including but not limited to any claims for indemnification
in connection with such matter (collectively, the "Bradley Damages"). If so
requested by a Bradley Indemnitee, the Buyer shall pay or advance any and all
reasonable expenses which shall include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with defending, being a
witness in or participating in, or preparing to defend, be a witness in or
participate in, any threatened, pending or completed action, suit, proceeding,
inquiry or investigation involving the Bradley Damages; provided that each such
requesting Bradley Indemnitee agrees to cooperate fully and provide reasonable
assistance to the Buyer in connection with the claims regarding the Bradley
Damages. The indemnity provided for in this paragraph shall not be subject to
the $1.5 million limitation of the Stock Purchase Agreement described above or
any time limitation.
The Buyer shall also indemnify Holding Corp. and Primark U.K. for any
increase in taxes paid by Holding Corp. and Primark U.K. as a result of any
reallocation of the purchase price allocation, including interest, penalties,
and other additions and for the cost of all reasonable outside legal and tax
services with respect to such taxes. This indemnification is not subject to the
$1.5 million limitation referred to above and will be subject only to the
applicable statute of limitations.
EXPENSES
Whether or not the Proposed Transaction is consummated, and except as
otherwise expressly set forth in the Stock Purchase Agreement, all costs and
expenses (including legal and financial advisory fees and expenses) incurred in
connection with, or in anticipation of, the Stock Purchase Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses. The Buyer agrees to waive compliance by Primark, Holding Corp. and
Primark U.K. with any applicable bulk transfer laws
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(including any so-called "tax bulk sales provisions"). Each of Primark, Holding
Corp. and Primark U.K., on the one hand, and the Buyer, on the other hand, will
indemnify and hold harmless the other party from and against any and all claims
or liabilities for financial advisory and finders' fees incurred by reason of
any action taken by such party or otherwise arising out of the transactions
contemplated by the Stock Purchase Agreement by any person claiming to have been
engaged by such party.
INTELLECTUAL PROPERTY
The Buyer is not purchasing, acquiring or otherwise obtaining any right,
title or interest in the name (i) "Primark" or the "globe" logo (whether alone
or in combination with any name, word or other symbol), or any trade names,
trademarks, identifying logos or service marks or employing the word "Primark"
or any variation of any of the foregoing, or (ii) any other marks owned or used
by Primark and its subsidiaries, (collectively, "Primark's Trademarks"). Primark
acknowledges that the TASC Entities and their subsidiaries do not use any of
Primark's Trademarks except ones that are described in clause (i) above. The
Buyer will not make any use of, or attempt to register, Primark's Trademarks
from and after the Closing Date. Within ninety (90) days after the Closing Date,
the Buyer shall delete all references to Primark's Trademarks from all
advertising, inventory, stationary, signage and any other materials.
MARKET PRICE DATA; DIVIDENDS
The Common Stock is listed on the New York Stock Exchange ("NYSE") and on
the Pacific Exchange under the symbol "PMK". The table below sets forth, for the
calendar periods indicated, the high and low intra-day sales price per share of
the Common Stock as reported on the NYSE Composite Tape.
HIGH LOW
-------- --------
1996
First Quarter.............................................................. $40 $27
Second Quarter............................................................. 38 1/2 30 3/4
Third Quarter.............................................................. 33 5/8 25 1/8
Fourth Quarter............................................................. 28 1/2 21 3/8
1997
First Quarter.............................................................. $28 1/4 $23 3/8
Second Quarter............................................................. 26 5/8 17 3/8
Third Quarter.............................................................. 30 11/16 25 3/16
Fourth Quarter............................................................. 42 26 1/2
1998
First Quarter (through February 23, 1998).................................. $42 1/2 $38
On December 5, 1997, the last full trading day before the public
announcement of the Proposed Transaction, the high and low sales price per share
of Common Stock, as quoted on the NYSE Composite Tape, were $35.875 and $34.25
respectively.
The closing sales price for the shares of Common Stock as reported on the
NYSE Composite Tape on February , 1998 (the latest practicable date prior to
mailing this Proxy Statement) was $ . As of the close of business on
the Record Date, there were approximately 8,314 holders of record of the
Company's Common Stock.
Since 1988, the Company has not paid cash dividends on its Common Stock.
The Company currently intends to retain its earnings for future growth and
therefore does not anticipate paying any cash dividends in the foreseeable
future. See the Consolidated Financial Statements of the Company and the Notes
thereto incorporated herein by reference concerning restrictions on dividends.
30
36
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information for the nine
months ended September 30, 1997 and the year ended December 31, 1996 presented
herein gives effect to the Company's sale of the TASC Entities and their
affiliates. For purposes of the Unaudited Pro Forma Consolidated Financial
Information, the term "TASC" shall mean TASC, Inc., its affiliates and TASC U.K.
The unaudited pro forma consolidated financial information for the years ended
December 31, 1994 and 1995 presented herein gives effect only to the treatment
of TASC and TIMCO as discontinued operations and does not reflect the effects of
the Proposed Transaction. The Unaudited Pro Forma Condensed Consolidated
Statements of Income for the nine months ended September 30, 1997 and for the
year ended December 31, 1996 assume that the Proposed Transaction occurred on
January 1. Accordingly, the pro forma financial information for the 1997 period
is based upon the historical financial statements of Primark and TASC for the
nine months ended September 30, 1997. The pro forma financial information for
1996 is based upon the historical financial statements of Primark and TASC for
the twelve months ended December 31, 1996, adjusted to reflect the operations of
TIMCO as discontinued. Certain reclassifications have been made to the
historical income statements to conform with the Company's current presentation.
The Unaudited Pro Forma Consolidated Financial Statements give effect to
events that are directly attributable to the Proposed Transaction and expected
to have a continuing impact on the Company. Explanations for these adjustments
are included in the Notes to the Unaudited Pro Forma Consolidated Condensed
Balance Sheet and Income Statements. The pro forma condensed consolidated income
statement for the year ended December 31, 1996 does not reflect interest income
which would have been earned on approximately $77,789,000 of unapplied proceeds.
Assuming the Company had invested such unapplied proceeds in overnight funds, it
would have earned interest income of approximately $4,000,000.
It should be noted that the Unaudited Pro Forma Consolidated Statement of
Income for the year ended December 31, 1996 includes the operations of the
following companies from their respective dates of acquisition: Groupe DAFSA
S.A. acquired June 18, 1996; Yankee acquired August 9, 1996; Worldscope/
Disclosure LLC acquired October 15, 1996; ICV Limited acquired October 24, 1996.
Similarly, the unaudited pro forma financial information for the nine months
ended September 30, 1997 includes the operations of Baseline Financial Services,
Inc. and WEFA Holdings, Inc. from their January 6, 1997 and February 7, 1997
dates of acquisition, respectively. Other than inclusion of operations from
their respective dates of acquisition, the Unaudited Pro Forma Consolidated
Statements do not include the impact of pro forma adjustments related to the
1996 and 1997 acquisitions as the acquisitions were not material in the
aggregate or on a stand alone basis.
The Company's Unaudited Pro Forma Consolidated Financial Information should
be read in conjunction with the historical financial statements of Primark and
TASC incorporated herein by reference and the information contained in the
Company's "Management's Discussion and Analysis of Financial Condition and
Results of Operations" which is also incorporated herein by reference.
31
37
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
UNAUDITED
PROPOSED PRO
AS REPORTED TASC(1) TRANSACTION ADJUSTMENTS FORMA
----------- --------- ----------- ----------- ---------
(THOUSANDS)
Cash and cash equivalents........ $ 16,308 $ (160) $ 427,790(2) $ (427,790)(3) $ 16,148
Accounts receivable.............. 181,969 (94,411) 87,558
Net assets of discontinued
operations..................... 44,864 151,723 (151,723)(2) 44,864
Other current assets............. 16,609 (3,163) 13,446
Goodwill, net.................... 652,763 (93,298) 559,465
Capitalized data and other
intangibles, net............... 49,194 (883) 48,311
Capitalized software, net........ 43,960 (689) 43,271
Other assets..................... 7,680 (319) (3,899)(4) 3,462
Property, plant and equipment.... 58,318 (11,742) 46,576
----------- --------- ----------- ----------- ---------
Total assets........... $ 1,071,665 $(52,942) $ 276,067 $ (431,689) $ 863,101
========= ========= ========= ========== ========
Notes payable.................... $ 2,951 $ 2,951
Accounts payable and accrued
liabilities.................... 61,263 $(28,751) $ (6,905)(3) 25,607
Federal income, property and
other taxes payable............ 11,767 (3,428) $ 3,013(2) (1,862)(5) 9,490
94,061(2) (94,061)(3)
Deferred income.................. 88,912 (6,763) 82,149
Long term debt................... 347,423 (321,337)(3) 26,086
Deferred income taxes............ 15,043 (6,933) (1,705)(4) 6,405
Other liabilities................ 80,645 (7,067) 73,578
Minority interest................ 907 907
Stockholders' equity............. 462,754 178,993(6) (3,038)(5) 635,928
(2,781)(4)
----------- --------- ----------- ----------- ---------
Total liabilities and
stockholders'
equity............... $ 1,071,665 $(52,942) $ 276,067 $ (431,689) $ 863,101
========= ========= ========= ========== ========
The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.
32
38
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
1. TASC
The pro forma condensed consolidated balance sheet gives effect to the
classification of TASC as a discontinued operation upon receipt of shareholder
approval. Included in the net assets of TASC is an account receivable, net, from
Primark of $18,435,000.
2. PROPOSED TRANSACTION
The pro forma condensed consolidated balance sheet gives effect to the sale
of TASC for $432,000,000, net of estimated transaction costs of $2,810,000 and
success fees of $1,400,000. Income taxes associated with the sale of TASC are
estimated to be $94,061,000. In connection with the proposed transaction,
Primark has agreed to fund all federal and state income tax liabilities of TASC
as of the closing. Federal and state income taxes at September 30, 1997 included
in the historical financial statements of TASC aggregate $3,013,000.
3. USE OF PROCEEDS
The pro forma condensed consolidated balance sheet assumes for the purpose
of this presentation that the proceeds will be used to (i) prepay all amounts
outstanding on the Company's $112,000,000 senior callable bonds, including a
4.375% premium aggregating $4,900,000 together with accrued interest thereon,
(ii) repay $209,337,000 of the Company's outstanding term loan together with
accrued interest thereon, and (iii) to fund the estimated income tax liability
associated with the proposed transaction of $94,061,000. The final amount of
taxes to be paid and the level and timing of bank debt to be repaid, if any,
will be determined following consummation of the proposed sale of TASC.
4. DEBT ISSUE COSTS
The pro forma condensed consolidated balance sheet gives effect to the
write off of unamortized debt issue costs of $3,899,000 and related tax benefit
of $1,482,000 associated with prepayment of the senior callable bonds and term
loan described in (3) above. In addition, at September 30, 1997 there were
$587,000 of unamortized original issue discounts that have been written off, net
of a related tax benefit of $223,000. Such amounts will be reflected as an
extraordinary item in the Company's consolidated statement of income.
5. DEBT PREPAYMENT PREMIUM
The pro forma condensed consolidated balance sheet gives effect to a charge
for the prepayment premium of $4,900,000 net of tax benefit of $1,862,000 as
described in (3) above. Such amounts will be reflected as an extraordinary item
in the Company's consolidated statement of income.
6. CLOSING ADJUSTMENTS
The actual gain at the closing date will be adjusted from the amounts
presented herein on a dollar for dollar basis for increases or decreases in
shareholders' equity of TASC between September 30, 1997 and the closing date,
excluding the effect of changes resulting from income tax liabilities to be paid
by the Company as described in (2) above.
33
39
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
UNAUDITED
PRO
AS REPORTED TASC(1) ADJUSTMENTS FORMA
----------- ---------- ----------- ---------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Operating Revenues.......................... $ 617,468 $(324,753) $ 2,010(2) $ 294,725
Operating Expenses:
Cost of Services.......................... 342,830 (226,046) 1,212(2) 117,996
Selling General and Administrative........ 179,905 (64,862) 115,043
Depreciation.............................. 16,963 (3,855) 13,108
Amortization of Goodwill.................. 13,893 (2,070) 11,823
Amortization of other intangible assets... 12,188 (724)(3) 11,464
Restructuring Charge...................... 6,800 6,800
----------- ---------- ----------- ---------
Total Operating Expenses.......... 572,579 (296,833) 488 276,234
----------- ---------- ----------- ---------
Operating Income.......................... 44,889 (27,920) 1,522 18,491
----------- ---------- ----------- ---------
Other Income and (Deductions)
Investment Income......................... 904 (776) 742(2) 870
Interest Expense.......................... (17,925) 108 (32)(2) (1,674)
16,175(3)
Foreign Currency Gain (loss).............. 2,327 (2) 2,325
Other..................................... 1,646 33 1,679
----------- ---------- ----------- ---------
Total Other....................... (13,048) (637) 16,885 3,200
----------- ---------- ----------- ---------
Income From Continuing Operations Before
Income Taxes.............................. 31,841 (28,557) 18,407 21,691
Income Taxes................................ 18,537 (12,439) 6,995(4) 13,093
----------- ---------- ----------- ---------
Income From Continuing Operations........... $ 13,304 $ (16,118) $11,412 $ 8,598
========= ========== ========= ========
Earnings per Common and Common Equivalent
Share..................................... $ 0.48 $ 0.31
========= ========
Weighted Average Common and Common
Equivalent Shares Outstanding............. 27,577 27,577
========= ========
The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.
34
40
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
PRO FORMA UNAUDITED
EXCLUDING PRO
AS REPORTED TIMCO(5) TIMCO TASC(1) ADJUSTMENTS FORMA
----------- ---------- --------- ---------- ----------- ---------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Operating Revenues........... $ 767,125 $(106,362) $660,763 $(386,953) $ 3,253(2) $277,063
Operating Expenses:
Cost of Services........... 457,528 (88,779) 368,749 (258,768) 3,144(2) 113,125
Selling General and
Administrative........... 199,922 (10,201) 189,721 (86,904) 102,817
Depreciation............... 19,445 (1,204) 18,241 (5,923) 12,318
Amortization of Goodwill... 13,369 13,369 (2,753) 10,616
Amortization of other
intangible assets........ 10,540 10,540 (192) (1,164)(3) 9,184
Total Operating
Expenses.......... 700,804 (100,184) 600,620 (354,540) 1,980 248,060
----------- ---------- --------- ---------- ----------- ---------
Operating Income........... 66,321 (6,178) 60,143 (32,413) 1,273 29,003
----------- ---------- --------- ---------- ----------- ---------
Other Income and
(Deductions)...............
Investment Income.......... 2,703 (4) 2,699 (638) 614(2) 2,675
Interest Expense........... (20,193) 1,544 (18,649) 26 18,623(3)
Foreign Currency Gain
(loss)................... 1,864 1,864 (28) 1,836
Other...................... (1,533) 239 (1,294) 1,360 66
----------- ---------- --------- ---------- ----------- ---------
Total Other......... (17,159) 1,779 (15,380) 720 19,237 4,577
----------- ---------- --------- ---------- ----------- ---------
Income From Continuing
Operations Before Income
Taxes...................... 49,162 (4,399) 44,763 (31,693) 20,510 33,580
Income Taxes................. 21,207 (1,988) 19,219 (14,401) 7,794(4) 12,612
----------- ---------- --------- ---------- ----------- ---------
Income From Continuing
Operations................. $ 27,955 $ (2,411) $ 25,544 $ (17,292) $12,716 $ 20,968
=========== =========== ========== =========== =========== ==========
Dividends on Preferred
Stock...................... (359) (359)
----------- ---------
Income Applicable to Common
Stock...................... $ 27,596 $ 20,609
=========== ==========
Earnings per Common and
Common Equivalent Share.... $ 1.04 $ .78
=========== ==========
Weighted Average Common and
Common Equivalent Shares
Outstanding................ 26,555 26,555
=========== ==========
The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.
35
41
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
PRO FORMA UNAUDITED
EXCLUDING PRO
AS REPORTED TIMCO(5) TIMCO TASC ADJUSTMENTS FORMA
----------- --------- ---------- ---------- ----------- ---------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Operating Revenues.............. $ 610,216 $(79,237) $ 530,979 $(346,443) $ 243(2) $184,779
Operating Expenses:
Cost of Services.............. 361,989 (64,021) 297,968 (228,643) 243(2) 69,568
Selling General and
Administrative.............. 159,113 (8,273) 150,840 (82,424) 68,416
Depreciation.................. 15,068 (931) 14,137 (5,961) 8,176
Amortization of Goodwill...... 9,561 9,561 (2,758) 6,803
Amortization of other
intangible assets........... 11,642 11,642 (712) 10,930
----------- --------- ---------- ---------- ----------- ---------
Total Operating
Expenses............. 557,373 (73,225) 484,148 (320,498) 243 163,893
----------- --------- ---------- ---------- ----------- ---------
Operating Income.............. 52,843 (6,012) 46,831 (25,945) 0 20,886
----------- --------- ---------- ---------- ----------- ---------
Other Income and (Deductions)
Investment Income............. 980 (3) 977 3 (13)(2) 967
Interest Expense.............. (17,467) 1,406 (16,061) 691 6,993(3) (8,377)
Foreign Currency Gain
(loss)...................... (2,620) (2,620) (2,620)
Other......................... (1,026) 219 (807) (38) (845)
----------- --------- ---------- ---------- ----------- ---------
Total Other............ (20,133) 1,622 (18,511) 656 6,980 (10,875)
----------- --------- ---------- ---------- ----------- ---------
Income From Continuing
Operations Before Income
Taxes......................... 32,710 (4,390) 28,320 (25,289) 6,980 10,011
Income Taxes.................... 14,863 (1,673) 13,190 (11,212) 2,652(5) 4,630
----------- --------- ---------- ---------- ----------- ---------
Income From Continuing
Operations.................... $ 17,847 $ (2,717) $ 15,130 $ (14,077) $ 4,328 $ 5,381
=========== ========== =========== =========== =========== ==========
Dividends on Preferred Stock.... (534) (534)
----------- ---------
Income Applicable to Common
Stock......................... $ 17,313 $ 4,847
=========== ==========
Earnings per Common and Common
Equivalent Share.............. $ 0.65 $ 0.18
=========== ==========
Weighted Average Common and
Common Equivalent Shares
Outstanding................... 26,555 26,555
=========== ==========
The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.
36
42
PRIMARK CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
PRO FORMA UNAUDITED
EXCLUDING PRO
AS REPORTED TIMCO(5) TIMCO TASC ADJUSTMENTS FORMA
----------- --------- ---------- ---------- ----------- ---------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
Operating Revenues........... $ 469,555 $(46,362) $ 423,193 $(312,199) $ 627(2) $111,621
Operating Expenses:
Cost of Services........... 272,770 (35,867) 236,903 (187,841) 627(2) 49,689
Selling General and
Administrative........... 135,812 (6,857) 128,955 (91,750) 37,205
Depreciation............... 12,091 (622) 11,469 (5,462) 6,007
Amortization of Goodwill... 6,932 6,932 (2,760) 4,172
Amortization of other
intangible assets........ 8,429 8,429 (106) 8,323
----------- --------- ---------- ---------- ----------- ---------
Total Operating
Expenses.......... 436,034 (43,346) 392,688 (287,919) 627 105,396
----------- --------- ---------- ---------- ----------- ---------
Operating Income........... 33,521 (3,016) 30,505 (24,280) 0 6,225
----------- --------- ---------- ---------- ----------- ---------
Other Income and (Deductions)
Investment Income.......... 648 648 (37) 611
Interest Expense........... (10,996) 495 (10,501) 1,925 5,392(3) (3,184)
Foreign Currency Gain
(loss)................... (1,329) (1,329) (1,329)
Other...................... 334 199 533 (6) 527
----------- --------- ---------- ---------- ----------- ---------
Total Other......... (11,343) 694 (10,649) 1,882 5,392 (3,375)
----------- --------- ---------- ---------- ----------- ---------
Income From Continuing
Operations Before Income
Taxes...................... 22,178 (2,322) 19,856 (22,398) 5,392 2,850
Income Taxes................. 9,494 (506) 8,988 (9,892) 2,049(5) 1,145
----------- --------- ---------- ---------- ----------- ---------
Income From Continuing
Operations................. $ 12,684 $ (1,816) $ 10,868 $ (12,506) $ 3,343 $ 1,705
=========== ========== =========== =========== =========== ==========
Dividends on Preferred
Stock...................... 1,434 1,434
----------- ---------
Income Applicable to Common
Stock...................... $ 14,118 $ 3,139
=========== ==========
Earnings per Common and
Common Equivalent Share.... $ 0.71 $ 0.16
=========== ==========
Weighted Average Common and
Common Equivalent Shares
Outstanding................ 19,909 19,909
=========== ==========
The notes to the unaudited pro forma condensed consolidated financial
statements are an integral part of this statement.
37
43
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED INCOME STATEMENTS
1. TASC
The pro forma condensed consolidated income statements give effect to the
classification of TASC as a discontinued operation upon receipt of shareholder
approval.
2. INTERCOMPANY ELIMINATION
The pro forma condensed consolidated income statements give effect to the
elimination of transactions between TASC and Primark or any of its other
subsidiaries that are included in the amounts reported for TASC on a separate
entity basis.
3. INTEREST EXPENSE AND DEBT ISSUE COSTS
A. 1996
The pro forma condensed consolidated income statement gives effect to the
reversal of interest expense for the period of $18,623,000 upon the application
of the proceeds from the sale of TASC to repay all amounts outstanding under
borrowing agreements of the Company. Upon the repayment of such amounts, the
Company would have no outstanding debt at any time during the year ended
December 31, 1996. Consequently, debt issue cost amortization of $1,164,000
would not have occurred. In addition, the Company would have had approximately
$77,789,000 of proceeds in excess of amounts required to repay all outstanding
borrowings, which, if invested, would have earned approximately $4,000,000 in
interest income assuming an interest rate of 5.2%.
B. 1997
The pro forma condensed consolidated income statement gives effect to the
reduction in 1) actual interest expense of $7,393,000 for the repayment of the
$112,000,000 senior callable bonds in their entirety, 2) actual interest expense
of $10,666,000 related to the estimated repayment of the Company's term loan
based upon the remaining available proceeds which would have resulted in a
paydown of $217,089,000 on the balance outstanding of $225,000,000, reduced by
$1,884,000 of interest expense allocated to the discontinued operations of
TIMCO, and 3) amortization of debt issue costs of $724,000.
4. INCOME TAXES
The pro forma condensed consolidated income statements give effect to the
tax benefit of adjustments (1) through (3) and (6), as described above and
below, at an incremental rate of 38%.
5. TIMCO
As a result of the Company's June 1997 announced plan to dispose of TIMCO,
a wholly owned subsidiary of the Company, the pro forma condensed consolidated
income statements for the year ended December 31, 1996 and for the period ended
September 30, 1997, as previously reported, reflect TIMCO as a discontinued
operation.
6. CLOSING ADJUSTMENTS
The actual gain at the closing date will be adjusted from the amounts
presented herein on a dollar for dollar basis for increases or decreases in
shareholders' equity of TASC between September 30, 1997 and the closing date,
excluding the effect of changes resulting from income tax liabilities to be paid
by the Company as described in note (2) above.
38
44
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned as of February 1, 1998 by each director, the chief executive
officer and the four other most highly compensated executive officers, and by
all directors and executive officers of the Company as a group:
NUMBER PERCENT
NAME OF SHARES OWNERSHIP
---------------------------------------------------------------- --------- ---------
Kevin J. Bradley(1)............................................. 62,736 .23%
Stephen H. Curran(2)(3)......................................... 233,705 .86%
Ira Herenstein(2)(3)............................................ 113,094 .42%
John C. Holt(2)(3).............................................. 475,464 1.73%
Michael R. Kargula(2)(3)........................................ 330,918 1.22%
Joseph E. Kasputys(2)(3)........................................ 1,391,870 5.08%
Steven Lazarus(1)............................................... 96,840 .36%
Patricia McGinnis(1)............................................ 22,500 .08%
Jonathan Newcomb(1)............................................. 17,300 .06%
Constance K. Weaver(1).......................................... 30,000 .11%
All directors and executive officers as a group (12
persons)(4)(5)(6)............................................. 3,092,568 10.81%
- ---------------
(1) Includes for Messrs. Bradley, Lazarus and Newcomb 62,436, 74,904 and 15,000
shares of Common Stock, respectively, and for Mdmes. McGinnis and Weaver
22,500 and 30,000 shares of Common Stock, respectively, which such directors
have the right to acquire pursuant to the exercise of the options held by
them under the Primark Corporation Stock Option Plan for Non-Employee
Directors. Directors who are employees of the Company, or a subsidiary
thereof, are not eligible to receive option grants under this plan.
(2) Includes 28,262 shares of Common Stock for each of Messrs. Curran and
Kasputys, 28,899 shares of Common Stock for Mr. Kargula and 12,484 shares of
Common Stock for Mr. Herenstein allocated to the participant's account under
the Primark Corporation Savings and Stock Ownership Plan (formerly the
Primark Corporation Employee Stock Ownership Plan) ("Savings Plan").
Includes 144 shares of Common Stock held by Mr. Holt under the TASC, Inc.
Profit Sharing and Stock Ownership Plan ("PSSOP"). Also includes 2,199
shares of Common Stock held by Mr. Curran under the Primark Corporation 1992
Employee Stock Purchase Plan ("ESPP").
(3) Includes 431,000, 474,320, 103,000, 145,000 and 100,610 shares of Common
Stock subject to stock options exercisable within 60 days of February 1,
1998 held by Messrs. Kasputys, Holt, Curran, Kargula and Herenstein,
respectively, which options were granted under various plans of the Company.
(4) Includes 1,468,130 shares of Common Stock subject to stock options
exercisable within 60 days of February 1, 1998 held by executive officers
under various plans of the Company.
(5) Includes 154,903 shares of Common Stock for all executive officers as a
group which are held under the Savings Plan and PSSOP as of February 1,
1998. As to shares of Common Stock held in the Savings Plan, the executive
officers possess both voting and dispositive power with respect to all such
shares of Common Stock. Non-employee directors of the Company are not
eligible to participate in these plans.
(6) Includes 2,825 shares of Common Stock for all executive officers as a group
which are held under the ESPP.
39
45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on information filed with the Securities and Exchange Commission
("SEC") on Schedule 13Gs, certain information is set forth below with respect to
beneficial owners of more than five percent of the shares of Common Stock (see
also "Security Ownership of Management" above).
NUMBER PERCENT OF CLASS
NAME AND ADDRESS OF SHARES AS OF FEBRUARY 15, 1998
- ---------------------------------------------------------- ------------ -----------------------
The Capital Group Companies, Inc.......................... 2,288,900(1) 8.49%
Capital Research and Management Company
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
Geocapital, LLC........................................... 1,588,033(2) 5.89%
767 Fifth Avenue
45th Floor
New York, New York 10153-4590
- ---------------
(1) As of December 31, 1997, The Capital Group Companies, Inc. is the parent
holding company of a group of investment management companies that hold
investment power and, in some cases, voting power over the securities
reported. Capital Research and Management Company serves as investment
advisor to various investment management companies and has the sole power to
dispose of the reported securities. SMALLCAP World Fund, Inc. is an
investment management company and has the sole power to vote 1,350,000
shares of the reported securities. The Capital Group Companies, Inc. does
not have investment power or voting power over any of the securities
reported above; however, The Capital Group Companies, Inc. may be deemed to
beneficially own such securities by virtue of the rules and regulations
promulgated by the SEC.
(2) As of December 31, 1997, sole dispositive power is claimed with respect to
1,588,033 shares of Common Stock.
INDEPENDENT PUBLIC ACCOUNTANT
A representative of Deloitte & Touche LLP, the Company's independent public
accountants, will be present at the Special Meeting, afforded the opportunity to
make a statement and available to respond to questions.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's Proxy
Statement and form of Proxy relating to the Company's 1998 Annual Meeting of
Shareholders must have been received by the Secretary of the Company at 1000
Winter Street, Suite 4300N, Waltham, Massachusetts 02154, not later than
December 11, 1997.
40
46
WHERE YOU CAN FIND MORE INFORMATION
Primark files annual, quarterly and special reports, proxy statements and
other information with the SEC. Shareholders may read and copy any reports,
statements or other information that the Company files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Our filings are also available from commercial document
retrieval services and at the Internet web site maintained by the SEC at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Proxy Statement, except
for any information superseded by information contained directly in this Proxy
Statement. This Proxy Statement incorporates by references the documents set
forth below that we have previously filed with the SEC. These documents contain
important information about us and our financial condition.
PRIMARK SEC FILINGS (FILE NO. 1-8260) PERIOD
- --------------------------------------------- ---------------------------------------------
Annual Report on Form 10-K and Form 10-K/A... Year ended December 31, 1996
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 1997, June 30, 1997,
and September 30, 1997
Current Reports on Form 8-K.................. Filed January 7, 1997 (amending the Form 8-K
filed November 14, 1996), February 4, 1997,
April 3, 1997, April 18, 1997, June 20,
1997, July 11, 1997, July 28, 1997 and
December 9, 1997 (as amended on December
11, 1997)
We are also incorporating by reference additional documents that we may
file with the SEC between the date of this Proxy Statement and the date of the
Special Meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
proxy statements.
If you are a shareholder, you may have previously received some of the
documents incorporated by reference. You may still obtain copies of any of these
documents from Primark or the SEC or the SEC's Internet web site described
above. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Proxy Statement, by requesting them in writing or by telephone
from Primark at the following address:
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Attention: Investor Relations
Telephone: (781) 466-6611
Please request documents by March 23, 1998 to ensure receipt before the
Special Meeting.
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47
ANNEX A
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
PRIMARK CORPORATION,
PRIMARK HOLDING CORPORATION,
PRIMARK INFORMATION SERVICES UK LIMITED
AND
LITTON INDUSTRIES, INC.
AND
LITTON U.K. LIMITED
DATED AS OF DECEMBER 8, 1997
================================================================================
48
TABLE OF CONTENTS
ARTICLE 1
SALE OF STOCK
PAGE
----
SECTION 1.1. Purchase and Sale of Shares; Entry into Covenant not to Compete........ A-1
SECTION 1.2. Time and Place of Closing.............................................. A-2
SECTION 1.3. Purchase Price Adjustment.............................................. A-2
SECTION 1.4. Deliveries by the Parent and the Sellers............................... A-3
SECTION 1.5. Deliveries by the Buyer................................................ A-3
SECTION 1.6. Use of the Parent's Name and Logo...................................... A-3
SECTION 1.7. No Ongoing or Transition Services...................................... A-4
SECTION 1.8. Intercompany Accounts.................................................. A-4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE SELLERS
SECTION 2.1. Organization; Etc...................................................... A-4
SECTION 2.2. Authority Relative to this Agreement................................... A-5
SECTION 2.3. Capitalization......................................................... A-5
SECTION 2.4. Ownership of Shares.................................................... A-5
SECTION 2.5. Subsidiaries........................................................... A-5
SECTION 2.6. Consents and Approvals; No Violations.................................. A-6
SECTION 2.7. Financial Statements................................................... A-6
SECTION 2.8. Absence of Undisclosed Liabilities..................................... A-7
SECTION 2.9. Absence of Certain Changes............................................. A-7
SECTION 2.10. Litigation............................................................. A-7
SECTION 2.11. Compliance with Law.................................................... A-7
SECTION 2.12. Employee Benefit Plans; ERISA.......................................... A-7
SECTION 2.13. Taxes.................................................................. A-9
SECTION 2.14. Title, Ownership and Related Matters................................... A-10
SECTION 2.15. Leases................................................................. A-10
SECTION 2.16. Certain Contracts and Arrangements..................................... A-10
SECTION 2.17. Intellectual Property.................................................. A-10
SECTION 2.18. Computer Software...................................................... A-11
SECTION 2.19. Brokers; Finders and Fees.............................................. A-11
SECTION 2.20. Permits and Security Clearances........................................ A-11
SECTION 2.21. Government Contracts................................................... A-11
SECTION 2.22. Environmental Matters.................................................. A-14
SECTION 2.23. Insurance.............................................................. A-15
SECTION 2.24. Intercompany Transactions.............................................. A-15
SECTION 2.25. Powers of Attorney..................................................... A-15
SECTION 2.26. Aggregation............................................................ A-15
SECTION 2.27. Disclosure............................................................. A-15
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
SECTION 3.1. Organization; Etc...................................................... A-16
SECTION 3.2. Authority Relative to this Agreement................................... A-16
(A-i)
49
PAGE
----
SECTION 3.3. Consents and Approvals; No Violations.................................. A-16
SECTION 3.4. Acquisition of Shares for Investment................................... A-16
SECTION 3.5. Availability of Funds.................................................. A-16
SECTION 3.6. Litigation............................................................. A-16
SECTION 3.7. Investigation by Buyer................................................. A-17
SECTION 3.8. Brokers; Finders and Fees.............................................. A-17
ARTICLE 4
COVENANTS OF THE PARTIES
SECTION 4.1. Conduct of Business of the Company..................................... A-17
SECTION 4.2. Access to Information.................................................. A-18
SECTION 4.3. Consents; Cooperation.................................................. A-19
SECTION 4.4. Commercially Reasonable Efforts........................................ A-19
SECTION 4.5. Public Announcements................................................... A-19
SECTION 4.6. Tax Matters............................................................ A-19
SECTION 4.7. The Buyer's Knowledge of Breach........................................ A-22
SECTION 4.8. Employees; Employee Benefits........................................... A-22
SECTION 4.9. Shareholders' Meeting.................................................. A-24
SECTION 4.10. Substitute Guaranty; Indemnity......................................... A-24
SECTION 4.11. Notification of Certain Matters........................................ A-25
SECTION 4.12. Prior Knowledge........................................................ A-25
SECTION 4.13. Supplemental Disclosure................................................ A-25
SECTION 4.14. Noncompetition......................................................... A-25
SECTION 4.15. Nondisclosure of Proprietary Data...................................... A-26
SECTION 4.16. Inconsistent Agreements................................................ A-26
SECTION 4.17. Redemption of Parent Notes............................................. A-27
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
SECTION 5.1. Conditions to Each Party's Obligations to Consummate the Stock
Purchase............................................................. A-27
SECTION 5.2. Further Conditions to the Parent's and the Sellers' Obligations........ A-27
SECTION 5.3. Further Conditions to the Buyer's Obligations.......................... A-28
SECTION 5.4. Materiality of Conditions.............................................. A-28
ARTICLE 6
TERMINATION AND ABANDONMENT
SECTION 6.1. Termination............................................................ A-29
SECTION 6.2. Procedure for and Effect of Termination................................ A-29
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
SECTION 7.1. Survival Periods....................................................... A-30
SECTION 7.2. Parent's and the Sellers' Agreement to Indemnify....................... A-30
SECTION 7.3. The Buyer's Agreement to Indemnify..................................... A-31
SECTION 7.4. Third Party Indemnification............................................ A-32
(A-ii)
50
PAGE
----
SECTION 7.5. No Set-Off............................................................. A-33
SECTION 7.6. Insurance.............................................................. A-33
SECTION 7.7. No Duplication......................................................... A-33
ARTICLE 8
MISCELLANEOUS PROVISIONS
SECTION 8.1. Amendment and Modification............................................. A-33
SECTION 8.2. Extension; Waiver...................................................... A-33
SECTION 8.3. Entire Agreement; Assignment........................................... A-33
SECTION 8.4. Severability........................................................... A-33
SECTION 8.5. Notices................................................................ A-34
SECTION 8.6. Governing Law; Arbitration............................................. A-35
SECTION 8.7. Descriptive Headings................................................... A-35
SECTION 8.8. Counterparts........................................................... A-35
SECTION 8.9. Fees and Expenses...................................................... A-35
SECTION 8.10. Knowledge.............................................................. A-35
SECTION 8.11. Interpretation......................................................... A-36
SECTION 8.12. No Third Party Beneficiaries........................................... A-36
SECTION 8.13. No Waivers............................................................. A-36
SECTION 8.14. Specific Performance................................................... A-36
SECTION 8.15. Further Assurances..................................................... A-36
SECTION 8.16. Preservation of and Access to Certain Information After Closing........ A-36
EXHIBIT 1 Form of IT Services Agreement.......................................... A-38
EXHIBIT 2 Shareholders' Equity for September 30, 1997............................ A-48
EXHIBIT 3 Form of Parent and Sellers Legal Opinion............................... A-49
EXHIBIT 4 Form of Buyer Legal Opinion............................................ A-50
EXHIBIT 5 Form of Employment Agreement........................................... A-51
(A-iii)
51
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 8, 1997 (this
"Agreement"), is entered into by and among Primark Corporation, a Michigan
corporation (the "Parent"), Primark Holding Corporation, a Delaware corporation
(the "U.S. Seller"), Primark Information Services UK Limited, a company
incorporated under the laws of England and Wales (the "U.K. Seller," and
together with the U.S. Seller, the "Sellers"), Litton Industries, Inc., a
Delaware corporation (the "U.S. Buyer"), and Litton U.K. Limited, a company
organized under the laws of England (the "U.K. Buyer," and collectively with the
U.S. Buyer, the "Buyer").
WHEREAS, the Parent owns all of the outstanding shares of capital stock of
the U.S. Seller; and
WHEREAS, the U.S. Seller owns all of the outstanding shares of capital
stock of TASC, Inc., a Massachusetts corporation (the "U.S. Company"); and
WHEREAS, the U.S. Seller owns the entire issued share capital of the U.K.
Seller; and
WHEREAS, the U.K. Seller owns the entire issued share capital of The
Analytic Sciences Corporation Limited, a company incorporated under the laws of
England and Wales (the "U.K. Company," and together with the U.S. Company, the
"Companies" and each a "Company"); and
WHEREAS, the Sellers desire to sell to the Buyer, and the U.S. Buyer
desires to purchase from the U.S. Seller, 1,000 shares of common stock, par
value $.10 per share (the "U.S. Shares"), representing all of the issued and
outstanding shares of the U.S. Company, and the U.K. Buyer desires to purchase
from the U.K. Seller 316,107 ordinary shares (the "U.K. Shares," and together
with the U.S. Shares, the "Shares"), representing the entire issued share
capital of the U.K. Company, in each case upon the terms and subject to the
conditions set forth herein; and
WHEREAS, concurrently with the execution of this Agreement, certain
executive officers of the Parent and/or the Sellers who own stock in the Parent
have each entered into a voting agreement with the U.S. Buyer (collectively, the
"Voting Agreements") pursuant to which each such executive officer has agreed,
among other things, to vote his or her shares of the Parent to approve the
acquisition of the Companies by the Buyer; and
WHEREAS, the Parent and the Sellers wish to enter into a covenant which
will prevent them from engaging in certain lines of business for a certain
period of time; and
WHEREAS, the Parent, the U.S. Buyer and the U.S. Company have agreed to
enter into an Information Technology Services Agreement (the "IT Services
Agreement"), the form of which is attached hereto as Exhibit 1, effective upon
the purchase and sale of the Shares, concerning the provision to the Parent by
the U.S. Company of certain information technology services.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK
SECTION 1.1. Purchase and Sale of Shares; Entry into Covenant not to
Compete. Upon the terms and subject to the conditions of this Agreement, at the
Closing (as hereinafter defined): (i) the U.K. Seller will sell, convey, assign,
transfer and deliver the U.K. Shares to the U.K. Buyer for $80,000,000.00; (ii)
the U.S. Seller will sell, convey, assign, transfer and deliver the U.S. Shares
to the U.S. Buyer for $267,000,000.00; and (iii) the Sellers and the Parent will
enter into the covenant set forth in Section 4.14, for which the U.K. Buyer will
pay to the U.K. Seller $5,000,000.00, and for which the U.S. Buyer will pay to
the U.S. Seller $10,000,000.00, and for which the U.S. Buyer will pay to the
Parent $70,000,000.00. All amounts to be paid by the Buyer to the Sellers and
the Parent pursuant to this Section 1.1 (as the same is adjusted as
A-1
52
provided below, the "Purchase Price") shall be paid in cash by wire transfer of
immediately available funds to an account or accounts designated by the Sellers
and the Parent prior to the Closing. The transactions contemplated by clauses
(i) and (ii) of this Section 1.1 are sometimes herein referred to as the "Stock
Purchase."
SECTION 1.2. Time and Place of Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, One Beacon Street, Boston, Massachusetts 02108, at
9:00 a.m. (local time) on the first business day following the date on which all
of the conditions to each party's obligations hereunder have been satisfied or
waived, or at such other date, place or time as the parties may agree. The date
on which the Closing occurs and the transactions contemplated hereby become
effective is referred to herein as the "Closing Date."
SECTION 1.3. Purchase Price Adjustment. (a) The Parent and the Sellers
will prepare consolidated financial statements ("Closing Financial Statements")
of the Companies as of the Closing Date. During the period following the Buyer's
receipt of the Closing Financial Statements from the Parent and the Sellers,
representatives of the Buyer shall have the opportunity, upon reasonable notice,
to inspect the workpapers relevant to the preparation of the Closing Financial
Statements, interview the personnel involved in the preparation of the Closing
Financial Statements, and otherwise observe the preparation of those workpapers
and the Closing Financial Statements. The Parent and the Sellers will deliver
the Closing Financial Statements (including the calculation of the Adjustment
Amount (as defined below)) to the Buyer within 60 days after the Closing Date.
If within 120 days following the Closing Date, the Buyer has not given the
Parent and the Sellers notice of its objection to the Closing Financial
Statements (which notice must contain a statement of the basis of the Buyer's
objection), then the "Shareholders' Equity" reflected in the Closing Financial
Statements will be used in computing an amount (which may be a positive or
negative number) equal to (x) "Shareholders' Equity" as of the Closing Date,
minus the balance of the intercompany account(s) as of the Closing Date and
minus all Income Tax liabilities due the Parent or governmental authorities as
of the Closing Date, and minus any cash balance as of the Closing Date, minus
(y) "Shareholders' Equity" as of September 30, 1997, minus the balance of the
intercompany account(s) as of September 30, 1997 and minus all Income Tax
liabilities due the Parent or governmental authorities as of September 30, 1997,
and minus any cash balance as of September 30, 1997 (the "Adjustment Amount").
The parties agree that the "Shareholders' Equity" as of September 30, 1997 minus
the balance of the intercompany account(s) as of September 30, 1997 and minus
all Income Tax liabilities due the Parent or governmental authorities as of
September 30, 1997 and minus any cash balance as of September 30, 1997 is
$154,741,299 as calculated in Exhibit 2. If the Buyer gives such notice of
objection, the Buyer, the Parent and the Sellers shall endeavor in good faith to
resolve any disputed items within 20 days after the Sellers' receipt of the
Buyer's notice of objections. If they are unable to do so, then the issues in
dispute will be submitted to a mutually agreeable nationally known independent
accounting firm (the "Accountants") for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such workpapers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
or its Subsidiaries (as defined below) (or its independent public accountants),
and will be afforded the opportunity to present to the Accountants any material
relating to the determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants, as set forth in a notice
delivered to both parties by the Accountants, will be binding and conclusive on
the parties; and (iii) the Buyer and the Sellers will each bear 50% of the fees
of the Accountants for such determination. For purposes of this Section 1.3,
"Shareholders' Equity" means shareholders' equity set forth on a balance sheet
prepared in accordance with the September 30, 1997 Balance Sheet (as defined
below).
(b) If during the period from September 30, 1997 through the Closing Date,
the Parent and the Sellers pay amounts in excess of the aggregate Income Taxes
of the Companies and their Subsidiaries applicable to such period and the Buyer
receives a benefit as a result of such excess payments, the Buyer will promptly
pay the Parent and the Sellers the amount of any benefit actually received by
the Buyer.
A-2
53
(c) The "Shareholders' Equity" shall be determined in accordance with
generally accepted accounting principles in the United States ("GAAP"), in a
manner consistent with and as provided in the financial statements identified in
Section 2.7, and shall be certified by the chief financial officer of the Parent
as having been prepared consistent with the provisions of this Section 1.3. The
accounting firm selected to resolve any disputes will be instructed to determine
the "Shareholders' Equity" in the same manner.
(d) On the tenth business day following the final determination of the
Adjustment Amount, if the Adjustment Amount is a positive number, the Buyer will
pay the Adjustment Amount to the Parent, and if the Adjustment Amount is a
negative number, the Parent will pay the Adjustment Amount to the Buyer. All
payments will be made together with interest at a rate of 6% per annum simple
interest based on actual days over a 365-day year from the Closing Date through
the date of payment. Payments must be made in immediately available funds.
Payments to the Buyer or to the Parent must be made by wire transfer to such
bank account as the Buyer or the Parent, as the case may be, will specify.
SECTION 1.4. Deliveries by the Parent and the Sellers. Subject to the
terms and conditions hereof, at the Closing, the Parent and the Sellers will
deliver the following to the Buyer:
(a) Certificates representing the Shares, accompanied by stock powers duly
endorsed in blank or accompanied by duly executed instruments of transfer;
(b) An executed copy of the IT Services Agreement;
(c) The resignations of all directors and officers of the Companies or any
of their respective Subsidiaries;
(d) Executed copies of the Voting Agreements;
(e) A certificate of the Secretary or an Assistant Secretary of the Parent
and each Seller, dated the Closing Date, setting forth the resolutions of the
Boards of Directors of the Parent or such Seller, as the case may be,
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and certifying that such resolutions have
not been amended or rescinded and are in full force and effect;
(f) A good standing certificate and certified charter documents, dated as
of a date reasonably close to the Closing Date, for each Company and each of its
respective Subsidiaries;
(g) An opinion dated as of the Closing Date from legal counsel to the
Parent and the Sellers in the form attached hereto as Exhibit 3; and
(h) All other documents, instruments and writings required to be delivered
by the Parent and the Sellers at or prior to the Closing Date pursuant to this
Agreement.
SECTION 1.5. Deliveries by the Buyer. Subject to the terms and conditions
hereof, at the Closing, the Buyer will deliver the following to the Sellers
and/or the Parent, as appropriate:
(a) The Purchase Price, in immediately available funds, as set forth in
Section 1.1 hereof;
(b) An executed copy of the IT Services Agreement;
(c) A certificate of the Secretary or an Assistant Secretary of the Buyer,
dated the Closing Date, setting forth the resolutions of the Board of Directors
of the Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and certifying that such
resolutions have not been amended or rescinded and are in full force and effect;
(d) An opinion dated as of the Closing Date from legal counsel to the Buyer
in the form attached hereto as Exhibit 4; and
(e) All other documents, instruments and writings required to be delivered
by the Buyer at or prior to the Closing Date pursuant to this Agreement.
SECTION 1.6. Use of the Parent's Name and Logo. It is expressly agreed
that the Buyer is not purchasing, acquiring or otherwise obtaining any right,
title or interest in the name (i) "Primark" or the
A-3
54
"globe" logo (whether alone or in combination with any name, word or other
symbol), or any trade names, trademarks, identifying logos or service marks or
employing the word "Primark" or any variation of any of the foregoing, or (ii)
any other marks owned or used by the Parent and its Subsidiaries, (collectively,
the "Parent's Trademarks"). The Parent acknowledges that the Companies and their
Subsidiaries do not use any of the Parent's Trademarks except ones that are
described in clause (i) above. The Buyer agrees that neither it nor any of its
affiliates shall make any use of, or attempt to register, the Parent's
Trademarks from and after the Closing Date. Without limiting the generality of
the foregoing, within 90 days after the Closing Date, the Buyer shall delete all
references to the Parent's Trademarks from all advertising, inventory,
stationary, signage and any other materials.
SECTION 1.7. No Ongoing or Transition Services. Except as otherwise
agreed to in writing on or before the Closing Date by the Parent and/or either
of the Sellers, on the one hand, and the Buyer, on the other hand or as set
forth in Section 1.7 of the disclosure schedule being delivered by the Parent
and the Sellers to the Buyer concurrently herewith (the "Disclosure Schedule"),
as of the Closing, all accounting, insurance, banking, tax, personnel, legal,
communications and other products and services, provided to the Companies or any
of their respective affiliates, employees or consultants by the Parent, the
Sellers or any of their respective affiliates, including any agreements or
understandings (written or oral) with respect thereto, will terminate. The
Parent and the Sellers agree to cooperate with the Buyer and the Companies
during the change of ownership of the Companies including the provision by the
Parent and the Sellers of such services for a 90 day period following the
Closing as the Buyer shall reasonably request on or prior to the Closing Date to
be compensated at a customary rate agreed to by the Buyer, the Parent and the
Sellers.
SECTION 1.8. Intercompany Accounts. On or prior to the Closing Date, all
intercompany accounts between the Companies, on the one hand, and the Parent,
the Sellers and their respective affiliates, on the other hand, other than those
arising from ordinary course arms length transactions between such parties which
are reflected in accounts receivables or accounts payables, shall be contributed
to the capital of the respective Company and otherwise cancelled and no
adjustment shall be made to the Purchase Price as a result of any such
cancellation. In addition, the Sellers shall have the right and do intend, at or
immediately prior to the Closing, to cause the Companies and their respective
Subsidiaries to distribute all cash holdings to the Sellers or their respective
affiliates, by one or more cash dividends and/or other distributions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLERS
The Parent and the U.S. Seller, with respect to the U.S. Company, and the
Parent, the U.S. Seller and the U.K. Seller, with respect to the U.K. Company,
hereby each represents and warrants to the Buyer as follows:
SECTION 2.1. Organization; Etc. The Parent and the Sellers are
corporations duly organized or incorporated, validly existing and in good
standing under the respective laws of the jurisdiction of their incorporation or
organization. Each Seller has all necessary corporate power and authority to
execute, deliver and perform this Agreement and any related agreements to which
it is a party. Each Company and each of their respective Subsidiaries (a) is
duly organized or incorporated, validly existing and in good standing under the
laws of its jurisdiction of organization, (b) has all requisite corporate power
and authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted, and (c) is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership, operation or leasing of its properties makes such
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Company Material Adverse Effect (as
hereinafter defined). Section 2.1 of the Disclosure Schedule correctly sets
forth the jurisdiction in which each Company was and is required to be
organized, each jurisdiction in which each Company is qualified or licensed to
do business and the current directors and executive officers of each Company.
True, correct and complete copies of the respective charter documents of each
Company as in effect on the date hereof have been delivered to the Buyer.
Neither Company is a registered or reporting company under the Securities
Exchange Act of 1934, as amended. As used in this Agreement, the word
"Subsidiary" means, with respect to
A-4
55
any party, any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or other
interests having by their terms ordinary voting power (other than as affected by
events of default) to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, the term "Company Material Adverse
Effect" shall mean a material adverse change in, or effect on, the business,
financial condition, results of operations of the Companies and their respective
Subsidiaries, taken as a whole, provided, however, that the effects of changes
that are generally applicable to the industries in which the Companies or their
respective Subsidiaries operate or to the United States or the United Kingdom
economies generally shall be excluded from such determination.
SECTION 2.2. Authority Relative to this Agreement. Each of the Parent and
the Sellers has all necessary corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the approval of the Parent's
shareholders, to consummate the transactions contemplated hereby and in any
related document. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Boards of Directors of the Parent and the Sellers and all
other requisite corporate action on the part of the Parent and the Sellers and,
except for obtaining the approval of the Parent's shareholders as contemplated
by Section 4.9 hereof, no other corporate proceedings on the part of the Parent
or the Sellers are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by each of the Parent and the Sellers and, subject to approval and
adoption of this Agreement by the Parent's shareholders, assuming this Agreement
has been duly authorized, executed and delivered by the Buyer, constitutes the
legally valid and binding agreement of each of the Parent and the Sellers,
enforceable against each of the Parent and the Sellers in accordance with its
terms, except that (a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally and
(b) enforcement of this Agreement, including, among other things, the remedy of
specific performance and injunctive and other forms of equitable relief, may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 2.3. Capitalization. Section 2.3 of the Disclosure Schedule sets
forth the number of issued and outstanding shares of capital stock of each
Company. The Shares represent all of the outstanding capital stock or issued
share capital in the Companies. All of the Shares are validly issued, fully paid
and nonassessable and were issued in conformity with applicable Laws (as defined
below). Except for the Shares, there are not, and at the Closing there will not
be, any existing options, warrants, calls, rights of preemption, subscriptions
or other rights or other agreements or commitments of any character whatsoever
relating to the issued or unissued capital stock or share capital of the
Companies or obligating either Company to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or issued share capital
of, or other equity interests in, the respective Company or securities
convertible into or exchangeable for such shares or equity interests or
obligating the respective Company to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement or commitment.
SECTION 2.4. Ownership of Shares. Except as set forth in Section 2.4 of
the Disclosure Schedule, all of the U.S. Shares are owned of record and
beneficially by the U.S. Seller, and all of the U.K. Shares are owned legally
and of record and beneficially by the U.K. Seller, in each case free and clear
of all liens, pledges, charges, claims, security interests or other
encumbrances, whether consensual, statutory or otherwise (collectively,
"Liens"). The consummation of the Stock Purchase will convey to the Buyer good
title to the U.S. Shares and to the U.K. Buyer good title to the U.K. Shares, in
each case free and clear of all Liens, except for those created by the Buyer or
arising out of ownership of the Shares by the Buyer.
SECTION 2.5. Subsidiaries. Except for the Subsidiaries set forth in
Section 2.5 of the Disclosure Schedule, there is no corporation, partnership,
joint venture or other entity in which either Company directly or indirectly
owns any equity or other ownership interest. Set forth in Section 2.5 of the
Disclosure Schedule is the number of authorized, issued and outstanding shares
of each of the Subsidiaries and its jurisdiction of incorporation. Except as set
forth in Section 2.5 of the Disclosure Schedule, all the outstanding shares of
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capital stock or issued share capital of each of such Subsidiaries are validly
issued, fully paid and nonassessable and were issued in conformity with
applicable Laws, have not been issued in violation of any preemptive or similar
rights, and are owned beneficially and of record by the respective Company
designated in Section 2.5 of the Disclosure Schedule free and clear of any
Liens. There are no outstanding options, warrants, calls, rights or commitments
or any other agreements of any character relating to the sale, issuance or
voting of, or the granting of rights to acquire, any shares of the capital stock
or issued share capital of any such Subsidiary, or any securities or other
instruments convertible into, exchangeable for or evidencing the right to
purchase any shares of capital stock or issued share capital of any of such
Subsidiaries. Section 2.5 of the Disclosure Schedule correctly lists the current
directors and executive officers of each of the Companies' Subsidiaries. True,
correct and complete copies of the respective charter documents of each of the
Companies' Subsidiaries as in effect on the date hereof have been delivered to
the Buyer. No such Subsidiary is a registered or reporting company under the
Exchange Act.
SECTION 2.6. Consents and Approvals; No Violations. Except (i) as set
forth in Section 2.6 of the Disclosure Schedule, (ii) for the approval of the
Parent's shareholders, and (iii) for filings, permits, authorizations,
determinations, consents and approvals as may be required under, and other
applicable requirements of, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "H-S-R Act"), Section 721 of the Defense Production Act of
1950, as amended (the "Exon-Florio Provisions"), and the National Industrial
Security Program Operating Manual (the "NISPOM"), neither the execution and
delivery of this Agreement by the Parent or the Sellers, nor the consummation by
the Parent, the Sellers or the Companies of the transactions contemplated hereby
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of the Parent, the Sellers, the
Companies or any of the Companies' Subsidiaries, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or require any consent under, any indenture, license, contract, agreement
or other instrument or obligation to which the Parent, the Sellers, the
Companies or any of the Companies' Subsidiaries is a party or by which any of
them or any of their respective properties or assets are bound, (c) violate any
order, writ, injunction, decree, statute, rule or regulation (collectively,
"Laws" and, individually, a "Law") applicable to the Parent, the Sellers, the
Companies or any of the Companies' Subsidiaries or any of their respective
properties or assets, (d) require any filing with, or the obtaining of any
permit, authorization, consent or approval of, any governmental or regulatory
authority, domestic or foreign, or (e) result in the imposition of a Lien on any
Company, any of its Subsidiaries, or any of their respective properties or
assets except in the case of clauses (b), (c), (d) and (e) of this Section 2.6
for any such violations, breaches, defaults, rights of termination, cancellation
or acceleration or requirements which, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect and would
not reasonably be expected to adversely affect the ability of the Parent and the
Sellers to consummate the transactions contemplated by this Agreement.
SECTION 2.7. Financial Statements. Section 2.7 of the Disclosure Schedule
contains (a) the audited combined balance sheets of the Companies and their
respective Subsidiaries as of December 31, 1996 and the audited combined
statement of operations and statement of cash flows of the Companies and their
respective Subsidiaries for the years then ended and (b) the unaudited combined
balance sheet (the "September 30, 1997 Balance Sheets") of the Companies and
their respective Subsidiaries as of September 30, 1997 and the unaudited
combined statement of operations and statement of cash flows of the Companies
and their respective Subsidiaries for the nine months then ended. Such balance
sheets fairly present in all material respects the financial position of the
Companies and their respective Subsidiaries as of the respective dates thereof,
and such statements of operations fairly present in all material respects the
results of operations of the Companies and their respective Subsidiaries for the
respective periods indicated. All such financial statements were prepared in
accordance with GAAP consistently applied throughout the period indicated. The
Sellers have made available to the Buyer copies of each management letter
delivered to the Sellers, the Parent, any Company or any Subsidiary of any
Company by independent public accountants in connection with the balance sheets
or relating to any review by such accountants of the internal controls of any
Company or any of its respective Subsidiaries during the five-year period ended
September 30, 1997 or thereafter, and have used reasonable efforts to make
available for inspection all reports and working papers produced or developed by
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auditors or management in connection with their examination of financial
statements with respect to any Company or any of its respective Subsidiaries, as
well as all such reports and working papers for prior periods for which any tax
liability of any Company or any of its respective Subsidiaries has not been
finally determined or barred by applicable statutes of limitation. Other than as
disclosed in the financial statements of the U.S. Company, since December 31,
1995, there has been no change in any of the significant accounting policies,
practices or procedures of any Company or any of its respective Subsidiaries.
SECTION 2.8. Absence of Undisclosed Liabilities. Except (a) for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since December 31, 1996, and (b) as otherwise
disclosed in Section 2.8 of the Disclosure Schedule, since December 31, 1996
neither Company nor any of its respective Subsidiaries has incurred any
liabilities or obligations (whether direct, indirect, accrued or contingent)
individually or in the aggregate, that would be required to be reflected or
reserved against in a balance sheet of the respective Company or Subsidiary
prepared in accordance with GAAP as used in preparing the September 30, 1997
Balance Sheets.
SECTION 2.9. Absence of Certain Changes. Except as set forth in Section
2.9 of the Disclosure Schedule or as otherwise contemplated by this Agreement,
since September 30, 1997, the Companies and their Subsidiaries in the aggregate
have not suffered a Company Material Adverse Effect.
SECTION 2.10. Litigation. Except as set forth in Section 2.10 of the
Disclosure Schedule, there is no action, suit, proceeding or governmental
investigation pending or, to the knowledge of the Parent, threatened against the
Parent, the Sellers, the Companies or any of the Companies' Subsidiaries by or
before any court or governmental or regulatory entity, which (a) individually or
in the aggregate, would reasonably be expected to have a Company Material
Adverse Effect, (b) would reasonably be expected to adversely affect the ability
of the Parent and the Sellers to consummate the transactions contemplated
hereby, or (c) involves a claim or potential claim of aggregate liability in
excess of $250,000 against (whether directly or pursuant to obligations to
indemnify other persons), or that enjoins or compels or seeks to enjoin or to
compel any activity by, any Company or any of its respective Subsidiaries.
SECTION 2.11. Compliance with Law. (a) The business of each of the
Companies and their Subsidiaries is not being and has not been conducted in
violation of any applicable Law or any order, writ, injunction or decree of any
court or governmental or regulatory entity, except for any such violations which
in the aggregate would not reasonably be expected to have a Company Material
Adverse Effect.
(b) The Companies and their Subsidiaries have all governmental permits,
licenses and authorizations (collectively, "Permits") which are necessary to own
their assets and to operate their businesses as conducted under all applicable
Laws, except for Permits the failure to have, in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. The Companies
and their Subsidiaries have complied with and are in compliance with the terms
of their Permits, except where the failure to comply, in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect. Except as
set forth in Section 2.11 of the Disclosure Schedule, all such Permits are valid
and in full force and effect and will remain so upon consummation of the
transactions contemplated by this Agreement. To the knowledge of the Parent, no
suspension, cancellation or termination of any of such Permits is threatened or
imminent that could reasonably be expected to have a Company Material Adverse
Effect.
SECTION 2.12. Employee Benefit Plans; ERISA. (a) Section 2.12(a) of the
Disclosure Schedule sets forth a list of all material employee benefit plans
(including but not limited to plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained by the
U.S. Company or by any trade or business, whether or not incorporated, which
together with the U.S. Company would be deemed a "single employer" within the
meaning of Section 4001(b)(15) of ERISA (an "ERISA Affiliate") for the benefit
of employees of the U.S. Company ("Benefit Plans") and all employment and
severance agreements with employees of the U.S. Company ("Employee Agreements").
True and complete copies of all Employee Agreements have been made available to
the Buyer. All material required reports and descriptions (including Form 5500
Annual Reports) have been filed or distributed appropriately with respect to
each such Benefit Plan.
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(b) With respect to each Benefit Plan, except as otherwise set forth in
Section 2.12(b) of the Disclosure Schedule: (i) if intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code"), such plan has received a
determination letter from the Internal Revenue Service stating that it so
qualifies and that its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable Law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the U.S. Company; (iv) no disputes are pending, or, to
the knowledge of the Parent, threatened that might reasonably be expected to
give rise to material liability on the part of the U.S. Company; (v) no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) has occurred that might reasonably be expected to give rise to
material liability on the part of the U.S. Company; (vi) all contributions
required to be made to such plan as of the date hereof (taking into account any
extensions for the making of such contributions) have been made in full, and the
U.S. Company and each of its Subsidiaries has otherwise performed in all
material respects its obligations under each Benefit Plan and Employee
Agreement; and (vii) all premiums or other payments if due for all periods
ending on or before the Closing Date have been paid with respect to each such
Benefit Plan for which such payments are required.
(c) Except as set forth in Section 2.12(c) of the Disclosure Schedule,
there are no actions, suits or claims pending or to the knowledge of the Parent,
threatened, including proceedings before the Internal Revenue Service, the
United States Department of Labor, or the United States Pension Benefit Guaranty
Corporation, against any Benefit Plan, Employee Agreement or any administrator
or fiduciary thereof. To the knowledge of the Parent, no facts exist which could
reasonably be expected to give rise to any such actions, suits or claims
contemplated by the preceding sentence, other than benefit claims arising in the
normal course of operation of such Benefit Plan or Employee Agreement.
(d) Except as set forth in Section 2.12(d) of the Disclosure Schedule, no
Benefit Plan is a "multiemployer pension plan," as defined in Section 3(37) of
ERISA, nor is any Benefit Plan a plan described in Section 4063(a) of ERISA.
(e) Neither the U.S. Company nor any of its ERISA Affiliates has incurred a
"withdrawal" or "partial withdrawal," as defined in Sections 4203 and 4205 of
ERISA, from any multi-employer pension plan, which has resulted in an unpaid
liability, or could reasonably be expected to result in liability, of the U.S.
Company or any of its ERISA Affiliates.
(f) No liability under Title IV of ERISA has been incurred by the U.S.
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the U.S. Company or any ERISA
Affiliate of incurring a material liability under such Title. No Benefit Plan
has incurred an accumulated funding deficiency, as defined in Section 302 of
ERISA or Section 412 of the Code, whether or not waived. No Benefit Plan is
subject to Title IV of ERISA. Neither the U.S. Company nor any of its ERISA
Affiliates: (i) have maintained since August 8, 1991 a Benefit Plan that was
subject to Title IV of ERISA; or (ii) are under any obligation, whether
contractual or otherwise, to make any payments, contributions, or other
expenditures with respect to any other benefit plan maintained by any other
person with respect to employees covered by such benefit plan.
(g) Except as set forth in Section 2.12(g) of the Disclosure Schedule, with
respect to each Benefit Plan that is a "welfare plan" (as defined in Section
3(1) of ERISA), no such plan provides medical or death benefits with respect to
current or former employees of the U.S. Company beyond their termination of
employment (other than to the extent required by applicable law).
(h) Except as set forth in Section 2.12(h) of the Disclosure Schedule, the
Subsidiaries of the U.K. Company neither pay nor are under any liability to pay
to any employee (other than by payment of employer's contributions under
national insurance or social security legislation), any pension or other benefit
on retirement, death or disability or on the attainment of a specified age or on
the completion of a specified number of years of service.
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(i) Except as set forth in Section 2.12(i) of the Disclosure Schedule, the
Subsidiaries of the U.K. Company do not provide any employee benefits.
SECTION 2.13. Taxes. (a) To the knowledge of the Parent, as of the
Closing Date, the Parent has filed, has caused to be filed or will cause to be
filed, within the times prescribed by law, all federal, state, local and foreign
Tax Returns (as defined below) which are required to be filed by, or with
respect to, the Companies and their respective Subsidiaries. To the knowledge of
the Parent, all such Tax Returns were correct and complete in all material
respects.
(b) To the knowledge of the Parent, each of the Companies, and their
respective Subsidiaries have, within the time prescribed by law, paid (and until
the Closing Date will, within the time prescribed by law, pay) all Taxes,
including all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party
with respect to each of the Companies and their respective Subsidiaries, that
are due and payable (whether or not shown on any Tax Return) on or before the
Closing Date.
(c) To the knowledge of the Parent, there are no material liens with
respect to Taxes upon any of the properties or assets of the Companies or their
respective Subsidiaries.
(d) To the knowledge of the Parent, except as listed in Section 2.13 of the
Disclosure Schedule, neither Company nor any of their respective Subsidiaries
has in effect, as of the date of this Agreement, or will have in effect, as of
the Closing Date, any waiver or extension of any statute of limitations with
respect to Taxes.
(e) To the knowledge of the Parent, except as listed in Section 2.13 of the
Disclosure Schedule, no material federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Tax Returns.
(f) Neither Company nor any of their respective Subsidiaries will be a
party to any agreement providing for the allocation or sharing of Taxes as of
the Closing Date, and after the Closing Date neither Company nor any of its
respective Subsidiaries shall be bound by or have any liability under any such
agreement.
(g) Neither Company nor any of its respective Subsidiaries has any
liability for the Income Taxes of any person other than the Companies and their
Subsidiaries under Section 1.1502-6 of the Income Tax Regulations and none of
the Companies and their respective Subsidiaries are includible in any unitary,
affiliated, combined or consolidated Income Tax Return (or any similar provision
of state, local, or foreign law) except as set forth in Section 2.13 of the
Disclosure Schedule.
(h) The affiliated group of corporations (as that term is defined in
Section 1504(a) of the Code) of which the U.S. Company was a member prior to and
as of the Closing Date (the "Affiliated Group") has filed consolidated federal
Income Tax Returns and state Income Tax Returns filed on a consolidated or
combined basis where appropriate for all taxable years falling within the
Pre-Closing Period (as defined below) and during which the U.S. Company was a
member of the Affiliated Group. The Affiliated Group has paid, withheld or
adequately provided for (or will adequately provide for in the financial
statements) all income and franchise tax, levies, or other like assessments
imposed by the United States or any state, county, local or foreign government,
including additions to Tax, interest and penalties thereon.
(i) Neither Company nor any of its respective Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances would obligate it to make any payments that will not
be deductible under Section 280G of the Code (and any corresponding provision of
state or local tax laws) except as set forth in Section 2.13 of the Disclosure
Schedule.
(j) To the knowledge of the Parent, the U.K. Company and its Subsidiaries
are registered and taxable persons for purposes of the United Kingdom value
added tax and have maintained proper records appropriate for the purposes
thereof, and they have not been required to give security to the Commissioners
of HM Customs & Excise and have duly paid or provided for all value added tax
for which they are liable.
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SECTION 2.14. Title, Ownership and Related Matters. (a) Except as set
forth in Section 2.14(a) of the Disclosure Schedule, the Companies and their
Subsidiaries do not own and have not owned any real property.
(b) Each Company and each of its respective Subsidiaries has, or will as of
the Closing have, good title to, or rights by license, lease or other agreement
to use, all properties and assets (or rights thereto) (other than cash, cash
equivalents and securities and except as set forth in Section 2.14(b) of the
Disclosure Schedule) necessary to permit each Company and each of its respective
Subsidiaries to conduct their respective businesses as currently conducted,
except where the failure to have such title or rights would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
SECTION 2.15. Leases. Section 2.15 of the Disclosure Schedule lists, as
of the date hereof, all real property leases and subleases for space occupied by
either of the Companies or any of their Subsidiaries (collectively, the
"Leases"). True and complete copies of the Leases and all written amendments and
agreements relating thereto have been delivered to the Buyer. All of the Leases
are valid, binding and enforceable obligations of the U.S. Company, the U.K.
Company or one of their Subsidiaries, as the case may be, in accordance with
their terms, and neither Company nor any of its Subsidiaries, as the case may
be, nor, to the knowledge of the Parent, the other party to any Lease is in
default under such Lease, other than such defaults, if any, which would not,
individually or in the aggregate, have a Company Material Adverse Effect. There
is no action, suit, proceeding or governmental investigation pending or, to the
knowledge of the Parent, threatened that would materially interfere with the
quiet enjoyment of any of the Leases.
SECTION 2.16. Certain Contracts and Arrangements. Except for Government
Contracts (as defined below) and as set forth in Section 2.16 of the Disclosure
Schedule, as of the date hereof, neither the U.S. Company nor any of its
Subsidiaries is a party to any written (a) employment agreement; (b) indenture,
mortgage, note, agreement or other instrument relating to the borrowing of money
by the U.S. Company or any of its Subsidiaries, as the case may be (other than
intercompany accounts which shall be governed by Section 1.8 hereof), or the
guaranty by either of the U.S. Company or any of its Subsidiaries of any
obligation for the borrowing of money; (c) agreement or contract the loss of
which would have a Company Material Adverse Effect; (d) contract or agreement
that has or is expected to generate at least $1,000,000 in revenue (including
unexercised options) to the U.S. Company and its Subsidiaries for the year ended
December 31, 1997; (e) contracts or agreements (excluding supplier contracts and
agreements) having an unexpired term as of the date hereof (including
unexercised options) in excess of two years; (f) contracts or agreements
limiting or restricting the ability of the U.S. Company or any of its
Subsidiaries to compete or otherwise to conduct any business in any manner or
place; (g) grants of power of attorney, agency or similar authority to another
person or entity; (h) contracts or agreements containing a right of first
refusal; (i) contract or agreement to which any affiliate, officer or director
of the Parent, the Sellers, the U.S. Company or its Subsidiaries is party; and
(j) contract or agreement not made in the ordinary course of business
(collectively, "Material Contracts"). All of the Material Contracts are valid,
binding and enforceable obligations of the U.S. Company or its Subsidiaries, as
the case may be, in accordance with their terms. Neither the U.S. Company nor
one of its Subsidiaries, as the case may be, nor, to the knowledge of the
Parent, any other party thereto (i) is in default under any of the aforesaid
agreements, other than such defaults, if any, which would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or (ii) has waived any material rights under any Material Contract (other
than releases executed in the ordinary course of business in connection with
closing contracts or task orders). To the knowledge of the Parent, there are no
written agreements or contracts to which the U.S. Company or any of its
Subsidiaries is a party or by which any of their properties is bound with
respect to which a "show cause" notice, a cure notice or a default notice has
been received or is threatened to be sent to the U.S. Company or any of its
Subsidiaries.
SECTION 2.17. Intellectual Property. (a) Except for the Parent's
Trademarks (including those set forth in Section 2.17 of the Disclosure
Schedule), each Company and each of its respective Subsidiaries has, or will as
of the Closing have, ownership of or such rights by license or other agreement
to all trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, copyrights and copyright registrations,
patents and all applications therefor, trade secrets and technology
(collectively, "Intellectual Property") free and clear of any royalty or Lien,
subject in the case of licensed intellectual
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property to the terms of the respective license agreements, as are used by the
Companies or their Subsidiaries in the operation of their respective businesses,
as currently conducted, except where the failure to have such ownership, license
or right to use would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Section 2.17(a) of the
Disclosure Schedule sets forth, as of the date of this Agreement, a complete
list of the U.S. Company's patents and patent applications and the U.S.
Company's trademarks, servicemarks, tradenames and copyrights which are the
subject of registration or application.
(b) Except for proceedings, litigations, and adverse claims relating to the
use of the Parent's Trademarks and as set forth in Section 2.17(b) of the
Disclosure Schedule, there are no pending or, to the knowledge of the Parent,
threatened proceedings, litigations or other adverse claims by any person
against either Company or any of its respective Subsidiaries relating to their
respective use of any Intellectual Property. Except as set forth in Section
2.17(b) of the Disclosure Schedule and except as would not reasonably be
expected to have a Company Material Adverse Effect, none of the Companies nor
any of their Subsidiaries has received any notice or claim that any Intellectual
Property is not valid or enforceable, or of any infringement upon or conflict
with any patent, trademark, servicemark, copyright, tradename, trade secret or
other proprietary right of any third party by the Companies or any of their
Subsidiaries or of any claim by any third party alleging any such infringement
or conflict. Except as set forth in Section 2.17(b) of the Disclosure Schedule
and except as would not, in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, neither the Companies nor any of their
respective Subsidiaries has any knowledge of any infringement by any third party
upon any of the Intellectual Property listed in Section 2.17(b) of the
Disclosure Schedule. Except as set forth in Section 2.17(b) of the Disclosure
Schedule and except as would not, in the aggregate, reasonably be expected to
have a Company Material Adverse Effect, the Companies and their Subsidiaries
will not be infringing any third party's patent, copyright, trademark,
servicemark, tradename, know-how, trade secret or other intellectual property
rights.
SECTION 2.18. Computer Software. Except as set forth in Section 2.18 of
the Disclosure Schedule, to the knowledge of the Parent, each Company and each
of its respective Subsidiaries has, or will as of the Closing have, such
ownership of or such rights by license or other agreement to all of the computer
software programs as are used by such Company and or such Subsidiary as the case
may be, in the conduct of their respective businesses as currently conducted,
except where the failure to have such ownership, license, or right to use would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Section 2.18 of the Disclosure
Schedule, all such licenses and agreements with respect to material software
shall remain in full force and effect after the consummation of the transactions
contemplated hereby upon the same terms and conditions as in effect on the
Closing Date immediately prior to the Closing.
SECTION 2.19. Brokers; Finders and Fees. Except for BT Alex Brown & Sons
Incorporated, whose fees will be paid by the Parent, neither the Parent, the
Sellers nor the Companies nor any affiliate of the foregoing has employed any
investment banker, broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
SECTION 2.20. Permits and Security Clearances. The Companies and their
Subsidiaries have all material security clearances necessary to the conduct of
their respective businesses as conducted on the date hereof.
SECTION 2.21. Government Contracts. (a) Section 2.21 of the Disclosure
Schedule sets forth a complete and accurate list of all current Government
Contracts to which either Company or any of its Subsidiaries is a party and
which involve aggregate consideration over the anticipated duration of the
contract (including options) in excess of $1,000,000. Except as reflected in
Section 2.21 of the Disclosure Schedule:
(i) to the knowledge of the Parent, all certifications and
representations made by the Companies in the Government Contracts listed in
Section 2.21 of the Disclosure Schedule were complete and accurate at the
time they were made;
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(ii) to the knowledge of the Parent, the Companies have complied fully
with all material terms and conditions of the Government Contracts listed
in Section 2.21 of the Disclosure Schedule and have complied fully with all
applicable laws and regulations in performing those Government Contracts;
(iii) to the knowledge of the Parent, all cost or pricing data
submitted by the Companies in connection with the Government Contracts
listed in Section 2.21 of the Disclosure Schedule was current, accurate and
complete at the time of submission, and at the time of price agreement, and
has been updated as and when required by applicable law, regulation, or the
terms of the Government Contract in question;
(iv) to the knowledge of the Parent, there have been no actions or
inactions on the part of the Companies, their Subsidiaries or their
respective employees since the award of the Government Contracts listed in
Section 2.21 of the Disclosure Schedule which would form the basis for any
claim or cause of action by or on behalf of the U.S. Government (as defined
below) or the U.K. Government (as defined below), as the case may be, which
could result in any liability of the U.S. Company or any of its respective
Subsidiaries to the U.S. Government or the U.K. Company or any of its
respective Subsidiaries to the U.K. Government in connection with those
Government Contracts;
(v) to the knowledge of the Parent, there have been no actions or
inactions on the part of the U.S. Company, its respective Subsidiaries or
its employees which could result in suspension or debarment of the U.S.
Company or any of its respective Subsidiaries, and neither the U.S. Company
nor any of its Subsidiaries is currently on the List of Parties Excluded
from Procurement Programs;
(vi) to the knowledge of the Parent, there have been no actions or
inactions on the part of the Companies, their Subsidiaries or their
respective employees in connection with Completed Contracts (as defined
below) which could result in any civil or criminal liability on the part of
the U.S. Company or any of its Subsidiaries to the U.S. Government or the
U.K. Company or any of its respective Subsidiaries to the U.K. Government;
(vii) to the knowledge of the Parent, during the past five years, no
payment has been made by either of the Companies, by any of their
respective Subsidiaries, or by any person or entity authorized to act on
behalf of either of the Companies, or any of their respective Subsidiaries,
to any person in connection with any Government Contract, in violation of
applicable procurement laws or regulations or in violation of (or requiring
disclosure pursuant to) the Foreign Corrupt Practices Act or any other Law;
(viii) the cost accounting and procurement systems used by the
Companies and their Subsidiaries with respect to Government Contracts are
in compliance in all material respects with all applicable laws and
governmental regulations;
(ix) to the knowledge of Parent and except as set forth in Section
2.21 of the Disclosure Schedule, with respect to each Government Contract:
(a) neither the U.S. Government, the U.K. Government nor any prime
contractor or subcontractor to the Companies has notified either of the
Companies, or any of their Subsidiaries, either orally or in writing, that
either of the Companies or any of their Subsidiaries has breached or
violated any applicable law, or any certification, representation, clause,
provision or requirement pertaining to such Government Contract; (b) no
termination for convenience, termination for default, cure notice or show
cause notice is in effect as of the date hereof pertaining to any
Government Contract; (c) no governmental entity has provided either Company
or any of its Subsidiaries with written notice of any cost incurred by the
Companies or any of their Subsidiaries pertaining to any Government
Contract which has been questioned, challenged or disallowed or has been
the subject of any investigation (other than routine DCAA audits); and (d)
no money due to either Company or any of its Subsidiaries under any
Government Contract has been (or has been attempted to be) withheld or set
off, except for amounts withheld under contracts in the ordinary course of
business;
(x) except as set forth in Section 2.21 of the Disclosure Schedule:
(a) neither of the Companies, none of their Subsidiaries, nor any of their
respective directors, officers or employees is (or during the last two
years has been) under administrative, civil, or criminal investigation, or
indictment by any governmental authority with respect to any alleged
irregularity, misstatement, omission or any other
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matter arising under or relating to any Government Contract; and (b) during
the last two years, neither of the Companies nor any of their Subsidiaries
have conducted or initiated any internal investigation or made a voluntary
disclosure to the U.S. Government or the U.K. Government with respect to
any alleged irregularity, misstatement, omission or any other matter
arising under or relating to a Government Contract except for matters
relating to routine security violations;
(xi) except as set forth in Section 2.21 of the Disclosure Schedule,
there exist: (a) no outstanding claims against either of the Companies or
any of their Subsidiaries, either by the U.S. Government or the U.K.
Government or by any prime contractor, subcontractor, vendor or other third
party, arising under or relating to any Government Contract; (b) no
material disputes between the U.S. Company (or any of its Subsidiaries and
the U.S. Government under the Contract Disputes Act or any other Federal
statute or between the U.S. Company (or any of its Subsidiaries and any
prime contractor, subcontractor or vendor arising under or relating to any
Government Contract; and (c) no material disputes between the U.K. Company
(or any of its Subsidiaries and the U.K. Government or between the U.K.
Company (or any of its Subsidiaries and any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract;
(xii) neither Company, none of their Subsidiaries, nor any of their
respective directors, officers or employees is (or during the last two (2)
years has been) suspended or debarred from doing business with either the
U.S. Government or the U.K. Government or is (or during such period was)
the subject of a finding of nonresponsibility or ineligibility for U.S.
Government or U.K. Government contracting.
(b) Except as disclosed in Section 2.21 of the Disclosure Schedule, neither
Company nor any of its Subsidiaries has submitted any Bid relating to its
business which is currently outstanding and which, if accepted, would result in
a Government Contract where the volume of purchases of materials, supplies,
goods, services, equipment or other assets from such Company or Subsidiary in
connection with its business under any such resulting Government Contract could
reasonably be expected to exceed $1,000,000. Section 2.21(b) of the Disclosure
Schedule identifies each such Bid.
(c) Section 2.21 of the Disclosure Schedule sets forth a list and
description of each settlement agreement between either Company or any of its
Subsidiaries and the U.S. Government or the U.K. Government which will have a
binding effect on the Buyer after the Closing Date, and under which either
Company or any of its Subsidiaries had material underperformed obligations.
(d) To the knowledge of the Parent, except as set forth in Section 2.21 of
the Disclosure Schedule or as set forth or reserved against in the financial
statements identified in Section 2.7, no Loss Contract exists with respect to
any Government Contracts or other contracts to which any Company or any of its
Subsidiaries is a party or with respect to any Bids (as defined below). Those
Government Contracts, contracts or Bids for which a Loss Contract is not deemed
to exist because, after consideration of existing reserves, the sales price
therefor is equal to or less than $100,000 less than the sum of the cost
incurred to date and the expected cost to complete, with all costs determined in
accordance with GAAP on a basis consistent with prior periods, would not, in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. For
purposes of this Agreement, "Loss Contract" shall mean a contract or Bid, after
consideration of existing reserves, the sales price therefor is more than
$100,000 less than the sum of the cost incurred to date and the expected cost to
complete, with all costs determined in accordance with GAAP on a basis
consistent with prior periods. The Buyer acknowledges that in making the
representation in this subparagraph (d), the Parent's knowledge is based on
information known on the date this representation is made; that it may be
difficult to determine profitability of contracts, such as fixed price
contracts, until such contracts are substantially completed; and that this
representation does not constitute a guarantee of profitability for any
particular contract. Nothing in the preceding sentence relieves the Parent and
the Sellers from the representation that the determination as to whether a Loss
Contract exists is to be made in accordance with GAAP on a basis consistent with
prior periods.
(e) Except as would not have a Company Material Adverse Effect, all
personal property, equipment and fixtures loaned, bailed or otherwise furnished
to either Company or any of its Subsidiaries by or on behalf of the U.S.
Government or the U.K. Government that are or should be in the possession of
such Company or any
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such Subsidiary ("Customer-Furnished Items") are in good state of maintenance
and repair, have been regularly and appropriately maintained and repaired in
accordance with all contractual, legal and regulatory requirements and, unless
returned to the U.S. Government or the U.K. Government, shall be in possession
of such Company or such Subsidiary on the Closing Date. Except as would not have
a Company Material Adverse Effect, each Company and each of its Subsidiaries has
complied in all material respects with all of its obligations relating to the
Customer-Furnished Items, and upon the return thereof, would have no liability
to the U.S. Government or the U.K. Government with respect thereto. To the
knowledge of the Parent, the Companies and their Subsidiaries have complied in
all material respects with their obligations to keep and maintain records
required under regulations of the U.S. Government and the U.K. Government.
(f) Section 2.21 of the Disclosure Schedule sets forth the backlog of the
Companies and their Subsidiaries as of September 30, 1997 together with the
dollar amount of the backlog that is characterized as "funded" in accordance
with the policies and procedures of the Companies and their Subsidiaries
described in such Section.
(g) For purposes of this Section 2.21, the term "U.S. Government" means any
agency, division, instrumentality, subdivision, audit group, or procuring office
of the federal government, including the employees or agents thereof; the term
"U.K. Government" means any agency, division, instrumentality, subdivision,
audit group, or procuring office of the federal government, including the
employees or agents thereof; the term "Government Contract" means any prime
contract, subcontract, basic ordering agreement, letter contract, purchase
order, delivery order, teaming agreement or arrangement, joint venture, change
order, Bid or other legally binding commitment of any kind, including all
amendments, modifications and options thereunder or relating thereto, between
the U.S. Company or any of its Subsidiaries and either the U.S. Government or
any prime contractor or subcontractor of the U.S. Government currently in force,
or between the U.K. Company or any of its Subsidiaries and either the U.K.
Government or any prime contractor of the U.K. Government currently in force;
the term "Completed Contracts" means Government Contracts which expired, were
terminated or for which final payment was received within the three years
preceding the date of this Agreement; and the term "Bid" shall mean any
quotation, bid or proposal made by the Parent, the Sellers, the Companies or
their Subsidiaries that, if accepted or awarded, would lead to a contract with
the U.S. Government for the design, manufacture and sale of products or the
provisions of services by the Companies or their Subsidiaries.
SECTION 2.22. Environmental Matters. (a) Except as set forth in Section
2.22 of the Disclosure Schedule and except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
each of the Companies and each of their Subsidiaries is in compliance with all
applicable environmental Laws, (ii) the Companies and their Subsidiaries have
obtained all permits, licenses and other authorizations that are required under
applicable Laws relating to the protection of the environment, and (iii) the
Companies and their Subsidiaries are in compliance with the terms and conditions
under which such permits, licenses and other authorizations were issued or
granted.
(b) Except as set forth in Section 2.22(b) of the Disclosure Schedule and
except as could not reasonably be expected to have a Company Material Adverse
Effect, (i) none of the Companies nor any of their Subsidiaries has generated,
used, transported, treated, stored, released or disposed of, or has suffered or
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance (as defined below) in violation of any Laws;
(ii) there has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Substance in connection with the conduct of
the business of any Company or any of its Subsidiaries or in connection with the
use of any current or former property or facility of any Company or any of its
Subsidiaries, which has resulted in a release or a disposal into the environment
of any Hazardous Substance or which release or disposal which has created or
might reasonably be expected to create any condition or liability under any Laws
or which would require investigation by, reporting to or notification of any
governmental entity; (iii) no asbestos or polychlorinated biphenyl or
underground storage tank is or has been contained in or located at any facility
of any Company or any of its Subsidiaries; and (iv) any Hazardous Substance
handled or dealt with in any way in connection with the businesses of the
Companies or their Subsidiaries, whether before or during the Sellers' ownership
thereof, has been and is being handled or dealt with in all respects in
compliance with applicable Laws. "Hazardous
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Substances" shall mean substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Laws as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," oil, pollutant or
contaminant or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity."
SECTION 2.23. Insurance. The Companies and their Subsidiaries are, and at
all times during the past five years have been, insured with reputable insurers
against all risks normally insured against by companies in similar lines of
business of a similar size, except for professional liability insurance. Section
2.23 of the Disclosure Schedule sets forth a list of the insurance coverage for
the Companies and their Subsidiaries in effect as of the date of this Agreement.
None of the insurance carriers listed in Section 2.23 of the Disclosure Schedule
are related to or affiliated with the Parent, either Seller, the Companies or
the Companies' Subsidiaries. None of the Companies nor any of their Subsidiaries
is in default under any of its insurance policies. All insurance policies
maintained by the Companies and their Subsidiaries will remain in full force and
effect and may reasonably be expected to be renewed on comparable terms
following consummation of the transactions contemplated by this Agreement
(subject to such entities' continuing compliance with the applicable terms
thereof and any right of insurers to terminate without cause). None of the
Parent, any Seller, any Company or any of the Companies' Subsidiaries has
received notice or other indication from any insurer or agent of any intent to
cancel or not so renew any of such insurance policies. Each of the Companies and
each of their Subsidiaries has complied with and implemented all outstanding (i)
requirements of and recommendations of any insurance company that has issued a
policy to it and (ii) requirements and recommendations of the Board of Fire
Underwriters or any other body exercising similar functions or any governmental
entity with respect to any such insurance policy.
SECTION 2.24. Intercompany Transactions. Except as set forth in Section
2.24 of the Disclosure Schedule, (x) neither Company nor any of its Subsidiaries
has engaged in any transaction with the Parent, either Seller or any of their
affiliates, (y) neither Company nor any of its Subsidiaries has any liabilities
or obligations to the Parent or either Seller or any of their affiliates and (z)
neither the Parent nor either Seller nor any of their affiliates has any
obligations to either Company or any of its Subsidiaries. The consummation of
the transactions contemplated by this Agreement will not (either alone, or upon
the occurrence of any act or event, or with the lapse of time, or both) result
in any payment arising or becoming due from either Company or any of its
Subsidiaries or the successor or assign of any thereof to the Parent or either
Seller or any of their affiliates.
SECTION 2.25. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of either of the Companies or any of their
respective Subsidiaries.
SECTION 2.26. Aggregation. The imperfections, defects, actions, orders,
defaults, liabilities, inaccuracies and other items omitted from disclosure in
connection with the representations and warranties made in Sections 2.1 through
2.27 on grounds of immateriality, failure to have a material adverse effect or
failure to constitute a Company Material Adverse Effect do not, taken as a
whole, constitute a Company Material Adverse Effect.
SECTION 2.27. Disclosure. Any information disclosed in one Section of the
Disclosure Schedule shall be deemed to be disclosed in all Sections of the
Disclosure Schedule but only if such deemed disclosure is readily apparent based
on the disclosure in such other Section. The disclosure of any information shall
not be deemed to constitute an acknowledgment that such information is required
to be disclosed in connection with the representations and warranties made by
the Parent and the Sellers in this Agreement or that it is material, nor shall
such information be deemed to establish a standard of materiality.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to each of the Parent and the
Sellers as follows:
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SECTION 3.1. Organization; Etc. The Buyer (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own, lease and
operate all of its properties and assets and to carry on its business as now
being conducted, and (c) is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Buyer Material Adverse Effect (as hereafter defined). As used
in this Agreement, the term "Buyer Material Adverse Effect" shall mean an event,
change or circumstance which would adversely affect the ability of Buyer to
consummate the transactions contemplated hereby.
SECTION 3.2. Authority Relative to this Agreement. The Buyer has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Buyer and all other requisite corporate action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer and,
assuming this Agreement has been duly authorized, executed and delivered by the
Parent and the Sellers, constitutes a valid and binding agreement of the Buyer,
enforceable against the Buyer in accordance with its terms, except that (a) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws, now or hereafter in effect,
relating to or limiting creditors' rights generally and (b) enforcement of this
Agreement, including, among other things, the remedy of specific performance and
injunctive and other forms of equitable relief, may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 3.3. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, determinations, consents and approvals as may be
required under, and other applicable requirements of, the H-S-R Act, the
Exon-Florio Provisions and the NISPOM, neither the execution and delivery of
this Agreement by the Buyer nor the consummation by the Buyer of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificate of incorporation or by-laws of the Buyer,
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or require any consent under,
any indenture, license, contract, agreement or other instrument or obligation to
which the Buyer or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound, (c) violate any
order, writ, injunction, decree or Laws applicable to the Buyer, any of its
subsidiaries or any of their respective properties or assets, (d) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any governmental or regulatory authority, domestic or foreign, or (e) result
in the imposition of a Lien on the Buyer or any of its properties or assets
except in the case of clauses (b), (c), (d) and (e) of this Section 3.3 for any
such violations, breaches, defaults rights of termination, cancellation or
acceleration or requirements which, individually or in the aggregate, would not
reasonably be expected to have a Buyer Material Adverse Effect.
SECTION 3.4. Acquisition of Shares for Investment. Each of the U.S. Buyer
and the U.K. Buyer is acquiring the Shares for investment and not with a view
toward, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling such Shares. Each of the U.S. Buyer
and the U.K. Buyer agrees that the Shares may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities laws, except pursuant to an exemption from such
registration under the Securities Act and such state securities laws.
SECTION 3.5. Availability of Funds. The Buyer currently has sufficient
immediately available funds in cash or cash equivalents and will at the Closing
have sufficient immediately available funds, in cash, to pay the Purchase Price
and to pay any other amounts payable pursuant to this Agreement and to effect
the transactions contemplated hereby.
SECTION 3.6. Litigation. There is no claim, action, suit, proceeding or,
to the knowledge of the Buyer, governmental investigation pending or, to the
knowledge of the Buyer, threatened against the Buyer or any of
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its subsidiaries by or before any court or governmental or regulatory authority
which, individually or in the aggregate, would reasonably be expected to have a
Buyer Material Adverse Effect.
SECTION 3.7. Investigation by Buyer. The Buyer has conducted its own
independent review and analysis of the business, operations, assets,
liabilities, results of operations, financial condition, software, technology
and prospects of the Companies and their respective Subsidiaries and
acknowledges that the Buyer has been provided access to the personnel,
properties, premises and records of the Companies and their respective
Subsidiaries for such purpose. In entering into this Agreement, the Buyer has
relied solely upon its own investigation and analysis and the representations
and warranties contained herein.
SECTION 3.8. Brokers; Finders and Fees. Except for Goldman, Sachs & Co.
whose fees will be paid by the Buyer, neither the Buyer nor any of its
affiliates has employed any investment banker, broker or finder or incurred any
liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE IV
COVENANTS OF THE PARTIES
SECTION 4.1. Conduct of Business of the Company. During the period from
the date of this Agreement to the Closing Date, the Parent and the U.S. Seller
will cause the U.S. Company and each of the U.S. Company's Subsidiaries, and the
Parent and the Sellers will cause the U.K. Company and each of the U.K.
Company's Subsidiaries, in each case, to conduct its business and operations in
the ordinary course consistent with past practice to preserve the business of
each of the Companies and their Subsidiaries and to preserve the goodwill of
customers, suppliers and others having business relations with the Companies and
their Subsidiaries. Without limiting the generality of the foregoing, the Parent
and the U.S. Seller will cause the U.S. Company and each of the U.S. Company's
Subsidiaries, and the Parent and the Sellers will cause the U.K. Company and
each of the U.K. Company's Subsidiaries, in each case, not to, prior to the
Closing Date, without the prior consent of the Buyer:
(a) Amend its certificate of incorporation or by-laws or articles of
association;
(b) Acquire or dispose of any property or assets other than in the ordinary
course of business;
(c) Enter into any employment, severance or similar contract or adopt any
new, or amend any existing, employee benefit plan or agreement, or increase any
compensation payable to officers or employees other than in the ordinary course
of business;
(d) Incur any indebtedness for borrowed money other than from the Parent or
the Sellers or pursuant to any credit agreement which has been disclosed to the
Buyer, issue any debt securities or assume, guarantee or endorse the obligations
of any other persons other than in the ordinary course or mortgage or encumber
any of their respective properties or assets other than immaterial Liens which
do not restrict use or detract from value;
(e) Take any action that would cause any of the representations or
warranties of the Parent and the Sellers to be untrue;
(f) Except as required by their terms, amend, terminate or renegotiate any
Material Contract or any Government Contract or default (or take or omit to take
any action that, with or without the giving of notice or passage of time, would
constitute a default) in any of its obligations under any Material Contract or
any Government Contract or enter into any new Material Contract or any new
Government Contract or take any action that would jeopardize the continuance of
its material supplier or customer relationships;
(g) Terminate, amend or fail to renew any existing insurance coverage other
than in the ordinary course of business;
(h) Terminate or fail to renew or preserve any material Permits;
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(i) Make any loan, guaranty or other extension of credit, or enter into any
commitment to make any loan, guaranty or other extension of credit, to or for
the benefit of any director, officer, employee or stockholder or any of their
respective associates or affiliates other than in the ordinary course of
business;
(j) Other than cash dividends and other than the settlement of intercompany
accounts in each case as contemplated by Section 1.8, declare, issue, make or
pay any dividend or other distribution of assets, whether consisting of money,
other personal property, real property or other thing of value, to its
shareholders, or split, combine, dividend, distribute or reclassify any shares
of its equity securities or authorize for issuance, issue or sell any additional
shares of capital stock or any securities or obligations convertible into shares
of capital stock or issue or grant any option, warrant or other right to
purchase any shares of capital stock;
(k) From and after the date hereof, (i) make any capital expenditures
individually in excess of $250,000 or (ii) make or commit to make capital
expenditures in excess of $2,000,000 in the aggregate;
(l) Dispose of or permit to lapse any rights to the use of any Intellectual
Property or dispose of or disclose any Intellectual Property not a matter of
public knowledge;
(m) Make any Tax election or make any change in any method or period of
accounting or in any accounting policy, practice or significant procedure;
(n) Merge or consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, or otherwise acquire, any other business
entity; or
(o) Agree or commit to take any of the foregoing actions.
SECTION 4.2. Access to Information. (a) To the extent permitted by
applicable Law and applicable national security regulations and restrictions,
from the date of this Agreement to the Closing, the Parent and the Sellers will
cause the Companies and the Companies' respective Subsidiaries to (i) give the
Buyer and its authorized representatives access to all books, records,
personnel, offices and other facilities and properties of the Companies, the
Companies' respective Subsidiaries and their accountants as well as all
Government Contracts of the Companies which have organizational conflict of
interest or other similar provisions that would restrict or preclude the Buyer
from providing products or services to any governmental entity or supplier
thereto, (ii) permit the Buyer to make such copies and inspections thereof as
the Buyer may reasonably request, (iii) cause the Companies' and the Companies'
respective Subsidiaries' officers and employees to furnish the Buyer with such
financial and operating data and other information with respect to the business
and properties of the Companies and the respective Company's Subsidiaries as the
Buyer may from time to time reasonably request, and permit the Buyer and its
representatives access to the business plans for the Companies, (iv) permit the
Buyer to conduct or cause to be conducted on any real property of the Companies
or any of their Subsidiaries such soils and geological tests and environmental
inspections, audits and tests (including the taking of soils and ground water
samples) and such structural and other physical inspections as the Buyer shall
deem necessary or useful in connection with the Stock Purchase, and (v) permit
the Buyer to discuss the businesses of the Companies and their Subsidiaries with
their respective directors, officers, employees, accountants and counsel as the
Buyer considers necessary or appropriate for the purposes of familiarizing
itself with such businesses, obtaining any necessary approvals of or permits for
the transactions contemplated by this Agreement and conducting an evaluation of
the organization and business of the Companies and their Subsidiaries, and
permit the Buyer to discuss the businesses of the Companies and their
Subsidiaries with their suppliers, customers and creditors as required by law or
as mutually agreed to by the Buyer and the Parent for the purpose of obtaining
necessary approvals of the transactions contemplated by this Agreement,
provided, however, that any such access shall be conducted at the Buyer's
expense, at a reasonable time, under the supervision of the Parent, the U.S.
Seller, the U.K. Seller, the U.S. Company, the U.K. Company, the U.S. Company's
Subsidiaries, the U.K. Company's Subsidiaries or their respective personnel and
in such a manner as reasonably to maintain the confidentiality of this Agreement
and the transactions contemplated hereby and not to interfere unreasonably with
the operation of the business of the Parent, the Sellers, the Companies and the
respective Company's Subsidiaries.
(b) All such information and access shall be subject to the terms and
conditions of the letter agreement (the "Confidentiality Agreement"), between
the Buyer and the Parent, dated September 17, 1997.
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SECTION 4.3. Consents; Cooperation. (a) Each of the Parent, the Sellers
and the Buyer shall, and the Parent and the Sellers shall cause each of the
Companies and their Subsidiaries to, cooperate, and use its commercially
reasonable efforts, to make all filings and obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties necessary to consummate the transactions
contemplated by this Agreement, including under the H-S-R Act, the Exon-Florio
Provisions and the NISPOM. In addition to the foregoing, the Parent shall obtain
a release of any Liens on the Shares and the shares of capital stock of the
Companies' respective Subsidiaries as well as a release of any Liens on the
Intellectual Property assets of the Companies and their Subsidiaries. In
addition to the foregoing, the Buyer agrees to provide such assurances as to
financial capability, resources and creditworthiness as the Buyer may deem
reasonably necessary to acquire the approval of any third party whose consent or
approval is sought hereunder.
(b) To the extent permitted by applicable law, including applicable
national security regulations and restrictions and regulations pertaining to
classified information, each of the parties hereto shall, in connection with the
efforts referenced in Section 4.3(a) to obtain all requisite authorizations and
approvals for the consummation of the Stock Purchase, use its commercially
reasonable efforts to (i) keep the other parties, to the extent authorized by
applicable national security regulations, informed in all material respects of
any material communication received by such party from, or given by such party
to, any governmental or regulatory authority and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding the Stock Purchase and (ii) permit the other parties, to the
extent authorized by national security regulations, to review any material
communication given by it to, and consult with each other in advance of any
meeting or conference with, any governmental or regulatory authority or, in
connection with any proceeding by a private party, with any other person, give
the other parties the opportunity to attend and participate in such meetings and
conferences.
SECTION 4.4. Commercially Reasonable Efforts. Each of the Parent, the
Sellers and the Buyer shall cooperate, and use its commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
SECTION 4.5. Public Announcements. The Parent and the Buyer shall consult
with each other prior to issuing any press release with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release prior to such consultation unless required by law.
SECTION 4.6. Tax Matters. (a) The Parent will prepare and file, or cause
to be prepared and filed, Income Tax Returns of, or which include, the Companies
and their respective Subsidiaries with respect to any Pre-Closing Period. In
order to assist the Parent in the preparation of all Income Tax Returns that the
Parent is required to prepare, the Buyer will prepare (or cause the Companies to
prepare in accordance with prior practices) and deliver to the Parent, as soon
as reasonably practical after their receipt of a request therefor from the
Parent, all data (including but not limited to the annual tax reporting package)
regarding the Companies and their respective Subsidiaries reasonably requested
by the Parent that is necessary to prepare any Income Tax Return and properly
report the operations of the Companies and their respective Subsidiaries
thereon. The Buyer will prepare and file, or cause to be prepared and filed,
Income Tax Returns of, or which include, the Companies and their respective
Subsidiaries with respect to any Post-Closing Period (as defined below).
(b) The Parent will pay or cause to be paid, for all Pre-Closing Periods
(i) all Income Taxes of the Companies and their respective Subsidiaries, (ii)
Income Taxes of the Affiliated Group and (iii) all Taxes (other than Income
Taxes) of the Companies and their respective Subsidiaries to the extent not
adequately reserved for on the Closing Financial Statements. The Buyer will pay
or cause to be paid, all Taxes of the Companies and their respective
Subsidiaries for all taxable periods which do not constitute Pre-Closing
Periods. In the case of a Straddle Period of the Companies and their respective
Subsidiaries, Income Taxes for the entire taxable period shall be allocated to a
deemed Pre-Closing Period using an interim closing-of-the-books method assuming
that the deemed Pre-Closing Period ended as of the close of business on the
Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis shall be
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apportioned on a per diem basis, real property taxes shall be allocated in
accordance with Section 164(d) of the Code, and allowable tax deductions
attributable to payments made by the Companies and their respective Subsidiaries
which amounts are allocable to the Parent shall be allocated to the Pre-Closing
Period.
(c) The Buyer will prepare and file, or cause to be prepared and filed, all
Tax Returns required to be filed by the Companies and their respective
Subsidiaries for Straddle Periods. The Buyer will notify the Parent of the
Buyer's calculation of the Parent's share of the Taxes of the Companies or their
respective Subsidiaries for any Straddle Period and provide to the Parent a copy
of the Tax Return and the calculation of the split of the Tax liability of the
Straddle Period between the Buyer and the Parent (the "Statement") no later than
30 days before the due date (including Extensions) for filing such Tax Return.
The Buyer and the Parent will attempt to resolve in good faith any disagreement
arising out of any Straddle Period Tax Return and/or the Statement. If any such
dispute is not resolved, the matter will be resolved in accordance with Section
4.6(l) of this Agreement.
(d) The Parent and the Buyer will not make an election under Section 338 of
the Code (or any similar provision of the law of any country or Tax
jurisdiction) with respect to the sale of the Shares of the U.S. Company
pursuant to this Agreement. The Buyer in its sole discretion will decide whether
to make an election under Section 338 of the Code (or any similar provision of
the law of any country or Tax jurisdiction) with respect to the sale of the
Shares of the U.K. Company pursuant to this Agreement.
(e) The Buyer and Sellers agree to file all Tax Returns in conformance with
the purchase price allocation specified in Section 1.1 of this Agreement.
(f) The Buyer will pay or reimburse the Parent for all sales, use,
transfer, stamp, conveyance, value added or other similar Taxes, duties, excise
or governmental charges imposed by any Tax jurisdiction, and all recording fees,
filing fees, notarial fees and other similar costs with respect to the transfer
of the Shares; provided that the Parent will pay all Income Taxes of the Parent
and the Sellers attributable to either the Stock Purchase or any other receipt
by the Parent or the Sellers of any amounts pursuant to Section 1.1.
(g) The Sellers and the Buyer hereby agree that any amount of Taxes paid by
a Seller to a Buyer constitutes a reduction in the Purchase Price of the Shares
of the Company to which such payment relates. The Sellers and the Buyer hereby
agree that any amount of Taxes paid by a Buyer to a Seller constitutes an
increase in the Purchase Price of the Shares of the Company to which such
payment relates. For purposes of this provision, the value of the common stock
of the Parent (less exercise price) delivered to employees of the Companies and
their respective Subsidiaries after the Closing Date upon the exercise of Parent
stock options shall be considered a payment by the Sellers to the Buyer and the
corresponding compensation deduction may be taken by the Companies and their
respective Subsidiaries for the Post-Closing Period.
(h) The Buyer will promptly notify the Parent in writing upon receipt by
the Buyer of notice of any pending or threatened federal, state, local, or
foreign Tax audits or assessments of the Companies or their respective
Subsidiaries related to a Pre-Closing Period or Straddle Period and any pending
or threatened federal, state, local or foreign Tax audits or assessments of the
Buyer or any affiliate of the Buyer which may affect the Tax liabilities of the
Companies or their respective Subsidiaries for Pre-Closing Periods or Straddle
Period. The Parent will promptly notify the Buyer in writing upon receipt by the
Parent or any affiliate of the Parent of notice of any pending or threatened
federal, state, local, or foreign Tax audits or assessments from any Tax
authority which may affect the Tax liabilities of the Companies or their
respective Subsidiaries for periods which do not constitute Pre-Closing Periods.
(i) The Parent or the Buyer will have the right to control any audit or
determination by any Tax authority, to initiate any claim for refund or file any
amended Tax Return, and to contest, resolve and defend against any assessment,
notice of deficiency, or other adjustment or proposed adjustment of Taxes for
any taxable period for which such party is required to file the Tax Return
relating to such Tax. With respect to a Straddle Period, the Buyer shall not
take any action that would affect the Tax liability for which the Parent is
responsible without the Parent's consent, which consent will not be unreasonably
withheld.
(j) After the Closing Date, the Parent and the Buyer will cooperate fully,
and will cause their respective affiliates to cooperate fully, and will provide
assistance as may reasonably be requested, and cause their
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respective affiliates to provide assistance as may reasonably be requested, in
connection with the preparation of any Tax Return, the conduct of any audit or
the defense of any litigation or other proceeding with respect to any Tax
liability of the Companies or their respective Subsidiaries for any period and
shall retain, or shall cause to be retained, for the appropriate period any
records or information that may be relevant to any such Tax Return or audit.
(k) The Parent and its Subsidiaries will provide the Buyer, and the Buyer
and its Subsidiaries will provide the Parent, with the right, at reasonable
times and upon reasonable notice, to have access to, and to copy and use, any
records or information which may be relevant for the taxable period for which
the requesting party is charged with payment responsibility for Taxes under this
Agreement in connection with the preparation of any Tax Returns, the conduct of
any audits, the defense of any litigation with respect to any Tax liability, the
filing of any claim for a refund of Tax or allowance of any Tax credit, or any
judicial or administrative proceedings relating to liability for Taxes.
(l) If the Parent or the Buyer disagree as to any matters governed by this
Section 4.6 of the Agreement, the Parent and the Buyer will promptly consult
with each other in an effort to resolve any such dispute. Any amounts not in
dispute will be paid promptly, and any amount payable upon the resolution of a
dispute will be paid to a bank account designated by the payee. If any such
disagreement cannot be resolved within ten days after the Parent or the Buyer
asserts in writing that such dispute cannot be resolved, the Parent and the
Buyer will jointly select an independent accounting firm to act as an arbitrator
to resolve the disagreement. The independent accounting firm's determination
will be final and binding upon the parties and any fees and expense relating to
the engagement of the independent accounting firm will be shared equally by the
Parent and the Buyer.
(m) Notwithstanding any other provision of this Agreement, the Parent and
the Sellers shall indemnify and hold harmless the Buyer, the Companies, and
their respective Subsidiaries and Successors against: (i) all Income Taxes paid
or payable with respect to the Companies or their respective Subsidiaries for
any Pre-Closing Period, including without limitation any liability for Income
Taxes arising out of the inclusion of any of the Companies or their respective
Subsidiaries in any consolidated or combined return of income required to be
filed with any taxing authority; (ii) all Income Taxes paid with respect to the
Parent, any of its Subsidiaries, and any member of the Affiliated Group (other
than the Companies and their respective Subsidiaries) for any and all taxable
periods; and (iii) all Taxes (other than Income Taxes) of the Companies and
their respective Subsidiaries to the extent not adequately reserved for on the
Closing Financial Statements. Any indemnification for Taxes (other than Income
Taxes) pursuant to clause (iii) above shall be subject to Section 7.2(b)(i). The
Buyer shall indemnify and hold harmless the Parent and the Sellers against the
Income Taxes required to be paid by the Buyer pursuant to Section 4.6(b). The
covenants of the parties contained in this Section 4.6 shall survive the Closing
Date and shall expire when all applicable statutes of limitations (including
extensions thereof) have expired.
(n) The Buyer or its Successors (as defined below) shall be entitled to all
refunds and credits of all Taxes with respect to the Companies or their
respective Subsidiaries for any Post-Closing Period. The Parent, the Sellers and
their respective Subsidiaries shall, promptly after the receipt thereof, remit
or cause to be remitted to the Buyer any refund of Tax received by the Parent,
the Sellers, or their respective Subsidiaries to the extent that such refund
relates to a Post-Closing Period. The Parent shall be entitled to all refunds
and credits of all Taxes with respect to the Companies or their respective
Subsidiaries for any Pre-Closing Period. The Buyer shall, promptly after the
receipt thereof, remit or cause to be remitted to the Parent any refund of Tax
received by the Buyer, the Companies, or their respective Subsidiaries to the
extent that such refund relates to a Pre-Closing Period.
(o) If an audit adjustment, amended return or amended assessment
(collectively, an "Adjustment") shall be made, filed or assessed after the
Closing Date for any period prior to the Closing Date, which causes an increase
in the Tax liability of the Buyer, the Companies or any of their respective
Subsidiaries or Successors in any period after the Closing Date, then, when and
to the extent that the Buyer or such Company or any of its Subsidiaries or
Successors realizes the Tax cost of such Adjustment, the Parent, the Sellers,
their Subsidiaries and their Successors shall promptly pay to the Buyer a cash
amount equal to the amount of the
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Tax cost realized by the Buyer, the Companies or any of their Subsidiaries or
Successors. This subsection (o) shall be effective for so long as the periods
prior to the Closing Date remain open to Adjustment.
(p) DEFINITIONS.
(i) The term "Governmental Authority" shall mean any agency,
administrative body or instrumentality of the United States of America or
elsewhere, including, without limitation any parish, county, district,
municipality, state or foreign authority, or any other entity exercising
executive, legislative, judicial, regulatory, or administrative functions
of or pertaining to, whether now or hereafter in effect.
(ii) The term "Post-Closing Period" shall mean a taxable period ending
after the Closing Date.
(iii) The term "Pre-Closing Period" shall mean any tax period ending
on or prior to the Closing Date and, with respect to any Straddle Period,
the portion of such Straddle Period that ends on and includes the Closing
Date.
(iv) The term "Straddle Period" shall mean a taxable year or taxable
period of the Companies or their respective Subsidiaries which begins
before the Closing Date and ends after the Closing Date.
(v) The term "Successor" shall mean a corporation, limited liability
company, partnership, limited partnership, or other legal entity which,
through amalgamation, consolidation, merger, liquidation, or other legal
succession becomes invested with the rights, and assumes the burdens of, a
party to this Agreement or any Subsidiary thereof.
(vi) The term "Tax" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
(vii) The term "Income Tax" shall mean all income and franchise taxes,
levies or other like assessments imposed by the United States or any state,
local or foreign taxing jurisdiction, including any interest, penalty, or
addition thereto, whether disputed or not.
(viii) The term "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
(ix) The term "Income Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to
Income Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
SECTION 4.7. The Buyer's Knowledge of Breach. If prior to the Closing the
Buyer shall have actual knowledge (but not constructive or imputed knowledge)
that any representation and warranty of the Parent and the U.S. Seller, and, if
applicable, the U.K. Seller contained in Article II shall not be true and
correct in all material respects, the Buyer shall promptly notify the Parent and
the Sellers of its knowledge, in reasonable detail, including the amount which
the Buyer believes, based on the facts actually known by it, would be payable by
the Parent and the Sellers pursuant to the indemnification provisions hereof
without reference to any indemnification limitations set forth in Section 7.2
hereof.
SECTION 4.8. Employees; Employee Benefits. (a) On and after the Closing
for a period of one year, the Buyer shall cause the Companies to provide their
respective employees with salary and benefit plans, programs and arrangements no
less favorable in the aggregate than those currently provided by the Buyer to
its current employees in comparable lines of business with commensurate service
and position. In addition, except as otherwise herein provided, the Buyer shall
cause each Company to honor all employment agreements entered into by such
Company.
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(b) If any employee of either Company becomes a participant in any employee
benefit plan, practice or policy of the Buyer or any of its affiliates, such
employee shall be given credit under such plan for all service prior to the
Closing Date with the Companies, or any predecessor employer (to the extent such
credit was given by such Company or such predecessor), and all service prior to
the time such employee becomes such a participant, for purposes of eligibility
and vesting and for all other purposes for which such service is either taken
into account or recognized; provided, however, such service need not be credited
to the extent it would result in a duplication of benefits. In addition, if any
employee of either Company becomes a participant in any employee benefit plan,
practice or policy of the Buyer or any of its affiliates, such employee shall be
given credit under such plan for all copayments and deductibles made and
preexisting condition exclusion periods satisfied (in whole or in part), prior
to the Closing Date, to the extent such copayments, deductibles, and excluded
periods are credited under the corresponding employee benefit plan of such
Company.
(c) The Buyer shall comply with the notice requirements set forth in the
Worker Adjustment and Retraining Notification Act ("WARN Act") prior to
effectuating within 90 days of the Closing (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment of the Companies, or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment of the
Companies.
(d) To protect the Buyer against any efforts by the Parent, the Sellers or
any of their affiliates to cause employees of the Companies or their
Subsidiaries to terminate their employment, each of the Parent and the Sellers
agrees that for a period of two years following the Closing Date, neither the
Parent nor any Seller nor any of their affiliates will, directly or indirectly
(i) induce any employee of the Companies or their Subsidiaries with a then
current compensation of more than $50,000 annually to leave any of the Companies
or their Subsidiaries or to accept any other employment or position, (ii)
solicit or hire any such employee, unless such employee's employment with the
Companies or their Subsidiaries is terminated by the Companies or their
Subsidiaries; provided that nothing herein shall prevent the Parent or the
Sellers from soliciting and hiring such employees pursuant to a general
solicitation not specifically directed at such employees, or (iii) assist any
other entity in hiring any such employee.
(e) Within 10 days after the date hereof, the Parent and the Sellers shall
deliver to the Buyer a list of 100 to 150 key employees of the Companies. Within
30 days after the Buyer's receipt of such list, the Buyer, the Parent and the
Sellers shall meet to discuss any possible changes to such list. The parties
thereafter will work together to develop an incentive compensation arrangement
for such employees that is designed to encourage them to remain with the
Companies after the Closing. Once the parties have agreed upon such arrangement,
the Parent and the Sellers agree to, and the Parent and the Sellers shall cause
the Companies to, assist the Buyer in conveying and promoting the Buyer's
incentive compensation offers to the individuals identified on such list.
(f) The Parent shall be responsible for the payment to employees of the
Companies of any "success fees" in connection with the transactions contemplated
by this Agreement which will be paid on the Closing Date, but shall not be
obligated to pay any severance or other change of control fees to such
employees.
(g) The Parent, the U.S. Company and the Buyer will enter into severance
and related arrangements with John C. Holt, effective as of the Closing Date, on
terms and conditions reasonably acceptable to the Parent and the Buyer, which
terms will include the following: (i) the cancellation of all existing
agreements between the Companies and their Subsidiaries, on the one hand, and
Mr. Holt, on the other (including Mr. Holt's employment agreement with the U.S.
Company and the Parent), (ii) if requested by the Buyer, Mr. Holt entering into
a written consulting agreement with the Buyer to provide a reasonable level of
consulting services, as an independent contractor (but in any event not to
exceed three days per week in the first 90 days after Closing and five days per
month thereafter, in each case, on a non-cumulative basis, the selection of
which days shall be mutually agreeable to Mr. Holt and the Buyer), to the Buyer
through December 31, 1998, and which provides Mr. Holt will report only to an
executive officer of the U.S. Buyer, (iii) the U.S. Company paying to Mr. Holt,
immediately after the Closing (with any deduction with respect thereto allocated
to a Post-Closing Period), all amounts owed to Mr. Holt through the Closing Date
pursuant to the Long Term Incentive Agreement ("EVA") dated as of February 29,
1996 between the U.S. Company
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and Mr. Holt and (iv) with respect to payments to Mr. Holt other than pursuant
to clause (iii) above that may be negotiated in such severance and related
arrangements, whether for services as a consultant to the Buyer or for salary,
bonus, EVA, or otherwise, the U.S. Company shall be responsible for (and the
Buyer will cause the U.S. Company to pay) up to $1,000,000 of such payments
(payable as provided in the next sentence) and the Parent shall be responsible
for (and will pay) any amounts in excess thereof. The aggregate payments of up
to $1,000,000 by the U.S. Company shall be made as follows: with respect to the
EVA, (x) the amount accrued under the EVA at Closing shall be paid immediately
after the Closing (with any deduction with respect thereto allocated to a
Post-Closing Period), (y) if the amount paid pursuant to (x) above is determined
to be less than the amount Mr. Holt is entitled to based on the Closing
Financial Statements as accepted by the parties, appropriate adjustment shall be
made promptly after such acceptance of the Closing Financial Statements; and (z)
all other amounts payable under the EVA for the period from Closing to December
31, 1998 shall be paid between August 1, 1998 and August 31, 1998; with respect
to independent contractor compensation to be paid in the same amount as would
have been earned as salary under Mr. Holt's employment contract if it had
remained in existence, such payments shall be made on a periodic basis
consistent with the U.S. Company's prior practice with respect to Mr. Holt's
payment of salary under his employment agreement; and with respect to Mr. Holt's
1998 bonus, such bonus shall be paid in December 1998. The above payments for
EVA and bonus shall be computed as if the U.S. Company had achieved its
financial targets for 1998. All payments to Mr. Holt will be made net of payroll
taxes and applicable withholdings.
SECTION 4.9. Shareholders' Meeting. (a) The Parent, acting through its
Board of Directors, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its shareholders as soon as practicable for the purpose of considering and
taking action upon this Agreement;
(ii) prepare and file with the Securities and Exchange Commission
("SEC") a preliminary proxy statement relating to this Agreement and use
its best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and,
after consultation with the Buyer, to respond promptly to any comments made
by the SEC with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
shareholders and (y) to obtain the necessary approvals of this Agreement by
its shareholders; and
(iii) subject to the fiduciary obligations of the Board of Directors
under applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Board of Directors that
shareholders of the Parent vote in favor of the adoption of this Agreement.
(b) The Buyer agrees that it will promptly upon request provide the Parent
with the information concerning the Buyer required to be included in the Proxy
Statement.
SECTION 4.10. Substitute Guaranty; Indemnity. (a) The Parent has
furnished the Buyer with a copy of the four guaranties (the "Parent Guaranty")
given by the Parent to Lombard North Central plc and its affiliates ("Lombard")
with respect to equipment leases to the Subsidiaries of the U.K. Company. As
soon as reasonably practicable after the Closing, the Buyer agrees to provide a
guaranty of the Buyer in respect of all of the Parent's obligations under the
Parent Guaranty, substantially similar to the Parent Guaranty, and to use its
commercially reasonable efforts to have Lombard (i) accept the substitute
guaranty offered by the Buyer in full substitution for the Parent Guaranty and
(ii) release the Parent from all liability and all of its obligations under or
with respect to the Parent Guaranty. From and after the Closing and until the
Parent is fully released from all liability and all of its obligations under or
with respect to the Parent Guaranty, the Buyer agrees to reimburse the
Parent/Seller Indemnitees (as defined in Section 7.3(a)) for any obligations,
costs and expenses incurred as a result of failure so to be fully released.
(b) The Parent has furnished the Buyer with a copy of the "comfort letter"
dated March 31, 1997 (the "Comfort Letter") given by the Parent to its United
Kingdom independent auditors ("Deloitte U.K.") with respect to the provision of
adequate financial support to the U.K. Company and its Subsidiaries to ensure
their
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ability to operate as going concerns until March 31, 1998. As soon as reasonably
practicable after the Closing, the Buyer agrees to provide Deloitte U.K. a
substitute comfort letter, and to use its commercially reasonable efforts to
have Deloitte U.K. (i) accept the substitute comfort letter offered by the Buyer
in full substitution for the Comfort Letter and (ii) release the Parent from all
liability and all its obligations under or with respect to the Comfort Letter.
From and after the Closing and until the Parent is fully released from all
liabilities and all of its obligations under or with respect to the Comfort
Letter, the Buyer agrees to reimburse the Parent/Seller Indemnities for any
obligations, costs and expenses incurred as a result of failure so to be fully
released.
SECTION 4.11. Notification of Certain Matters. (a) The Parent and the
Sellers shall give prompt notice to the Buyer of (i) the occurrence, or failure
to occur, of any event that would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Closing Date and (ii)
any failure of the Seller to comply with or satisfy, in any material respect,
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement. No such notification shall affect the representations or
warranties of the Seller or the conditions of the Seller's obligations
hereunder.
(b) The Parent and the Sellers shall furnish to the Buyer (i) as soon as
available, and in any event within five business days after it is prepared, any
report by either Company or any of its Subsidiaries for submission to its board
of directors and the working papers related thereto and other operating or
financial reports (including any projections and budgets) prepared for
management of any of their respective businesses and the working papers related
thereto, (ii) monthly and quarterly unaudited balance sheets, statements of
operations and cash flow and changes in shareholders' equity for either Company,
and (iii) such other reports as the Buyer may reasonably request relating to the
Companies and their Subsidiaries. Each of the financial statements delivered
pursuant to this Section 4.11(b) shall be prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed therein),
except that such financial statements may omit footnote disclosures required by
GAAP to the extent the content thereof would not materially differ from those
disclosures reported in the most recent audited period and year-end adjustments.
Each of the financial statements delivered pursuant to this Section 4.11(b)
shall be accompanied by a certificate of the respective chief financial officers
of the Parent and the relevant Company to the effect that such financial
statements present fairly the financial condition and results of operations of
such Company and its Subsidiaries for the periods covered and reflect all
adjustments (which consist only of normal recurring adjustments not material in
amount) necessary for a fair presentation.
SECTION 4.12. Prior Knowledge. If the Buyer had actual knowledge (but not
constructive or imputed knowledge) prior to the execution of this Agreement that
any representation or warranty of the Parent or the Sellers contained in Article
II was not true and correct in all material respects as of the date hereof, the
Buyer may not assert such breach of a representation and warranty (x) as a basis
not to consummate the transactions contemplated hereby, (y) as a basis for an
indemnification claim under Article VII, or (z) in any respect against the
directors, officers, employees, affiliates, controlling persons, agents,
advisors or representatives of the Parent or the Sellers.
SECTION 4.13. Supplemental Disclosure. The Parent and the Sellers shall
have the right and the obligation from time to time prior to the Closing to
supplement or amend the Disclosure Schedule with respect to any matter hereafter
arising or discovered which if existing or known at the date of this Agreement
would have been required to be set forth or described in such Disclosure
Schedule; provided, however, that such amended Disclosure Schedule shall be
provided to the Buyer no later than five business days prior to the Closing
Date. Any such supplemental or amended disclosure shall not be deemed to have
cured any breach of any representation or warranty made in this Agreement for
purposes of Article VII. However, if in the aggregate the matters included in
all such supplemental or amended disclosures would reasonably be expected to
have a Company Material Adverse Effect, the condition to the Buyer's obligation
to consummate the transactions set forth in Section 5.3(a) will be deemed not to
be satisfied.
SECTION 4.14. Noncompetition. (a) The Parent and the Sellers agree that
after the Closing the Buyer, the Companies and their Subsidiaries shall be
entitled to the goodwill and going concern value of the
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business of the Companies and their Subsidiaries and to protect and preserve the
same to the maximum extent permitted by law. The Parent and the Sellers also
acknowledge that their management contributions to the business of the Companies
and their Subsidiaries have been uniquely valuable and involve proprietary
information that would be competitively unfair to make available to any
competitor of the Companies or their Subsidiaries. For these and other reasons
and as an inducement to the Buyer to enter into this Agreement, the Parent and
the Sellers each agrees that for a period of three years after the Closing Date
neither the Parent nor either Seller will, directly or indirectly, for its own
benefit or as agent for another carry on or participate in the ownership,
management or control of, or the financing of, or be employed by, or consult for
or otherwise render services (in the same lines of business in which the
Companies or its Subsidiaries are in as of the Closing Date) to, or allow its
name or reputation to be used in or by any other present or future business
enterprise that competes with the Buyer or the Companies or their Subsidiaries
in activities in which any of the Companies or their Subsidiaries is engaged as
of the Closing Date; provided, however, that nothing herein shall prohibit the
Parent and the Sellers and their Subsidiaries other than the Companies and their
Subsidiaries from engaging in any businesses in which they are involved in as of
the Closing Date or from providing information technology services to the
financial industry.
(b) Nothing contained herein shall limit the right of the Parent or either
Seller as an investor to hold and make investments in securities of any
corporation or limited partnership that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided the equity interest of
the Parent and the Sellers therein in the aggregate does not exceed 5% of the
outstanding shares or interests in such corporation or partnership.
(c) If this Section 4.14 is more restrictive than permitted by the Laws of
the jurisdiction in which the Buyer seeks enforcement hereof, this Section 4.14
shall be limited to the extent required to permit enforcement under such Laws.
SECTION 4.15. Nondisclosure of Proprietary Data. Neither the Parent, nor
either Seller shall, at any time, make use of, divulge or otherwise disclose,
directly or indirectly, any trade secret or other proprietary data (including
any customer list, record or financial information) concerning the business or
policies of the Companies or their Subsidiaries that the Parent or the Sellers
may have learned as a shareholder, employee, officer or director of the
Companies or their Subsidiaries. In addition, neither the Parent nor the Sellers
shall make use of, divulge or otherwise disclose, directly or indirectly, to
persons other than the Buyer, any confidential information concerning the
business or policies of the Companies or their Subsidiaries which may have been
learned in any such capacity. Notwithstanding the foregoing, this Section 4.15
shall not apply to any work performed by the U.S. Company on behalf of the
Parent or any of its Subsidiaries or affiliates including work for which such
party for which licenses were granted. Notwithstanding the foregoing, the
Parent, the Sellers, any of their affiliates or representatives shall have no
obligation hereunder for that portion of such confidential information which is
independently developed by or for any of them, which is rightfully received by
any of them from a third party, is disclosed by the Companies or their
Subsidiaries to others without any restriction on use and disclosure, is
approved for release after the Closing by written consent of the Companies or
their Subsidiaries or is generally publicly available.
SECTION 4.16. Inconsistent Agreements. The Parent and the Sellers will
not, either directly or indirectly, through the Companies, their Subsidiaries or
otherwise, initiate, solicit or encourage, and will use its best efforts to
cause all of its directors, officers, employees and agents not to initiate,
solicit or encourage, any inquiry, offer or proposal with respect to, or furnish
any information relating to, or participate in any negotiations or discussions
concerning, any acquisition, merger, tender or exchange offer or other form of
business combination, or any acquisition or disposition of all or any
substantial part of the assets or the stock or other securities of the Companies
or any of their Subsidiaries. The Parent and the Sellers will promptly notify
the Buyer of the details of any discussions with or proposal or offer from any
other person relating to an acquisition, merger, tender or exchange offer or
other form of business combination involving any Company, any of their
Subsidiaries or any of their respective securities or substantial assets or any
other proposal, the acceptance of which would be inconsistent with the
consummation of this Agreement in accordance with its terms. With respect to any
party to whom information regarding the Companies and their Subsidiaries was
furnished prior to the date hereof pursuant to a confidentiality agreement, the
Parent shall instruct each of
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such entities to destroy such information. At the Closing, if requested by the
Buyer, the Parent will assign all of its rights under such confidentiality
agreements to the Buyer.
SECTION 4.17. Redemption of Parent Notes. Simultaneously with the
Closing, the Parent shall cause to be issued a notice of redemption of all of
its outstanding 8 3/4% Senior Notes Due October 15, 2000 and shall redeem all
such Notes in accordance with the terms of the Indenture dated as of October 18,
1993.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
SECTION 5.1. Conditions to Each Party's Obligations to Consummate the
Stock Purchase. The respective obligations of each party to consummate the
transactions contemplated hereby is subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) This Agreement shall have been approved and adopted by the requisite
vote of the Parent's shareholders; and
(b) No statute, rule, regulation, executive order, decree, or injunction
shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory entity which prohibits the consummation of the Stock
Purchase; and
(c) There shall not be any suit, action, investigation, inquiry or other
proceeding instituted, pending or threatened by any governmental or other
regulatory or administrative agency or commission (i) challenging or seeking to
make illegal or otherwise directly or indirectly restrain or prohibit or make
materially more costly the consummation of the transactions contemplated hereby,
or seeking to obtain material damages in connection with such transactions; or
(ii) which constitutes a Company Material Adverse Effect, and no order shall
have been issued which would have the effect of or require anything set forth in
clause (i) or clause (ii) above; and
(d) Any waiting periods applicable to the transactions contemplated by this
Agreement under applicable U.S. antitrust or trade regulation laws and
regulations, including, without limitation, under the H-S-R Act, shall have
expired or been terminated; and
(e) All consents, approvals, orders and Permits of, and registrations,
declarations and filings with, any governmental authority that shall be legally
required in order to enable the Parent, the Sellers and the Buyer to consummate
the transactions contemplated hereby, including under the H-S-R Act, the
Exon-Florio Provisions and the NISPOM, shall have been made or obtained.
SECTION 5.2. Further Conditions to the Parent's and the Sellers'
Obligations. The obligation of the Parent and the Sellers to consummate the
transactions contemplated hereby are further subject to satisfaction or waiver
of the following conditions:
(a) The representations and warranties of the Buyer contained in Article
III of this Agreement shall be true and correct in all material respects as of
the date hereof and at and as of the Closing Date as though such representations
and warranties were made at and as of such date, except for representations and
warranties which are as of a different date or period which shall be true and
correct in all material respects as of such other date or period; and
(b) The Buyer shall have performed and complied in all material respects
with all agreements and obligations required by this Agreement to be performed
or complied with by it on or prior to the Closing; and
(c) The Parent and the Sellers shall have received a certificate of an
authorized officer of the Buyer to the effect that the conditions in paragraphs
(a) and (b) of this Section 5.2 have been satisfied; and
(d) The IT Services Agreement shall have been entered into by the parties
thereto.
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SECTION 5.3. Further Conditions to the Buyer's Obligations. The
obligation of the Buyer to consummate the transactions contemplated hereby are
further subject to the satisfaction or waiver at or prior to the Closing Date of
the following conditions:
(a) The representations and warranties of the Parent and the Sellers
contained in Article II of this Agreement shall be true and correct in all
material respects as of the date hereof and at and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except for representations and warranties which are as of a different date or
period which shall be true and correct in all material respects as of such other
date or period; and
(b) The Parent and the Sellers shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by it on or prior to the Closing; and
(c) Releases shall have been obtained with respect to any Liens on the
Shares or the shares of capital stock of the Companies' respective Subsidiaries
as well as a release of any Liens on the Intellectual Property assets of the
Companies and their Subsidiaries; and
(d) The Parent and the Sellers shall have obtained all material third-party
consents listed in Section 2.6 of the Disclosure Schedule required for the
consummation of the transactions contemplated by this Agreement; and
(e) The Parent and the Sellers shall have provided the Buyer with all of
the documents required by Section 1.4 to be delivered at Closing by the Sellers;
and
(f) The Buyer shall have entered into employment agreements with R. Evan
Hineman and with at least five of the other seven key employees identified in
Section 5.3 of the Disclosure Schedule, substantially in the form attached
hereto as Exhibit 5; and
(g) Since the date of this Agreement, none of the Companies nor their
Subsidiaries shall have suffered a change or changes in its business or
financial condition that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and
(h) The Parent, the U.S. Company and John C. Holt shall have entered into
severance arrangements upon the terms set forth in Section 4.8(g); and
(i) The Buyer shall have received a certificate of an authorized officer of
each of the Parent and the Sellers to the effect that the conditions in
paragraphs (a), (b), (c), (d) and (g) of this Section 5.3 have been satisfied.
SECTION 5.4. Materiality of Conditions. Notwithstanding anything
contained herein, no condition involving performance of agreements by the
Parent, the Sellers or the Companies, on the one hand, or the Buyer, on the
other, or the accuracy of representations and warranties made by the Parent and
the Sellers, on the one hand, or the Buyer, on the other, as of the date hereof
or the Closing Date or any other date or period shall be deemed not fulfilled,
and the Buyer or the Parent and the Sellers, as the case may be, shall not be
entitled to fail to consummate the transactions contemplated by this Agreement
or terminate this Agreement on such basis, if (i) the nonperformance of such
agreements was unintentional and (ii) if the respects in which such agreements
have not been performed or the representations and warranties are untrue, would
not, individually or in the aggregate, have or reasonably be expected to have a
Company Material Adverse Effect or a Buyer Material Adverse Effect, as the case
may be.
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ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) By mutual written consent of the Parent, the Sellers and the Buyer; or
(b) By the Parent, the Sellers or the Buyer at any time after April 30,
1998 if the Closing shall not have occurred by such date; provided, that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur by such date; or
(c) By the Parent, the Sellers or by the Buyer, if any governmental entity
of competent jurisdiction shall have issued an order, decree or ruling or taken
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action shall have
become final and nonappealable; or
(d) By the Buyer by written notice to the Sellers if any event occurs or
condition exists which would render impossible the satisfaction of one or more
conditions to the obligations of the Buyer to consummate the transactions
contemplated by this Agreement as set forth in Section 5.3; or
(e) By the Sellers by written notice to the Buyer if any event occurs or
condition exists which would render impossible the satisfaction of one or more
conditions to the obligations of the Sellers to consummate the transactions
contemplated by this Agreement as set forth in Section 5.2.
SECTION 6.2. Procedure for and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties hereto pursuant to Section 6.1 hereof, written notice
thereof shall be given by a party so terminating to the other parties and this
Agreement shall forthwith terminate. If this Agreement is terminated pursuant to
Section 6.1 hereof:
(a) Each party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 4.2(b) hereof;
(b) All filings, applications and other submissions made pursuant hereto
shall, and to the extent practicable, be withdrawn from the agency or other
person to which made; and
(c) There shall be no liability or obligation hereunder on the part of the
Parent, the Sellers or the Buyer or any of their respective directors, officers,
employees, affiliates, controlling persons, agents or representatives, except
that the Parent, the U.S. Seller, the U.K. Seller or the Buyer, as the case may
be, may have liability to the other parties if the basis of termination is a
breach by the Parent, the U.S. Seller, the U.K. Seller or the Buyer, as the case
may be, of one or more of the provisions of this Agreement, and except that the
obligations provided for in Section 4.5, this Section 6.2 and Article VIII
hereof shall survive any such termination.
(d) Notwithstanding clause (c), if this Agreement or the transactions
contemplated hereby are terminated by reason of (x) the failure by the Parent to
obtain release of any Lien on the Shares or the Intellectual Property assets of
the Companies and their Subsidiaries or (y) a determination by the Board of
Directors of the Parent to change its recommendation to the shareholders of the
Parent, the U.S. Seller shall promptly (and in any event within five days after
such event) pay to the Buyer, in immediately available funds, the sum of (a) all
reasonable out-of-pocket expenses and fees of the Buyer (including all fees,
expenses and disbursements of counsel, accountants, investment bankers and other
representatives of the Buyer) incurred by the Buyer or on its behalf in
connection with the transactions contemplated by this Agreement and the
negotiation, preparation, execution or performance of this Agreement and any
related investigations of the Parent, the Sellers, the Companies and their
Subsidiaries and (b) an amount equal to $12,000,000.
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ARTICLE VII
SURVIVAL AND INDEMNIFICATION
SECTION 7.1. Survival Periods. (a) All representations and warranties of
the parties contained in this Agreement shall survive the Closing until 18
months following the Closing Date (the "Survival Period") but, except as
provided in Section 6.2(c) hereof, shall not survive any termination of this
Agreement. The parties intend to shorten the statute of limitations and agree
that no claims or causes of action may be brought against the Parent, the
Sellers or the Buyer based upon, directly or indirectly, any of the
representations, warranties or agreements contained in Articles II and III
hereof after the Survival Period or, except as provided in Section 6.2(c)
hereof, any termination of this Agreement. This Section 7.1 shall not limit any
covenant or agreement of the parties which contemplates performance after the
Closing, including the covenants and agreements set forth in Sections 4.3, 4.6,
4.8, 4.10, 4.11, 4.14, 4.15 and 4.17 hereof.
(b) Notwithstanding anything in this Section 7.1 to the contrary, the
representations and warranties made by the Parent and the Sellers relating to
Income Taxes in Section 2.13 shall survive the Closing Date and shall expire
when all applicable statutes of limitations (including extensions thereof) have
expired. The representations and warranties made by the Parent and the Sellers
relating to Taxes other than Income Taxes expire at the end of the Survival
Period.
SECTION 7.2. Parent's and the Sellers' Agreement to Indemnify. (a)
Subject to the terms and conditions set forth herein, from and after the
Closing, the Parent and the Sellers shall jointly and severally indemnify and
hold harmless the Buyer and its directors, officers, employees, affiliates,
controlling persons, agents and representatives and their successors and assigns
(collectively, the "Buyer Indemnitees") from and against all liability, demands,
claims, actions or causes of action, assessments, losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (collectively "Buyer Damages") asserted against or incurred by any
Buyer Indemnitee as a result of or arising out of (i) a breach by the Parent or
the Sellers of any representation or warranty contained in this Agreement when
made or at and as of the Closing Date (or at and as of such different date or
period specified for such representation or warranty) as though such
representation or warranty were made at and as of the Closing Date (or such
different date or period), (ii) the merger of Westmark Insurance Services, Inc.
into the U.S. Company (including the liabilities of Westmark Insurance Services,
Inc.); and (iii) the conduct of the business of the Parent, the Sellers and any
of their Subsidiaries other than the Companies and the Companies' Subsidiaries
as conducted on the Closing Date.
(b) The Parent's and the Sellers' obligation to indemnify the Buyer
Indemnitees pursuant to Section 7.2(a) is subject to the following limitations:
(i) No indemnification shall be made by the Parent and the Sellers
unless the aggregate amount of Buyer Damages exceeds $1,500,000 and, in
such event, indemnification shall be made by the Parent and the Sellers
only to the extent Buyer Damages exceed $1,500,000; provided, however, that
the indemnity provided for in Section 7.2(a)(ii) and (iii) shall not be
subject to this Section 7.2(b)(i) or any time limitation.
(ii) In no event shall the Parent's and the Sellers' aggregate
obligation to indemnify the Buyer Indemnitees exceed $100,000,000;
(iii) The amount of any Buyer Damages shall be reduced by (A) any
amount received by a Buyer Indemnitee with respect thereto under any
insurance coverage or from any other party alleged to be responsible
therefor and (B) the amount of any Tax benefit available to the Buyer
Indemnitee relating thereto. The Buyer Indemnitees shall use reasonable
efforts to collect any amounts available under such insurance coverage and
from such other party alleged to have responsibility. If a Buyer Indemnitee
receives an amount under insurance coverage or from such other party with
respect to Buyer Damages at any time subsequent to any indemnification
provided by the Parent and the Sellers pursuant to this Section 7.2, then
such Buyer Indemnitee shall promptly reimburse the Parent and the Sellers,
as the case may be, for any payment made or expense incurred by the Parent
and the Sellers in connection with providing such indemnification up to
such amount received by the Buyer Indemnitee; and
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(iv) The Parent and the Sellers shall be obligated to indemnify the
Buyer Indemnitees only for those claims giving rise to Buyer Damages as to
which the Buyer Indemnitees have given the Parent and the Sellers written
notice thereof prior to the end of the Survival Period. Any written notice
delivered by a Buyer Indemnitee to the Parent and the Sellers with respect
to Buyer Damages shall set forth with reasonable specificity the basis of
the claim for Buyer Damages and a reasonable estimate of the amount
thereof.
SECTION 7.3. The Buyer's Agreement to Indemnify. (a) Subject to the terms
and conditions set forth herein, from and after the Closing, the Buyer shall
indemnify and hold harmless the Parent and the Sellers and their directors,
officers, employees, affiliates, controlling persons, agents and representatives
and their successors and assigns (collectively, the "Parent/Seller Indemnitees")
from and against all liability, demands, claims, actions or causes of action,
assessments, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "Parent/Seller Damages")
asserted against or incurred by any Parent/Seller Indemnitee as a result of or
arising out of a breach of any representation or warranty contained in Article
III of this Agreement when made or at and as of the Closing Date (or at and as
of such different date or period specified for such representation or warranty)
as though such representation and warranty were made at and as of the Closing
Date (or such different date or period).
(b) The Buyer's obligation to indemnify the Parent/Seller Indemnitees
pursuant to Section 7.3(a) hereof is subject to the following limitations:
(i) No indemnification shall be made by the Buyer unless the aggregate
amount of Parent/Seller Damages exceeds $1,500,000 and, in such event,
indemnification shall be made by the Buyer only to the extent that the
aggregate amount of Parent/Seller Damages exceed $1,500,000;
(ii) In no event shall the Buyer's aggregate obligation to indemnify
the Parent/Seller Indemnitees exceed $100,000,000;
(iii) The amount of any Parent/Seller Damages shall be reduced by (A)
any amount received by a Parent/Seller Indemnitee with respect thereto
under any insurance coverage or from any other party alleged to be
responsible therefor and (B) the amount of any Tax benefit available to the
Parent/Seller Indemnitee relating hereto. The Parent/Seller Indemnitees
shall use reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have
responsibility. If a Parent/Seller Indemnitee receives any amount under
insurance coverage or from such other party with respect to Parent/Seller
Damages at any time subsequent to any indemnification provided by the Buyer
pursuant to this Section 7.3, then such Parent/Seller Indemnitee shall
promptly reimburse the Buyer, as the case may be, for any payment made or
expense incurred by the Buyer in connection with providing such
indemnification up to such amount received by the Parent/Seller Indemnitee;
and
(iv) The Buyer shall be obligated to indemnify the Parent/Seller
Indemnitees only for those claims giving rise to Parent/Seller Damages as
to which the Parent/Seller Indemnitees have given the Buyer written notice
thereof prior to the end of the Survival Period. Any written notice
delivered by a Parent/ Seller Indemnitee to the Indemnifying Party with
respect to Parent/Seller Damages shall set forth with specificity the basis
of the claim for Parent/Seller Damages and a reasonable estimate of the
amount thereof.
(c) From and after the Closing, the Buyer shall indemnify and hold
harmless, to the fullest extent permitted by law, the Parent, the directors and
officers of the Parent both in their capacities as directors and/or officers of
the Parent, or any subsidiaries or affiliates of the Parent and as individuals,
and the successors and assigns of the above (the "Bradley Indemnitees"), from
and against all liability, demands, claims, actions or causes of action,
assessments, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) asserted against or incurred by any
Bradley Indemnitee as a result of or arising out of the acquisition of the U.S.
Company by the Parent and which was or is the subject matter of the Bradley v.
Gelb et al. litigation brought in Middlesex Superior Court in 1992 or the
settlement thereof including but not limited to any claims for indemnification
in connection with such matter (collectively, the "Bradley Damages"). If so
requested by a Bradley Indemnitee, the Buyer shall pay or
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advance (within ten business days of such request) any and all reasonable
expenses which shall include attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with defending, being a witness in or
participating in, or preparing to defend, be a witness in or participate in, any
threatened, pending or completed action, suit, proceeding, inquiry or
investigation involving the Bradley Damages; provided that each such requesting
Bradley Indemnitee agrees to cooperate fully and provide reasonable assistance
to the Buyer in connection with the claims regarding the Bradley Damages.
Notwithstanding anything in this Article VII to the contrary, in the event of a
claim for indemnification pursuant to this Section 7.3(c), the Buyer shall be
permitted to undertake the defense thereof on behalf of itself and such
indemnitees by counsel of its own choosing, which counsel shall be satisfactory
to the Bradley Indemnitee(s) in their reasonable discretion, provided that if in
the Bradley Indemnitee(s)' judgment, upon advice of counsel reasonably
acceptable to the Buyer, a conflict of interest may exist between the Buyer or
its Subsidiaries and any Bradley Indemnitee with respect to such a claim
regarding Bradley Damages, such Bradley Indemnitee(s) shall be entitled to
select counsel of their own choosing, in which event the Buyer shall be
obligated to pay the reasonable fees and expenses of such counsel; provided,
further, that the Bradley Indemnitees may select only one counsel to represent
all Bradley Indemnitees in such action. Notwithstanding anything in this Article
VII to the contrary, no Bradley Indemnitee shall, without the Buyer's consent,
settle any claim relating to the Bradley Damages. The indemnity provided for in
this paragraph shall not be subject to Section 7.3(b)(i) or any time limitation.
(d) In the event the purchase price allocation as set forth in Section 1.1
is challenged by the United States or any state, county, local or foreign taxing
authority, the Buyer will fully and promptly indemnify and hold harmless the
Sellers for any increase in Taxes paid by the Sellers as a result of any
reallocation of the purchase price allocation, including interest, penalties,
and other additions, and for the cost of all reasonable outside legal and Tax
services with respect to such Taxes. The Sellers will cooperate at the Buyer's
request in contesting and defending against any such challenges, and the Buyer
will pay all additional fees, costs and Taxes, including interest and penalties,
incurred by the Buyer as a result of such action. The indemnity provided for in
this paragraph shall not be subject to Section 7.3(b)(i) and shall be subject
only to the applicable statute of limitations.
SECTION 7.4. Third Party Indemnification. The obligations of the Parent
and the Sellers to indemnify the Buyer Indemnitees under Section 7.2 hereof with
respect to Buyer Damages and the obligations of the Buyer to indemnify the
Parent/Seller Indemnitees under Section 7.3 hereof with respect to Parent/Seller
Damages and to indemnify the Bradley Indemnitees with respect to Bradley
Damages, in either case resulting from the assertion of liability by third
parties (each, as the case may be, a "Claim"), will be subject to the following
terms and conditions:
(a) Promptly after acquiring knowledge of any claim in respect of which a
party (the "Indemnified Party") may seek indemnification from the other party
(the "Indemnifying Party") hereunder, the Indemnified Party shall give written
notice thereof to the Indemnifying Party describing such claim and demanding
indemnification hereunder. Notwithstanding the foregoing, failure to provide the
aforementioned notice will not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party under this Agreement, except to the
extent that (i) such failure to provide notice causes the amounts paid by the
Indemnifying Party to be greater than they would have been had such notice been
given on a reasonably timely basis; or (ii) such notice is not delivered to the
Indemnifying Party prior to the expiration of any applicable survival period, if
any, under Section 7.1. The Indemnifying Party will be entitled to assume
control of the defense of any claim, and to settle or compromise such claim in
its discretion, subject to the consent of the Indemnified Party which consent
will not be unreasonably withheld or delayed. After written notice by the
Indemnifying Party to the Indemnified Party of its election to assume control of
the defense of any such action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof. Notwithstanding
anything in this Section 7.4 to the contrary, if (i) the Indemnifying Party does
not promptly assume control of the defense of such action as provided in this
Section 7.4 or (ii) the Indemnified Party reasonably believes and so notifies
the Indemnifying Party in writing that the claim, even if indemnified for,
materially and adversely will affect its business, financial condition or
results of operations, the Indemnified Party shall have the right to
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defend such action in such manner as it may deem appropriate at the cost and
expense of the Indemnifying Party and the Indemnifying Party will promptly
reimburse the Indemnified Party therefor (subject, if applicable, to the
limitations contained in Sections 7.2(b) and 7.3(b)).
(b) Any amounts to which the Indemnified Party is entitled under this
Article VII shall be paid by the Indemnifying Party within ten days following a
request therefor.
(c) Anything in this Section 7.4 to the contrary notwithstanding, the
Indemnifying Party shall not enter into any settlement or compromise of any
action, suit or proceeding or consent to the entry of any judgment (i) which
does not include as an unconditional term thereof the delivery by the claimant
or plaintiff to the Parent/Seller Indemnitee or the Buyer Indemnitee, as the
case may be, of a written release from all liability in respect of such action,
suit or proceeding or (ii) for other than monetary damages to be borne by the
Indemnifying Party, without the prior written consent of the Parent/Seller
Indemnitee or the Buyer Indemnitee, as the case may be, which consent shall not
be unreasonably withheld.
(d) The Indemnifying Party and the Indemnified Party shall cooperate fully
in all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to this Article VII, including by providing the other party
with reasonable access to employees and officers (including as witnesses) and
other information.
SECTION 7.5. No Set-Off. Neither the Buyer nor the Parent and the Sellers
shall have any right to set-off any Buyer Damages or Parent/Seller Damages,
respectively, against any payments to be made by any of them pursuant to this
Agreement, the IT Services Agreement or otherwise.
SECTION 7.6. Insurance. The indemnifying party shall be subrogated to the
rights of the indemnified party in respect of any insurance relating to damages
to the extent of any indemnification payments made hereunder.
SECTION 7.7. No Duplication. Any liability for indemnification hereunder
shall be determined without duplication of recovery by reason of the state of
facts giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1. Amendment and Modification. This Agreement may be amended,
modified or supplemented at any time by the parties hereto, pursuant to an
instrument in writing signed by all parties.
SECTION 8.2. Extension; Waiver. At any time prior to the Closing Date,
the party entitled to the benefit of any respective term or provision hereof may
(a) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered
pursuant hereto, or (c) waive compliance with any obligation, covenant,
agreement or condition contained herein. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party entitled to the benefits of such extended or
waived term or provision.
SECTION 8.3. Entire Agreement; Assignment. This Agreement (including the
Disclosure Schedule), the IT Services Agreement, the Confidentiality Agreement
and the Voting Agreements (a) constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede other
prior agreements and understandings, both written and oral, between the parties
hereto with respect to the subject matter hereof and (b) shall not be assigned,
by operation of law or otherwise, by a party hereto, without the prior written
consent of the other parties except that the Buyer may assign any or all of its
rights hereunder (including its rights under Article VII) to one or more
wholly-owned subsidiaries of the Buyer.
SECTION 8.4. Severability. The invalidity or unenforceability of any term
or provision of this Agreement in any situation or jurisdiction shall not affect
the validity or enforceability of the other terms or provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in
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any other jurisdiction and the remaining terms and provisions shall remain in
full force and effect, unless doing so would result in an interpretation of this
Agreement which would deprive a party of the material benefits intended hereby.
SECTION 8.5. Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and may be given by any of
the following methods: (a) personal delivery; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Such notices and communications shall be sent to the
appropriate party at its address or facsimile number given below or at such
other address or facsimile number for such party as shall be specified by notice
given hereunder (and shall be deemed given upon receipt by such party or upon
actual delivery to the appropriate address, or, in case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error; in the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above,
provided however, that such mailing shall in no way alter the time at which the
facsimile notice is deemed received):
(a) if to the Parent and the Sellers, to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Joseph E. Kasputys,
Chairman, President and
Chief Executive Officer
with a copy to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Michael R. Kargula, Esq.
Executive Vice President,
General Counsel and
Secretary
and with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telecopy: (202) 393-5760
Attention: Stephen W. Hamilton, Esq.
(b) if to the Buyer, to
Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California 91367
Telecopy: (818) 598-2025
Attention: John E. Preston, Esquire
Senior Vice President and General Counsel
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with a copy to
O'Melveny & Myers LLP
555 13th Street, N.W.
Washington, DC 20004-1109
Telecopy: (202) 383-5414
Attention: David G. Pommerening, Esq.
SECTION 8.6. Governing Law; Arbitration. (a) This Agreement shall be
governed by, enforced under and construed in accordance with the laws of the
State of Massachusetts, without giving effect to any choice or conflict of law
provision or rule thereof.
(b) Except as specifically provided for elsewhere in this Agreement, all
claims and controversies arising out of or in connection with this Agreement
shall be subject to binding arbitration by a single arbitrator in accordance
with the commercial arbitration rules of the American Arbitration Association
("AAA") or the existing Rules of Practice and Procedures of the Judicial
Arbitration and Mediation Services, Inc. ("JAMS"). Any arbitration initiated by
the Buyer shall occur in Massachusetts, and any judgment on the award rendered
in such arbitration shall be entered in any Massachusetts state or federal court
having jurisdiction. Any arbitration initiated by the Parent or any Seller shall
occur in California, and any judgment on the award rendered in such arbitration
shall be entered in any California state or federal court having jurisdiction.
The party filing the arbitration shall have the right to select either AAA or
JAMS. The parties shall be entitled to discovery in accordance with the
provisions of New York law. The prevailing party in any arbitration proceeding
hereunder as determined by the arbitrator or in any legal proceedings or actions
arising from or in connection with this Agreement shall be entitled to recover
reasonable attorneys' fees and costs. Nothing herein shall prohibit a party from
seeking equitable relief in a court of law to maintain the status quo while an
arbitration is pending hereunder. The parties agree that the arbitrator shall
not have the right to award punitive damages.
SECTION 8.7. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this
Agreement nor in any way affect this Agreement.
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.9. Fees and Expenses. Whether or not this Agreement and the
transactions contemplated hereby are consummated, and except as otherwise
expressly set forth herein including Section 6.2(d), all costs and expenses
(including legal and financial advisory fees and expenses) incurred in
connection with, or in anticipation of, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. The
Buyer hereby waives compliance by the Parent and the Sellers with any applicable
bulk transfer laws (including any so-called "tax bulk sales provisions"). Each
of the Parent and the Sellers, on the one hand, and the Buyer, on the other
hand, shall indemnify and hold harmless the other party from and against any and
all claims or liabilities for financial advisory and finders' fees incurred by
reason of any action taken by such party or otherwise arising out of the
transactions contemplated by this Agreement by any person claiming to have been
engaged by such party.
SECTION 8.10. Knowledge. The phrase "to the knowledge of the Parent" or
any similar phrase shall mean and be limited to the actual (but not constructive
or imputed) knowledge of Joseph E. Kasputys, Stephen H. Curran, John C. Holt,
Michael R. Kargula and William S. Swift who shall make reasonable written
inquiry of Robert Brammer, Mark Gildersleeve, Evan Hineman, Elton Klibanoff,
Stephen Landry, John Putney, James Shields and Noel Widdifield as to the
accuracy of the representations and warranties in this Agreement. The phrase "to
the knowledge of the Buyer" or similar phrase shall mean and be limited to the
actual (but not constructive or imputed) knowledge of John Leonis, Michael
Brown, Lawrence Hoke, John Preston and Richard Russin.
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SECTION 8.11. Interpretation. (a) In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
(b) The use in this Agreement or any other related document of the word
"include" or "including", when following any general statement, term or matter,
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
SECTION 8.12. No Third Party Beneficiaries. This Agreement is solely for
the benefit of the Parent and the Sellers and their successors and permitted
assigns, with respect to the obligations of the Buyer under this Agreement, and
for the benefit of the Buyer, and its successors and permitted assigns, with
respect to the obligations of the Parent and the Sellers, under this Agreement,
and this Agreement shall not be deemed to confer upon or give to any other third
party any remedy, claim of liability or reimbursement, cause of action or other
right.
SECTION 8.13. No Waivers. Except as otherwise expressly provided herein,
no failure to exercise, delay in exercising, or single or partial exercise of
any right, power or remedy by any party, and no course of dealing between the
parties, shall constitute a waiver of any such right, power or remedy. No waiver
by a party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. No waiver shall be valid unless in writing and
signed by the party against whom such waiver is sought to be enforced.
SECTION 8.14. Specific Performance. The parties hereto agree that if any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, without the necessity of proving the
inadequacy of money damages as a remedy, in addition to any other remedy at law
or equity.
SECTION 8.15. Further Assurances. The parties hereto each agree to
execute, make, acknowledge, and deliver such instruments, agreements and other
documents as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
SECTION 8.16. Preservation of and Access to Certain Information After
Closing. The Parent and the Sellers shall give to the Buyer, the Companies and
their Subsidiaries and their employees, counsel and advisors, full and complete
access upon reasonable notice during normal business hours, to all agreements,
records and other information relating to the Companies and their Subsidiaries,
and will provide copies of such information concerning the Companies and their
Subsidiaries (with respect to periods prior to the Closing) as the Buyer may
reasonably request, including but not limited to full and complete access in
connection with the preparation of any Tax Returns for the Affiliated Groups, in
connection with or in anticipation of any audit by any federal, state or local
Tax authorities of the Affiliated Groups or matters relating to insurance
coverage, third-party litigation, claims, proceedings and investigations. From
and after the Closing Date, the Parent and the Sellers shall preserve all such
agreements, records and information for a period of eight years, or with respect
to Tax matters, until the expiration of the applicable statute of limitations
(including any extensions thereof), provided, however, that the Parent and the
Sellers shall not destroy or dispose of any such agreements, records or
information without giving notice to the Buyer and the Companies of such pending
destruction or disposal and offering the Buyer and the Companies the right and
opportunity to copy such agreements, records or information. The Buyer shall
reimburse the Parent and the Sellers for all reasonable out-of-pocket expenses
they may incur with respect to the foregoing.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
duly signed as of the date first above written.
PRIMARK CORPORATION
By: /s/ JOSEPH E. KASPUTYS
------------------------------------
Name: Joseph E. Kasputys
Title: Chairman, President and
Chief Executive Officer
PRIMARK HOLDING CORPORATION
By: /s/ JOSEPH E. KASPUTYS
------------------------------------
Name: Joseph E. Kasputys
Title: Chairman, President and
Chief Executive Officer
PRIMARK INFORMATION SERVICES
UK Limited
By: /s/ JOSEPH E. KASPUTYS
------------------------------------
Name: Joseph E. Kasputys
Title: Managing Director
LITTON INDUSTRIES, INC.
By: /s/ JOHN E. PRESTON
------------------------------------
Name: John E. Preston
Title: Senior Vice President
and General Counsel
LITTON U.K. LIMITED
By: /s/ JOHN E. PRESTON
------------------------------------
Name: John E. Preston
Title:
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Exhibit 1
INFORMATION TECHNOLOGY SERVICES AGREEMENT
BY AND AMONG
PRIMARK CORPORATION
TASC, INC.
AND
LITTON INDUSTRIES, INC.
DATED AS OF , 1998
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INFORMATION TECHNOLOGY SERVICES AGREEMENT
INFORMATION TECHNOLOGY SERVICES AGREEMENT dated , 1998 (the
"IT Services Agreement") by and among Primark Corporation, a Michigan
corporation ("Primark"), TASC, Inc., a Massachusetts corporation ("TASC") and
Litton Industries, Inc., a Delaware corporation ("Buyer").
WHEREAS, Primark and Buyer have entered into a Stock Purchase Agreement
dated as of December 8, 1997 (the "Stock Purchase Agreement"), pursuant to which
Buyer will purchase, among other things, all of the outstanding capital stock of
TASC, a wholly-owned indirect subsidiary of Primark (the "Stock Purchase"); and
WHEREAS, prior to the Closing of the Stock Purchase, TASC has been
providing certain information technology services (the "IT Services") to Primark
and its subsidiaries ("Primark" as hereinafter used in this IT Services
Agreement, means Primark, its direct and indirect subsidiaries, as listed on
Attachment A and Primark Decision Economics, Inc., a Massachusetts corporation
in which Primark owns a minority interest); and
WHEREAS, both Primark and Buyer desire that TASC continue to supply IT
Services on a level of effort basis to Primark subsequent to the Closing of the
Stock Purchase; and
WHEREAS, this IT Services Agreement shall commence immediately upon the
closing of the Stock Purchase, unless said closing does not take place by April
30, 1998, in which event this IT Services Agreement shall be null and void;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PROVISION OF SERVICES
SECTION 1.1 Sale of IT Services. The IT Services defined in Section 1.3
will be supplied by TASC to Primark on a timely basis either as indicated in
Section 1.2 or as requested by Primark from time to time, as the case may be.
Primark will reimburse TASC for the cost of the IT Services in accordance with
ARTICLE II.
SECTION 1.2 Information Technology Representative. TASC will designate an
Information Technology Representative ("ITR"), who shall be a senior employee of
TASC with the principal responsibility for the planning, oversight and review of
TASC's own information technology research and development, plans and
capabilities. The ITR will be the principal point of contact between Primark and
TASC regarding matters under this IT Services Agreement.
SECTION 1.3 Definition of IT Services. The IT Services to be provided by
TASC to Primark are as follows:
(a) The ITR will chair or serve as a member of the Primark Financial
Information Team -- Information Technology Committee ("FIT-IT"), as designated
by Primark. The members of the FIT-IT will be designated by Primark. When
serving as Chairman, the ITR will hold monthly meetings of the FIT-IT, either in
person, teleconference or videoconference, establish the agenda, issue minutes
and pursue necessary action items resulting therefrom. When serving as a member,
but not as Chairman, the ITR will participate in monthly meetings of the FIT-IT
and pursue such necessary action items resulting therefrom as may be relevant to
the obligations of TASC herewith.
(b) The ITR, together with such members of his/her staff as the ITR
considers appropriate, will have regular and on-going contact with FIT-IT
members, visit the facilities of Primark and visit designated customer locations
for the purpose of advising Primark on information technology issues (including,
but not limited to, Year 2000 and Euro issues) related to computers,
communications, networks, software, databases
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and similar information technology capabilities used in Primark's internal
operations or in the delivery of products and services to Primark's customers.
Such advice may be given orally, but will thereafter be confirmed in written
presentations, memoranda and/or reports.
(c) The ITR will serve as an advisor to the Primark Financial Industry Team
("FIT") and attend monthly and special meetings of the FIT, as requested by the
FIT Chairman, for the purpose of providing information technology advice on
Primark's plans, programs and product developments projects. The ITR will make
presentations on information technology to the FIT from time to time as the ITR
considers appropriate and as requested by the FIT Chairman and, when serving as
Chairman of the FIT-IT, make monthly reports on the activities of the FIT-IT to
the FIT, TASC and Primark management.
(d) The ITR will participate in the annual review of Primark's Five-Year
Plan and Annual Budget, together with quarterly updates thereto, providing
advice on information technology matters affecting such plans and budgets.
(e) The ITR, with the assistance and participation of the members of the
FIT-IT, will prepare an annual Information Technology Plan ("IT Plan") for
Primark, in such form and detail as the ITR and FIT Chairman shall mutually
determine; covering information technology issues and projects relevant to both
the Five-Year Plan and Annual Budget described in Paragraph (d) of this Section
1.3. The IT Plan will be prepared on the same cycle as Primark's Five-Year Plan
and Annual Budget.
(f) The ITR will, as requested from time to time, provide special briefings
to Primark senior management and the Primark Board of Directors.
(g) TASC, through the ITR and/or members of the ITR's staff, will have
responsibility for the design and operation of the Primark Telecommunications
Network ("PTN"), including network architecture, procurement and operation, to
the extent mutually agreed upon between TASC and Primark. This will involve
assisting Primark in determining the nature and extent of telecommunications
requirements, designing networks and related capabilities that will, as a goal,
enable Primark to provide high quality state-of-the-art telecommunications
services at the lowest cost internally and to its customers, drafting requests
for proposals, assisting in procurement negotiations and actual operation of
portions of Primark's telecommunications networks. All contracts for
telecommunications services will be executed by Primark and payments for
services will be made directly by Primark.
(h) The ITR, and/or members of the technical staff of TASC, will
participate in special Primark projects from time to time as requested by
Primark and agreed by TASC. Such projects may include performing due diligence
on acquisition candidates, evaluating new product development proposals,
resolving information technology problems for Primark customers and similar
projects, provided that in case of an actual, perceived or potential conflict of
interest, TASC may decline participation in such projects.
(i) Primark may request TASC to undertake information technology projects
on Primark's behalf, or to participate as team members in such information
technology projects undertaken by Primark. Such projects could include, but are
not limited to, information technology surveys and assessments, research and
development on new technology capabilities and the planning, development and/or
testing of new Primark information products and internal information technology
capabilities, provided that in case of an actual, perceived or potential
conflict of interest, TASC may decline participation in such projects.
ARTICLE II
PAYMENTS FOR SERVICES
SECTION 2.1 Annual Retainer. For the services described in Section
1.3(a), (b), (c), (d), (e) and (f), Primark will pay TASC an annual retainer of
$100,000, paid quarterly in advance commencing on the first day of the month
immediately following the Closing of the Stock Purchase. The annual retainer
shall compensate TASC for the availability of the ITR not to exceed 480 hours
per year and for the availability of members of his/her staff not to exceed 240
hours per year. Efforts of the ITR or members of his/her staff in excess of the
hours stipulated above shall be paid by Primark at a rate or rates agreed upon
by the parties.
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Primark will also make incentive payments of up to $8,500 at the end of each
quarter during the term of this IT Services Agreement and an additional amount
up to $45,000 at the end of each twelve month period following the execution of
this IT Services Agreement, with such payments to be determined in the sole
discretion of Primark reflecting Primark's judgment on the quality of the IT
Services received. Primark will also reimburse TASC for out-of-pocket expenses,
such as travel and reproduction expenses, at cost, including applicable
overhead, monthly in arrears. The quarterly retainer and out-of-pocket expenses
will be paid within thirty (30) days after the receipt of invoices by Primark
from TASC. Monthly out-of-pocket expenses may not exceed $5,000 in any month
without prior approval by Primark.
SECTION 2.2 Telecommunications Services. For the telecommunications
services described in Section 1.3(g), Primark will reimburse TASC at hourly
rates mutually agreed in advance. Out-of-pocket costs, including any external
vendor charges, will be reimbursed at cost, including such overhead as may be
required to be charged by applicable government regulation. A part of the IT
Plan described in Section 1.3(e) will include a Telecommunications Cost Annex,
estimating the telecommunications costs for Primark's Five-Year Plan and Annual
Budget. Upon Primark's approval of the telecommunications cost estimate for the
Annual Budget, TASC may begin incurring such costs. The telecommunications cost
estimate for the Annual Budget will be updated quarterly. Any expenditure by
TASC on Primark's behalf in excess of 5% above the approved telecommunications
cost estimate will require prior approval by Primark. Payments for
telecommunications services will be made monthly in arrears, within thirty (30)
days of receipt of invoices.
SECTION 2.3 Other Services. For the services described in Sections 1.3(h)
and (i), relating to special projects, upon request by Primark, TASC will submit
a proposal covering the scope of work, milestones, schedule, deliverables,
personnel assigned and costs. TASC may commence work on special projects upon
receipt of approval from Primark. Primark will reimburse TASC for these other
services, at hourly rates mutually agreed by the parties. Out-of-pocket costs
will be reimbursed based on costs incurred, including applicable overhead.
Payments for other services will be made monthly in arrears, within thirty (30)
days of receipt of invoices.
SECTION 2.4 Overhead. For the purposes of this Article II, overhead means
the overhead and general and administrative expenses (G&A) charges on cost-based
contracts performed for the U.S. Government during similar time periods,
calculated and applied in the same manner.
ARTICLE III
TERMINATIONS
SECTION 3.1 Normal Termination Date. This IT Services Agreement
terminates three years from the date of the Closing (as defined in the Stock
Purchase Agreement). However, notwithstanding anything herein to the contrary,
the telecommunications services described in Section 1.3(g) hereof may be
terminated separately at any time upon ninety (90) calendar days advance notice
to TASC.
SECTION 3.2 Special Termination. After the first anniversary of this IT
Services Agreement, Primark may terminate this Service Agreement at any time
upon ninety (90) calendar days advance notice to TASC.
ARTICLE IV
INTELLECTUAL PROPERTY RIGHTS
SECTION 4.1 Work to be Performed and IT Services to be Rendered.
(a) For purposes of this IT Services Agreement "Work Product" shall mean
all data, documentation, software and information, in whatever form, first
produced or created by TASC in the performance of the work or the rendition of
services under this IT Services Agreement and delivered to Primark as a
deliverable hereunder including all proprietary rights therein including rights
of patent, copyright, trademark, mask work and trade secret ("Intellectual
Property Rights").
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(b) During the term of this IT Services Agreement TASC shall render the
services set forth in Section 1.3 above. All services to be rendered hereunder
shall be under the general supervision of a designated Primark representative
(the "Primark Representative").
(c) All services to be rendered and deliverables to be delivered hereunder
shall be deemed accepted by the Primark Representative if not rejected within
forty five (45) calendar days of submission to Primark. If the Primark
Representative rejects the services and or deliverables required hereunder,
Primark shall provide reasonably detailed information about the rejection and
TASC shall promptly correct such services and/or deliverables and resubmit same
to Primark for acceptance in accordance with the provisions of this paragraph
(c).
(d) The services to be rendered hereunder shall be performed by TASC, but
such services may be subcontracted or otherwise performed by third parties on
behalf of TASC without the prior consent of Primark if, and only if, such
subcontracting is a customary practice of TASC.
SECTION 4.2 Ownership of Work Product. (a) TASC acknowledges and agrees
that Primark is to be the exclusive owner of the Work Product, including all
Intellectual Property Rights therein, whether such Work Product is tangible or
intangible and including works-in-progress, and whether such Work Product is
created or reduced to practice by TASC alone or jointly with Primark's employees
or agents. Without limiting the generality of the foregoing, all copyrightable
works included in the Work Product shall be considered "works for hire" of
Primark, and TASC expressly waives any right of attribution, droit morale or
similar rights therein.
(b) In the event that title to any or all of the Work Product may not, by
operation of law, vest in Primark or is found not to be a "work for hire" within
the meaning of the Copyright Act, then TASC hereby conveys and irrevocably
assigns to Primark, without further consideration, all its right, title and
interest in all Work Product and all copies thereof, in whatever medium fixed or
embodied, and in all written records, graphics, diagrams, notes, or reports
relating thereto in TASC's possession or under its control.
(c) TASC hereby represents, warrants, and covenants that any contributions
of its own employees or subcontractors (to the extent Intellectual Property
Rights are transferred by subcontractors) to the Work Product, including but not
limited to, contributions of the FIT and his or her staff, are and shall be
"works for hire" of TASC or shall be otherwise owned solely and exclusively by
TASC upon delivery to Primark.
(d) Except as otherwise agreed, to the extent that the delivery of Services
by TASC involves the use of any pre-existing (as of the effective date of this
IT Services Agreement) Intellectual Property Rights which are owned or
controlled by TASC or TASC's subsidiaries (other than WSI), Primark is hereby
granted a non-exclusive, perpetual, royalty-free, fully-paid up, worldwide right
and license, with the right to sublicense or transfer the license for such
Intellectual Property Rights to subsidiaries that remain Primark subsidiaries;
provided, however, that Primark may use said Intellectual Property Rights solely
for its own use and that of its subsidiaries and may not sublicense or transfer
such license to any third party including a parent or affiliate (other than a
subsidiary). The license hereby granted to Primark shall survive the termination
of this IT Services Agreement for whatever reason.
ARTICLE V
CONFIDENTIALITY
TASC shall not disclose, or use for the benefit of other than Primark, any
and all written or tangible information marked "confidential," "proprietary" or
with a similar legend disclosed to TASC as a result of this IT Services
Agreement; provided, however, that TASC shall have no obligation hereunder for
that portion of such information which is (i) disclosed by Primark to others
without any restriction on use and disclosure, or (ii) approved for release by
written consent of Primark, or (iii) available to the general public by lawful
means, or (iv) if independently developed by or for TASC or rightfully received
by TASC from a third party, unless any of such information was provided to TASC
as a result of Primark's ownership of TASC.
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ARTICLE VI
EMPLOYMENT PROVISIONS
The parties acknowledge and agree that: (i) in furnishing the Services to
Primark hereunder, TASC and its Affiliates are functioning as an independent
contractor to Primark; and (ii) except as otherwise provided herein, TASC and
any Affiliate are solely responsible for the payment of salary, employee
benefits and all other compensation due to TASC and Affiliate personnel for
rendering services, and for all applicable federal, state and local tax
withholding with respect to compensation and benefits payable to them under this
IT Services Agreement or otherwise; and (iii) TASC or any Affiliate personnel
shall not participate in or be eligible to participate in any compensation or
benefit plan or perquisite of Primark.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 Definition. The term "Affiliate" as used in this IT Services
Agreement shall mean a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
a specified person.
SECTION 8.2 Amendment and Modification. This IT Services Agreement may be
amended, modified or supplemented at any time by the parties hereto, pursuant to
an instrument in writing signed by all parties.
SECTION 8.3 Entire Agreement; Assignment. This IT Services Agreement (a)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof and (b) shall not be assigned, by operation of law
or otherwise, by a party hereto, without the prior written consent of the other
parties.
SECTION 8.4 Severability. The invalidity or unenforceability of any term
or provision of this IT Services Agreement in any situation or jurisdiction
shall not affect the validity or enforceability of the other terms or provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction and the remaining terms and
provisions shall remain in full force and effect, unless doing so would result
in an interpretation of this IT Services Agreement which is manifestly unjust.
SECTION 8.5 Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and may be given by any of
the following methods: (a) personal delivery; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Such notices and communications shall be sent to the
appropriate party at its address or facsimile number given below or at such
other address or facsimile number for such party as shall be specified by notice
given hereunder (and shall be deemed given upon receipt by such party or upon
actual delivery to the appropriate address or, in case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above,
provided however, that such mailing shall in no way alter the time at which the
facsimile notice is deemed received):
if to Primark, to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Joseph E. Kasputys, Chairman, President
and Chief Executive Officer
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with a copy to
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, Massachusetts 02154
Telecopy: (617) 890-6129
Attention: Michael R. Kargula, Esq. Executive Vice
President, General Counsel and Secretary
if to TASC, to
TASC, Inc.
55 Walkers Brook Drive
Reading, Massachusetts 01867
Telecopy: (617)
Attention:
if to Litton Industries, Inc., to
Litton Industries, Inc.
21240 Burbank Blvd.
Woodland Hills, CA 91367
Telecopy: (818) 598-5047
Attention: Alden Munson
with a copy to
Litton Industries, Inc.
21240 Burbank Blvd.
Woodland Hills, CA 91367
Telecopy: (818) 598-2025
Attention: John E. Preston, Senior VP
and General Counsel
SECTION 8.6 Governing Law; Arbitration. This IT Services Agreement shall
be governed by, enforced under and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to any choice or conflict
of law provision or rule thereof. In the event any dispute or difference of any
kind whatsoever shall arise between the parties in connection with or arising
out of the validity or invalidity, construction, execution, meaning, operation
or effect of this IT Services Agreement or breach thereof, the parties shall
seek to resolve the same amicably through good faith negotiation. Failing
resolution by such means the same shall be finally settled by binding
arbitration in Boston, Massachusetts, under the Commercial Arbitration Rules of
the American Arbitration Association governed by the substantive law of the
Commonwealth of Massachusetts. The arbitration shall be before a panel of three
arbitrators unless the parties agree in writing to arbitration before a single
arbitrator. The prevailing party in any arbitration proceedings hereunder as
determined by the arbitrator or in any legal proceedings or actions arising from
or in connection with this IT Services Agreement shall be entitled to recover
reasonable attorneys' fees and costs. Pending resolution of such dispute, TASC
agrees to proceed diligently with the performance of this IT Services Agreement,
unless otherwise directed by Primark.
SECTION 8.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this IT
Services Agreement nor in any way affect this IT Services Agreement.
SECTION 8.8 Counterparts. This IT Services Agreement may be executed in
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
SECTION 8.9 Interpretation. In the event an ambiguity or question of
intent or interpretation arises, this IT Services Agreement shall be construed
as if drafted jointly by the parties and no presumption or
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burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this IT Services Agreement.
SECTION 8.10 No Third Party Beneficiaries. This IT Services Agreement is
solely for the benefit of Primark and its successors and permitted assigns, with
respect to the obligations of TASC and Buyer under this IT Services Agreement,
and for the benefit of Buyer and TASC, and their successors and permitted
assigns, with respect to the obligations of Primark under this IT Services
Agreement, and this IT Services Agreement shall not be deemed to confer upon or
give to any other third party any remedy, claim of liability or reimbursement,
cause of action or other right.
SECTION 8.11 No Waivers. Except as otherwise expressly provided herein,
no failure to exercise, delay in exercising, or single or partial exercise of
any right, power or remedy by any party, and no course of dealing between the
parties, shall constitute a waiver of any such right, power or remedy. No waiver
by a party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. No waiver shall be valid unless in writing and
signed by the party against whom such waiver is sought to be enforced.
SECTION 8.12 No Solicitation/No Hire. During the period of performance of
this IT Services Agreement, and for two (2) years thereafter, neither party
hereto shall, without the prior written consent of the other party, hire,
solicit for hire or knowingly allow its employees to hire or solicit for hire
any of those employees of the other party or its affiliates who are associated
with the performance of this IT Services Agreement.
SECTION 8.13 Warranties/Disclaimer. BUYER AND TASC ARE FURNISHING NO
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. BUYER AND
TASC SHALL NOT BE LIABLE FOR LOSS FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR
INJURY TO THIRD PARTIES.
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IN WITNESS WHEREOF, each of the undersigned has caused this IT Services
Agreement to be duly signed as of the date first above written.
PRIMARK CORPORATION
By:
------------------------------------
Name:
Title:
TASC, INC.
By:
------------------------------------
Name:
Title:
LITTON INDUSTRIES, INC.
By:
------------------------------------
Name:
Title:
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ATTACHMENT A
Primark Holding Corporation Primark Financial Technologies, Inc.
Primark Data Company Baseline Financial Services, Inc.
Yankee Group Research, Inc. Yankee Group Asia-Pacific Pty Limited
WEFA Holdings, Inc. WEFA, Inc.
WEFA GmbH WEFA SA
WEFA Southern Africa (Pty) Ltd. CIEMEX, Inc.
CIEMEX WEFA, Inc. WEFA (Holdings) Limited
WEFA Limited Staniland Hall Associates Limited
WEFA Canada, Inc. Primark Belgium SA
ICV Limited Interquote Limited
I.C.V. Benelux BV ICV Europe Limited
Primark Luxembourg SA Primark Poland SP.Z0.0
Datastream International Inc. Datastream International (DC), Inc.
Primark Hong Kong Limited Datastream International (Japan) KK
Datastream International Pty (Australia) Primark Information Services UK Limited
Limited
Datastream International (Switzerland) Datastream International (Italy) Srl
Limited
Datastream International GmbH Datastream International (Canada) Ltd.
Datastream International (France) SA Datastream International (Sweden) Aktiebolag
Datastream International (South Africa) Datastream International (Korea) Limited
Proprietary Limited
Datastream International (Thailand) Limited Datastream International (Singapore) Pte.
Ltd.
Disclosure Incorporated Disclosure International, Inc.
Worldscope/Disclosure International Partners Worldscope/Disclosure LLC
Worldscope/Disclosure Incorporated India Vestek Systems, Inc.
Pvt. Ltd.
I/B/E/S International, Inc. I/B/E/S Inc.
I/B/E/S Japan K.K. Disclosure Ltd.
Datastream Pension Trustees Limited Datastream Group
Datastream I/B/E/S UK Limited
Datastream International Limited Datastream International B.V.
Datastream registered Malaysia branch Primark Investment Management Services
Limited
Groupe DAFSA SA DAFSA Edition SNC
SAFE SNC Globe On Line
Primark Information Services Spain SA Triad International Maintenance Corporation
Panroma
All other entities that may be acquired or created by Primark Corporation and/or
its direct or indirect subsidiaries from time to time is automatically included
in this Attachment A.
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Exhibit 2
Shareholders' Equity per the 9/30/97 Combined Balance Sheet................... $170,161,073
Less Cash..................................................................... (159,867)
Advance Receivable to Parent............................................. (18,717,277)
Balance in Tax due Primark Account....................................... 3,009,918
Note Payable to Parent................................................... 447,452
------------
$154,741,299
===========
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Exhibit 3
SUBSTANCE OF PARENT AND SELLERS' LEGAL OPINION
1. Each of the Parent, each of the Sellers and each Company (the "Subject
Companies") has been duly organized and is validly existing and in good standing
under the laws of its jurisdiction of incorporation, with the full power and
authority to perform its obligations under the Stock Purchase Agreement.
2. The execution, delivery and performance of the Stock Purchase Agreement
by each of the Subject Companies that is a party thereto has been duly
authorized by all necessary corporate action on the part of the pertinent
Subject Company, and the Stock Purchase Agreement has been duly executed and
delivered by the pertinent Subject Companies.
3. The Stock Purchase Agreement constitutes legally valid and binding
obligations of each Subject Company that is a party thereto, enforceable in
accordance with their terms, except (i) that such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
4. The Subject Company's execution and delivery of, and performance of its
obligations under, the Stock Purchase Agreement does not and will not (i)
violate, such Subject Company's articles or certificate of incorporation or
by-laws, or (ii) breach or otherwise violate any existing obligation or
restriction on such Subject Company under any order, judgment or decree of any
state, federal or foreign court or governmental authority binding on such
Subject Company.
5. The execution and delivery by each Subject Company that is a party
thereto of, and performance of its obligations under, the Stock Purchase
Agreement do not violate any state, federal, or foreign statute or regulation
that we have, in the exercise of customary professional diligence, recognized as
applicable to such Subject Company or to transactions of the type contemplated
by the Stock Purchase Agreement.
6. No order, consent, permit or approval of any state, federal, or foreign
governmental authority that we have, in the exercise of customary professional
diligence, recognized as applicable to any of the Subject Companies, or to
transactions of the type contemplated by the Stock Purchase Agreement, is
required on the part of any of the Subject Companies, for the execution and
delivery of, and performance of their respective obligations under, the Stock
Purchase Agreement.
7. The authorized capital stock of the U.S. Company consists of 1,000
shares of common stock and 0 shares of preferred stock, and the authorized
capital stock of the U.K. Company consists of 316,107 ordinary shares and 0
preferred shares.
8. Upon payment of the Purchase Price in accordance with the terms of the
Stock Purchase Agreement, assuming that the Buyer has no notice of any adverse
claims with respect to the certificates for the U.S. Shares or the U.K. Shares
then, upon physical delivery to the Buyer in the State of Massachusetts of such
certificates, the Buyer will acquire such certificates (and the shares
represented thereby) free and clear of any adverse claims under Section 8-303 of
the Uniform Commercial Code in effect in the State of Massachusetts.
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Exhibit 4
SUBSTANCE OF BUYER'S LEGAL OPINION
1. Each of the U.S. Buyer and the U.K. Buyer (the "Subject Companies") has
been duly organized and is validly existing and in good standing under the laws
of its jurisdiction of incorporation, with the full power and authority to
perform its obligations under the Stock Purchase Agreement.
2. The execution, delivery and performance of the Stock Purchase Agreement
by each of the Subject Companies that is a party thereto has been duly
authorized by all necessary corporate action on the part of the pertinent
Subject Company, and the Stock Purchase Agreement has been duly executed and
delivered by the pertinent Subject Companies.
3. The Stock Purchase Agreement constitutes legally valid and binding
obligations of each Subject Company that is a party thereto, enforceable in
accordance with their terms.
4. The Subject Company's execution and delivery of, and performance of its
obligations under, the Stock Purchase Agreement does not and will not (i)
violate such Subject Company's articles or certificate of incorporation or
by-laws, or (ii) breach or otherwise violate any existing obligation of or
restriction on such Subject Company under any order, judgment or decree of any
state, federal or foreign court or governmental authority binding on such
Subject Company.
5. The execution and delivery by each Subject Company that is a party
thereto of, and performance of its obligations under, the Stock Purchase
Agreement do not violate any state, federal, or foreign statute or regulation
that we have, in the exercise of customary professional diligence, recognized as
applicable to such Subject Company or to transactions of the type contemplated
by the Stock Purchase Agreement.
6. No order, consent, permit or approval of any state, federal, or foreign
governmental authority that we have, in the exercise of customary professional
diligence, recognized as applicable to any of the Subject Companies, or to
transactions of the type contemplated by the Stock Purchase Agreement, is
required on the part of any of the Subject Companies, for the execution and
delivery of, and performance of their respective obligations under, the Stock
Purchase Agreement.
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Exhibit 5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this ____ day of ______________ 19__ by and between
TASC, Inc., a Massachusetts corporation (the "Company"), and
______________________________ (the "Employee").
WHEREAS, the parties hereto desire to provide for the Employee's employment
by the Company on and subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein set forth, the parties hereto agree as follows:
1. Employment. Beginning on the day following the closing ("Effective
Date") of the purchase by Litton Industries, Inc., of all of the outstanding
common stock of the Company (the "Acquisition"), the Company agrees to employ
the Employee, and the Employee agrees to work for and be in the employ of the
Company, upon the terms and conditions hereinafter set forth. In the event that
the Acquisition does not take place, neither party shall have any rights or
obligations under this Agreement.
2. Term. Subject to the provisions of Section 7 hereof, the Employee's
period of employment under the terms of this Agreement will be for a period of
three (3) years beginning on the Effective Date and ending on the third
anniversary of the Acquisition (the "Period of Employment").
3. Duties. During the Period of Employment, the Employee shall serve as
________________________________________ of the Company and will have such
authority and responsibilities and perform such duties as are generally
associated with such position. The Employee will be directly accountable to the
____________________ of the Company. The Employee agrees to devote all of his
business time and energies to the business of the Company and its parent (Litton
Industries, Inc.), subsidiaries and affiliates (collectively, the "Group") and
faithfully, diligently and competently perform his duties under this Agreement.
The primary place of employment will be ________________________________________
and the Employee shall perform his duties there, except for required travel
consistent with past practice.
4. Compensation and Benefits. For all services rendered by the Employee
to the Group during the Period of Employment, the Employee shall receive the
following compensation and benefits:
(a) Base Salary. The Company shall pay the Employee a base salary at the
rate of Dollars ($________) per year, payable to the Employee in monthly or more
frequent installments, in accordance with the Company's regular pay practices.
At the Company's regular salary review date established for the Employee
following the Effective Date of this Agreement beginning with the Company's 1999
fiscal year and continuing annually thereafter, the base salary shall be
increased by an amount determined by the [President] of the Company considering
the duties and responsibilities of the Employee and his performance thereof.
Each such increase shall be promptly put into effect as of the Company's regular
salary adjustment date for the Employee, and the salary of the Employee as so
increased shall thereafter constitute the annual base salary of the Employee.
(b) Transition Cash Award. As an additional incentive for the Employee's
execution of the Agreement, the Employee shall receive a Transition Cash Award
of $________ which shall be paid no later than October 31, 1998. If the
employment of the Employee is terminated by the Company without cause on or
before the date the Transition Award is paid, the Transition Cash Award shall
nevertheless be paid by October 31, 1998.
(c) Annual Bonus. Subject to Sections 7 and 8 below, the Employee shall
be eligible to receive a lump-sum bonus for each fiscal year of the Company
during the Period of Employment, in accordance with the terms of the Company's
Incentive Compensation Plan applicable to the Employee for such fiscal year. The
Annual Bonus Plan (also known as the "Company Incentive Compensation Plan") will
be based on the
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approved Company financial plan at the beginning of the fiscal year and
individual milestones approved by the Company [President].
(i) The Employee's target bonus under such Company Incentive
Compensation Plan for a particular fiscal year shall be equal to
percent ( %) of the Employee's annual base salary during such fiscal
year; provided, however, that the actual bonus amount to be paid to the Employee
for a particular fiscal year under such Company Incentive Compensation Plan
shall be determined by and in accordance with the terms of such plan.
(ii) The percent of salary will be increased in a linear calculation
to ______% if the actual performance exceeds the target by ______% . The percent
of salary will be decreased in a linear calculation to zero if the actual
performance is under the target by ______%.
(iii) Any bonus payable pursuant to Section 4(c)(i) above for a
particular fiscal year shall be paid by the Company to the Employee in cash in a
lump sum no later than October 31st of each year.
(iv) The annual base salary used to calculate the bonus payable to the
Employee hereunder shall be the annual base salary in effect as of first day of
the fiscal year for which the bonus is earned.
(v) The Employee acknowledges that the Company's fiscal year will
correspond to the parent's fiscal year (currently on or about August 1 to on or
about July 31). For the period between January l, 1998 and July 31, 1998, the
Employee shall receive a prorated bonus of based upon the portion of the fiscal
year ending on or about July 31, 1998, and to be paid by October 31, 1998.
(vi) The Employee shall not be eligible to receive an annual bonus in
the event he/she resigns prior to the bonus payout date.
(d) Stock Option Award. Within a reasonable time after the Effective
Date of this Agreement, the Employee shall be granted a stock option award equal
to ________ options, based on the Black-Scholey pricing formula or its
equivalent. This stock option award shall vest in equal installments over a
______ year period. The Employee shall be eligible for consideration for annual
stock option awards thereafter.
(e) Value-Added Incentive Plan ("VAP"). The VAP shall continue until all
outstanding Awards granted under the VAP expire at which time the VAP shall be
terminated. No additional Awards shall be granted under the VAP.
(f) Other Benefits. Consistent with the terms of the Company's benefit
plans, the Employee shall be eligible to participate in all employee benefits
plans maintained by the Company to the extent of the Employee's eligibility to
participate in the plans on the day before the Effective Date.
5. Expenses. The Employee shall be reimbursed for all ordinary, necessary
and reasonable expenses that he may incur in the course of transacting and
promoting the business of the Company or the Group, subject to such practices as
the Company may from time to time establish requiring advance approval of
certain expenditures. The Employee agrees to maintain adequate records in such
detail as the Company may reasonably request, of expenses to be reimbursed by
the Company, and to submit vouchers promptly.
6. Confidentiality and Competitive Activity.
(a) The Employee acknowledges that he has acquired and will continue to
acquire during the Period of Employment (and during any employment tenure which
the Employee might have with the Company or the Group which follows the Period
of Employment) confidential information regarding the business of the Company
and the Group. Accordingly, the Employee agrees that, without the written
consent of the Company, he will not, at any time, whether during or at any time
after the Period of Employment, disclose to any unauthorized person or otherwise
use any such confidential information. For this purpose, confidential
information means non-public information concerning the financial data, customer
lists and data, licensing arrangement, business strategies, pricing information,
product development and other proprietary or sensitive information concerning
the Company and/or the Group, except for specific items which have become
publicly available other than as a result of the Employee's breach of this
Agreement.
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(b) The Employee hereby assigns to the Company all of his right, title
and interest in, and to any invention or idea, patentable or not (including,
without limitation, all writings and computer programs), heretofore or during
the Period of Employment (or during any employment tenure which the Employee
might have with the Company or the Group which follows the Period of Employment)
conceived solely or jointly by him which relates in any manner to the actual or
anticipated business or research and development of the Company or the Group or
which is suggested by or results from any work performed by the Employee for the
Company or the Group. The Employee shall promptly disclose all such ideas and
inventions to the Company and will, upon request, execute such instruments and
documents as the Company or the Group may deem appropriate to enable the Company
to secure such patent, copyright or other protection as may be available.
(c) Except as otherwise stated herein, during the Period of Employment
(and during any employment tenure which the Employee might have with the Company
or the Group which follows the Period of Employment) and for eighteen (18)
months after the effective date of termination of employment, the Employee will
not, alone, or with or for others, without the written consent of the Company,
directly or indirectly, (i) compete with the Group for business with current or
contemplated customers for whom the Employee provided a service or proposed to
provide a service while within the Group; (ii) solicit or hire any employee of
the Company or the Group at a time when such person is employed by the Company
or the Group; or (iii) solicit, entice, persuade or induce any person or entity
doing business with the Company or the Group to terminate such relationship or
to refrain from extending or renewing the same.
(d) The Employee hereby acknowledges that the provisions of this Section
6 are reasonable and necessary for the protection of the Company and the Group,
each of which will be irrevocably damaged if such covenants are not specifically
enforced. Accordingly, without limiting the generality of any other provision of
this Agreement, the Employee agrees that, in addition to any other relief to
which the Company may be entitled, the Company will be entitled to seek and
obtain injunctive relief (without the requirement of any bond) from a court of
competent jurisdiction for the purposes of restraining the Employee from any
actual or threatened breach of such covenants. Further, without limiting the
generality of any other provision hereof, in the event that any court determines
that the duration, area and/or scope, or all of them, for which the covenant not
to compete set forth in Section 6(c) above is to be effective are unreasonable,
the parties hereto agree that the restriction shall remain in full force and
effect for the greatest time period and in the greatest area and with the
greatest scope that would not render it unenforceable.
7. Termination. The employment of the Employee pursuant to this Agreement
shall terminate:
(a) upon the death of the Employee or, at the option of the Company, in
the event of the Employee's inability to perform his duties under this Agreement
by reason of disability (to be determined by the Company in a manner consistent
with the Company's employee benefit plans);
(b) upon at least thirty (30) days written notice by the Company at any
time; and
(c) upon notice by the Company at any time with cause as described in
Section 8(d).
8. Payments Upon Termination.
(a) If the employment of the Employee is terminated by the Company
without cause at any time during the first year of this Agreement (including any
termination pursuant to Section 7(b)) or by reason of death or disability, the
Employee shall be entitled to (a) twenty-four (24) months annual base salary at
the time of termination, plus a bonus amount equal to two times the prior fiscal
year's actual bonus paid, all subject to the usual withholdings, payable in the
case of salary in equal monthly installments for the twenty-four (24) month
period, and in the case of bonus, one-half ( 1/2) of the amount at the end of
the first year and one-half ( 1/2) at the end of the second year, and (b)
continued coverage for such same period under any employee benefit plans and
programs (other than the Company bonus or incentive compensation plans) under
which he would have been covered if the Period of Employment were not
terminated; provided that prior to the Employee's receipt of such payments and
coverage, the Employee executes a release for the benefit of and in the form and
scope specified by the Company.
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(b) If the employment of the Employee is terminated by the Company
without cause at any time during the second year of this Agreement (including
any termination pursuant to Section 7(b)), or by reason of death or disability,
the Employee shall be entitled to (a) eighteen (18) months annual base salary at
the time of termination, plus a bonus amount equal to one and one-half ( 1/2)
times the prior fiscal year's actual bonus paid, all subject to the usual
withholdings, payable, in the case of salary, in equal monthly installments for
the eighteen (18) month period, and in the case of bonus at the end of the
eighteen (18) months, and (b) continued coverage for such same period under any
employee benefit plans and programs (other than the Company bonus or incentive
compensation plans) under which he would have been covered if the Period of
Employment were not terminated; provided that prior to the Employee's receipt of
such payments and coverage, the Employee executes a release for the benefit of
and in the form and scope specified by the Company.
(c) If the employment of the Employee is terminated by the Company
without cause at any time during the third year of this Agreement, (including
any termination pursuant to Section 7(b)), or by reason of death or disability,
the Employee shall be entitled to (a) twelve (12) months annual base salary at
the time of termination, plus a bonus amount equal to the prior fiscal year's
actual bonus paid, all subject to the usual withholdings, payable in the case of
salary, in equal monthly installments for the twelve (12) month period, and in
the case of bonus at the end of the year, and (b) continued coverage for such
same period under any employee benefit plans and programs (other than the
Company bonus or incentive compensation plans) under which he would have been
covered if the Period of Employment were not terminated; provided that prior to
the Employee's receipt of such payments and coverage, the Employee executes a
release for the benefit of and in the form and scope specified by the Company.
(d) If the Employee's employment is terminated for cause, the Employee
shall not be entitled to receive any compensation or benefits hereunder from and
after the date of such termination. For purposes of this Agreement, the term
"cause" shall mean: (i) continued willful failure of the Employee to perform his
duties under this Agreement (other than by reason of death or disability) after
written demand for performance is made specifically identifying the failure in
performance and after reasonable opportunity is given to cure such failure in
performance within the thirty (30) day period following such written demand;
(ii) misconduct of the Employee demonstrably injurious to the Company or the
Group; (iii) a material act of dishonesty or fraud by the Employee affecting the
Company or the Group; or (iv) commission of an act by the Employee in the
performance of his duties under this Agreement constituting gross, willful or
wanton negligence.
9. Cancellation of Previous "Change of Control Compensation
Agreement". The Employee hereby acknowledges and agrees that this Agreement
supersedes and replaces that certain "Change of Control Compensation Agreement"
dated as of ____________________, 1997 between the Employee and the Company in
its entirety, and that such Change of Control Compensation Agreement is canceled
and of no further force or effect.
10. Representations of Employee. The Employee represents and warrants that
he is not a party to or bound by any agreement or contract or subject to any
restrictions, particularly, but without limitation, in connection with any
previous employment, which prevent the Employee from entering into and
performing his obligations under this Agreement or which materially and
adversely affect (or may in the future, so far as the Employee can reasonably
foresee, materially and adversely affect) the Employee's right to participate in
the affairs of the Company or the Group.
11. Miscellaneous.
(a) (i) The Employee expressly recognizes that any breach of this
Agreement by him is likely to result in irreparable injury to the Company and
agrees that the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, either in law or
in equity, to obtain damages for any breach of this Agreement, or to enforce the
specific performance of this Agreement by the Employee, or to enjoin the
Employee from activities in violation of this Agreement.
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(ii) Subject to the provisions of Sections 6(d) and 11(a)(i) above,
all disputes arising out of or in connection with this Agreement shall be
subject to binding arbitration by a single arbitrator in accordance with the
arbitration rules of the American Arbitration Association ("AAA") relating to
employment disputes. The arbitration shall be held in [Boston, Massachusetts]
[Washington, D.C.]. The decision of the arbitrator shall be final and binding
upon the parties, and shall be enforceable in any court of competent
jurisdiction.
(b) The Company agrees that all payments to be made to the Employee
pursuant to this Agreement shall be made at the time specified without offset or
deduction of any damages allegedly suffered by the Company as a result of any
breach or alleged breach of this Agreement by the Employee; provided, however,
that the Company may make such offsets or deductions as are required by law, or
as are appropriate to repay or reimburse the Company for any advance(s) or
overpayment(s) of any kind made to the Employee, or as are appropriate under or
in accordance with the terms of any benefit plan in which the Employee
participates or under which he receives coverage or other benefits. This Section
shall not, however, limit or in any way impair the Company's right to bring a
separate action against the Employee in connection with any breach or alleged
breach of this Agreement.
(c) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein and may be altered, amended or
superseded only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
(d) If any provision of this Agreement shall be prohibited or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(e) This Agreement shall be binding upon and shall inure to the benefit
of the Employee and upon the administrators, executors, heirs and assigns of the
Employee and shall be binding upon and shall inure to the benefit of the
successors and assigns of the Company, its subsidiaries and affiliates. The
Employee's obligations under this Agreement shall survive the termination of his
employment regardless of the manner of such termination.
(f) The validity, interpretation and performance of this Agreement shall
be governed by and construed in accordance with the laws of the Commonwealth of
[Massachusetts] [Virginia].
(g) All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
certified or registered mail, postage prepaid, return receipt requested, to the
parties or their successors in interest at the following address or at such
other addresses as the parties may designate by written notice in the manner
aforesaid, any such notice to be effective upon receipt:
If to the Company to:
______________________________
______________________________
______________________________
Attention:
With a copy to:
______________________________
______________________________
______________________________
If to the Employee to:
______________________________
______________________________
______________________________
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IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first above written.
COMPANY
By:
------------------------------------
Its:
--------------------------------------
EMPLOYEE:
Signature
--------------------------------------
Printed Name
--------------------------------------
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ANNEX B
[BT ALEX. BROWN INCORPORATED [BANKERS TRUST LOGO]
LETTERHEAD]
December 8, 1997
Primark Corporation
1000 Winter Street
Suite 4300N
Waltham, MA 02154
Dear Sirs:
Primark Corporation ("Primark"), Primark Holding Corporation ("U.S.
Seller") and Primark Information Services U.K. Limited ("U.K. Seller"), Litton
Industries, Inc. and Litton U.K. Limited (Litton Industries, Inc. and Litton
U.K. Limited being collectively referred to herein as "Purchaser") have entered
into a Stock Purchase Agreement dated as of December 8, 1997 (the "Agreement")
providing for the sale to Purchaser of the issued and outstanding shares of
common stock (the "U.S. Shares") of TASC, Inc. ("TASC") and the issued share
capital (the "U.K. Shares") of The Analytic Sciences Corporation Limited ("TASC
Limited"). Pursuant to the Agreement, U.S. Seller and U.K. Seller shall sell to
Purchaser the U.S. Shares and the U.K. Shares for an aggregate price of $432
million in cash, subject to certain adjustments set forth in the Agreement. You
have requested our opinion as to whether the consideration to be paid by
Purchaser pursuant to the Agreement is fair, from a financial point of view, to
the holders of the common stock of Primark.
BT Alex. Brown Incorporated ("BT Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. BT Alex. Brown regularly publishes research reports regarding Primark
and the information services industry and the businesses and securities of
publicly owned companies in that industry. We have acted as financial advisor to
Primark in the past in conjunction with various capital raising transactions and
advisory assignments. In the ordinary course of business, we may actively trade
the securities of Primark for our own account and the account of our customers
and, accordingly, may at any time hold a long or short position in securities of
Primark.
In connection with our opinion, we have reviewed certain publicly available
financial information concerning Primark, TASC and TASC Limited and reviewed
certain internal financial analyses and other information furnished to us by
Primark. As a result of the classified nature of certain of TASC's government
contracts, we have relied on disclosure by management as to the financial
results of those contracts and the representations of management that all such
contracts are in full force and effect. We have held discussions with members of
the senior management of Primark regarding the business and the prospects of
Primark and TASC and TASC Limited. We have also held discussions with members of
the senior management of Primark regarding the strategic rationale for the sale
of the capital shares of TASC and TASC Limited. In addition, we have (i)
reviewed the reported price and trading activity for the common stock of
Primark, (ii) analyzed selected recently completed and pending mergers and
acquisitions in the applied technology industry, (iii) reviewed certain
financial and stock market information for companies in the applied technology
and information industries, (iv) performed a discounted cash flow analysis, (v)
reviewed the terms of the Agreement and (vi) performed such other studies and
analyses and considered such other factors as we deemed appropriate.
B-1
108
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospects of Primark, TASC
and TASC Limited, we have assumed that such information reflects the best
currently available estimates and judgments of the management of Primark as to
the likely future financial performance of Primark, TASC and TASC Limited. In
addition, we have not made an independent evaluation or appraisal of the assets
of Primark, nor have we been furnished with any such evaluation or appraisal.
Our opinion is based on market, economic and other conditions as they exist and
can be evaluated as of the date of this letter.
Our advisory services and the opinion expressed herein were prepared for
the use of the Board of Directors of Primark and do not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
stockholder's meeting in connection with the approval of the Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the consideration to be paid by Purchaser pursuant to the
Agreement is fair, from a financial point of view, to the holders of common
stock of Primark.
Very truly yours,
BT ALEX BROWN INCORPORATED
/s/ BT Alex. Brown Incorporated
B-2
109
PRIMARK CORPORATION
1000 WINTER STREET, SUITE 4300
WALTHAM, MASSACHUSETTS 02154
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph E. Kasputys, Michael R. Kargula
and Stephen H. Curran, and each of them, as Proxies, with the power of
substitution, to vote all shares of Common Stock of Primark Corporation held of
record by the undersigned as of the close of business on February 23, 1998, at
the Special Meeting of Shareholders to be held on March 30, 1998, or any
adjournments thereof.
The shares of Common Stock represented by this proxy will be voted as
directed by the shareholder. UNLESS OTHERWISE DIRECTED, SUCH SHARES WILL BE
VOTED "FOR" THE APPROVAL AND ADOPTION OF THE STOCK PURCHASE AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY AND OTHERWISE IN THE
DISCRETION OF THE PROXY HOLDERS. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
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110
[X] Please mark
votes as in
this example.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE STOCK PURCHASE AGREEMENT.
1. To approve and adopt the Stock Purchase Agreement, dated as of
December 8, 1997, by and among Primark Corporation, Primark Holding
Corporation, Primark Information Services UK Limited, Litton
Industries, Inc. and Litton U.K. Limited and the transactions
contemplated thereby.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
Mark here for address change and note at left [ ]
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, personal representative, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature: Date Signature: Date
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