1
EXHIBIT 2.1
CONFORMED COPY
===============================================================================
-----------------------------------------------
GENERAL PARTNERSHIP INTEREST PURCHASE AGREEMENT
-----------------------------------------------
Among
UNITED AIR LINES, INC.,
COVIA LLC,
US AIRWAYS, INC.,
USAM CORP.,
AIR CANADA,
RESNET HOLDINGS, INC.,
APOLLO TRAVEL SERVICES PARTNERSHIP
and
GALILEO INTERNATIONAL PARTNERSHIP
Dated as of July 30, 1997
===============================================================================
2
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms............................................. 2
1.02. Other Defined Terms............................................... 6
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Partnership Interests.................... 8
2.02. Purchase Price.................................................... 8
2.03. Closing........................................................... 8
2.04. Cash Mechanism.................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
ENTITIES AND SELLERS
3.01. Organization, Authority and Qualification of the Parent
Entities and the Sellers........................................ 12
3.02. Organization, Authority and Qualification of the Partnership
and the Subsidiaries............................................ 13
3.03. Partnership Interests............................................. 14
3.04. No Conflict....................................................... 16
3.05. Governmental Consents and Approvals............................... 17
3.06. Financial Information and Books and Records....................... 17
3.07. No Undisclosed Liabilities........................................ 18
3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions........................................... 18
3.09. Litigation........................................................ 21
3.10. Compliance with Laws.............................................. 21
3.11. Environmental and Other Permits and Licenses; Related Matters..... 21
3.12. Material Contracts................................................ 22
3.13. Intellectual Property............................................. 23
3.14. Real Property and Leases.......................................... 24
3.15. Assets............................................................ 25
-i-
3
SECTION PAGE
3.16. Employee Benefit Matters.......................................... 26
3.17. Labor Matters..................................................... 28
3.18. Taxes............................................................. 28
3.19. Insurance......................................................... 30
3.20. Brokers........................................................... 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization, Authority and Qualification of the Purchaser........ 31
4.02. No Conflict....................................................... 32
4.03. Governmental Consents and Approvals............................... 32
4.04. Investment Purpose................................................ 32
4.05. Brokers........................................................... 33
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing.......................... 33
5.02. Access to Information............................................. 34
5.03. Confidentiality................................................... 35
5.04. Regulatory and Other Authorizations; Notices and Consents......... 36
5.05. Notice of Developments............................................ 37
5.06. No Solicitation of Employees...................................... 37
5.07. Use of Intellectual Property...................................... 37
5.08. Monthly Financial Statements...................................... 38
5.09. Premier Travel Services, L.L.C.................................... 38
5.10. Pre-Closing Balance Sheet......................................... 38
5.11. Environmental Audit............................................... 39
5.12. Employees and Employee Benefits................................... 39
5.13. Further Action.................................................... 40
ARTICLE VI
TAX MATTERS
6.01. Tax Indemnity..................................................... 40
6.02. Apportionment of Taxes............................................ 41
6.03. Returns and Payments.............................................. 41
6.04. Contests.......................................................... 43
-ii-
4
SECTION PAGE
6.05. Survival of Obligations........................................... 44
6.06. Section 754 Elections............................................. 44
6.07. Conveyance Taxes.................................................. 44
6.08. Tax Refunds, Credits and Other Payments........................... 45
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of the Parent
Entities, the Sellers and the Partnership........................ 46
7.02. Conditions to Obligations of the Purchaser........................ 47
ARTICLE VIII
INDEMNIFICATION
8.01. Survival of Representations and Warranties........................ 49
8.02. Indemnification by the Parent Entities and the Sellers............ 51
8.03. Tax Matters....................................................... 52
8.04. Indemnification by the Purchaser.................................. 53
8.05. Indemnification Procedures........................................ 53
ARTICLE IX
TERMINATION AND WAIVER
9.01. Termination....................................................... 54
9.02. Effect of Termination............................................. 55
9.03. Waiver............................................................ 56
ARTICLE X
GENERAL PROVISIONS
10.01. Expenses......................................................... 56
10.02. Notices.......................................................... 56
10.03. Public Announcements............................................. 59
10.04. Headings......................................................... 59
10.05. Severability..................................................... 59
10.06. Entire Agreement................................................. 59
10.07. Assignment....................................................... 60
-iii-
5
SECTION PAGE
10.08. No Third Party Beneficiaries..................................... 60
10.09. Amendment........................................................ 60
10.10. Arbitration...................................................... 60
10.11. Sellers' Disclosure Schedule..................................... 63
10.12. Governing Law.................................................... 63
10.13. Counterparts..................................................... 63
10.14. Specific Performance............................................. 63
-iv-
6
GENERAL PARTNERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement"), dated
as of July 30, 1997, among UNITED AIR LINES, INC., a Delaware corporation
("United"), COVIA LLC, a Delaware limited liability company ("Covia"), US
AIRWAYS, INC., a Delaware corporation ("USAW"), USAM CORP., a Delaware
corporation and a wholly owned subsidiary of USAW ("USAM"), AIR CANADA, a
corporation organized under the laws of Alberta ("Air Canada"), RESNET
HOLDINGS, INC., a Delaware corporation and a wholly owned subsidiary of Air
Canada ("Resnet"), APOLLO TRAVEL SERVICES PARTNERSHIP, a Delaware general
partnership (the "Partnership"), and GALILEO INTERNATIONAL PARTNERSHIP, a
Delaware general partnership, and any successor in interest thereto, including,
without limitation, the corporation or limited liability company formed in
connection with the IPO (the "Purchaser"). Covia, USAM and Resnet (or their
respective successors, as the case may be) are each referred to herein as a
"Seller" and as a group they are referred to herein as the "Sellers". United,
USAW and Air Canada are each referred to herein as a "Parent Entity" and as a
group they are referred to herein as the "Parent Entities".
WHEREAS, the Sellers collectively own one hundred percent (100%) of the
interests in the Partnership;
WHEREAS, Covia wishes, and United wishes to cause Covia, to sell to the
Purchaser, and the Purchaser wishes to purchase from Covia, Covia's 77% general
partnership interest in the Partnership (the "Covia Partnership Interest"),
upon the terms and subject to the conditions set forth herein;
WHEREAS, USAM wishes, and USAW wishes to cause USAM, to sell to the
Purchaser, and the Purchaser wishes to purchase from USAM, USAM's 21.08%
general partnership interest in the Partnership (the "USAM Partnership
Interest"), upon the terms and subject to the conditions set forth herein; and
WHEREAS, Resnet wishes, and Air Canada wishes to cause Resnet, to sell to
the Purchaser, and the Purchaser wishes to purchase from Resnet, Resnet's 1.92%
general partnership interest in the Partnership (the "Resnet Partnership
Interest"), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser, the Parent Entities and the
Sellers hereby agree as follows:
7
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"After-Tax Basis" means, (i) with respect to any Loss that is required to
be indemnified pursuant to Article VI or Article VIII on an After-Tax Basis,
that the indemnification payment will be calculated so as to take into account
both the deductibility or creditability by the indemnitee for Tax purposes of
the Loss being indemnified and the taxability to the indemnitee of the
indemnifying payment (including taxability of any payments made to gross up for
the taxability of the indemnifying payment), and (ii) with respect to any
refund or credit that is required to be paid on an After-Tax Basis pursuant to
Section 6.08, that the refund or credit will be calculated so as to take into
account both the deductibility by the Purchaser for Tax purposes of the payment
of such refund or credit to the Sellers and the taxability to the Purchaser of
the receipt of the refund or credit.
"Agreement" or "this Agreement" means this General Partnership Interest
Purchase Agreement, dated as of July 30, 1997, among the parties listed in the
preamble (including the Exhibits hereto and the Sellers' Disclosure Schedule)
and all amendments hereto made in accordance with the provisions of Section
10.09.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of
New York.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
8
3
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of
such Person.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and Tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, surface water sediment,
soil, subsurface strata and ambient air.
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders
or consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising from any alleged
injury or threat of injury to health, safety or the Environment.
"Environmental Law" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the Environment, health or safety or to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required to operate the respective businesses of
the Partnership or any Subsidiary or the Real Property under any applicable
Environmental Law.
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority, other than any rules and regulations (whether promulgated by order
or otherwise) which apply generally to the computer reservations system
industry.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant
or waste under any applicable Environmental Law.
9
4
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Independent Accounting Firm" means any one of the "big six" accounting
firms other than the Purchaser's Accountants and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect" means any change in or effect on the business of
the Partnership that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets or Liabilities of the Partnership and the Subsidiaries,
taken as a whole, or prevents consummation of the transactions contemplated
hereby.
"Net Asset Test Reference Balance Sheet" means the audited consolidated
balance sheet (including the related notes and schedules thereto) of the
Partnership, dated as of March 31, 1997, excluding (i) any indebtedness for
borrowed money of the Partnership and the Subsidiaries, (ii) any Cash other
than cash in the amount of any checks outstanding, and (iii) the assets and
liabilities of Premier, a copy of which is set forth in Section 3.06(a) of the
Sellers' Disclosure Schedule.
"Net Assets" means the excess of total consolidated assets over total
consolidated liabilities of the Partnership and the Subsidiaries shown on the
Pre-Closing Balance Sheet or the Seasonally Adjusted Net Asset Test Reference
Balance Sheet, as applicable.
"Ordinary Course Taxes" means Taxes relating to periods (or portions
thereof) prior to the Closing Date and paid by the Partnership or the
Subsidiaries after the Closing Date in the ordinary course of business and not
as a result of an audit or examination by a government or Tax authority or an
administrative or judicial proceeding or a settlement or compromise thereof in
connection with a Tax previously paid or a Return previously filed.
10
5
"Other Tax Audit Reserve" means a non-specific reserve for sales and use
tax audit settlements of $400,000.
"Partnership Intellectual Property" means all trademarks, trademark
rights, trade names, trade name rights, patents, patent rights, industrial
models, inventions, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the
Partnership and the Subsidiaries as currently conducted or as currently
contemplated (by existing Partnership management) to be conducted, together
with all applications currently pending for any of the foregoing.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for Taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations;
(c) pledges or deposits to secure obligations under workers' compensation laws
or similar legislation or to secure public or statutory obligations; and (d)
minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in connection
with any indebtedness for borrowed money of the Partnership, (ii) do not render
title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purchaser's Accountants" means KPMG Peat Marwick LLP, independent
accountants of the Purchaser.
"Real Property" means the real property leased or owned by the Partnership
or any Subsidiary.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Return" means any return, report or form relating to a Tax or Taxes.
11
6
"Seasonally Adjusted Net Asset Test Reference Balance Sheet" means the Net
Asset Test Reference Balance Sheet adjusted to multiply current assets
reflected thereon by the appropriate seasonal adjustment factors set forth on
Schedule 1.01(a) hereto and current liabilities by the appropriate seasonal
adjustment factors set forth on Schedule 1.01(b) hereto.
"Subsidiaries" means any and all corporations, partnerships, limited
liability companies, joint ventures, associations and other similar entities
controlled by the Partnership directly or indirectly through one or more
intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other similar charges (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority (whether federal, state,
local, foreign or otherwise), including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation, or net
worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"Tax Benefit" means the value, when actually received, of any deduction,
loss, credit or refund to the Purchaser, any Affiliate of the Purchaser, or the
Seller, as the case may be.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently
throughout the periods involved.
SECTION 1.02. Other Defined Terms. Each of the following terms is
defined in the Section set forth opposite such term:
Terms Section
----- -------
Agreement.......................................... Preamble
Air Canada......................................... Preamble
Arbitration Request................................... 10.10
Assets.............................................. 3.15(a)
Association........................................... 10.10
ATS Names........................................... 5.07(a)
Average Cash Amount................................. 2.04(b)
Award........................................... 10.10(a)(v)
Cash................................................ 2.04(b)
12
7
Cash Payment Amount................................. 2.04(b)
Closing................................................ 2.03
Closing Cash Amount................................. 2.04(e)
Closing Date........................................... 2.03
Commencement Date............................... 10.10(a)(i)
Covia.............................................. Preamble
Covia Partnership Interest......................... Recitals
Dispute Notice..................................... 10.10(a)
Environmental Audit................................... 5.11
ERISA............................................... 3.16(a)
Escrow Agent..................................... 2.04(f)(i)
Financial Statements................................ 3.06(a)
Indemnified Party...................................... 6.01
Independent Firm.................................... 6.03(b)
Interim Financial Statements........................ 3.06(a)
IPO.................................................... 2.03
Loss................................................... 8.02
Material Contracts.................................. 3.12(a)
Measuring Period.................................... 2.04(b)
Non-Disclosure Agreement............................ 5.03(a)
Parent Entity...................................... Preamble
Parent Entities.................................... Preamble
Partnership........................................ Recitals
Partnership Agreement............................... 3.02(a)
Partnership Interests............................... 3.03(a)
Partnership Licenses................................... 3.13
Petitioner......................................... 10.10(a)
Plans............................................... 3.16(a)
Pre-Closing Balance Sheet.............................. 5.10
Premier................................................ 5.09
Purchase Price......................................... 2.02
Purchase Price Allocation Schedule.................. 6.03(c)
Purchaser.......................................... Preamble
Purchaser Indemnified Party......................... 8.02(a)
Resnet............................................. Preamble
Resnet Partnership Interest........................ Recitals
Respondent......................................... 10.10(a)
Response....................................... 10.10(a)(ii)
Returnable Refund or Credit......................... 6.08(a)
Sales Tax Audit Reserve............................. 6.01(a)
SEC................................................. 5.03(a)
Seller............................................. Preamble
13
8
Sellers............................................ Preamble
Sellers' Disclosure Schedule........................... 3.05
Seller Indemnified Party............................ 8.04(a)
Statement.......................................... 10.10(a)
Third Party Claim...................................... 8.05
Transaction Agreement............................... 7.01(g)
United............................................. Preamble
USAW............................................... Preamble
USAM............................................... Preamble
USAM Partnership Interest.......................... Recitals
WARN................................................ 3.16(g)
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Partnership Interests. Upon the
terms and subject to the conditions of this Agreement, at the Closing, (i)
United shall cause Covia to sell, and Covia shall sell to the Purchaser, and
the Purchaser shall purchase from Covia, the Covia Partnership Interest, (ii)
USAW shall cause USAM to sell, and USAM shall sell to the Purchaser, and the
Purchaser shall purchase from USAM, the USAM Partnership Interest, and (iii)
Air Canada shall cause Resnet to sell, and Resnet shall sell to the Purchaser,
and the Purchaser shall purchase from Resnet, the Resnet Partnership Interest.
SECTION 2.02. Purchase Price. The purchase price for the Covia
Partnership Interest, the USAM Partnership Interest and the Resnet Partnership
Interest shall be $700 million in the aggregate (the "Purchase Price") to be
paid in cash pro rata to Covia, USAM and Resnet in accordance with their
respective Partnership Interests in the Partnership.
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the sale and purchase of the Partnership Interests contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at
10:00 A.M. New York time on the day of the consummation of the proposed initial
public offering by the Purchaser (the "IPO"), or at such other place or at such
other time or on such other date as the Sellers and the Purchaser may mutually
agree upon in writing (the day on which the Closing takes place being the
"Closing Date").
SECTION 2.04. Cash Mechanism. (a) Subject to the provisions of this
Section 2.04, at or immediately following the Closing, the Partnership will pay
to each of the
14
9
Sellers its pro rata share (determined in accordance with its Partnership
Interest) of the Cash Payment Amount, less, in the case of Covia, $50 million.
(b) For purposes of this Section 2.04, (i) the "Average Cash Amount"
means, subject to adjustment as set forth in Section 2.04(c), the amount of
cash that is equal to the simple average daily balance of cash, time deposits,
certificates of deposit, marketable securities and other short term investments
and cash equivalents ("Cash") of the Partnership and the Subsidiaries at the
close of business on each Business Day during the Measuring Period, (ii)
"Measuring Period" means the period commencing at 12:01 a.m. EDT on the date of
the month immediately preceding the month in which the Closing Date occurs that
is the same date of the month as the Closing Date (or if such date is not a
calendar date, the date that corresponds most closely to the date that is the
Closing Date) and ending at 11:59 p.m. EDT on the day immediately preceding the
Closing Date, and (iii) "Cash Payment Amount" means the Average Cash Amount
less the checks issued by the Partnership and the Subsidiaries that have not
cleared on the Closing Date.
(c) The Average Cash Amount will be adjusted in the event the Partnership
makes (i) any Cash distribution (in respect of their respective Partnership
Interests) to any of the Sellers, or (ii) any payment to one or more brokers
pursuant to Section 3.20 hereof, in either case during the Measuring Period, by
subtracting the amount of any such distribution or payment, as the case may be,
from the daily amount of Cash in each of the days during the Measuring Period
immediately preceding the date of such distribution or payment.
(d) During the Measuring Period, each of the Purchaser and the Partnership
will make all payments that are to be made to each other under existing
contractual arrangements or agreements in the ordinary course of business
consistent with past practice. In addition, during the Measuring Period, the
Partnership will conduct its business in the ordinary course consistent with
past practice, including, without limitation, not shortening or lengthening the
customary payment time for any of its payables or receivables and continuing
its purchasing and capital purchasing practices in accordance with past
practice. To facilitate the foregoing, (i) Covia shall circulate to the
relevant personnel of the Partnership at least thirty days prior to the
expected commencement of the Measuring Period written instructions to such
effect, (ii) the Partnership will provide representatives of the Purchaser with
access, at reasonable times, to all offices, personnel, books and records of
the Partnership and the Subsidiaries that the Purchaser may reasonably request
for purposes of monitoring the compliance by the Partnership with this Section
2.04(d) and the calculation by the Partnership of the Average Cash Amount, the
Cash Payment Amount and the Closing Cash Amount in accordance with this Section
2.04, and (iii) the parties will agree on mutually agreeable procedures for
implementing the cash transfers described in Section 2.04(e). During the
period from 11:59 p.m. EDT on the day immediately preceding the Closing Date
through the Closing, the Partnership will make no payments of cash except
pursuant to normal banking transactions, including check clearing or deposits,
that are not
15
10
under the control of the Partnership, or pursuant to contractual obligations
with third parties that were previously disclosed to the Purchaser or that
were entered into in the ordinary course of business consistent with past
practice.
(e) On the Closing Date, the Partnership will inform each of the Parent
Entities and the Purchaser of the (i) Average Cash Amount, as well as the
calculations resulting therein, (ii) the aggregate amount with respect to
which checks of the Partnership and the Subsidiaries have been issued but not
cleared on the Closing Date, and (iii) the amount of Cash of the Partnership
and the Subsidiaries as of 12:01 a.m. EDT on the Closing Date (the "Closing
Cash Amount"). If the Closing Cash Amount is less than the Cash Payment Amount,
then the Purchaser will make available to the Partnership such difference and,
subject to the provisions of Section 2.04(f), the Cash Payment Amount will be
paid to the Sellers as set forth in Section 2.04(a). If the Closing Cash
Amount is greater than the Cash Payment Amount, then, subject to the provisions
of Section 2.04(f), the Cash Payment Amount will be paid to the Sellers as set
forth in Section 2.04(a), and the difference between the Closing Cash Amount
and the Cash Payment Amount will be retained by the Partnership.
(f) (i) Prior to the Closing, the Purchaser and the Parent Entities shall
enter into an Escrow Agreement, in substantially the form attached hereto as
Exhibit 2.04(f), with a third party selected by the Purchaser and reasonably
acceptable to the Parent Entities (the "Escrow Agent"). In accordance with the
terms of the Escrow Agreement, the Partnership or the Sellers (pro rata in
accordance with their respective Partnership Interests) will, on the Closing
Date, deposit the sum of $3 million with the Escrow Agent, which will hold such
amount in an interest bearing account until the day that is 90 days following
the Closing Date, to be managed and paid out in accordance with the Escrow
Agreement and this Section 2.04.
(ii) In the event the Purchaser determines, within 90 days following the
Closing Date, that the agreements of the Partnership contained in Section
2.04(d) were not complied with and, as a result of such non-compliance, the
Average Cash Amount was either greater or lesser than the average amount of
Cash that the Partnership would have had during the Measuring Period had such
provisions been complied with, the Purchaser will provide written notice to the
Parent Entities to such effect, specifying the amount of the difference and its
reasons for such determination. In the absence of any written notice of
dispute delivered by any of the Parent Entities to the Purchaser and the Escrow
Agent within 10 days after receipt of the Purchaser's written notice as to such
determination and the amount of such difference, (x) in the event the Average
Cash Amount is greater than it would have been, the Purchaser will receive from
the Escrow Agent and the Parent Entities (on a several basis in proportion to
their respective Partnership Interests), if appropriate, a cash payment equal
to the amount of such difference, together with interest thereon, as set forth
in clause (iii) below, and (y) in the event the Average Cash Amount is less
than it would have been, the Sellers will receive (pro rata in proportion to
their respective Partnership Interests)
16
11
from the Partnership or the Purchaser a cash payment equal to the amount of
such difference, together with interest thereon, as set forth in clause (iii)
below. In the event any of the Parent Entities deliver such a written notice
disputing such determination or the amount of such difference, such dispute
will be submitted for resolution to the Independent Accounting Firm, which will
resolve such dispute within 30 days of the date of such submission and whose
decision will be final and binding on the Parent Entities and the Purchaser.
The fees and expenses of the Independent Accounting Firm will be allocated
between the Purchaser, on the one hand, and the Parent Entities (pro rata in
accordance with their respective Partnership Interests), on the other hand, in
the same proportion that the aggregate amount of the difference so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by the Parent
Entities, on the one hand, or the Purchasers, on the other hand, bears to the
total amount of the difference so submitted.
(iii) In the event any payment is to be made to the Purchaser pursuant to
clause (ii) above, the Escrow Agent will pay such amount to the Purchaser,
together with the appropriate amount of interest thereon, and if such payment
is less than the amount of such difference, the Purchaser will recover such
excess amount from the Parent Entities (on a several basis in proportion to
their respective Partnership Interests), together with interest thereon from
the Closing Date to and including the date of payment by the Parent Entities to
the Purchaser at the Interest Rate (as such term is defined in the Escrow
Agreement), pursuant to the provisions of Section 8.02 (except that the
provisions of Section 8.02(b)(i) and (ii) will not apply). In the event any
payment is to be made to the Sellers pursuant to clause (ii) above, the
Partnership or the Purchaser will pay such amount to the Sellers (pro rata in
accordance with their respective Partnership Interests), together with interest
thereon from the Closing Date to and including the date of payment by the
Partnership or Purchaser to the Sellers at the Interest Rate, pursuant to the
provisions of Section 8.04. In the event any amount remains in the Escrow Fund
(as such term is defined in the Escrow Agreement) on the 90th day following the
Closing Date, all amounts held by the Escrow Agent on such day, after giving
effect to any payments to be made to the Purchaser hereunder, will be paid to
the Sellers pro rata in accordance with their Partnership Interests, including
all interest accrued on the remaining principal amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
ENTITIES AND SELLERS
As an inducement to the Purchaser to enter into this Agreement, the Parent
Entities and the Sellers hereby represent and warrant to the Purchaser as
follows: United and Covia jointly and severally represent and warrant as to the
representations and warranties in Sections 3.01(a), 3.03(a), 3.04(a) and
3.05(a); USAW and USAM jointly and severally
17
12
represent and warrant as to the representations and warranties in Sections
3.01(b), 3.03(b), 3.04(b) and 3.05(b); Air Canada and Resnet jointly and
severally represent and warrant as to the representations and warranties in
Sections 3.01(c), 3.03(c), 3.04(c) and 3.05(c); and the Parent Entities and the
Sellers severally represent and warrant as to the representations and
warranties in Sections 3.02, 3.03(d), 3.06, 3.07, 3.08, 3.09, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19 and 3.20.
SECTION 3.01. Organization, Authority and Qualification of the Parent
Entities and the Sellers. (a) Each of United and Covia is a corporation (and,
in the case of Covia, on or prior to the Closing will be either a corporation
or a limited liability company) duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement, to carry out its respective
obligations hereunder and to consummate the transactions contemplated hereby.
Each of United and Covia is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by
each of them or the operation of each of their businesses make such licensing
or qualification necessary, except to the extent that the failure to be so
licensed or qualified would not adversely affect the ability of either United
or Covia to carry out its respective obligations under, and to consummate the
transactions contemplated by, this Agreement. The execution and delivery of
this Agreement by United and Covia, the performance by United and Covia of
their respective obligations hereunder and the consummation by United and
Covia of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of United and Covia. This Agreement has been duly
executed and delivered by United and Covia, and (assuming due authorization,
execution and delivery by the other Sellers and Parent Entities and the
Purchaser) this Agreement constitutes a legal, valid and binding obligation of
each of United and Covia enforceable against each of them in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
(b) Each of USAW and USAM is a corporation (and, in the case of USAM, on
or prior to the Closing will be either a corporation or a limited liability
company) duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary power and authority to enter
into this Agreement, to carry out its respective obligations hereunder and to
consummate the transactions contemplated hereby. Each of USAW and USAM is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by each of them or the
operation of each of their businesses make such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not adversely affect the ability of either USAW or USAM to carry out its
respective obligations under, and to consummate the transactions contemplated
by, this Agreement. The execution and delivery of this Agreement by USAW and
USAM, the performance by USAW and USAM of their respective obligations
hereunder and the consummation by USAW and USAM of the
18
13
transactions contemplated hereby have been duly authorized by all requisite
action on the part of USAW and USAM. This Agreement has been duly executed and
delivered by USAW and USAM, and (assuming due authorization, execution and
delivery by the other Sellers and Parent Entities and the Purchaser) this
Agreement constitutes a legal, valid and binding obligation of each of USAW and
USAM enforceable against each of them in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by general principles of equity.
(c) Each of Air Canada and Resnet is a corporation duly organized, validly
existing and in good standing under the laws of Alberta and the State of
Delaware, respectively, and has all necessary power and authority to enter into
this Agreement, to carry out its respective obligations hereunder and to
consummate the transactions contemplated hereby. Each of Air Canada and Resnet
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by each of them or the
operation of each of their businesses make such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not adversely affect the ability of either Air Canada and Resnet to carry
out its respective obligations under, and to consummate the transactions
contemplated by, this Agreement. The execution and delivery of this Agreement
by Air Canada and Resnet, the performance by Air Canada and Resnet of their
respective obligations hereunder and the consummation by Air Canada and Resnet
of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of Air Canada and Resnet. This Agreement has been
duly executed and delivered by Air Canada and Resnet, and (assuming due
authorization, execution and delivery by the other Sellers and Parent Entities
and the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of each of Air Canada and Resnet enforceable against each of them in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights generally
or by general principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the
Partnership and the Subsidiaries. (a) The Partnership is a general
partnership duly organized and validly existing under the laws of the State of
Delaware and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business or the respective businesses of the Subsidiaries
makes such licensing or qualification necessary (and all such jurisdictions are
set forth in Section 3.02(a) of the Sellers' Disclosure Schedule). The
Partnership has all the necessary power and authority to own, operate or lease
the properties and assets owned, operated, or leased by the Partnership and to
carry on its business and the respective businesses of the Subsidiaries as they
have been and are currently conducted by the Partnership and the Subsidiaries.
All material actions taken by the Partnership have been duly authorized, and
the Partnership has not taken any material action that in any respect conflicts
with or results in a violation of any provision of its partnership agreement
(the "Partnership Agreement").
19
14
A true and correct copy of the Partnership Agreement, as in effect on the
date hereof, has been delivered by the Sellers to the Purchaser. The execution
and delivery of this Agreement by the Partnership, the performance by the
Partnership of its obligations hereunder and the consummation by the
Partnership of the transactions contemplated hereby have been duly authorized
by all requisite action on the part of the Partnership. This Agreement has
been duly executed and delivered by the Partnership, and (assuming due
authorization, execution and delivery by the Sellers, the Parent Entities and
the Purchaser) this Agreement constitutes a legal, valid and binding obligation
of the Partnership enforceable against the Partnership in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
(b) Section 3.02(b) of the Sellers' Disclosure Schedule sets forth a true
and complete list of all Subsidiaries, listing for each Subsidiary its name,
type of entity, the jurisdiction and date of its incorporation or organization,
its authorized capital stock, partnership capital or equivalent, and the
current ownership of such capital stock, partnership interests or similar
ownership interests.
(c) Other than the Subsidiaries, there are no other corporations,
partnerships or limited liability companies in which the Partnership owns, of
record or beneficially, any direct or other interest or any right (contingent
or otherwise) to acquire the same. The Partnership is not, directly or
indirectly, a participant in any joint venture.
(d) Each Subsidiary: (i) is a corporation or partnership duly organized
and validly existing under the laws of its jurisdiction of organization, (ii)
has all necessary power and authority to own, operate or lease the properties
and assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary and (iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary (and all such
jurisdictions are set forth in Section 3.02(d) of the Sellers' Disclosure
Schedule). True and complete copies of the charter and bylaws (or similar
organizational documents), in each case as in effect on the date hereof, of
each Subsidiary have been delivered by the Sellers to the Purchaser.
(e) No Subsidiary is a member of (nor is any part of its business
conducted through) any partnership, other than the Partnership.
SECTION 3.03. Partnership Interests. (a) As of the date hereof, 77% of
the outstanding interests in the Partnership ("Partnership Interests") are
owned, beneficially and of record, by Covia, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating
United, Covia or any Affiliate thereof to issue or sell any Partnership
20
15
Interests or any other interest in the Partnership. Neither United, Covia nor
any Affiliate thereof is party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests. Upon consummation of the transactions
contemplated by Article II, the Purchaser will acquire from Covia 77% of the
Partnership Interests free and clear of all Encumbrances (other than
Encumbrances created by the Purchaser).
(b) As of the date hereof, 21.08% of the outstanding Partnership Interests
are owned, beneficially and of record, by USAM, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating
USAW, USAM or any Affiliate thereof to issue or sell any Partnership Interests
or any other interest in the Partnership. Neither USAW, USAM nor any Affiliate
thereof is party to any voting trusts, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
Partnership Interests. Upon consummation of the transactions contemplated by
Article II, the Purchaser will acquire from USAM 21.08% of the Partnership
Interests free and clear of all Encumbrances (other than Encumbrances created
by the Purchaser).
(c) As of the date hereof, 1.92% of the outstanding Partnership Interests
in are owned, beneficially and of record, by Resnet, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating Air
Canada, Resnet or any Affiliate thereof to issue or sell any Partnership
Interests or any other interest in the Partnership. Neither Air Canada, Resnet
nor any Affiliate thereof is party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests. Upon consummation of the transactions
contemplated by Article II, the Purchaser will acquire from Resnet 1.92% of
the Partnership Interests free and clear of all Encumbrances (other than
Encumbrances created by the Purchaser).
(d) None of the outstanding Partnership Interests was issued in violation
of any preemptive rights. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the Partnership Interests or obligating the Partnership
to issue or sell any Partnership Interests or any other interest in the
Partnership. There are no outstanding contractual obligations of the
Partnership to repurchase, redeem or otherwise acquire any equity interests of
or to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any other Person. The Partnership Interests
constitute all the issued and outstanding equity interests in the Partnership.
The Partnership is not a party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests.
21
16
SECTION 3.04. No Conflict. (a) Except as disclosed in Section 3.04 of
the Sellers' Disclosure Schedule, the execution, delivery and performance of
this Agreement by United, Covia and the Partnership do not and will not (i)
violate, conflict with or result in the breach of any provision of the charter,
bylaws, limited liability company agreement or partnership agreement (or
similar organizational documents) of United, Covia, the Partnership or any
Subsidiary, (ii) conflict with or violate (or cause an event which could have a
Material Adverse Effect as a result of) any Law or Governmental Order
applicable to United, Covia, the Partnership or any Subsidiary, or any of their
respective assets, properties or businesses, or (iii) conflict with, result in
any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Partnership Interests held by Covia or on any of the
assets or properties of United, Covia, the Partnership or any Subsidiary
pursuant to, any note, bond, mortgage or indenture, or material contract,
agreement, lease, sublease, license, sublicense, permit, franchise or other
instrument or arrangement to which United, Covia, the Partnership or any
Subsidiary is a party or by which any of the Partnership Interests held by
Covia or any of such assets or properties is bound or affected.
(b) Except as disclosed in Section 3.04 of the Sellers' Disclosure
Schedule, the execution, delivery and performance of this Agreement by USAW,
USAM and the Partnership do not and will not (i) violate, conflict with or
result in the breach of any provision of the charter, bylaws, limited liability
company agreement or partnership agreement (or similar organizational
documents) of USAW, USAM, the Partnership or any Subsidiary, (ii) conflict with
or violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to USAW, USAM, the
Partnership or any Subsidiary, or any of their respective assets, properties or
businesses, or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Partnership Interests held by USAM or on any of the assets or properties of
USAW, USAM, the Partnership or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, or material contract, agreement, lease, sublease,
license, sublicense, permit, franchise or other instrument or arrangement to
which USAW, USAM, the Partnership or any Subsidiary is a party or by which any
of the Partnership Interests held by USAM or any of such assets or properties
is bound or affected.
(c) Except as disclosed in Section 3.04 of the Sellers' Disclosure
Schedule, the execution, delivery and performance of this Agreement by Air
Canada, Resnet and the Partnership do not and will not (i) violate, conflict
with or result in the breach of any provision of the charter, bylaws, limited
liability company agreement or partnership
22
17
agreement (or similar organizational documents) of Air Canada, Resnet, the
Partnership or any Subsidiary, (ii) conflict with or violate (or cause an
event which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to Air Canada, Resnet, the Partnership or any
Subsidiary, or any of their respective assets, properties or businesses, or
(iii) conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any of the Partnership
Interests held by Resnet or on any of the assets or properties of Air Canada,
Resnet, the Partnership or any Subsidiary pursuant to, any note, bond, mortgage
or indenture, or material contract, agreement, lease, sublease, license,
sublicense, permit, franchise or other instrument or arrangement to which Air
Canada, Resnet, the Partnership or any Subsidiary is a party or by which any of
the Partnership Interests held by Resnet or any of such assets or properties is
bound or affected.
SECTION 3.05. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement by United, Covia and the Partnership
do not and will not require any consent, approval, authorization or other order
of, action by, filing with or notification to any Governmental Authority or any
other Person, except for (i) the notification requirements of the HSR Act and
(ii) the consents, approvals and authorizations set forth in Section 3.05 of
the disclosure schedule which has been delivered by the Sellers to the
Purchaser prior to the date hereof and which is attached hereto (the "Sellers'
Disclosure Schedule").
(b) The execution, delivery and performance of this Agreement by USAW,
USAM and the Partnership do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority or any other Person, except for (i) the notification
requirements of the HSR Act and (ii) the consents, approvals and authorizations
set forth in Section 3.05 of the Sellers' Disclosure Schedule.
(c) The execution, delivery and performance of this Agreement by Air
Canada, Resnet and the Partnership do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other Person, except for (i)
the notification requirements of the HSR Act and (ii) the consents, approvals
and authorizations set forth in Section 3.05 of the Sellers' Disclosure
Schedule.
SECTION 3.06. Financial Information and Books and Records. (a) True and
complete copies of (i) the audited consolidated balance sheet of the
Partnership and the Subsidiaries for each of the three fiscal years ended as of
December 31, 1994, December 31, 1995 and December 31, 1996, and the related
audited consolidated statements of income,
23
18
together with all related notes and schedules thereto, accompanied by the
reports thereon of the Sellers' Accountants (collectively referred to herein as
the "Financial Statements") and (ii) the unaudited consolidated balance sheet
of the Partnership and the Subsidiaries for the quarter ending March 31, 1997,
and the related consolidated statements of income of the Company, together with
all related notes and schedules thereto (collectively referred to herein as the
"Interim Financial Statements") have been delivered by the Sellers to the
Purchaser. The Financial Statements, the Interim Financial Statements and the
Net Asset Test Reference Balance Sheet (i) were prepared in accordance with the
books of account and other financial records of the Partnership, (ii) present
fairly the consolidated financial condition and results of operations of the
Partnership and the Subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with U.S. GAAP and (iv)
include all adjustments (consisting only of normal accruals) that are necessary
for a fair presentation of the consolidated financial condition of the
Partnership and the Subsidiaries and the results of the operations of the
Partnership and the Subsidiaries as of the dates thereof or for the periods
covered thereby, except in the case of the Net Asset Test Reference Balance
Sheet (a copy of which is set forth in Section 3.06(a) of the Sellers'
Disclosure Schedule), which excludes (i) any indebtedness for borrowed money of
the Partnership and the Subsidiaries, (ii) any cash or cash equivalents other
than cash in the amount of any checks outstanding, and (iii) the assets and
liabilities of Premier.
(b) The books of account and other financial records of the Partnership
and the Subsidiaries: (i) reflect all items of income and expense and all
assets and Liabilities required to be reflected therein in accordance with U.S.
GAAP and (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies.
(c) The minute books of the Partnership and the Subsidiaries contain
accurate records of all meetings and accurately reflect all other actions taken
by the Partners or Stockholders thereof. Complete and accurate copies of all
such minute books have been provided to the Purchaser.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of
the Partnership or any Subsidiary, other than Liabilities (i) reflected or
reserved against on the Net Asset Test Reference Balance Sheet, (ii) incurred
since March 31, 1997 in the ordinary course of the business, consistent with
the past practice, or (iii) disclosed in this Agreement or in the Sellers'
Disclosure Schedule, of the Partnership and the Subsidiaries and which do not
and could not have a Material Adverse Effect.
SECTION 3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Except as disclosed in Section 3.08 of the Sellers'
Disclosure Schedule, since March 31, 1997, the business of the Partnership and
the Subsidiaries has been conducted in the ordinary course and consistent with
past practice.
24
19
As amplification and not limitation of the foregoing, since March 31, 1997,
except as disclosed in Section 3.08 of the Sellers' Disclosure Schedule,
neither the Partnership nor any Subsidiary has:
(i) permitted or allowed any of the assets or properties (whether
tangible or intangible) of the Partnership or any Subsidiary to be
subjected to any Encumbrance, other than Permitted Encumbrances;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other than current
liabilities reflected on the Net Asset Test Reference Balance Sheet and
current liabilities incurred in the ordinary course of business
consistent with past practice since March 31, 1997;
(iii) made any loan to, guaranteed any indebtedness of or otherwise
incurred any indebtedness on behalf of any Person;
(iv) redeemed any of the Partnership Interests;
(v) except as specifically requested by the Purchaser or as required
to accommodate changes in the Purchaser's business practices, made any
material changes in the customary methods of operations of the
Partnership or any Subsidiary, including, without limitation, practices
and policies relating to marketing, selling and pricing;
(vi) merged with, entered into a consolidation with or acquired any
interest in any Person or acquired a substantial portion of the assets
or business of any Person or any division or line of business thereof, or
otherwise acquired any material assets;
(vii) made any capital expenditure or commitment for any capital
expenditure in excess of the capital expenditures contemplated by the
planned budget, a true and complete copy of which has been provided to
the Purchaser;
(viii) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible assets) with an
individual value in excess of $50,000;
(ix) issued or sold any Partnership Interests, or other equity
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, the Partnership or any Subsidiary, except
as contemplated by this Agreement;
25
20
(x) except for agreements, arrangements or transactions with the
Purchaser or having an individual value of less than $5,000, entered into
any agreement, arrangement or transaction with any of its directors,
officers, employees or partners (or with any relative, beneficiary,
spouse or Affiliate of such Person);
(xi) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Partnership or any Subsidiary to any of its
employees, including, without limitation, any increase or change pursuant
to any Plan, or (B) established or increased or promised to increase any
benefits under any Plan, in either case except for ordinary increases
consistent with the past practices of the Partnership or such Subsidiary;
(xii) revalued any assets of the Partnership or any Subsidiary other
than in accordance with U.S. GAAP;
(xiii) amended, terminated, cancelled or compromised any material
claims of the Partnership or any Subsidiary or waived any other rights of
material value to the Partnership or any Subsidiary;
(xiv) made any material change in any method of accounting or
accounting practice or policy used by the Partnership or any Subsidiary;
(xv) amended or restated the Partnership Agreement or the
organizational documents of any Subsidiary;
(xvi) made any express or deemed election or settled or compromised
any liability that is the subject of a dispute with any government or
taxing authority, with respect to (A) Taxes of the Partnership or any
Subsidiary or (B) Taxes, insofar as Partnership items or any Subsidiary
items are involved, of the partners of the Partnership or of any
Subsidiary;
(xvii) suffered any casualty loss or damage with respect to any of
the Assets which individually has a replacement cost of more than
$50,000, which loss or damage shall not have been covered by insurance;
(xviii) suffered any Material Adverse Effect; or
(xix) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.08 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 3.08.
26
21
SECTION 3.09. Litigation. Except as set forth in Section 3.09 of the
Sellers' Disclosure Schedule, there are no Actions by or against the
Partnership or any Subsidiary (or by or against the Sellers or any Affiliate
thereof and relating to the Partnership or any Subsidiary or their respective
businesses), or affecting any of the Assets, pending or threatened before any
Governmental Authority. None of the Partnership, the Subsidiaries or any of
the Assets nor the Sellers is subject to any Governmental Order, nor are there
any such Governmental Orders threatened to be imposed by any Governmental
Authority, which has a Material Adverse Effect.
SECTION 3.10. Compliance with Laws. (a) Except as disclosed in Section
3.10(a) of the Sellers' Disclosure Schedule, the Partnership and the
Subsidiaries have conducted and continue to conduct their respective
businesses in accordance with all Laws and Governmental Orders applicable to
the Partnership, any Subsidiary or any of the Assets or such businesses, and
neither the Partnership nor any Subsidiary is in violation of any such Law or
Governmental Order.
(b) Section 3.10(b) of the Sellers' Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Partnership or any
Subsidiary or any of the Assets or the Partnership's or the Subsidiaries'
respective businesses, and no such Governmental Order has or could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.11. Environmental and Other Permits and Licenses; Related
Matters. (a) Except as disclosed in Section 3.11(a) of the Sellers'
Disclosure Schedule, (i) neither the Partnership nor any Subsidiary has
received notice of any violation of any Environmental Laws; (ii) the
Partnership and the Subsidiaries have obtained all Environmental Permits and
are and have been in material compliance with their requirements; (iii) except
as permitted by or as would not result in any material liability under
applicable Environmental Laws, there are no underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or disposed on
any of the owned or leased properties or, with respect to the period of the
Partnership's or any Subsidiary's ownership, tenancy or operation of such
property, on any real property formerly owned, leased or occupied by the
Partnership or any Subsidiary; (iv) there is no asbestos or asbestos-containing
material on any of the owned or leased properties, except as permitted by or as
would not result in any material liability under applicable Environmental Laws;
(v) neither the Partnership nor any Subsidiary has released, discharged or
disposed of an amount of Hazardous Materials on any of the owned or leased
properties or on any real property formerly owned, leased or occupied by the
Partnership or any Subsidiary in a manner or quantity which would have a
material effect on the Partnership; (vi) neither the Partnership nor any
Subsidiary is undertaking, has completed, nor is required to conduct, any
investigation or assessment or remedial or response action relating to any
release, discharge or disposal of or contamination with an amount of Hazardous
Materials at any site, location
27
22
or operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law which would have a
material effect on the Partnership; and (vii) there are no past, pending or
threatened in writing Environmental Claims against the Partnership, any
Subsidiary or any of their properties, and there are no facts which can form
the basis of any such Environmental Claim.
(b) Except as disclosed in Section 3.11(b) of the Sellers' Disclosure
Schedule, there are no environmental audit reports, studies or analyses in the
possession of the Parent Entities, the Sellers or the Partnership or under
their control relating to the owned or leased properties or the operations of
the Partnership and the Subsidiaries.
SECTION 3.12. Material Contracts. (a) Section 3.12(a) of the
Sellers' Disclosure Schedule lists each of the following contracts and
agreements (including, without limitation, oral contracts and agreements) of
the Partnership and each Subsidiary (such contracts and agreements being
"Material Contracts"):
(i) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Partnership or any
Subsidiary is a party under which the Partnership can be reasonably
expected to pay or be paid at least $50,000 during the course of the
twelve months following the date hereof;
(ii) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Partnership or any Subsidiary is a party, which are not cancelable
without penalty or further payment and without more than 30 days' notice,
and under which the Partnership can be reasonably expected to pay or be
paid at least $50,000 during the course of the twelve months following
the date hereof;
(iii) all contracts and agreements relating to Indebtedness of the
Partnership or any Subsidiary;
(iv) any agreements that are material to the business of the
Partnership and that are currently in effect with subscribers that have
generated annual booking fees of $1.0 million or more per annum over the
course of any of the last three fiscal years;
(v) all contracts and agreements with any Governmental Authority to
which the Partnership or any Subsidiary is a party and under which the
Partnership can be reasonably expected to pay or be paid at least $50,000
during the course of the twelve months following the date hereof;
28
23
(vi) all contracts and agreements that limit or purport to limit the
ability of the Partnership or any Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
(vii) all contracts and agreements between or among the Partnership
or any Subsidiary and the Sellers or any Affiliate of the Sellers; and
(viii) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to the Partnership, any
Subsidiary or the conduct of their respective businesses or the absence
of which would have a Material Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth in Section 3.05 of the Sellers' Disclosure
Schedule are not obtained, shall continue in full force and effect without
penalty or other adverse consequence, except as disclosed in Section 3.12(a)
of the Sellers' Disclosure Schedule. Neither the Partnership nor any
Subsidiary is in breach of, or default under, any Material Contract. The
Sellers have furnished the Purchaser with true and complete copies of all
Material Contracts.
(c) To the best knowledge of the Parent Entities, the Sellers and the
Partnership, no other party to any Material Contract is in breach thereof or
default thereunder, except as disclosed in Section 3.12(c) of the Sellers'
Disclosure Schedule.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of the
Partnership or any Subsidiary.
SECTION 3.13. Intellectual Property. The Partnership owns or
possesses adequate licenses or other valid rights to use all of the Partnership
Intellectual Property which is material to the conduct of the business of the
Partnership, and there is no assertion or claim challenging the validity of any
such Partnership Intellectual Property. Except as disclosed in Section 3.13(i)
of the Sellers' Disclosure Schedule, there are no infringements of any
Partnership Intellectual Property. Notwithstanding anything to the contrary
herein, the representations and warranties contained in the two preceding
sentences shall not be deemed to have been breached with respect to any
Partnership Intellectual Property that has been provided to the Partnership or
any of the Subsidiaries by the Purchaser unless the breach results from any
modification by the Partnership or any of its Subsidiaries to any such
Partnership Intellectual Property. There are no pending or threatened
interferences, reexaminations, oppositions or nullities involving any patents,
patent rights or applications
29
24
therefor of the Partnership which is material to the conduct of the
business of the Partnership. Section 3.13(ii) of the Sellers' Disclosure
Schedule lists each material license or other agreement pursuant to which the
Partnership has the right to use Partnership Intellectual Property utilized in
connection with any services provided by the Partnership (the "Partnership
Licenses"). There is no breach or violation of any Partnership License by the
Partnership or by any third party or threatened or actual loss of rights
accruing to the Partnership under any Partnership License. Each Partnership
License is a legal, valid and binding agreement of the Partnership and each
Partnership License is a legal, valid and binding agreement of the other
parties thereto. Except as disclosed in Section 3.13(ii) of the Sellers'
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not result in the termination of, or any modification to, any
Partnership License, except where the foregoing would not have a material
effect on the conduct of the business of the Partnership. The Partnership has
taken reasonable measures to maintain the confidentiality of the know-how of
the Partnership, the value of which to the Partnership is dependent upon the
maintenance of the confidentiality thereof. The Partnership has not licensed or
otherwise permitted the use by any third party of any proprietary information
on terms or in a manner that is reasonably likely to have a Material Adverse
Effect. The conduct of the business of the Partnership as currently conducted
or as currently contemplated (by existing Partnership management) to be
conducted does not and will not infringe upon or conflict with, in any way, any
license, trademark, trademark right, trade name, trade name right, patent,
patent right, industrial model, invention, service ▇▇▇▇ or copyright of any
third party that is reasonably likely to be material to the Partnership's
operations.
SECTION 3.14. Real Property and Leases. (a) Set forth on Section
3.14(a) of the Sellers' Disclosure Schedule is a list of all Real Property.
(b) Except as disclosed in Section 3.14(a) of the Sellers' Disclosure
Schedule, the Partnership and the Subsidiaries have sufficient title or
leasehold interests to all their Real Property to conduct their respective
businesses as currently conducted or as currently contemplated (by existing
Partnership management) to be conducted.
(c) All leases of real property leased for the use or benefit of the
Partnership or any Subsidiary to which the Partnership or any Subsidiary is a
party which are material, individually or in the aggregate, to the business of
the Partnership and the Subsidiaries taken as a whole, and all amendments and
modifications thereto are in full force and effect and have not been modified
or amended, and there exists no default under any such lease by the Partnership
or any Subsidiary, nor any event which with notice or lapse of time or both
would constitute a default thereunder by the Partnership or any Subsidiary,
which would permit any such lease to be terminated by the other party thereto.
30
25
SECTION 3.15. Assets. (a) Either the Partnership or a Subsidiary, as
the case may be, owns, leases or has the legal right to use all material
properties and assets, including, without limitation, the Partnership
Intellectual Property, used or intended to be used in the conduct of its
business or otherwise owned, leased or used by the Partnership or any
Subsidiary and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all material contracts, agreements and other
arrangements used or intended to be used by the Partnership or any Subsidiary
or in or relating to the conduct of their respective businesses (all such
properties, assets and contract rights being the "Assets"). Set forth on
Section 3.15(a) of the Sellers' Disclosure Schedule is a list of all of the
Assets as of the date hereof. Except as disclosed in Section 3.14(a) of the
Sellers' Disclosure Schedule, either the Partnership or a Subsidiary, as the
case may be, has good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Encumbrances, except for Permitted Encumbrances.
(b) The Assets constitute all the material properties, assets and rights
forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the
businesses (as currently conducted by existing Partnership management) of the
Partnership and the Subsidiaries. At all times since December 31, 1996, the
Partnership has caused the Assets to be maintained in accordance with good
business practice, and the Assets are generally in good operating condition and
repair and are suitable for the purposes for which they are used and intended,
except for ordinary wear commensurate with the age and depreciated value of
such Assets.
(c) Except as disclosed in Section 3.14(a) of the Sellers' Disclosure
Schedule, following the consummation of the transactions contemplated by this
Agreement, either the Partnership or a Subsidiary, as the case may be, will
continue to own, pursuant to good and marketable title, or lease, under valid
and subsisting leases, or otherwise retain its respective interest in the
Assets without incurring any penalty or other adverse consequence, including,
without limitation, any increase in rentals, royalties, or licenses or other
fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement (except, with respect to
contractual arrangements to the extent that any consents set forth in Section
3.05 of the Sellers' Disclosure Schedule are not obtained). Immediately
following the Closing, (i) in the case of books and records other than
Tax-related books and records, either the Partnership or a Subsidiary, as the
case may be, shall own or possess all documents, books, records, agreements
and financial data of any sort used by the Partnership or such Subsidiary which
is material to the conduct of its business, and (ii) in the case of Tax-related
books and records (including all information (including copies of Returns,
original work papers, and source documents (or copies thereof)) relating to any
and all Tax filings of the Partnership or any Subsidiary), the Partnership
shall own or possess all of such books and records or the Purchaser shall have
access to such records pursuant to Section 5.02(c)).
31
26
SECTION 3.16. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.16(a) of the Sellers' Disclosure Schedule lists (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, pension,
retiree medical or life insurance, supplemental retirement, severance or other
benefit plans, programs or arrangements, and all employment, termination,
severance or other contracts or agreements, to which the Partnership or any
Subsidiary is a party, with respect to which the Partnership or any Subsidiary
has any obligation or which are maintained, contributed to or sponsored by the
Partnership or any Subsidiary for the benefit of any current or former
employee, officer or director of the Partnership or any Subsidiary, (ii) each
employee benefit plan for which the Partnership or any Subsidiary could incur
liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated, (iii) any plan in respect of which the Partnership or any
Subsidiary could incur liability under Section 4212(c) of ERISA and (iv) any
contracts, arrangements or understandings between the Sellers or any of its
Affiliates and any employee of the Partnership or of any Subsidiary, including,
without limitation, any contracts, arrangements or understandings relating to
the sale of the Partnership (collectively, the "Plans"). Except as disclosed
in Section 3.16(a) of the Sellers' Disclosure Schedule, each Plan is in writing
and the Parent Entities and the Sellers have furnished the Purchaser with a
complete and accurate copy of each Plan and a complete and accurate copy of
each material document prepared in connection with each such Plan including,
without limitation, (i) a copy of each trust or other funding arrangement, (ii)
each summary plan description and summary of material modifications, (iii) the
most recently filed IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
or a single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Partnership or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA. Except as disclosed in Section 3.16(b) of the
Sellers' Disclosure Schedule, none of the Plans provides for the payment of
separation, severance, termination or similar-type benefits to any Person or
obligates the Partnership or any Subsidiary to pay separation, severance,
termination or similar-type benefits solely as a result of any transaction
contemplated by this Agreement or as a result of a "change in control",
within the meaning of such term under Section 280G of the Code. Except as
disclosed in Section 3.16(b) of the Sellers' Disclosure Schedule, none of the
Plans provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the
Partnership or any Subsidiary. Except as disclosed in Section 3.16(b) of the
Sellers' Disclosure Schedule, each of the Plans is subject only to the laws of
the United States or a political subdivision thereof.
32
27
(c) Compliance with Applicable Law. Except as disclosed in Section
3.16(c) of the Sellers' Disclosure Schedule, each Plan is in compliance with
all material requirements of all applicable Law, including, without limitation,
ERISA and the Code, and all persons who participate in the operation of such
Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA)
have always acted in accordance with the provisions of all applicable Law,
including, without limitation, ERISA and the Code. The Partnership and each
Subsidiary has performed all obligations required to be performed by it under,
is not in any respect in default under or in violation of, and has no knowledge
of any default or violation by any party to, any Plan. Except as disclosed in
Section 3.16(c) of the Sellers' Disclosure Schedule, no legal action, suit or
claim is pending or threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and no fact or event exists that could
reasonably be expected to give rise to any such action, suit or claim.
(d) Qualification of Certain Plans. Except as disclosed in Section
3.16(d) of the Sellers' Disclosure Schedule, each Plan which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no fact
or event has occurred since the date of such determination letter from the IRS
to adversely affect the qualified status of any such Plan or the exempt status
of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan which could reasonably be expected
to give rise to a material liability of the Partnership or any Subsidiary.
Except as disclosed in Section 3.16(e) of the Sellers' Disclosure Schedule,
neither the Partnership nor any Subsidiary has incurred any liability for any
penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the
Code or any liability under Section 502 of ERISA which, in the case of any such
penalty, tax or liability, has not been satisfied in full, and no fact or event
exists which could give rise to any such liability. Neither the Partnership
nor any Subsidiary has incurred any liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course) which has
not been satisfied in full. Except as disclosed in Section 3.16(e) of the
Sellers' Disclosure Schedule, no reportable event (within the meaning of
Section 4043 of ERISA) has occurred or is expected to occur with respect to any
Plan subject to Title IV of ERISA. No Plan had an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended plan year of such
Plan. None of the assets of the Partnership or any Subsidiary is the subject
of any lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code; neither the Partnership nor any Subsidiary has been required to post any
security under Section 307 of ERISA or
33
28
Section 401(a)(29) of the Code; and no fact or event exists which could give
rise to any such lien or requirement to post any such security.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions are deductible for income tax
purposes. Except as disclosed in Section 3.16(f) of the Sellers' Disclosure
Schedule, as of the Closing Date, no Plan which is subject to Title IV of ERISA
will have an "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA).
(g) WARN Act. The Partnership and the Subsidiaries are in compliance with
the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
SECTION 3.17. Labor Matters. Except as set forth in Section 3.17 of the
Sellers' Disclosure Schedule, (a) neither the Partnership nor any Subsidiary is
a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Partnership or any Subsidiary and
currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Partnership or any Subsidiary; (b) there are no material
controversies, strikes, slowdowns or work stoppages pending or threatened
between the Partnership or any Subsidiary and any of their respective
employees, and neither the Partnership nor any Subsidiary has experienced any
such material controversy, strike, slowdown or work stoppage within the past
three years; (c) there are no unfair labor practice complaints pending against
the Partnership or any Subsidiary before the National Labor Relations Board or
any other Governmental Authority or any current union representation questions
involving employees of the Partnership or any Subsidiary which could have a
Material Adverse Effect; and (d) the Partnership and each Subsidiary is
currently in material compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Partnership or any Subsidiary and is not liable for any material arrears
of wages, taxes, penalties or other sums for failure to comply with any of the
foregoing.
SECTION 3.18. Taxes. Except as set forth in Section 3.18(a) of the
Sellers' Disclosure Schedule, (a) (i) All returns and reports in respect of
Taxes required to be filed with respect to the Partnership or any Subsidiary
with respect to Taxes of the Partnership or any Subsidiary for all periods
ending on or before the Closing Date (including without limitation Internal
Revenue Service Form 1065 (or successor form) and any comparable state and
local returns) have been timely filed (or will be timely filed by the
Partnership); (ii) all
34
29
Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all returns and reports relating to Taxes on or with
respect to income (including without limitation Internal Revenue Service Form
1065 (or successor form) and any comparable state and local returns) are true,
correct and complete and all returns and reports of the Partnership or any
Subsidiary relating to Taxes other than Taxes on or with respect to income are
true, correct and complete in all material respects; (iv) no adjustment
relating to such returns has been proposed in writing formally or informally by
any Tax authority and no basis exists for any such adjustment; (v) there are no
pending or, to the best knowledge of the Parent Entities and the Sellers after
due inquiry, threatened actions or proceedings for the assessment or collection
of Taxes against the Partnership or any Subsidiary; (vi) there are no Tax liens
on any assets of the Partnership or any Subsidiary except liens for Taxes not
yet due and payable; (vii) neither the Partnership nor any Subsidiary is a
party to any agreement or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code; (viii) other than with respect to any interest in
any Subsidiary, the Partnership has not been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has not
expired; (ix) the Partnership and each Subsidiary qualify (and have since the
date of each such entity's respective date of formation qualified) to be
treated as a partnership for Federal income tax purposes and for state and
local tax purposes in all state and local jurisdictions in which such treatment
is relevant and none of the Partnership, the Sellers, any Subsidiary, or any
Tax authority has taken a position inconsistent with such treatment; (x) the
Partnership has in effect a valid election pursuant to Section 754 of the Code;
(xi) there are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which the Partnership or
any Subsidiary may be subject; (xii) the Partnership (or its partners) does not
have any income reportable for a period ending after the Closing Date but
attributable to the sale of property or the provision of services (e.g., an
installment sale) occurring in or a change in accounting method made for a
period ending on or prior to the Closing Date which resulted in a deferred
reporting of income from which economically accrued in a period ending on or
before the Closing Date from such transaction or from such change in accounting
method; (xiii) there are no requests by any Tax authority for information
currently outstanding with respect to the Taxes of the Partnership (or any
Subsidiary) (or of its partners with respect to Partnership or Subsidiary
items); (xiv) there are no proposed reassessments of any property owned by the
Partnership (or any Subsidiary) or other taxpayer specific proposals that could
increase the amount of any Tax to which the Partnership (or any Subsidiary)
would be subject and (xv) no power of attorney that is currently in force has
been granted with respect to any matter relating to Taxes of the Partnership or
a Subsidiary.
(b) For purposes of the Parent Entities' and the Sellers' indemnification
of the Purchaser pursuant to Section 6.01, the representations in Section
3.18(a) shall be
35
30
deemed to have been made with no exception for items disclosed in
Section 3.18(a) of the Disclosure Schedule or otherwise.
(c) (i) Section 3.18(c) of the Sellers' Disclosure Schedule lists all
Returns (federal, state, local and foreign) filed by each of the Partnership
and the Subsidiaries for taxable periods ended on or after September 16, 1993,
indicates for which jurisdictions Returns have been filed on the basis of a
unitary group, indicates the most recent Return for each relevant jurisdiction
and type of Tax for which an audit has been completed or the statute of
limitations has lapsed and indicates all Returns that currently are the
subject of audit; (ii) the Sellers and the Parent Entities have made available
to the Purchaser correct and complete copies of all federal, state, local and
foreign Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Partnership or any Subsidiary since September 16,
1993; and (iii) the Sellers and the Parent Entities have delivered to the
Purchaser a true and complete copy of any tax-sharing or allocation agreement
or arrangement to which the Partnership or any Subsidiary is a party and a
true and complete description of any such unwritten or informal agreement or
arrangement.
SECTION 3.19. Insurance. (a) Section 3.19(a) of the Sellers' Disclosure
Schedule sets forth a complete list of all material policies of insurance
(including, without limitation, errors and omissions insurance) that the
Partnership or any Subsidiary has in effect.
(b) With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable in accordance with its terms and, except for
policies that have expired under their terms in the ordinary course, is in full
force and effect; (ii) neither the Partnership nor any Subsidiary is in breach
or default (including any breach or default with respect to the payment of
premiums or the giving of notice), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default or permit
termination or modification, under the policy; (iii) no party to the policy has
repudiated, or given notice of an intent to repudiate, any provision thereof;
and (iv) to the best knowledge of the Partnership, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation or currently has a rating of "B+" or below from A.M. Best & Co. or
a claims paying ability rating of "BBB" or below from Standard & Poor's, Inc.
(c) Section 3.19(c) of the Sellers' Disclosure Schedule sets forth a
general description of all risks of a nature generally insured against which
the Partnership or any Subsidiary is self-insured or which are covered under
any risk retention program in which the Partnership or any Subsidiary
participates.
(d) All material assets, properties and risks of the Partnership and each
Subsidiary are covered by valid and, except for policies that have expired
under their terms
36
31
in the ordinary course, currently effective insurance policies or binders of
insurance (including, without limitation, general liability insurance, property
insurance and workers' compensation insurance) issued in favor of the
Partnership or a Subsidiary, as the case may be, in each case with responsible
insurance companies, in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Partnership or such
Subsidiary, as the case may be.
(e) Except as disclosed in Section 3.19(e) of the Sellers' Disclosure
Schedule, no insurance policy listed in Section 3.19(a) of the Sellers'
Disclosure Schedule will cease to be legal, valid, binding, enforceable in
accordance with its terms and in full force and effect on terms identical to
those in effect as of the date hereof as a result of the consummation of the
transactions contemplated by this Agreement.
SECTION 3.20. Brokers. Except for ▇▇▇▇▇▇ Brothers, the fees and
expenses of which will be paid by the Partnership prior to Closing, or by the
Sellers or the Parent Entities pro rata in proportion to their respective
Partnership Interests, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Sellers. Any amounts owing for services provided to the
Partnership by ▇▇▇▇▇▇ Brothers or any other Person in connection with the
transactions contemplated by this Agreement or any other transaction involving
the Partnership (including, without limitation, any other sale of the
Partnership or public offering of the Partnership) will be settled by the
Partnership prior to the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Parent Entities, the Sellers and the Partnership
to enter into this Agreement, the Purchaser hereby represents and warrants to
the Parent Entities, Sellers and the Partnership as follows:
SECTION 4.01. Organization, Authority and Qualification of the Purchaser.
The Purchaser is a general partnership, and on or prior to the Closing will be
a limited liability company, duly organized and validly existing under the laws
of the State of Delaware and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the properties owned or
leased by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be so
licensed or qualified would not adversely affect the ability of the Purchaser
to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement.
37
32
The Purchaser has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Purchaser, the performance by the Purchaser of its obligations hereunder
and the consummation by the Purchaser of the transactions contemplated hereby
have been duly authorized by all requisite action on its part. This Agreement
has been duly executed and delivered by the Purchaser and (assuming due
authorization, execution and delivery by the Parent Entities and the Sellers)
this Agreement constitutes a legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally or by general principles
of equity.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred
to in Section 4.03, except as may result from any facts or circumstances
relating solely to the Sellers, the execution, delivery and performance of this
Agreement by the Purchaser do not and will not (a) violate, conflict with or
result in the breach of any provision of, in the case of the Purchaser's
Partnership Agreement (b) conflict with or violate any Law or Agreement,
dated as of July 3, 1996, among the Purchaser, the banks parties thereto, the
letter of credit issuing banks named therein and ▇▇▇▇▇▇ Guaranty Trust Company
of New York, as agent, conflict with, or result in any breach of, constitute a
default (or event which with the giving of notice or lapse or time, or both,
would become a default) under, require any consent under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party or by which
any of such assets or properties are bound or affected which would have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority, except (a) as
described in a writing given to the Sellers by the Purchaser on or prior to the
date of this Agreement and (b) the notification requirements of the HSR Act.
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the
Partnership Interests solely for the purpose of investment and not with a view
to, or for offer or sale in connection with, any distribution thereof.
38
33
SECTION 4.05. Brokers. Except for ▇.▇. ▇▇▇▇▇▇, the fees and expenses of
which will be paid for by the Purchaser, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Except as
described in Section 5.01(a) of the Sellers' Disclosure Schedule, between the
date hereof and the time of the Closing, the Partnership shall, and shall cause
each Subsidiary to, conduct its business in the ordinary course and consistent
with the Partnership's and such Subsidiary's prior practice. Without limiting
the generality of the foregoing, except as described in Section 5.01(a) of the
Sellers' Disclosure Schedule, as requested by the Purchaser, or as required to
accommodate changes in the Purchaser's business practices, the Partnership and
each Subsidiary shall (i) continue their advertising and promotional
activities, and pricing and purchasing policies, including capital purchasing,
in accordance with past practice; (ii) not shorten or lengthen the customary
payment cycles for any of their payables or receivables; (iii) use all
reasonable efforts to (A) preserve intact their business organizations, (B)
keep available to the Purchaser the services of the employees of the
Partnership and each Subsidiary, (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Partnership, each Subsidiary and their respective
businesses and (D) preserve their current relationships with their customers,
suppliers and other persons with which they have significant business relations
hips; (iv) exercise, but only after notice to the Purchaser and receipt of the
Purchaser's prior written approval, any rights of renewal pursuant to the terms
of any of the material leases or subleases which by their terms would
otherwise expire; and (v) not engage in any practice, take any action, fail to
take any action or enter into any transaction which could cause any
representation or warranty of the Parent Entities or the Sellers to be untrue
or result in a breach of any covenant made by the Parent Entities, the Sellers
or the Partnership in this Agreement.
(b) Without limiting the generality of the foregoing, the Partnership
covenants and agrees that between the date hereof and the Closing Date, (i) the
Partnership will not, without the prior written consent of the Purchaser, enter
into any contract (other than with regard to the Partnership's July 1997 trade
show) with Premier relating to the provision by Premier to the Partnership, or
by the Partnership to Premier, of any services after the Closing Date, and (ii)
at least five Business Days prior to entering into any contract pursuant to
which the Partnership will be a provider or purchaser of services relating to
the
39
34
Partnership's help desk or network outsourcing businesses, the Partnership
will provide reasonably detailed information concerning such proposed contract
to the Purchaser and will consult with the Purchaser and discuss in good faith
alternatives to entering into any such contract with the Purchaser to the
extent the Purchaser objects to such proposed contract.
(c) Except as described in Section 5.01(c) of the Sellers' Disclosure
Schedule, the Partnership covenants and agrees that, prior to the Closing,
without the prior written consent of the Purchaser, neither the Partnership nor
any Subsidiary will take any of the actions enumerated in the second sentence
of Section 3.08 (including, without limitation, clauses (i) through (xix)
thereof); provided, however, that if the Partnership or any Subsidiary desires
to take any of the actions enumerated in Section 3.08(v) in response to general
industry conditions, the Partnership shall provide written notice of the
proposed actions to the Purchaser and the Purchaser shall respond to such
written notice not more than two Business Days after the receipt thereof.
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Partnership shall, and the Partnership
shall cause each of the Subsidiaries and each of the Partnership's and the
Subsidiaries' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, underwriters, financing sources and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, plants, other facilities, books and records
of the Partnership and each Subsidiary (including access to the Partnership's
1996 financial audit work papers) and to those officers, directors, employees,
agents, accountants and counsel of the Partnership and of each Subsidiary who
have any knowledge relating to the Partnership, any Subsidiary or their
respective businesses and (ii) furnish to the officers, employees and
authorized agents, accountants, counsel, underwriters, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties and goodwill of the
Partnership (excluding any Returns or other Tax information of the Parent
Entities or the Sellers), the Subsidiaries and their respective businesses (or
legible copies thereof) as the Purchaser may from time to time reasonably
request, including, without limitation, any financial information or other
information that will be required in connection with the IPO.
(b) In order to facilitate the resolution of any claims made against or
incurred by the Sellers prior to the Closing, for a period of seven years after
the Closing, the Purchaser shall (i) retain the books and records of the
Partnership and the Subsidiaries relating to periods prior to the Closing in a
manner reasonably consistent with the prior practice of the Partnership and the
Subsidiaries; provided, however, that any Tax-related books and records shall
be maintained for a period of ten years after the Closing Date, and prior to
disposal thereof the Purchaser shall contact the Parent Entities and offer to
provide them with copies of any such books and records subject to reimbursement
of reasonable
40
35
expenses; and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of the Sellers reasonable access
(including the right to make, at the Sellers' expense, photocopies), during
normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser, the Partnership or any Subsidiary after the
Closing or for any other reasonable purpose, for a period of seven years
following the Closing, the Parent Entities and the Sellers shall (i) retain the
books and records of the Sellers which relate to the Partnership and the
Subsidiaries and their operations for periods prior to the Closing and which
shall not otherwise have been delivered to the Purchaser, the Partnership or
any Subsidiary; provided, however, that any Tax-related books and records shall
be maintained for a period of ten years after the Closing Date, and prior to
disposal thereof the Parent Entities or the Sellers, as the case may be, shall
contact the Purchaser and offer to provide it with copies of any such books and
records subject to reimbursement of reasonable expenses; and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the Purchaser, the Partnership or any Subsidiary reasonable
access (including the right to make photocopies, at the expense of the
Purchaser, the Partnership or such Subsidiary), during normal business hours,
to such books and records.
SECTION 5.03. Confidentiality. (a) Except to the extent of any
disclosure required (after consultation with the Parent Entities and after
seeking appropriate confidential treatment) to be made in the Purchaser's
registration statement on Form S-1 (including in any exhibits thereto) filed
with the Securities and Exchange Commission (the "SEC") in connection with the
IPO or in any future filings made with the SEC or other regulatory authorities,
and except as reasonably required by the underwriters in connection with the
IPO, the parties shall comply with, and shall cause their respective
representatives and agents to comply with all of their respective obligations
under the Non-Disclosure Agreement, dated as of May 1, 1996, between the
Partnership and the Purchaser (the "Non-Disclosure Agreement"), until the
Closing, at which time such Non-Disclosure Agreement and the obligations of the
Purchaser and the Partnership thereunder shall terminate. If this Agreement
is, for any reason, terminated prior to the Closing, the Non-Disclosure
Agreement shall continue in full force and effect.
(b) Subject to the qualifications contained in Section 5.03(b) of the
Sellers' Disclosure Schedule, each of the Sellers, the Parent Entities and the
Partnership separately agrees for itself to, and shall cause its agents,
representatives and Affiliates to: (i) treat, hold as confidential and (in the
case of the Sellers and the Parent Entities) not exploit for its benefit or the
benefit of other relationships with any of its customers (and not disclose or
provide access to any Person to) all information relating to the Partnership's
or the Subsidiaries' products, customers, assets, plans, business, finances and
technological developments and programs, (ii) in the event that the Sellers,
the Parent Entities or the Partnership or any such agent, representative or
Affiliate becomes legally compelled to
41
36
disclose any such information, provide the Purchaser with prompt written
notice of such requirement so that the Purchaser or the Partnership may seek a
protective order or other remedy or waive compliance with this Section 5.03(b),
and (iii) in the event that such protective order or other remedy is not
obtained, or the Purchaser waives compliance with this Section 5.03(b), furnish
only that portion of such confidential information which is legally required to
be provided and exercise their best efforts to obtain assurances that
confidential treatment will be accorded such information; provided, however,
that this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Sellers, the Parent Entities, the Partnership, their agents,
representatives or Affiliates; provided further that, with respect to
Partnership Intellectual Property, specific information shall not be deemed to
be within the foregoing exception merely because it is embraced in general
disclosures in the public domain.
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) Each party shall for itself use all reasonable efforts to obtain (or, in
the case of each of the Parent Entities and the Sellers separately, cause the
Partnership and the Subsidiaries to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that may be
or become necessary for their execution and delivery of, and the performance of
their obligations pursuant to, this Agreement and will cooperate fully promptly
seeking to obtain all such authorizations, consents, orders and approvals.
Each party hereto agrees for itself to supply as promptly as practicable to the
appropriate Governmental Authorities any additional information and documentary
material that may be requested pursuant to the HSR Act. Without limiting the
generality of the foregoing, each party hereto will (i) use all reasonable
efforts to prevent the entry in a judicial or administrative proceeding brought
under any antitrust law of any preliminary injunction or other order that would
make consummation of the transactions contemplated hereby unlawful or would
prevent or delay such consummation; and (ii) take promptly, in the event that
such an injunction or order has been issued in such a proceeding, all steps
necessary to prosecute an appeal of such an injunction or order, and diligently
prosecute such appeal.
(b) The Parent Entities and the Sellers shall or shall cause the
Partnership and the Subsidiaries to give promptly such notices to third parties
and use all reasonable efforts to obtain such third party consents and estoppel
certificates as the Purchaser may deem necessary or desirable in connection
with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
the Partnership in giving such notices and obtaining such consents and estoppel
certificates; provided, however, that neither the Purchaser nor the Parent
Entities or Sellers shall have any obligation to give any guarantee or other
consideration of any nature in connection with any such notice, consent or
estoppel certificate or to consent to any change in the terms of
42
37
any agreement or arrangement which the Purchaser may deem adverse to the
interests of the Purchaser, the Partnership, any Subsidiary or their respective
businesses.
(d) None of the Purchaser, the Parent Entities or the Sellers knows of any
reason why all the consents, approvals and authorizations necessary for the
consummation of the transactions contemplated hereby will not be received.
SECTION 5.05. Notice of Developments. (a) Prior to the Closing, the
Partnership and each Parent Entity and Seller shall promptly notify the
Purchaser in writing of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could result in any
breach of a representation or warranty or covenant of such Parent Entity or
Seller in this Agreement, or could result in any breach of a covenant of the
Partnership in this Agreement, or which could have the effect of making any
representation or warranty of such Parent Entity or Seller in this Agreement
untrue or incorrect in any material respect.
(b) Prior to the Closing, the Purchaser shall promptly notify the Parent
Entities and the Sellers in writing of all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could result
in any breach of a representation or warranty or covenant of the Purchaser in
this Agreement or which could have the effect of making any representation or
warranty of the Purchaser untrue or incorrect in any material respect.
SECTION 5.06. No Solicitation of Employees. (a) Each Parent Entity and
Seller severally agrees for itself that it shall not, and each shall cause each
of its Affiliates not to, during the period from the date hereof until Closing
and, if the Closing occurs, for a period of two years from the Closing, without
the prior written consent of the Purchaser, directly or indirectly, solicit on
a specific or targeted basis for employment or employ any person who is an
employee of the Partnership or any Subsidiary, provided that this Section
5.06(a) shall not prohibit any form of employment advertising or prevent the
hiring of any individual who contacts the Parent Entity or Seller or any of
their Affiliates.
(b) The Purchaser agrees that it shall not, during the period from the
date hereof until Closing and, if the Closing occurs, for a period of two years
from the Closing, without the prior written consent of United, directly or
indirectly, solicit on a specific or targeted basis for employment or employ
any person who is an employee of United's information systems division,
provided that this Section 5.06(b) shall not prohibit any form of employment
advertising or prevent the hiring of any individual who contacts the Purchaser.
SECTION 5.07. Use of Intellectual Property. (a) The Sellers acknowledge
that from and after the Closing the name "Apollo Travel Services" and all
similar or related
43
38
names, marks and logos (all of such names, marks and logos being the "ATS
Names") shall be owned by the Partnership or a Subsidiary, that (except as
provided in Section 5.07(b)) neither the Sellers nor any of their Affiliates
shall have any rights in the ATS Names, and that none of the Sellers nor any of
their Affiliates will contest the ownership or validity of any rights of the
Purchaser, the Partnership or any Subsidiary in or to the ATS Names.
(b) Except as expressly agreed in writing by the Purchaser or pursuant to
any agreements and licenses between the Purchaser and the Sellers, or the
Partnership and the Purchaser or any of its Affiliates, from and after the
Closing, neither the Sellers nor any of their Affiliates shall use any of the
Partnership Intellectual Property.
SECTION 5.08. Monthly Financial Statements. Between the date hereof and
the Closing, promptly following the end of each calendar month, but in no event
later than 15 days following the end of each calendar month, the Partnership
will prepare, or cause to be prepared, and will promptly provide to the
Purchaser, a consolidated balance sheet of the Partnership and the Subsidiaries
as of the end of the preceding calendar month and statements of consolidated
income of the Partnership and the Subsidiaries for the preceding calendar
month. Such monthly financial statements shall be prepared in accordance with
past practice.
SECTION 5.09. Premier Travel Services, L.L.C.. Attached as Exhibit 5.09
hereto is a complete and correct list of the assets and liabilities of Premier
Travel Services, L.L.C. or any business of the Partnership related thereto
("Premier") and of the employees of the Partnership who will be transferred
with Premier on or prior to the Closing Date. On or prior to the Closing Date,
all of the equity interests in Premier shall be transferred by the Partnership
to two or more Persons other than the Partnership or any Subsidiary thereof.
SECTION 5.10. Pre-Closing Balance Sheet. No fewer than five Business
Days prior to the Closing Date, the Partnership shall prepare an unaudited
consolidated balance sheet of the Partnership and the Subsidiaries in
accordance with this Section 5.10 (the "Pre-Closing Balance Sheet"). In the
event that the Closing is scheduled to occur after the fifteenth day of any
particular calendar month, the Pre-Closing Balance Sheet shall be prepared as
of the last day of the immediately preceding calendar month. If the Closing is
scheduled to occur on or prior to the fifteenth day of any particular calendar
month, the Pre-Closing Balance Sheet shall be prepared as of the last day of
the second preceding calendar month. The Pre-Closing Balance Sheet shall be
prepared in accordance with U.S. GAAP applied on a basis consistent with the
preparation of the Net Asset Test Reference Balance Sheet and shall exclude (i)
any indebtedness for borrowed money of the Partnership and the Subsidiaries,
(ii) any cash or cash equivalents, other than cash in the amount of any checks
outstanding, and (iii) the assets and liabilities of Premier. During the
preparation of the Pre-Closing Balance Sheet and during the period of any
review by the Purchaser and its representatives of the Pre-Closing Balance
Sheet, the Partnership shall provide, and the Parent Entities and the Sellers
shall cause the Partnership and the Subsidiaries and their
44
39
respective officers, employees and agents to provide, full access to the books,
records, facilities and employees of the Partnership and the Subsidiaries, in
each case to the extent required by the Purchaser and its representatives in
order to monitor the preparation of, and review, the Pre-Closing Balance Sheet.
SECTION 5.11. Environmental Audit. Prior to the Closing Date, the
Purchaser and the Partnership shall conduct, or cause to be conducted, an
investigation of the underground storage tank located on the Partnership's
premises in Atlanta, Georgia (the "Environmental Audit"). The costs and
expenses of the Environmental Audit shall be borne equally by the Purchaser, on
the one hand, and the Sellers (pro rata in proportion to their respective
Partnership Interests), on the other. During the preparation of the
Environmental Audit, the Partnership shall provide, and the Parent Entities and
the Sellers shall cause the Partnership and the Subsidiaries and their
respective officers, employees and agents to provide, full access to the books,
records, facilities and employees of the Partnership and the Subsidiaries, in
each case to the extent required by the Purchaser and the Persons conducting
the Environmental Audit in order to prepare the Environmental Audit.
SECTION 5.12. Employees and Employee Benefits. From and after the
Closing Date, the Purchaser shall grant all employees of the Partnership and
the Subsidiaries credit for all service (to the same extent as service with the
Purchaser or any subsidiary of the Purchaser is taken into account with respect
to similarly situated employees of the Purchaser and the subsidiaries of the
Purchaser) with the Partnership and any Subsidiary and their respective
predecessors (including, without limitation, United and Covia Partnership)
prior to the Closing Date for all purposes as if such service with the
Partnership or any Subsidiary or predecessor was service with the Purchaser or
any subsidiary of the Purchaser (provided, however, that no such past service
credit shall be granted to the extent it would result in duplicative accrual of
benefits for the same period of service), and, with respect to any medical or
dental benefit plan, the Purchaser shall waive any pre-existing condition
exclusions and actively-at-work requirements (provided, however, that no such
waiver shall apply to a pre-existing condition of any employee of the
Partnership or any Subsidiary who was, as of the Closing Date, excluded from
participation in a Plan by virtue of such pre-existing condition) and provide
that any covered expenses incurred on or before the Closing Date by an employee
or an employee's covered dependent shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Closing Date to the same extent as such expenses are taken
into account for the benefit of similarly situated employees of the Purchaser
and subsidiaries of the Purchaser. The Purchaser shall provide or shall cause
the Partnership and each Subsidiary to provide benefits to any employee of the
Partnership and each Subsidiary which are not less favorable in the aggregate
than the benefits provided to similarly situated employees of the Purchaser and
subsidiaries of the Purchaser, excluding flight benefits; provided, however,
that nothing in this Section 5.12 shall require the Purchaser to provide
benefits to any such
45
40
employee that are more favorable than the benefits provided or proposed to
be provided to such employee by the Partnership or any Subsidiary immediately
prior to the Closing Date.
SECTION 5.13. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE VI
TAX MATTERS
SECTION 6.01. Tax Indemnity. (a) Except to the extent of Ordinary
Course Taxes with respect to sales and use tax audit settlements, the Other Tax
Audit Reserve and, with respect to the open sales tax audits as of April 30,
1997 for which specific reserves of $1.8 million have been established (the
"Sales Tax Audit Reserve"), the Sales Tax Audit Reserve, the Partnership and
the Purchaser and its Affiliates, officers, directors, employees, agents,
successors and assigns (each an "Indemnified Party") shall be indemnified and
held harmless by the Parent Entities and Sellers, on a several basis, for any
and all Losses arising out of or resulting from:
(i) the breach of any representation or warranty made in Section
3.18; or
(ii) Liabilities of the Partnership or any Subsidiary for Taxes with
respect to the period before the Closing Date; provided, however, that
such indemnity shall be reduced by any Tax Benefit to the Purchaser or
any Affiliate of the Purchaser with respect to such Losses or Liabilities
or the items or adjustments resulting in such Losses or Liabilities;
provided, further, that amounts under clause (i) and clause (ii) shall be
without duplication of the amount provided for under the other clause.
To the extent that any of the Parent Entities and the Sellers' undertakings set
forth in this Section 6.01 may be unenforceable, each of the Parent Entities
and the Sellers shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the Indemnified Parties.
(b) The Sellers and the Purchaser agree to treat all payments made
under this Article VI and all indemnification payments made under Article VIII
of this Agreement as adjustments to the Purchase Price for Tax purposes except
to the extent that the laws of a particular jurisdiction provide otherwise.
46
41
(c) The obligation of each Parent Entity and its Affiliate Seller
with respect to any indemnification payment under this Section 6.01 shall be
limited to such Affiliate Seller's pro rata share (in accordance with its
Partnership Interest in the Partnership) of the amount of such indemnification
payment under this Section 6.01.
SECTION 6.02. Apportionment of Taxes. (a) For purposes of
Section 6.01, Taxes with respect to the period before the Closing Date shall
mean: (i) Taxes imposed on the Partnership or any Subsidiary with respect to
taxable periods of such person ending on or before the Closing Date; and (ii)
with respect to taxable periods beginning before the Closing Date and ending
after the Closing Date, Taxes imposed on the Partnership or any Subsidiary
which are allocable, pursuant to Section 6.02(b), to the portion of such
period ending on the Closing Date.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending
on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related
to income or receipts, or (y) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, which are
governed by Section 6.07), deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect
to the assets of the Partnership, or otherwise measured by the level of
any item, deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the
period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period.
SECTION 6.03. Returns and Payments. (a) From the date of this
Agreement through and after the Closing Date, the Sellers shall prepare and
file or otherwise furnish in proper form to the appropriate Tax Authority (or
cause to be prepared and filed or so furnished) in a timely manner all Returns
relating to the Partnership and the Subsidiaries that are due on or before the
Closing Date. The Sellers shall pay or cause the Partnership to pay Taxes
prior to the Closing Date in such amounts and at such times as are consistent
with past practices employed with respect to the Partnership and the
Subsidiaries. In the event that the Closing Date does not occur prior to the
due date (including any extension thereof) for the filing of the Federal,
state or local Partnership income tax returns for the Partnership's 1996
taxable year, the Sellers will provide the Purchaser and its authorized
representative a copy of such completed returns at least 10 Business Days
prior to the earlier of the due date
47
42
(including any extension thereof) for the filing of such returns or the
date of filing. The Purchaser shall prepare and file or otherwise furnish in
proper form to the appropriate Tax authority (or cause to be prepared and filed
or so furnished) in a timely manner all Returns relating to the Partnership and
the Subsidiaries that are due after the Closing Date. With respect to Returns
filed by the Purchaser for any period ending on or before the Closing Date, the
Purchaser shall pay the Taxes shown as due and owing on such Returns. Returns
of the Partnership and the Subsidiaries prepared by the Sellers and not yet
filed for any taxable period that ends on or before the Closing Date shall be
prepared in a manner consistent with past practices employed with respect to
the Partnership and the Subsidiaries (except to the extent counsel for the
Sellers renders a legal opinion that there is no reasonable basis in law
therefore or determines that a Return cannot be so prepared and filed without
being subject to penalties).
(b) With respect to Returns filed by the Purchaser for any period
beginning before and ending after the Closing Date, the Purchaser shall pay the
Taxes shown as due and owing on such Returns. The Purchaser will notify the
Sellers of any position it will take on a Return which would be inconsistent
with that taken by the Sellers on prior Returns. If the Purchaser and the
Sellers disagree on the position taken and the position would in any way alter
the balance of Taxes owing or Tax refunds or credits obtainable with respect to
(i) any Tax period of the Partnership or the Subsidiaries ending on or prior to
the Closing Date or (ii) in the case of Tax refunds or credits, any period up
to and including the Closing Date which is part of a Tax period of the
Partnership or the Subsidiaries beginning prior to and ending after the Closing
Date, then the parties shall submit the matter to a mutually selected
independent nationally recognized accounting firm, other than KPMG Peat Marwick
and its affiliates and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and its affiliates (the "Independent
Firm"), and the Independent Firm shall resolve the issue based on a standard of
maximal fairness to both the Purchaser and the Sellers.
(c) With respect to any Return required to be filed by the Purchaser
with respect to the Partnership and the Subsidiaries and as to which an amount
of Tax is allocable to the Sellers under Section 6.02(b), the Purchaser shall
provide the Sellers and their authorized representatives with a copy of such
completed Return and a statement certifying the amount of Tax shown on such
Return that is allocable to the Sellers pursuant to Section 6.02(b), together
with appropriate supporting information and schedules at least 10 Business Days
prior to the due date (including any extension thereof) for the filing of such
Return, in the case of Taxes other than payroll and sales and use Taxes, or
five (5) days prior to the date on which such Return is required to be filed
(taking into account any extensions) in the case of payroll and sales and use
Taxes, and the Sellers and their authorized representatives shall have the
right to review and comment on such Return and statement prior to the filing of
such Return.
48
43
(d) The sum of the Purchase Price and any Partnership Liabilities
that are part of the Purchaser's Federal income tax basis for its partnership
interest shall be allocated among the assets as of the Closing Date in
accordance with a schedule to be mutually agreed upon by the Purchaser and the
Sellers within 90 days following the Closing Date (the "Purchase Price
Allocation Schedule"). If the Purchaser and the Sellers cannot agree on the
Purchase Price Allocation Schedule, then the parties shall submit the matter to
the Independent Firm, and the Independent Firm shall resolve the issue based on
a standard of maximal fairness to both the Purchaser and the Sellers. Any
subsequent adjustments to the sum of the Purchase Price and such Partnership
Liabilities shall be reflected in the allocation in a manner consistent with
Treas. Reg. 1.1060-1T(f). For all Tax purposes (including, without limitation,
the Purchaser's statement filed pursuant to Treas. Reg. 1.743-1(b)(3)), the
Purchaser and the Seller agree to report the transactions contemplated in this
Agreement in a manner consistent with the Purchase Price Allocation Schedule
and agree that none of them will take any position inconsistent therewith in
any Tax return, in any refund claim, in any litigation, or otherwise.
SECTION 6.04. Contests. (a) After the Closing, the Purchaser shall
promptly notify the Sellers in writing of any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding of the
Purchaser or of any of the Partnership and the Subsidiaries which, if
determined adversely to the taxpayer, would be grounds for indemnification
under this Article VI or could otherwise result in any Tax cost to any of the
Sellers; provided, however, that a failure to give such notice will not affect
the Purchaser's right to indemnification under this Article VI except to the
extent such failure on the part of the Purchaser or any Affiliate of the
Purchaser prejudices the Sellers by preventing the avoidance of all or a
portion of the Tax liability in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, provided that the
Sellers acknowledge in writing their indemnification obligation liability under
Article VI of this Agreement with respect to the potential liability of the
Purchaser, the Partnership or any Subsidiary as a result of such audit or
administrative or judicial proceeding, the Sellers (or the Parent Entities, as
the case may be) shall have the right, at their expense, to participate in and
control the conduct of such audit or proceeding; the Purchaser may also
participate in any such audit or proceeding but only if such audit or
proceeding relates to non-income Taxes and, if the Sellers do not assume the
defense of any such audit or proceeding, the Purchaser, at its expense, may
defend the same in such manner as it may deem appropriate, including, but not
limited to, settling such audit or proceeding after giving five days' prior
written notice to the Sellers setting forth the terms and conditions of
settlement. In the event that issues relating to a potential adjustment for
which the Sellers have acknowledged their indemnification obligation are
required to be dealt with in the same proceeding as separate issues relating to
a potential adjustment for which the Purchaser would be liable, the Purchaser
shall have the right, at its expense, to control the audit or proceeding with
respect
49
44
to the latter issues, provided that the Purchaser provides the Sellers
with a written acknowledgement of the Purchaser's liability.
(c) Notwithstanding Section 6.04(b), neither the Purchaser nor the
Sellers shall enter into any compromise or agree to settle any claim pursuant
to any Tax audit or proceeding, including without limitation a Federal, state
or local income Tax audit or proceeding to the extent it involves Partnership
items, which would adversely affect the other party for such year or any prior
or subsequent year without the written consent of the other party which consent
may not be unreasonably withheld. If the Purchaser or the Sellers refuse to
provide the respective other party with written consent to settle any such
claim, then the parties shall submit the matter to an Independent Firm and the
Independent Firm shall resolve the issue based on a standard of maximal
fairness to both the Purchaser and the Sellers.
(d) The Purchaser and the Sellers (or the Parent Entities, as the
case may be) shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with (i) the filing of Returns pursuant to
Section 6.03 (including such amended Returns for periods (or portions thereof)
ending on or prior to the Closing Date that the Sellers or the Parent Entities
may reasonably request the Purchaser to file; provided, however, that if in the
Purchaser's reasonable judgment the filing of the amended return would be
disadvantageous to the Purchaser, the Purchaser may deny the Sellers' or the
Parent Entities' request and the parties shall submit the matter to an
Independent Firm and the Independent Firm shall resolve the issue based on a
standard of maximal fairness to both the Purchaser and the Sellers or the
Parent Entities, as the case may be]) and (ii) any audit, litigation or other
proceeding with respect to Taxes.
SECTION 6.05. Survival of Obligations. Notwithstanding any
provision in this Agreement to the contrary, obligations of the Parent Entities
and the Sellers to indemnify and hold harmless the Indemnified Parties pursuant
to this Article VI, and the representations and warranties contained in Section
3.18, shall terminate at the close of business on the 180th day following the
expiration of the applicable statute of limitations with respect to the Tax
liabilities in question (giving effect to any waiver, mitigation or extension
thereof).
SECTION 6.06. Section 754 Elections. If and only if requested by
Purchaser, the Sellers and the Parent Entities shall cause any Subsidiary
(other than Premier) which is the subject of such request to make the election
described in Section 754 of the Code for such Subsidiary's taxable year which
ends on or includes the Closing Date.
SECTION 6.07. Conveyance Taxes. The Sellers and the Parent
Entities on the one hand and the Purchaser on the other hand shall share
equally any liability for any real property transfer or gains, sales, use,
transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes (but
50
45
specifically not including Taxes on or with respect to income) that become
payable in connection with the transactions contemplated by this Agreement.
The Partnership shall prepare in a timely manner for the review and approval of
the parties and file such applications and documents as shall permit any such
Tax to be assessed and paid on or prior to the Closing Date in accordance with
any available presale filing procedure. The parties shall execute and
deliver all instruments and certificates necessary to enable the Partnership to
comply with the foregoing.
SECTION 6.08. Tax Refunds, Credits and Other Payments. (a) The
Purchaser shall, within 10 days of receipt of any Tax refund or credit actually
received by or on behalf of the Purchaser or any Affiliate or successor thereto
(other than a refund or credit with respect to Taxes paid by the Purchaser or
any Affiliate or successor thereto on or after the Closing Date and not
previously indemnified by the Parent Entities or the Sellers pursuant to
Section 6.01(a)) (A) for or attributable to any Tax period of the Partnership
or any Subsidiary ending at or prior to the Closing Date or (B) for or
attributable to any period up to and including the Closing Date which is part
of a Tax period of the Partnership or any Subsidiaries beginning prior to and
ending after the Closing Date, pay such Tax refund or credit (a "Returnable
Refund or Credit") on an After-Tax Basis and net of amounts payable under
Section 6.08(c) hereof to the Sellers (including any interest or addition
actually received thereon). If the amount of any Returnable Refund or Credit
is applied against any other liability of any of the Purchaser or any Affiliate
or successor thereto for Taxes for any Tax period after the Closing Date, the
Purchaser shall, within 10 days of the date of such application, pay to the
Sellers an amount equal to the Returnable Refund or Credit on an After-Tax
Basis and net of amounts payable under Section 6.08(c) hereof (including any
interest or addition actually received thereon). The Purchaser shall deliver
with payment to the Sellers a copy of any written explanation of the facts
surrounding the Returnable Refund or Credit and a copy of any related notice or
statement received from any Tax authority.
(b) To the extent that the Purchaser or any Affiliate or successor
thereto receives a Tax Benefit that is attributable to an adjustment of any
income, gain, loss, deduction, credit, refund or other Tax item made with
respect to any Tax period of the Partnership or any Subsidiary ending on or
prior to the Closing Date or any period beginning before and ending on the
Closing Date which is part of a Tax period of the Partnership or any Subsidiary
beginning before and ending after the Closing Date and in connection therewith
the Sellers or the Parent Entities or any Affiliate or successor thereto suffer
a Loss, the Purchaser will, within 10 days of the receipt of such Tax Benefit
by the Purchaser, or any Affiliate or successor thereto, pay to the Sellers
their respective share, in proportion to their respective Partnership
interests, of an amount equal to the lesser of the amount of the Tax Benefit or
the Loss.
(c) Without duplication of any amounts paid to the Purchaser
pursuant to Section 6.01, to the extent that the Seller receives a Tax Benefit
that is attributable to an
51
46
adjustment of any income, gain, loss, deduction, credit, refund or other Tax
item made with respect to any Tax period of the Partnership or any Subsidiary
ending on or before the Closing Date or any period ending on or before the
Closing Date which is part of a Tax period of the Partnership or any Subsidiary
beginning before and ending after the Closing Date and in connection therewith
the Purchaser or any Affiliate or successor thereto suffers a Loss, the Seller
will, within 10 days of the receipt of such Tax Benefit by the Seller, pay to
the Purchaser an amount equal to the lesser of the amount of the Tax Benefit or
the Loss.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Parent Entities, the
Sellers and the Partnership. The obligations of the Parent Entities, the
Sellers and the Partnership to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, with the same force and effect as if
made as of the Closing Date, other than such representations and warranties as
are made as of another date, which shall be true and correct in all material
respects as of such date (provided, however, if any portion of any
representation or warranty is already qualified by materiality, for purposes of
determining whether this Section 7.01(a) has been satisfied with respect to
such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), and the covenants and agreements contained in this Agreement to be
complied with by the Purchaser on or before the Closing shall have been
complied with in all material respects, and the Sellers shall have received a
certificate from the Purchaser to such effect signed by a duly authorized
officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Partnership Interests
contemplated hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against any of the Parent
Entities, the Sellers, the Partnership or the Purchaser, seeking to restrain or
prevent the consummation of the transactions contemplated by this Agreement;
provided, however, that the provisions of this Section 7.01(c) shall not apply
if the Parent Entities, the Sellers, the Partnership or any Affiliate thereof
have directly or indirectly solicited or encouraged any such Action;
52
47
(d) Resolutions. The Sellers shall have received a true and complete
copy, certified by the Secretary of the Purchaser, of the resolutions of the
Purchaser's Supervisory Board evidencing its authorization of the consummation
of the transactions contemplated hereby;
(e) Incumbency Certificate. The Sellers shall have received a
certificate of the Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to sign this Agreement
and the other documents to be delivered hereunder;
(f) Escrow Agreement. The Purchaser shall have duly executed and
delivered the Escrow Agreement in substantially the form of Exhibit 2.04(f)
hereto;
(g) Consummation of Transactions Contemplated by Transaction
Agreement. The transactions contemplated by the Transaction Agreement, a form
of which is attached as Exhibit 7.01(g) hereto (the "Transaction Agreement"),
shall have been consummated; and
(h) Completion of the IPO. The IPO shall have been consummated.
SECTION 7.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Parent Entities and the Sellers contained in this
Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing with
the same force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date, which shall be
true and correct in all material respects as of such date (provided, however,
that the representations and warranties contained in Section 3.03 will be true
and correct in all respects and that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 7.02(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and the
covenants and agreements contained in this Agreement to be complied with by the
Parent Entities, the Sellers and the Partnership on or before the Closing shall
have been complied with in all material respects, and the Purchaser shall have
received certificates from each of the Parent Entities and Sellers and from the
Partnership to such effect (relating solely to such Persons) signed by a duly
authorized officer thereof;
53
48
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Partnership Interests
contemplated hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Parent Entities, the Sellers, the Partnership or the Purchaser, seeking to
restrain or prevent the consummation of the transactions contemplated hereby;
provided, however, that the provisions of this Section 7.02(c) shall not
apply if the Purchaser has solicited or encouraged any such Action;
(d) Resolutions of the Sellers, the Parent Entities and the
Partnership. The Purchaser shall have received a true and complete copy,
certified by the Secretary or an Assistant Secretary of each of the Sellers,
the Parent Entities and the Partnership, of the resolutions duly and validly
adopted by the Board of Directors of each of the Sellers and the Parent
Entities and the Supervisory Board of the Partnership evidencing their
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(e) Incumbency Certificate of the Sellers, the Partnership and the
Parent Entities. The Purchaser shall have received certificates of the
Secretary or an Assistant Secretary of each of the Parent Entities, the Sellers
and the Partnership certifying the names and signatures of the officers of each
of the Parent Entities, the Sellers and the Partnership authorized to sign
this Agreement and the other documents to be delivered hereunder;
(f) Consents and Approvals. The Purchaser and the Sellers shall have
received, each in form and substance satisfactory to the Purchaser, all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials and all third party consents and estoppel certificates set forth
on Schedule 7.02(f);
(g) Good Standing; Qualification to Do Business. The Purchaser
shall have received good standing certificates for each Subsidiary from the
secretary of state of the jurisdiction in which each such entity is organized
dated as of a date not earlier than five Business Days prior to the Closing
Date;
(h) Financing. The Purchaser shall have obtained financing on terms
acceptable to it sufficient to enable it to consummate the transactions
contemplated by this Agreement;
(i) Completion of the IPO. The IPO shall have been consummated;
54
49
(j) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which have, or are reasonably
likely to have, a Material Adverse Effect;
(k) No Debt. The Partnership shall have no indebtedness for borrowed
money as of the Closing Date;
(l) United Network Services Agreement. All necessary actions shall
have been taken by the Partnership to ensure that the Network Services
Agreement, dated as of September 16, 1993, between the Partnership and United
will remain in full force and effect after the Closing;
(m) Net Asset Test. The Net Assets reflected on the Seasonally
Adjusted Net Asset Test Reference Balance Sheet shall not exceed the Net Assets
reflected on the Pre-Closing Balance Sheet by $5 million or more;
(n) Environmental Audit. The results of the Environmental Audit
shall be satisfactory to the Purchaser;
(o) Non-Neutral Travel Provider Issuer. The Purchaser and United
shall have entered into an agreement with respect to the settlement of the
Non-Neutral Travel Provider Issuer as set forth in paragraph (c) of the letter
dated February 21, 1997 from the Purchaser to the Partnership's Supervisory
Board;
(p) Transfer of Premier. Premier shall have been transferred as
set forth in Section 5.09;
(q) Transfer of Interest in Apollo Communications Services L.L.C..
The Sellers shall have transferred their respective equity interests in Apollo
Communications Services L.L.C. to the Partnership or one of the wholly-owned
Subsidiaries; and
(r) Consummation of Transactions Contemplated by the Transaction
Agreement. The transactions contemplated by the Transaction Agreement shall
have been consummated.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
representations and warranties of the parties contained in Sections 3.06, 3.11,
3.14, 3.15, 3.16, 3.17 and 3.19, and Article IV (other than Section 4.05), and
the covenants of the
55
50
parties set forth in Article V (other than Sections 5.02(b) and (c), 5.03,
5.06, 5.07, 5.12 and 5.13) shall terminate at Closing. The representations and
warranties of the parties contained in Sections 3.01, 3.02, 3.03, 3.04, 3.05,
3.07, 3.09, 3.10, 3.12, 3.13 and 3.20 and Section 4.05 shall survive the
Closing until the second anniversary of the Closing Date. The representations
and warranties dealing with Tax matters shall survive as provided in Article
VI, and the representations and warranties set forth in Section 3.08 shall
survive the Closing until the first anniversary of the Closing Date. The
covenants of the parties set forth in Sections 5.02(b) and (c), 5.03, 5.06,
5.07 and 5.12 shall survive the Closing, and the other covenants set forth in
this Agreement that expressly survive the Closing shall survive the Closing in
accordance with their respective terms. Notwithstanding the foregoing or
anything to the contrary in this Article VIII, in the event that the Purchaser
has actual knowledge prior to the Closing Date that any of the representations
and warranties of the Sellers or the Parent Entities to survive the Closing in
accordance with this Section 8.01 were not true and correct as of the date
hereof or are not true and correct as of the Closing Date or that the
agreements of the Parent Entities and the Sellers contained in Section 5.03(b)
have not been complied with, the sole and exclusive remedy of the Purchaser
with respect to such breaches will be to not consummate the transactions
contemplated by this Agreement if any such breach results in the
nonsatisfaction of the condition contained in Section 7.02(a). For purposes of
the foregoing sentence, the term "actual knowledge" means the actual knowledge
of an officer of the Purchaser, including, without limitation, as a result of
(A) the delivery to the Purchaser by the Parent Entities, the Sellers or the
Partnership not fewer than three Business Days prior to the Closing (other than
in a case in which an event occurs within such three Business Day period which
could not have been anticipated, in which case written notice of such event
must be provided to the Purchaser promptly after the Parent Entities, the
Sellers or the Partnership become aware of it) of a written notice specifically
identifying in detail the nature of the breach and the provisions of this
Agreement that have been breached, or (B), without duty of any other due or
specific inquiry, a written survey of (i) employees of the Purchaser who are
reasonably likely, because of their substantive and significant contacts with
the Partnership, to have knowledge as to the truth and correctness of the
representations and warranties of the Parent Entities and the Sellers to
survive the Closing or whether the Parent Entities and the Sellers have
complied with Section 5.03(b), (ii) the accountants at KPMG Peat Marwick LLP,
(iii) the investment bankers at ▇▇ ▇▇▇▇▇▇ and (iv) the attorneys at Shearman &
Sterling and ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, who, in the case of (ii), (iii) and (iv),
actually participated in the Purchaser's due diligence investigation of the
Partnership. Subject to the foregoing, neither the period of survival nor the
liability of the parties hereto with respect to their representations and
warranties and covenants shall be reduced by any investigation made at any time
by or on behalf of any such party. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties and
covenants by the parties hereto, then the relevant representations and
warranties and covenants shall survive as to such claim until such claim has
been finally resolved.
56
51
SECTION 8.02. Indemnification by the Parent Entities and the
Sellers. (a) The Purchaser, its Affiliates, including the Partnership and the
Subsidiaries, and their successors and assigns, and the officers, directors,
employees and agents of the Purchaser, its Affiliates and their successors and
assigns (each a "Purchaser Indemnified Party") shall be indemnified and held
harmless, as and to the extent set forth in this Section 8.02, by the Parent
Entities and the Sellers, severally and not jointly, for any and all
Liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise initiated by
any of them) on an After-Tax Basis (hereinafter a "Loss"), arising out of or
resulting from:
(i) the breach of any representation or warranty made by the Parent
Entities or the Sellers contained in any of Sections 3.01, 3.02, 3.03,
3.04, 3.05, 3.07, 3.09, 3.10, 3.12, 3.13, 3.18 or 3.20 of this Agreement;
or
(ii) the breach of any covenant or agreement by the Parent Entities
or the Sellers contained in Section 5.03(b) of this Agreement; or
(iii) any shortfall in the Cash of the Partnership that is not
covered by the amount held by the Escrow Agent, together with interest
thereon, as determined by the parties in accordance with Section
2.04(f)(iii); or
(iv) Liabilities arising from or related to Premier.
(b) The obligation of a Parent Entity and its Affiliate Seller, as
between themselves, to indemnify a Purchaser Indemnified Party shall be joint
and several and subject to the limitation set forth in the fifth sentence of
Section 8.01 and to the following limitations: (i) no indemnification by any
Parent Entity and Seller (other than an indemnification pursuant to Section
8.02(a)(iii)) shall be made unless the aggregate amount of Losses relating to
breaches or otherwise subject to indemnification hereunder exceeds $5 million,
and then indemnification shall be made solely in the amount of such excess;
(ii) in no event shall the aggregate obligation of all Parent Entities and
Sellers to indemnify the Purchaser Indemnified Parties (other than an
indemnification pursuant to Section 8.02(a)(iii)) exceed $175 million, except
for a breach of the representations and warranties contained in Section 3.03 in
which case the obligation to indemnify the Purchaser Indemnified Parties shall
not exceed $700 million; (iii) the aggregate obligation of each Parent Entity
and its Affiliate Seller and the obligation of each Parent Entity and its
Affiliate Seller with respect to any individual indemnifiable Loss,
respectively, shall be limited to such Affiliate Seller's pro rata share (in
accordance with its Partnership Interests in the Partnership) of the aggregate
amount set forth in clause (ii) or such individual indemnifiable Loss,
respectively, except to the extent such Parent Entity or Affiliate Seller is in
breach of its representations and warranties under any of Section 3.01, 3.03,
3.04 or 3.05, or is in breach of the covenants
57
52
contained in 5.03, in which event the aggregate obligations of such Parent
Entity or Affiliate Seller and the obligation of such Parent Entity or
Affiliate Seller with respect to any individual indemnifiable Loss,
respectively, shall not be subject to the limitation set forth in this clause
(iii); (iv) any recovery of a Loss due to breach of one representation will
preclude recovery of such Loss due to breach of any other representation, and
all indemnification shall be without duplication of any other recovery; (v) a
Purchaser Indemnified Party shall not be entitled to be indemnified for breach
of the representations and warranties set forth in Section 3.08 or Section 3.12
unless it establishes that (A) a reasonably prudent business person would have
concluded, based on the information available to such person at the time of
taking the action that caused such breach or, in the case of Section 3.12, at
the time of entering into the contract that caused such breach, that the Losses
associated with such action or such contract, as the case may be, would exceed
the benefits associated therewith, and (B) in the case of Sections 3.12(a)(vi)
and (a)(viii) only, that such breach has had a materially negative
effect on the Partnership or the Subsidiaries; (vi) a Purchaser Indemnified
Party shall not be entitled to be indemnified for any breach of the
representations and warranties set forth in Section 3.10 if and to the extent
such breach also constitutes a breach of any of the representations and
warranties set forth in Sections 3.11, 3.16 or 3.17; and (vii) for purposes of
determining whether a Purchaser Indemnified Party is entitled to be indemnified
for any breach of the representations and warranties contained in Section 3.12,
the term "Material Contracts" shall be deemed to refer solely to (A) any
contracts or agreements under which the Partnership can be reasonably expected
to pay or be paid at least $1,000,000 over any five year period during the life
of the contract following the Closing Date, (B) any contracts or agreements
that limit or purport to limit the ability of the Partnership or any Subsidiary
to compete in any line of business or with any Person or in any geographic area
or during any period of time, or (C) any contracts the presence or absence of
which would have a Material Adverse Effect.
(c) Each Purchaser Indemnified Party shall use its reasonable
efforts to mitigate any Losses for which it seeks indemnification hereunder.
(d) To the extent that the Parent Entities' and the Sellers'
undertakings set forth in this Section 8.02 may be unenforceable, the Parent
Entities and the Sellers shall contribute (in the same proportion as they would
otherwise have indemnified the Purchaser Indemnified Party in accordance with
Section 8.02(b)(iii)) the maximum amount that they are permitted to contribute
under applicable law to the payment and satisfaction of all Losses incurred
by the Purchaser, the Partnership and the Subsidiaries.
SECTION 8.03. Tax Matters. Anything in this Article VIII to the
contrary notwithstanding, the rights and obligations of the parties with
respect to indemnification for any and all Tax matters shall be governed solely
by Article VI.
58
53
SECTION 8.04. Indemnification by the Purchaser. (a) The Parent
Entities, its Affiliates and their successors and assigns, and the officers,
directors, employees and agents of the Parent Entities, their Affiliates and
their successors and assigns (each a "Seller Indemnified Party") shall be
indemnified and held harmless, as and to the extent set forth in this Section
8.04, by the Purchaser for any and all Losses on an After-Tax Basis arising out
of or resulting from:
(i) the breach of any representation or warranty made by the
Purchaser contained in Section 4.05 of this Agreement;
(ii) Liabilities of the Partnership or any Subsidiary, other than
any Liabilities for which the Purchaser is entitled to be indemnified
pursuant to Section 8.02;
(iii) any Cash that the Purchaser is required to pay to the Parent
Entities, together with interest thereon, as determined by the parties in
accordance with Section 2.04(f)(iii).
(b) Each Seller Indemnified Party shall use its reasonable efforts to
mitigate any Losses for which it seeks indemnification hereunder.
(c) To the extent that the Purchaser's undertakings set forth in this
Section 8.04 may be unenforceable, the Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the Parent Entities.
SECTION 8.05. Indemnification Procedures. A Purchaser Indemnified
Party or a Seller Indemnified Party, as the case may be (in each case, the
"Indemnified Party"), shall give the Parent Entities and the Sellers, or the
Purchaser, as the case may be (in each case, the "Indemnifying Party"), notice
of any matter which an Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of an Indemnifying Party under this
Article VIII with respect to Losses arising from claims of any third party
which are subject to the indemnification provided for in this Article VIII (a
"Third Party Claim") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive notice
of any Third Party Claim, the Indemnified Party shall give the Indemnifying
Party notice of such Third Party Claim within 30 days of the receipt by the
Indemnified Party of such notice; provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
obligations under this Article VIII except to the extent the Indemnifying Party
is
59
54
materially prejudiced by such failure and shall not relieve the Indemnifying
Party from any other obligation or Liability that it may have to any
Indemnified Party otherwise than under this Article VIII. If the Indemnifying
Party acknowledges in writing its obligations to indemnify the Indemnified
Party hereunder against any Losses (subject to the limitations set forth in
Section 8.02(b)) that may result from such Third Party Claim, then such
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within five Business
Days of the receipt of such notice from the Indemnified Party; provided,
however, that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
Indemnified Party for the same counsel to represent both the Indemnified Party
and the Indemnifying Party, then the Indemnified Party shall be entitled to
retain its own counsel, in each jurisdiction for which the Indemnified Party
determines counsel is required to participate in such defense, at the expense
of the Indemnifying Party. In the event the Indemnifying Party exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Party shall cooperate with the Indemnifying
Party in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party, subject to reimbursement of reasonable out-of-pocket expenses.
Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party, subject to reimbursement of reasonable out-of-pocket expenses. No such
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Sellers and the Purchaser;
(b) by either the Sellers or the Purchaser if the Closing shall not
have occurred by December 31, 1997;
60
55
(c) by either the Purchaser or the Sellers in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) there shall have been a breach of any material
representation or warranty of the Parent Entities and the Sellers contained in
this Agreement; (ii) a Seller, a Parent Entity or the Partnership shall not
have complied with any material covenant or agreement to be complied with by
them and contained in this Agreement; or (iii) the Parent Entities, the
Sellers, the Partnership or any Subsidiary makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Parent Entities, the Sellers, the Partnership or any Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization.
(e) by the Sellers and the Parent Entities if, between the date
hereof and the time scheduled for the Closing: (i) there shall have been a
breach of any material representation or warranty of the Purchaser contained in
this Agreement; (ii) the Purchaser shall not have complied with any material
covenant or agreement to be complied with by them and contained in this
Agreement; or (iii) the Purchaser makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Purchaser
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization.
SECTION 9.02. Effect of Termination. (a) In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except that the provisions of Sections 5.03(a), 9.02(b), 10.01, 10.02,
10.03, 10.06, 10.08, 10.10, 10.11 and 10.13 shall survive any such termination.
(b) Notwithstanding the foregoing, if the Closing does not occur
because of a breach by a party, such party will reimburse the other parties (as
their sole and exclusive remedy hereunder) for their out-of-pocket costs and
expenses, including, without limitation, fees and disbursements of counsel,
financing sources (other than bank commitment fees paid by the Purchaser prior
to June 15, 1997 or paid by the Purchaser after June 15, 1997 without
consulting the Parent Entities) and accountants, and disbursements (but not
fees) of financial advisors, incurred in connection with the preparation,
negotiation and performance of this Agreement and the transactions contemplated
hereby.
61
56
SECTION 9.03. Waiver. A party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered by the other
parties pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
(a) if to United or Covia:
United Air Lines, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. "Jake" Brace, III
62
57
with a copy to:
United Air Lines, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
and a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to USAW or USAM:
US Airways, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
with a copy to:
US Airways, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esq.
and a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
63
58
(c) if to Air Canada or Resnet:
Air Canada
C.P. 14,000/P.O. ▇▇▇ ▇▇,▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, Esq.
with a copy to:
Osler, Hoskin, & Harcourt
1 First Canadian Place
West 61st Floor
Toronto, Ontario
Canada M5X 3B8
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(d) if to the Sellers: copies to Covia, USAM and Resnet as set
forth above
(e) if to the Parent Entities: copies to United, USAW and Air
Canada as set forth above
(f) if to the Partnership:
Apollo Travel Services Partnership
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
with copies to:
United, Covia, USAW, USAM, Air Canada and Resnet, as set forth
above
64
59
(g) if to the Purchaser:
Galileo International Partnership
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇'▇▇▇▇▇, Esq.
SECTION 10.03. Public Announcements. Except as may be required by
Law, no party to this Agreement shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or the transactions
contemplated hereby or the existence of discussion or negotiations between the
parties or otherwise communicate with any news media without the prior consent
of the other parties, and the parties shall cooperate as to the form, timing
and contents of any such press release or public announcement.
SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 10.06. Entire Agreement. This Agreement (including the
Exhibits and the Sellers' Disclosure Schedule which are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein)
and the Non-Disclosure Agreement
65
60
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Parent Entities, the Sellers,
the Partnership and the Purchaser with respect to the subject matter hereof and
thereof.
SECTION 10.07. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Sellers and the Purchaser (which consent may be granted or withheld by the
Sellers or the Purchaser); provided, however, that the Purchaser may assign all
or any portion of its rights and obligations under this Agreement to one or
more Affiliates of the Purchaser without the consent of the Sellers; provided
further that in the event of such assignment, Purchaser will remain liable for
any obligations hereunder not performed by such assignee or assignees.
SECTION 10.08. No Third Party Beneficiaries. This Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and its
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Parent Entities, the Sellers, the Partnership and the Purchaser or (b) by a
waiver in accordance with Section 9.03.
SECTION 10.10. Arbitration. (a) Subject to the final sentence of
this Section 10.10, any dispute arising between or among the parties hereto or
any of them involving the subject matters covered by this Agreement shall be
submitted to arbitration under this Section 10.10. Any party asserting a
breach of this Agreement by any other party or parties shall notify all other
parties of such alleged breach (a "Dispute Notice") and the parties shall
attempt to resolve such dispute amicably and if they shall fail to resolve it
within thirty (30) days of the date of the Dispute Notice, any party may notify
any of the other parties that it wishes to commence an arbitration proceeding
under this Section 10.10 (an "Arbitration Request"). In any arbitration
proceeding the party or parties commencing the arbitration (alone or together,
if more than one, the "Petitioner") shall include in the Arbitration Request
(a) a statement of the facts constituting the alleged breach or dispute, (b) a
written statement of position ("Statement") regarding the dispute and (c) the
name of an elector designated by it. The Statement shall state the facts and
arguments in support of the position taken by the party submitting such
Statement and shall detail that party's proposed solution and relief sought (if
any). Copies of any Arbitration Request shall be furnished at the same time to
the other parties hereto. The party or parties with whom the Petitioner has
its dispute (alone or together, if more than one, the "Respondent") shall
within five (5) Business Days after the date of the Arbitration Request
designate a second elector by notice
66
61
to the Petitioner (copies of which shall be furnished to the other parties),
but if it or they shall fail to do so within such period the Petitioner may
designate an elector on Respondent's behalf. The electors chosen by the
Petitioner and the Respondent shall attempt to agree upon an arbitrator (the
"Arbitrator"), but if they are unable to do so within twenty (20) Business Days
after the designation of the second elector, then either elector thereafter may
apply to the American Arbitration Association (the "Association") for the
selection of the Arbitrator in accordance with the Commercial Arbitration Rules
of such Association. The Arbitrator so selected shall have full power to
decide any dispute referred to in this Section 10.10. The arbitration
proceedings shall be conducted in the English language, and the place of
arbitration and the making of the Award (as defined below) shall be the
City of New York. The UNCITRAL rules of commercial arbitration shall apply to
any arbitration commenced pursuant to this Section 10.10, as modified by the
following procedure:
(i) Within five (5) Business Days of the selection of the Arbitrator
(the "Commencement Date"), the Respondent shall deliver its Statement
regarding the dispute to the Arbitrator and to the Petitioner.
(ii) Within fifteen (15) Business Days from the Commencement Date,
each of the Petitioner and Respondent shall deliver to the Arbitrator and
to the other party, a response ("Response") to the other party's
Statement setting forth opposing facts and arguments and limited in
length to ten (10) typed, single spaced pages (excluding any evidentiary
exhibits included therein).
(iii) Within twenty (20) Business Days from the Commencement Date,
each of the Petitioner and the Respondent may deliver to the Arbitrator
and to the other party, a reply to the Response limited to setting forth
facts and arguments in rebuttal to the Statement and Response of the
other party and limited in length to five (5) typed, single spaced pages
(excluding any evidentiary exhibits included therein).
(iv) Within twenty-five (25) Business Days from the Commencement
Date, each of the Petitioner and Respondent shall present an oral
summation of its position to the Arbitrator in the presence of the other
party in accordance with such rules of procedure including, without
limitation, length of presentation and right of cross-examination, as the
Arbitrator shall determine in writing and deliver to the parties not less
than three (3) Business Days prior to such hearing; provided, however,
that such hearing shall not exceed eight (8) hours in total and may not
be adjourned except for extraordinary circumstances beyond the control of
the parties.
(v) The Arbitrator shall either issue his decision and award
("Award") or request a further meeting of the parties within fifteen (15)
days of the hearing.
67
62
(vi) Any such further meeting of the parties shall take place within
five (5) Business Days of the request therefor and shall be conducted as
determined by the Arbitrator. The Arbitrator shall issue his Award no
later than fifteen (15) days after any such further meeting of the
parties.
(vii) The Award shall be in writing and shall be limited to a
decision either completely in favor of Petitioner's request for relief or
completely in favor of Respondent's request for relief. The Award shall
be final and binding upon the parties hereto and judgment may be entered
thereon in any court of competent jurisdiction and the costs and expenses
of such arbitration (and of enforcing any Award) shall be borne by the
party losing such arbitration.
(viii) In the event that the Arbitrator fails to render his Award
within the time limits contained in Sections 10.10(a)(v) or (vi), the
Arbitrator shall, nonetheless, retain jurisdiction over the dispute for a
reasonable period of time.
(b) This Section 10.10 shall in no way affect the right of any party
to seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
(c) In order to facilitate the resolution of any claim for
indemnification brought by a Purchaser Indemnified Party pursuant to Section
8.02 and the enforcement of any Award resulting therefrom, the Parent Entities
and the Sellers agree to be joined as parties to any arbitration relating to a
Purchaser Indemnified Party's claim for indemnification pursuant to Section
8.02. In addition, in order to facilitate the enforcement of any Award
resulting from a claim for indemnification brought by a Purchaser Indemnified
Party pursuant to Section 8.02 or a Seller Indemnified Party pursuant to
Section 8.04, the Parent Entities, the Sellers and the Purchaser (i) submit to
the jurisdiction of any New York State or Federal court sitting in the Borough
of Manhattan, The City of New York with respect to any actions relating to the
enforcement of any Award providing for indemnification of a Purchaser
Indemnified Party pursuant to Section 8.02 or a Seller Indemnified Party's
claim for indemnification pursuant to Section 8.02, as the case may be; (ii)
agree that all claims with respect to such actions shall be heard and
determined in the United States District Court for the Southern District of New
York, or if that court does not have subject matter jurisdiction, in any state
court located in the Borough of Manhattan, The City of New York, and the Parent
Entities, the Sellers and the Purchaser agree to submit to the jurisdiction of
and venue in, such courts; (iii) irrevocably waive, to the fullest extent
permitted by law, any objection that they may have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
any such suit, action or proceeding brought in such a court has been brought in
an inconvenient forum; (iv) consent to the service of process upon them by
mailing or delivering such service to their agent for service of process and
represent and warrant that United has irrevocably appointed Prentice
68
63
Hall, New York, New York, and each of the other Parent Entities, each Seller
and the Purchaser has irrevocably appointed CT Corporation, New York, New York,
as its agent to accept and acknowledge on its behalf service of any and all
process that may be served in any such suit, action or proceeding in any court
sitting in New York City; and (v) agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 10.11. Sellers' Disclosure Schedule. From time to time
after the date hereof and not later than three Business Days (other than in a
case in which an event occurs within such three Business Day period which could
not have been anticipated, in which case written notice of such event must be
provided to the Purchaser promptly after the Parent Entities, the Sellers or
the Partnership become aware of it) prior to the Closing Date, each of the
Parent Entities and the Sellers may amend or supplement the Sellers' Disclosure
Schedule in writing in accordance with Section 10.02 with respect to any matter
coming to its attention or arising which, if known by it or existing prior to
the date of this Agreement would have been required to be set forth or
described in the Sellers' Disclosure Schedule or which is necessary or
desirable to complete or correct any information in the Sellers' Disclosure
Schedule or in any representation or warranty of such Parent Entity or Seller
which has been rendered inaccurate thereby. For purposes of determining the
satisfaction of the Purchaser's condition to close as set forth in Section
7.02(a), the Sellers' Disclosure Schedule shall be deemed not to have been
amended or supplemented from that attached hereto on the date hereof.
SECTION 10.12. Governing Law. This Agreement shall be governed by
the laws of the State of New York, excluding (to the greatest extent
permissible by law) any rule of law that would cause the application of the
laws of any jurisdiction other than the State of New York.
SECTION 10.13. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.14. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
69
64
IN WITNESS WHEREOF, the Parent Entities, the Sellers, the Partnership and
the Purchaser have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
UNITED AIR LINES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
Financial Analysis and Controller
COVIA LLC
By United Airlines, Inc.,
By: /s/ Authorized Signatory
------------------------------------------
Name:
Title:
US AIRWAYS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President, Finance
and CFO
USAM CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director & Treasurer
70
AIR CANADA
By: /s/ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President, Finance
and Chief Financial Officer
RESNET HOLDINGS, INC.
By: /s/ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇
Title: President
APOLLO TRAVEL SERVICES PARTNERSHIP
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President, General Counsel
GALILEO INTERNATIONAL PARTNERSHIP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
71
SELLERS' DISCLOSURE SCHEDULE
This Sellers' Disclosure Schedule has been prepared and delivered in
accordance with the General Partnership Interest Purchase Agreement (the
"Agreement"), dated as of July 30, 1997, among United Air Lines, Inc., a
Delaware corporation ("United"), Covia LLC, a Delaware limited liability
company and wholly owned subsidiary of United, US Airways, Inc., a Delaware
corporation ("USAW"), USAM Corp., a Delaware corporation and a wholly owned
subsidiary of USAW, Air Canada, a corporation organized under the laws of
Alberta ("Air Canada"), Resnet Holdings, Inc., a Delaware corporation and a
wholly owned subsidiary of Air Canada, Apollo Travel Services Partnership, a
Delaware general partnership, and Galileo International Partnership, a Delaware
general partnership, or any successor in interest thereto. Capitalized terms
used but not defined in this Sellers' Disclosure Schedule shall have the
meanings assigned to such terms in the Agreement, unless the context otherwise
requires.
