SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report: August 5, 1996
(Date of earliest event reported: July 22, 1996)
ESCO ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Commission file number 1-10596
Missouri 43-1554045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8888 Ladue Road, Suite 200 63124-2090
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
Registrants telephone number, including area
code:(314) 213 7200
ESCO Electronics Corporation
Item 2. Acquisition or Disposition of Assets.
On May 23, 1996, ESCO Electronics Corporation (the Company)
and GEC-Marconi Electronic Systems Corporation (GEC) signed
the Stock Purchase Agreement (the Agreement) relating to
the purchase and sale of 100% of the common stock of Hazeltine
Corporation (Hazeltine), an indirect, wholly-owned
subsidiary of the Company. The sale was subject to various
contingencies and regulatory approvals including, but not
limited to, Hart Scott Rodino approval and Exon-Florio
approval.
On July 22, 1996, the Company announced that the contingencies
had been satisfied and removed and that it has closed the
sale of Hazeltine to GEC. The Company sold the stock of
Hazeltine for $110 million in cash.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information.
The following unaudited pro forma consolidated statements of
operations for the year ended September 30, 1995 and the six
months ended March 31, 1996 present the Companys results of
operations as adjusted to give effect to the divestiture of
Hazeltine as if it occurred on September 30, 1994. The
accompanying unaudited pro forma consolidated balance sheet as
of March 31, 1996 presents the Companys financial position as
if the divestiture occurred on March 31, 1996. The unaudited
pro forma consolidated balance sheet as of March 31, 1996
reflects the elimination of the net assets of Hazeltine, the
elimination of all intercompany accounts, the inclusion of the
net proceeds from the sale in cash and cash equivalents, and
the estimated gain on the sale in retained earnings. The
estimated gain on the sale of Hazeltine may change upon final
determination and settlement of post-closing adjustments.
The unaudited pro forma financial statements should be read in
conjunction with the Companys consolidated financial
statements and notes thereto previously filed as part of the
Companys most recent annual and quarterly reports on Forms
10-K and 10-Q for periods ended September 30, 1995 and March
31, 1996, respectively.
The unaudited pro forma information below is provided for
informational purposes only and is not necessarily indicative
of what the actual financial position or results of operations
of the Company would have been had the transaction actually
occurred on the dates indicated, nor does it purport to
indicate the future financial position or results of
operations of the Company. Results of operations for the six
months ended March 31, 1996 may not be indicative of results
of operations to be expected for a full year. The pro forma
adjustments are based upon available information and
assumptions believed to be reasonable in the circumstances.
There can be no assurance that such information and
assumptions will not change from those reflected in the pro
forma financial statements and notes thereto.
ESCO Electronics Corporation
Unaudited Pro Forma Consolidated Statement Of Operations
Year Ended September 30, 1995
(Dollars in thousands, except per share amounts)
(a)
Elimination
ESCO of Pro forma ESCO
Historical Hazeltine Adjustments Pro forma
Net Sales $441,023 114,196 0 $326,827
Cost and Expenses:
Cost of sales 344,781 96,833 0 247,948
Selling, general and
administrative expenses 74,162 14,198 3,000 (b) 62,964
Interest expense (income) 5,549 61 (5,488)(c) 0
Other, net 10,665 1,589 0 9,076
Nonrecurring charges 35,371 0 0 35,371
Total costs and expenses 470,528 112,681 (2,488) 355,359
Earnings (loss) before
income taxes (29,505) 1,515 2,488 (28,532)
Income taxes 755 646 0 (d) 109
Net earnings (loss) $(30,260) 869 2,488 $(28,641)
Loss per share $(2.76) $(2.61)
Average common shares
outstanding 10,973 10,973
The accompanying notes are an integral part of these financial
statements.
ESCO Electronics Corporation
Unaudited Pro Forma Consolidated Statement Of Income
Six Months Ended March 31, 1996
(Dollars in thousands, except per share amounts)
(a)
Elimination
ESCO of Pro forma ESCO
Historical Hazeltine Adjustments Pro forma
Net Sales $230,054 54,828 0 $175,226
Cost and Expenses:
Cost of sales 181,526 43,750 0 137,776
Selling, general and
administrative expenses 35,468 7,630 1,500 (b) 29,338
Interest expense(income) 2,814 22 (2,792)(c) 0
Other, net 2,613 375 0 2,238
Total costs and expenses 222,421 51,777 (1,292) 169,352
Earnings before income taxes 7,633 3,051 1,292 5,874
Income taxes 3,297 1,280 558 (d) 2,575
Net earnings $4,336 1,771 734 $3,299
Earnings per share:
Primary and fully diluted $0.37 $0.28
Average common and common share equivalents outstanding:
Primary 11,579 11,579
Fully diluted 11,824 11,824
The accompanying notes are an integral part of these financial
statements.
ESCO Electronics Corporation
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1996
(Dollars in thousands, except per share amounts)
(a)
Elimination
ESCO of Pro forma ESCO
Historical Hazeltine Adjustments Pro forma
Cash and cash equivalents $3,116 0 44,500 (e) $47,616
Accounts receivable, net 44,502 8,862 (122)(f) 35,518
Unbilled receivables 64,625 14,126 0 50,499
Inventories 105,182 23,241 0 81,941
Other current assets 4,092 949 0 3,143
Total current assets 221,517 47,178 44,378 218,717
Property, plant and
equipment, net 89,523 33,156 0 56 ,367
Goodwill 20,217 0 0 20,217
Other assets 53,686 3,042 0 50,644
$384,943 83,376 44,378 $345,945
Short-term borrowings/current
maturities long-term debt $53,500 0 (53,500)(e) $ 0
Accounts payable 35,196 5,180 (69)(f) 29,947
Advance payments on
long-term contracts 16,752 6,421 0 10,331
Accrued expenses and other
current liabilities 35,151 13,499 0 21,652
Total current liabilities 140,599 25,100 (53,569) 61,930
Other liabilities 31,657 1,109 0 30,548
Long-term debt 22,415 1,415 (8,000)(e) 13,000
Total liabilities 194,671 27,624 (61,569) 105,478
Commitments and contingencies -- -- -- --
Shareholders equity
Preferred stock, par value,
$.01/share -- -- -- --
Common stock, par value $.01/share 118 0 0 118
Additional paid-in capital 214,110 53,904 53,904 (g) 214,110
Retained earnings
(accumulated deficit) (17,616) 1,848 52,043 (h) 32,579
Cumulative foreign currency
translation adjustment 51 0 0 51
Minimum pension liability (1,998) 0 0 (1,998)
194,665 55,752 105,947 244,860
Less treasury stock, at cost (4,393) 0 0 (4,393)
Total shareholders equity 190,272 55,752 105,947 240,467
$384,943 83,376 44,378 $345,945
The accompanying notes are an integral part of these financial statements
ESCO Electronics Corporation
Notes To Unaudited Pro Forma Consolidated Financial Statements
Note (a) The elimination of operating results, assets sold to
and liabilities assumed by GEC reflect the terms of
the Agreement.
Note (b) Represents certain ongoing corporate office cost
allocations from the Company which were previously
absorbed by Hazeltine operations.
Note (c) Represents an adjustment of interest expense
assuming the net cash proceeds were used to pay off
all outstanding debt at the beginning of the periods
presented.
Note (d) Represents the tax expense impact on the pro forma
adjustments. Due to the loss on consolidated
operations for the year ending September 30, 1995,
no tax expense or tax benefit was recognized.
The effective tax rate for the period ended
March 31, 1996 was 43.2%, consistent with ongoing
operating results.
Note (e) Represents the net proceeds of the transaction after
deducting estimated professional fees relating to
the transaction, and after assumed repayment of
outstanding debt, with the exception of $13
million in term debt.
Note (f) Represents the elimination of Hazeltines
intercompany accounts with the Company.
Note (g) Represents the elimination of Hazeltines
additional paid in capital.
Note (h) Represents the retained earnings impact as a result
of the divestiture.
ESCO Electronics Corporation
(c) Exhibits.
Exhibit No Exhibit Description
2 Stock Purchase Agreement dated as of May 23, 1996, as amended
July 19, 1996, between GEC-Marconi Electronic Systems
Corporation and ESCO Electronics Corporation relating to the
purchase and sale of 100% of the Common Stock of Hazeltine
Corporation.
Certain schedules and attachments have been omitted due to
immateriality. The Registrant agrees to furnish supplementary
a copy of any omitted schedule or attachment to the Commission
upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ESCO Electronics Corporation
/s/ Philip M. Ford
By :Philip M. Ford
Senior Vice President and
Chief Financial Officer
Dated: August 5, 1996
EXHIBIT NO. 2
STOCK PURCHASE AGREEMENT
dated as of
May 23, 1996
between
GEC-MARCONI ELECTRONIC
SYSTEMS CORPORATION
and
ESCO ELECTRONICS CORPORATION
relating to the purchase and sale
of
100% of the Common Stock
of
HAZELTINE CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . 1
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale . . . . . . . . . . . . 4
2.2 Closing . . . . . . . . . . . . . . . . . 4
2.3 Closing Balance Sheet . . . . . . . . . . 4
2.4 Adjustment of Purchase Price. . . . . . . 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Corporate Existence and Power . . . . . . 7
3.2 Corporate Authorization . . . . . . . . . 7
3.3 Governmental Authorization. . . . . . . . 8
3.4 Non-Contravention . . . . . . . . . . . . 8
3.5 Capitalization. . . . . . . . . . . . . . 8
3.6 Ownership of Shares; Subsidiaries . . . . 8
3.7 Financial Statements. . . . . . . . . . . 9
3.8 Absence of Certain Changes. . . . . . . . 9
3.9 No Undisclosed Material Liabilities . . . 11
3.10 Material Contracts . . . . . . . . . . . 11
3.11 Government Contracts . . . . . . . . . . 13
3.12 Litigation . . . . . . . . . . . . . . . 16
3.13 Compliance with Laws and Court Orders;
No Material Defaults. . . . . . . . . . . 16
3.14 Properties . . . . . . . . . . . . . . . 16
3.15 Intellectual Property. . . . . . . . . . 17
3.16 Finders Fees. . . . . . . . . . . . . . 17
3.17 Environmental Matters. . . . . . . . . . 17
3.18 Employee Benefit Plans.. . . . . . . . . 18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Corporate Existence and Power . . . . . . 21
4.2 Corporate Authorization . . . . . . . . . 21
4.3 Governmental Authorization. . . . . . . . 21
4.4 Non-Contravention . . . . . . . . . . . . 21
4.5 Financing . . . . . . . . . . . . . . . . 21
4.6 Litigation. . . . . . . . . . . . . . . . 21
4.7 Finders Fees . . . . . . . . . . . . . . 22
ARTICLE 5
COVENANTS OF SELLER
5.1 Conduct of the Company. . . . . . . . . . 22
5.2 Access to Information Prior to Closing. . 22
5.3 Notices of Certain Events . . . . . . . . 23
5.4 Resignations. . . . . . . . . . . . . . . 23
5.5 Noncompetition. . . . . . . . . . . . . . 23
5.6 Records . . . . . . . . . . . . . . . . . 24
5.7 Insurance . . . . . . . . . . . . . . . . 24
5.8 Assignment of Confidentiality
Agreements. . . . . . . . . . . . . . . . 25
5.9 Other Transactions. . . . . . . . . . . . 25
5.10 Certain Licenses and Permits . . . . . . 25
5.11 Confidentiality. . . . . . . . . . . . . 25
5.12 Transferred Assets . . . . . . . . . . . 25
5.13 Retained Liabilities . . . . . . . . . . 25
5.14 Employee Benefits Information. . . . . . 27
5.15 Bank Lien. . . . . . . . . . . . . . . . 27
ARTICLE 6
COVENANTS OF BUYER
6.1 Access After Closing. . . . . . . . . . . 27
6.2 Plans Following the Closing . . . . . . . 28
6.3 Confidentiality Agreement . . . . . . . . 29
6.4 Seller Guarantees and Letters of Credit . 29
ARTICLE 7
COVENANTS OF BUYER AND SELLER
7.1 Further Efforts . . . . . . . . . . . . . 30
7.2 Certain Filings . . . . . . . . . . . . . 30
7.3 Public Announcements. . . . . . . . . . . 30
7.4 Trademarks; Tradenames. . . . . . . . . . 30
7.5 Intercompany Arrangements . . . . . . . . 31
7.6 Exon-Florio . . . . . . . . . . . . . . . 31
ARTICLE 8
TAX MATTERS
8.1 Definitions.. . . . . . . . . . . . . . . 32
8.2 Tax Representations.. . . . . . . . . . . 33
8.3 Tax Covenants . . . . . . . . . . . . . . 35
8.4 Termination of Existing Tax Sharing
Agreements. . . . . . . . . . . . . . . . 36
8.5 Cooperation on Tax Matters. . . . . . . . 37
8.6 Indemnification by Seller.. . . . . . . . 37
8.7 Contests. . . . . . . . . . . . . . . . . 39
8.8 Survival. . . . . . . . . . . . . . . . . 40
ARTICLE 9
CONDITIONS TO CLOSING
9.1 Conditions to Obligations of Buyer and
Seller. . . . . . . . . . . . . . . . . . 41
9.2 Conditions to Obligation of Buyer . . . . 41
9.3 Conditions to Obligation of Seller. . . . 41
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 Survival . . . . . . . . . . . . . . . . 42
10.2 Indemnification. . . . . . . . . . . . . 42
10.3 Environmental Indemnification. . . . . . 45
ARTICLE 11
TERMINATION
11.1 Grounds for Termination. . . . . . . . . 48
11.2 Effect of Termination. . . . . . . . . . 48
ARTICLE 12
MISCELLANEOUS
12.1 Notices. . . . . . . . . . . . . . . . . 49
12.2 Amendments and Waivers . . . . . . . . . 50
12.3 Expenses . . . . . . . . . . . . . . . . 50
12.4 Successors and Assigns . . . . . . . . . 50
12.5 Governing Law. . . . . . . . . . . . . . 50
12.6 Counterparts; Third Party
Beneficiaries . . . . . . . . . . . . . . 50
12.7 Entire Agreement . . . . . . . . . . . . 50
12.8 Jurisdiction . . . . . . . . . . . . . . 51
12.9 Severability . . . . . . . . . . . . . . 51
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of May 23, 1996 between GEC-
Marconi Electronic Systems Corporation, a Delaware
corporation (Buyer), and ESCO Electronics Corporation,
a Missouri corporation (Seller).
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, as
used herein, have the following meanings:
Affiliate means, with respect to any Person,
any other Person directly or indirectly controlling,
controlled by, or under common control with such Person
provided that the Company or any of its Subsidiaries
shall not be considered an Affiliate of Seller.
Balance Sheet means the consolidated balance
sheet of the Company and its Subsidiaries as of March 31,
1996.
Balance Sheet Date means March 31, 1996.
Closing Date means the date of the Closing.
Common Stock means the common stock, no par
value, of the Company.
Company means Hazeltine Corporation, a
Delaware corporation.
"Disclosure Schedule" means that certain
schedule identified as such and delivered by the Seller
to the Buyer pursuant hereto prior to the date hereof.
HSR Act means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder.
Intellectual Property Right means any
trademark, service mark, trade name, copyright or patent
(including any registrations or applications for
registration of any of the foregoing).
"Intentional Misrepresentation" means, with
respect to any representation or warranty of Seller
contained in this Agreement, a breach as to which (a) the
Seller had knowledge, at the close of business on the
last business day prior to (i) the execution and delivery
of this Agreement or (ii) the Closing, as the case may
be, of matters required to be disclosed pursuant to such
representation or warranty and (b) such knowledge would,
at such time and under the circumstances at such time,
have led a reasonable person to conclude that the failure
to disclose such matters was a breach of such
representation or warranty.
"knowledge" means actual knowledge (i.e., the
conscious awareness of facts or other information),
without undertaking any investigation, and not
constructive knowledge. The words "know", "knowing" and
"known" shall be construed accordingly, In the case of
the Seller, knowledge means the knowledge of the Chief
Executive Officer, Chief Financial Officer, General
Counsel and Vice President Human Resources of Seller, and
President, Vice President Financial Planning, General
Counsel, Vice President Human Resources, Vice President
Finance, Vice President Operations - Quality, Senior Vice
President IFF Products, Executive Vice President
Engineering and Technology and Vice President Business
Development of the Company.
Lien means, with respect to any property or
asset, any mortgage, lien, pledge, charge, security
interest, encumbrance or other adverse claim of any kind
in respect of such property or asset. For the purposes
of this Agreement, a Person shall be deemed to own
subject to a Lien any property or asset which it has
acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such
property or asset.
Material Adverse Effect means a material
adverse effect on the condition (financial or otherwise),
business, assets or results of operations of the Company;
provided that (i) changes that affect the defense
industry generally (ii) changes in general economic
conditions and (iii) changes resulting from the
transactions contemplated by this Agreement or the
announcement thereof shall not be considered in
determining whether there has been a Material Adverse
Effect.
Person means an individual, corporation,
partnership, association, trust or other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
Shares means all of the outstanding shares of
Common Stock.
"Subsidiary" means any entity of which
securities or other ownership interests having ordinary
voting power to elect a majority of the board of
directors or other persons performing similar functions
are at the time directly or indirectly owned by the
Company.
(b) Each of the following terms is defined in
the Section set forth opposite such term:
Term Section
Accounting Principles 3.7
Base Stockholders Equity 2.4
Benefit Arrangement 3.18
Bid 3.11
Business 5.5
Buyer Indemnified Parties 10.2
Closing 2.2
Closing Balance Sheet 2.3
Closing Stockholders Equity 2.3
Code 8.1
Combined State Tax 8.1
Company Intellectual Property Rights 3.15
Company Securities 3.5
Confidentiality Agreement 6.3
Credit Agreement 3.4
Employee Plan 3.18
Environmental Laws 3.17
ERISA 3.18
ERISA Affiliate 3.18
Exon-Florio Provision 4.3
Federal Taxes 8.1
Final Determination 8.1
Final Stockholders Equity 2.4
Government Contract 3.11
Industrial Development Revenue Bond 2.2
Multiemployer Plan 3.18
Noncompete Consideration 5.5
PBGC 3.18
Post-Closing Tax Period 8.1
Pre-Closing Tax Period 8.1
Purchase Price 2.1
Retained Liabilities 5.13
Returns 8.1
Seller Group 8.1
Seller Trademarks and Tradenames 7.4
Tax 8.1
Tax Asset 8.1
Tax Basket 8.1
Title IV Plan 3.18
U.S. Government 3.11
1995 Balance Sheet 2.3
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to
the conditions of this Agreement, Seller agrees to sell to Buyer
and Buyer agrees to purchase from Seller, the Shares at the
Closing. The purchase price for the Shares (the Purchase Price)
is $109,000,000 in cash. The Purchase Price shall be paid as
provided in Section 2.2, subject to adjustment as provided in
Section 2.4.
2.2 Closing. The closing (the Closing) of the
purchase and sale of the Shares hereunder shall take place at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York or at such other place as the parties agree, as soon as
possible, but in no event later than 10 business days, after
satisfaction of the conditions set forth in Article 9, or at such
other time or place as Buyer and Seller may agree. At the Closing:
(a) Buyer shall deliver to Seller:
(i) $109,000,000 in immediately available funds by
wire transfer to an account of Seller with a bank
designated by Seller, by notice to Buyer, not later than
two business days prior to the Closing Date (or if not so
designated, then by certified or official bank check
payable in immediately available funds to the order of
Seller in such amount) and
(ii) the Noncompete Consideration in immediately
available funds by wire transfer to such account of Seller.
(b) Seller shall deliver to Buyer (or its nominee):
(i) certificates for the Shares duly endorsed or
accompanied by stock powers duly endorsed in
blank in proper form for transfer, with appropriate transfer
stamps, if any, affixed and
(ii) the $4 million 1991 Taxable Industrial Revenue Bond
(Hazeltine Corporation Facility) issued by Suffolk County
Industrial Development Agency (Industrial Development Revenue
Bond).
2.3 Closing Balance Sheet. (a) As promptly as
practicable, but no later than 45 days, after the Closing Date,
Buyer and Seller will cause the Company to prepare and deliver to
Buyer and Seller the Closing Balance Sheet, together with a
certificate of the President and Chief Financial Officer of the
Company to the effect that the Closing Balance Sheet complies with
the requirements of (i) and (ii) of the second following sentence
and setting forth the Company's calculation of Closing
Stockholders Equity. Buyer and Seller (and their accountants and
representatives) shall have the right to consult with the Company
in relation to, and participate in, the preparation of the Closing
Balance Sheet. The Closing Balance Sheet (Closing Balance
Sheet) shall (i) fairly present, in all material respects, the
financial position of the Company as of the close of business on
the Closing Date in accordance with the Accounting Principles
applied on a basis consistent with those used in the preparation of
the consolidated balance sheet of the Company and its Subsidiaries
as of September 30, 1995 ("1995 Balance Sheet") and (ii) shall
include line items substantially consistent with those in the 1995
Balance Sheet, provided that, without duplication:
(A) liabilities for Retained Liabilities (including
liabilities relating to the Varian matter) and deferred
Taxes, current Federal Taxes, current Combined State
Taxes and management reserves reflected in the tax
liability account shall be eliminated, which will
increase Closing Stockholder's Equity;
(B) assets retained by Seller pursuant to Section 5.12
(including assets related to the Varian matter) and
deferred Tax assets shall be eliminated, which will
reduce Closing Stockholder's Equity;
(C) the transactions contemplated by Sections 2.2(b)(ii)
(which will be treated as if the debt had been cancelled
and contributed to Closing Stockholder's Equity),
7.5(c)(i) and 7.5(d) shall have been given effect to,
which will increase Closing Stockholder's Equity;
(D) the transactions contemplated by Sections 7.5(a) and
7.5(c)(ii) shall have been given effect to, which will
reduce Closing Stockholder's Equity;
(E) assets classified as property, plant and equipment
acquired since the Balance Sheet Date in excess of the
Company's planned capital expenditures set forth in
Schedule 2.3 (except to the extent Buyer has agreed to
such expenditures) shall be excluded;
(F) overdrafts (i.e. cash float reflected as a negative on
the cash line) shall be reclassified to accounts payable
(which shall increase accounts payable); and cash
(reflected as a positive on the cash line) shall be
reclassified to intercompany operating debt (which shall
reduce intercompany operating debt) and eliminated
pursuant to Section 2.3(a)(ii)(C) (the parties recognize
that there was a different treatment of these items in
arriving at Base Stockholder's Equity); and
(G) liability for the Wysocki worker's compensation matter
shall be reflected on the Closing Balance Sheet to the
extent required by generally accepted accounting
principles.
Closing Stockholders Equity means the stockholders equity of
the Company as shown on the Closing Balance Sheet, excluding the
effect of any act, event or transaction on the Closing Date after
the Closing not in the ordinary course of business of the Company.
(b) Within 30 days after delivery of the documents
referred to in Section 2.3(a), either Seller or Buyer (or both) may
deliver a notice to the other party indicating that such party
disagrees with the Company's calculation of Closing Stockholder's
Equity and setting forth such party's calculation of such amount.
Any such notice of disagreement shall specify those items or
amounts as to which such party disagrees and the basis for such
disagreement, and such party shall be deemed to have agreed with
all other items and amounts contained in the Closing Balance Sheet
and the Company's calculation of Closing Stockholders Equity.
(c) If a notice of disagreement shall be delivered
pursuant to Section 2.3, Seller and Buyer shall, during the 30 days
following such delivery, use their best efforts to reach agreement
on the disputed items or amounts in order to determine, as may be
required, the amount of Closing Stockholders Equity. If, during
such period (or any mutual extension), Seller and Buyer are unable
to reach such agreement, they shall promptly thereafter cause an
independent firm of accountants of nationally recognized standing
reasonably satisfactory to Buyer and Seller (who shall not have any
material relationship with Buyer or Seller), promptly to review
this Agreement and to arbitrate the disputed items or amounts
described in the notice of disagreement for the purpose of
calculating Closing Stockholders Equity. In making such
calculation, such independent firm of accountants shall consider
only those items or amounts in the Closing Balance Sheet or the
Companys calculation of Closing Stockholders Equity as to which
either party has described in the notice of disagreement. Such
independent firm of accountants shall deliver to Seller and Buyer,
as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon Seller
and Buyer and shall constitute an arbitral award upon which
judgment may be entered in any court having jurisdiction thereof.
The cost of such review and report shall be borne equally by Seller
and Buyer.
(d) Seller and Buyer agree that they will, and agree to
cause the Company to, cooperate and assist in the preparation of
the Closing Balance Sheet and the calculation of Closing
Stockholders Equity and in the conduct of the reviews referred to
in this Section, including without limitation, the making
available to the extent reasonably requested of books, records,
work papers and personnel.
2.4 Adjustment of Purchase Price. (a) If Base
Stockholders Equity exceeds Final Stockholders Equity, Seller
shall pay to Buyer, as an adjustment to the Purchase Price, in the
manner and with interest as provided in Section 2.4(b), the amount
of such excess. If Final Stockholders Equity exceeds Base
Stockholders Equity, the Company shall pay to Seller, as an
adjustment to the Purchase Price (and Buyer agrees to cause the
Company to make such payment), in the manner and with interest as
provided in Section 2.4(b), an amount equal to the excess of Final
Stockholder's Equity over Base Stockholder's Equity. Base
Stockholders Equity means $50,012,000 and is derived from the pro
forma balance sheet of the Company set forth on the Disclosure
Schedule. Final Stockholders Equity means the Closing
Stockholders Equity (i) as shown in the Companys calculation
delivered pursuant to Section 2.3(a) no notice of disagreement is
delivered pursuant to Section 2.3(b); or (ii) if such a notice of
disagreement is delivered, (A) as agreed by Buyer and Seller
pursuant to Section 2.3(c) or (B) in the absence of such agreement,
as shown in the independent accountant's calculation delivered
pursuant to Section 2.3(c); provided that, in no event shall Final
Stockholders Equity be less than the lesser of the Company's
calculation of Closing Stockholders Equity delivered pursuant to
Section 2.3(a) and Buyer's calculation of Closing Stockholder's
Equity delivered pursuant to Section 2.3(b), if any, or more than
the greater of the Company's calculation of the Closing
Stockholder's Equity delivered pursuant to Section 2.3(a) and
Sellers calculation of Closing Stockholders Equity delivered
pursuant to Section 2.3(b), if any.
(b) Any payment pursuant to Section 2.4(a) shall be made
at a mutually convenient time and place, within 5 days after the
Final Stockholders Equity has been determined by delivery by the
Company or Seller, as the case may be, of a certified or official
bank check payable in immediately available funds to the other
party or by causing such payment to be credited to such account of
such other party as may be designated by such other party. The
amount of any payment to be made pursuant to this Section shall
bear interest from and including the Closing Date to but excluding
the date of payment at a rate per annum equal to 8%. Such interest
shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365
days and the actual number of days elapsed.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date
hereof and as of the Closing Date that:
Corporate Existence and Power. Each of Seller and
the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted. The
Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. Seller has heretofore
delivered to Buyer true and complete copies of the certificate of
incorporation and bylaws of Seller and the Company as currently in
effect. The stock certificate and transfer books and the minute
books of each of the Company and its Subsidiaries (which have been
made available for inspection by Buyer prior to the date hereof)
are true and complete in all material respects.
3.2 Corporate Authorization. The execution, delivery
and performance by Seller of this Agreement are within Sellers
corporate powers and have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes
a valid and binding agreement of Seller.
3.3 Governmental Authorization. The execution, delivery
and performance by Seller of this Agreement require no action by or
in respect of, or filing with, any governmental body, agency, or
official other than (i) compliance with any applicable requirements
of the HSR Act; (ii) any necessary approvals of the U.S. Government
(including, without limitation, the Department of Defense) relating
to Government Contracts or other approvals set forth in the
Disclosure Schedule; and (iii) any such matters (excluding
approvals of the U.S. Government) as would not, individually or in
the aggregate, have a Material Adverse Effect.
3.4 Non-Contravention. The execution, delivery and
performance by Seller of this Agreement do not violate (i) the
certificate of incorporation or bylaws of Seller or the Company or
any of its Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 3.3, violate any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) except for
the consent of the banks pursuant to the credit agreement dated as
of September 23, 1990 (as amended) among Seller, Defense Holding
Corp., the banks listed therein and Morgan Guaranty Trust Company
of New York, as agent ("Credit Agreement") and any consents
required in connection with the transfer of the Industrial
Development Revenue Bond and assuming compliance with the matters
referred to in Section 3.3, require any consent or other action by
any Person under, constitute a default (with or without notice,
lapse of time or both) under, or give rise to any right of
termination, cancellation or acceleration of any right or
obligation of Seller or the Company or to a loss of any benefit to
which Seller or the Company is entitled under, any Government
Contract or Bid, any other agreement or other instrument or
commitment binding upon Seller or the Company or any governmental
license, authorization, permit, consent or approval held by the
Company, or (iv) result in the creation or imposition of any Lien
on any asset of the Company except as disclosed in the Disclosure
Schedule and except, in the case of clauses (ii), (iii) and (iv),
for such matters as would not, individually or in the aggregate,
have a Material Adverse Effect.
3.5 Capitalization. (a) The authorized capital stock
of the Company consists of 3,000 shares of Common Stock. There are
outstanding 100 shares of Common Stock, constituting the Shares,
and there are no other shares of capital stock of the Company
outstanding or commitments for the issue of additional shares.
(b) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable. Except as set forth in this Section 3.5,
there are no outstanding shares of capital stock or voting
securities of the Company or obligations of the Company to issue
any such stock or voting securities (collectively the Company
Securities). There are no outstanding obligations of the Company
to repurchase, redeem or otherwise acquire any Company Securities.
3.6 Ownership of Shares; Subsidiaries. (a) Seller is
the beneficial owner of the Shares, free and clear of any Lien and
any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of the Shares) except
for the Lien of the banks pursuant to the Credit Agreement ("Bank
Lien") and will transfer and deliver to Buyer at the Closing valid
title to the Shares free and clear of any Lien and any such
limitation or restriction (including the Bank Lien, evidence
reasonably satisfactory to Buyer of the release of which shall have
been provided to Buyer by the Closing). Subject to the Bank Lien,
Seller is the record and beneficial owner of all of the outstanding
shares of common stock of Defense Holdings Corp. which is the
record owner of the Shares and has valid title thereto. Assuming
Buyer has the requisite power and authority to be the lawful owner
of the Shares, upon delivery to Buyer at the Closing of
certificates representing the Shares, duly endorsed by Seller for
transfer to Buyer, and upon Seller's receipt of the Purchase Price,
Buyer will acquire valid title to the Shares, free and clear of any
Liens and restrictions of any kind, other than those arising from
acts of Buyer or its Affiliates. Other than this Agreement and the
Bank Lien, the Shares are not subject to any voting trust agreement
or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of the Shares.
(b) Except as disclosed in the Disclosure Schedule, the
Company has no Subsidiaries which own any assets or conduct any
business related to the business of the Company. Except for the
Company's Subsidiaries and other than as set forth in the
Disclosure Schedule, the Company does not directly or indirectly
own any capital stock of or other equity interests in any
corporation, partnership, or other Person.
3.7 Financial Statements. The balance sheets and the
related statement of earnings of the Company as of and for the
years ended September 30, 1995 and September 30, 1994 and the
balance sheets and the related statements of earnings of the
Company as of and for the three months ended December 31, 1995 and
the six months ended March 31, 1996 (collectively, the "Financial
Statements") set forth on the Disclosure Schedule were (x) derived
from the accounting books and records of the Company and (y)
prepared in accordance with generally accepted accounting
principles except as set forth in the Disclosure Schedule
("Accounting Principles"). Except as set forth in the Disclosure
Schedule, the Financial Statements fairly present, in all material
respects, the financial condition and the results of operations of
the Company as of the dates and for the periods thereof in
accordance with the Accounting Principles applied on a consistent
basis (subject to normal year-end adjustments in the case of
interim financial statements).
3.8 Absence of Certain Changes. Except as set forth in
the Disclosure Schedule, since the Balance Sheet Date, the business
of the Company has been conducted in the ordinary course consistent
with past practices and there has not been:
(i) any event, occurrence, development or state of
circumstances or facts which has had a Material Adverse Effect;
(ii) Except as set forth in the Disclosure Schedule, any
declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition or any
issuance by the Company of any outstanding shares of capital stock
or other securities of, or other ownership interests in the Company
(it being understood that the foregoing representation shall be
deemed not to be breached by giving effect to the transactions
contemplated by Sections 2.4, 5.12 or 7.5);
(iii) any amendment of any material term of any
outstanding security of the Company or to the certificate of
incorporation or the bylaws of the Company;
(iv) any incurrence, assumption or guarantee by the
Company of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent
with past practices;
(v) any creation or assumption by the Company of any Lien
on any material asset other than in the ordinary course of business
consistent with past practices;
(vi) any making of any loan, advance or capital
contributions to or investment in any Person other than in the
ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or
assets of the Company which has had a Material Adverse Effect;
(viii) any transaction or commitment made, or any
contract or agreement entered into, by the Company relating to its
assets or business (including the disposition of any assets or
business), the acquisition by the Company of any assets or
business, or any relinquishment by the Company of any contract or
other right, in either case, material to the Company other than (a)
transactions and commitments in the ordinary course of business
consistent with past practices and (b) those specifically
contemplated by this Agreement;
(ix) any (A) employment, deferred compensation,
severance, retirement or other similar agreement entered into by
the Company with any director, officer or employee of the Company
(or any amendment to any such existing agreement), (B) grant by the
Company of any severance or termination pay to any director,
officer or employee of the Company, or (C) change in compensation
or other benefits payable to any director, officer or employee of
the Company pursuant to any severance or retirement plans or
policies of the Company or otherwise, other than in the ordinary
course of business consistent with past practice;
(x) since January 1, 1994, any labor dispute, other than
routine individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any employees of
the Company, any entry by the Company into any collective
bargaining agreement or any lockouts, strikes, slowdowns, work
stoppages or threats thereof or written allegation of an unfair
labor practice or discrimination by or with respect to any
employees of the Company which, in any such case, has had a
Material Adverse Effect;
(xi) except for intercompany transactions in the ordinary
course of business, any payment to, or sale, transfer or lease of
any of the Company's assets to, or any agreement or arrangement
entered into by the Company with, Seller or any of its Affiliates
(it being understood that the foregoing representation shall be
deemed not to be breached by giving effect to the transactions
contemplated by Sections 2.4, 5.12 or 7.5);
(xii) any change by the Company in any method of
accounting or accounting practice or policy other than those
required by U.S. generally accepted accounting principles,
including in respect of deferred revenues;
(xiii) any lease of real property entered into by the
Company as lessor or lessee; or
(xiv) any amendments, other than amendments in the
ordinary course or that would not have a Material Adverse Effect,
in any material agreement or instrument set forth in the Disclosure
Schedule pursuant to Section 3.10.
3.9 No Undisclosed Material Liabilities. There are no
liabilities or obligations of the Company of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable,
unasserted or otherwise, that are required in accordance with
generally accepted accounting principles to be reflected on a
balance sheet of the Company or in the footnotes thereto, other
than:
(a) liabilities or obligations provided for in the
Balance Sheet or incurred after the Balance Sheet Date in the
ordinary course of business consistent with past practice;
(b) liabilities disclosed on the Disclosure Schedule;
and
(c) other undisclosed liabilities which are not material
to the Company.
3.10 Material Contracts. (a) Except as disclosed in
the Disclosure Schedule (true and complete copies of each such item
having been made available for inspection by Buyer prior to the
date hereof) and except for any agreements that are terminable on
not more than 90 days notice and without any material consequence
to the Company or any Government Contract or Bid, as of the date
hereof, the Company is not a party to or bound by:
(i) any lease, sub-lease or similar agreement relating
to real property;
(ii) any partnership, joint venture or other similar
agreement (including any cooperation or collaboration agreement);
(iii) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of stock, sale
of assets or otherwise) entered into after December 31, 1986;
(iv) any employment agreement which has an aggregate
future liability in accordance with the terms of such agreement in
excess of $100,000;
(v) any employee collective bargaining agreement or other
contract with any labor union;
(vi) any agreement, contract or other instrument under
which the Company has borrowed any money from, or issued any note,
bond, debenture or other evidence of indebtedness to, any Person in
any such case which, individually, is in excess of $500,000;
(vii) any agreement, contract or other instrument
(including so-called take-or-pay or keepwell agreements) under
which (A) any person has directly or indirectly guaranteed
indebtedness, liabilities or obligations of the Company or (B) the
Company has directly or indirectly guaranteed indebtedness,
liabilities or obligations of any Person (in each case other than
endorsements for the purpose of collection in the ordinary course
of business), in any such case which, individually, is in excess of
$500,000;
(viii) any agreement, contract or other instrument under
which the Company has, directly or indirectly, made any advance,
loan, extension of credit or capital contribution to, or other
investment in, any Person, in any such case which, individually, is
in excess of $500,000;
(ix) any mortgage, pledge, security agreement, deed of
trust or other instrument granting a Lien (A) securing any of the
agreements referred to in (vi) or (vii) or (B) upon any material
real or personal property owned or leased by the Company;
(x) any agreement or instrument providing for
indemnification of any Person with respect to material liabilities
relating to any current or former business of the Company or any
predecessor Person;
(xi) any agreement that materially limits the freedom of
the Company to compete in any line of business or with any Person
or in any area or which would so limit the freedom of the Company
or the Buyer or its Affiliates after the Closing Date;
(xii) any agreement with Seller or any of its Affiliates
that continues in effect after Closing; or, to Seller's knowledge,
any agreement with any Person who is, or has been within the past
five years, a director, officer or employee of Seller or any of its
Affiliates that is material to the Company, was not entered into in
the ordinary course and continues in effect after Closing; or
(xiii) any other agreement not made in the ordinary
course of business that is material to the Company.
(b) Each agreement disclosed or required to be disclosed
pursuant to Section 3.10(a) is a legal, valid and binding agreement
of the Company, and is in full force and effect, and neither the
Company nor, to the knowledge of Seller, any other party thereto is
in default or breach in any material respect under the terms of any
such agreement except for such matters as would not, individually
or in the aggregate, have a Material Adverse Effect.
3.11 Government Contracts. (a) Except as set forth in
the Disclosure Schedule and except for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect,
the Company has since December 31, 1986 complied with all
applicable requirements of the U.S. Government Cost Accounting
Standards, the Federal Truth in Negotiations Act and other U.S.
laws, rules, regulations or orders applicable to, any Government
Contract or Bid.
(b) Except for such matters as would not, individually
or in the aggregate, have a Material Adverse Effect, the Disclosure
Schedule identifies each Government Contract with respect to which,
to Seller's knowledge, as of the date hereof:
(i) the Company is in breach;
(ii) aggregate costs (direct and indirect) incurred or
currently expected to be incurred in connection with any
such contract will exceed any limitation on costs or
other similar provision in such contract;
(iii) the Company expects to recognize a loss at the
gross profit level (determined in accordance with
generally accepted accounting principles applied on a
basis consistent with those used in the preparation of
the Balance Sheet) in connection with such contract; or
(iv) full funding (pursuant to multi-year contract
provisions) has not been established; or
(v) has been materially amended since the Balance Sheet
Date, other than in the ordinary course.
(c) Except as set forth on the Disclosure Schedule and
except for such matters as would not, in the aggregate, have a
Material Adverse Effect:
(i) to the Seller's knowledge, there are no audits
(other than those conducted in the ordinary course of
business) of any Government Contracts being conducted by
the U.S. Government, a prime contractor or any other
party to any Government Contract, and
(ii) except to the extent finally resolved (and any
liability relating thereto has been paid or reflected in
the Balance Sheet), neither Seller nor the Company has,
with respect to any Government Contracts, received:
(A) any written cure notice or show cause
notice (as defined in the Federal Acquisition
Regulations Part 49, 49.607 (a) and (b),
respectively) pursuant to applicable contract
default provisions or notice of default;
(B) any written contract termination, whether
for default, convenience, cancellation or lack
of funding or other reasons;
(C) any written final decision or unilateral
modification assessing a price reduction,
penalty or claim for damages or other remedy;
(D) any written claim based on assertions of
defective pricing or violations of government
cost accounting standards or cost principles;
(E) any written request for an equitable
adjustment of, or claim concerning, such
contracts by any of the Company's customers,
subcontractors or suppliers;
(F) any written disallowance, written
questioning or other written challenging of
material costs (direct or indirect); or
(G) any written notice of any investigation or
enforcement proceeding of a criminal, civil or
administrative nature by any investigative or
enforcement agency of any government
(including any qui tam action brought under
the Civil False Claims Act alleging any
irregularity, misstatement or omission arising
under or relating to any Government Contract)
and
(iii) to Seller's knowledge no amount of money due to the
Company pertaining to any Government Contract has been
withheld or set off nor has any claim been made to
withhold or set off money and the Company is entitled to
all progress payments received with respect thereto.
(d) Except as set forth in the Disclosure Schedule,
neither the Company, nor to Seller's knowledge, any of the
Company's officers or employees, is suspended or debarred from
doing business with the U.S. Government or is the subject of a
finding of nonresponsibility or ineligibility for U.S. Government
contracting.
(e) Except as set forth in the Disclosure Schedule and
except as would not have a Material Adverse Effect: (i) to
Seller's knowledge, neither the Company nor any of its directors,
officers, employees, consultants or agents is or during the past
three years has been under administrative, civil or criminal
investigation, indictment or information by the U.S. Government
with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Bid and
(ii) during the past year, neither the Company nor any Affiliate of
the Company has conducted or initiated any internal investigation
or made a voluntary disclosure to the U.S. Government with respect
to any alleged irregularity, misstatement or omission arising under
or relating to a Government Contract or Bid.
(f) Except as set forth in the Disclosure Schedule and
except for matters which, in the aggregate, would not have a
Material Adverse Effect, there are not (i) any claims pending or,
to Seller's knowledge, threatened against the Company, either by
the U.S. Government or by any prime contractor, subcontractor,
vendor or other Person, arising under or relating to any Government
Contract and (ii) any material disputes before a court or
administrative agency between the Company and the U.S. Government
under the Contract Disputes Act or any other statute or regulation
or between the Company and any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract.
Except as set forth in the Disclosure Schedule, the Company has not
received any draft or final post award audit report except for
those which in the aggregate would not have a Material Adverse
Effect.
(g) Except as set forth in the Disclosure Schedule and
except for matters which, in the aggregate, would not have a
Material Adverse Effect, to Seller's knowledge, all material test
and inspection results provided by the Company to the U.S.
Government or to any other Person pursuant to any Government
Contract or as a part of the delivery to the U.S. Government or to
any other Person pursuant to a Government Contract of any article
designed, engineered or manufactured by the Company were complete
and correct in all material respects as of the date so provided.
Except as set forth in the Disclosure Schedule and except for
matters which, in the aggregate, would not have a Material Adverse
Effect, the Company has provided all material test and inspection
results to the U.S. Government or to any other Person pursuant to
a Government Contract as required by U.S. law and the terms of the
applicable Government Contracts.
(h) The following terms, as used herein, have the
following meanings:
Bid means any written offer by the Company that if
accepted would lead to a Government Contract.
Government Contract means any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic
ordering agreement, letter contract, purchase order, delivery
order, change order, or other arrangement of any kind in writing,
(A) between Company and (i) the U.S. Government (acting on its own
behalf or on behalf of another country or international
organization), (ii) any prime contractor of the U.S. Government,
(iii) any subcontractor with respect to any contract described in
clauses (i) or (ii) above, or (B) financed by the U.S. Government
and subject to the rules and regulations of the U.S. Government
concerning procurement.
U.S. Government means the United States Government and
any agencies, instrumentalities and departments thereof.
Notwithstanding anything else in this Agreement to the
contrary, all representations and warranties with respect to
Government Contracts and Bids are set forth exclusively in this
Section and all other representations and warranties contained in
any other Section herein shall be deemed not to include any
representations or warranty with respect to such matters, except
for such representations and warranties which expressly refer to
Government Contracts or Bids.
3.12 Litigation. Except as set forth in the Disclosure
Schedule, there is no action, suit or proceeding pending against
or, to the knowledge of Seller, threatened against or affecting,
the Company or its properties before any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable probability of an adverse decision which would have a
Material Adverse Effect.
3.13 Compliance with Laws and Court Orders; No Material
Defaults. Except as set forth in the Disclosure Schedule and
except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect, (a) the Company is not
in violation of any applicable law, rule, regulation, judgment,
injunction, order or decree, (b) the Company is not in default
under, and no condition exists that with notice or lapse of time or
both would constitute a default under, any agreement or other
instrument binding upon the Company, and (c) neither the Seller nor
the Company has received any written communication during the past
two years from a governmental entity that alleges that the Company
is not in compliance in any material respect with any laws.
3.14 Properties. Except as set forth in the Disclosure
Schedule and except for such matters as would not, individually or
in the aggregate, have a Material Adverse Effect, (a) the Company
has good title to, or in the case of leased property has valid
leasehold interests in, all property and assets (whether real or
personal, tangible or intangible) reflected on the Balance Sheet or
acquired after the Balance Sheet Date, except for properties and
assets sold since the Balance Sheet Date in the ordinary course of
business consistent with past practices; and (b) none of such
property or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet or Liens
incurred in the ordinary course of business consistent with past
practices;
(ii) Liens for taxes not yet due or being contested in
good faith; or
(iii)Liens not securing liabilities for borrowed money or
the purchase price of assets which do not materially interfere with
the current use of such property or assets.
The manufacturing and testing equipment of the Company is
in such condition as to allow the Company to carry on its business
as presently conducted, except for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect.
3.15 Intellectual Property. (a) The Disclosure
Schedule contains a list of all material Intellectual Property
Rights owned, licensed or used by the Company (Company
Intellectual Property Rights), specifying as to each, as
applicable: (i) the nature of such Intellectual Property Right;
(ii) the owner of such Intellectual Property Right; and (iii) the
jurisdictions by or in which such Intellectual Property Right has
been issued or registered or in which an application for such
issuance or registration has been filed, including the respective
registration or application numbers. The Disclosure Schedule
contains a list of all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which
any Person is authorized to use the Company Intellectual Property
Rights or any other material rights of the Company with respect to
intellectual property. The Company Intellectual Property Rights
are sufficient to allow the Company to carry on its business as
presently conducted, except for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule and
except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect; (i) since December 1986,
the Company has not been a defendant in any action, suit,
investigation or proceeding relating to, or otherwise has been
notified of, any alleged claim of infringement by the Company of
any intellectual property rights of any other Person in which there
is a reasonable probability of an adverse determination; (ii)
Seller has no knowledge of any continuing infringement by any other
Person of the rights of the Company with respect to intellectual
property; and (iii) none of the rights of the Company with respect
to intellectual property is subject to any outstanding judgment,
injunction, order, decree or agreement restricting the use or
licensing thereof by the Company.
(c) The Company has taken reasonable steps to preserve
the confidentiality of the processes and formulae, research and
development results and other know-how of the Company, the value of
which to the Company is contingent upon maintenance of the
confidentiality thereof.
3.16 Finders Fees. Except for J.P. Morgan Securities
Inc. and Quarterdeck Investment Partners, Inc., whose fees will be
paid by Seller, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to
act on behalf of Seller or the Company who might be entitled to any
fee or commission in connection with the transactions contemplated
by this Agreement.
3.17 Environmental Matters. Except as set forth in the
Disclosure Schedule and except for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect,
to the knowledge of Seller:
(a) the Company is in compliance with all applicable
Environmental Laws, and the Company has not received any formal
notice or demand from a governmental entity, citizens' group or
other person relating to any actual or alleged violation of
Environmental Law;
(b) the Company has all permits and other authorizations
required under Environmental Laws ("Environmental Permits"), and
there are no violations, investigations or proceedings pending with
respect to such Environmental Permits;
(c) no conditions were created or occurred at any
facility currently or formerly owned, leased or operated by the
Company during the period of the Company's ownership, lease or
operation of such facility that require remediation under any
Environmental Law; and
(d) the Company is not the subject of any currently
pending notice, demand or investigation under Environmental Law as
a result of the offsite disposal of any hazardous material or
waste.
"Environmental Laws" means any federal, state, local or
foreign law, treaty, rule or regulation, order or decree, as in
effect on the Closing Date, relating to the protection of the
environment or to the regulation of any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances,
materials, contaminants, pollutants or wastes.
Notwithstanding anything else in this Agreement to the
contrary, all representations and warranties with respect to
environmental matters are set forth exclusively in this Section and
Section 3.12, and all other representations and warranties
contained in any other Section herein shall be deemed not to
include any representations or warranty with respect to such
matters.
3.18 Employee Benefit Plans. (a) The Disclosure
Schedule identifies each material Employee Plan. Seller has
furnished or made available to Buyer copies of such Employee Plans
(and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with (i) the
most recent annual report prepared in connection with any Employee
Plan (Form 5500 including, if applicable, Schedule B thereto) and
(ii) the most recent actuarial valuation report prepared in
connection with any Employee Plan.
(b) Neither the Seller nor any of its ERISA Affiliates
has incurred, or reasonably expects to incur prior to the Closing
Date, any liability under Title IV of ERISA that could become a
liability of the Buyer or any of its ERISA Affiliates after the
Closing Date. No condition exists that could constitute grounds
for termination by the PBGC of any employee benefit plan that is
subject to Title IV of ERISA that is maintained by Seller or any of
its ERISA Affiliates. No Employee Plan is a Title IV Plan or a
Multiemployer Plan and the Company has not maintained, contributed
to or been required to maintain or contribute to any plan that was
a Title IV Plan or a Multiemployer Plan within the last six years.
(c) Except as set forth on the Disclosure Schedule and
except as would not have a Material Adverse Effect: (i) each
Employee Plan that is intended to be qualified under Section 401(a)
of the Code has been determined by the Internal Revenue Service to
be so qualified and Seller knows of no event that has occurred
since the date of such determination that would adversely affect
such qualification or require security under Section 307 of ERISA;
and (ii) each trust created under any such Plan has been determined
by the Internal Revenue Service to be exempt from tax under Section
501(a) of the Code and Seller knows of no event that has occurred
since the date of such determination that would adversely affect
such exemption. Each material Employee Plan has been maintained in
compliance with its terms and with the requirements prescribed by
all applicable laws, rules and regulations, including but not
limited to ERISA and the Code, except for such matters as would
not, individually or in the aggregate, have a Material Adverse
Effect.
(d) The Disclosure Schedule identifies all material
Benefit Arrangements. Seller has furnished or made available to
Buyer copies or descriptions of each such Benefit Arrangement.
Each material Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements
prescribed by all applicable laws, rules and regulations, except as
set forth in the Disclosure Schedule and except for such matters as
would not, individually or in the aggregate, have a Material
Adverse Effect.
(e) Except as set forth on the Disclosure Schedule and
except as would not, individually or in the aggregate, have a
Material Adverse Effect, to the knowledge of Seller (1) no
"prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA) has occurred that involves the assets of any
Employee Plan; (2) no prohibited transaction has occurred that
could subject the Company or any of its Subsidiaries to the tax or
sanctions on prohibited transactions imposed by Section 4975 of the
Code or Title I of ERISA; and (3) neither the Company, any of its
Subsidiaries nor any trustee, administrator or other fiduciary of
any Benefit Plan has engaged in any transaction in which there is
a reasonable probability that the Company or any such Subsidiary
would be subject to any liability for breach of fiduciary duty
under ERISA or any other applicable law.
(f) Except as may otherwise be provided in the Employee
Plans or Benefit Arrangements or in any other documents made
available to Buyer, to the knowledge of Seller, there has been no
written or oral communication that would prevent the Company from
amending or terminating any Employee Plan or Benefit Arrangement
without material liability to the Company at any time after the
Closing Date.
(g) Except as set forth in the Disclosure Schedule or as
would not have a Material Adverse Effect, the purchase of the
Shares by Buyer will not (i) entitle any current or former employee
or officers of the Company or any of its Subsidiaries to severance
pay, unemployment compensation or any other similar payment or (ii)
accelerate the time of payment or vesting or increase the amount of
compensation due any such employee or officer.
(h) During the 180 days prior to the Closing Date, none
of Seller, the Company or any of its Subsidiaries shall have taken
any action which, as of the Closing Date, would create a material
liability to the Company under the Worker Adjustment and Retraining
Notification Act of 1988.
(i) The following terms, as used herein, have the
following meanings:
"Benefit Arrangement" means any employment, severance or
similar contract, or any other contract, plan or arrangement
(whether or not written) providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance
benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits)
that (i) is not an Employee Plan, (ii) is entered into, maintained,
administered or contributed to, as the case may be, by Seller or
any of its ERISA Affiliates, and (iii) covers any employee or
former employee of the Company.
"Employee Plan" means any "employee benefit plan", as
defined in Section 3(3) of ERISA, that (i) is subject to any
provision of ERISA, (ii) is maintained, administered or contributed
to by Seller or any of its ERISA Affiliates, and (iii) covers any
employee or former employee of the Company.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated
thereunder.
"ERISA Affiliate" of any entity means any other entity
which, together with such entity, would be treated as a single
employer under Section 414 of the Code.
"Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Title IV Plan" means an Employee Plan, other than any
Multiemployer Plan, subject to Title IV of ERISA.
_____________________________
Notwithstanding anything contained in this Agreement to
the contrary, the representations and warranties contained in this
Agreement shall not apply to any assets of the Company retained by
the Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date
hereof and as of the Closing Date that:
4.1 Corporate Existence and Power. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all
corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry
on its business as now conducted.
4.2 Corporate Authorization. The execution, delivery
and performance by Buyer of this Agreement are within the corporate
powers of Buyer and have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement constitutes
a valid and binding agreement of Buyer.
4.3 Governmental Authorization. The execution, delivery
and performance by Buyer of this Agreement require no action by or
in respect of, or filing with, any governmental body, agency or
official other than (i) compliance with any applicable requirements
of the HSR Act or (ii) compliance with any applicable requirements
of Sec. 721 of Title VII of the Defense Production Act of 1950, as
amended (50 U.S.C. App. 2170) ("Exon-Florio Provision").
4.4 Non-Contravention. The execution, delivery and
performance by Buyer of this Agreement do not (i) violate the
certificate of incorporation or bylaws of Buyer, (ii) assuming
compliance with the matters referred to in Section 4.3, violate any
material law, rule, regulation, judgment, injunction, order or
decree, or (iii) require any consent or other action by any Person
under, constitute a default (with or without notice, lapse of time
or both) under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Buyer or
to a loss of any benefit to which Buyer is entitled under, any
material agreement or other instrument or commitment binding upon
Buyer, other than, in the case of clauses (ii) and (iii) above, any
such items that, individually or in the aggregate, would not have
a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby.
4.5 Financing. Buyer has sufficient cash or other
sources of immediately available funds to enable it to make payment
of the Purchase Price and any other amounts to be paid by it
hereunder.
4.6 Litigation. There is no action, suit, investigation
or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or
arbitrator or any governmental body, agency or official which in
any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
4.7 Finders Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or
is authorized to act on behalf of Buyer who might be entitled to
any fee or commission from Seller or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
5.1 Conduct of the Company. From the date hereof until
the Closing Date, Seller shall cause the Company to conduct its
business in the ordinary course consistent with past practice and
to use its best efforts to preserve intact its business
organizations and relationships with third parties and to keep
available the services of its present officers and employees.
Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, Seller will not permit the Company
to:
(i) adopt or propose any change in its certificate of
incorporation or bylaws;
(ii) merge or consolidate with any other Person or
acquire assets of any other Person that are material to the Company
other than in the ordinary course of business consistent with past
practices;
(iii) sell, lease, license or otherwise dispose of any
material assets or property except (A) pursuant to existing
contracts or commitments or (B) in the ordinary course of business
consistent with past practice; or
(iv) agree or commit to do any of the foregoing.
Seller will not, and will not permit the Company to take or agree
or commit to take any action that would make any representation and
warranty of Seller hereunder inaccurate in any material respect at
the Closing Date.
5.2 Access to Information Prior to Closing. From the
date hereof until the Closing Date, Seller will (i) give, and will
cause the Company to give, Buyer and its authorized representatives
access, on reasonable notice and at reasonable times in the
presence of officers of the Company or Seller, to the offices,
properties, personnel, books and records of the Company and to the
books and records of Seller relating to the Company, (ii) furnish,
and will cause the Company to furnish, to Buyer and its authorized
representatives such financial and operating data and other
information relating to the Company as such Persons may reasonably
request, and (iii) instruct the employees, counsel and financial
advisors of Seller or the Company to cooperate with Buyer in its
investigation of the Company. Notwithstanding the foregoing, and
unless otherwise agreed, Buyer shall not prior to Closing have
access to (i) personnel records of the Company relating to the
performance, evaluations or medical history of any employee, (ii)
classified contracts or materials, or (iii) trade secrets or other
similar proprietary information.
5.3 Notices of Certain Events. Seller shall promptly
notify Buyer of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Seller or the
Company that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 3.12 or
that relate to the consummation of the transactions contemplated by
this Agreement.
5.4 Resignations. Seller will deliver to Buyer, at or
prior to the Closing Date, the resignations from positions with the
Company of all officers of the Company who will be officers,
directors or employees of Seller or any of its Affiliates after the
Closing Date (which does not include any of the persons listed in
Schedule 6.2(b)) and all directors of the Company.
5.5 Noncompetition. (a) Seller agrees that for a
period of two years from the Closing Date, neither it nor any of
its Affiliates shall:
(i) engage, directly or indirectly, in any business that
materially competes in the United States with the business
conducted by the Company within two years prior to the Closing Date
(the "Business"); provided that nothing herein shall prohibit (x)
the acquisition by Seller or any of its Affiliates of a company
having not more than 10% of its sales (based on its latest
published annual audited financial statements) attributable to a
business that materially competes with the Business or (y) any
business conducted as of the date hereof by Seller or any of its
Affiliates; or
(ii) employ or solicit, or receive or accept the
performance of services by any employee of the Company that
performs a management, accounting, engineering or technical
function for the Company provided that this provision shall not
apply to any such employee who (x) is listed on Schedule 5.5, (y)
initiates discussions regarding such employment without any direct
or indirect solicitation by Seller or any of its Affiliates, or (z)
is terminated by such employee's employer prior to commencement of
employment discussions between Seller or any of its Affiliates and
such employee.
(b) If any provision contained in this Section shall for
any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Section, but this Section shall
be construed as if such invalid, illegal or unenforceable provision
had never been contained herein. It is the intention of the
parties that if any of the restrictions or covenants contained
herein is held to cover a geographic area or to be for a length of
time which is not permitted by applicable law, or in any way
construed to be too broad or to any extent invalid, such provision
shall not be construed to be null, void and of no effect, but to
the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe
and interpret or reform this Section to provide for a covenant
having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall
be valid and enforceable under such applicable law. Seller
acknowledges that Buyer would be irreparably harmed by any breach
of this Section and that there would be no adequate remedy at law
or in damages to compensate Buyer for any such breach. Seller
agrees that Buyer shall be entitled to injunctive relief requiring
specific performance by Seller of this Section, and Seller consents
to the entry thereof.
(c) In consideration of Seller agreeing to the
provisions of this Section, Buyer agrees to pay to Seller at the
Closing the sum of $1 million (the Noncompete Consideration) in
the manner provided in Section 2.2.
5.6 Records. On, or reasonably promptly after, the
Closing Date, Seller shall, to the extent not in the possession of
the Company, and to the extent reasonably practicable, deliver or
cause to be delivered to Buyer all agreements, documents, books,
records and files, including records and files stored on computer
disks or tapes or any other storage medium (collectively,
"Records"), if any, in the possession of Seller relating to the
business and operations of the Company, subject to the following
exceptions:
(i) Buyer recognizes that certain Records may relate
primarily to Seller or its subsidiaries or divisions
other than the Company, and that Seller may retain such
Records and shall provide copies of the relevant portions
thereof to Buyer;
(ii) Seller may retain all Records prepared in
connection with the sale of the Shares, including bids
received from other parties and analyses relating to the
Company; and
(iii) Seller may retain any tax returns, reports or
forms, and Buyer shall be provided with copies of such
returns, reports or forms only to the extent that they
relate to separate returns or separate tax liability of
the Company and its Subsidiaries.
5.7 Insurance. Seller shall keep, or cause to be kept, all
insurance policies relating to the Company and currently in effect
(whether maintained by the Company or Seller), or suitable
replacements therefor, in full force and effect through the close
of business on the Closing Date. In the event of any casualty or
other significant damage prior to the Closing to any asset of the
Company that is necessary to the Company's enterprise, to the
extent that Seller receives proceeds of any insurance policy
maintained by it with respect to such asset, Seller shall
turn over to the Company the portion of such proceeds reasonably
necessary to fund the repair or replacement by the Company of such
asset. After Closing, Seller shall not take steps to cancel or
reduce occurrence-based insurance coverage with respect to pre-
Closing matters under insurance policies which name (directly or
indirectly) the Company as an insured.
5.8 Assignment of Confidentiality Agreements. On the
Closing Date, Seller shall assign, to the extent permitted by law,
to Buyer its rights under all confidentiality agreements entered
into by Seller with any Person other than Buyer in connection with
the proposed sale of the Shares to the extent such rights relate to
the Company.
5.9 Other Transactions. From the date of this Agreement
to the Closing, Seller and its Affiliates shall not, and shall use
reasonable efforts to cause their respective officers, directors,
or other representatives not to, directly or indirectly, encourage,
solicit, initiate or participate in discussions or negotiations
with, or provide any information or assistance to, any Person or
group (other than Buyer and its representatives) concerning any
merger, sale of securities, sale of substantial assets or similar
transaction involving the Company.
5.10 Certain Licenses and Permits. Seller covenants that
all licenses, permits and authorizations which are held in the name
of any employee, officer, director, agent or otherwise on behalf of
the Company and are transferable shall be duly and validly
transferred (or, to the extent not transferable, shall provide to
Buyer the benefits thereof to the extent legally permitted) to the
Company without consideration prior to the Closing and that the
warranties, representations, covenants and conditions contained in
this Agreement shall apply to the same as if held by the Company as
of the date hereof.
5.11 Confidentiality. After the Closing, Seller shall keep
confidential, and cause its Affiliates and instruct its and their
officers, directors, employees and advisors to keep confidential,
all information relating to the Company and its business, except as
required by law or administrative process and except for
information which is available to the public on the Closing Date,
or thereafter becomes available to the public other than as a
result of a breach of this Section.
5.12 Transferred Assets. The Company shall transfer to
Seller (or an Affiliate nominated by the Seller) prior to Closing
(i) the Riverhead facility, (ii) the assets relating to the Varian
matter, which as of September 30, 1995 aggregated $2,700,000 as set
forth in the pro forma balance sheet of the Company set out in
Section 2.4 of the Disclosure Schedule and (iii) the Company's
Subsidiaries.
5.13 Retained Liabilities. Notwithstanding the sale of the
Company hereunder to the Buyer or anything to the contrary in this
Agreement, the Seller shall assume and be primarily liable for, and
shall defend and indemnify the Buyer and the Company against, the
following (the "Retained Liabilities"):
(a) the defense (or prosecution) of all litigation
identified in Attachment 3.12 hereto (including the Varian
matter but excluding the Aprea and Racanelli lawsuits as to
which Seller's obligation are set forth in Section 10.3(a)(ii)),
and for all liabilities relating thereto and all pending
investigations relating thereto;
(b) all liabilities of the Company (including all
environmental liabilities) relating to or arising from the
Riverhead facility and any other assets of the Company or the
Subsidiaries retained by Seller;
(c) the defense of and liability (whether criminal or
civil) of the Company for all actions alleging violation of the
Foreign Corrupt Practices Act or the Truth in Negotiations Act,
or actions alleging fraud in connection with Government
Contracts or Bids under existing law as of the date hereof under
any of the following statutes and related regulations (as they
may be recodified): The False Claims Act (18 U.S.C. 287), the
False Claims Act (31 U.S.C. 3729), the False Statements Act (18
U.S.C. 1001), the Major Fraud Act (18 U.S.C. 1031), Conspiracy
to Defraud the Government (18 U.S.C. 371), the Anti Kickback Act
(41 U.S.C. 51, 54) and the Program Fraud Civil Remedies Act of
1986 (31 U.S.C. 3801 et. seq.), in every case based on pre-
Closing conduct;
(d) liabilities relating to the Seller plans listed on
Schedule 3.18(g) and the first five items of Schedule 3.18(d),
costs associated with the provision of benefits to the former
employees of the Company listed on Schedule 6.2(c) in accordance
with the terms described on such Schedule or otherwise, and any
claims related to the proceeds or ownership of the life
insurance policies being distributed to Seller pursuant to
Section 7.5(a).
(e) liabilities of the Company relating to any line of
business or line of products that were discontinued or disposed
of after December 31, 1986 and prior to the Closing other than
those under the Purchase Agreement between the Company and Ford
Aerospace & Communications Corporation dated January 27, 1987;
and
(f) liabilities of Seller or Defense Holdings Corp. not
relating to the Company or its business (and excluding
liabilities either of them has secondarily on behalf of the
Company), or except as otherwise provided herein liabilities of
the Company to any of them or to Emerson Electric.
Buyer and Seller shall cooperate with each other to give
effect to the retention by Seller of the Retained Liabilities.
Without limiting the above, Buyer agrees to furnish or cause to
be furnished to Seller (subject to any reasonable request of
confidentiality), upon request, as promptly as practicable, such
information (including access to books and records) and
assistance relating to the Retained Liabilities as is reasonably
necessary for the filing of any return, preparation for any
audit, the prosecution or defense of any claim, suit or
proceeding, or otherwise reasonably necessary. Buyer agrees to
give notice to Seller prior to the transfer, discarding or
destroying of any such books and records and shall allow Seller
to take possession of such books and records (subject to any
reasonable request of confidentiality). Buyer and Seller shall
execute and deliver such documents or other instruments or
certificates as are reasonably necessary to carry out the intent
of this Section. Seller's rights and responsibility for any
litigation or other legal proceedings relating to the Retained
Liabilities shall include the legal defense or prosecution, as
the case may be, thereof.
5.14 Employee Benefits Information. Upon Buyer's request
from time to time after the Closing, Seller will use reasonable
efforts promptly to furnish to Buyer such information as Seller has
in its possession or has available to it that is not in the
possession of, or otherwise available to, the Company as is
reasonably requested by the Internal Revenue Service or any other
governmental agency in connection with any Employee Plan or Benefit
Arrangement or is otherwise reasonably required by Buyer to
administer such Employee Plan or Benefit Arrangement.
5.15 Bank Lien. In addition to the Seller's obligation to
remove the Bank Lien from the Shares prior to the Closing pursuant
to Section 3.6, Seller shall have caused the Bank Lien to be
removed by the Closing from all other assets or properties of the
Company covered by such lien and shall have provided to Buyer
reasonably satisfactory evidence of such removal. Promptly after
the Closing, Seller shall cause to be duly filed appropriate
instruments reasonably satisfactory to the Buyer evidencing the
removal of such lien that correspond to previously filed mortgages
or UCC filing statements or similar instruments.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
6.1 Access After Closing. (a) Buyer will cause the
Company, on and after the Closing Date, to afford promptly to
Seller and its agents access, on reasonable notice and at
reasonable times in the presence of officers of the Company or
Buyer, to its properties, books, records and employees to the
extent reasonably necessary to permit Seller to determine any
matter relating to its rights and obligations hereunder or to any
period ending on or before the Closing Date. Seller will hold, and
will use reasonable efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all
confidential documents and information concerning the Company
provided to it pursuant to this Section; provided that nothing
herein shall preclude disclosure by Seller to third parties of
documents or information relating to Seller's rights or obligations
pursuant to Articles 8 or 10.
(b) On, or reasonably promptly after, the Closing Date,
Buyer shall cause the Company to deliver to Seller all agreements,
documents, books, records and files, including records and files
stored on computer disks or tapes or any other storage medium, if
any, in the possession of the Company relating to the business and
operations of the Seller or its Affiliates.
6.2 Plans Following the Closing. (a) For a period of one
year after the Closing Date, Buyer will cause the Company to
maintain employee compensation and benefit plans and arrangements
that are substantially comparable in the aggregate to the Employee
Plans and Benefit Arrangements, excluding, for this purpose, any
Employee Plans and Benefit Arrangements which provide (A) for the
grant of stock options or other equity compensation (including
without limitation stock purchase plans and arrangements) or (B)
incentive compensation. Buyer shall provide incentive compensation
arrangements under its plans and programs to such employees of the
Company as it deems appropriate. Nothing herein shall be construed
as requiring Buyer to continue in employment any employee of the
Company or its Subsidiaries following the Closing or as requiring
the Buyer to continue in effect any specific Employee Plan or
Benefit Arrangement or any other plan, program, policy or
arrangement. Notwithstanding the foregoing, in the event the
Company is unable to procure insurance coverage on commercially
reasonable terms comparable to Seller's long-term disability
policy, group term life insurance policy, group variable universal
life insurance policy and supplemental/dependent term life
insurance policy, then if requested by Buyer and at Buyer's expense
(including a reasonable charge for administration), for a period of
up to one year after the Closing Date, Seller shall continue
(solely to the extent permitted by Seller's insurance carriers) to
provide such benefits to the Company's employees under Seller's
policies.
(b) If the employment of any employee listed on Schedule
6.2(b) is involuntarily terminated without cause during the one
year period after the Closing Date, Buyer will cause the Company to
pay such employee an amount equal to no less than the sum of one
year's annualized base salary (which base salary shall be the
greater of such employee's annualized base salary on the Closing
Date or on the date of termination) and the most recent annual
bonus received by such employee, less any base salary and bonus
paid to such employee by the Company during such one year period.
For purposes of this Section 6.2(b), the offer of a job within the
Company or Buyer (which offer may require a residence relocation)
with comparable compensation shall not be deemed to be an
involuntary termination.
(c) If requested by Seller, then at Seller's expense
(including a reasonable charge for administration and any Tax
liability of Buyer or the Company resulting under this Section
6.2(c)), Buyer shall cause the Company to provide the benefits
described on Schedule 6.2(c) to the former employees listed on such
Schedule; provided that (except as otherwise provided on such
Schedule) such benefits shall be the same as those provided to
active employees of the Company from time to time, it being
understood that such benefits may be provided on an insured or an
uninsured basis as Buyer shall determine.
(d) Following the Closing Date, Buyer shall cause the
Company to directly assume, except as provided in the following
sentence, all liabilities and obligations with respect to the
Company's current and former employees under applicable workers'
compensation laws which relate to periods prior to the Closing Date
("Pre-Closing Workers' Compensation Claims") and Buyer shall
indemnify and hold Seller harmless from any loss, liability, claim,
damage or expense relating to the Pre-Closing Workers' Compensation
Claims. The parties agree to cooperate to make pre-Closing
workers' compensation insurance arrangements applicable to the
Company available at Buyer's expense to the Company on a stand
alone basis after the Closing Date; provided, however, that in the
event that such insurance arrangements cannot be made available to
the Company on a stand alone basis on commercially reasonable
terms, Buyer shall cause the Company to continue to reimburse
Seller (in accordance with the practices of the Company in effect
immediately prior to the Closing Date) for any such liabilities or
obligations relating to the Pre-Closing Workers' Compensation
Claims. The parties further agree that, if the Buyer provides a
written request to Seller, the parties shall use their best efforts
to enable Buyer or the Company to self-administer the Pre-Closing
Workers' Compensation Claims.
6.3 Confidentiality Agreement. (a) Buyer's obligations
under the Confidentiality Agreement dated December 22, 1995 between
Buyer and J.P. Morgan Securities, Inc. as agent for Seller
("Confidentiality Agreement") remain in full force and effect;
provided, however, that, effective upon the Closing, the
Confidentiality Agreement shall terminate with respect to
information relating to the Company and its Subsidiaries.
(b) After the Closing, Buyer shall keep confidential, and
cause its Affiliates and instruct its and their officers,
directors, employees and advisors to keep confidential, all
information relating to Seller, its Affiliates and its and their
business, except as required by law or administrative process and
except for information which is available to the public on the
Closing Date, or thereafter becomes available to the public other
than as a result of a breach of this Section.
6.4 Seller Guarantees and Letters of Credit. At or as
promptly as practicable after Closing, Buyer shall (i) use best
efforts (which shall not include the payment of money) to replace
the guarantees ("Seller Guarantees") described in Schedule 6.4 with
guarantees upon substantially the same terms of Buyer or, with the
consent of Seller (which shall not be unreasonably withheld), any
of its Affiliates, and (ii) cause back-up letters of credit to be
issued in favor of Seller in the form contained in Schedule 6.4
from prime issuers for the letters of credit described in Schedule
6.4 ("Seller Letters of Credit"). Buyer shall indemnify Seller for
any payments Seller is required to make pursuant to the Seller
Guarantees and, after giving effect to any payments made on the
backup letters of credit, the Seller Letters of Credit after
Closing. The giving of the foregoing indemnity shall, in the event
that the Seller Guarantees are not replaced after Seller and Buyer
shall have used their best efforts to obtain the same, mean that
Buyer's obligation to replace the Seller Guarantees shall be deemed
satisfied.
ARTICLE 7
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
7.1 Further Efforts. Subject to the terms and conditions
of this Agreement (including Section 7.2 and Article XI), Buyer and
Seller will use their reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Buyer
and Seller shall cooperate with each other, and shall cause their
officers, employees, agents, auditors and representatives to
cooperate with each other, for a period of 180 days after the
Closing to ensure the orderly transition of the Company from Seller
to Buyer and to minimize any disruption to the respective
businesses of Seller, Buyer or the Company that might result from
the transactions contemplated hereby. Without limiting the above,
Buyer shall cause the Company to provide Seller support from
Company personnel to (i) transition oversight of the environmental
remediation activities and (ii) transfer intellectual property
records and intellectual property matters, not relating to the
Company but relating to Seller and Seller's Affiliates, to Seller.
Following Closing, the parties shall cooperate to ensure that a
proper cut-off of payments and receipts by Seller and its
Affiliates on account of the Company is effected, taking into
account the payables and receivables on the Closing Balance Sheet.
7.2 Certain Filings. Seller and Buyer shall cooperate with
one another (i) in determining whether any other action by or in
respect of, or filing with, any governmental body, agency, official
or authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers.
7.3 Public Announcements. The parties agree to consult
with each other before issuing any press release or making any
public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable
law or any listing agreement with any national securities exchange,
will not issue any such press release or make any such public
statement prior to such consultation.
7.4 Trademarks; Tradenames. (a) Except as set forth in
the other subsections of this Section, Buyer shall not permit the
Company to use after the Closing any of the marks or names set
forth on Schedule 7.4 (collectively or individually as the context
requires, the Seller Trademarks and Tradenames).
(b) After the Closing, the Company shall have the right to
sell existing inventory and to use existing packaging, labelling,
containers, supplies, advertising materials, technical data sheets
and any similar materials bearing any Seller Trademarks and
Tradenames until the date existing stocks are exhausted. The
Company shall have the right to use the Seller Trademarks and
Tradenames in advertising that cannot be changed by them using
reasonable efforts (which shall not include the payment of any
money) for a period not to exceed six months after the Closing
Date. Buyer shall cause the Company to comply with all applicable
laws or regulations in any use of packaging or labelling containing
the Seller Trademarks and Tradenames.
(c) The Company shall not be obligated to change the Seller
Trademarks and Tradenames on goods in the hands of dealers,
distributors, customers and other third parties. The obliteration
of the Seller Trademarks and Tradenames shall be deemed compliance
with the covenant not to use the Seller Trademarks and Tradenames
pursuant to this Section.
(d) Buyer agrees to cause the Company to use reasonable
efforts to cease using the Seller Trademarks and Tradenames on
buildings, cars, trucks and other fixed assets as soon as
practicable, but in any event, within six months after the Closing
Date.
7.5 Intercompany Arrangements. (a) Prior to the Closing,
Seller shall cause Company to distribute the life insurance
policies (with related cash surrender value of such policies)
described in Schedule 7.5(a) to Seller.
(b) All intercompany work orders existing on the Closing
Date shall be converted to firm fixed price purchase orders on the
terms and conditions set forth on Schedule 7.5(b). Buyer agrees to
cause the Company, for a period of five years after Closing, to
continue to offer to supply Seller and Seller's Affiliate with the
products listed on Schedule 7.5(b) on the terms described therein.
(c) Immediately prior to the Closing and except as provided
in Section 2.2(b)(ii) (with respect to the Industrial Development
Revenue Bond) and Section 7.5(b), (i) all outstanding debts and
accounts payable owed by the Company to the Seller or any of its
Affiliates shall be cancelled (with the effect provided in Section
2.3) and (ii) all outstanding debts and accounts receivable payable
to the Company or its Subsidiaries by the Seller or any of its
Affiliates shall be cancelled (with the effect provided in Section
2.3).
(d) Immediately prior to Closing, Seller's rights in the
life insurance policy described in Section 3.18 of the Disclosure
Schedule shall be transferred to the Company and Buyer shall cause
the Company to assume Seller's obligations to pay premiums in
accordance with the agreements set forth in Attachment 3.18(d).
7.6 Exon-Florio. Buyer and Seller agree to use their best
efforts to compile and provide the information and documentation
necessary for filing a joint Exon-Florio notification with the
Committee on Foreign Investment in the United States, as promptly
as practicable, after the date hereof. Seller shall, and shall
cause Company to, use all reasonable efforts to initiate and obtain
national interest determinations ("NID(s)") from each of the
Company customers that hold contracts requiring access to
"proscribed" classified information. Buyer agrees to use all
reasonable efforts to advise and assist in obtaining these NID(s).
ARTICLE 8
TAX MATTERS
8.1 Definitions. (A) The following terms, as used herein,
have the following meanings:
"Buyer Group" means, with respect to Federal Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of
the Code) of which Buyer is a member and, with respect to state or
local income or franchise taxes, the consolidated, combined, or
unitary group of which Buyer or any of its Affiliates is a member.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"Combined State Tax" means any income or franchise Tax
payable to any state or any local taxing jurisdiction in which the
Company files Returns with a member of the Seller Group on a
consolidated, combined or unitary basis for purposes of such income
or franchise Tax.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code
or execution of an Internal Revenue Service Form 870AD and, with
respect to Taxes other than Federal Taxes, any final determination
of liability in respect of a Tax that, under applicable law, is not
subject to further appeal, review or modification through
proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds,
amended returns or appeals from adverse determinations) or (ii) the
payment of Tax by Buyer, Seller or any of their Affiliates,
whichever is responsible for payment of such Tax under applicable
law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party
agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing
Date.
"Return" means any Tax return, statement, report or form
required to be filed with any Taxing Authority by or with respect
to the Company.
"Seller Group" means, with respect to Federal Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of
the Code) of which Seller is a member and, with respect to state or
local income or franchise Taxes, the consolidated, combined or
unitary group of which Seller or any of its Affiliates is a member.
"Tax" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including any tax
imposed under Subtitle A of the Code and any net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding on amounts paid to or by the Company, payroll,
employment, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall profit tax, premium, custom,
duty or other tax), together with any interest, penalty, addition
to tax or additional amount due from, or in respect of, the Company
imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax (a "Taxing
Authority"), (ii) any liability for the payment of any amount of
the type described in the immediately preceding clause (i) as a
result of the Company being a member of an affiliated, consolidated
or combined group with any other corporation at any time on or
prior to the Closing Date and (iii) any liability of the Company
with respect to the payment of any amounts of the type described in
(i) or (ii) as a result of any express or implied obligation to
indemnify any other person.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or
any other credit or tax attribute which could reduce Taxes
(including, without limitation, deductions and credits related to
alternative minimum Taxes), provided, however, that such term shall
not include the Tax basis of the Shares or any assets of the
Company.
"Tax Basket" means the amount at any time equal to (a) the
reserves for current state or local Taxes provided for on the
Closing Balance Sheet, minus (b) any reductions (in the aggregate)
made pursuant to Section 8.6(e) hereof plus (c) any additions (in
the aggregate) made pursuant to Section 8.6(b) hereof.
(B) For purposes of this Article 8, references to the
Company shall be deemed to include any Subsidiaries.
8.2 Tax Representations. (a) Seller represents and
warrants to Buyer as of the date hereof and as of the Closing Date
that, except as set forth in the Balance Sheet or on the Disclosure
Schedule or as required by this Agreement, (i) all material Returns
required to be filed with any Taxing Authority on or before the
Closing Date (taking into account any extension of a required
filing date) with respect to any Pre-Closing Tax Period by, or with
respect to, the Company have been filed or will be filed on or
before the Closing Date in accordance with all applicable laws and
such Returns are or will be true, correct and complete in all
material respects; (ii) all other material Returns required to be
filed with respect to the Company (excluding separate Returns
required to be filed by the Company) with respect to any
Pre-Closing Tax Period will be filed by Seller when due (taking
into account any extension of a required filing date); (iii) the
Company has timely paid all Taxes shown as due and payable on the
Returns that have been filed; (iv) the Company has made or will on
or before the Closing Date make provision for all material Taxes
payable by the Company for any Pre-Closing Tax Period for which no
Return has yet been filed; (v) the charges, accruals and reserves
for Taxes with respect to the Company reflected on the Balance
Sheet are adequate to cover the material Tax liabilities accruing
through the date thereof; (vi) the Company is not delinquent in the
payment of any material Tax and has not requested any extension of
time within which to file any material Tax Return and has not yet
filed such Tax Return; (vii) there are no outstanding requests for
rulings or determinations in respect of any Tax or Tax Asset
pending between the Company and any Taxing Authority; (viii) the
Company has not been a member of an affiliated, consolidated,
combined or unitary group other than one of which Seller was the
common parent; (ix) the Company has not received any written notice
of deficiency or assessment from any Taxing Authority with respect
to material liabilities for income or other Taxes which have not
been fully paid or finally settled; (x) there are no Liens for
material Taxes (except for Taxes not yet due) on any of the assets
of the Company, and no action, proceeding, or, to the knowledge of
Seller, investigation has been instituted against the Company in
which there is a reasonable probability of an adverse determination
that would result in any such Lien; (xi) neither the Company nor
any direct or indirect shareholder of the Company has made with
respect to the Company, or any property held by the Company, any
consent under Section 341 of the Code; (xii) no property of the
Company is "tax-exempt use property" within the meaning of Section
168(g) of the Code; (xiii) the Company is not a party to any lease
made pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954; (xiv) Seller is not a "foreign person" for purposes of
Section 1445 of the Code; (xv) the Company is not under any
contractual obligation to pay the Tax obligations of any other
person or pay the Tax obligations with respect to any transactions
relating to any other person or to indemnify any other person with
respect to any Tax; (xvi) to Seller's knowledge there is no action,
suit, proceeding, investigation, audit or claim now proposed or
pending against or with respect to the Company in respect of any
material Tax; (xvii) all Federal Tax and Combined State Tax Returns
filed with respect to Taxable years of the Company through the
taxable year ended December 2, 1986 have been examined and closed
or are Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions
or waivers, has expired; (xviii) the Company has not granted any
extension or waiver of the statute of limitations period applicable
to any material Tax Returns, which period (after giving effect to
such extension or waiver) has not expired; (xix) the Company will
not be required to recognize for income tax purposes in a taxable
year beginning on or after the Closing Date any amount of income or
gain which it would have been required to recognize under the
accrual method of accounting for Tax purposes in a Pre-Closing Tax
Period as a result of the installment method of accounting, the
completed contract method of accounting, the cash method of
accounting or a change in method of accounting.
(b) Seller has delivered or made available to Buyer (i)
complete copies of all material income, franchise and similar
Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company for all Tax periods
ending after September 30, 1990 (or, in the case of any
consolidated, combined or unitary Return, the portions of such
Returns relating solely to the Company); and (ii) true and complete
copies of any written Tax-sharing or allocation agreement or
arrangement to which the Company is a party and a true and complete
description of any unwritten or informal such agreement or
arrangement, other than any such agreement that is terminated
pursuant to the provisions of Section 8.4 herein.
8.3 Tax Covenants.
(a) Buyer covenants that without the prior consent of
Seller it will not, and will not cause or permit the Company or any
Affiliate of Buyer, to (i) take any action on the Closing Date
other than in the ordinary course of business, including but not
limited to the distribution of any dividend or the effectuation of
any redemption that could give rise to any Tax liability of the
Seller Group or indemnification obligation of Seller under Section
8.8 of this Agreement, or (ii) make or change any Tax election
(including any election under Section 338 of the Code), amend any
Return or take any Tax position on any Return, take any action,
omit to take any action or enter into any transaction that results
in any increased tax liability or reduction of any Tax Asset of
Seller or the Seller Group in respect of any Pre-Closing Tax
Period: provided however, that with respect to clause (ii),
Seller's consent shall not be unreasonably withheld or delayed.
Buyer agrees that Seller is to have no liability for any Tax
resulting from any action of the Company, Buyer or any Affiliate of
Buyer referred to in the preceding sentence, and agrees to
indemnify on an after-tax basis (determined in accordance with
Section 10.2(b)) and hold harmless Seller and its Affiliates
against any such Tax or reduction of any Tax Asset.
(b) Without the prior written consent of Buyer, which will
not be unreasonably delayed or withheld, neither the Seller or any
of its Affiliates (and, prior to the Closing, the Company or any of
its Affiliates) shall, to the extent it may affect or relate to the
Company, make or change any Tax election, amend any tax Return or
take any position on any Return, take any action, omit to take any
action or enter into any other transaction that would have the
effect of increasing the Tax liability or reducing any Tax Asset of
Buyer or the Buyer Group in respect of any Post-Closing Tax Period.
Seller agrees that Buyer is to have no liability for any Tax
resulting from any action of Seller or any Affiliates referred to
in the preceding sentence, and agrees to indemnify on an after-tax
basis (determined in accordance with Section 10.2(b)) and hold
harmless the Buyer Group against any such Tax or reduction of any
Tax Asset.
(c) Buyer may, at its option, cause the Company to elect
where permitted by law, to carry forward any net operating loss,
net capital loss, charitable contribution or other item arising
after the Closing Date that would, absent such election, be carried
back to a Pre-Closing Tax Period of the Company in which the
Company filed a consolidated, combined or unitary Tax return with
Seller or an Affiliate of Seller.
(d) Buyer shall promptly pay or shall cause prompt payment
to be made to Seller of (i) all refunds of Taxes and interest
thereon received by, or credited against the Tax liability of
Buyer, any Affiliate of Buyer or the Company attributable to Taxes
paid by Seller, the Company or any Affiliate of Seller with respect
to any Pre-Closing Tax Period except to the extent such amounts are
reflected on the Closing Balance Sheet. If, with respect to a
Return required to be filed by the Company, Seller reasonably
determines that the Company is entitled to file a claim for refund
or an amended Return with respect to a Pre-Closing Tax Period,
Buyer shall, upon Seller's reasonable request, cause the Company to
file all such claims or amended Returns; provided that Buyer shall
not be required to cause the Company to file any such claim or
amended Return (other than any claim or Return referred to on
Schedule 8.3(d) or any Return required to be filed under applicable
law as a result of a Final Determination of an audit adjustment) if
so doing could have the effect of increasing the Tax liability or
reducing any Tax Asset of Buyer, the Company or the Buyer Group in
any Post-Closing Tax Period.
(e) All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement (including
any New York State Real Property Transfer Gains Tax, New York State
Real Estate Transfer Tax, New York City Real Property Transfer Tax
and any similar tax imposed in other states or subdivisions) up to
a total of $120,000 in the aggregate shall be borne and paid
equally by Buyer and Seller, and any excess over $120,000 shall be
paid solely by Seller. The party that is required by applicable
law to file any Return or make any payment with respect to any such
Tax shall do so, and the other party shall cooperate with respect
thereto as necessary. The non-paying party shall reimburse the
paying party in accordance with this Section 8.3(e) within 5
business days after it receives notice of the payment of such Tax.
(f) Buyer shall prepare, or cause to be prepared, all
separate Returns required to be filed by the Company after the
Closing Date with respect to a Pre-Closing Tax Period. Any such
Return shall be prepared in a manner consistent with past practice
and without a change of any election or any accounting method and
shall be submitted by Buyer to Seller (together with schedules,
statements and, to the extent requested by Seller, supporting
documentation) at least 40 days prior to the due date (including
extensions) of such Return. If Seller objects to any item on any
such Return, it shall, within 10 days after delivery of such
Return, notify Buyer in writing that it so objects, specifying with
particularity any such item and stating the specific factual or
legal basis for any such objection. If a notice of objection shall
be duly delivered, Buyer and Seller shall negotiate in good faith
and use their best efforts to resolve such items. If Buyer and
Seller are unable to reach such agreement within 5 days after
receipt by Buyer of such notice, the disputed items shall be
resolved by a nationally recognized accounting firm with no
material relationship with Buyer, Seller or their Affiliates (which
shall, after the Closing, include the Company) (the "Accounting
Referee"), chosen and mutually acceptable to both Buyer and Seller
within five days of the date on which the need to choose the
Accounting Referee arises. The Accounting Referee shall resolve
any disputed items within 20 days of having the item referred to it
pursuant to such procedures as it may require. The costs, fees and
expenses of the Accounting Referee shall be borne (i) by Seller if
the net resolution of the disputed items favors Buyer, (ii) by
Buyer if the net resolution of the disputed items favors Seller,
and (iii) otherwise equally by Buyer and Seller.
8.4 Termination of Existing Tax Sharing Agreements. Any
and all existing Tax sharing agreements between the Company and any
member of the Seller Group shall be terminated as of the Closing
Date. After such date neither the Company, Seller nor any Affiliate
of Seller shall have any further rights or liabilities thereunder.
8.5 Cooperation on Tax Matters. (a) Buyer and Seller
agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including
access to books and records) and assistance relating to the Company
as is reasonably necessary for the filing of any return, for the
preparation for any audit, and for the prosecution or defense of
any claim, suit or proceeding relating to any proposed adjustment.
Buyer and Seller agree to retain or cause to be retained all books
and records pertinent to the Company until the applicable period
for assessment under applicable law (giving effect to any and all
extensions or waivers) has expired, and to abide by or cause the
abidance with all record retention agreements entered into with any
Taxing Authority. The Company agrees to give Seller reasonable
notice prior to transferring, discarding or destroying any such
books and records relating to Tax matters and, if Seller so
requests, the Company shall retain copies or possession of such
books and records. Buyer and Seller shall cooperate with each
other in the conduct of any audit or other proceedings involving
the Company for any Tax purposes and each shall execute and deliver
such powers of attorney and other documents as are necessary to
carry out the intent of this subsection.
(b) Buyer and Seller further agree, upon request, to
provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
8.6 Indemnification by Seller. (a) Seller hereby
indemnifies Buyer, any member of the Buyer Group and the Company
against and agrees to hold it harmless on an after-tax basis
determined in accordance with Section 10.2(b) from any (i) Tax of
the Company with respect to taxable periods ending on, as of the
close of, or before the Closing Date; (ii) with respect to taxable
periods beginning before (but not ending on or before) the Closing
Date, any Taxes imposed on or in respect of the Company which are
allocable, pursuant to Section 8.6(c), to the portion of such
period ending on the Closing Date; (iii) notwithstanding anything
to the contrary in the preceding clauses (i) or (ii), any Taxes
imposed on or in respect of any corporation with which the Company
has filed or hereafter files a Tax Return on a combined or
consolidated basis for any taxable period that includes the Closing
Date or that ends on, as of the close of, or before the Closing
Date (including, without limitation, any Taxes for which the
Company would be liable pursuant to the provisions of Treasury
Regulation Sections 1.1502-6) other than any corporation that is an
affiliate of Buyer; (iv) Tax attributable to the distributions
described in Section 5.12 and Section 7.5; and (v) liabilities,
costs, expenses (including, without limitation, reasonable expenses
of investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or
incident to the imposition, assessment or assertion of any such
Tax, including those incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, in each case incurred or suffered by
Buyer, any of its Affiliates or, effective upon the Closing, the
Company (the sum of (i) through (v) being referred to as a "Loss");
provided, however, that Seller shall have no liability for the
payment of any loss attributable to or resulting from any action
described in Section 8.3(a) hereof, and provided, further, that
Seller shall have no obligation to make any payment to Buyer
pursuant to this Section 8.6 until the amount of a claim arising
pursuant hereto exceeds the Tax Basket, in which case Buyer shall
be entitled to indemnity for the amount of such claim in excess of
the Tax Basket and all claims made thereafter.
(b) If an adjustment with respect to a Pre-Closing Tax
Period makes allowable to Buyer, any of its Affiliates or,
effective upon the Closing, the Company any deduction,
amortization, exclusion from income or other allowance (a "Tax
Benefit") which would not, but for such adjustment, be allowable,
then within 30 days after the filing of the applicable return in
which such Tax Benefit is claimed, Buyer shall pay to Seller the
excess of (i) the amount of Taxes that would have been payable by
any of the Company, Buyer or any Affiliate of Buyer with respect to
such Tax Period in the absence of such Tax Benefit over (ii) the
amount of Taxes actually paid; provided, however that Buyer shall
not be required to make a payment to Seller under this Section
8.6(b) to the extent that pursuant to Section 8.6(a) or (d) Seller
has not borne the burden of such adjustment by reason of there
being a positive balance in the Tax Basket, and the Tax Basket
shall be increased by any amount not paid to Seller as a result of
this proviso.
(c) For purposes of this Section 8.6, in the case of any
Taxes that are imposed on a periodic basis and are payable for a
Tax period that includes (but does not end on) the Closing Date,
the portion of such Tax related to the portion of such Tax period
ending on the Closing Date shall (x) in the case of any Taxes other
than Taxes based upon or related to income, be deemed to be the
amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is
the number of days in the entire Tax period, and (y) in the case of
any Tax based upon or related to income be deemed equal to the
amount which would be payable if the relevant Tax period ended on
the Closing Date. All determinations necessary to give effect to
the foregoing allocations will be made in a manner consistent with
prior practice of the Company.
(d) If as a result of an adjustment Seller makes a payment
to any Taxing Authority in respect of a Tax of the Company or a Tax
Asset of Seller or the Seller Group is reduced as a result of a Tax
liability of the Company, in each case with respect to any Pre-
Closing Tax Period, then Buyer shall promptly pay to Seller an
amount equal to such payment made by Seller or such reduction,
provided, however, that any such payment by Buyer shall not exceed
an amount equal to the positive balance, if any, in the Tax Basket.
(e) The Tax Basket shall be reduced by (i) the amount of
any claim of Buyer under Section 8.6(a) hereof that is not paid in
whole or part by Seller solely by reason of there being a positive
balance in the Tax Basket, and (ii) the amount of any payment of
Buyer to Seller under Section 8.6(d) hereof.
(f) Any payment by Seller pursuant to this Section 8.6
shall be made not later than 30 days after receipt by Seller of
written notice from Buyer stating that any Loss has been paid by
Buyer, any of its Affiliates or, effective upon the Closing, the
Company and the amount thereof and of the indemnity payment
requested.
(g) Seller shall not be liable under this Section 8.6 for
(i) any Tax (other than any current state or local Tax to the
extent reflected on the Closing Balance Sheet) the payment of which
was made without Seller's prior written consent, which shall not be
unreasonably withheld or delayed, (ii) any settlements effected
without the consent of Seller, which shall not be unreasonably
withheld or delayed, or (iii) any Loss resulting from any claim,
suit, action, litigation or proceeding with respect to which Buyer
did not satisfy its obligations under Section 8.7 or resulting from
any claim, suit, action or proceeding in which Seller was not
afforded the opportunity to participate as required by Section 8.7
herein.
(h) The following sentence shall apply only to the extent
that either (i) Seller's net operating loss immediately after
giving effect to the transactions contemplated by this Agreement is
less than $60,000,000, or (ii) Seller's allowable capital loss
immediately after giving effect to the transactions contemplated by
this Agreement is less than $20,000,000 or (iii) the look-back
method described in Section 460(b)(2) of the Code is applied to a
Pre-Closing Tax Period using the principles of the simplified
marginal impact method as defined in Section 1.460-6(d) of Proposed
Treasury Regulations issued on June 11, 1990. Subject to the
foregoing sentence, Seller shall indemnify and hold harmless Buyer
and the Company from any interest computed with respect to a long-
term contract under the look-back method described in Section
460(b)(2) of the Code which is attributable to a hypothetical
increase in gross income from any such contract in a Pre-Closing
Tax Period, excluding any such hypothetical increase that is solely
attributable to (i) a post-Closing change order or (ii) the
aggregation of an agreement entered into after the Closing with an
agreement entered into prior to the Closing pursuant to Internal
Revenue Service Notice 89-15 or Treasury Regulations Section 1.451-
3(e); provided, however, that if Seller's indemnification
obligation under this Section 8.6(h) arises solely due to clause
(iii) of the first sentence of this Section 8.6(h), (x) Seller
shall indemnify Buyer and the Company for 50 percent of the first
$1,000,000 of such interest described above, and any excess over
$1,000,000 shall be borne solely by Seller, (y) Buyer and Seller
shall each be entitled to 50 percent of any interest computed under
the look-back method described in Section 460(b) (2) of the Code
with respect to a long-term contract that is not completed on or
prior to the Closing Date and which is attributable to a
hypothetical decrease in gross income from any such contract in a
Pre-Closing Tax Period, provided that Buyer shall be entitled to
any interest attributable to any such hypothetical decrease that is
solely attributable to (i) a post-Closing change order or (ii) the
aggregation of an agreement entered into after the Closing with an
agreement entered into prior to the Closing pursuant to Internal
Revenue Service Notice 89-15 or Treasury Regulations Section
1.451-3(e), and (z) from and after the time that the look-back
method is required to be applied in the manner described in clause
(iii) of the first sentence of this Section 8.6(h), Buyer shall
sever all agreements entered into after the Closing from any
agreement entered into prior to the Closing to the extent permitted
under Internal Revenue Service Notice 89-15 or Treasury Regulations
Section 1.451-3(e).
8.7 Contests. (a) Each party entitled to an indemnity
payment pursuant to the provisions of Section 8.3 or 8.6 herein (a
"Tax Indemnified Party") agrees to give written notice to the
indemnifying party (the "Tax Indemnitor") of the receipt of any
written notice by the Tax Indemnified Party or an Affiliate of such
Tax Indemnified Party (including, in the case where the Buyer is
the Tax Indemnified Party, the Company) which involves the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought (an
"Indemnifiable Tax") within 10 days of such receipt or such earlier
time as would allow the Tax Indemnitor to timely respond to such
claim, demand, action or proceeding, and the Tax Indemnified Party
shall give the Tax Indemnitor such information with respect thereto
as the Tax Indemnitor may reasonably request. The Tax Indemnitor
may discharge, at any time, its indemnity obligations by paying the
Tax Indemnified Party the amount of the applicable loss, calculated
on the date of such payment. The Tax Indemnitor may, at its own
expense, participate in and, upon notice to the Tax Indemnified
Party, assume the defense of any such claim, demand, suit, action
or proceeding (including any Tax audit); provided, however, that
prior to the Tax Indemnitor assuming control of such defense it
shall first confirm to the Tax Indemnified Party in writing that
such Indemnifiable Tax is governed by the provisions of either
Section 8.3 or 8.6 hereof, as appropriate; and provided, further,
that:
(i) the Tax Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel
of its choice for such purpose, the fees and expenses of which
separate counsel shall be borne by the Tax Indemnified Party
(except that the reasonable fees and expenses of such separate
counsel incurred prior to the date the Tax Indemnitor assumes
control of such defense shall be borne by the Tax Indemnitor);
(ii) if the Tax Indemnitor shall control the defense of
any such claim, the Tax Indemnitor shall obtain the prior
written consent of the Tax Indemnified Party (which shall not
be unreasonably withheld or delayed) before entering into any
settlement of a claim or ceasing to defend such claim if the
resolution or settlement relating to such claim could have the
effect of increasing the Tax liability or reducing any Tax
Asset of the Tax Indemnified Party;
(iii) in the event Seller is the Tax Indemnitor and the
claim is one for which the Tax Basket is applicable, the Tax
Indemnitor shall not be entitled to assume control of the
defense of the claim unless the claim is reasonably likely to
exceed the Tax Basket by an amount such that the Tax
Indemnitor will be reasonably likely to bear the majority of
the cost of the claim (provided that, if Seller shall not be
entitled to assume control of such defense, the Tax
Indemnified Party shall not settle the claim without the
consent of the Seller, which shall not be unreasonably
withheld or delayed); and
(iv) whether or not the Tax Indemnitor chooses to defend
or prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
8.8 Survival. Notwithstanding anything in this Agreement
to the contrary, the provisions of this Article VIII other than
Section 8.2 shall survive for the full period of all applicable
statutes of limitations (giving effect to any waiver, mitigation or
extension thereof).
ARTICLE 9
CONDITIONS TO CLOSING
9.1 Conditions to Obligations of Buyer and Seller. The
obligations of Buyer and Seller to consummate the Closing are
subject to the satisfaction of the following conditions:
(i) Any applicable waiting period under the HSR Act
relating to the transactions contemplated hereby shall have expired
or been terminated.
(ii) The United States Government shall have completed its
national security review under the Exon-Florio Provision and shall
have concluded that no Presidential action to suspend or prohibit
the transaction contemplated hereby is warranted.
(iii) No provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the
consummation of the Closing.
(iv) All actions by or in respect of or filings with any
governmental body, agency or official required in accordance with
Sections 3.3 and 4.3 and all consents or other actions of other
Persons required in accordance with Sections 3.4 and 4.4 shall have
been taken, made or obtained.
9.2 Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of
the following further conditions: (A) Seller shall have performed
in all material respects all of its obligations hereunder required
to be performed by it on or prior to the Closing Date, (B) the
representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date, and (C) Buyer
shall have received a certificate signed by the chief executive
officer or the chief financial officer and the general counsel of
Seller to the foregoing effect and (D) Buyer shall have obtained,
at its own expense, ALTA owner's title insurance with respect to
the Company's real property in the amount of $18,131,000 for the
Huntington/Greenlawn Suffolk County, New York property (the "NY
Property") and $1 million for the Town of Braintree/City of Quincy,
Norfolk County, Massachusetts property (the "MA Property"), and
subject only, in the case of the NY Property to those matters
referred to in item 1(a) and items 2 through 16, of Schedule B of
the Specimen Policy of Owner's Title Insurance issued by First
American Title Insurance Company of New York, bearing Title No.
135-NYNY-173365SX, and faxed to the parties by the title company on
May 14, 1996; and in the case of the MA Property, those matters
referred to in items 1 and 2 (to the extent not voluntarily created
on and after May 14, 1996 by Seller or the Company), and items 3
through 9, of Schedule B to the Specimen Policy of Owner's Title
Insurance issued by First American Title Insurance Company, bearing
Title No 135-MA-17335 and faxed to the parties by the title company
on May 14, 1996.
9.3 Conditions to Obligation of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of
the following further conditions: (A) Buyer shall have performed
in all material respects all of its obligations hereunder required
to be performed by it at or prior to the Closing Date, (B) the
representations and warranties of Buyer contained in this Agreement
shall be true in all material respects at and as of the Closing
Date, as if made at and as of such date, and (C) Seller shall have
received a certificate signed by the Vice President of Buyer to the
foregoing effect.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 Survival. Notwithstanding anything to the contrary
but subject to Section 8.8, the covenants and agreements contained
in this Agreement and the representations and warranties contained
in Sections 3.5, 3.6. 3.7, 3.16 and 3.18 shall survive the Closing
and (i) in the case of the representations and warranties contained
in Section 3.7, shall terminate one year following the Closing
Date, (ii) in the case of the representations and warranties
contained in Sections 3.5, 3.6, 3.16 and 3.18, shall survive
without limitation, (iii) in the case of the covenants and
agreements contained in this Agreement other than in this Article
10, such covenants and agreements requiring performance prior to
the Closing shall survive for one year from the Closing Date
(except those covenants and agreements contained in Section 5.6,
5.8, 5.10, 5.11, 5.13, 5.15 and 7.5, which shall survive without
limitation) and such covenants and agreements requiring performance
after the Closing shall survive for one year after the period
specified therein, or if no period is specified, indefinitely. The
other representations and warranties contained in this Agreement
shall not survive the Closing, except to the extent of any
Intentional Misrepresentation with respect to any representation or
warranty of Seller contained in Article 3 of this Agreement (other
than those contained in Sections 3.5, 3.6. 3.7, 3.16 and 3.18 of
this Agreement).
10.2 Indemnification. (a) Seller shall indemnify Buyer,
its Affiliates (including after the Closing the Company and its
Subsidiaries) and each of their respective officers, directors,
employees, stockholders, agents and representatives (collectively,
the "Buyer Indemnified Parties") against and hold them harmless
from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any
such indemnified party (other than any relating to Taxes, for which
indemnification provisions are set forth in Article 8 or relating
to environmental matters, for which indemnification provisions are
set forth in Section 10.3 or in clause (ii) below) arising from,
relating to or otherwise in respect of (i) any breach of any
representation or warranty of Seller contained in Sections 3.5,
3.6. 3.7, 3.16 and 3.18 of this Agreement for so long as such
representation or warranty survives the Closing, (ii) any
Intentional Misrepresentation with respect to any representation or
warranty of Seller contained in Article 3 of this Agreement (other
than in Sections 3.5, 3.6. 3.7, 3.16 and 3.18), (iii) any breach of
any covenant or agreement of Seller contained in this Agreement for
so long as such covenant or agreement survives and (iv) the
Retained Liabilities; provided, however, that with respect to the
representations and warranties contained in Section 3.7, the Seller
shall not have any liability under clause (i) above except to the
extent that the aggregate of all losses, liabilities, claims,
damages and expenses relating thereto for which Seller would, but
for this proviso, be liable exceeds a deductible on a cumulative
basis of $2,000,000 and Seller's liability under clause (i) above
insofar as it relates to the representations and warranties
contained in Section 3.7 shall in no event exceed $50,000,000;
provided, further, however, that Seller shall not have any
liability under clause (i) or (ii) above for any breach of any
representation or warranty of Seller so long as (x) prior to the
time of Closing Seller shall have provided written notice to Buyer
of such breach and (y) any condition to the obligation of Buyer set
forth in Sections 9.1 or 9.2 shall not have been satisfied but for
the waiver thereof by the Buyer and Seller shall have acknowledged
in writing that such condition has not been satisfied.
(b) Losses Net of Insurance, etc. The amount of any loss,
liability, claim, damage, expense or Tax for which indemnification
is provided under this Section 10.2, under Section 10.3 and under
Article 8 shall be net of any amounts recovered or recoverable by
the indemnified party under insurance policies (except captive
reinsurance or other such retention arrangements of such party)
with respect to such loss, liability, claim, damage, expense or Tax
(collectively, a "Loss") and shall be (i) to the extent not treated
as an adjustment to the Purchase Price as provided below, increased
to take account of any net Tax cost incurred by the indemnified
party arising from the receipt of indemnity payments hereunder
(grossed up for such increase) and (ii) reduced to take account of
any net Tax benefit (other than any Tax benefit addressed in
Section 8.6(b)) realized by the indemnified party arising from the
incurrence or payment of any such Loss. In computing the amount of
any such Tax cost or Tax benefit, the indemnified party shall be
deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the
receipt of any indemnity payment hereunder or the incurrence or
payment of any indemnified Loss. Any indemnity payment under this
Agreement shall be treated as an adjustment to the Purchase Price
for Tax purposes, unless a final determination (which shall include
the execution of a Form 870-AD or successor form) with respect to
the indemnified party or any of its Affiliates causes any such
payment not to be treated as an adjustment to the Purchase Price
for United States Federal income Tax purposes.
(c) Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto (x) if pursuant to
Section 10.2(a)(i) or (iii), shall terminate if and when the
applicable representation, warranty, covenant or agreement
terminates pursuant to Section 10.1 and (y) if pursuant to the
other clauses of Section 10.2(a), shall not terminate; provided,
however, that, as to Section 10.2(a)(i) and (iii), such obligation
to indemnify and hold harmless shall not terminate with respect to
any item as to which the Person to be indemnified shall have,
before the expiration of the applicable period, previously made a
claim by delivering a notice of such claim (stating in reasonable
detail the basis of such claim) to the Seller.
(d) Notwithstanding anything herein to the contrary, after
the Closing and with respect to those matters that an indemnified
person proposes form the basis for indemnification pursuant to
Section 10.2 (a):
(i) Such indemnified person shall agree to give prompt
notice to Seller of the assertion of any claim, or the commencement
of any suit, action or proceeding; provided, however, that failure
to give such notification shall not affect the indemnification
provided hereunder except to the extent Seller shall have been
actually prejudiced as a result of such failure. Seller shall have
the exclusive option to assume and control the defense of any such
suit, action or proceeding at its own expense if Seller
acknowledges its obligation to defend and to indemnify the
indemnified party therefor. If the Seller assumes such defense,
the indemnified party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by Seller, it being understood that
Seller shall control such defense. The Seller shall be liable for
the reasonable fees and expenses of counsel employed by the
indemnified party for any period during which the Seller has failed
to assume the defense hereof to the extent covered by Seller's
indemnification obligation. Seller shall not be liable under
Section 10.2 for any resolution or settlement effected without its
consent (which shall not be unreasonably withheld) of any such
claim, litigation or proceeding. If the Seller shall have assumed
the defense of a claim, the indemnified party shall agree to any
settlement, compromise or discharge of such claim which the Seller
may recommend and which by its terms obligates the Seller to pay
the full amount of the liability in connection with such claim, and
which would not otherwise adversely affect the indemnified party.
The indemnification required by Section 10.2(a) shall be
made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or
loss, liability, claim, damage or expense is incurred.
(ii) Buyer shall, and shall cause the Company to, cooperate
fully with the Seller in all reasonable respects. Buyer shall not,
and shall use best efforts to cause the Company not to, initiate,
encourage, or aid any action by any third party which could
reasonably be expected to lead to a claim by such third party,
provided that if required to do so pursuant to any applicable law,
Buyer shall promptly notify Seller of such requirement and the
content and timing of any proposed disclosure and shall consider,
in good faith, changes to such disclosure proposed by Seller.
(e) After the Closing, Article 8, Section 10.2 and Section
10.3 will provide the exclusive remedy for any misrepresentation,
breach of warranty, covenant or other agreement (other than those
contained in Sections 2.3, 2.4, 5.5, 5.13, 6.1, 6.2, 6.3, 6.4, 7.4,
7.5, 12.3 and 12.8) or other claim arising out of this Agreement or
the transactions contemplated hereby. Without limiting the
generality of the foregoing, the Buyer hereby waives, releases and
discharges, and shall cause its Affiliates (including, after the
Closing, the Company and its Subsidiaries) to waive, release and
discharge, Seller and its Affiliates from any and all suits,
actions, causes of action, rights for contribution and claims of
whatever kind, known or unknown, now existing or hereafter arising,
including without limitation any action under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.A.
Sec. 9601 et seq., as it may be amended from time to time, or any
state equivalent, that the releasing entity may have, by statute or
otherwise, at any time against Seller and its Affiliates to the
extent that such released claims arise under or relate to
environmental laws as they may exist at any time.
(f) Buyer shall use reasonable efforts (not involving the
expenditure of material amounts of money) to obtain reimbursement
under applicable insurance policies of the Company (excluding
policies issued after the Closing) which were in effect for periods
prior to the Closing to the extent applicable to any loss,
liability, claim, damage or expense subject to indemnification
under this Article.
10.3 Environmental Indemnification. Other than to the
extent covered by Section 5.13(b) or, insofar as it relates to
Section 3.17, clause (ii) of Section 10.2(a) and other than
Sections 10.2(b), 10.2(e) and 10.2(f) which shall apply to this
Section 10.3, Seller's indemnification obligations with respect to
environmental matters shall be governed exclusively by this
Section.
(a) Subject to the terms and conditions set forth in
subparagraph (b) hereof, with respect to any matters arising under
or related to liabilities under any Environmental Law, Seller will
indemnify the Buyer Indemnified Parties for all losses,
liabilities, claims, damages or expenses which, for purposes of
this Section, shall include administrative oversight costs,
reasonable legal fees and expenses, natural resource damages and
consultants fees (hereinafter collectively referred to as
"Environmental Damages") incurred by the Buyer Indemnified Parties
arising from or relating to:
(i) any fact, condition or circumstance existing prior to
the Closing Date at any property or facility which is not as of
the Closing Date but was at any time prior to the Closing Date
owned, leased or operated by the Company, or any predecessor,
subsidiary or division thereof;
(ii) any matter disclosed in Section 3.17(a) of the
Disclosure Schedule (but excluding any matter disclosed in
Section 3.13(a) of the Disclosure Schedule and any disclosure
relating to the Riverhead facility, which shall be governed by
Section 5.13(b)) to the extent such matter arose or existed on
or prior to the Closing Date and the Aprea and Racanelli
lawsuits described in Section 3.12 of the Disclosure Schedule;
(iii) any disposal of hazardous wastes, hazardous
substances or other hazardous materials at any time prior to
Closing at any location not owned, operated or leased by the
Company (excluding any adjacent or nearby property onto which
any such hazardous wastes, hazardous substances or hazardous
materials generated at any property owned, operated or leased by
the Company have migrated, which shall instead be governed by
the terms of clause (iv) of this clause (a), if otherwise
applicable); provided, however that Seller's obligations to
indemnify the Buyer Indemnified Parties for Environmental
Damages under this subparagraph (iii) shall be limited to any
matters as to which Buyer has made a claim under Article 10
within eight years after the Closing; and
(iv) any fact, condition or circumstance existing prior to
the Closing at any property or facility owned, leased or
operated by the Company as of the Closing that requires
remediation under Environmental Laws as in effect as of the
Closing Date or that otherwise constitutes a violation of
Environmental Laws as in effect as of the Closing Date,
provided, however, that Seller's obligations for Environmental
Damages under this subparagraph (iv) shall be limited to any
matters as to which Buyer has made a claim under Article 10
within five years after the Closing.
Buyer shall give prompt notice to Seller of the assertion
of any written claim, the commencement of any suit, action or
proceeding, or the existence of any condition or circumstance
relating to matters which could form the basis for indemnification
under this Section 10.3; provided, however, that failure to give
such notification shall not affect the indemnification provided
hereunder except to the extent Seller shall have been actually
prejudiced as a result of such failure.
(b) Seller's obligation to indemnify the Buyer Indemnified
Parties for Environmental Damages is subject to the following
conditions:
(i) Seller shall have, at its option, exclusive control
over any matter as to which Seller is potentially obligated to
indemnify the Buyer Indemnified Parties including, without
limitation, (A) the right to control the resolution of any claim
or the defense of any action, suit or proceeding (except for
third party claims which are not reasonably expected to involve
any on-site investigation, remediation or clean-up, which shall
be governed by the terms of Section 10.2(d) above) and (B) after
reasonable consultation with Buyer, the exclusive right to
control any negotiations with any governmental entities, to
prepare and implement remedial action plans, to conduct any
investigation, monitoring or remediation and to take any other
action reasonably calculated to address any requirements imposed
by a governmental entity or by an Environmental Law and/or to
lead to the issuance of a no further action letter (or the
substantial equivalent thereof) with respect to environmental
conditions on the property or facility;
(ii) Seller's obligation to indemnify the Buyer Indemnified
Parties for Environmental Damages shall terminate when the
results of any clean-up, remediation or investigation at the
affected property meets, at Seller's option, either (A) all
requirements of the governmental entity with authority over such
clean-up, remediation or investigation or (B) all requirements
of Environmental Law in effect at the time of the Closing (or,
at Seller's option, as in effect on the date the clean-up,
remediation or investigation is concluded), in any event based
on the nature of the use of the property as of the Closing
provided that, notwithstanding anything herein to the contrary,
with respect to the matters referred to in Section 3.17(a) of
the Disclosure Schedule relating to the Greenlawn, New York
facility (and excluding any matters described in Section 3.13
and 3.17(c) of the Disclosure Schedule relating to such
facility), in the event that the Greenlawn site is delisted or
deleted from the New York Registry of Inactive Hazardous Waste
Disposal Sites, the Seller shall have no further indemnification
obligations in connection with such matters and provided further
that if the Greenlawn site is not so delisted or deleted,
Seller's indemnification obligations in connection with any such
matter shall terminate when (A) the results of any cleanup,
remediation or investigation undertaken by Seller in connection
with any such matter meets all requirements of the governmental
entity with authority over such matter in (x) the judgment of
such governmental entity or (y) the reasonable judgment of an
environmental consultant (which shall not be the consultant
retained by Seller to perform any such clean-up, remediation or
investigation) selected by Seller, subject to Buyer's approval,
which shall not be unreasonably withheld or delayed (the
"Consultant") or (B) in the reasonable judgment of the
Consultant, there is no data indicating that further remediation
in connection with such matter is necessary (based on a review
of filings or results of testing submitted by or on behalf of
Seller or the Company or its Subsidiaries to the appropriate
governmental entities in connection with such matter and
responses made and letters or other documentation issued by such
governmental entities), in each case taking into account the
nature of the use of the property as of the Closing;
(iii) Buyer agrees that it will, and will cause its
Affiliates (including, after the Closing, the Company and its
Subsidiaries) to, provide reasonable access to the affected
premises to permit Seller to fulfill its obligations under this
Agreement; provided that Seller agrees to use reasonable efforts
to avoid any unreasonable interference with the normal business
operations of the Company. Such access shall include reasonable
use of utilities and other on-site facilities, at Seller's
expense and in compliance with all requirements of Environmental
Law;
(iv) Buyer agrees that it will not, and will cause its
Affiliates (including, after the Closing, the Company and its
Subsidiaries) not to, (A) undertake or permit any voluntary
action (not including property maintenance, building expansion
or construction undertaken in the ordinary course of business)
at any property or facility currently owned or operated by the
Company that could reasonably be expected to lead to liability
under Environmental Law or could reasonably be expected to lead
to further requirements under Environmental Law to investigate
or remediate conditions at the property or facility, and (B)
actively seek the involvement of any governmental entity in
connection with any fact, circumstance or condition that could
constitute or lead to the discovery of indemnifiable
Environmental Damages, unless, in either case, it is required to
do so by law, in which case Buyer agrees to notify Seller of
such requirement and the content and timing of the anticipated
contact in advance and shall reasonably consider any changes to
such contact proposed by Seller; and
(v) Seller's indemnification obligations under clauses
(i), (ii) and (iv) of Section 10.3(a) above are expressly
conditioned upon any subsequent owner, tenant or occupant of any
facility or property (and their respective Affiliates) owned,
operated or leased by the Company on or after the Closing and
any subsequent owner of the Company (and its Affiliates)
complying with the provisions set forth in this Section 10.3(b).
ARTICLE 11
TERMINATION
11.1 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer;
(ii) by either Seller or Buyer if the Closing shall not
have been consummated on or before October 31, 1996;
(iii) by either Seller or Buyer if there shall be any law
or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate
any nonappealable final judgement, injunction, order or decree of
any court or governmental body having competent jurisdiction; or
(iv) by Seller if the condition set forth in Section
9.1(ii) has not been satisfied or waived within 45 days of
acceptance of the initial filing pursuant to 31 CFR 800.404 of
Exon-Florio notification; provided that if Seller gives notice of
termination pursuant to this clause (iv), the termination shall not
become effective if prior to the expiration of 2 business days
after receipt of such notice, the condition has been waived by
Buyer or satisfied, and provided further that if either party is
notified pursuant to 31 CFR 800.403 that there exists a
deficiency in such filing attributable to information to be
provided by the Company, the 45 day period shall be tolled until
the date that the Company shall have provided the requisite
information.
The party desiring to terminate this Agreement shall give
written notice of such termination to the other party.
11.2 Effect of Termination. If this Agreement is
terminated as permitted by Section 11.1, termination shall be
without liability of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such
party) to the other parties to this Agreement; provided that if
such termination shall result from the willful failure of any party
to fulfill a condition to the performance of the obligations of the
other party or to perform a covenant contained herein or knowing
breach as of the date hereof by any party of any representation or
warranty contained herein, such party shall be fully liable for any
and all damages incurred or suffered by the other party as a result
of such failure or breach. The provision of Section 12.3 shall
survive any termination hereof pursuant to Section 11.1.
ARTICLE 12
MISCELLANEOUS
12.1 Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including facsimile transmission) and shall be given,
if to Buyer, to:
GEC-Marconi Electronic Systems Corporation
164 Totowa Road
P.O. Box 975
Wayne, NJ 07474-0975
Attention: General Counsel
Fax: (201) 633-6431
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019-7475
Attention: Melvin L. Bedrick, Esq.
Fax: (212) 765-0993
if to Seller, to:
ESCO Electronics Corporation
8888 Ladue Road, Suite 200
St. Louis, Missouri 63124
Attention: General Counsel
Fax: (314) 213-7215
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: C. Mayer, Esq.
Fax: (212) 450-4800
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if
received prior to 5 p.m. in the place of receipt and such day is a
business day in the place of receipt. Otherwise, any such notice,
request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
12.2 Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Closing Date if,
but only if, such amendment or waiver is in writing and is signed,
in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law.
12.3 Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring
such cost or expense.
12.4 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the
consent of each other party hereto except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of
its wholly owned subsidiaries or its other Affiliates, the right to
purchase all or a portion of the Shares, but no such transfer or
assignment will relieve Buyer of its obligations hereunder.
12.5 Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York,
without regard to the conflicts of law rules of such state.
12.6 Counterparts; Third Party Beneficiaries. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. No
provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
12.7 Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between
the parties with respect to the subject matter of this Agreement
and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter
of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been
made or relied upon by either party hereto. Neither this Agreement
nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
12.8 Jurisdiction. Except as otherwise expressly
provided in this Agreement, any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of
or in connection with, this Agreement or the transactions
contemplated hereby may be brought in the United States District
Court for the Southern District of New York or any other New York
State court sitting in New York City, and each of the parties
hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is
brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be
served on any party by U.S. registered mail to such party's address
set forth above and shall be deemed effective service of process on
such party.
12.9 Severability. If any provision of this Agreement
(or any portion thereof) or the application of any such provision
(or any portion thereof) to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or
the remaining portion thereof) or the application of such provision
to any other persons or circumstances. This Section 12.9 shall
apply to Section 5.5 only as a whole and not to any subpart
thereof, to which subparts Section 5.5(b) shall instead apply.
12.10 Disclosure Schedule. Unless otherwise noted, each
reference in this Agreement to the Disclosure Schedule shall be
deemed to be a reference to the section of such schedule numbered
correspondingly to the section of this Agreement in which such
reference is contained.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
GEC-MARCONI ELECTRONIC SYSTEMS CORPORATION
By: /s/ John A. Currier
Title: Vice President, General Counsel
and Secretary
ESCO ELECTRONICS CORPORATION
By: /s/ Walter Stark
Title: Sr. Vice President, Secretary
and General Counsel
________________________________
Hazeltine Corporation hereby
agrees to make the payment
provided for in Section 2.4
of the above agreement
HAZELTINE CORPORATION
By: /s/ Walter Stark
Title: Assistant Secretary
EXHIBIT NO. 2
FIRST AMENDMENT AGREEMENT TO THE STOCK PURCHASE
AGREEMENT
This Amendment Agreement, effective as of July 19, 1996, is made by
and between ESCO Electronics Corporation (ESCO) and GEC-Marconi
Electronic Systems Corporation (GEC).
WHEREAS, GEC and ESCO executed a Stock Purchase Agreement
(the Stock Purchase Agreement), dated as of May 23, 1996, relating to the
purchase and sale of 100% of the Common Stock of Hazeltine Corporation;
and
WHEREAS, the parties are desirous of amending Section 6.2(b) of the
Stock Purchase Agreement,
NOW, THEREFORE, the parties agree as follows:
1. Section 6.2(b) of the Stock Purchase Agreement is hereby
deleted in its entirety and replaced by the following:
If the employment of any employee listed on Schedule 6.2(b) is
involuntarily terminated without cause during the one year period after the
Closing Date, Buyer will cause the Company to pay such employee an amount
equal to no less than the sum of one years annualized base salary (which base
salary shall be the greater of such employees annualized base salary on the
Closing Date or on the date of termination) and the most recent annual bonus
received by such employee, less any base salary and bonus paid to such
employee by the Company during such one year period. Notwithstanding the
above, if the employment of any employee listed on Schedule 6.2(b) is
involuntarily terminated without cause during the two year period after the
Closing Date, Buyer will cause the Company to pay such employee an amount
equal to no less than the sum of six months annualized base salary (which base
salary shall be employees annualized base salary on the date of termination)
and one half (1/2) the most recent annual bonus received by such employee.
For purposes of this Section 6.2(b), the offer of a job within the Company or
Buyer (which offer may require a residence relocation) with comparable
compensation shall not be deemed to be an involuntary termination. As a
prerequisite to eligibility for any entitlement under this Section 6.2(b), each
employee listed on Schedule 6.2(b) whose employment is terminated must
execute, in a form to be provided by Buyer: (a) a waiver and release
agreement covering all employment-related claims against the Buyer, the
Company and Seller, (b) a post-termination employment and solicitation
restriction agreement (the Restriction Agreement) covering a reasonable
period of time; and (c) a reasonable confidentiality and non-disclosure
agreement (the Non-Disclosure Agreement). The Restriction Agreement will
provide that the employee shall not accept employment with, provide
consulting services for, or assist in the formation of a business which intends
to become, a primary competitor of Buyer or the Company or their Affiliates,
which employment, consulting, or formation relates to the sale, marketing,
design and/or engineering of specific Buyer and Company products. The
Restriction Agreement will set forth a reasonable list of primary industry
competitors of Buyer and Company and a reasonable list of material specific
products of Buyer and Company. The list of primary competitors and material
specific products shall be subject to the mutual agreement of the employee and
Buyer. Nothing contained in the Restriction Agreement shall preclude the
employee from accepting employment or providing consulting services in the
financial, legal, human resources or administration areas. The Restriction
Agreement and the Non-Disclosure Agreement shall be suitable to each
employees position and consistent with custom and practice in the defense
industry and compliant with the laws of the State of New York. Failure to
execute any or all of the above agreements by an employee listed on Schedule
6.2(b) will result in such employee being ineligible to receive the benefits of
this Section 6.2(b), and instead such employee will be subject to the same
termination/ severance benefits (with the same terms and conditions) as apply
to all other employees of the Company.
2. All other terms and conditions of the Stock Purchase Agreement
shall remain unchanged.
IN WITNESS WHEREOF, ESCO and GEC, by their duly authorized
officers, execute this Agreement.
ESCO ELECTRONICS GEC-MARCONI ELECTRONIC
CORPORATION SYSTEMS CORPORATION
By:/s/ Walter Stark By:/s/ John A. Currier
Name: Walter Stark Name: John A. Currier
Senior Vice President,
Title:General Counsel & SecretaryTitle: Vice-President
