ASSET PURCHASE AGREEMENT
by and between
VARO INC.
and
VARO ACQUISITION CORP.
Dated as of September 13, 1996
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1.1 Certain Definitions 1
ARTICLE II ASSETS TO BE ACQUIRED
2.1 Acquisition and Transfer of Assets 8
2.2 Excluded Assets 10
2.3 Assumed Liabilities 11
2.4 Excluded Liabilities 12
2.5 Cancellation of Permits, Bonds and Guarantees 12
ARTICLE III PURCHASE PRICE
3.1 Purchase Price and Payment 13
3.2 Purchase Price Adjustment 13
3.3 Interim Period Cash Adjustment. 14
3.4 Allocation of Purchase Price 14
ARTICLE IV THE CLOSING
4.1 Closing Date 14
4.2 Proceedings at the Closing 15
4.3 Deliveries by the Seller to the Purchaser 15
4.4 Deliveries by the Purchaser to the Seller 16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER
5.1 Organization and Good Standing 17
5.2 Corporate Authority; No Violation 17
5.3 Title to Assets Other than Leased Real Property and
Intellectual Property 18
5.4 Title to Leased Real Property 18
5.5 Consents 18
5.6 Permits 18
5.7 Financial Statements 18
5.8 Absence of Certain Developments 19
5.9 Material Contracts 19
5.10 Intellectual Property 19
5.11 Taxes 19
5.12 Employee Benefits 20
5.13 Litigation; Compliance With Law 20
5.14 Receivables 21
5.15 Inventory 21
5.16 Assets Necessary to Conduct the Business 21
5.17 Work in Process 21
5.18 Environmental Matters 21
5.19 Brokers 22
5.20 Insurance Coverage 22
5.21 Labor Matters 23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Organization and Good Standing 23
6.2 Authority; No Violation 23
6.3 Consents 24
6.4 Availability of Funds 24
6.5 Litigation 24
6.6 Brokers 24
ARTICLE VII COVENANTS OF THE SELLER
7.1 Cooperation 25
7.2 Access to Documents; Opportunity to Ask Questions 25
7.3 Conduct of Business 25
7.4 Consents and Conditions 26
7.5 Confidentiality 27
7.6 Non-Solicitation 27
ARTICLE VIII COVENANTS OF THE PURCHASER
8.1 Cooperation 27
8.2 Confidentiality 28
8.3 Consents and Conditions 28
8.4 Permits, Bonds and Guarantees 28
8.5 Financing 28
ARTICLE IX ADDITIONAL COVENANTS
9.1 Offer of Employment 28
9.2 Employment and Other Agreements 29
9.3 Employee Benefit Plans and Benefit Arrangements 29
9.4 Welfare Plans 29
9.5 Credited Service 30
9.6 Liabilities Excluded 30
9.7 Assignment of Contract Payments 30
9.8 Grant of Security Interest 31
ARTICLE X TAX MATTERS
ARTICLE XI CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
11.1 Representations, Warranties and Covenants 32
11.2 No Prohibition 33
11.3 Opinion of Seller's Counsel 33
11.4 Delivery of Documents 33
11.5 Consents 33
11.6 Financing 33
ARTICLE XII CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
12.1 Representations, Warranties and Covenants 33
12.2 Subcontract 34
12.3 No Prohibition 34
12.4 Opinion of the Purchaser's Counsel 34
12.5 Delivery of Documents 34
12.6 Consents 34
ARTICLE XIII ADDITIONAL POST-CLOSING COVENANTS
13.1 Further Assurances 34
13.2 Assignments; Novations 35
13.3 Provisions Relating to Certain Assets 37
13.4 Use of Transferred Employees 38
13.5 AIM-9 Warranty. 39
13.6 Provisions Relating to Certain Excluded Assets 39
13.7 Public Announcements 39
13.8 Joint Post-Closing Covenant of the Seller and the
Purchaser 39
13.9 Books and Records; Personnel 40
ARTICLE XIV INDEMNIFICATION AND RELATED MATTERS
14.1 Indemnification by the Seller 41
14.2 Indemnification by the Purchaser 41
14.3 Determination of Damages and Related Matters 42
14.4 Limitation on Indemnification Liabilities 42
14.5 Survival of Representations, Warranties and Covenants43
14.6 Notice of Indemnification 43
14.7 Indemnification Procedure for Third Party Claims 43
14.8 Consequential Damages 44
14.9 Exclusive Remedy 44
ARTICLE XV TERMINATION
15.1 Termination 44
15.2 Liabilities After Termination 44
ARTICLE XVI MISCELLANEOUS
16.1 Prorations 44
16.2 Waiver of Compliance with Bulk Transfer Laws 45
16.3 Entire Agreement 45
16.4 Governing Law 45
16.5 Expenses 45
16.6 Table of Contents and Headings; Certain Construction
Rules 45
16.7 Notices 46
16.8 Severability 47
16.9 Binding Effect; No Assignment 47
16.10 Amendments 47
16.11 Counterparts 47
SCHEDULES AND EXHIBITS
Schedule 2.1(d) Real Property
Schedule 2.1(h) Permits
Schedule 2.2(f) Excluded Intellectual Property
Schedule 2.2(h) Excluded Contracts
Schedule 2.2(p) Other Excluded Assets
Schedule 2.4(d) Excluded Liabilities
Schedule 5.1 States Where Seller is Qualified
Schedule 5.2 Corporate Authority; No Violation
Schedule 5.3(a)(iii) Third Party Assets
Schedule 5.3(a)(iv) Encumbrances to be Extinguished at Closing
Schedule 5.3(b) Seller Maintenance Assets
Schedule 5.5 Required Consents
Schedule 5.6 Permits
Schedule 5.7 Financial Statements
Schedule 5.8 Certain Business Developments
Schedule 5.9 Material Contracts
Schedule 5.10 Certain Intellectual Property
Schedule 5.11(c) Tax Disputes
Schedule 5.11(d) Agreements Regarding Tax Liability
Schedule 5.12(a) Employee Benefit Plans
Schedule 5.12(b) Employment and Severance Contracts
Schedule 5.12(c) Identities, Positions of Employees
Schedule 5.13 Litigation
Schedule 5.16 Assets Necessary to Conduct Business
Schedule 5.18 Environmental Matters
Schedule 5.20 Insurance Policies
Schedule 12.2 Subcontracted Contracts
Exhibit A Initial Balance Sheet
Exhibit B Form of ▇▇▇▇ of Sale and Assignment
Exhibit C Form of Undertaking and Assumption
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Purchaser's Counsel
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated
as of September 13, 1996, is by and between Varo Inc., a Texas
corporation (the "Seller"), and Varo Acquisition Corp., a
Delaware corporation (the "Purchaser").
RECITALS
WHEREAS, the Seller, principally through its Electronic
Systems Division, is engaged in the business of manufacturing and
selling guided missile launcher systems and electric power
conversion systems for military and commercial applications (the
"Business"); and
WHEREAS, the Purchaser desires to purchase, and the
Seller desires to sell, substantially all of the assets and
properties of the Seller employed exclusively in the Business
and, as part of such purchase and sale, the Seller desires to
assign, and the Purchaser desires to assume, all of the
obligations and liabilities of the Business subject, in each
case, to the exceptions, terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and agreements
hereinafter set forth, and upon the terms and subject to the
conditions hereinafter set forth, the Seller and the Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement,
the following terms shall have the respective meanings set forth
below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounts Receivable" shall have the meaning set forth
in Section 2.1(c) hereof.
"Affiliate" shall mean, with respect to any specified
Person, any Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under
common control with, the Person specified.
"Agreement" shall have the meaning set forth in the
preamble hereto.
"AIM-9 Claim" shall mean the constructive change and
partial termination for convenience claim filed by the Seller
pursuant to the AIM-9 Contract and currently pending against the
United States Department of the Air Force before the Armed
Services Board of Contract Appeals under the appeals docketed
under numbers 47945 and 47946 and any claim for compensation for
warranty work performed prior to the Closing Date.
"AIM-9 Contract" shall mean the AIM-9 launcher contract
number F09603-86-C-2278.
"AIM-9 Warranty Costs" shall mean all allocable costs
(except for general and administrative expenses) incurred by the
Purchaser in performing all warranty work as required by the
United States government under the AIM-9 Contract which is not
compensable under the AIM-9
Contract.
"Arbitrator" shall have the meaning set forth in
Section 3.2(c) hereof.
"Assumed Liabilities" shall have the meaning set forth
in Section 2.3 hereof.
"Benefit Arrangement" shall have the meaning set forth
in Section 5.11(b) hereof.
"Business" shall have the meaning set forth in the
recitals hereof.
"Bylaws" shall mean, with respect to any corporation,
the bylaws of such corporation, as in effect on the date hereof.
"Cash Transactions" shall mean receipts or
disbursements of cash or cash equivalents in the ordinary course
of business.
"Charter" shall mean, with respect to any corporation,
the certificate or articles of incorporation (or similar
governing document) of such corporation, as in effect on the date
hereof.
"Citicorp" shall have the meaning set forth in Section
9.7(a) hereof.
"Closing" shall mean the consummation of the
transactions contemplated hereby.
"Closing Balance Sheet" shall have the meaning set
forth in Section 3.2(a) hereof.
"Closing Date" shall mean the date on which the Closing
occurs.
"Closing Net Book Value" shall have the meaning set
forth in Section 3.2(b) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" shall have the meaning set
forth in Section 7.2 hereof.
"Contract" shall mean any contract (including, without
limitation, any Government Contract), agreement, indenture, note,
bond, loan, instrument, lease, sublease, conditional sale
contract, mortgage, license, sublicense, franchise, insurance
policy, commitment or other binding arrangement or agreement,
whether written or oral.
"CS First Boston" shall mean CS First Boston
Corporation.
"Damages" shall mean all claims, losses, damages,
costs, expenses and liabilities (including reasonable attorneys'
fees incident to any of the foregoing).
"Employee Benefit Plan" shall have the meaning set
forth in Section 5.12(a) hereof.
"Employees" shall mean all Persons employed in the
Business on the day immediately prior to the Closing Date,
excluding any Persons on permanent leave of absence from the
Business.
"Environmental Claim" shall mean any investigation,
notice of violation, action, suit, injunction, judgment, order,
decree, fine, lien, proceeding, or claim (whether administrative,
judicial or private in nature) arising: (A) in connection with,
an actual or alleged violation of any Environmental Law; (B) in
connection with any Hazardous Material; (C) from any abatement,
removal, remedial, corrective, or other response action in
connection with any Hazardous Material, Environmental Law, or
other order or directive of any federal, state or local
Governmental Authority; or (D) from any actual or alleged damage,
injury, threat, or harm to health, safety, natural resources, or
the environment.
"Environmental Law" shall mean any federal, state,
local or foreign statute, rule or regulation governing,
regulating or relating to emissions into the air, water or land
of hazardous or solid wastes or Hazardous Material, including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
9601 et seq.; the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. 6901 et
seq.; the Federal Water Pollution Control Act of 1972, as amended
by the Clean Water Act of 1977, as amended, 33 U.S.C. 1251 et
seq.; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. 11001 et seq.; the Clean Air Act of 1966, as
amended by the Clean Air Act Amendments of 1990, 42 U.S.C. 7401
et seq.; and common law.
"Environmental Liability" shall mean any Liability
attributable to the Seller or any Affiliate relating to the
Business or the Purchased Assets or the Leased Real Property that
arises under or is based upon any Environmental Law.
"Equipment" shall have the meaning set forth in
Section 2.1(a) hereof.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Excluded Assets" shall have the meaning set forth in
Section 2.2 hereof.
"Export Control Laws" shall mean all Laws, now or
hereafter in effect, and in each case as amended or supplemented
from time to time, and any judicial or administrative
interpretations thereof, relating to the export or reexport of
commodities and technologies. Export Control Laws include,
without limitation, the Export Administration Act of 1979 (24
U.S.C. Sections 2401-2420); the International Emergency Economic
Powers Act (50 U.S.C. Sections 1701-1706); the Trading with the
Enemy Act (50 U.S.C. Sections 1 et seq.); the Arms Export Control
Act (22 U.S.C. Sections 2278, 2279); and the International
Boycott Provisions of Section 999 of the Code.
"Facility" shall have the meaning set forth in
Section 9.1(c) hereof.
"Final Purchase Price Adjustment" shall have the
meaning set forth in Section 3.2(c) hereof.
"Financial Statements" shall have the meaning set forth
in Section 5.7 hereof.
"Governmental Approval" shall mean any permit, license,
variance, certificate, consent, letter, clearance, closure,
exemption, authorization, decision or action or approval of any
federal, state or local Governmental Authority with jurisdiction
over any Environmental Law.
"Governmental Authority" shall mean any government, any
arbitration panel, any court or any governmental department,
commission, board, bureau, agency or instrumentality of the
United States or any foreign or domestic state, province,
commonwealth, nation, territory, possession, country, parish,
town, township, village or municipality.
"Government Contract" shall mean any Contract with
respect to the Business between the Seller and (i) any United
States Governmental Authority, (ii) any prime contractor of any
United States Governmental Authority, or (iii) any subcontractor
with respect to any Contract described in clause (i) or (ii).
"Hazardous Material" shall mean any substance,
chemical, compound, product, solid, gas, liquid, waste, by-
product, pollutant, contaminant, or material which is hazardous
or toxic, and includes without limitation, asbestos or any
substance containing asbestos, polychlorinated biphenyls,
petroleum (including crude oil or any fraction thereof), and any
hazardous or toxic waste, material, or substance regulated as
such under any Environmental Law.
"Imo" shall mean Imo Industries Inc., a Delaware
corporation and the owner of all of the outstanding shares of
capital stock of the Seller.
"Indemnitee" shall have the meaning set forth in
Section 14.6 hereof.
"Indemnitor" shall have the meaning set forth in
Section 14.6 hereof.
"Initial Balance Sheet" shall mean the balance sheet of
the Business at March 31, 1996, attached as part of Exhibit A
hereto.
"Intellectual Property" shall mean all United States
and foreign (i) patents and patent applications (including
reissues, divisions, continuations-in-part and extensions
thereof), invention disclosures, inventions and improvements
thereto, (ii) trademarks, trade names, service marks, trade dress
and logos and registrations and applications for registration
thereof, (iii) copyrights and registrations thereof, (iv)
research, developments, processes, trade secrets, know-how,
formulae, compositions, designs, parts routings and
manufacturing, engineering and other technical information, (v)
computer software, data and documentation (in whatever form or
medium including electronic media), (vi) mask work and other
semiconductor chip rights and registrations thereof and (vii)
licenses of any of the foregoing and all rights to ▇▇▇ for, and
remedies against, past, present and future infringements thereof,
and rights of priority and protection of interests therein under
the Laws of any jurisdiction.
"Interest" shall have the meaning set forth in
Section 7.4 hereof.
"Interim Period" shall have the meaning set forth in
Section 3.3 hereof.
"Law" shall mean any federal, state, local or foreign
law (including common law), treaty, statute, code, ordinance,
rule, regulation or other requirement or guideline issued by a
Governmental Authority; provided, however, that Law shall not
include any Environmental Law.
"Leased Real Property" shall mean the real property
which is leased by the Seller and located at (i) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and (ii) ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇-
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"Legal Proceeding" shall mean any judicial,
administrative or arbitral action, suit, proceeding (public or
private), claim or governmental proceeding.
"Liabilities" shall have the meaning set forth in
Section 2.3 hereof.
"Lien" shall mean any lien, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of
first refusal, easement, or other real estate declaration,
covenant, condition, restriction or servitude, transfer
restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Effect" shall mean any material
adverse effect on, or any effect that results in a material
adverse change in, the Purchased Assets as a whole or the
business, financial condition, results of operations or
liabilities of the Business as a whole.
"Material Contracts" shall have the meaning set forth
in Section 5.9 hereof.
"Negative Adjustment" shall have the meaning set forth
in Section 3.2(b) hereof.
"Novation Agreements" shall have the meaning set forth
in Section 13.2(b) hereof.
"Order" shall mean any order, injunction, judgment,
decree, ruling, writ, assessment or arbitration award.
"Pension Plan" shall mean the existing defined benefit
pension plan covering the Employees.
"Permit" shall mean any written approval,
authorization, consent, exemption, franchise, license, permit,
waiver, security clearance, certificate of occupancy or use,
exception or variance granted by or any registration with any
Person.
"Permitted Encumbrances" shall mean (i) as reflected on
the Financial Statements, with such changes in the amount thereof
as may have occurred in the normal and ordinary course of
business on or prior to the Closing Date; (ii) Liens for current
Taxes not yet due and delinquent, being contested in good faith
by appropriate proceedings or as to which adequate reserves have
been established by a Seller; (iii) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, materialmen and
other similar Persons and other Liens incurred in the ordinary
course of business for sums not yet delinquent or being contested
in good faith, (iv) Liens relating to deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, (v) title to or any other interest in work-in-process
or other tangible personal property used or held for use in the
Business by any United States Governmental Authority under FAR
Sections 52.232-16, 52.245-2(c), 52.245-5(c), 52.245.17,
52.245.18 or any clause of similar import, (vi) the interest of
any United States Governmental Authority in technical data,
computer software, and patents under the clauses pertaining
thereto in any Government Contract relating to the Business,
(vii) the rights of the landlord in respect of the Leased Real
Property, (viii) Liens or other rights of Governmental
Authorities or other Persons in respect of property or assets
delivered to the Seller for repair, maintenance or other
improvements as described in Section 2.1(l) or (m), and (ix) such
other imperfections in title, charges, easements, restrictions,
and encumbrances that do not, individually or in the aggregate,
have a Material Adverse Effect.
"Person" shall mean any individual, corporation,
partnership, firm, joint venture, association, joint-stock
company, trust, unincorporated organization or Governmental
Authority.
"Positive Adjustment" shall have the meaning set forth
in Section 3.2(b) hereof.
"Preliminary Net Book Value" shall have the meaning set
forth in Section 3.2(b) hereof.
"Preliminary Purchase Price Adjustment" shall have the
meaning set forth in Section 3.2(b) hereof.
"Purchase Price" shall have the meaning set forth in
Section 3.1 hereof.
"Purchased Assets" shall have the meaning set forth in
Section 2.1 hereof.
"Purchaser" shall have the meaning set forth in the
preamble hereto.
"Purchaser Documents" shall have the meaning set forth
in Section 6.2 hereof.
"Purchaser Representatives" shall have the meaning set
forth in Section 7.2 hereof.
"Secured Receivables" shall have the meaning set forth
in Section 9.8(a) hereof.
"Security Agreement" shall have the meaning set forth
in Section 9.8(a) hereof.
"Seller" shall have the meaning set forth in the
preamble hereto.
"Seller Documents" shall have the meaning set forth in
Section 5.2 hereof.
"Seller Maintenance Assets" shall have the meaning set
forth in Section 2.1(m) hereof.
"Straddle Period" shall mean any taxable period
beginning prior to and ending after the Closing Date.
"Subcontract" shall have the meaning set forth in
Section 12.2 hereof.
"Subcontracted Contracts" shall have the meaning set
forth in Section 12.2 hereof.
"Subsidiary" shall mean, with respect to any Person, a
corporation, partnership or other entity in which such Person, a
Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, has or have
(i) a majority ownership in the equity thereof, (ii) the power,
under ordinary circumstances, to elect, or to direct the election
of, a majority of the board of directors or other governing body
of such entity, (iii) the title or function of general partner or
the right to designate the Person having such title or function
or (iv) control thereof.
"Taxes" shall mean all taxes, charges, fees, levies or
other similar assessments or liabilities (including, without
limitation, income, receipts, ad valorem, value added, excise,
property (whether real property or personal property), sales,
transfer, occupation, service, stamp, use, licensing,
withholding, employment or unemployment, payroll, share, capital,
surplus, profits, franchise, occupational, net worth or other
taxes) imposed by any tax authority, whether computed on a
separate, consolidated, unitary or combined basis or in any other
manner, and includes any interest, fines, penalties, assessments,
deficiencies or additions to tax.
"Third Party Assets" shall have the meaning set forth
in Section 2.1(l) hereof.
"Threshold Amount" shall have the meaning set forth in
Section 14.4 hereof.
"Transferred Employees" shall mean all Employees who
accept offers of employment from the Purchaser on or after the
Closing Date.
"United States Governmental Authority" shall mean any
government, any arbitration or mediation panel, any court or any
governmental department, commission, board, bureau, agency or
instrumentality of the United States or any domestic state,
territory, possession, county, parish, town, township, village or
municipality.
"Varo Trademark Rights" shall mean (a) the name "Varo"
and (b) the Varo logo.
"WARN Act" shall have the meaning set forth in
Section 9.1(c) hereof.
"Welfare Plan" shall have the meaning set forth in
Section 9.4 hereof.
"Working Capital" shall have the meaning set forth in
Section 7.3 hereof.
ARTICLE II
ASSETS TO BE ACQUIRED
2.1 Acquisition and Transfer of Assets. At the
Closing, upon the terms and subject to the conditions hereinafter
set forth, the Seller shall sell, assign, transfer, convey and
deliver to the Purchaser, and the Purchaser shall purchase,
acquire and accept from the Seller, all right, title and interest
of the Seller in and to the Business, including, without
limitation, in and to all of the assets, properties, rights,
Contracts and claims employed exclusively in the Business (except
as otherwise set forth in Section 2.2 hereof), wherever located,
whether tangible or intangible, and all goodwill appertaining
thereto, as the same shall exist as of the Closing. The assets,
properties, rights, Contracts and claims to be purchased pursuant
to this Agreement are hereinafter collectively referred to as the
"Purchased Assets." The Purchased Assets shall include, without
limitation, all right, title and interest of the Seller in and to
the assets, properties, rights, Contracts and claims described in
the following paragraphs (a) through (m) but in each case only to
the extent exclusively used in, held for exclusive use in, or
exclusively related to, the Business:
(a) all furnishings, furniture, office supplies,
vehicles, spare parts, tools, dies, machinery and equipment and
other tangible personal property (collectively, the "Equipment");
(b) all items of inventory, including, without
limitation, raw materials, work-in-progress, finished goods,
goods in transit, supplies, spare parts and samples;
(c) all accounts receivable and all notes receivable
(whether short-term or long-term) from third parties and all
deposits with third parties, together with any unpaid interest
accrued thereon from the respective obligors and any security or
collateral therefor, including recoverable deposits
(collectively, the "Accounts Receivable");
(d) all right, title and interest of the Seller in the
Leased Real Property, including all buildings located thereon,
any of the fixtures attached thereto and any Permits relating
thereto;
(e) except as set forth in Section 2.2(f) hereof, all
Intellectual Property, including the Varo Trademark Rights;
(f) all marketing brochures and materials and other
non-proprietary printed and written materials relating to the
Seller's ownership of or operation of the Business that the
Seller is not required by law to retain (of which the Seller may
retain duplicates), and duplicates of any such materials that the
Seller is required by law to retain;
(g) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers
and contractors in connection with the operation of the Business
or affecting the Equipment;
(h) all Permits listed on Schedule 2.1(h) hereto held
by the Seller and its Subsidiaries (to the extent permitted by
applicable law to be transferred);
(i) except as set forth in Section 2.2(k) and (h)
hereof, all Contracts relating to the Business including, without
limitation, those listed on Schedule 5.9 hereto;
(j) all deferred and prepaid charges, sums and fees,
other than in respect of Taxes and insurance premiums;
(k) except as set forth in Section 2.2(j) hereof, all
books, records, or other data relating to the Purchased Assets,
the Business, or the Leased Real Property;
(l) all Equipment, machinery, merchandise, parts,
components, raw materials and supplies delivered to the Seller by
any Person and which is in Seller's custody and control, for the
purposes of repair, service, maintenance, upgrade, retooling or
other improvement by Seller, and any deposits, Contracts,
documents, specifications, Intellectual Property or other rights
of Seller in connection therewith, all of the foregoing being
referred to collectively, hereafter, as the "Third Party Assets";
and
(m) any assets, inventory, Equipment, machinery,
components or other properties of the Seller that are related to
the Business and that have been delivered or transferred to any
other Person for the purposes of repair, maintenance, upgrade,
retooling or other improvement and any Contracts, documents,
specifications, Intellectual Property or other rights of Seller
in connection therewith, all of the foregoing being referred to
collectively, hereafter, as the "Seller Maintenance Assets."
The aforementioned Purchased Assets shall be sold,
assigned, transferred, conveyed and delivered to the Purchaser,
free and clear of all liabilities, indebtedness or Liens, of any
kind, character or description whatsoever, other than Permitted
Encumbrances, and such sale, assignment, transfer, conveyance and
delivery shall be royalty-free, irrevocable and for the exclusive
use of the Purchaser (except, in the case of Intellectual
Property, as set forth in Schedule 5.10 hereto).
2.2 Excluded Assets. Notwithstanding anything to the
contrary contained in Section 2.1 hereof, the Seller and the
Purchaser expressly understand and agree that the Seller is not
hereunder selling, assigning, transferring, conveying or
delivering to the Purchaser the following assets, properties,
rights, Contracts and claims (collectively, the "Excluded
Assets"):
(a) any issued and outstanding shares of capital stock
of the Seller or its Subsidiaries;
(b) the Charter, Bylaws, the corporate seal, minute
books, stock books or other similar records relating to the
corporate organization of the Seller;
(c) cash, bank accounts, certificates of deposit,
treasury bills, treasury notes and marketable securities;
(d) except as otherwise specifically provided herein,
pension or other funded employee benefit plan assets;
(e) any policy of insurance;
(f) any of the Seller's right, title or interest in or
to any item of Intellectual Property listed on Schedule 2.2(f)
hereto;
(g) all Accounts Receivable due and owing to the
Seller from Imo or any of its Affiliates;
(h) any Contracts set forth on Schedule 2.2(h) hereto
and all Contracts that relate solely to the Excluded Assets or
the Excluded Liabilities;
(i) all prepaid insurance premiums and prepaid Taxes
pertaining to the Business and all prepaid charges, sums and fees
pertaining to any of the Excluded Assets or the Excluded
Liabilities;
(j) any books, records or other data relating to the
Seller's ownership or operation of the Business (i) not located
on the premises of the Business, (ii) proprietary to Imo or the
Seller or (iii) required by applicable law to be retained by the
Seller;
(k) any of Seller's right, title and interest under
any Contracts or Permits that are not transferable without
consent (unless such consent has been obtained);
(l) any claims for refunds or rebates of any
previously paid taxes, levies or duties, including, without
limitation, customs duties;
(m) any rights and claims of the Seller (whether
contingent or absolute, matured or unmatured and whether in tort,
contract or otherwise) against any Person relating to the
Business but not relating to any of the Purchased Assets
(including, without limitation, any Liens, judgments, causes of
action and rights of recovery);
(n) the AIM-9 Claim;
(o) any assets employed exclusively in the Business
that are disposed of by the Seller in the usual and ordinary
course of Business prior to the Closing; and
(p) the other assets listed on Schedule 2.2(p) hereto.
2.3 Assumed Liabilities. At Closing, the Purchaser
shall assume and agree to pay, perform and discharge all debts,
claims, liabilities, obligations, damages and expenses
(collectively, the "Liabilities") of the Seller of every kind and
nature, whether known, unknown, contingent, absolute, determined,
undetermined or indeterminable on the Closing Date and whether
incurred or accruing prior to, on or after the Closing Date, to
the extent relating to or arising from the operation of the
Business including, without limitation, all Liabilities of the
Seller with respect to the Contracts being transferred to the
Purchaser hereunder and the Subcontracted Contracts (to the
extent that such Liabilities remain unsatisfied or are required
to be performed on or after the Closing Date), all Environmental
Liabilities resulting from the ownership, operation or use of the
Business or the Purchased Assets on or after the Closing Date,
and, to the extent set forth in Article IX hereof, all
Liabilities with respect to Transferred Employees and other
Employees to whom rights are granted pursuant to Section 9.1(a)
hereof (collectively, the "Assumed Liabilities"); provided,
however, that such Assumed Liabilities shall not include any
Liabilities to the extent that the same are covered by insurance
with respect to the Business, the Leased Real Property, the
Purchased Assets or the Excluded Assets under policies maintained
for the benefit of the Seller prior to the Closing Date pursuant
to which insurance proceeds are or have been paid on behalf of
the Seller; and provided, further, that the Seller hereby
covenants and agrees that it will not take any action or fail to
take any action from and after the date hereof up to and
including the Closing Date that would result in any cancellation
of, give rise to any default under or result in any breach of the
terms of any such insurance policies or otherwise cause any of
such policies not to remain in full force and effect through the
Closing Date.
2.4 Excluded Liabilities. Notwithstanding anything to
the contrary contained in Section 2.3 hereof, the Seller and the
Purchaser expressly understand and agree that the Purchaser shall
not assume or become liable for any of the following Liabilities
of the Seller (collectively, the "Excluded Liabilities"):
(a) Liabilities for Taxes to be borne by the Seller
pursuant to Article X;
(b) Liabilities arising out of any action or omission
by the Seller prior to the Closing Date in connection with the
performance of any Contract relating to the Business;
(c) (i) Environmental Liabilities resulting from the
ownership, operation or use of the Business, the Leased Real
Property, or the Purchased Assets or in connection with any
activity relating to any Hazardous Material prior to the Closing
Date under Environmental Laws in effect as of the Closing Date
and (ii) Environmental Liabilities resulting from the ownership,
operation or use of the Excluded Assets; and
(d) any other Liability of the Seller described in
Schedule 2.4(d) hereto.
2.5 Cancellation of Permits, Bonds and Guarantees.
(a) Following the Closing, to the extent permitted by
law, the Seller shall have the right to cancel any Permit or any
bond, guarantee or undertaking by the Seller applicable to the
Business or the Purchased Assets to the extent such is not
assigned or transferred to the Purchaser pursuant to Section 2.1
hereof. The failure of the Seller to cancel any Permit, bond,
guarantee or undertaking shall not affect the respective rights,
obligations, liabilities and indemnification of the Seller and
the Purchaser under this Agreement.
(b) The Purchaser shall assume, or promptly reimburse
the Seller for, all costs associated with the assignment or
transfer of all Permits related to the Business and the costs of
all bonds related to the Business which, in either case, cannot
be canceled for as long as they remain outstanding.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price and Payment. The aggregate
purchase price to be paid by the Purchaser to the Seller for the
Purchased Assets and the Assumed Liabilities shall be $11,000,000
(the "Purchase Price"), subject to adjustment as provided in
Section 3.2 hereof. Payment of the Purchase Price shall be in
United States dollars and shall be made no later than 11:30 a.m.
(New York City time) on the Closing Date by wire transfer of
immediately available funds to the account or accounts designated
by the Seller.
3.2 Purchase Price Adjustment.
(a) On the Closing Date, the Seller shall deliver to
the Purchaser a balance sheet for the Business as of the last day
of the month immediately preceding the Closing Date (the "Closing
Balance Sheet"), which shall include a computation of the
Preliminary Purchase Price Adjustment (as hereinafter defined)
for the Business as of the last day of the month immediately
preceding the Closing Date. The Closing Balance Sheet shall be
prepared by the Seller on a basis consistent with the Initial
Balance Sheet.
(b) The "Preliminary Purchase Price Adjustment" for
the Business shall be the amount (if any) by which the Closing
Net Book Value is greater than $13,000,000 ("Positive
Adjustment") or less than $12,000,000 ("Negative Adjustment").
As used herein, "Closing Net Book Value" shall mean the total net
book value of the Purchased Assets less the total of the Assumed
Liabilities, as reflected on the Closing Balance Sheet.
(c) The Purchaser shall have a period of 30 days to
review the Closing Balance Sheet and the calculation of the
Preliminary Purchase Price Adjustment following the Closing.
During such period, the Seller shall afford the Purchaser and its
accountants access to any of its books, records and work papers
necessary to enable the Purchaser and its accountants to review
the Closing Balance Sheet and the calculation of the Preliminary
Purchase Price Adjustment. The Purchaser may dispute any amounts
reflected in the Preliminary Purchase Price Adjustment by giving
notice in writing to the Seller specifying each of the disputed
items and setting forth in reasonable detail the basis for such
dispute; provided, however, that the Purchaser may only dispute
the calculation of the Preliminary Purchase Price Adjustment to
the extent that the aggregate of all items in dispute would
increase any Positive Adjustment or Negative Adjustment by more
than $50,000. Failure by the Purchaser to dispute the amounts
reflected in the Preliminary Purchase Price Adjustment within 30
days of delivery of the Closing Balance Sheet by the Seller shall
be deemed an acquiescence therein by the Purchaser. If within 30
days after delivery by the Purchaser to the Seller of any notice
of dispute, the Purchaser and the Seller are unable to resolve
all of such disputed items, then any remaining items in dispute
shall be submitted to Ernst & Young LLP (the "Arbitrator"). The
Arbitrator shall determine the remaining disputed items and
report to the Seller and the Purchaser upon such items. The
Arbitrator's decision shall be final, conclusive and binding on
all parties. The fees and disbursements of the Arbitrator shall
be borne equally by the Purchaser and the Seller. The
Preliminary Purchase Price Adjustment, if undisputed or deemed
undisputed or as revised in accordance with the procedure
outlined above, shall be the "Final Purchase Price Adjustment."
(d) If the Final Purchase Price Adjustment is a
Positive Adjustment then the Purchase Price shall be increased by
the amount of the Final Purchase Price Adjustment and the
Purchaser shall promptly pay to the Seller an amount in cash
equal to such Final Purchase Price Adjustment, with interest from
the Closing Date computed at the prime rate announced from time
to time by Citibank N.A., as in effect from time to time.
(e) If the Final Purchase Price Adjustment is a
Negative Adjustment then the Purchase Price shall be decreased by
the amount of the Final Purchase Price Adjustment and the Seller
shall promptly pay to the Buyer an amount in cash equal to such
Final Purchase Price Adjustment, with interest from the Closing
Date computed at the prime rate announced from time to time by
Citibank N.A., as in effect from time to time.
3.3 Interim Period Cash Adjustment. For the period
from the date of the Closing Balance Sheet until the Closing Date
(the "Interim Period"), the Seller shall maintain a current
register of all Cash Transactions of the Business, as adjusted
for Excluded Assets and Excluded Liabilities in accordance with
Sections 2.2 and 2.4 hereof. At the Closing, Seller shall
provide a copy of the register of Cash Transactions, together
with a report summarizing all cash activity of the Business for
the Interim Period, as adjusted for Excluded Assets and Excluded
Liabilities in accordance with Sections 2.2 and 2.4 hereof.
Based upon the report, (i) if the cash receipts exceed cash
expenditures during the Interim Period, the Seller shall pay the
Purchaser the difference at the Closing; and (ii) if the cash
expenditures exceed the cash receipts during the Interim Period,
the Purchaser shall pay the Seller the difference at the Closing.
3.4 Allocation of Purchase Price. The Purchaser and
the Seller shall negotiate in good faith to reach an agreement,
as soon as practicable following the Closing Date, as to the
proper allocation of the Purchase Price among the Purchased
Assets. The parties further agree to file all tax returns and
reports (including IRS Form 8594) in a manner consistent with
such agreed allocation.
ARTICLE IV
THE CLOSING
4.1 Closing Date. The Closing shall take place at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
at 9:00 a.m., on the fifth business day after the conditions set
forth in Articles XI and XII hereof have been satisfied, or at
such other place and at such other time and date as may be
mutually agreed upon by the Purchaser and the Seller.
4.2 Proceedings at the Closing. All proceedings to be
taken and all documents to be executed and delivered by the
Seller in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel. All proceedings to
be taken and all documents to be executed and delivered by the
Purchaser in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Seller and its counsel. All proceedings to be
taken and all documents to be executed and delivered by all
parties at the Closing shall be deemed to have been taken,
executed and delivered simultaneously, and no proceedings shall
be deemed to have been taken nor any documents executed or
delivered until all have been taken, executed and delivered.
4.3 Deliveries by the Seller to the Purchaser. At the
Closing, the Seller shall deliver, or shall cause to be
delivered, to the Purchaser the following:
(a) a duly executed ▇▇▇▇ of sale and assignment,
substantially in the form of Exhibit B;
(b) duly executed instruments of assignment of the
Intellectual Property included in the Purchased Assets;
(c) such other (i) duly executed bills of sale,
general conveyances, endorsements, assignments and other good and
sufficient documents and instruments of sale, assignment,
transfer and conveyance and (ii) releases, termination statements
and other documents and instruments as are sufficient to
eliminate and extinguish all Liens (other than Permitted
Encumbrances) on any of the Purchased Assets, in each case as the
Purchaser may reasonably request in order more effectively to
vest in the Purchaser all right, title and interest in and to the
Purchased Assets free and clear of all Liens (other than
Permitted Encumbrances);
(d) the certificate referred to in Section 11.1(c)
hereof signed by a duly authorized officer of the Seller;
(e) the opinion of counsel for the Seller referred to
in Section 11.3 hereof;
(f) the Closing Balance Sheet;
(g) the register of Cash Transactions and report
referred to in Section 3.3 hereof;
(h) a receipt for the Purchase Price;
(i) the duly executed Subcontract referred to in
Sections 12.2 and 13.2(c) hereof;
(j) the duly executed Security Agreement referred to
in Section 9.8(a) hereof;
(k) duly executed UCC-1 financing statements with
respect to the Secured Receivables;
(l) termination statements on Form UCC-3 (or any other
required form) with respect to any security interest of Citicorp
in any of the Purchased Assets; and
(m) revised Schedules to this Agreement to provide
information current as of the Closing Date (or the latest
practicable date prior thereto) with respect to the matters set
forth therein.
4.4 Deliveries by the Purchaser to the Seller. At the
Closing, the Purchaser shall deliver, or shall cause to be
delivered, to the Seller the following:
(a) a duly executed Undertaking and Assumption,
substantially in the form of Exhibit C.
(b) immediately available funds in the amount of the
Purchase Price, by wire transfer as provided in Section 3.1
hereof;
(c) the certificate referred to in Section 12.1(c)
hereof signed by a duly authorized officer of the Purchaser;
(d) the duly executed Subcontract referred to in
Sections 12.2 and 13.2(c) hereof;
(e) the duly executed Security Agreement referred to
in Section 9.8(a) hereof;
(f) the opinion of counsel for the Purchaser referred
to in Section 12.4 hereof; and
(g) a written release executed by the Purchaser
whereby the Purchaser discharges and releases Imo from all
current or future liability, claim or other obligation arising
under this Agreement or the transactions contemplated hereby or
out of the operation of the Business by the Purchaser or
otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the
Purchaser as follows:
5.1 Organization and Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and has all requisite
corporate power and authority to carry on its business as
presently conducted by it. The Seller is duly licensed,
qualified and authorized to do business and is in good standing
in the states set forth on Schedule 5.1 hereto, which are the
only jurisdictions where the Seller is required to be so
qualified or licensed. Copies of the Seller's Charter and By-
laws, as amended to the date of this Agreement, have been
delivered to the Purchaser and are correct and complete as of
such date.
5.2 Corporate Authority; No Violation. The Seller has
the corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument or
certificate to be executed by the Seller in connection with the
consummation of the transactions contemplated by this Agreement
(all such other agreements, documents, instruments and
certificates required to be executed by the Seller being
hereinafter referred to collectively as the "Seller Documents"),
and to perform fully its obligations hereunder and thereunder.
The execution, delivery and performance by the Seller of this
Agreement and each of the Seller Documents have been duly
authorized by all requisite corporate action on the part of the
Seller. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly executed and
delivered by the Seller, and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Seller Documents when
so executed and delivered will constitute, a legal, valid and
binding obligation of the Seller, enforceable against the Seller
in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity). Except as set forth on Schedule 5.2 hereto, none of the
execution and delivery by the Seller of this Agreement or the
Seller Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Seller with
any of the provisions hereof or thereof will (i) conflict with,
or result in the breach of, any provision of the Charter or
Bylaws of the Seller, (ii) conflict with, violate, result in the
breach or termination of, or constitute a default under, any
Material Contract or Order relating to the Business to which the
Seller is a party or by which it or any of the Purchased Assets
is bound or subject, (iii) constitute a violation of any Law
applicable to the Seller or (iv) result in the creation of any
Lien (other than any Lien in favor of the Purchaser) upon any of
the Purchased Assets, except, in each case, for conflicts,
breaches, violations, terminations, defaults or Liens that,
individually or in the aggregate, would not materially hinder or
impair the transactions contemplated hereby or have a Material
Adverse Effect.
5.3 Title to Assets Other than Leased Real Property
and Intellectual Property.
(a) The Seller (i) owns and has good and valid title
to or, (ii) in the case of leased properties, has a valid
leasehold interest in, or (iii) in the case of the Third Party
Assets set forth on Schedule 5.3(a)(iii) has custody and control
over (for the purpose of performing repairs, service,
maintenance, upgrading, retooling or other improvements thereto):
all of the Purchased Assets (other than the Leased Real Property
and the Intellectual Property), including all of such Purchased
Assets reflected on the Financial Statements, except Purchased
Assets disposed of in the ordinary course of business after June
30, 1996. The Seller holds title to all of the Purchased Assets
(other than the Third Party Assets, the Leased Real Property and
the Intellectual Property listed on Schedule 2.2(f)) free and
clear of all Liens other than Liens set forth on Schedule
5.3(a)(iv) hereto (which will be extinguished as of the Closing)
and Permitted Encumbrances.
(b) Notwithstanding the fact that on the Closing Date
the Seller may not have physical possession and control of the
Seller Maintenance Assets, the Seller owns and has good and valid
title to all of the Seller Maintenance Assets set forth on
Schedule 5.3(b) (except for Seller Maintenance Assets disposed of
in the ordinary course of business since August 31, 1996), free
and clear of all Liens other than Permitted Encumbrances.
5.4 Title to Leased Real Property. The Seller has a
valid leasehold interest in the Leased Real Property free and
clear of all Liens other than Permitted Encumbrances. A complete
and correct copy of each lease currently in effect with respect
to the Leased Real Property has been furnished to the Purchaser.
5.5 Consents. No consent, waiver, approval, or
authorization of, declaration or filing with, or notification to,
any Person is required on the part of the Seller in connection
with the execution and delivery by the Seller of this Agreement
or the Seller Documents, or the compliance by the Seller with any
of the provisions hereof or thereof, except (i) as set forth on
Schedule 5.5 hereto, (ii) the novation of the Government
Contracts pursuant to Sections 13.2 and 13.3 hereof, and (iii
consents, waivers, approvals or authorizations with respect to
any Contract involving the payment to or from the Seller or one
of its Subsidiaries of amounts not in excess of $250,000 per year
or a term not in excess of one year.
5.6 Permits. The Seller has, and on the Closing Date
will have, all environmental, land use and any other Permits or
governmental authorizations necessary for the conduct of the
Business, the ownership of the Purchased Assets or the use of the
Leased Real Property and any operations or activities currently
conducted thereon. A list of all such Permits is set forth on
Schedule 5.6 hereto.
5.7 Financial Statements. The balance sheet and the
statement of income of the Business as of, and for the six months
ended, June 30, 1996, are attached hereto as Schedule 5.7
(collectively, the "Financial Statements"). The Financial
Statements have been prepared in a manner consistent with past
practices and present fairly the financial position and results
of operations of the Business at the date and for the period
indicated (except as set forth in Schedule 5.7).
5.8 Absence of Certain Developments. Except as set
forth on Schedule 5.8 hereto or as disclosed in another Schedule
to this Agreement or in a document referred to in any such
Schedule, since June 30, 1996, the Seller has operated the
Business in the ordinary course consistent with past practice and
there has been no Material Adverse Effect.
5.9 Material Contracts. Schedule 5.9 hereto contains
a true and complete list (as of August 31, 1996) of each written
Contract (other than purchase orders in the ordinary course of
business) included in the Purchased Assets or related to the
Business to which the Seller or one of its Subsidiaries is a
party, involving the payment to or from the Seller or one of its
Subsidiaries of amounts in excess of $250,000 per year and a term
in excess of one year (collectively, the "Material Contracts").
Except as disclosed in Schedule 5.9 hereto, to the best of the
Seller's knowledge, it is not in default under any of the
Material Contracts.
5.10 Intellectual Property. Schedule 5.10 hereto sets
forth a list of the registered patents and trademarks
constituting Intellectual Property that are included in the
Purchased Assets. Except as set forth on Schedule 5.10 hereto,
each item of Intellectual Property listed on such Schedule as
being owned by the Seller or its Subsidiaries or otherwise
included in the Purchased Assets is, to the best of the Seller's
knowledge, owned by the Seller or such Subsidiaries free and
clear of any and all Liens (other than Permitted Encumbrances)
and, to the best of the Seller's knowledge, no other Person has
any claim of ownership with respect thereto. Except as set forth
on Schedule 5.10 hereto, the Seller has, to the best of the
Seller's knowledge, adequate licenses or other valid rights to
use each item of Intellectual Property included in the Purchased
Assets which it does not own and which is material to the conduct
of the Business as presently conducted. To the best of the
Seller's knowledge, the Seller's use of the foregoing
Intellectual Property does not conflict with, infringe upon,
violate or interfere with any Intellectual Property or rights
therein of any other Person.
5.11 Taxes.
(a) To the best of the Seller's knowledge, the Seller
has (i) timely filed all material returns and reports relating to
Taxes that are required to be filed on or before the Closing Date
by the Seller and (ii) paid all Taxes that are shown to be due
and payable on such returns.
(b) There are no Liens for Taxes upon the Purchased
Assets or the Business (except for Taxes not yet due and
payable).
(c) Except as set forth on Schedule 5.11(c) hereof, to
the best of the Seller's knowledge, there are no pending or
threatened disputes with any tax authority concerning Taxes of
the Seller relating to the Business or the Purchased Assets.
(d) The Seller is not a party to any written consent
with any tax authority to extend the period for assessment or
collection of any Taxes, or, except as set forth on Schedule
5.11(d) hereof, to any written agreement with any tax authority
concerning liability for Taxes, which relate to the Purchased
Assets or the Business.
(e) The Seller is not a party to any written tax
sharing or tax benefit agreement which relates to Taxes with
respect to the Purchased Assets or the Business.
(f) The Seller is not a foreign Person within the
meaning of Section 1445(b)(2) of the Code.
(g) The Seller has properly withheld from the
salaries, wages and other compensation paid to its officers and
employees, and has paid to the appropriate federal, state or
local taxing authorities all amounts required to be withheld
therefrom, under applicable laws, rules or regulations.
5.12 Employee Benefits.
(a) Schedule 5.12(a) hereto lists each "employee
benefit plan," as defined in Section 3(3) of ERISA, of the Seller
that is currently in effect covering any Employee or former
Employee of the Business (an "Employee Benefit Plan").
(b) Schedule 5.12(b) hereto lists each employment or
severance Contract, each plan or arrangement providing for
insurance coverage, severance, termination or similar coverage
and all written compensation policies and practices maintained by
the Seller covering any Employee or former Employee of the
Business and that is not an Employee Benefit Plan (a "Benefit
Arrangement"). A copy of each Benefit Arrangement has been
provided by the Seller to the Purchaser.
(c) Schedule 5.12(c) hereto lists (as of August 31,
1996) the name and title of each of the Employees.
(d) Neither the Seller nor any entity required to be
aggregated therewith pursuant to section 414(b) or (c) of the
Code has incurred or could reasonably be expected to incur any
material liability under (i) Title IV of ERISA (other than for
retirement benefits or Pension Benefit Guaranty Corporation
insurance premiums, in either or both cases payable in the
ordinary course) or (ii) section 401(a)(29), 412(f) or 412(n) of
the Code.
5.13 Litigation; Compliance With Law. Except as set
forth on Schedule 5.13 hereto, there is no Legal Proceeding or
Environmental Claim pending or, to the best of the Seller's
knowledge, threatened (i) against the Seller in connection with
the operation of the Business or the use of the Leased Real
Property that is not covered by insurance and if determined
adversely would have a Material Adverse Effect or result in
Damages in excess of $50,000, with respect to any such Legal
Proceeding or Environmental Claim, or $500,000, with respect to
all such Legal Proceedings and Environmental Claims in the
aggregate; (ii) that seeks to enjoin, or obtain Damages in
respect of, the consummation of the transactions contemplated
hereby; (iii) that questions the validity of this Agreement, any
of the Seller Documents or any action taken or to be taken by the
Seller in connection with the consummation of the transactions
contemplated hereby or thereby or (iv) that alleges any
noncompliance by the Seller with any Law of the United States or
Order of a United States Governmental Authority other than Legal
Proceedings or Environmental Claims that are immaterial in nature
or that would not, in the aggregate, have a Material Adverse
Effect. There are no material Orders, penalties or fines issued
by any Governmental Authority against any of the Purchased Assets
or the Business or the Leased Real Property.
5.14 Receivables. All of the Accounts Receivable
reflected on the Initial Balance Sheet are valid claims and arose
from bona fide transactions in the ordinary course of business
consistent with past practice.
5.15 Inventory. All finished goods contained in the
inventory of the Business reflected on the Initial Balance Sheet
are of a quality saleable in the ordinary course of Business at
prevailing market conditions, subject to applicable reserves
recorded in the Initial Balance Sheet.
5.16 Assets Necessary to Conduct the Business. Except
as set forth on Schedule 5.16 hereto, the Purchased Assets
comprise all of the assets necessary to operate the Business as
presently operated in all material respects.
5.17 Work in Process. All work in process and
materials comprising part of the Purchased Assets are, in all
material respects, of a quality consistent with the production of
the intended final end product.
5.18 Environmental Matters. Except as otherwise
disclosed on Schedule 5.18:
(a) The Business, the Leased Real Property and the
Purchased Assets currently are in compliance in all material
respects with all applicable Environmental Laws;
(b) The Business has obtained all material Permits of
any Governmental Authority that currently are required under any
applicable Environmental Law;
(c) The Seller has not received written notice from
any Person of any unresolved violation or pending or threatened
Legal Proceeding or any Environmental Claim relating to the
Business, the Leased Real Property or the Purchased Assets under
any applicable Environmental Law;
(d) The Seller has not received written notice from
any Person of any removal, remediation or cleanup obligation
under any applicable Environmental Law with respect to any of the
Purchased Assets, the Business or the Leased Real Property;
(e) None of the operations of the Business is
conducted on property that is located on the National Priorities
List of the United States Environmental Protection Agency, the
Comprehensive Environmental Response Compensation and Liability
and Information System, the Resource Conservation and Recovery
Information System or any similar list maintained by any state
environmental agency;
(f) The Seller has not filed or otherwise provided any
notice under any federal, state or local law indicating past or
present treatment, storage or disposal of Hazardous Materials
that would require a treatment, storage or disposal permit under
RCRA or a similar state Environmental Law;
(g) The Business does not own or operate any
underground storage tanks and there are no such tanks present at
the Leased Real Property; and
(h) The Seller has not generated, stored, transported,
treated, disposed of or arranged for the disposal of any
Hazardous Material in violation of any Environmental Law.
Other than the representations set forth in this
Section 5.18, the Seller does not make any representation or
warranty about the Seller's compliance with or obligations or
liabilities under any Environmental Law.
5.19 Brokers. Other than CS First Boston, no Person
has acted, directly or indirectly, as a broker, finder or
financial advisor for the Seller in connection with the
negotiations relating to or the transactions contemplated by this
Agreement and no Person other than CS First Boston is entitled to
any fee, commission or like payment in respect thereof based in
any way on any Contract made by or on behalf of the Seller. The
Seller acknowledges that it is responsible for the payment of the
fees of CS First Boston in connection with the transactions
contemplated by this Agreement.
5.20 Insurance Coverage. All of the insurance covering
the Business, the Purchased Assets, the Excluded Assets and the
Leased Real Property has been obtained by Imo and there are no
insurance policies relating exclusively to the Business. All
insurance policies maintained by Imo which include coverage for
the Purchased Assets, the Business, the Excluded Assets and the
Leased Real Property cover such damage, loss, liabilities, claims
and risks, and are in such amounts, as is customary in the
industry in which the Business operates and such amounts for
property damage are (subject to the deductibles contained in such
policies) at least equal to the fair market value of the insured
property. A list of all such policies is set forth in Schedule
5.20. All of such insurance policies are and will be in full
force and effect in accordance with their terms at all times up
to and including the Closing Date, no notice of cancellation has
been received, and there is no existing default or event which,
with the giving of notice or lapse of time or both, would
constitute a default thereunder.
5.21 Labor Matters.
(a) There are no collective bargaining agreements in
effect for any of Seller's employees;
(b) There are no pending or, to the Seller's
knowledge, threatened actions or proceedings to obtain
recognition of any collective bargaining unit on behalf of
Seller's employees; and
(c) There are no pending or, to the Seller's
knowledge, no threatened enforcement actions against the Seller
before the National Labor Relations Board or any state labor
enforcement agency.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the
Seller that:
6.1 Organization and Good Standing. The Purchaser is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all
requisite power and authority to carry on its business as
presently conducted by it.
6.2 Authority; No Violation. The Purchaser has full
power and authority to execute and deliver this Agreement and
each other agreement, document, instrument or certificate to be
executed by the Purchaser in connection with the consummation of
the transactions contemplated by this Agreement (all such other
agreements, documents, instruments and certificates required to
be executed by the Purchaser being hereinafter referred to
collectively as the "Purchaser Documents") and to perform fully
its obligations hereunder and thereunder. The execution,
delivery and performance by the Purchaser of this Agreement and
each Purchaser Document has been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been,
and each of the Purchaser Documents will be at or prior to the
Closing, duly executed and delivered by the Purchaser and
(assuming the due authorization, execution and delivery by the
other parties hereto and thereto) this Agreement constitutes, and
each of the Purchaser Documents when so executed and delivered
will constitute, a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with
its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability,
to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). None
of the execution and delivery by the Purchaser of this Agreement
or the Purchaser Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Purchaser
with any of the provisions hereof or thereof, will (i) conflict
with, or result in the breach of, any provision of the Charter or
Bylaws of the Purchaser, (ii) conflict with, violate, result in
the breach or termination of, or constitute a default under any
Contract or Order to which the Purchaser is a party or by which
it or any of its properties or assets is bound or subject, or
(iii) constitute a violation of any law applicable to the
Purchaser, except, in each case, for such conflicts, breaches,
violations, terminations or defaults that, individually or in the
aggregate, would not materially hinder or impair the transactions
contemplated hereby.
6.3 Consents. No consent, waiver, approval, Order,
Permit or authorization of, declaration or filing with, or
notification to, any Person or Governmental Authority is required
on the part of the Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents or the
compliance by the Purchaser with any of the provisions hereof or
thereof.
6.4 Availability of Funds. The Purchaser has
available, or will obtain prior to the Closing Date, sufficient
funds to enable it to consummate the transactions contemplated by
this Agreement. On the date hereof, the Purchaser has furnished
to the Seller true and correct copies of the balance sheets and
income statements of the Purchaser and its Affiliates as of, and
for the year ended December 31, 1995. As soon as possible after
the date hereof, and in any event no later than September 30,
1996, the Purchaser shall deliver to the Seller true and correct
copies of the balance sheets and income statements for the
Purchaser and its Affiliates as of, and for the six months ended,
June 30, 1996.
6.5 Litigation. There is no Legal Proceeding pending
or, to the best of the Purchaser's knowledge, threatened, that
seeks to enjoin, or obtain damages in respect of, the
consummation of the transactions contemplated by this Agreement
or that questions the validity of this Agreement, the Purchaser
Documents or any action taken or to be taken by the Purchaser in
connection with the consummation of the transactions contemplated
hereby or thereby.
6.6 Brokers. No Person has acted, directly or
indirectly, as a broker, finder or financial advisor for the
Purchaser in connection with the negotiations relating to or the
transactions contemplated by this Agreement and no Person is
entitled to any fee or commission or like payment in respect
thereof based in any way on any Contract made by or on behalf of
the Purchaser.
ARTICLE VII
COVENANTS OF THE SELLER
From and after the date hereof and until the Closing,
the Seller hereby covenants and agrees with the Purchaser that:
7.1 Cooperation. The Seller shall use its best
efforts to take, or cause to be taken, all actions necessary or
advisable in order for it to fulfill its obligations hereunder
and to cause the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof.
7.2 Access to Documents; Opportunity to Ask Questions.
The Seller shall provide the Purchaser with such information as
the Purchaser from time to time may reasonably request with
respect to the Business, and shall permit the Purchaser and any
of its directors, officers, employees, counsel, representatives,
accountants and auditors (collectively, the "Purchaser
Representatives") reasonable access, during normal business hours
and upon reasonable prior notice, to the properties, corporate
records and books of accounts of the Business, as the Purchaser
from time to time may reasonably request; provided, however, that
the Seller shall not be obligated to provide the Purchaser with
any information the provision of which may be prohibited by law
or contractual obligation. Without limiting the foregoing, the
Purchaser shall have the right to conduct, at its own expense, a
Phase I environmental assessment (provided, however, that,
without the prior written approval of the Seller, the assessment
shall not involve the collection or analysis of any samples) and
the Seller shall provide the Purchaser reasonable access to the
Seller's insurance manager or broker for the purposes of
reviewing the Seller's current insurance policies relating to the
Business and determining the insurance needs of the Business from
and after the Closing. No disclosure by the Seller whatsoever
during any investigation by the Purchaser shall constitute an
enlargement of or additional warranty or representation of the
Seller beyond those expressly set forth in this Agreement. All
information and access obtained by the Purchaser in connection
with the transactions contemplated by this Agreement shall be
subject to the terms and conditions of the letter agreement
relating to confidentiality, dated as of November 10, 1995,
between Imo and Technical Systems Incorporated (the
"Confidentiality Agreement").
7.3 Conduct of Business.
(a) Except as otherwise may be contemplated by this
Agreement, required by any of the documents listed in the
Schedules hereto or as the Purchaser otherwise may consent to in
writing (which consent shall not be unreasonably withheld), the
Seller shall cause the Business to be operated in the ordinary
course consistent with past practice and shall use its best
efforts consistent with past practice to (i) preserve the present
business operations, organization and goodwill of the Business,
(ii) keep available the services of the present employees of the
Business, (iii) preserve the present relationships with Persons
having business dealing(s) with the Business, (iv) maintain all
of the assets and properties of the Business in their current
condition, normal wear and tear excepted, (v) maintain insurance
in such amounts and of such kinds as is comparable to that in
effect on the date hereof (with insurers of substantially the
same or better financial condition) and (vi) without the prior
written consent of the Purchaser, shall not allow the value of
the net inventory to exceed $12,000,000 or allow the Working
Capital of the Business to be less than $5,500,000. For purposes
of this section Working Capital shall mean the current assets of
the Business less current liabilities of the Business, as
adjusted for excluded assets and liabilities in accordance with
Sections 2.2 and 2.4 hereof.
(b) Except as otherwise may be contemplated by this
Agreement, required by any of the documents listed in the
Schedules hereto or as the Purchaser otherwise may consent to in
writing (which consent shall not be unreasonably withheld), the
Seller shall not do any of the following:
(i) (A) increase the rate of compensation payable
or to become payable to any of the employees or agents
of the Business other than in the ordinary course of
business, (B) amend in any material respect any bonus,
stock option, stock purchase, profit-sharing, deferred
compensation, pension, retirement or other similar plan
or arrangement to or in respect of any such employee or
agent, other than in the ordinary course of business
and as may be required to maintain compliance with
ERISA and/or the Code or (C) enter into any new, or
amend in any material respect any existing, employment,
severance or consulting agreement, sales agency or
other Contract with respect to the performance of
personal services for the Business, other than in the
ordinary course of business and as may be required to
maintain compliance with ERISA and/or the Code;
(ii) (A) incur or become subject to, or agree
to incur or become subject to, any material obligation
or liability (contingent or otherwise) relating to the
Business, except (x) normal trade or business
obligations (including Contracts) incurred in the
ordinary course of business and consistent with past
practice and (y) obligations under Contracts listed on
any Schedule to this Agreement, (B) sell, assign,
transfer, convey, lease or otherwise dispose of any of
the Purchased Assets, other than (x) sales of inventory
of the Business in the ordinary course of business and
(y) transactions not exceeding $100,000 in the
aggregate, (C) cancel or compromise any material debt
or claim or waive or release any material right
relating to the Business or the Purchased Assets,
except for adjustments or settlements made in the
ordinary course of business consistent with past
practice or (D) acquire any material assets relating to
the Business other than in the ordinary course of
business consistent with past practice.
7.4 Consents and Conditions. As soon as practicable
following the satisfaction or waiver of the condition set forth
in Section 11.6 hereof, the Seller shall use its best efforts to
obtain all approvals, consents or waivers from all Persons
necessary to assign to the Purchaser all of the Seller's interest
in the Purchased Assets or any claim, right or benefit arising
thereunder or resulting therefrom (each, an "Interest");
provided, however, that in no event shall the Seller be obligated
to pay any consideration therefor to the third party from whom
such approval, consent or waiver is requested or release any
right, benefit or claim in order to obtain such approval, consent
or waiver.
7.5 Confidentiality. The Seller and its Affiliates
will hold and keep strictly confidential (and will not disclose
to any Person or use):
(a) any information, documents or materials provided
to the Seller or any of its Affiliates or any of their
representatives by or on behalf of the Purchaser or any of its
Affiliates in connection with the transactions contemplated
hereby; and
(b) after the Closing, any information regarding the
Purchased Assets, the Assumed Liabilities or the Business;
provided that this Section 7.5 shall not apply to the following:
(i) information which is publicly available at the time of
disclosure (through no act of the Seller or any of its
Affiliates), (ii) information which is disclosed to the Seller or
an Affiliate of the Seller by a third party which did not
disclose it in violation of a duty of confidentiality, (iii) use
of information to perform the Seller's obligations hereunder,
(iv) use of information in pursuit of the AIM-9 Claim or (v)
disclosures which are required to be made by the Seller or any of
its Affiliates under legal process by subpoena or other court
order or other applicable laws or regulations, or which are
requested by the Purchaser or any of its Affiliates. As used in
this Section 3.4, "Affiliates" includes Affiliates as of the date
hereof and future Affiliates.
7.6 Non-Solicitation. From the Closing Date and for a
period of two years thereafter, the Seller agrees that neither
the Seller nor any of its current or future Affiliates will (for
their own account or for the account of any other Person) solicit
any then current employees of the Business or any then current
employees of the Purchaser or of its then Affiliates or otherwise
induce (or attempt to cause) any such employee to leave such
employment. Without limiting the rights of the Purchaser to
pursue any remedies, the parties agree that damages are not an
adequate remedy for a breach of this Section 7.6 and that the
obligations of the Seller may be specifically enforced.
ARTICLE VIII
COVENANTS OF THE PURCHASER
From and after the date hereof, and until the Closing
Date, the Purchaser hereby covenants and agrees with the Seller
that:
8.1 Cooperation. The Purchaser shall use its best
efforts to take, or cause to be taken, all actions necessary or
advisable in order for it to fulfill its obligations hereunder
and to cause the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof.
8.2 Confidentiality. The Purchaser shall comply with
the terms of the Confidentiality Agreement.
8.3 Consents and Conditions. The Purchaser shall use
its best efforts to obtain all approvals, consents or waivers
from all Persons necessary to assign to the Purchaser all of the
Seller's interest in the Purchased Assets or any claim, right or
benefit arising thereunder or resulting therefrom as soon as
practicable; provided, however, that in no event shall the
Purchaser be obligated to pay any consideration therefor to the
third party from whom such approval, consent or waiver is
requested or release any right, benefit or claim in order to
obtain such approval, consent or waiver.
8.4 Permits, Bonds and Guarantees. As of the Closing,
the Purchaser shall obtain all Permits required by any
Governmental Authority with respect to the operation of the
Business or the ownership or operation of the Purchased Assets
without any guaranty or liability of Imo or the Seller with
respect thereto; provided, however, that, as provided in
Section 2.1 hereof, the Seller shall assign, transfer or convey
to the Purchaser at the Closing those Permits described in
Schedule 5.6 hereto that are held by the Seller exclusively in
connection with the Business, the Leased Property or the
Purchased Assets and that can be assigned without having to
obtain the consent of any Governmental Authority with respect
thereto.
8.5 Financing. The Purchaser shall use its best
efforts to obtain all financing necessary to deliver the Purchase
Price in accordance with Section 3.1 hereof. The Purchaser shall
provide to the Seller, on a timely basis, (i) copies of all
offering documents distributed or made available to investors,
potential investors or financial institutions in connection with
the solicitation of such financing and (ii) bi-weekly status
reports describing the Purchaser's efforts to obtain such
financing.
ARTICLE IX
ADDITIONAL COVENANTS
9.1 Offer of Employment.
(a) The Purchaser shall offer employment as of the
Closing Date to each Employee in the same position and location
and, in each case, at a rate of pay at least equal to such
Employee's rate of pay in effect, and with such benefits as shall
be substantially similar to those maintained by the Purchaser for
its similarly situated employees at its manufacturing facilities
located in Decatur, Alabama, except for severance policies, which
will be maintained in accordance with Seller's existing severance
policies; provided, however, that in the event an Employee
rejects the Purchaser's offer of employment and therefore does
not become a Transferred Employee, the Purchaser hereby agrees to
pay to each such Employee the severance benefit, if any, to which
such Employee becomes entitled under the Seller's severance plan
with respect to the termination of employment of such Employee by
the Seller, in effect, on the business day immediately preceding
the Closing Date. The Purchaser shall deliver to the Seller a
true and complete list of all Transferred Employees as of the
Closing Date. The Purchaser shall be solely responsible for all
compensation accruing or to be paid on or after the Closing Date
with respect to the Transferred Employees, for any compensation
with respect to which there are accruals on the Closing Balance
Sheet and for all employment and withholding tax obligations with
respect to such compensation.
(b) The Seller shall provide to the Purchaser a
statement of all accrued entitlements for Employees, including,
without limitation, vacation days, wages and other compensation
consistent with the Benefit Arrangements.
(c) During the sixty day period from and after the
Closing Date, the Purchaser shall not: (i) permanently or
temporarily shut down a Facility if the shutdown results in an
employment loss during any thirty day period at the Facility for
fifty or more employees, excluding any part-time employees; and
(ii) lay off more than thirty-three percent of the active
employees, and no more than forty-nine employees, excluding
part-time employees, at any Facility. For purposes of this
Subsection 9.1(c), the term "Facility" shall mean a "single site
of employment" and/or an "operating unit" as those terms are
defined in the Worker Adjustment and Retraining Notification Act
(the "WARN Act"). The term "employment loss" shall have the
meaning ascribed to it in the WARN Act. It is intended by this
Subsection 9.1(c) that the Purchaser assume any and all
Liabilities under the WARN Act arising out of this transaction.
9.2 Employment and Other Agreements. The Purchaser
agrees to assume all of the rights and obligations of the Seller
under all employment agreements or consulting agreements
applicable to the Transferred Employees and which are in effect
on the business day immediately preceding the Closing Date and
which were disclosed (and copies of which were provided to the
Purchaser pursuant to Section 5.12(b)), except for any consulting
employment agreement between the Seller and ▇▇ ▇▇▇▇▇▇▇.
9.3 Employee Benefit Plans and Benefit Arrangements.
Effective on the Closing Date, the Seller shall amend the
Employee Benefit Plans and Benefit Arrangements so that no
Employees are thereafter eligible to participate therein, except
as otherwise required by law. In addition, effective as of the
Closing Date, each Pension Plan or 401(k) plan of Imo or Seller
that covers any of the Transferred Employees shall be amended by
Imo and/or the Seller, as the case may be, to provide that the
benefits accrued thereunder as of the Closing Date by the
Transferred Employees shall be fully vested without regard to
their years of service.
9.4 Welfare Plans. The Purchaser shall be liable for
all claims made (regardless of when incurred) on or after the
Closing Date by any Transferred Employee under any Employee
Benefit Plan that is an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA (a "Welfare Plan").
9.5 Credited Service. From and after the Closing, the
Purchaser shall credit to the Transferred Employees for all
purposes under all benefit plans, benefit arrangements and
compensation policies and practices of the Purchaser, all
previous service recognized by the Seller for such Transferred
Employees and disclosed to the Purchaser under the Employee
Benefit Plans and Benefit Arrangements on the business day
immediately preceding the Closing Date.
9.6 Liabilities Excluded. Except as otherwise
provided in this Article IX, it is expressly agreed that the
Purchaser shall not be responsible for, and the Assumed
Liabilities shall not include, any obligation, duty or liability
with respect to any Benefit Arrangements or Employee Benefit
Plans, practices, policies or arrangements of the Seller under
which benefits (including, without limitation, any pension
benefits) were provided to Employees during the period prior to
the Closing.
9.7 Assignment of Contract Payments.
(a) Prior to the Closing, the Seller shall assign to
Citicorp USA, Inc. ("Citicorp"), as agent for the Seller's
secured creditors, all moneys due or to become due under the AIM-
9 Contract. The Purchaser and the Seller shall take all steps
necessary to continue (i) the assignment to Citicorp until the
payment in full of all amounts to be paid by the contracting
parties under the AIM-9 Contract and (ii) the remaining
assignment until consummation of the novation agreements for the
Subcontracted Contracts.
(b) The Seller will send written instructions, in form
and substance satisfactory to the Purchaser, to all account
debtors party to the Subcontracted Contracts (other than the AIM-
9 Contract), including, without limitation, the United States
Government, directing each of them to make payment on all
receivables due in respect of such Subcontracted Contracts
directly to the financial institution designated by the
Purchaser.
(c) The Seller hereby covenants and agrees that from
and after the Closing, when and if it receives any payments
relating to the Subcontracted Contracts (other than the AIM-9
Contract), it shall hold the same in trust for the Purchaser,
shall segregate such amounts from all other assets or funds and
shall, as soon as practicable, transfer such amounts directly to
the Purchaser.
(d) The Purchaser hereby covenants and agrees that
from and after the Closing, when and if it receives any payments
relating to the AIM-9 Contract (including, without limitation,
any payments relating to the AIM-9 Claim but excluding any
payments received by the Purchaser from Varo pursuant to Section
13.5 hereof), it shall hold the same in trust for Citicorp, shall
segregate such amounts from all other assets or funds and shall,
as soon as practicable, transfer such amounts directly to
Citicorp.
(e) On or prior to the Closing Date, the Seller shall
grant to the Purchaser a limited power of attorney to make such
changes and amendments in the terms of the Subcontracted
Contracts, in the name of Varo, Inc., as may be necessary or
desirable in order to assure that the Purchaser receives all
economic benefits of the Subcontracted Contracts as described
herein.
9.8 Grant of Security Interest.
(a) As security for the obligations of the Seller
under this Agreement and the Subcontract and until the earlier of
(i) the date when full and complete assignments of all of the
Subcontracted Contracts have been made to the Purchaser, or
novations have been made in respect of the Government Contracts,
and (ii) the date on which all obligations to be performed under
the Subcontracted Contracts on the part of the Seller or the
Purchaser pursuant to the Subcontract shall have been performed,
satisfied and discharged in full, the Seller shall, on or prior
to the Closing Date, grant to the Purchaser or a financial
institution designated by it a security interest in all of its
right, title and interest in and to all of the accounts
receivable and all other amounts payable to the Seller by the
contract obligors in respect of each of the Subcontracted
Contracts (other than the AIM-9 Contract) and all proceeds
thereof and income therefrom (collectively, the "Secured
Receivables") pursuant to a security agreement in a form
reasonably satisfactory to the parties hereto (the "Security
Agreement").
(b) On the Closing Date, the Seller shall execute and
deliver to the Purchaser, and hereby authorizes the Purchaser at
or after the Closing to file in all appropriate locations and
jurisdictions, UCC financing statements and any other related
documents or instruments and to give any notices necessary or
desirable to perfect the Lien of the Purchaser in the Secured
Receivables. The Seller hereby confirms that it is the intention
of this Agreement that the Purchaser or a financial institution
designated by it have a first priority perfected security
interest in the Secured Receivables and all rights and benefits
appertaining thereto or intended to be conferred thereunder on
the Closing Date.
ARTICLE X
TAX MATTERS
Except for Taxes included in the Assumed Liabilities,
the Seller shall be liable for (a) all Taxes that are imposed on
or connected with the Purchased Assets or the Business for any
taxable period ending on or before the Closing Date, including,
without limitation, any sales and use taxes relating to the
period from January 1989 to and including the Closing Date that
may be imposed by the State of Texas, (b) 50% of all transfer
Taxes, sales and use Taxes, and similar Taxes relating to the
transfer of the Purchased Assets and the Business, (c) the
portion, determined as described below, of any Taxes that are
imposed on or connected with the Purchased Assets or the Business
for any Straddle Period which is allocable to the period ending
on or before the Closing Date, and (d) all income Taxes
(including franchise Taxes and excise Taxes which are measured by
reference to net income) directly imposed on the Seller on
account of the transfer of the Purchased Assets or the Business.
The Purchaser shall be liable for (a) all Taxes that are imposed
on or connected with the Purchased Assets or the Business for any
taxable period beginning on or after the Closing Date, (b) the
portion of any Taxes that are imposed on or connected with the
Purchased Assets or the Business for any Straddle Period other
than the portion for which the Seller is liable under clause (c)
of the preceding sentence, (c) 50% of all transfer Taxes, sales
and use Taxes and similar Taxes relating to the transfer of the
Purchased Assets and the Business (but not including any of the
Taxes described in clause (d) of the preceding sentence), and (d)
all Taxes that are included in the Assumed Liabilities. The
determination of the portion of any Taxes imposed on or connected
with the Purchased Assets or the Business for the Straddle Period
which is allocable to the period ending on or before the Closing
Date shall be made, in the case of ad valorem, property or
similar Taxes, by allocating such Taxes on a per diem basis and,
in the case of all other Taxes, by assuming that the period
ending on or before the Closing Date constitutes a separate
taxable period and by taking into account the actual taxable
events occurring during such period.
ARTICLE XI
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the
transactions contemplated by this Agreement on the Closing Date
is subject to the satisfaction (or waiver by the Purchaser) of
the following conditions:
11.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the
Seller contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same force and
effect as though the same had been made on and as of the Closing
Date, it being understood that to the extent that such
representations and warranties were made as of a specified date
the same shall continue on the Closing Date to be true and
correct in all material respects as of such specified date.
(b) The Seller shall have performed and complied, in
all material respects, with the covenants and provisions of this
Agreement required to be performed or complied with by it at or
prior to the Closing Date.
(c) The Purchaser shall have received a certificate of
the Seller, dated as of the Closing Date and signed by an officer
of the Seller, certifying as to the fulfillment of the conditions
set forth in subparagraphs (a) and (b) of this Section 11.1.
11.2 No Prohibition. No Law or Order of any
Governmental Authority shall be in effect that prohibits the
Purchaser from consummating the transactions contemplated hereby.
11.3 Opinion of Seller's Counsel. The Purchaser shall
have received an opinion of counsel for the Seller, dated the
Closing Date, substantially in the form attached hereto as
Exhibit D.
11.4 Delivery of Documents. The Seller shall have, or
shall cause to be, executed and delivered to the Purchaser at the
Closing each of the items set forth in Section 4.3.
11.5 Consents. The Seller shall have obtained all of
the consents, waivers, approvals and authorizations listed on
Schedule 5.5 hereto.
11.6 Financing. The Purchaser shall have obtained all
financing necessary in order to consummate the transactions
contemplated hereby.
ARTICLE XII
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the
transactions contemplated by this Agreement on the Closing Date
is subject to the satisfaction (or waiver by the Seller) of the
following conditions:
12.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the
Purchaser contained herein shall be true and correct in all
material respects on and as of the Closing Date with the same
force and effect as though the same had been made on and as of
the Closing Date, it being understood that to the extent that
such representations and warranties were made as of a specified
date the same shall continue on the Closing Date to be true and
correct in all material respects as of such specified date.
(b) The Purchaser shall have performed and complied in
all material respects with the covenants and provisions in this
Agreement required to be performed or complied with by it at or
prior to the Closing Date.
(c) The Seller shall have received a certificate of
the Purchaser, dated as of the Closing Date and signed by an
officer of the Purchaser, certifying as to the fulfillment of the
conditions set forth in subparagraphs (a) and (b) of this Section
12.1.
12.2 Subcontract. The Seller and the Purchaser shall
have entered into a subcontract (the "Subcontract") in accordance
with Section 13.2(c) with respect to the performance of all
Government Contracts that relate to the Business and are included
among the Purchased Assets and all other Contracts for the
delivery of goods or services by the Seller that relate to the
Business and are included among the Purchased Assets
(collectively, such Government Contracts and other Contracts are
referred to herein as the "Subcontracted Contracts"). Without
limiting the generality of the foregoing, Schedule 12.2 contains
a list of those Government Contracts and other Contracts that, as
of August 27, 1996, would have constituted the Subcontracted
Contracts. The Subcontract shall confer on the Purchaser (i) the
responsibility for the performance of the corresponding prime
Government Contracts and the other Subcontracted Contracts and
(ii) all of the economic benefits, except for the AIM-9 Contract,
of the corresponding prime Government Contracts and the other
Subcontracted Contracts until the earlier to occur of (a)
novation or complete assignment of or (b) the satisfaction of all
obligations under and the payment in full of all amounts payable
under, such corresponding prime Government Contracts and the
other Subcontracted Contracts, as the case may be. All consents,
if any, of the United States government or a department or agency
thereof to the entering into of such Subcontract as may be
required shall have been obtained.
12.3 No Prohibition. No Law or Order of any
Governmental Authority shall be in effect that prohibits the
Seller from consummating the transactions contemplated hereby.
12.4 Opinion of the Purchaser's Counsel. The Seller
shall have received an opinion of counsel for the Purchaser,
dated the Closing Date, substantially in the form attached hereto
as Exhibit E.
12.5 Delivery of Documents. The Purchaser shall have
executed and delivered to the Seller at the Closing each of the
items set forth in Section 4.4.
12.6 Consents. The Seller shall have obtained all of
the consents, waivers, approvals and authorizations listed on
Schedule 5.5 hereto.
ARTICLE XIII
ADDITIONAL POST-CLOSING COVENANTS
13.1 Further Assurances.
(a) From time to time following the Closing Date, each
of the Seller and the Purchaser shall, at its sole cost and
expense, at the reasonable request of the other party, execute
and deliver such other and further instruments of sale,
assignment, assumption, transfer and conveyance and take such
other and further action as such other party may reasonably
request in order to vest in the Purchaser, and put the Purchaser
in possession of, the Purchased Assets and to transfer to the
Purchaser all Contracts and rights of the Seller relating to the
Purchased Assets and assure to the Purchaser the benefits
thereof, and to give effect to the Purchaser's assumption of the
Assumed Liabilities.
(b) To the extent any of the approvals, consents or
waivers referred to in Section 7.4 hereof have not been obtained
by the Seller as of the Closing Date, the Seller's only
obligation with respect thereto shall be to use its reasonable
efforts to do the following:
(i) cooperate with the Purchaser in any
reasonable and lawful arrangements designed to provide
the benefits of such Interest to the Purchaser as long
as the Purchaser fully cooperates with the Seller in
such arrangements and promptly reimburses the Seller,
upon written demand by the Seller, for all payments,
charges or other liabilities made or suffered by the
Seller in connection therewith; and
(ii) enforce, at the request of the Purchaser and
at the expense and for the account of the Purchaser,
any and all rights of the Seller arising from such
Interest against such issuer or grantor thereof or the
other party or parties thereto (including the right to
elect to terminate such Interest in accordance with the
terms thereof upon the written advice of the
Purchaser).
To the extent that the Seller enters into lawful arrangements
designed to provide the benefits of any Interest as set forth in
clause (b)(i) above, such Interest shall be deemed to have been
assigned to the Purchaser for purposes of Section 2.1 hereof.
(c) Following the Closing Date, the Purchaser shall
use the Equipment and other Purchased Assets to perform, on
behalf of the Seller, each Contract with a Governmental Authority
that relates to the Business and each Subcontracted Contract and
shall, except as otherwise provided herein, be entitled to
receive any and all sums payable to the Seller thereunder.
(d) As soon as practicable following the Closing Date,
the Purchaser shall take or cause to be taken, any and all
actions necessary to cause to be issued any and all letters of
credit necessary to the operation of the Business.
13.2 Assignments; Novations.
(a) The Seller shall use commercially reasonable
efforts to effect, if necessary, the transfer or assignment of
all licenses, registrations, permits or other documents
pertaining to the Business that were issued by a Governmental
Authority under the authority of the Export Control Laws.
(b) The Seller and the Purchaser shall cooperate fully
with each other and shall use all reasonable efforts to obtain
the novation of all Government Contracts that relate to the
Business, including obtaining a novation agreement or agreements
with the United States Government in accordance with FAR Section
42.1204 ("Novation Agreements"), and the Purchaser hereby agrees
expeditiously to take all reasonable steps to obtain approval of
all required Novation Agreements. Nothing in this Agreement,
however, shall require the Seller or the Purchaser to offer or
pay any consideration or concession for any such Novation
Agreement not contained in the model form set forth in FAR
Section 42.1204(e).
(c) With respect to each Subcontracted Contract that
relates to the Business, the performance obligations of the
Seller thereunder shall be subcontracted to the Purchaser until
such Subcontracted Contract has been novated, assigned in full to
the Purchaser or the obligations and duties thereunder shall have
been satisfied and discharged in full. The Purchaser, as a
subcontractor or delegate, shall perform such Subcontracted
Contract and the Seller shall cooperate to cause the other party
or parties to the Subcontracted Contract to promptly pay to the
Purchaser or its designee all amounts received by the Seller as a
result of performance by the Purchaser of such Subcontracted
Contract (except the AIM-9 Contract). Prior to the complete
assignment or novation of each such Subcontracted Contract to the
Purchaser, the Seller, as the contracting party, shall take such
timely action as is reasonably necessary to allow the Purchaser
to perform such Subcontracted Contract and to protect any rights
that may exist or accrue under such Subcontracted Contract until
it is fully assigned or novated. In connection therewith, the
Purchaser is authorized to act as agent on behalf of the Seller
for purposes of performing and administering each such
Subcontracted Contract during the period after the Closing until
such Subcontracted Contract is fully assigned or novated to the
Purchaser; provided, however, that such authority to act as agent
shall not authorize the Purchaser to settle or compromise claims
under such Subcontracted Contract where such claims are not
Purchased Assets or Assumed Liabilities. Prior to the date the
Subcontract becomes effective, the Seller shall deliver to the
Purchaser a full, complete and correct copy of the Seller's
contract file for each Subcontracted Contract. The Purchaser
shall indemnify and hold the Seller and its directors, officers,
employees, affiliates, agents and assigns harmless from any loss
that directly results from any action or omission of the
Purchaser in connection with the performance or administration by
the Purchaser, as contemplated by this Section 13.2, of any
Subcontracted Contract during the period after the Closing until
all obligations under such Subcontracted Contract have been fully
performed or satisfied in full.
(d) Effective upon the complete assignment or novation
of a Subcontracted Contract to the Purchaser, the Subcontracted
Contract shall be assumed by the Purchaser; provided, that the
Seller shall reimburse the Purchaser for any monetary benefit
received by the Seller (net of any actual out-of-pocket costs of
the Seller in connection with such Subcontracted Contract and any
payments made by the Seller under Section 13.2(c)) that would
have accrued to the Purchaser had the Subcontracted Contract been
fully assigned or novated as of the Closing Date. Any
subcontract or other delegation except the assignments of money
due or to become due under the Subcontracted Contracts which the
Seller and the Purchaser have theretofore entered into or agreed
upon in respect of such Subcontracted Contract shall be
terminated as of the effective date of such complete assignment
and assumption or novation agreement.
(e) The Seller and the Purchaser shall cooperate with
each other to preserve all bids, quotations and proposals made in
the ordinary course of the Business by the Seller and to
facilitate the award of the Contract related thereto consistent
with applicable legal requirements. With respect to any
contracts awarded to the Seller pursuant to such bids, quotations
and proposals (i) the right to all payments thereunder shall be
deemed to be assigned by the Seller to the Purchaser, the
schedule to the Subcontract shall be amended to identify such
Contract as a contract covered thereby, and the Seller shall
assign to the financial institution designated by the Purchaser
all moneys due or to become due thereunder and (ii) the
performance obligations related thereto shall be deemed to be
assumed by the Purchaser and, in the case of Contracts with the
United States government, shall be governed by this Section 13.2.
13.3 Provisions Relating to Certain Assets.
(a) To the extent that a Contract (including, without
limitation, a Government Contract) or other asset that is
included within the definition of "Purchased Assets", or any
Interest, is not capable of being sold, assigned, transferred,
subcontracted or conveyed without the approval, consent or waiver
of the issuer thereof or the other party thereto, or any third
Person (including a Governmental Authority), and such approval,
consent or waiver has not been obtained prior to the Closing, or
if such sale, assignment, transfer or conveyance or attempted
sale, assignment, transfer or conveyance would constitute a
breach thereof or a violation of any Law, this Agreement shall
not constitute a sale, assignment, transfer or conveyance
thereof, or an attempted sale, assignment, transfer or conveyance
thereof.
(b) Anything in this Agreement to the contrary
notwithstanding, subject to Section 8.4, the Seller is not
obligated to sell, assign, transfer or convey to the Purchaser
any of its rights or obligations in or to any of the Interests
without first obtaining all necessary approvals, consents or
waivers. The Seller shall cooperate with the Purchaser to obtain
all approvals, consents or waivers necessary to convey to the
Purchaser each such Interest other than Government Contracts
requiring novation, which are governed by Section 13.2, as soon
as practicable; provided, however, that neither the Seller nor
the Purchaser shall be obligated to offer or pay any
consideration or concession therefor to the third party from whom
such approval, consent or waiver is requested. The failure by
the Seller to obtain any such approval, consent or waiver
necessary to convey any Interest to the Purchaser shall not
affect the obligations of the parties to close hereunder;
provided that the Seller agrees to use reasonable efforts to
cause the economic benefit of such Interest to be furnished to
the Purchaser.
(c) To the extent any of the approvals, consents or
waivers necessary to convey any Interest other than Government
Contracts requiring novation, which are governed by Section 13.2,
to the Purchaser have not been obtained by the Seller as of the
Closing or to the extent any Interest cannot be transferred to
the Purchaser by the Closing, the Seller shall, during the
remaining term of such Interest, use commercially reasonable
efforts, to (1) at the request of the Purchaser, cooperate with
the Purchaser to obtain the consent of any such third party;
provided, however, that neither the Seller nor the Purchaser
shall be obligated to offer or pay any consideration to any
Person, (2) at the request of the Purchaser, cooperate with the
Purchaser in any reasonable and lawful arrangements designed to
provide the benefits of such Interest to the Purchaser, (3)
enforce, at the request of the Purchaser and at the expense and
for the account of the Purchaser, any rights of the Seller
arising from such Interest against the issuer thereof or the
other party or parties thereto (including the rights to elect to
terminate any such Interest in accordance with the terms thereof
upon the request of the Purchaser). To the extent that the
Seller enters into lawful arrangements reasonably satisfactory to
the Purchaser designed to provide the benefits of any such
Interest to the Purchaser as set forth in clauses (1) and (2)
above, such Interest shall be deemed to have been conveyed to the
Purchaser for the purposes of this Agreement.
13.4 Use of Transferred Employees. The Purchaser
understands and acknowledges that, after the Closing Date, Imo or
the Seller may require the assistance or participation of its
former employees who are employed by the Purchaser after Closing
in locating and obtaining records and files maintained by the
Purchaser and in the anticipation of, or preparation for, ongoing
investigations and actions, including, without limitation, the
AIM-9 Claim, or existing or future litigation, arbitration,
administration or tax-related matters. To the extent that such
former employees of Imo or the Seller are employed by the
Purchaser, Imo or the Seller may, at the Seller's expense, have
reasonable access to such employees upon the following terms and
conditions:
(a) The Seller shall give the Purchaser notice of the
necessity to utilize specified employees prior to the date on
which Imo or the Seller is requesting the assistance or
participation of such employees; provided, however, it is
understood and agreed that, under certain special circumstances,
it may be impractical for Imo or the Seller to comply with the
requirement for prior notice contained in this Section 13.4(a),
in which event the Purchaser will not unreasonably withhold from
the Seller access to such employees in such circumstances;
(b) The Seller shall reimburse the Purchaser for all
out-of-pocket expenses incurred by each such employee and shall
reimburse the Purchaser for all wages paid by the Purchaser to
each such employee relating to the time period during which Imo
or the Seller has retained the assistance of such employee as
provided herein; and
(c) To the extent any such employee is utilized by Imo
or the Seller for more than twenty business days during any
calendar year, the Seller shall, in addition to the reimbursement
called for by Section 13.4(b) above, pay to the Purchaser all
other costs to the Purchaser of having such employee away from
his occupation with the Purchaser, as shall reasonably be agreed
to by the Seller and the Purchaser.
13.5 AIM-9 Warranty. Subject to the terms and
conditions specified in this Section 13.5, the Purchaser
covenants and agrees to perform all warranty work as required by
the government under the AIM-9 Contract. The Seller agrees to
(i) reimburse the Purchaser for all AIM-9 Warranty Costs and (ii)
to pay to the Purchaser an additional 15% of such AIM-9 Warranty
Costs so reimbursed. The Purchaser shall provide the Seller a
detailed invoice for all AIM-9 Warranty Costs. The Seller shall
have a period of 30 days following receipt of such invoice to
review the Purchaser's records and files relating to such AIM-9
Warranty Costs, and the Purchaser shall make such records and
files available to the Seller and its representatives upon the
request of the Seller. The Seller may dispute any amounts
reflected in such invoice by giving notice in writing to the
Purchaser specifying each of the disputed items and setting forth
in reasonable detail the basis for such dispute. Failure by the
Seller to dispute the amounts reflected in any such invoice
within 30 days of delivery of such invoice shall be deemed an
acquiescence therein by the Seller. If within 40 days after
delivery by the Purchaser to the Seller of any notice of dispute,
the Purchaser and the Seller are unable to resolve all of such
disputed items, then any remaining items in dispute shall be
submitted to the Arbitrator. The Arbitrator shall determine the
remaining disputed items and report to the Seller and the
Purchaser upon such items. The Arbitrator's decision shall be
final, conclusive and binding on all parties. The fees and
disbursements of the Arbitrator shall be borne equally by the
Purchaser and the Seller.
13.6 Provisions Relating to Certain Excluded Assets.
The Purchaser shall promptly pay over to the Seller in full any
amounts received by the Purchaser that relate to the Excluded
Assets, including, without limitation, any amounts received in
connection with the AIM-9 Claim. Furthermore, the Purchaser
hereby consents to the Seller's and Imo's pursuit of the AIM-9
Claim in the name of Varo Inc., but for Imo's benefit and at
Imo's expense. Notwithstanding any other provision of this
Agreement, the Purchaser hereby authorizes Imo and the Seller to
take all action in the name of Varo Inc. reasonably necessary or
appropriate for these purposes, including, without limitation,
the submission and certification of documents, appeals or
pleadings in connection with the AIM-9 Claim.
13.7 Public Announcements. Neither the Seller (nor any
of its Affiliates) nor the Purchaser (nor any of its Affiliates)
shall make any public statement, including, without limitation,
any press release, with respect to this Agreement or the
transactions contemplated hereby, without the prior written
consent of the other party (which consent shall not be
unreasonably withheld), except as may be required by law.
13.8 Joint Post-Closing Covenant of the Seller and the
Purchaser. The Seller and the Purchaser jointly covenant and
agree that, from and after the Closing Date, the Seller and the
Purchaser will cooperate with each other in defending or
prosecuting any action, suit, proceeding, investigation or audit
of the other relating to (a) the preparation and audit of the
Seller's and the Purchaser's tax returns for all periods up to
and including the Closing Date, (b) any audit of the Purchaser
and/or the Seller with respect to the sales, transfer and similar
Taxes imposed by the laws of any state relating to the
transactions contemplated by this Agreement and (c) the
performance of any Contract including without limitation any
Government Contract or other Subcontracted Contract. In
furtherance hereof, the Purchaser and the Seller further covenant
and agree to respond to all reasonable inquiries related to such
matters and to provide, to the extent possible, substantiation of
transactions and to make available and furnish appropriate
documents and personnel in connection therewith.
13.9 Books and Records; Personnel. For a period of
seven years following the Closing Date (or such longer period as
may be required by any Governmental Authority or ongoing Legal
Proceeding):
(a) The Purchaser shall not dispose of or destroy any
of the business records and files of the Business. If the
Purchaser wishes to dispose of or destroy such records and files
after that time, it shall first give 30 days' prior written
notice to the Seller and the Seller shall have the right, at its
option and expense, upon prior written notice to the Purchaser
within such 30 day period, to take possession of the records and
files within 60 days after the date of the Seller's notice to the
Purchaser.
(b) The Purchaser shall allow the Seller and its
representatives reasonable access to all business records and
files of the Business which are transferred to the Purchaser in
connection herewith, during regular business hours and upon
reasonable notice at the Purchaser's principal place of business
or at any location where such records are stored, and the Seller
shall have the right, at its own expense, to make copies of any
such records and files; provided, however, that any such access
or copying shall be had or done in such a manner so as not to
interfere with the normal conduct of the Purchaser's business or
operations.
(c) The Purchaser shall make available to the Seller
and its representatives, upon written request and at the Seller's
expense (i) the Purchaser's personnel to assist the Seller in
locating and obtaining records and files maintained by the
Purchaser and (ii) any of the Purchaser's personnel previously in
the Seller's employ whose assistance or participation is
reasonably required by the Seller in anticipation of, or
preparation for, existing or future litigation, arbitration,
administrative proceeding, tax return preparation or other
matters in which the Seller or any of its Affiliates is involved
and which is related to the Business.
13.10 Actions Regarding Subcontracted Contracts.
The Seller hereby agrees that so long as any of the Subcontracted
Contracts remains in effect and not in default, it shall not take
any action or fail to take any action in connection with the
Subcontracted Contracts that would impair or diminish, in any
way, its rights thereunder or the rights of the Purchaser
hereunder or under the subcontract in respect of the
Subcontracted Contracts. For purposes of this Section 13.10, a
Subcontracted Contract shall be deemed to be "in default" if the
Purchaser has received a written notice from the applicable
contracting officer that it is in default in respect of one or
more of its obligations under such Subcontracted Contract, that
the Purchaser has failed to cure the default(s) alleged in said
notice, and that the time for the Purchaser to cure the default
or challenge the default notice has lapsed. In no event shall
the existence of a default under any individual Subcontracted
Contract permit the Seller to exercise rights in or to payments
under other Subcontracted Contracts which are not in default.
ARTICLE XIV
INDEMNIFICATION AND RELATED MATTERS
14.1 Indemnification by the Seller. Subject to the
provisions of this Article XIV, the Seller agrees to indemnify
and hold the Purchaser harmless from and against all Damages
resulting from or arising out of:
(a) the failure of any of the representations and
warranties contained in Article V of this Agreement to have been
true in all material respects when made and as of the Closing
Date, it being understood that to the extent that any of such
representations and warranties were made as of a specified date
the same shall apply only to the failure of such representations
and warranties to be true in all material respects as of such
specified date;
(b) the failure of the Seller to comply in all
material respects with any of the covenants contained in this
Agreement that are required to be performed by the Seller;
(c) the Excluded Liabilities and the Excluded Assets;
(d) any claims of Transferred Employees in connection
with the Pension Plan arising prior to the Closing Date; and
(e) any claims made prior to the Closing Date under a
Welfare Plan.
14.2 Indemnification by the Purchaser. Subject to the
provisions of this Article XIV and in addition to the
indemnification obligations of the Purchaser set forth in Section
13.2, the Purchaser agrees to indemnify and hold the Seller
harmless from and against all Damages resulting from or arising
out of:
(a) the failure of any of the representations and
warranties contained in Article VI of this Agreement to have been
true in all material respects when made and as of the Closing
Date, it being understood that to the extent that any of such
representations and warranties were made as of a specified date
the same shall apply only to the failure of such representations
and warranties to be true in all material respects as of such
specified date;
(b) the failure of the Purchaser to comply in all
material respects with any of the covenants contained in this
Agreement that are required to be performed by the Purchaser;
(c) the Assumed Liabilities;
(d) the operation of the Business or ownership of the
Purchased Assets on or after the Closing Date including, without
limitation, the failure of the Purchaser to perform its
obligations under any Contract relating to the Business;
(e) subject to Section 9.1(a), any claims of
Transferred Employees arising out of their employment with the
Purchaser or under any Law relating to the termination of such
Transferred Employee's employment by the Purchaser arising on or
after the Closing Date; and
(f) any obligation under any lease relating to the
Leased Real Property arising on or after the Closing Date.
14.3 Determination of Damages and Related Matters. In
calculating any amount payable to the Purchaser pursuant to
Section 14.1 or payable to the Seller pursuant to Section 14.2,
the Seller or the Purchaser, as the case may be, shall receive a
credit for (i) any tax benefit allowable as a result of the facts
giving rise to the claim for indemnification and (ii) any
insurance recoveries, and no amount shall be included for the
Purchaser's or Imo's and the Seller's, as the case may be,
special, consequential or punitive damages. The Seller and the
Purchaser agree that, except as specifically set forth in this
Agreement, no party (including its representatives) has made or
shall have liability for any representation or warranty, express
or implied, in connection with the transactions contemplated by
this Agreement, including, in the case of the Seller and its
representatives, any representation or warranty, express or
implied, as to the accuracy or completeness of any information
regarding the Business. The Purchaser acknowledges and agrees
that the Purchaser and the Purchaser Representatives have the
experience and knowledge to evaluate the business, financial
condition, assets and liabilities of the Business, that the
Purchaser and the Purchaser Representatives have had access to
such of the information and documents referred to in Article V
and to such of the real property, fixtures and tangible personal
property of the Business as the Purchaser and the Purchaser
Representatives shall have requested to see and/or review, that
the Purchaser and the Purchaser Representatives have had a full
opportunity to meet with appropriate management and employees of
the Seller and its Subsidiaries to discuss the Business and the
Purchased Assets; and that, in determining to acquire the
Purchased Assets, the Purchaser has made its own investigation
into, and based thereon the Purchaser has formed an independent
judgment concerning, the Purchased Assets and the Business. It
is therefore expressly understood and agreed that, except as
otherwise expressly provided herein, the Purchaser accepts the
condition of the Purchased Assets "AS IS, WHERE IS" and without
any representation, warranty or guarantee, express or implied, as
to merchantability, fitness for a particular purpose or otherwise
as to the condition, size, extent, quantity, type or value of the
Purchased Assets or the Business.
14.4 Limitation on Indemnification Liabilities. The
indemnification in favor of (i) the Purchaser contained in
Section 14.1 hereof and (ii) the Seller contained in Section 14.2
hereof (a) shall not be effective until the aggregate dollar
amount of all Damages indemnified against under such Section 14.1
or 14.2 exceeds $100,000 (the "Threshold Amount"), and then only
to the extent such aggregate amount exceeds the Threshold Amount
and (b) shall terminate once the dollar amount of all Damages
indemnified against under such Section 14.1 or 14.2 aggregates an
amount equal to 25% of the Purchase Price.
14.5 Survival of Representations, Warranties and
Covenants. The parties hereto agree that the representations and
warranties made in this Agreement and any indemnification with
respect thereto shall survive for one year after the Closing
Date. Claims for indemnification under Sections 14.1(b), (c),
(d) and (e), and under Sections 14.2(b), (c), (d) and (e), shall
survive for three years after the Closing Date. Claims for
indemnification under Section 14.2(f) shall survive for a period
of three years after the expiration of any such lease relating to
the Leased Real Property.
14.6 Notice of Indemnification. In the event any Legal
Proceeding or Environmental Claim shall be threatened or
instituted or any claim or demand shall be asserted by any Person
in respect of which payment may be sought by one party hereto
from the other party hereto under the provisions of this Article
XIV or for breach of any of the representations and warranties
set forth herein, the party seeking indemnification (the
"Indemnitee") shall promptly cause written notice of the
assertion of any such claim of which it has knowledge which it
reasonably believes to be covered by this indemnity to be
forwarded to the other party (the "Indemnitor"), which notice
must be received by the Indemnitor prior to the expiration of (i)
one year after the Closing Date, in the case of any claim for
indemnification referred to in the first sentence of Section
14.5, or (ii) three years after the Closing Date, in the case of
any claim for indemnification referred to in the second sentence
of Section 14.5. Any notice of a claim by reason of any of the
representations, warranties or covenants contained in this
Agreement shall state specifically the representation, warranty
or covenant with respect to which the claim is made, the facts
giving rise to an alleged basis for the claim, and the amount of
the liability asserted against the Indemnitor by reason of the
claim.
14.7 Indemnification Procedure for Third Party Claims.
Except as otherwise provided herein, in the event of the
initiation of any Legal Proceeding against an Indemnitee by a
third party, the Indemnitor shall have the absolute right after
the receipt of the notice provided for in Section 14.6, at its
option and at its own expense, to be represented by counsel of
its choice, and to defend against, negotiate, settle or otherwise
deal with any proceeding, claim, or demand which relates to any
Damages indemnified against hereunder. The parties hereto agree
to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such Legal Proceeding,
claim or demand, including by providing any pertinent records,
materials or information within their control as may be
reasonably required. To the extent the Indemnitor elects not to
defend such Legal Proceeding, claim or demand, and the Indemnitee
defends against or otherwise deals with any such Legal
Proceeding, claim or demand, the Indemnitee may retain counsel,
at the expense of the Indemnitor, and control the defense of such
proceeding. If the Indemnitee shall settle any such proceeding
without the consent of the Indemnitor, the Indemnitee shall
thereafter have no claim against the Indemnitor under this
Article XIV with respect to any Damages occasioned by such
settlement.
14.8 Consequential Damages. No party hereto shall have
any liability for any punitive, exemplary, indirect or
consequential damages, including without limitation lost profits
or lost savings.
14.9 Exclusive Remedy. The exclusive remedy available
to a party hereto in respect of the matters arising in connection
with the transactions contemplated by this Agreement, including
without limitation the matters covered by Section 14.1 or Section
14.2 hereof, shall be to proceed in the manner and subject to the
limitations contained in this Article XIV.
ARTICLE XV
TERMINATION
15.1 Termination. This Agreement may be terminated:
(a) by the written agreement of the Purchaser and the
Seller;
(b) by either the Purchaser or the Seller if there
shall be in effect a non-appealable Order of a court of competent
jurisdiction permanently prohibiting the consummation of the
transactions contemplated hereby;
(c) by the Seller if the condition set forth in
Section 11.6 is not satisfied on or before the date that is 60
days after the date of this Agreement; or
(d) by either the Purchaser or the Seller if the
Closing shall not have occurred on or before the date that is 90
days after the date of this Agreement.
15.2 Liabilities After Termination. Upon any
termination of this Agreement pursuant to Section 15.1 above, no
party hereto shall thereafter have any further liability or
obligation hereunder other than the Purchaser's obligations
pursuant to Section 8.2 hereof, but no such termination shall
relieve either party hereto of any liability to the other party
hereto for any breach of this Agreement prior to the date of such
termination.
ARTICLE XVI
MISCELLANEOUS
16.1 Prorations. The Purchaser and the Seller hereby
agree as follows with regard to prorations applicable to the
consummation of the transactions contemplated hereby:
(a) All operational expenses incurred directly in the
operation of the Business, including, without limitation, utility
bills, the expense of supplies, the expense of fuel, and the
like, shall be prorated between the parties as of the Closing
Date, and as of such date shall become the obligation and
responsibility of the Purchaser;
(b) Prorations which are to be effected on the Closing
Date shall be made on the Closing Date or, if such prorations
cannot reasonably be made as of the Closing Date, as soon
thereafter as possible and "as of" the Closing Date;
(c) All prepaid expenses shall be prorated between the
parties as of the Closing Date; and
(d) The Purchaser, as of the Closing Date, shall pay
such amounts as may be required to replace all deposits held with
the suppliers of utilities to the Business, and to assist the
Seller as may be reasonably required in obtaining a return of
such deposits put in place by the Seller as of the Closing Date.
16.2 Waiver of Compliance with Bulk Transfer Laws. The
Purchaser hereby waives compliance by the Seller with the
provisions of the bulk transfer laws of any jurisdiction in
connection with the transactions contemplated hereby.
16.3 Entire Agreement. This Agreement (together with
the Schedules and Exhibits attached hereto) contains, and is
intended as, a complete statement of all of the terms and the
arrangements between the parties hereto with respect to the
matters provided for herein, and supersedes any and all previous
agreements and understandings between the parties hereto with
respect to such matters.
16.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Texas, without giving effect to the conflicts of law principles
thereof, and controlling United States federal law.
16.5 Expenses. Each of the parties hereto shall bear
its own expenses (including, without limitation, fees and
disbursements of its counsel, accountants and other experts)
incurred by it in connection with the preparation, negotiation,
execution, delivery and performance of this Agreement, each of
the other documents and instruments executed in connection with
or contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
16.6 Table of Contents and Headings; Certain
Construction Rules. The table of contents and section headings
of this Agreement are for reference purposes only and are to be
given no effect in the construction or interpretation of this
Agreement. The words "hereof," "herein" and "hereunder" and
words of similar import referring to this Agreement refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
16.7 Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed
given when delivered personally or four days after being mailed
by registered mail, return receipt requested, to a party at the
following address (or to such other address as such party may
have specified by notice given to the other party pursuant to
this provision):
If to the Seller, to:
IMO Industries Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇. ▇ West
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.; Executive Vice President
and General Counsel
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
The Warner
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Purchaser, to:
Varo Acquisition Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
with a copy to:
LeBoeuf, Lamb, Green & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
16.8 Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity
or enforceability of any other provision of this Agreement, each
of which shall remain in full force and effect.
16.9 Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Nothing in this
Agreement shall create or be deemed to create any third party
beneficiary rights in any Person or entity not party to this
Agreement. No assignment of this Agreement or of any rights or
obligations hereunder may be made by any party (by operation of
law or otherwise) without the prior written consent of the other
party hereto and any attempted assignment without such required
consent shall be void.
16.10 Amendments. This Agreement may be amended,
supplemented or modified, and any provision hereof may be waived,
only pursuant to a written instrument making specific reference
to this Agreement signed by each of the parties hereto.
16.11 Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first above written.
VARO INC.
By: /s/▇. ▇. ▇▇▇▇
Name:▇. ▇. ▇▇▇▇
Title:Executive VP, General Counsel &
Secretary
VARO ACQUISITION CORP.
By: /s/▇▇▇▇▇ ▇▇▇▇▇
Name:▇▇▇▇▇ ▇▇▇▇▇
Title:President