EXHIBIT 2.1
MASTER PURCHASE AGREEMENT
BETWEEN
BCP ACQUISITION COMPANY L.L.C.
AND
NORTHROP GRUMMAN CORPORATION
Dated as of November 18, 2002
TABLE OF CONTENTS
Page
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ARTICLE I TRANSFER AND ASSUMPTION .....................................................................2
1.1 Preliminary Steps; Acquisition Structure Steps and
Acquisition Steps ...........................................................................2
1.2 Transfer and Contribution of the Equity Interests, the Automotive Assets
and the Excluded Assets .....................................................................4
1.3 Assumption of Liabilities; Excluded Liabilities..............................................5
1.4 Method of Transfer and Assumption............................................................6
1.5 Nonassignable Contracts......................................................................6
1.6 Treatment of Transfers.......................................................................7
ARTICLE II SALE AND PURCHASE OF THE SHARES, THE LLC INTERESTS, THE FOREIGN SHARES, THE PARENT RULING
NEWCO STOCK, THE ▇▇▇▇▇-VARITY CAPITAL STOCK, THE TRW UK CAPITAL STOCK AND THE INO
CAPITAL STOCK................................................................................7
2.1 Sale and Purchase of the Shares, the LLC Interests, the Foreign Shares, the Parent Ruling
Newco Stock, the ▇▇▇▇▇-Varity Capital Stock, the TRW UK Capital Stock and the INO
Capital Stock ...............................................................................7
ARTICLE III CLOSING; PURCHASE PRICE AND PAYMENT..........................................................8
3.1 Closing; Purchase Price; Closing Deliveries; Ancillary Agreements............................8
3.2 Purchase Price Adjustment....................................................................9
ARTICLE IV TERMINATION.................................................................................12
4.1 Termination of Agreement....................................................................12
4.2 Procedure Upon Termination..................................................................13
4.3 Effect of Termination.......................................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NORTHROP GRUMMAN, TRW AND TRW AUTOMOTIVE..................14
5.1 Authority; No Conflicts; Governmental Consents; Corporate Matters...........................14
5.2 Capitalization of the Company and its Subsidiaries..........................................16
5.3 Financial Statements; Absence of Changes....................................................17
5.4 Taxes.......................................................................................19
5.5 Assets Other than Real Property Interests...................................................19
5.6 Real Property Interests.....................................................................19
5.7 Intellectual Property.......................................................................20
5.8 Contracts...................................................................................20
5.9 Litigation; Decrees.........................................................................23
5.10 Employee Benefits...........................................................................23
5.11 Environmental Matters.......................................................................26
5.12 Employee and Labor Relations................................................................27
5.13 Compliance with Law; Permits................................................................28
5.14 Assets of the Business......................................................................28
5.15 Affiliate Transactions......................................................................28
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5.16 Product Liability...........................................................................28
5.17 Insurance...................................................................................29
5.18 Customers and Suppliers.....................................................................29
5.19 Financial Advisors..........................................................................29
5.20 Investment Intention........................................................................29
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BCP.......................................................30
6.1 Authority; No Conflicts; Governmental Consents..............................................30
6.2 Actions and Proceedings, Etc................................................................31
6.3 Investment Intention........................................................................31
6.4 Financing Capability........................................................................31
6.5 Financial Advisors..........................................................................31
6.6 Limitations on Representations and Warranties...............................................31
ARTICLE VII COVENANTS...................................................................................32
7.1 Confidentiality; Access to Information......................................................32
7.2 Conduct of the Business Pending the Closing.................................................33
7.3 Consents....................................................................................35
7.4 Filings with Governmental Bodies............................................................35
7.5 Insurance...................................................................................36
7.6 Foreign Sales...............................................................................36
7.7 Other Actions...............................................................................36
7.8 No Solicitation.............................................................................37
7.9 Books and Records...........................................................................38
7.10 Publicity...................................................................................38
7.11 Guarantees and Letters of Credit............................................................39
7.12 TRW and TRW Automotive to Become Parties....................................................39
7.13 Non-Competition Agreement...................................................................40
7.14 Waiver of Bulk Sales Requirement............................................................40
7.15 Discharge of Indebtedness...................................................................40
7.16 Cooperation in Financing....................................................................41
7.17 Updated Financial Statements................................................................41
7.18 Stockholders' Agreement and Transition Services Agreement...................................42
7.19 Transaction and Monitoring Fee Agreement....................................................42
7.20 Agreed Assumed Indebtedness.................................................................42
ARTICLE VIII CONDITIONS TO CLOSING.......................................................................43
8.1 Conditions Precedent to Obligations of Each Party...........................................43
8.2 Conditions Precedent to Obligations of BCP..................................................43
8.3 Conditions Precedent to Obligations of Northrop Grumman, TRW and TRW Automotive.............44
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ARTICLE IX DOCUMENTS TO BE DELIVERED...................................................................45
9.1 Documents to be Delivered by Northrop Grumman, TRW, TRW Automotive and Holdings.............45
9.2 Documents to be Delivered by the BCP Entities...............................................46
ARTICLE X INDEMNIFICATION.............................................................................46
10.1 Indemnification.............................................................................46
10.2 Certain Limitations.........................................................................47
10.3 Indemnification Procedures..................................................................48
10.4 Employee Benefits and Labor Indemnity.......................................................49
10.5 Environmental Liability Indemnity...........................................................49
10.6 Fruehauf Litigation Indemnity...............................................................50
10.7 Limitation of Liability.....................................................................50
10.8 Survival....................................................................................51
10.9 OPEB Indemnity..............................................................................51
ARTICLE XI TAX MATTERS.................................................................................58
11.1 Indemnification Obligations With Respect to Taxes...........................................58
11.2 Tax Returns and Payment Responsibility......................................................60
11.3 Refunds.....................................................................................61
11.4 Contest Provisions..........................................................................61
11.5 Section 338(h)(10) Election.................................................................62
11.6 Section 338(g) Election.....................................................................63
11.7 Tax Sharing Agreement.......................................................................63
11.8 Assistance and Cooperation..................................................................63
11.9 Retention of Records........................................................................63
11.10 Other Provisions............................................................................63
11.11 Characterization of Payments................................................................63
11.12 Tax Indemnification Claims..................................................................63
ARTICLE XII MISCELLANEOUS...............................................................................64
12.1 Certain Definitions.........................................................................64
12.2 Interpretation..............................................................................79
12.3 Costs and Expenses..........................................................................79
12.4 Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.............79
12.5 Entire Agreement; Amendments and Waivers....................................................79
12.6 Governing Law...............................................................................80
12.7 Table of Contents and Headings..............................................................80
12.8 Notices.....................................................................................80
12.9 Severability................................................................................81
12.10 Binding Effect; Assignment..................................................................81
12.11 Counterparts................................................................................82
iii
EXHIBITS
EXHIBIT A-1 Intellectual Property License Agreement (In-Bound)
EXHIBIT A-2 Intellectual Property License Agreement (Out-Bound)
EXHIBIT B Transition Services Agreement
EXHIBIT C Employee Matters Agreement
EXHIBIT D Insurance Allocation Agreement
EXHIBIT E Key Terms of Stockholders' Agreement
EXHIBIT F Transaction and Monitoring Fee Agreement
EXHIBIT G Calculation of OPEB Indemnity Obligations
EXHIBIT H Summary of Key Terms of Seller Note
iv
SCHEDULES
Schedule 1.1 Purchase Price Allocation
Schedule 1.1(b)(vi) Foreign Acquirors
Schedule 1.1(c)(ii) Foreign Entities
Schedule 1.1(c)(iii) French Foreign Entities
Schedule 6.1(c) Governmental Consents
Schedule 7.11 Guarantees and Letters of Credit
Schedule 7.20 Summary of Automotive Debt
Schedule 8.2(g) Consents to Close
Schedule 11.5(a) 338(h)(10) Elections
Schedule 12.1(a) Adjusting Indebtedness
Schedule 12.1(b) Automotive Affiliates
Schedule 12.1(c) Excluded Assets
Schedule 12.1(d) Separate Purchases
Schedule 12.1(e) Knowledge of TRW
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SCHEDULES TO NORTHROP GRUMMAN DISCLOSURE LETTER
Schedule 5.1(b) No Conflicts
Schedule 5.1(c) Government Consents
Schedule 5.1(d) Subsidiary Authority
Schedule 5.1(e) Commitments or Agreements for the Issuance or Sale of
Securities of the Company or its Subsidiaries
Schedule 5.2(b) Commitments or Agreements for the Issuance or Sale of
Securities of the Company or its Subsidiaries
Schedule 5.2(c) Capital Stock of the Company and its Subsidiaries
Schedule 5.2(d) Indebtedness
Schedule 5.3(a) Financial Statements
Schedule 5.3(b) Absence of Changes
Schedule 5.4 Taxes
Schedule 5.6 Real Property Interests
Schedule 5.7(a) Intellectual Property
Schedule 5.7(b) Infringement Intellectual Property
Schedule 5.8(a) Employment, Relocation and Severance Agreements
Schedule 5.8(b) Material Collective Bargaining Agreements
Schedule 5.8(c) Supplier Contracts
Schedule 5.8(d) Customer Contracts
Schedule 5.8(g) Capital Expenditure Agreements
Schedule 5.8(h) Agreements Relating to Location and Number of Employees
Schedule 5.8(i) Indentures, Notes, Loans and Credit Agreements
Schedule 5.8(j) Agreements That Restrict Company Business Activities
Schedule 5.8(k) Tangible Personal Property Leases
Schedule 5.8(l) Material IP Licenses
Schedule 5.8(m) Indemnification Related to Divestitures
Schedule 5.8(n) Material Joint Ventures, Partnerships, LLCs
Schedule 5.9 Litigation; Decrees
Schedule 5.10 Employee Benefit Plans
Schedule 5.10(l) Collective Bargaining Agreements
Schedule 5.11 Environmental Matters
Schedule 5.12 Employee and Labor Relations
Schedule 5.13 Compliance with Laws; Permits
Schedule 5.15 Affiliate Transactions
Schedule 5.16 Products Liability
Schedule 5.17 Insurance
Schedule 7.2 Conduct of Business Pending Closing
Schedule 12.1 Capital Expenditure Budget
vi
ANNEXES
Annex I Preliminary Steps
Annex II Final Structure
vii
INDEX OF DEFINED TERMS
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Accounting Arbitrator.....................................Section 3.2(f).........................................11
Acquisition Steps.........................................Section 1.1(c)..........................................4
Acquisition Structure Steps...............................Section 1.1(b)..........................................3
Acquisition Transaction...................................Section 7.8(a).........................................37
Adjusted Interim Balance Sheet............................Section 5.3(a).........................................17
Adjusting Indebtedness....................................Section 12.1...........................................64
Affiliate.................................................Section 12.1...........................................64
Aggregate Indemnity Amount................................Section 10.9(b)........................................52
Aggregate Shortfall Amount................................Section 10.9(b)........................................52
Aggregate Unreimbursed Indemnity Amount...................Section 10.9(b)........................................52
Aggregate Unreimbursed Shortfall Amount...................Section 10.9(b)........................................52
Agreed Assumed Indebtedness...............................Section 7.20...........................................43
Agreed Foreign Entity.....................................Section 7.6............................................36
Agreement.................................................Preamble................................................1
Ancillary Agreements......................................Section 3.1(e)..........................................9
Assets....................................................Section 12.1...........................................65
ATV Payment Date..........................................Section 10.9(h)........................................57
Audited Balance Sheet.....................................Section 5.3(a).........................................17
Auto Newco I..............................................Section 1.1(c)..........................................4
Auto Newco................................................Recitals................................................1
Automotive Affiliate......................................Section 12.1...........................................66
Automotive Assets.........................................Section 12.1...........................................66
Automotive Business Employee..............................Section 12.1...........................................67
Automotive Business.......................................Section 12.1...........................................66
Automotive Liabilities....................................Section 12.1...........................................67
Basket....................................................Section 10.2(a)........................................47
BCP Entities..............................................Recitals................................................2
BCP.......................................................Preamble................................................1
Blackstone................................................Section 6.4............................................31
Business Day..............................................Section 12.1...........................................67
Business Property or Properties...........................Section 5.6(a).........................................20
Cap.......................................................Section 10.2(a)........................................47
Capital Expenditure Budget................................Section 12.1...........................................67
Capital Stock.............................................Section 12.1...........................................67
Claim.....................................................Section 10.3(a)........................................48
Closing Adjusting Indebtedness............................Section 12.1...........................................68
Closing Balance Sheet.....................................Section 3.2(b)..........................................9
Closing Date Shareholders.................................Section 10.9(i)........................................57
Closing Date..............................................Section 3.1(a)..........................................8
Closing Statement.........................................Section 3.2(c).........................................10
Closing Working Capital...................................Section 12.1...........................................68
Closing...................................................Section 3.1(a)..........................................8
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INDEX OF DEFINED TERMS
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Code......................................................Section 12.1...........................................68
Commitment Letters........................................Section 6.4............................................31
Company Intellectual Property.............................Section 12.1...........................................68
Company Plans.............................................Section 5.10(a)........................................23
Company...................................................Recitals................................................1
Confidential Information..................................Section 12.1...........................................68
Confidentiality Agreement.................................Section 7.1(a).........................................32
Consent...................................................Section 12.1...........................................69
Contract..................................................Section 12.1...........................................69
Copyright.................................................Section 12.1...........................................69
Copyrights................................................Section 12.1...........................................73
Current Year..............................................Section 10.9(h)........................................56
Debt Commitment Letters...................................Section 6.4............................................31
Debt Financing............................................Section 6.4............................................31
Disclaimed Damages........................................Section 10.7...........................................50
EC Merger Regulation......................................Section 6.1(c).........................................31
Employee Benefit Plans....................................Section 5.10(a)........................................23
Employee Matters Agreement................................Section 3.1(e)..........................................9
Environmental Claim.......................................Section 12.1...........................................69
Environmental Law.........................................Section 12.1...........................................69
Environmental Liabilities.................................Section 12.1...........................................69
Equity Commitment Letters.................................Section 6.4............................................31
Equity Consideration......................................Section 1.1(b)..........................................3
Equity Financing..........................................Section 6.4............................................31
Equity Interests..........................................Section 12.1...........................................70
ERISA.....................................................Section 5.10(a)........................................23
Estimated Adjusting Indebtedness..........................Section 3.2(a)..........................................9
Estimated Closing Balance Sheet...........................Section 3.2(a)..........................................9
Estimated Working Capital.................................Section 3.2(a)..........................................9
Exchange Act..............................................Section 5.1(c).........................................15
Excluded Assets...........................................Section 12.1...........................................70
Excluded Liabilities......................................Section 12.1...........................................71
Fee Payment Date..........................................Section 4.3(b).........................................13
Final Closing Adjusting Indebtedness......................Section 3.2(f).........................................11
Final Closing Balance Sheet...............................Section 3.2(f).........................................11
Final Closing Statement...................................Section 3.2(f).........................................11
Final Closing Working Capital.............................Section 3.2(f).........................................11
Financial Statements......................................Section 5.3(a).........................................17
▇▇▇▇▇.....................................................Section 1.1(b)..........................................3
Foreign Acquirors.........................................Section 1.1(b)..........................................3
Foreign Entities..........................................Section 1.1(c)..........................................3
Foreign Shares............................................Section 1.1(c)..........................................4
Foreign Stock Closing Threshold Date......................Section 12.1...........................................72
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INDEX OF DEFINED TERMS
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French Foreign Acquiror...................................Section 12.1...........................................72
Freuhauf Liabilities......................................Section 12.1...........................................72
Freuhauf Matter...........................................Section 12.1...........................................72
GAAP......................................................Section 12.1...........................................72
Governmental Body.........................................Section 12.1...........................................72
Hazardous Substance.......................................Section 12.1...........................................72
Holdings..................................................Recitals................................................1
HSR Act...................................................Section 5.1(c).........................................15
Income Tax Return.........................................Section 12.1...........................................72
Income Tax................................................Section 12.1...........................................72
Indebtedness..............................................Section 12.1...........................................73
Indemnity Payment.........................................Section 10.9(a)........................................52
Infringe..................................................Section 5.7(b).........................................20
INO.......................................................Recitals................................................1
Intellectual Property Agreements..........................Section 3.1(e)..........................................9
Intellectual Property.....................................Section 12.1...........................................73
Intended Transferee.......................................Section 1.5.............................................6
Intended Transferor.......................................Section 1.5.............................................6
Interim Balance Sheet.....................................Section 5.3(a).........................................17
Interim Financial Statements..............................Section 5.3(a).........................................17
Intermediate Holdco.......................................Recitals................................................1
Law.......................................................Section 12.1...........................................74
Leased Property...........................................Section 5.6(a).........................................19
Leases....................................................Section 5.6(a).........................................19
Legal Proceeding..........................................Section 12.1...........................................74
Liability.................................................Section 12.1...........................................74
LIBOR.....................................................Section 3.2(g).........................................11
Lien......................................................Section 12.1...........................................74
LLC Interests.............................................Recitals................................................1
Losses....................................................Section 12.1...........................................74
▇▇▇▇▇-Varity Capital Stock................................Recitals................................................1
▇▇▇▇▇-Varity..............................................Recitals................................................1
Material Adverse Change...................................Section 12.1...........................................74
Material Adverse Effect...................................Section 12.1...........................................75
New Early Retirement Program..............................Section 10.9(c)........................................53
New Program Early Retiree.................................Section 10.9(c)........................................53
Newco Sub.................................................Section 1.1(b)..........................................3
Newco.....................................................Recitals................................................2
Non-U.S. Plans............................................Section 5.10(j)........................................26
Northrop Grumman Disclosure Letter........................Article V..............................................14
Northrop Grumman Indemnified Parties......................Section 10.1(b)........................................47
Northrop Grumman..........................................Preamble................................................1
Northrop Refunds..........................................Section 11.3...........................................61
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INDEX OF DEFINED TERMS
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Northrop/TRW Closing......................................Recitals................................................1
Northrop/TRW Merger Agreement.............................Recitals................................................1
Northrop/TRW Merger.......................................Recitals................................................1
OPEB Arbitrator...........................................Section 10.9(j)........................................57
Owned Property............................................Section 5.6(a).........................................19
Parent Ruling Newco Stock.................................Section 1.1(b)..........................................2
Parent....................................................Recitals................................................1
Patents...................................................Section 12.1...........................................73
Payment Date..............................................Section 10.9(a)........................................51
PBGC......................................................Section 5.10(c)........................................24
Permits...................................................Section 12.1...........................................76
Permitted Liens...........................................Section 5.5............................................19
Person....................................................Section 12.1...........................................76
Post Employment Benefits..................................Section 10.9(c)........................................53
Post-Closing Periods......................................Section 11.1(c)........................................59
Preceding Year............................................Section 10.9(e)........................................54
Pre-Closing Periods.......................................Section 11.1(a)........................................58
Preliminary Steps.........................................Section 1.1(a)..........................................2
Prior Year................................................Section 10.9(h)........................................56
Purchase Price Allocation Schedule........................Section 1.1(b)..........................................2
Purchase Price............................................Section 3.1(b)..........................................8
Purchaser Carryback Refunds...............................Section 11.3...........................................61
Purchaser Indemnified Parties.............................Section 10.1(a)........................................46
Qualified Plans...........................................Section 5.10(b)........................................23
Ruling Newco..............................................Section 1.1(b)..........................................2
Section 338 Allocation....................................Section 11.5(c)........................................62
Section 338 Election......................................Section 11.5(a)........................................62
Section 338 Forms.........................................Section 11.5(b)........................................62
Seller Note...............................................Section 12.1...........................................77
Seller Plans..............................................Section 5.10(a)........................................23
Shares....................................................Recitals................................................1
Shortfall Amount..........................................Section 10.9(b)........................................52
SMLLC.....................................................Recitals................................................1
Stockholders' Agreement...................................Section 7.18...........................................42
Straddle Period...........................................Section 12.1...........................................77
Subject Year..............................................Section 10.9(b)........................................52
Subsidiary................................................Section 12.1...........................................77
Target Working Capital....................................Section 12.1...........................................77
Tax Losses................................................Section 11.1(a)........................................58
Tax Return................................................Section 12.1...........................................77
Taxes.....................................................Section 12.1...........................................77
Termination Fee...........................................Section 4.3(b).........................................13
Trademarks................................................Section 12.1...........................................73
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INDEX OF DEFINED TERMS
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Transaction and Monitoring Fee Agreement..................Section 7.19...........................................42
Transaction Steps.........................................Section 1.1.............................................2
Transfer Documents........................................Section 12.1...........................................78
Transferee................................................Section 12.1...........................................78
Transferor................................................Section 12.1...........................................78
Transferred Entities......................................Section 12.1...........................................78
Transfers.................................................Section 1.3(c)..........................................5
TRW Asset Transferring Companies..........................Section 12.1...........................................78
TRW Automotive............................................Recitals................................................1
TRW Equity Transferring Companies.........................Section 12.1...........................................78
TRW Execution Date........................................Section 7.12...........................................39
TRW Fee...................................................Section 4.3(b).........................................13
TRW Intellectual Property.................................Section 12.1...........................................78
TRW Participants..........................................Section 12.1...........................................78
TRW Transferring Companies................................Section 12.1...........................................78
TRW UK Capital Stock......................................Recitals................................................1
TRW UK....................................................Recitals................................................1
TRW.......................................................Recitals................................................1
Updated Financial Statements..............................Section 7.17(b)........................................42
VSSI......................................................Section 1.1(b)..........................................2
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MASTER PURCHASE AGREEMENT
MASTER PURCHASE AGREEMENT, dated as of November 18, 2002 (this
"AGREEMENT"), by and between NORTHROP GRUMMAN CORPORATION, a Delaware
corporation ("NORTHROP GRUMMAN"), and BCP ACQUISITION COMPANY L.L.C., a Delaware
limited liability company ("BCP").
W I T N E S S E T H:
WHEREAS, Northrop Grumman and TRW Inc., an Ohio corporation ("TRW"),
are parties to that certain Agreement and Plan of Merger, dated as of June 30,
2002 (the "NORTHROP/TRW MERGER AGREEMENT"), pursuant to which a wholly-owned
subsidiary of Northrop Grumman will be merged with and into TRW (the
"NORTHROP/TRW MERGER") and TRW, as the surviving corporation, will become a
wholly-owned subsidiary of Northrop Grumman;
WHEREAS, TRW Automotive Inc., a Delaware corporation ("TRW AUTOMOTIVE")
and a wholly owned subsidiary of TRW, has formed or will form prior to the
Closing Date TRW Auto Holdings Inc., a Delaware corporation ("HOLDINGS"), and
will own all of the issued and outstanding shares of common stock, par value
$0.001 per share (the "SHARES"), of Holdings;
WHEREAS, TRW has formed or will form prior to the Closing Date TRW
Automotive U.S. LLC, a Delaware limited liability corporation ("SMLLC"), and
will own all of the issued and outstanding equity ownership interests in SMLLC
(the "LLC INTERESTS");
WHEREAS, TRW Automotive U.K. Inc., a Delaware corporation and an
indirect subsidiary of TRW ("AUTO NEWCO"), owns (i) one hundred percent (100%)
of the issued and outstanding Capital Stock (the "▇▇▇▇▇-VARITY CAPITAL STOCK")
of ▇▇▇▇▇-Varity Unlimited, a company organized under the laws of England and
Wales ("▇▇▇▇▇-VARITY"), (ii) all of the issued and outstanding Capital Stock
(the "TRW UK CAPITAL STOCK") of TRW UK Ltd, a company organized under the laws
of England and Wales ("TRW UK"), and (iii) all of the issued and outstanding
Capital Stock of TRW INO Ltd., a company organized under the laws of England and
Wales ("INO" and collectively with Holdings, SMLLC, ▇▇▇▇▇-Varity and TRW UK and
subject to the understanding set forth in the last sentence of Section 1.6(b),
the "COMPANY");
WHEREAS, TRW or its Affiliates own all of the issued and outstanding
shares of Capital Stock of each of the Foreign Entities;
WHEREAS, simultaneously with, or as promptly as practicable following,
the consummation of the Northrop/TRW Merger (the "NORTHROP/TRW CLOSING"),
Northrop Grumman will cause TRW and TRW Automotive to become parties to this
Agreement;
WHEREAS, to effectuate the transactions contemplated by this Agreement,
(i) BCP has formed or will form prior to the Closing Date Automotive Holdings
Corp., a Delaware corporation ("PARENT"), (ii) Parent has formed or will form
prior to the Closing Date Automotive Intermediate Corp., a Delaware corporation
("INTERMEDIATE HOLDCO"), as a direct subsidiary of
Parent, and (iii) Intermediate Holdco has formed or will form prior to the
Closing Date Roadster Acquisition Corp., a Delaware corporation ("NEWCO"), as a
direct or indirect subsidiary of Intermediate Holdco (BCP, Parent, Intermediate
Holdco, Newco and the Foreign Acquirors are collectively referred to herein as
the "BCP ENTITIES");
WHEREAS, prior to the Closing Date, TRW will take or cause to be taken
all actions necessary to cause the Preliminary Steps to occur;
WHEREAS, on or prior to the Closing Date, TRW, the BCP Entities and
Holdings will take or cause to be taken all actions necessary to cause the
Acquisition Structure Steps to occur;
WHEREAS, on the Closing Date, TRW and the BCP Entities will take or
cause to be taken all actions necessary to cause the Acquisition Steps to occur;
WHEREAS, the parties hereto also intend to enter into certain
agreements governing their relationships after the Closing Date, as contemplated
hereby; and
WHEREAS, certain capitalized terms used in this Agreement are defined
in Section 12.1.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
TRANSFER AND ASSUMPTION
1.1 Preliminary Steps; Acquisition Structure Steps and Acquisition
Steps. Subject to the terms and conditions of this Agreement, on or prior to the
Closing Date, Northrop Grumman and TRW, on the one hand, and BCP, on the other
hand, shall cause their respective Subsidiaries to cause the following
transactions (collectively, the "TRANSACTION STEPS") to occur in the following
order:
(a) Preliminary Steps. TRW, or its appropriate Subsidiary,
will cause the Transfers to occur in accordance with Sections 1.2 and 1.3. The
foregoing steps are collectively referred to herein as the "PRELIMINARY STEPS."
The Preliminary Steps will result in a structure substantially reflected on
Annex I.
(b) Acquisition Structure Steps. Subject to the terms and
conditions of this Agreement, on the Closing Date:
(i) Intermediate Holdco will acquire from TRW Vehicle
Safety Systems Inc., a Delaware corporation and an indirect,
wholly-owned subsidiary of TRW ("VSSI") or another Subsidiary of TRW,
shares of common stock of LucasVarity Automotive Holding Co., a
Delaware corporation ("RULING NEWCO"), representing approximately 43.8%
of the value of the issued and outstanding Capital Stock of Ruling
Newco (the "PARENT RULING NEWCO STOCK") in exchange for the Seller Note
in accordance with Schedule 1.1 (the "PURCHASE PRICE ALLOCATION
SCHEDULE"), and the Seller Note will be distributed to TRW or as TRW
directs;
2
(ii) Parent will contribute to Intermediate Holdco
(A) $500 million in cash and (B) newly issued shares of common stock of
Parent (having an implied value of $368 million based upon the Purchase
Price, and, before any adjustment pursuant to Section 3.2, representing
approximately forty-two percent (42%) of the issued and outstanding
common stock of Parent) (the "EQUITY CONSIDERATION") in exchange for
all of the issued and outstanding shares of common stock of
Intermediate Holdco;
(iii) Intermediate Holdco will contribute to Newco
$500 million in cash, the Parent Ruling Newco Stock and the Equity
Consideration in exchange for all of the issued and outstanding shares
of common stock of Newco;
(iv) Newco will consummate the Debt Financing;
(v) Newco will capitalize a company to be organized
under the laws of The Netherlands ("▇▇▇▇▇") by contributing cash in
exchange for all of the issued and outstanding shares of common stock
of ▇▇▇▇▇ and by lending cash to ▇▇▇▇▇ in amounts to be determined;
(vi) ▇▇▇▇▇ will capitalize the entities listed on
Schedule 1.1(b)(vi) (collectively, the "FOREIGN ACQUIRORS") by
contributing cash in exchange for all of the issued and outstanding
shares of Capital Stock of the Foreign Acquirors and by lending cash to
the Foreign Acquirors in amounts to be determined; and
(vii) Newco will capitalize Automotive (LV) Corp., a
Delaware corporation ("NEWCO SUB"), by contributing cash in exchange
for all of the issued and outstanding shares of common stock of Newco
Sub in an amount to be determined.
The steps referred to in the foregoing clauses (i) through (vii) are
collectively referred to herein as the "ACQUISITION STRUCTURE STEPS."
(c) Acquisition Steps. Subject to the terms and conditions of
this Agreement, on the Closing Date:
(i) Newco will acquire from VSSI or another
Subsidiary of TRW the remaining shares of common stock of Ruling Newco
(other than the Parent Ruling Newco Stock contributed to Newco pursuant
to Section 1.1(b)(iii)) for the amount of cash set forth on the
Purchase Price Allocation Schedule, and such cash will be distributed
to TRW or as TRW directs;
(ii) The Foreign Acquirors (other than the French
Foreign Acquiror) will acquire from Holdings or one of its Subsidiaries
all of the issued and outstanding Capital Stock of those entities
listed on Schedule 1.1(c)(ii) (collectively, the "FOREIGN ENTITIES")
(other than as provided for in Section 1.1(c)(iii)) that become Agreed
Foreign Entities in accordance with Section 7.6 hereof, in each case
for the amount of cash set forth on the Purchase Price Allocation
Schedule, and Holdings or its Subsidiaries, as the case may be, will
distribute any cash it receives to TRW Automotive; provided that any
cash allocated in the Purchase Price Allocation Schedule to the
purchase of any Foreign Entities that are not Agreed Foreign Entities
shall be added to the cash consideration
3
provided for in Section 1.1(c)(vi)(A), and the Capital Stock of such
Foreign Entities that are not Agreed Foreign Entities shall continue to
be held by Holdings or its appropriate Subsidiary (the Capital Stock of
the Agreed Foreign Entities acquired pursuant to this Section
1.1(c)(ii) and the Capital Stock of the French Subsidiaries acquired
pursuant to clause (iii) below are collectively referred to as the
"FOREIGN SHARES");
(iii) The French Foreign Acquiror will acquire from
Holdings or one of its Subsidiaries and from ▇▇▇▇▇-Varity or one of its
Subsidiaries all of the issued and outstanding Capital Stock of certain
direct and indirect French subsidiaries of Holdings and ▇▇▇▇▇-Varity
listed on Schedule 1.1(c)(iii) for the amount of cash and a note issued
by the French Foreign Acquiror with a face amount as set forth on the
Purchase Price Allocation Schedule and Holdings or its Subsidiaries, as
the case may be, and ▇▇▇▇▇-Varity or its Subsidiaries, as the case may
be, will distribute any cash they receive to TRW Automotive;
(iv) Newco Sub will acquire from a newly-formed
Delaware corporation and a wholly-owned subsidiary of Auto Newco ("AUTO
NEWCO I") the one percent (1%) equity interest in ▇▇▇▇▇-Varity held by
Auto Newco I for the amount of cash set forth on the Purchase Price
Allocation Schedule and Auto Newco I will distribute such cash to Auto
Newco;
(v) Newco will acquire from Auto Newco its
ninety-nine percent (99%) equity interest in ▇▇▇▇▇-Varity and the TRW
UK Capital Stock and the INO Capital Stock for the amount of cash and
the Equity Consideration set forth on the Purchase Price Allocation
Schedule; and
(vi) Newco will acquire (A) one hundred percent
(100%) of the Capital Stock of Holdings from TRW Automotive in exchange
for cash and (B) one hundred percent (100%) of the LLC Interests from
TRW or a wholly-owned Subsidiary of TRW in exchange for cash, in each
case in accordance with the Purchase Price Allocation Schedule and in a
transaction intended to be a "qualified stock purchase" of Holdings
with respect to which Northrop Grumman, Newco and TRW Automotive will
make an election under Section 338(h)(10) of the Code with respect to
Holdings and certain of its Subsidiaries pursuant to Section 11.5
hereof.
The steps referred to in the foregoing clauses (i) through (vi) are collectively
referred to herein as the "ACQUISITION STEPS." The Acquisition Structure Steps
and the Acquisition Steps will result in a final structure substantially
reflected on Annex II.
1.2 Transfer and Contribution of the Equity Interests, the
Automotive Assets and the Excluded Assets.
(a) Subject to the terms and conditions of this Agreement and
in a manner that results in the structure set forth in Annex I, prior to the
Closing Date, TRW shall, and shall cause the other TRW Equity Transferring
Companies to, transfer, convey, assign and deliver to Holdings, Auto Newco, Auto
Newco I or SMLLC, as appropriate, and Holdings, Auto Newco, Auto Newco I or
SMLLC, as appropriate, shall accept from TRW and such TRW Equity
4
Transferring Companies all of TRW's and such TRW Equity Transferring Companies'
right, title and interest in and to the Equity Interests.
(b) Subject to the terms and conditions of this Agreement and
in a manner that results in the structure set forth in Annex I, prior to the
Closing Date, TRW shall, and shall cause the other TRW Asset Transferring
Companies to, transfer, convey, assign and deliver to Holdings, Auto Newco, Auto
Newco I or SMLLC, as appropriate, and Holdings, Auto Newco, Auto Newco I or
SMLLC, as appropriate, shall accept from TRW and such TRW Asset Transferring
Companies all of TRW's and its Subsidiaries' right, title and interest in and to
the Automotive Assets.
(c) Subject to the terms and conditions of this Agreement,
prior to the Closing Date, TRW shall cause the Transferred Entities to transfer
to TRW (or at TRW's election, a Subsidiary of TRW) all of the Transferred
Entities' right, title and interest in and to the Excluded Assets, and TRW (or
such Subsidiary) shall accept from the Transferred Entities all of the
Transferred Entities' right, title and interest in and to the Excluded Assets.
1.3 Assumption of Liabilities; Excluded Liabilities.
(a) Subject to the terms and conditions of this Agreement, TRW
shall cause Holdings, in partial consideration for the transfers described in
Section 1.2, to assume all Automotive Liabilities and on a timely basis shall
pay, satisfy and discharge (or cause to be paid, satisfied and discharged) all
Automotive Liabilities.
(b) Subject to the terms and conditions of this Agreement,
prior to the Closing Date, TRW shall, or shall cause any Affiliate of TRW which
will not be an Affiliate of the Company or any of its Subsidiaries following the
Closing, to assume all Excluded Liabilities of the Transferred Entities, and on
a timely basis TRW shall pay, satisfy and discharge (or cause to be paid,
satisfied and discharged) all Excluded Liabilities. Notwithstanding anything in
this Agreement to the contrary, none of the Company, the BCP Entities and their
respective Affiliates (as determined from and after the Closing Date) shall
assume or be deemed to have assumed, any Excluded Liabilities.
(c) In completing the transfers described in Section 1.2 and
this Section 1.3, (together with the Preliminary Steps, the "TRANSFERS"),
Northrop Grumman and the TRW Participants shall not be permitted to modify or
deviate from the Transfers without the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed; provided that Northrop
Grumman shall promptly furnish to BCP all information reasonably necessary to
assess the effect on the Company and BCP of any such deviation or modification.
BCP shall promptly provide Northrop Grumman with the basis for the withholding
of such consent.
(d) Except for the Automotive Liabilities and except as
expressly provided otherwise in this Agreement or the Ancillary Agreements, none
of the BCP Entities, the Company and their respective Affiliates (as determined
from and after the Closing Date) is assuming, and none of them shall be deemed
to have assumed, any Indebtedness, Liabilities, commitments or obligations
(including Taxes), whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or
not
5
required by GAAP to be reflected in financial statements or in the notes
thereto, of any TRW Asset Transferring Company.
1.4 Method of Transfer and Assumption. The parties hereto
acknowledge and agree that (i) any Transfer will be effected by delivery by the
Transferor to the Transferee of (A) with respect to the Equity Interests that
are evidenced by capital stock certificates or similar instruments, certificates
duly endorsed in blank or accompanied by stock powers or other instruments of
assignment executed in blank and to the extent required by the Laws of any other
country, any local transfer or other document, (B) with respect to any real
property interest and/or any improvements thereon, a grant deed, ▇▇▇▇ of sale or
substantially equivalent instrument in any non-United States jurisdictions
conveying the property, and (C) with respect to all other Automotive Assets or
Equity Interests, as the case may be, such good and sufficient instruments of
contribution, assignment, conveyance, transfer and delivery, in form and
substance reasonably satisfactory to Parent and to the appropriate Transferor
and Transferee, as shall be necessary to vest in such Transferee all of the
Transferor's right, title and interest in and to any such Automotive Assets or
Equity Interests and (ii) the assumption of the Automotive Liabilities and the
Excluded Liabilities contemplated pursuant to Section 1.3 hereof will be
effected by delivery by the party assuming such Automotive Liabilities or
Excluded Liabilities to the party which is the obligor under such Automotive
Liabilities or Excluded Liabilities, of such good and sufficient instruments of
assumption, in form and substance reasonably satisfactory to Parent and Northrop
Grumman, as shall be necessary for the assumption of such Automotive Liabilities
and Excluded Liabilities. Each party hereto also agrees to deliver to each other
party hereto such other documents, instruments, certificates and agreements as
may be reasonably requested by any such other party hereto in connection with
the transactions contemplated hereby and to take such further action as may be
reasonably necessary to carry out the provisions hereof. Notwithstanding any
provision to the contrary contained in this Agreement, in the event and to the
extent that there is any conflict between the provisions of this Agreement and
the provisions of any of the instruments of transfer or assumption referred to
in this Section 1.4, the provisions of this Agreement will prevail and govern
and the parties will cause such instruments of transfer or assumption to contain
provisions which provide for this Agreement to prevail and govern in such event.
1.5 Nonassignable Contracts. Anything contained herein to the
contrary notwithstanding, but subject to Section 7.3 and Section 8.2(d), this
Agreement will not constitute an agreement to assign any Contract or other
Automotive Asset if an assignment or attempted assignment of the same without
the Consent of another Person would constitute a breach thereof or entitle any
other party thereto to terminate, or accelerate or assert additional material
rights thereunder or with respect thereto. If any such Consent is not obtained
or if an attempted assignment would be ineffective or have such other effect,
then (a) the party purporting to make such transfer (the "INTENDED TRANSFEROR")
shall (i) provide or cause to be provided to the party entitled to the benefits
of such purported transfer (the "INTENDED TRANSFEREE"), to the extent permitted
by Law, the benefits of any such Contract or Automotive Asset, (ii) cooperate in
any lawful arrangements designed to provide such benefits to the Intended
Transferee, (iii) enforce, at the request of and for the account of the Intended
Transferee, any rights of the Intended Transferor arising from such Contract or
Automotive Asset, including the right to elect to terminate any such Contract in
accordance with the terms thereof upon the advice of the Intended Transferee,
and (iv) promptly pay or cause to be paid to the Intended Transferee when
received
6
all moneys received by the Intended Transferor with respect to any such Contract
or Automotive Asset and (b) in consideration for the matters described in clause
(a) above, the Intended Transferee shall pay, perform and discharge on behalf of
the Intended Transferor all of the Intended Transferor's Liabilities thereunder
(to the extent such Liabilities would otherwise have been assumed by the
Intended Transferee pursuant to Section 1.3(a)) in a timely manner and in
accordance with the terms thereof. In addition, the Intended Transferor shall
take such other actions as may reasonably be requested by the Intended
Transferee in order to place the Intended Transferee, insofar as reasonably
possible, in the same position as if such Contract or Automotive Asset had been
transferred as contemplated hereby and so that all the benefits and burdens
relating thereto, including possession, use, risk of loss, potential for gain
and dominion, control and command, will inure to the Intended Transferee. If and
when such Consents are obtained, the transfer of the applicable Contract or
Automotive Asset will be effected in accordance with the terms of this
Agreement.
1.6 Treatment of Transfers.
(a) In the event that one of the parties, within one (1) year
of the Closing Date, identifies any Asset or Liability that has been transferred
other than in accordance with, or not transferred in accordance with, this
Agreement, the Transfer Documents or one of more of the Ancillary Agreements,
the parties agree to in good faith correct such error at the earliest
practicable date. In the event that one of the parties, within one (1) year of
the Closing Date, identifies any TRW Intellectual Property or Company
Intellectual Property that should have been licensed in accordance with the
Ancillary Agreements but was not so licensed, the parties agree to in good faith
correct such error at the earliest practicable date.
(b) Each of the representations, warranties, covenants,
agreements and undertakings of Northrop Grumman, TRW and TRW Automotive
contained herein (and all corresponding definitions) is given or made as if, and
on the basis that, Holdings, ▇▇▇▇▇-Varity, TRW UK, INO and SMLLC were in
existence, to the extent applicable, and the Transfers had occurred prior to all
dates relevant to such representations, warranties, covenants and undertakings.
Subject to the foregoing, any references to the Company and its Subsidiaries in
any such representations, warranties, covenants, agreements and undertakings
will be deemed to be a reference to Holdings, ▇▇▇▇▇-Varity, TRW UK, INO and
SMLLC and their respective Subsidiaries after giving effect to the Transfers
(and other variations on such references (e.g., the "Company or any of its
Subsidiaries" or "Subsidiaries of the Company") will be deemed to have
corresponding meanings) unless the context clearly indicates otherwise.
ARTICLE II
SALE AND PURCHASE OF THE SHARES, THE LLC INTERESTS,
THE FOREIGN SHARES, THE PARENT RULING NEWCO STOCK,
THE ▇▇▇▇▇-VARITY CAPITAL STOCK, THE TRW UK CAPITAL
STOCK AND THE INO CAPITAL STOCK
2.1 Sale and Purchase of the Shares, the LLC Interests, the
Foreign Shares, the Parent Ruling Newco Stock, the ▇▇▇▇▇-Varity Capital Stock,
the TRW UK Capital Stock and the INO Capital Stock. Subject to and in accordance
with the terms and conditions of this Agreement, on
7
the Closing Date, Northrop Grumman shall, or shall cause the Company, TRW, TRW
Automotive, Auto Newco, Auto Newco I, VSSI or Holdings, as appropriate, to,
sell, assign, transfer, convey and deliver to the BCP Entities, as appropriate,
the Shares, the LLC Interests, the Foreign Shares, the Parent Ruling Newco
Stock, the ▇▇▇▇▇-Varity Capital Stock, the TRW UK Capital Stock and the INO
Capital Stock, in each case free and clear of all Liens, and the BCP Entities
shall deliver to TRW, TRW Automotive, Auto Newco, Auto Newco I, VSSI and
Holdings the Purchase Price, in each case in the manner and for the
consideration set forth on the Purchase Price Allocation Schedule.
ARTICLE III
CLOSING; PURCHASE PRICE AND PAYMENT
3.1 Closing; Purchase Price; Closing Deliveries; Ancillary
Agreements.
(a) The closing of the transactions contemplated by this
Agreement (the "CLOSING") will be held (i) at the offices of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ within three (3) Business Days
after the later of (A) the date on which the last to be fulfilled or waived of
the conditions set forth in Article VIII (other than those conditions that by
their nature are to be fulfilled at the Closing) will be fulfilled or waived in
accordance with this Agreement and (B) the earlier of (x) the date on which each
Foreign Entity has become an Agreed Foreign Entity and (y) the later of March 1,
2003 and the Foreign Stock Closing Threshold Date, or (ii) at such other place
and time as the parties may agree. The date on which the Closing will occur is
referred to herein as the "CLOSING DATE."
(b) The aggregate purchase price (the "PURCHASE PRICE") to be
paid for the Shares, the LLC Interests, the Foreign Shares, the Parent Ruling
Newco Stock and the ▇▇▇▇▇-Varity Capital Stock, the TRW UK Capital Stock and the
INO Capital Stock acquired by the BCP Entities pursuant to this Agreement shall
consist of (i) (A) $3,757,000,000 in cash, less (B) the Estimated Adjusting
Indebtedness, subject to adjustment as provided in Section 3.2; (ii) the Equity
Consideration; and (iii) the Seller Note. The Purchase Price is to be allocated
in accordance with the Purchase Price Allocation Schedule, and no party shall
take a position inconsistent with such allocation on any Tax Return.
(c) At the Closing, BCP shall cause the appropriate BCP Entity
to deliver to TRW, TRW Automotive, Auto Newco, VSSI or Holdings, as appropriate,
the consideration described in Sections 1.1(b)(i), 1.1(c)(i), 1.1(c)(ii),
1.1(c)(iv), 1.1(c)(v) and 1.1(c)(vi).
(d) At the Closing, (i) Northrop Grumman, TRW and TRW
Automotive shall deliver or cause to be delivered to the BCP Entities each of
the certificates and other documents contemplated by Section 9.1 and (ii) the
BCP Entities shall deliver to Northrop Grumman, TRW, TRW Automotive, Auto Newco
and Holdings, as applicable, each of the certificates and other documents
contemplated by Section 9.2.
(e) Not later than the Closing, the parties hereto shall enter
into agreements embodying certain relationships between the BCP Entities or the
Company and its Subsidiaries, as applicable, on the one hand, and Northrop
Grumman or TRW, as applicable, on the other
8
hand, after the Closing Date. These agreements will be substantially in the
forms set forth in Exhibits A-1 and A-2 with respect to Intellectual Property
(the "INTELLECTUAL PROPERTY AGREEMENTS"), Exhibit B with respect to the
provision of certain transitional services, Exhibit C with respect to employee
matters (the "EMPLOYEE MATTERS AGREEMENT"), and Exhibit D with respect to
insurance administration (Exhibits A through D, collectively, the "ANCILLARY
AGREEMENTS").
3.2 Purchase Price Adjustment.
(a) Northrop Grumman shall cause management of the Company, as
soon as practicable after the Closing Date has been established, but in any
event no later than ten (10) Business Days prior to the Closing Date, to deliver
to Parent an estimated balance sheet of the Company and its Subsidiaries as of
the Closing Date (the "ESTIMATED CLOSING BALANCE SHEET") prepared in good faith
and in accordance with GAAP consistently applied, which will be in a format
comparable to and include the same line items as the Adjusted Interim Balance
Sheet. To the extent consistent with GAAP, the Estimated Closing Balance Sheet
will be prepared using the same accounting methods, policies, practices and
procedures, with consistent classifications, judgments and estimation
methodology, as was used in the preparation of the Adjusted Interim Balance
Sheet, and will not include any changes in assets or liabilities as a result of
purchase accounting adjustments arising from or resulting as a consequence of
the Northrop/TRW Merger or the transactions contemplated hereby. The Estimated
Closing Balance Sheet will be accompanied by an additional schedule of
information showing Northrop Grumman's method of calculating good faith
estimates of the Closing Working Capital ("ESTIMATED WORKING CAPITAL") and the
Closing Adjusting Indebtedness ("ESTIMATED ADJUSTING INDEBTEDNESS") in
accordance with the definitions thereof. The cash portion of the Purchase Price
set forth in Section 3.1(b)(i) of this Agreement shall be increased or decreased
in an amount equal to the amount by which the Estimated Working Capital is
greater or less than the Target Working Capital. If the Estimated Working
Capital is greater than the Target Working Capital, the cash portion of the
Purchase Price set forth in Section 3.1(b)(i) of this Agreement to be paid by
the appropriate BCP Entities at Closing shall be increased by the amount of such
excess. If the Estimated Working Capital is less than the Target Working
Capital, the cash portion of the Purchase Price set forth in Section 3.1(b)(i)
of this Agreement to be paid by the appropriate BCP Entities at Closing shall be
decreased by the amount of such deficit.
(b) Within sixty (60) days after the Closing Date, Parent
shall prepare and deliver to Northrop Grumman a combined balance sheet (together
with all work papers and other supporting documentation and schedules used in
the preparation thereof) of the Company and its Subsidiaries as of the Closing
Date prepared in accordance with GAAP consistently applied, which will be in a
format comparable to and include the same line items as the Adjusted Interim
Balance Sheet (such balance sheet, the "CLOSING BALANCE SHEET"). To the extent
consistent with GAAP, the Closing Balance Sheet will be prepared using the same
accounting methods, policies, practices and procedures, with consistent
classifications, judgments and estimation methodology, as was used in the
preparation of the Adjusted Interim Balance Sheet, and will not include any
changes in assets or liabilities as a result of purchase accounting adjustments
arising from or resulting as a consequence of the Northrop/TRW Merger or the
transactions contemplated hereby. In the event that the Closing Date does not
occur at a financial week or month end for accounting purposes, the parties
shall agree on mutually acceptable roll forward or roll back
9
procedures. Northrop Grumman shall provide such accounting and other information
to Parent and shall cause the employees of TRW to assist Parent to the extent
Parent may reasonably request in the preparation of the Closing Balance Sheet.
(c) The Closing Balance Sheet will be accompanied by an
additional schedule of information showing the calculations of the Closing
Working Capital and the Closing Adjusting Indebtedness in accordance with the
definitions thereof (the "CLOSING STATEMENT").
(d) The parties hereto agree that the sole purpose of the
purchase price adjustment contemplated by this Section 3.2 is to measure the
effect on working capital of operating activity and transactions and to measure
changes in Adjusting Indebtedness that have occurred between September 30, 2002
and the Closing Date. The purchase price adjustment is not intended to permit
the introduction of different judgments, accounting methods, policies,
practices, procedures, classifications or estimation methodology for purposes of
determining the asset and liability balances from those used in the preparation
of the Financial Statements to the extent the same are consistent with GAAP
(except as disclosed in the footnotes thereto). Each party will provide the
other party and its representatives with reasonable access to books and records
and relevant personnel during the preparation of the Closing Balance Sheet and
the resolution of any disputes that may arise under this Section 3.2.
(e) If Northrop Grumman disagrees with the determination of
the Closing Working Capital or the Closing Adjusting Indebtedness as shown on
the Closing Statement and the Closing Balance Sheet, Northrop Grumman shall
notify Parent in writing of such disagreement within sixty (60) days after
delivery of the Closing Balance Sheet (together with all work papers and other
supporting documentation and schedules used in the preparation thereof), which
notice will describe the nature of any such disagreement in reasonable detail,
identify the specific items involved and the dollar amount of each such
disagreement and provide reasonable supporting documentation for each such
disagreement. After the end of such 60-day period, Northrop Grumman may not
introduce additional disagreements with respect to any item in the Closing
Balance Sheet or the Closing Statement and any item not so identified will be
deemed to be agreed to by Northrop Grumman and will be final and binding upon
the parties. Similarly, a disagreement by Northrop Grumman does not provide any
right to Parent to introduce any changes to the Closing Balance Sheet or the
Closing Statement not directly related to the disputed item. During the 60-day
period of its review, Northrop Grumman shall have reasonable access to any
additional documents, schedules or workpapers and to accounting personnel of the
Company as it may reasonably request.
(f) BCP and Northrop Grumman agree to negotiate in good faith
to resolve any such disagreement, and any resolution agreed to in writing will
be final and binding upon the parties and their successors and assigns. If the
parties are unable to resolve all disagreements properly identified by Northrop
Grumman pursuant to Section 3.2(e) within sixty (60) days after delivery to
Parent of written notice of such disagreement, then the disputed matters will be
referred to the Chief Financial Officers or other substantially equivalent
executive officers of the respective businesses for resolution. If the Chief
Financial Officers or other substantially equivalent executive officers are
unable to resolve all disagreements within fifteen (15) days after referral of
such disagreement, then, within fifteen (15) days thereafter, the matter will be
referred for final determination to PricewaterhouseCoopers LLP. If such firm is
unable to serve,
10
the parties shall jointly select an arbiter from an internationally recognized
accounting firm that is not affiliated with the independent auditor of either
Parent or Northrop Grumman or their respective Affiliates; if the parties are
unable to select such an arbiter within such time period, the American
Arbitration Association will make such selection (PricewaterhouseCoopers LLP or
any other Person so selected will be referred to herein as the "ACCOUNTING
ARBITRATOR"). The Accounting Arbitrator so selected shall only consider those
items and amounts set forth in the Closing Balance Sheet and the Closing
Statement as to which the parties have disagreed within the time periods and on
the terms specified above and must resolve the matter in accordance with
applicable Law and the terms and provisions of the Agreement. The Accounting
Arbitrator shall deliver to the parties, as promptly as practicable, and in any
event within ninety (90) days after its appointment, a written report setting
forth the resolution of any such disagreement determined in accordance with the
terms of the Agreement. With respect to each item of disagreement, the
resolution shall be the arithmetic average of the Accounting Arbitrator's
determination of the appropriate amount of such item and the position of either
Parent or Northrop Grumman that is closest to the Accounting Arbitrator's
determination on such disputed item. Such report will be non-appealable, final
and binding upon Parent and Northrop Grumman to the fullest extent permitted by
applicable Law and may be enforced in any court having competent jurisdiction.
The fees, expenses and costs of the Accounting Arbitrator shall be borne
one-half by BCP and one-half by Northrop Grumman. The Closing Balance Sheet, the
Closing Statement, the Closing Working Capital and the Closing Adjusting
Indebtedness as finally agreed or determined pursuant to the foregoing
provisions are referred to herein as the "FINAL CLOSING BALANCE SHEET", the
"FINAL CLOSING STATEMENT", the "FINAL CLOSING WORKING CAPITAL" and the "FINAL
CLOSING ADJUSTING INDEBTEDNESS", respectively.
(g) If the Final Closing Working Capital is less than the
Estimated Closing Working Capital, TRW, TRW Automotive and Auto Newco shall pay
or cause to be paid to Parent the amount of such deficit. If the Final Closing
Working Capital is greater than the Estimated Closing Working Capital, the
parties will cause Parent to cause Newco to pay to TRW, TRW Automotive and Auto
Newco collectively the amount of such excess. If the Final Closing Adjusting
Indebtedness is less than the Estimated Adjusting Indebtedness, the parties will
cause Parent to cause Newco to pay to TRW, TRW Automotive and Auto Newco
collectively the amount of such deficit. If the Final Closing Adjusting
Indebtedness is greater than the Estimated Closing Adjusting Indebtedness, TRW,
TRW Automotive and Auto Newco shall pay or cause to be paid to Parent the amount
of such excess. Any payments made to TRW, TRW Automotive and Auto Newco pursuant
to this Section 3.2(g) shall be allocated among TRW, TRW Automotive and Auto
Newco in accordance with the Purchase Price Allocation Schedule. Any payments
made by any party pursuant to this Section 3.2(g) shall be made by wire transfer
of immediately available funds to an account designated by the party receiving
payment within five (5) Business Days after the final determination of the
amount of such reduction or increase in Purchase Price, plus interest on the
amount of such reduction or increase from the Closing Date to the date of such
payment thereof at the per annum rate equal to the London Interbank Offer Rate
("LIBOR") on the Closing Date as published in the Wall Street Journal.
11
ARTICLE IV
TERMINATION
4.1 Termination of Agreement. This Agreement may be terminated
prior to the Closing as follows:
(a) by mutual written consent of Northrop Grumman and BCP;
(b) by Northrop Grumman or BCP on or after March 31, 2003 if
the Closing shall not have occurred by the close of business on such date,
provided that the terminating party is not then in default in any material
respect of any of its covenants or other obligations hereunder;
(c) by Northrop Grumman or BCP if there shall be in effect a
final nonappealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(d) by BCP if there shall have been a breach in any material
respect of any of the covenants or agreements on the part of Northrop Grumman,
TRW or TRW Automotive set forth in this Agreement or a breach of any of the
representations and warranties of Northrop Grumman, TRW or TRW Automotive that
would cause the conditions precedent set forth in Section 8.2(a) not to be
satisfied, in each case which has not been cured within thirty (30) days after
receipt of notice of such breach (it being understood that the provisions of
Section 1.6(b) shall apply for purposes of interpreting this clause (d) at any
time prior to the Transfers);
(e) by Northrop Grumman if there shall have been a breach in
any material respect of any of the covenants or agreements on the part of BCP
set forth in this Agreement or a breach of any of the representations and
warranties of BCP that would cause the conditions precedent set forth in Section
8.3(a) not to be satisfied, in each case which has not been cured within thirty
(30) days after receipt of notice of such breach and which would reasonably be
expected to materially hinder or materially delay the Closing or the ability of
BCP to comply with its obligations hereunder or under the Ancillary Agreements;
(f) by Northrop Grumman or BCP if the Northrop/TRW Merger
Agreement has been terminated; or
(g) by BCP pursuant to Section 7.12.
Notwithstanding the foregoing or anything to the contrary in this
Agreement or in any Ancillary Agreement, no party will be entitled to terminate
this Agreement pursuant to this Section 4.1 on the basis of facts which were
caused by such party's own breach of this Agreement and which have prevented the
satisfaction of any condition to the transactions contemplated by this
Agreement. Any termination pursuant to this Section 4.1 must be effected by a
written instrument signed by the terminating party or parties, which instrument
will specify the specific section hereof pursuant to which this Agreement is
being terminated.
12
4.2 Procedure Upon Termination. In the event of termination of
this Agreement by BCP or Northrop Grumman, or both, pursuant to Section 4.1,
written notice thereof shall forthwith be given to the other party, and this
Agreement will terminate and the transactions contemplated hereunder will be
abandoned, without further action by BCP, Northrop Grumman, TRW or TRW
Automotive. If this Agreement is terminated as provided herein, each party shall
promptly return all documents, work papers and other materials of any other
party relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party that furnished the same.
4.3 Effect of Termination.
(a) In the event that this Agreement is validly terminated as
provided herein, then each of the parties will be relieved of its duties and
obligations arising under this Agreement after the date of such termination and
such termination will be without liability to BCP, Northrop Grumman, TRW or TRW
Automotive; provided, however, that the provisions set forth in Sections 4.2,
4.3, 7.1, 12.3, 12.4 and 12.6 will survive any such termination and will be
enforceable hereunder; and provided, further, that, except as expressly provided
in Section 4.3(b), nothing in this Section 4.3 will relieve BCP, Northrop
Grumman, TRW or TRW Automotive of any liability for a breach of this Agreement.
(b) Without limiting the foregoing, if (i)(A) either party
shall terminate this Agreement pursuant to Section 4.1(b) or (f) and (B) TRW
shall pay or have paid to Northrop Grumman a fee for or in connection with the
termination of the TRW Merger Agreement (the "TRW FEE"), then Northrop Grumman
and BCP agree that Northrop Grumman shall pay to BCP an amount equal to 27.3% of
the TRW Fee (the "TERMINATION FEE") as liquidated damages; provided, however,
that if, within eighteen (18) months of the date of payment of the Termination
Fee (the "FEE PAYMENT DATE"), BCP or any of its Affiliates consummates an
Acquisition Transaction, BCP shall on the date of the consummation of such
Acquisition Transaction pay to Northrop Grumman an amount equal to the
Termination Fee, plus interest on such amount from the Fee Payment Date to the
date of such payment thereof at the per annum rate equal to LIBOR on the Fee
Payment Date as published in the Wall Street Journal, or (ii) BCP shall
terminate this Agreement pursuant to Section 4.1(g), then Northrop Grumman shall
reimburse the BCP Entities for their documented out-of-pocket expenses
(including those of the banks providing the Debt Financing to the extent that
the BCP Entities are responsible therefor under the terms of the Debt Commitment
Letters) and reasonable fees and disbursements of counsel as shall have been
reasonably incurred by the BCP Entities after August 6, 2002 in connection with
this Agreement and the transactions contemplated hereby; provided, however, that
in no event shall Northrop Grumman reimburse the BCP Entities for any such
out-of-pocket expenses in excess of $15,000,000 in the aggregate.
(c) The Termination Fee required to be paid pursuant to
Section 4.3(b)(i) shall be paid by Northrop Grumman no later than two (2)
Business Days following the later of (i) the date of termination of this
Agreement or (ii) the date of Northrop Grumman's receipt of the TRW Fee, by wire
transfer of immediately available funds to an account designated by BCP in
writing. The amount required to be paid pursuant to Section 4.3(b)(ii) shall be
paid by Northrop Grumman no later than two (2) Business Days following the date
Northrop Grumman receives
13
written documentation from BCP detailing BCP's out-of-pocket expenses, by wire
transfer of immediately available funds to an account designated by BCP in
writing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF NORTHROP GRUMMAN, TRW AND TRW AUTOMOTIVE
Northrop Grumman, TRW (upon becoming a party hereto) and TRW Automotive
(upon becoming a party hereto) hereby represent and warrant to BCP that, except
as set forth on the disclosure letter delivered by Northrop Grumman to BCP
concurrently herewith (the "NORTHROP GRUMMAN DISCLOSURE LETTER"); it being
understood that any matter set forth in the Northrop Grumman Disclosure Letter
shall be deemed disclosed with respect to any section of this Article V to which
the matter relates, so long as the description of such matter in the Northrop
Grumman Disclosure Letter plainly indicates its relevance to the pertinent
section:
5.1 Authority; No Conflicts; Governmental Consents; Corporate
Matters.
(a) Each of Northrop Grumman, TRW, TRW Automotive,
▇▇▇▇▇-Varity, TRW UK, INO and Auto Newco is (and Holdings, Auto Newco and VSSI
at Closing will be) a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is or will be a party, and to consummate the
transactions contemplated hereby and thereby. SMLLC is a limited liability
company duly formed, validly existing and in good standing under the laws of the
state of Delaware. Each of the TRW Transferring Companies has, or will have at
the time of such Transfers, all requisite corporate power and authority to
consummate the Transfers. All corporate and limited liability company acts and
other proceedings (including any stockholder or board approvals) required to be
taken by each of Northrop Grumman, TRW, TRW Automotive and the Company to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements, to which it is or will be a party and the consummation of
the transactions hereby and thereby have been or (in the case of TRW, TRW
Automotive, Holdings ▇▇▇▇▇-Varity, TRW UK, INO, Auto Newco, Auto Newco I and
VSSI) will be as of the Closing, duly and properly taken. All corporate and
limited liability company acts and other proceedings (including any stockholder,
member or board approvals) required to be taken by each of the TRW Transferring
Companies to consummate the Transfers have been, or will be at the time of such
Transfers, duly and properly taken. This Agreement has been or (in the case of
TRW and TRW Automotive) will be as of the TRW Execution Date, and each of the
Ancillary Agreements, when executed will be, duly executed and delivered by each
of Northrop Grumman, TRW, TRW Automotive and the Company, as applicable, and
each constitutes, or will when executed constitute, a valid and binding
obligation of each of Northrop Grumman, TRW, TRW Automotive and the Company, as
applicable, enforceable against each of Northrop Grumman, TRW, TRW Automotive
and the Company, as the case may be, in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
14
(b) The execution and delivery of this Agreement does not, and
of the Ancillary Agreements will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms of this Agreement
and the Ancillary Agreements will not (with or without notice or lapse of time,
or both), conflict with, or result in any violation of or default under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a benefit under, or result in the creation of any Lien (not
including Permitted Liens) upon any of the properties or assets of TRW or the
Company or any of its Subsidiaries under, any provision of (i) the certificate
of incorporation, by-laws, regulations or other organizational or governing
documents of Northrop Grumman, TRW, TRW Automotive, the Company or any of its
Subsidiaries, (ii) any Permit, or Contract of a type that is required to be
disclosed on Schedule 5.8 to the Northrop Grumman Disclosure Letter or would be
required to be disclosed on Schedule 5.8 to the Northrop Grumman Disclosure
Letter had such Contract been entered into as of the date of this Agreement, of
Northrop Grumman, TRW, TRW Automotive or the Company or any of its Subsidiaries
or (iii) any Order or, subject to the matters described in clauses (i)-(iii) of
paragraph (c) below, Law applicable to Northrop Grumman, TRW, TRW Automotive or
the Company or any of its Subsidiaries or their respective property or assets,
other than, in the case of clauses (ii) and (iii) above, any such conflicts,
violations, defaults, rights or Liens that, individually or in the aggregate,
would not result in any material loss, cost or expense.
(c) No material Consent, material Permit or material Order of,
or registration, declaration, notice or filing with, any Governmental Body is
required to be obtained or made by Northrop Grumman, the TRW Participants or the
Company or any of its Subsidiaries in connection with the execution, delivery
and performance of this Agreement or the Ancillary Agreements or the
consummation of the transactions contemplated hereby and thereby (excluding the
Transfers; provided, that TRW shall or shall cause the TRW Participants to
obtain any and all such Consents necessary to effectuate the Transfers), other
than (i) compliance with and filings under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (the "EXCHANGE
ACT"), (ii) compliance with and filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 and the rules and regulations promulgated thereunder
(the "HSR ACT") and the Competition Act (Canada) and (iii) those that, if not
made or obtained, individually or in the aggregate, would not materially hinder
or materially delay the Closing or result in any material loss, cost or expense.
(d) Each of the Subsidiaries of the Company incorporated or
organized under the laws of any jurisdiction in the United States is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as it is now being conducted. Each of the Subsidiaries of the Company
incorporated in a jurisdiction outside of the United States and each of the
Automotive Affiliates is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction in which it is organized (to the
extent such status is applicable and can be determined) and has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as it is now being conducted, except where the failure of
such would not result in any material loss, cost or expense. Each of the Company
and its Subsidiaries incorporated or organized under the laws of any
jurisdiction in the United States is duly licensed or qualified and in good
standing as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of the business conducted by it is such as to require
it to be so licensed or qualified, except where
15
the failure to be so licensed or qualified or in good standing would not have a
Material Adverse Effect.
(e) None of the Company or its Subsidiaries has granted any
outstanding options, warrants, rights or other securities convertible into or
exchangeable or exercisable for its shares of capital stock or any other
commitments or agreements providing for the issuance or sale of additional
shares, the sale of treasury shares, or for the repurchase or redemption of the
Company's or any such Subsidiary's shares. There are no agreements of any kind
that obligate any of the Company or its Subsidiaries to issue, purchase, redeem
or otherwise acquire any of its shares.
5.2 Capitalization of the Company and its Subsidiaries.
(a) All of the issued and outstanding shares of Capital Stock
of Holdings will be at the Closing owned directly by TRW Automotive free and
clear of any and all Liens and will have been duly authorized for issuance and
will be validly issued, fully paid and non-assessable. SMLLC is a sole member
limited liability company. All of the membership interests of SMLLC will be at
the Closing owned directly by TRW free and clear of any and all Liens, will be
duly authorized for issuance and will be validly issued, fully paid and
non-assessable and there are no other outstanding equity interests in SMLLC.
(b) There are no existing options, warrants, calls, rights,
subscriptions, arrangements, claims, commitments (contingent or otherwise) or
other agreements of any character to which Northrop Grumman, TRW, TRW
Automotive, the Company or any of its Subsidiaries is a party, or is otherwise
subject, requiring, and there are no securities of the Company or any of its
Subsidiaries outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any additional shares of Capital Stock or other
securities of the Company or any of its Subsidiaries convertible into,
exchangeable for or evidencing the right to subscribe for or purchase Capital
Stock or any other securities of the Company or any of its Subsidiaries. None of
Northrop Grumman, TRW, TRW Automotive, or the Company is a party, or is
otherwise subject, to any voting trust or other voting agreement with respect to
any of the shares of Capital Stock of the Company or to any agreement relating
to the issuance, sale, redemption, transfer, acquisition or other disposition of
the Capital Stock of the Company.
(c) Schedule 5.2(c) to the Northrop Grumman Disclosure Letter
sets forth a true and complete list of the authorized and outstanding Capital
Stock, name, jurisdiction of organization, and record owner of the equity
interests of each of the Company, its Subsidiaries and the material Automotive
Affiliates, all of which are duly authorized, validly issued and fully paid,
nonassessable and free and clear of any and all Liens, except Liens incurred in
connection with the financing of the transactions contemplated hereby. Unless
otherwise noted on Annex II, all such Capital Stock will be wholly-owned,
directly or indirectly, by Newco, free and clear of any and all Liens, except
for Liens incurred by Parent or its Affiliates in connection with the financing
of the transactions contemplated hereby or otherwise.
(d) Schedule 5.2(d) to the Northrop Grumman Disclosure Letter
sets forth all outstanding Indebtedness of the Company, its Subsidiaries or the
Automotive Affiliates to any Person (i) other than Indebtedness owed to the
Company, its Subsidiaries or the Automotive
16
Affiliates and (ii) other than Indebtedness to be incurred at Closing in
connection with the transactions specifically contemplated by this Agreement and
the Ancillary Agreements.
5.3 Financial Statements; Absence of Changes.
(a) Schedule 5.3 to the Northrop Grumman Disclosure
Letter contains a true and complete copy of the following:
(i) audited combined balance sheets of TRW Automotive
and its Subsidiaries as of December 31, 2001 (the "AUDITED BALANCE
SHEET") and December 31, 2000;
(ii) audited combined statements of operations, cash
flows and changes in stockholder's investment of TRW Automotive and its
Subsidiaries for each of the three (3) one-year periods ended December
31, 2001, December 31, 2000 and December 31, 1999;
(iii) unaudited interim combined balance sheet of TRW
Automotive and its Subsidiaries as of September 30, 2002 (the "INTERIM
BALANCE SHEET"); and
(iv) unaudited interim combined statements of
operations, cash flows and changes in stockholder's investment of TRW
Automotive and its Subsidiaries for each of the nine (9) month periods
ended September 30, 2002 (together with the Interim Balance Sheet, the
"INTERIM FINANCIAL STATEMENTS") and September 30, 2001.
The financial statements described in the foregoing clauses (i) through (iv) are
collectively referred to herein as the "FINANCIAL STATEMENTS." The Financial
Statements were prepared in accordance with GAAP, consistently applied (except
as disclosed in the footnotes thereto) and present fairly, in all material
respects, the combined financial position and combined results of operations and
cash flows of the Company and its Subsidiaries as of the dates thereof and for
the periods covered thereby, except for (x) the absence of footnotes required by
GAAP in connection with unaudited statements as of, and for the period ended,
September 30, 2002; (y) the effect, calculated in accordance with GAAP, of the
inclusion in the Financial Statements of Indebtedness (1) allocated from TRW
(other than Indebtedness representing historical third-party obligations of the
automotive legal entities included in the Company and its Subsidiaries) and (2)
set forth on Schedule 7.20 to the extent the same does not become Agreed Assumed
Indebtedness; and (z) the effect, calculated in accordance with GAAP, of the
inclusion in the Financial Statements of the Assets, Liabilities and results of
the business of TRW Investment Management Company, which has as of the date
hereof and will have at Closing total Assets of $1 million or less. The Interim
Balance Sheet as adjusted to eliminate the effects referred to in (y) and (z)
above in accordance with GAAP is referred to herein as the "ADJUSTED INTERIM
BALANCE SHEET." All of the Assets and Liabilities of the Company and its
Subsidiaries as of September 30, 2002 would be reflected on the Adjusted Interim
Balance Sheet to the extent the same would be required to be so reflected under
GAAP, and no other Assets or Liabilities other than those of the Company and its
Subsidiaries would be reflected on the Adjusted Interim Balance Sheet (in each
case, if such Adjusted Interim Balance Sheet were prepared in accordance with
GAAP).
17
(b) Except as expressly contemplated by this Agreement, since
December 31, 2001, the Company and its Subsidiaries have operated in the
ordinary course and consistent with past practice, and there have not been any:
(i) Material Adverse Changes;
(ii) occurrences resulting in damage, destruction or
loss (whether or not covered by insurance) affecting any tangible asset
or property of the Company and its Subsidiaries in excess of $5,000,000
for any single loss or $10,000,000 for all such losses;
(iii) (x) material increases in the benefits under
any Company Plans or any modifications to any Company Plan having a
material cost impact on the Company or its Subsidiaries or (y) material
increases in salary payable to any Automotive Business Employee other
than in the ordinary course of the business of the Company and its
Subsidiaries and consistent with past practice;
(iv) changes in the accounting methods or practices
followed by or with respect to the Company and its Subsidiaries, or any
changes in depreciation or amortization policies or rates theretofore
adopted, except for any such change which is required or taken by
reason of a change in GAAP;
(v) Contracts to merge, reorganize or consolidate
with or otherwise acquire any other Person, or any part or division
thereof, for consideration in excess of $5,000,000;
(vi) other material transactions relating to the
Company and its Subsidiaries, other than in the ordinary course of
business and consistent with past practice;
(vii) Contracts, whether in writing or otherwise, for
the Company or its Subsidiaries to take any of the actions specified in
items (i) through (vi) above; or
(viii) any actions taken by the Company or any of its
Subsidiaries that would be prohibited under clauses (g)(ii), (j),
(k)(iii), (m) and (n) of Section 7.2 of this Agreement if undertaken
after the date hereof.
(c) Except as and to the extent as would be reflected on the
Adjusted Interim Balance Sheet (if such Adjusted Interim Balance Sheet were
prepared in accordance with GAAP), the Company and its Subsidiaries do not have
any material Liabilities required to be reflected on a balance sheet or the
notes thereto prepared in accordance with GAAP other than Liabilities incurred
since September 30, 2002 in the ordinary course of business and consistent with
past practice.
18
5.4 Taxes.
(a) All material Tax Returns of the Company and its
Subsidiaries which have become due prior to the date hereof (taking into account
valid extensions of time to file) have been timely filed, and all such Tax
Returns are accurate and complete in all material respects.
(b) All material Taxes of the Company and its Subsidiaries
that have become due and payable have been timely paid.
(c) There are no outstanding Tax Liens that have been filed by
any Tax authority against any property or Assets of the Company and its
Subsidiaries or against any Company Intellectual Property, except for Liens for
current Taxes that are not yet due or payable.
(d) There is no material Legal Proceeding now pending,
proposed, or threatened in writing in respect of any Tax of the Company or any
of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of Law.
5.5 Assets Other than Real Property Interests. The Company and its
Subsidiaries have good and marketable title to all assets reflected on the
Interim Balance Sheet or thereafter acquired, except those sold or otherwise
disposed of since the date of the Interim Balance Sheet in the ordinary course
of business and consistent with past practice, in each case free and clear of
any and all Liens, except (a) such as are disclosed in the Financial Statements
or securing debt reflected as a liability on the Interim Balance Sheet and (b)
(i) mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business for amounts not yet due or which are
being contested in good faith by appropriate Legal Proceedings, (ii) Liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business, (iii)
Liens for Taxes and other governmental charges which are not due and payable or
which may thereafter be paid without penalty, and (iv) imperfections of title,
restrictions or encumbrances, if any, which Liens, imperfections of title,
restrictions or other encumbrances do not, individually or in the aggregate,
materially impair the value or continued use and operation of the specific
assets to which they relate (the Liens described in the preceding clause (b) are
hereinafter referred to collectively as "PERMITTED LIENS"). This Section 5.5
does not relate to real property or interests in real property, such items being
the subject of Section 5.6.
5.6 Real Property Interests.
(a) Schedule 5.6 to the Northrop Grumman Disclosure Letter
sets forth a complete list of (i) all real property and interests in real
property owned by the Company or its Subsidiaries with respect to material
facilities ("OWNED PROPERTY"), (ii) all material leases, license, subleases,
easements and occupancy agreements, together with any amendments, modifications
and supplements thereto (the "LEASES"), with respect to all real property and
interests in real property leased by the Company or one of its Subsidiaries with
respect to material facilities ("LEASED PROPERTY") and, (c) as to Leased
Property, identifies any material
19
leases relating thereto (Owned Property or Leased Property being sometimes
referred to herein individually as a "BUSINESS PROPERTY" and collectively as
"BUSINESS PROPERTIES").
(b) The Company and its Subsidiaries have good and insurable
fee title to all Owned Property, free and clear of any and all Liens, covenants
and rights-of-way, except (a) Permitted Liens, (b) easements, covenants,
rights-of-way and other similar restrictions of record (or contained in the
respective title deeds) and (c) (i) zoning, building and other similar
restrictions, (ii) Liens that have been placed by any developer, landlord or
other third party on property over which the Company or such Subsidiary has
easement rights or on any Leased Property and subordination or similar
agreements relating thereto and (iii) unrecorded easements, covenants,
rights-of-way or other similar restrictions, none of which items set forth in
clauses (i), (ii) and (iii) above, individually or in the aggregate, materially
impairs the continued use, marketability, insurability and operation of the
property to which they relate.
(c) Each of the Leases is a valid and subsisting agreement in
full force and effect and constitutes a valid and binding obligation of, and is
legally enforceable against, the respective parties thereto. None of the Company
or its Subsidiaries has received any notice from the other party to such lease
of the termination thereof. There is no default or event that, with notice or
lapse of time or both, would constitute a default on the part of the Company or
its Subsidiaries (nor, to the Knowledge of TRW, on the part of any other party
thereto).
5.7 Intellectual Property.
(a) Schedule 5.7(a) to the Northrop Grumman Disclosure Letter
sets forth, with respect to all Company Intellectual Property, all Patents,
registered Trademarks and applications to register Trademarks, and registered
Copyrights and applications to register Copyrights.
(b) (i) The Company or a Subsidiary of the Company owns or has
the right to use the Company Intellectual Property, except where the failure to
own or to have the right to use such Company Intellectual Property would not
have a Material Adverse Effect; (ii) to the Knowledge of TRW, the Company
Intellectual Property does not infringe, impair, misappropriate, dilute or
otherwise violate ("INFRINGE") the rights of others and is not being Infringed
by others; (iii) no Legal Proceeding or Order is pending or outstanding, or to
the Knowledge of TRW, is threatened or imminent that seeks to cancel, limit or
challenge the validity, enforceability, ownership or use of any Company
Intellectual Property; and (iv) the Company and its Subsidiaries have taken
reasonable actions (including executing non-disclosure and intellectual property
assignment agreements and filing for statutory protections where appropriate) to
protect, preserve, police and maintain the Company Intellectual Property.
5.8 Contracts. Schedule 5.8 to the Northrop Grumman Disclosure
Letter sets forth a list of each of the following types of Contracts to which
the Company or any of its Subsidiaries is a party (or, with respect to Contracts
subject to Section 1.5, is the party in interest):
(a) any employment or relocation Contract not subject to
termination by the Company or any of its Subsidiaries without cost or liability
in excess of $500,000 and any severance Contract with any Person that provides
for severance compensation in excess of
20
$500,000, including such Contracts (A) to employ or terminate executive officers
or other personnel and other Contracts with present or former officers,
directors or shareholders of the Company or any of its Subsidiaries or (B) that
will result in the payment by, or the creation of any commitment or obligation
(absolute or contingent) to pay on behalf of the BCP Entities, the Company or
any of its Subsidiaries any severance, termination, "golden parachute," or other
similar payments to any present or former personnel resulting from the
consummation of the transactions contemplated by this Agreement, regardless of
whether paid during, or following termination of, employment;
(b) any material employee collective bargaining agreement with
any labor union covering Automotive Business Employees;
(c) any of the following Contracts or commitments between the
Company or any of its Subsidiaries and any of the top ten (10) suppliers of the
Company (as set forth on Schedule 5.8(c) to the Northrop Grumman Disclosure
Letter) based on payments for the year ended December 31, 2001 (i) master
purchase agreements setting forth the terms and conditions of purchases by the
Company or its Subsidiaries to such suppliers which are currently expected to
exceed $10,000,000 in 2002 or 2003 and (ii) commitments pursuant to which the
Company or any of its Subsidiaries has agreed to accept price increases
pertaining to purchases in excess of $10,000,000 in any year;
(d) any of the following Contracts or descriptions of
Contracts between the Company or any of its Subsidiaries and any of the top five
(5) customers of the Company (as set forth on Schedule 5.8(d) to the Northrop
Grumman Disclosure Letter) based on revenue for the year ended December 31, 2001
(i) master purchase agreements setting forth the terms and conditions of sales
by the Company or its Subsidiaries to such customers which are currently
expected to exceed $10,000,000 in 2002 or 2003 or (ii) commitments pursuant to
which the Company or any of its Subsidiaries has agreed to accept price
reductions pertaining to sales in excess of $10,000,000 in any year with such
customers;
(e) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar Contract currently in effect
requiring the payment by the Company or any of its Subsidiaries of any
commissions in excess of $10,000,000 per year;
(f) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property involving
payments to or by the Company or any of its Subsidiaries in excess of
$10,000,000;
(g) any commitment to make a capital expenditure or to
purchase a capital asset not contemplated by the Capital Expenditure Budget in
excess of $7,500,000;
(h) any material Contract relating to the location of
employees or minimum number of employees to be employed by the Company or any of
its Subsidiaries;
(i) (A) any indenture, note, loan or credit agreement or other
Contract relating to Indebtedness in an amount in excess of $2,000,000 or to the
direct or indirect guarantee or assumption of the obligations of any other
Person for borrowed money in excess of $2,000,000 and (B) any Contract or other
currently outstanding instrument under which the Company or any
21
of its Subsidiaries has, directly or indirectly, made any advance, loan,
extension of credit (other than an account receivable) or capital contribution
to, or other investment in, any Person in excess of $2,000,000;
(j) any covenant that by its terms restricts in any material
adverse manner the ability of the Company or any of its Affiliates after the
Closing Date to engage in the Automotive Business;
(k) any lease or similar agreement under which (i) the Company
or any of its Subsidiaries is the lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by any third Person
for an annual rent in excess of $10,000,000 or (ii) the Company or any of its
Subsidiaries is the lessor of, or makes available for use by any third Person,
any tangible personal property owned by the Company or any of its Subsidiaries
for an annual rent in excess of $10,000,000;
(l) any material licenses, licensing arrangements and other
Contracts providing in whole or in part for the use of, or limiting the use of,
Company Intellectual Property or TRW Intellectual Property;
(m) any Contract (i) entered into or assumed by the Company or
its Subsidiaries providing for indemnification of any Person with respect to
material Liabilities relating to any disposition, sale or other transfer of any
present or former business or commercial activity relating to the Automotive
Business and (ii) which was either (A) entered into after January 1, 1998 or (B)
pursuant to which there are any outstanding or unresolved indemnification claims
in excess of $10,000,000 against the Company or its Subsidiaries;
(n) any Contract for the creation or formation of any material
joint venture, partnership or limited liability corporation; and
(o) any other Contracts outside the ordinary course of
business not otherwise described in clauses (a) through (n) above to which the
Company or any of its Subsidiaries is a party or is otherwise bound, which is
reasonably expected to result in an annual expenditure by or revenue to the
Company or its Subsidiaries after the Closing Date of more than $10,000,000 for
any such individual Contract.
Each Contract listed on Schedule 5.8 to the Northrop Grumman
Disclosure Letter (and to the extent leases are not listed on Schedule 5.8 to
the Northrop Grumman Disclosure Letter, each Lease in respect of Leased
Property) has been made available to BCP or its representatives and is valid,
binding and in full force and effect and is enforceable by the Company or any of
its Subsidiaries that is party thereto in accordance with its terms. The Company
or any of its Subsidiaries, as applicable, has performed all material
obligations required to be performed by it to date under the Contracts and the
Leases, is not in breach or default in any material respect thereunder, and, to
the Knowledge of TRW, has not received notice of (A) noncompliance by the
Company or any of its Subsidiaries or by any counter party under any such
Contract or Lease, or (B) early termination of, or request for a material
concession from, the Company or any of its Subsidiaries under any such Contract
or Lease.
22
5.9 Litigation; Decrees. Schedule 5.9 to the Northrop Grumman
Disclosure Letter sets forth a list of all pending lawsuits, actions or
proceedings to which TRW or any of its Subsidiaries is a party or, to the
Knowledge of TRW, investigations with respect to TRW or any of its Subsidiaries,
that relate to the Automotive Business and which, individually or when
aggregated with other Legal Proceedings based on substantially the same facts or
circumstances, (a) involve or could reasonably be expected to involve a claim
for damages to the Automotive Business in excess of $10,000,000, (b) seek any
injunctive relief or (c) seek to prevent the transactions contemplated by this
Agreement or the Ancillary Agreements. Neither the Company nor any of its
Subsidiaries is in default under any outstanding material Order. This
representation and warranty does not apply to environmental matters which are
the subject of Section 5.11 below.
5.10 Employee Benefits.
(a) Schedule 5.10 to the Northrop Grumman Disclosure Letter
sets forth a complete and correct list of all material Employee Benefit Plans,
which shall mean "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
multiemployer plans within the meaning of ERISA section 3(37), and any stock
purchase, stock option, severance pay, employment, change-in-control, fringe
benefit, collective bargaining, vacation pay, company awards, salary
continuation, sick leave, excess benefit, supplemental retirement, deferred
compensation, bonus or other incentive compensation, life insurance and
scholarship plans, and all other employee benefit plans, Contracts, programs,
policies or other arrangements, whether or not subject to ERISA, whether formal
or informal, oral or written, (i) under which any present or former Automotive
Business Employee has any present or future right to benefits sponsored or
maintained by the Company or its Subsidiaries or under which the Company or its
Subsidiaries has had or has any present or future liability (the "COMPANY
PLANS") or (ii) under which any present or former Automotive Business Employee
has any present or future right to benefits sponsored or maintained by TRW or
any of its Subsidiaries (the "SELLER PLANS", and together with the Company
Plans, the "EMPLOYEE BENEFIT PLANS"). Employee benefit plans or programs that
are not identified on Schedule 5.10 to the Northrop Grumman Disclosure Letter do
not represent, in the aggregate, a material liability to the Company or its
Subsidiaries. Schedule 5.10 to the Northrop Grumman Disclosure Letter shall also
set forth a complete and correct list of all material stock purchase, stock
option, severance pay, employment, change-in-control, retention or similar
plans, programs or other arrangements, whether formal or informal, oral or
written, sponsored or maintained by Northrop Grumman and under which the present
executive officers of the Automotive Business have any present or future rights
to benefits.
(b) Each of the Employee Benefit Plans intended to qualify
under Section 401 of the Code (the "QUALIFIED PLANS") has received a current and
valid determination letter from the Internal Revenue Service that it does so
qualify or the remedial amendment period under the Code has not expired with
respect to such Qualified Plans. Nothing has occurred, whether by action or
failure to act, that could reasonably be expected to cause the loss of such
qualification or which action or failure to act could not be corrected through
an Internal Revenue Service compliance procedure without material liability to
the Company or its Subsidiaries.
23
(c) All contributions required by Law or by the terms of any
Employee Benefit Plan have been timely made (without regard to any waivers
granted with respect thereto) to any funds or trusts established thereunder or
in connection therewith, and no "accumulated funding deficiency" (as such term
is defined in Section 302 of ERISA and Section 412 of the Code (whether or not
waived)) has occurred with respect to any of such plans. All premiums have been
timely paid to the Pension Benefit Guaranty Corporation ("PBGC").
(d) With respect to any Employee Benefit Plan subject to Title
IV of ERISA, other than a multiemployer plan, as defined in Section 3(37) of
ERISA:
(i) The funding method used in connection with each
such plan which is subject to the minimum funding requirements of ERISA
is permissible and the actuarial assumptions used in connection with
funding each such plan are reasonable. As of the last day of the last
plan year of each such plan, as of the date of this Agreement and as of
the Closing Date, the "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA (but excluding from the
definition of "current value" of "assets" of such plan, accrued but
unpaid contributions) did not and will not exceed zero. No "accumulated
funding deficiency" (for which an excise tax is due or would be due in
the absence of a waiver) as defined in Section 412 of the Code or as
defined in Section 302(a)(2) of ERISA, whichever may apply, has been
incurred with respect to any such plan with respect to any plan year,
whether or not waived. Neither the Company nor any Subsidiary of the
Company has failed to pay when due any "required installment," within
the meaning of Section 412(m) of the Code and Section 302(e) of ERISA,
whichever may apply, with respect to any such plan. Neither the Company
nor any Subsidiary of the Company is required to provide security to
any such plan under Section 401(a)(29) of the Code.
(ii) No such plan has been terminated so as to
subject, directly or indirectly, any assets of the Company or any
Subsidiary of the Company to any Liability, contingent or otherwise, or
the imposition of any Liens under Title IV of ERISA.
(iii) No proceeding has been initiated or, to the
Knowledge of TRW, threatened by any Person, including PBGC, to
terminate any such plan.
(iv) No condition or event exists or is expected to
occur with respect to any such plan that could subject, directly or
indirectly, any assets of the Company or any Subsidiary of the Company
to any Liability, contingent or otherwise, or the imposition of any
Lien under Title IV of ERISA, whether to the PBGC or to any other
Person, except for matters which would not, individually or in the
aggregate, reasonably be expected to result in a material liability.
(v) No "reportable event," as defined in Section 4043
of ERISA (to the extent that the reporting of such event to the PBGC
has not been waived) has occurred and is continuing with respect to any
such plan, except with respect to matters disclosed in Schedule
5.10(d)(i) to the Northrop Grumman Disclosure Letter.
24
(e) With respect to any Employee Benefit Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA, that is subject to
Title IV of ERISA, (i) neither: the Company nor any Affiliate of the Company has
incurred or reasonably expects to incur any withdrawal Liability under Title IV
of ERISA or would be subject to such Liability if, as of the Closing Date, the
Company or any Affiliate of the Company were to engage in a complete withdrawal
(as defined in Section 4203 of ERISA) or partial withdrawal (as defined in
Section 4205 of ERISA) from any such multiemployer plan; and (ii) to the
Knowledge of TRW, no such multiemployer plan is in reorganization or insolvent
(as those terms are defined in Sections 4241 and 4245 of the Code,
respectively).
(f) True, current, correct and complete copies (or, to the
extent no such copy is readily available, an accurate description) of the
following documents, with respect to each of the material Employee Benefit
Plans, have been delivered or made available to Parent: (i) any plans and
related trust documents or other funding instruments, and all amendments
thereto; (ii) for the two most recent years, (A) Forms 5500 and schedules
thereto, (B) the most recent financial statements and actuarial valuations and
(C) actuarial valuation reports; (iii) the most recent Internal Revenue Service
determination letter; and (iv) the most recent summary plan descriptions
(including summaries of material modifications). TRW and its Subsidiaries will
use their reasonable best efforts to provide copies of written communications by
Northrop Grumman, TRW or the Company and its Subsidiaries to any present or
former Automotive Business Employees concerning the extent to which
post-retirement welfare benefits will be provided under an Employee Benefit
Plan. Within fifteen (15) days prior to the Closing Date, Northrop Grumman or
TRW will use their reasonable best efforts to provide BCP copies or summaries of
all Company Plans not previously provided pursuant to this Section 5.10(f).
(g) There are no pending material Legal Proceedings which have
been asserted or instituted against any of the Company Plans, the assets of any
such plans or TRW, or the plan administrator of the Company Plans with respect
to the operation of such plans (other than routine benefit claims) and, to the
Knowledge of TRW, there are no facts or circumstances which could reasonably be
expected to form the basis for any such Legal Proceeding and no written or oral
communication has been received from the PBGC in respect of any Employee Benefit
Plan subject to Title IV of ERISA concerning the funded status of any such plan
or any transfer of assets and liabilities from any such plan in connection with
the transactions contemplated herein.
(h) Each of the Employee Benefit Plans has been maintained, in
all material respects, in accordance with its terms and all applicable
provisions of ERISA, the Code and other applicable Laws. All amendments and
actions required to bring each of the Employee Benefit Plans into conformity in
all material respects with all of the applicable provisions of ERISA and other
applicable Law have been made or taken except to the extent that such amendments
or actions are not required to be made or taken until a date after the Closing
Date.
(i) Neither the execution and delivery of this Agreement nor
the consummation of (i) the transactions contemplated hereby (whether alone or
in connection with a subsequent event) or (ii) the transactions contemplated by
the Northrop/TRW Merger Agreement could (A) result in any material payment
becoming due to any Automotive Business Employee, (B) materially increase any
benefits otherwise payable under any Company Plan, or (C) result in
25
the acceleration of the time of payment or vesting of any material compensation
or employee benefits under any Company Plans, whether or not any such payment,
right or benefit would constitute a parachute payment within the meaning of
Section 280G of the Code.
(j) With respect to each Employee Benefit Plan maintained
outside the United States (collectively, the "NON-U.S. PLANS"), to the Knowledge
of TRW, each of the following is true:
(i) each Non-U.S. Plan is in compliance in all
material respects with the laws and regulations applicable to such
plan;
(ii) each Non-U.S. Plan and related funding
arrangement that is intended to qualify for tax-favored status has been
reviewed and approved for such status by the appropriate Governmental
Body (or has been submitted for such review and approval within the
applicable time period), and nothing has occurred and no condition
exists that is likely to cause the loss or denial of such tax-favored
status; and
(iii) with respect to those Non-US Plans other than
unfunded arrangements, as of the date of the most recent actuarial
valuation undertaken in accordance with local requirements and
practice, on an ongoing basis there are no materially underfunded
benefit liabilities.
(k) No liability has been imposed with respect to the Company
Plans under Section 144 of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or Section 75 of the
Pensions Act 1995 as a debt due to any United Kingdom occupational pension
scheme.
(l) Each collective bargaining agreement to be assumed by the
Company pursuant to Section 2.3 of the Employee Matters Agreement is listed on
Schedule 5.10(l) of the Northrop Grumman Disclosure Letter.
(m) No Assets held in the separate Code Section 401(h) account
under the TRW Salaried Pension Plan (as defined in the Employee Matters
Agreement) are attributable to the Salaried Pension Plan Participants (as
defined in the Employee Matters Agreement). No Assets held in the Voluntary
Employee Beneficiary Association (as defined in the Employee Matters Agreement)
maintained by TRW or its Affiliates or any related trust are attributable to TRW
Automotive Participants.
5.11 Environmental Matters. Except for matters which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect,
(a) (i) no written notice, notification, demand, request for
information, citation, summons, complaint or Order has been received by, and no
Legal Proceeding is pending or, to the Knowledge of TRW, threatened by any
Person against, the Company or any Subsidiary of the Company alleging any
violation or Liability with respect to any matters relating to or arising out of
any Environmental Law or with respect to any Hazardous Substance; (ii) there is
and, since January 1, 2000 has been, no Hazardous Substance located at any
property currently or formerly owned or leased by the Company or any of its
Subsidiaries that could reasonably be expected to give rise to any Liability of
the Company or any of its Subsidiaries under any
26
Environmental Law or result in costs or Liability to the Company or any of its
Subsidiaries under or relating to any Environmental Law; (iii) to the Knowledge
of TRW, there is no Hazardous Substance located at any other location, that
could reasonably be expected to give rise to any Liability of the Company or any
of its Subsidiaries under any Environmental Law or result in costs or Liability
to the Company or any of its Subsidiaries under or relating to Environmental
Laws; and (iv) neither the Company nor any of its Subsidiaries has assumed or
retained, by Contract or operation of Law, any obligation under any
Environmental Law or concerning any Hazardous Substance that could reasonably be
expected to be material to the Company or any of its Subsidiaries.
(b) To the Knowledge of TRW, TRW has made available to BCP or
its representatives true and complete copies of the most recent environmental
assessments and audits pertaining to the Automotive Business that are in the
possession or control of TRW.
5.12 Employee and Labor Relations.
(a) There is no material labor strike, slowdown, dispute, work
stoppage, or lockout pending, or, to the Knowledge of TRW, threatened against or
otherwise affecting the Company or any Subsidiary of the Company and neither the
Company nor any of its Subsidiaries has experienced such labor controversy
within the past three (3) years;
(b) To the Knowledge of TRW, no material union organization
campaign is in progress with respect to the Automotive Business Employees;
(c) There is no material unfair labor practice charge or
complaint against the Company or any of its Subsidiaries pending before the
National Labor Relations Board or any similar Governmental Body outside of the
United States involving the Company or its Subsidiaries;
(d) There is no pending grievance or arbitration involving an
Automotive Business Employee that, individually or when aggregated with other
grievances or arbitrations based on substantially the same facts or
circumstances, involves or would reasonably be expected to involve an amount in
controversy of at least $10,000,000;
(e) No discrimination charges or complaints with respect to or
relating to the Company or any of its Subsidiaries in respect of the Automotive
Business are pending before the Equal Employment Opportunity Commission or any
other similar Governmental Body responsible for the prevention of unlawful
employment practices that, individually or when aggregated with other claims
based on substantially the same facts or circumstances, involves or would
reasonably be expected to involve an amount in controversy of at least
$10,000,000;
(f) Neither the Company nor any of its Subsidiaries shall be
liable for any material severance pay or other material payments to any employee
or former employee under any benefit or severance policy, practice, agreement,
plan or program of the Company or its Subsidiaries as a result of or in
connection with the transactions contemplated hereunder; and
(g) Neither the Company nor any of its Subsidiaries has closed
any manufacturing plant or facility, effectuated any layoffs of 500 or more
employees at any single
27
facility or implemented any early retirement, separation or window program
within the past three (3) years, nor has the Company or any Subsidiary of the
Company planned or announced any such action or program for the future.
5.13 Compliance with Law; Permits.
(a) Since January 1, 2000, the Company and its Subsidiaries
have been in compliance with all Laws applicable to the Automotive Business,
except where failure to be in compliance has not had, or would not reasonably be
expected to have, a Material Adverse Effect.
(b) (i) The Company and its Subsidiaries have all Permits,
Orders, and other authorizations of or from all Governmental Bodies that are
necessary in the conduct of the Automotive Business as presently being
conducted; (ii) such Permits and Orders are in full force and effect; and (iii)
no violations or claimed violations are pending before any Governmental Body
with respect to such Permits and Orders, except any such violation or claimed
violation as would not result in a loss, cost or expense to the Company or any
of its Subsidiaries in excess of $10,000,000, provided that this clause (iii)
does not apply to environmental matters which are the subject of Section 5.11.
5.14 Assets of the Business. Except as set forth in Schedule 5.7(b)
to the Northrop Grumman Disclosure Letter and except for the Excluded Assets,
the Automotive Assets, the Equity Interests and the rights conferred by the
Ancillary Agreements comprise all of the properties, assets (including computer
software and licenses therefor) and rights necessary to enable the Company and
its Subsidiaries to conduct and operate the Automotive Business as presently
conducted and operated; provided, however, that this representation does not
include any representation as to any infringement of any third party
Intellectual Property rights. At Closing, the Company and its Subsidiaries shall
have no Assets other than the Equity Interests, the Automotive Assets and the
rights conferred by the Ancillary Agreement and no Liabilities other than (i)
the Indebtedness set forth on Schedule 5.2(d) to the Northrop Grumman Disclosure
Letter, (ii) other Automotive Liabilities, (iii) other Liabilities of the
Transferred Entities (other than Excluded Liabilities), (iv) Liabilities for
which Parent shall be indemnified under Articles X and XI and (v) Liabilities
incurred by the BCP Entities.
5.15 Affiliate Transactions. There are no transactions, agreements,
arrangements or understandings between Northrop Grumman or any of the TRW
Participants, on the one hand, and the Company or any of its Subsidiaries, on
the other hand, pertaining to or affecting the Automotive Business, that would
be required to be disclosed under Item 404 of Regulation S-K of the Securities
and Exchange Commission, assuming that the Company were subject to the reporting
requirements of the Exchange Act.
5.16 Product Liability.
(a) Except for matters which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, neither the
Company nor any of its Subsidiaries has received any written notice relating to
any claim involving any service provided or any product designed, manufactured,
serviced, produced, modified, distributed or sold by or on behalf of the Company
and its Subsidiaries, resulting from an alleged defect in design,
28
manufacture, materials or workmanship, performance, or any alleged failure to
warn, or from any alleged breach of implied warranties or representations, or
any alleged noncompliance with any applicable Laws pertaining to products
liability matters, other than notices or claims that have been settled or
resolved.
(b) The information set forth in the letter, dated the date of
this Agreement, from the General Counsel of the Company to BCP, is true and
correct in all material respects.
5.17 Insurance. Schedule 5.17 to the Northrop Grumman Disclosure
Letter lists all material insurance policies, Contracts or programs of
self-insurance owned or held by the Company or any of its Subsidiaries on the
date hereof which cover or relate in any manner to the Automotive Business. All
such insurance policies are in full force and effect and are valid and
enforceable and cover against the risks normally insured against by entities in
the same or similar lines of business in coverage amounts typically and
reasonably carried by such entities. All premiums due thereunder have been paid.
In the last two years, neither the Company nor any of its Subsidiaries has
received notice of cancellation or termination other than in connection with
normal renewals of any such insurance policies.
5.18 Customers and Suppliers. None of the suppliers or customers
identified on Schedule 5.8(c) to the Northrop Grumman Disclosure Letter or
Schedule 5.8(d) to the Northrop Grumman Disclosure Letter, respectively, has
materially reduced the volume of business that it does with the Company or any
of its Subsidiaries since December 31, 2001 or notified the Company or any of
its Subsidiaries that such customer or supplier intends to materially reduce the
volume of business that it does with the Company or any of its Subsidiaries.
5.19 Financial Advisors. Except for ▇▇▇▇▇▇▇▇ Financial Group,
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Credit Suisse First Boston
Corporation, ▇▇▇▇▇▇ Brothers, Lazard Freres & Co. LLC and W. Y. ▇▇▇▇▇▇▇▇ &
Company (the fees and expenses of each of which will be borne by Northrop
Grumman or TRW), no Person has acted, directly or indirectly, as a broker,
finder or financial advisor for Northrop Grumman, TRW, TRW Automotive, the
Company or any of their respective Subsidiaries in connection with the
transactions contemplated by this Agreement, and no Person is entitled to any
fee or commission or like payment in respect of any such services.
5.20 Investment Intention. TRW Automotive is acquiring the Equity
Consideration for its own account, solely for the purpose of investment and not
with a view to, or for sale in connection with, any distribution thereof in
violation of federal Law or any applicable securities Law. Northrop Grumman
understands that the Equity Consideration being acquired by TRW Automotive has
not been registered under the Securities Act on the basis that the sale provided
for in this Agreement is exempt from the registration provisions thereof.
Northrop Grumman acknowledges that such securities may not be transferred or
sold except pursuant to the registration and other provisions of applicable
securities laws or pursuant to any applicable exemption therefrom.
29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BCP
BCP hereby represents and warrants to Northrop Grumman, TRW (upon
becoming a party hereto) and TRW Automotive (upon becoming a party hereto) that:
6.1 Authority; No Conflicts; Governmental Consents.
(a) BCP is (and each of the other BCP Entities as of the
Closing will be) duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has (or will have) all
requisite corporate or limited liability company power and authority to enter
into any agreement contemplated by this Agreement to which it is or will be a
party and to consummate the transactions contemplated hereby and thereby. All
corporate or limited liability company acts and other proceedings required to be
taken by BCP or Newco to authorize the execution, delivery and performance of
this Agreement and each of the Ancillary Agreements to which it is a party and
the transactions contemplated hereby and thereby have been (or will be) duly and
properly taken, including, without limitation, any member or stockholder
approvals. This Agreement has been duly executed and delivered by BCP, and the
Ancillary Agreements to which BCP or Newco will be a party, when executed will
be, duly executed and delivered by each of BCP and Newco, as applicable, and
each constitutes or will constitute a valid and binding obligation of BCP and
Newco, as the case may be, enforceable against BCP and Newco, as the case may
be, in accordance with its respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally or by general
principles (regardless of whether such enforceability is considered in a
proceeding in equity or law).
(b) The execution and delivery of this Agreement do not, and
of the Ancillary Agreements will not, and the consummation of the transactions
contemplated hereby and compliance with the terms of this Agreement and the
Ancillary Agreements will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any material Lien
upon any of the properties or assets of any of the BCP Entities under, any
provision of (i) the certificate of incorporation, by-laws, regulations or other
organizational or governing documents of the BCP Entities, (ii) any material
Contracts of the BCP Entities, except for Liens incurred in connection with the
financing of the transactions contemplated hereby, or (iii) any material Order
or, subject to the matters described in clause (c) below, Law applicable to the
BCP Entities or their respective property or assets.
(c) No material Consent, Permit or Order of, or registration,
declaration or filing with, any court, administrative agency or commission or
other Governmental Body is required to be obtained or made by or with respect to
BCP or its Affiliates in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation by the BCP Entities
of the transactions contemplated hereby, other than (i) compliance with and
filings and notifications under applicable Environmental Laws, (ii) compliance
with and filings under the ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇/▇▇ of the
European Community, as amended
30
(the "EC MERGER REGULATION"), and other applicable foreign antitrust Laws, (iii)
compliance with and filings under the Investment Canada Act and (iv) as set
forth on Schedule 6.1(c) hereto.
6.2 Actions and Proceedings, Etc. There are no (a) outstanding
Orders against the BCP Entities or (b) Legal Proceedings pending or, to the
knowledge of BCP, threatened against the BCP Entities, in either case that are
reasonably likely to materially and adversely affect the ability of BCP to enter
into and perform its obligations under this Agreement or consummate the
transactions contemplated hereby.
6.3 Investment Intention. The BCP Entities, as applicable, are
acquiring the Shares and the Foreign Shares for their own account, solely for
the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of federal Law or any applicable
securities Law. BCP understands that the Shares have not been registered under
the Securities Act on the basis that the sale provided for in this Agreement is
exempt from the registration provisions thereof. BCP acknowledges that such
securities may not be transferred or sold except pursuant to the registration
and other provisions of applicable securities laws or pursuant to any applicable
exemption therefrom.
6.4 Financing Capability. BCP has received, accepted and agreed to
valid and binding commitment letters (collectively, the "DEBT COMMITMENT
LETTERS") from certain lenders, copies of which have been delivered to Northrop
Grumman prior to the date hereof, committing such banks, subject to the terms
and conditions stated therein, to provide financing to BCP or its Affiliates in
connection with the consummation of the transactions contemplated hereby (the
"DEBT FINANCING"). BCP has received, accepted and agreed to valid and binding
commitment letters (collectively, the "EQUITY COMMITMENT LETTERS" and, together
with the Debt Commitment Letters, the "COMMITMENT LETTERS") from Blackstone
Capital Partners IV Merchant Banking Fund L.P. ("BLACKSTONE"), copies of which
have been delivered to Northrop Grumman prior to the date hereof, committing
such persons, subject to the terms and conditions stated therein, to provide
equity financing to BCP or its Affiliates in connection with the consummation of
the transactions contemplated hereby (the "EQUITY FINANCING").
6.5 Financial Advisors. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ Brothers
and ▇.▇. ▇▇▇▇▇▇ Securities Inc. (the fees and expenses of which will be borne by
BCP or its Subsidiaries), no Person has acted, directly or indirectly, as a
broker, finder or financial advisor for the BCP Entities in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect of any such services.
6.6 Limitations on Representations and Warranties. BCP
acknowledges that none of Northrop Grumman, TRW, TRW Automotive, the Company or
any of the Company's Subsidiaries or any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Automotive Business or the
Automotive Assets, the Equity Interests or other matters that are not included
in this Agreement or the schedules hereto or in the Ancillary Agreements.
Without limiting the generality of the foregoing, none of Northrop Grumman, TRW,
TRW Automotive, the Company or any of the Company's Subsidiaries or any other
Person has made a representation or warranty to BCP with respect to (i) any
projections, estimates or budgets for the Automotive Business made available to
BCP or (ii) except as expressly set forth herein, any material, documents or
information
31
relating to the Automotive Business made available to BCP or its counsel,
accountants or advisors in TRW's data room or otherwise.
ARTICLE VII
COVENANTS
7.1 Confidentiality; Access to Information.
(a) BCP acknowledges that the information being provided to it
by Northrop Grumman and TRW is subject to the terms of a confidentiality
agreement dated August 6, 2002 between Blackstone Management Associates III
L.L.C., Carlyle Partners III, L.P. and Northrop Grumman (the "CONFIDENTIALITY
AGREEMENT"), the terms of which are incorporated herein by reference. Effective
upon, and only upon, the Closing, the Confidentiality Agreement will terminate;
provided, however, that BCP acknowledges its confidentiality obligations in the
Confidentiality Agreement will terminate only with respect to information
relating solely to the Automotive Business; and provided, further, that BCP
acknowledges that any and all other information provided to it by Northrop
Grumman or TRW or their respective representatives concerning Northrop Grumman
or TRW or their respective Subsidiaries will remain subject to the terms and
conditions of the Confidentiality Agreement after the date of the Closing.
(b) Prior to the Closing Date, Northrop Grumman shall, and
shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, provide BCP, through its
Affiliates, officers, employees and representatives, including representatives
of any Persons providing financing to any of the BCP Entities in connection with
the transactions contemplated hereby, the opportunity to make such investigation
of the management, employees, properties, businesses and operations of the
Company and its Subsidiaries, and such examination of the books, records and
financial condition of the Company and its Subsidiaries, as it reasonably
requests and to make extracts and copies of such books and records. Any
Confidential Information provided pursuant to this Section 7.1(b) will be kept
confidential by BCP and will be subject to applicable Law and the terms of the
Confidentiality Agreement. Any such investigation and examination will be
conducted during regular business hours and under reasonable circumstances after
appropriate advance notice.
(c) Prior to the Northrop/TRW Closing, Northrop Grumman shall,
and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, (i) hold, and use reasonable best
efforts to cause their respective Affiliates, consultants, advisors, agents and
representatives to hold, in strict confidence to the same extent as provided for
in the Confidentiality Agreement as if Northrop Grumman and its Affiliates were
deemed to be bound by reciprocal confidentiality obligations, all confidential
or trade secret information relating to the Automotive Business, (ii) not use
such confidential or trade secret information to the detriment of the Automotive
Business and (iii) shall assign its rights under any confidentiality agreement
relating to the Automotive Business with a third party to the Company.
32
7.2 Conduct of the Business Pending the Closing. From and after
the date hereof to the Northrop/TRW Closing, Northrop Grumman shall use its
reasonable best efforts, so far as is permitted under the Northrop/TRW Merger
Agreement, to cause TRW to, and following the Northrop/TRW Closing, Northrop
Grumman and TRW each shall, conduct the Automotive Business in the ordinary
course consistent with past practice and preserve intact the assets of and the
business organizations and relationships with employees and third parties having
material business dealings with the Company and its Subsidiaries, including
paying or otherwise satisfying obligations and liabilities on a timely basis as
they become due in the ordinary course of business and consistent with past
practice, including those with respect to Taxes, pensions, bonuses,
restructuring costs and recall costs, and making capital expenditures under the
Capital Expenditure Budget. Northrop Grumman shall cause to be paid in full
prior to the Closing Date all bonuses and pension costs or contributions accrued
or payable to or in respect of any Automotive Business Employee or any former
employee of the Automotive Business in respect of the year ended December 31,
2002 and any and all special bonuses payable to any Automotive Business Employee
or any former employee of the Automotive Business in connection with the
Northrop/TRW Merger. Without limiting the generality of the foregoing, except
(i) as otherwise expressly contemplated by this Agreement, including the
Transfers; (ii) for actions approved in advance by BCP in writing (which
approval shall not be unreasonably withheld); (iii) as required to comply with
applicable Law; and (iv) as set forth on Schedule 7.2 to the Northrop Grumman
Disclosure Letter, from and after the date hereof to the Closing Date, Northrop
Grumman shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, cause the Company and its
Subsidiaries not to take any of the following actions:
(a) adopt or propose any change in their respective
certificates of incorporation or bylaws or other similar organization or
governing documents;
(b) adopt a plan or agreement of complete or partial
liquidation, dissolution, restructuring, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than transactions with or between direct and/or indirect
wholly-owned Subsidiaries of the Company);
(c) issue, sell, transfer, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire any shares of
Capital Stock or other securities of the the Company or any of its Subsidiaries;
(d) split, combine, subdivide or reclassify its outstanding
shares of Capital Stock of SMLLC or Holdings or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to the Capital Stock of the Company;
(e) redeem, purchase or otherwise acquire directly or
indirectly any shares of Capital Stock of the Company;
(f) establish, enter into, adopt, amend, or terminate any
bonus, profit sharing, compensation, stock option, stock appreciation right,
restricted stock, performance unit, stock
33
equivalent, stock purchase agreement, strategic incentive, pension, retirement,
deferred compensation, or other agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any Automotive Business Employee in
any manner, or increase in any manner the compensation or fringe benefits of any
Automotive Business Employee (other than salary and bonus increases in the
ordinary course and consistent with past practice or the payment of accrued or
earned but unpaid bonuses), or pay any benefit not required by any Company Plan
as in effect as of the date hereof (including the granting of stock appreciation
rights or performance units); provided, however, that this Section 7.2(f) and
the following Section 7.2(g) shall not prevent the Company or its Subsidiaries
from entering into employment agreements or severance agreements with new
employees in the ordinary course of business and consistent with past practice;
(g) (i) grant any severance or termination pay or pension
benefit or augmentation pursuant to severance or termination to (or amend any
such existing arrangement to increase the value thereof) any Automotive Business
Employee, (ii) loan or advance any money or other property to any present or
former executive officer of the Company (other than travel and other advances in
the ordinary course of business and consistent with past practice), (iii) enter
into any employment, retention, deferred compensation or other similar agreement
(or amend any such existing agreement) with any Automotive Business Employee,
(iv) enter into any new, or modify or amend the vesting and/or payment of,
benefits payable under any existing severance or termination pay policies or
employment or consulting agreements or (v) modify or amend any compensation,
bonus or other perquisites payable to any Automotive Business Employee;
(h) enter into or consummate any transaction involving the
acquisition of the business, stock, assets or other properties of any other
Person having a value in excess of $5,000,000;
(i) other than as contemplated by Section 7.4, sell, lease,
license or otherwise dispose of any material amount of Assets or property except
pursuant to existing Contracts set forth on Schedule 5.8 to the Northrop Grumman
Disclosure Letter and except in the ordinary course of business consistent with
past practice;
(j) other than in the ordinary course of business consistent
with past practice, (i) make or rescind, or permit to be made or rescinded, any
material tax election with respect to the Company or any of its Subsidiaries,
(ii) change any of its material methods of reporting income or deductions for
Tax purposes (iii) compromise, or permit to be compromised, any Tax liability of
the Company or any of its Subsidiaries material to the Company and its
Subsidiaries that is material either individually or in the aggregate to the
Company and its Subsidiaries or (iv) issue a waiver to extend the period of
limitations for the payment or assessment of any Tax;
(k) (i) incur, assume or guarantee any long-term or short-term
debt or issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person except in the ordinary course
of business consistent with past practice and except for obligations of
Subsidiaries of the Company incurred in the ordinary course of business; (iii)
make any loans, advances or capital
34
contributions to or investments in any other person (other than to Subsidiaries
of the Company or customary loans or advances to employees, in each case in the
ordinary course of business consistent with past practice); (iv) pledge or
otherwise encumber shares of Capital Stock of the Company or any of its
Subsidiaries; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon;
(l) except as may be required as a result of a change in Law
or in GAAP, change any of the accounting principles or practices used by such
entities;
(m) except as required by GAAP, revalue in any material
respect any of its assets including without limitation writing down the value of
inventory or writing-off notes or accounts receivable other than in the ordinary
course of business;
(n) settle or compromise any pending or threatened Legal
Proceeding the settlement or compromise of which could have a Material Adverse
Effect (taking into consideration the precedential effect of such settlement or
compromise);
(o) make any payment to, or enter into any transaction with,
any Affiliate of any of Northrop Grumman or the TRW Participants relating to the
Automotive Business other than arms-length transactions on commercially
reasonable terms;
(p) enter into, amend, supplement, waive, modify, terminate,
cancel, allow to lapse or transfer any right in any Contract that would be
required to be disclosed on Schedule 5.8 to the Northrop Grumman Disclosure
Letter if in existence on the date hereof to the extent doing so would have a
Material Adverse Effect on the Company or its Subsidiaries; or
(q) agree or commit to do any of the foregoing.
7.3 Consents. Except as contemplated in Section 7.4, the BCP
Entities, on the one hand, and Northrop Grumman and TRW (upon becoming a party
hereto), on the other hand, shall each use its reasonable best efforts to obtain
all Consents required to consummate the transactions contemplated by this
Agreement, including obtaining the Consents and making the filings referred to
in Sections 5.1(b), 5.1(c) and 6.1(c) hereof; provided, however, that neither
the BCP Entities, on the one hand, nor Northrop Grumman and TRW, on the other
hand, will be obligated to pay any consideration therefor to any Person from
whom Consent is requested.
7.4 Filings with Governmental Bodies. As promptly as practicable
after the execution of this Agreement and to the extent permitted under
antitrust Law and the Northrop/TRW Merger Agreement and the Northrop/TRW
existing contractual arrangements, each party shall, in cooperation with the
other, (i) file or cause to be filed any reports, notifications or other
information that may be required under the HSR Act, the EC Merger Regulation and
other applicable foreign merger control or foreign investment Laws, and (ii)
shall furnish or cause to be furnished to the other all such information in its
possession as may be reasonably necessary for the completion of the reports,
notifications or submissions to be filed by the other. Each party hereto agrees
to use its reasonable best efforts to comply and cause its Affiliates to use
their reasonable best efforts to comply in a full and timely manner with any
request from a Governmental Body for additional information. Without limiting
the generality of the foregoing, each party shall promptly notify the other of
the receipt and content of any inquiries or requests
35
for additional information made by any Governmental Body in connection therewith
and shall promptly (i) use its reasonable best efforts to comply with any such
inquiry or request and (ii) provide the other with a description of the
information provided to any Governmental Body with respect to any such inquiry
or request. In addition, each party shall keep the other apprised of the status
of any such inquiry or request. In furtherance of the foregoing, BCP agrees to
use its reasonable best efforts to take all necessary and proper steps
(including any reasonable divestitures) as may be required for securing the
termination of any applicable waiting periods under the HSR Act or the receipt
of any clearance, approval or confirmation from Governmental Bodies in other
countries in which antitrust filings have been made in order to permit the
consummation of the transactions contemplated hereby prior to the date specified
in Section 4.1(b). Each party also agrees to take any action reasonably
necessary to vigorously defend, litigate, mitigate and rescind the effect of any
litigation or administrative proceeding brought by the Federal Trade Commission
or the United States Department of Justice adversely affecting this transaction,
including appealing promptly any adverse court of administrative order or
injunction or effecting divestitures under the circumstances contemplated above.
7.5 Insurance. Prior to the Northrop/TRW Closing, Northrop Grumman
shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, (a) keep, or cause to be kept, all
insurance policies presently maintained relating to the Automotive Business and
its properties, or replacements therefor, in full force and effect through the
close of business on the Closing Date and (b) apply all insurance proceeds from
coverage relating to the Automotive Business to restore the Automotive Assets or
hold such proceeds for Parent's account. At the Closing, TRW and the Company
shall execute the Insurance Allocation Agreement, the form of which is attached
as Exhibit D hereto.
7.6 Foreign Sales. Prior to the Northrop/TRW Closing, Northrop
Grumman shall, and shall use its reasonable best efforts, so far as is permitted
under the Northrop/TRW Merger Agreement, to cause TRW to, and following the
Northrop/TRW Closing, Northrop Grumman and TRW each shall, and Parent shall,
use, and cause their respective Affiliates to use, their respective reasonable
best efforts to prepare appropriate purchase agreements and other necessary
documentation and to take such steps as are necessary to effectuate the sale of
all of the issued and outstanding Capital Stock of the Foreign Entities to the
Foreign Acquirors on the Closing Date according to the Laws of each relevant
foreign jurisdiction. From time to time after the date hereof, BCP and Northrop
Grumman shall agree in good faith that sufficient steps have been taken so that
all of the issued and outstanding Capital Stock of one or more such Foreign
Entities is capable of being sold to the relevant Foreign Acquiror on the
Closing Date under the Laws of the foreign jurisdiction in which such entity is
formed or domiciled concurrently with the Closing of the other transactions
contemplated by this Agreement (each such Foreign Entity as to which such a
determination is made being referred to herein as an "AGREED FOREIGN ENTITY").
7.7 Other Actions.
(a) Prior to the Northrop/TRW Closing, Northrop Grumman shall,
and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman
36
and TRW each shall, and BCP shall, use their respective reasonable best efforts
to (i) take, or cause to be taken, all actions necessary or appropriate to
consummate the transactions contemplated by, this Agreement and (ii) cause the
fulfillment at the earliest practicable date of all of the conditions to their
respective obligations to consummate the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other obligation of BCP under
this Agreement or the Ancillary Agreements, BCP will not be required to offer or
agree to any amendment or modification to the Debt Commitment Letter in order to
induce the lenders thereunder to provide the Debt Financing. Prior to the
Northrop/TRW Closing, Northrop Grumman shall and shall use its reasonable best
efforts to cause TRW to, and following the Northrop/TRW Closing, Northrop
Grumman and TRW each shall, and shall cause their respective Subsidiaries to,
and shall use reasonable best efforts to cause their respective Affiliates to,
comply with the covenants and obligations imposed on each under this Agreement.
Following the Northrop/TRW Closing, Northrop Grumman shall cause TRW, and BCP
shall cause its appropriate Subsidiary, to comply with the covenants and
obligations imposed on such Subsidiary under any of the Ancillary Agreements, as
if such Ancillary Agreements had been executed by such Subsidiary as of the date
TRW becomes a party to this Agreement, to the extent such covenants and
obligations require or clearly contemplate performance prior to the Closing.
(b) Prior to the Northrop/TRW Closing, Northrop Grumman shall,
and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, and Parent shall, use their
respective reasonable best efforts to obtain any Consent necessary under, and
ensure compliance with, any Environmental Law in connection with any of the
transactions contemplated by this Agreement; provided, however, that, without
limiting Parent's rights to indemnification under this Agreement, Northrop
Grumman and the TRW Participants shall not be required to take any such actions
that would, individually or in the aggregate, reasonably be expected to impose
any material remediation costs or expenses on Northrop Grumman or any of the TRW
Participants.
7.8 No Solicitation.
(a) Prior to the Northrop/TRW Closing, Northrop Grumman shall
not, and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, not to permit TRW to, and following the
Northrop/TRW Closing, Northrop Grumman and TRW each shall not, and each shall
not permit any of their respective directors, officers, employees,
representatives or agents to do any of the following, directly or indirectly,
(i) discuss, negotiate, undertake, authorize, assist, participate in, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of (A) a material amount of the
business or assets of or (B) any Capital Stock of or other equity interest in
the Company and its Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement (an "ACQUISITION TRANSACTION"), (ii) facilitate,
encourage, solicit or initiate discussions, negotiations or submissions of
proposals or offers in respect of an Acquisition Transaction, (iii) furnish or
cause to be furnished to any Person any information concerning the business,
operations, properties or assets of the Company or any of its Subsidiaries in
connection
37
with an Acquisition Transaction, or (iv) otherwise assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or seek
any of the foregoing.
(b) BCP shall not, and shall not permit any of its directors,
officers, employees, representatives or agents to, directly or indirectly, (i)
discuss, negotiate, undertake, authorize, assist, participate in, recommend,
propose or enter into any transaction involving an Acquisition Transaction; (ii)
facilitate, encourage, solicit or initiate discussions, negotiations or
submissions of proposals or offers in respect of an Acquisition Transaction,
(iii) furnish or cause to be furnished to any Person any information concerning
the business, operations, properties or assets of the Company or any of its
Subsidiaries in connection with an Acquisition Transaction, or (iv) otherwise
assist or participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek any of the foregoing.
7.9 Books and Records.
(a) As soon as is reasonably practicable after the Closing,
TRW will deliver to BCP all properties, books, records, Contracts, information
and documents relating to the Automotive Business that are not already located
at any of the Business Properties or otherwise in the possession or control of
the Company or its Subsidiaries.
(b) Subject to Section 11.9 hereof (relating to the
preservation of Tax records), Northrop Grumman, TRW (on behalf of itself and the
TRW Participants) and BCP agree that each of them will preserve and keep the
records held by it relating to the Automotive Business of the Company and its
Subsidiaries for a period of ten years from the Closing Date in accordance with
their respective corporate records retention policies; provided, however, that
prior to disposing of any such records in accordance with such policies, the
parties hereto shall provide written notice to the other party of its intent to
dispose of such records and shall provide such other party the opportunity to
take ownership and possession of such records (at such other party's sole
expense) within thirty (30) days after such notice is delivered. If such other
party does not confirm its intention in writing to take ownership and possession
of such records within such 30-day period, the party who possesses the records
may proceed with the disposition of such records. Northrop Grumman, TRW (on
behalf of itself and the TRW Participants) and BCP shall make such records
available to the other as may be reasonably required by such party in connection
with, among other things, any insurance claims by, Legal Proceedings against, or
governmental investigations of Northrop Grumman, TRW (on behalf of itself and
the TRW Participants) or BCP or any of their respective Affiliates or in order
to enable Northrop Grumman, TRW (on behalf of itself and the TRW Participants)
or BCP to comply with their respective obligations under this Agreement and each
other agreement, document or instrument contemplated hereby or thereby.
7.10 Publicity. Prior to the Northrop/TRW Closing, Northrop Grumman
shall not, and shall use its reasonable best efforts, so far as is permitted
under the Northrop/TRW Merger Agreement, not to permit TRW to, and following the
Northrop/TRW Closing, Northrop Grumman and TRW each shall not, and BCP shall
not, issue any press release or public announcement concerning this Agreement or
the transactions contemplated hereby without obtaining the prior written
approval of the other parties hereto, which approval will not be unreasonably
withheld or delayed, unless, in the reasonable judgment of BCP, Northrop
38
Grumman or TRW, disclosure is otherwise required by applicable Law or by the
applicable rules of any stock exchange on which BCP, Northrop Grumman or TRW
lists its securities; provided that, to the extent required by applicable Law or
by the rules of any stock exchange, the party intending to make such release or
announcement shall use its reasonable best efforts consistent with such
applicable Law to consult with the other party with respect to the text thereof.
7.11 Guarantees and Letters of Credit. BCP shall cause Parent to
use its reasonable best efforts to (i) substitute itself or an Affiliate for TRW
or a Subsidiary of TRW, as applicable, with respect to (and cause TRW or such
Subsidiary to be released from) the financial and performance guarantees
delivered by TRW or such Subsidiary of TRW prior to the Closing Date in
connection with the operation of the Automotive Business, each of which is
identified on Schedule 7.11, and (ii) cause to be issued letters of credit as
replacement letters of credit for ones issued by TRW or a Subsidiary of TRW
prior to the Closing Date in connection with the operation of the Automotive
Business, each of which is identified on Schedule 7.11; provided, however, that
the parties agree to cause Parent to indemnify and hold Northrop Grumman and TRW
harmless from and against any and all Losses resulting from any payment
following the Closing Date by TRW or any of its Subsidiaries under such
guarantees or letters of credit. Schedule 7.11 sets forth all of such financial
and performance guarantees and letters of credit that are outstanding as of the
date hereof.
7.12 TRW and TRW Automotive to Become Parties. As promptly as
practicable, but in no event later than seven (7) Business Days following the
consummation of the Northrop/TRW Merger, Northrop Grumman shall cause TRW and
TRW Automotive, and, to the extent necessary or appropriate, all TRW
Subsidiaries, to take all such action as may be required for the due
authorization, execution and delivery of this Agreement by TRW and TRW
Automotive (such date, the "TRW EXECUTION DATE") and consummation of the
transactions contemplated hereby. Upon becoming parties to this Agreement, each
of TRW and TRW Automotive shall deliver to BCP a certificate, executed on behalf
of each company by a duly authorized officer thereof, dated the TRW Execution
Date and in form and substance reasonably satisfactory to BCP, certifying that
(a) all representations and warranties set forth in Article V qualified as to
materiality are true and correct, and all representations and warranties set
forth in Article V not qualified as to materiality are true and correct in all
material respects at and as of the TRW Execution Date with the same effect as
though those representations and warranties had been made again at and as of the
TRW Execution Date, except with respect to those representations and warranties
made as of a particular time which must be true and correct (if qualified as to
materiality) or true and correct in all material respects (if not so qualified
as to materiality) as of such time, and (b) from the date of this Agreement to
and including the TRW Execution Date, TRW or TRW Automotive, as the case may be,
has not taken any action that would have constituted a breach of any covenant,
agreement or undertaking contained in this Article VII had TRW or TRW
Automotive, as the case may be, been a party to this Agreement on the date
hereof (and had all references in this Article VII to the Northrop/TRW Closing
and the TRW Execution Date been references to the date hereof); provided,
however, that, if TRW and TRW Automotive are unable to provide such
certification and Northrop Grumman, TRW and TRW Automotive are unable to cure
any breaches of representations or covenants giving rise to such inability
within thirty (30) days of the TRW Execution Date, BCP shall have the right to
terminate this Agreement; and provided further that, in the event BCP terminates
this Agreement pursuant to this Section 7.12, none of Northrop Grumman, TRW or
TRW Automotive shall have
39
any liability, except as provided in Section 4.3(b)(ii), to the BCP Entities for
TRW's and TRW Automotive's failure to provide the certification pursuant to this
Section 7.12.
7.13 Non-Competition Agreement. During the period beginning on the
Closing Date and ending on the fifth anniversary thereof, none of Northrop
Grumman, TRW or any of their respective Subsidiaries or Affiliates shall
directly or indirectly engage in any business or activity in any geographic area
in which the Company or any of its Subsidiaries operate which is in competition
with the Automotive Business; provided, that no business or activity shall be
deemed in competition with the Automotive Business unless the competitive sales
of such business or activity exceed $25,000,000 annually; and provided, further,
that none of Northrop Grumman, TRW or any of their respective Subsidiaries or
Affiliates shall be prevented from:
(a) acquiring as an investment in the ordinary course of
business (including investments by any trust of any of its Company plans) any
securities required to be registered under the Exchange Act of any Person to the
extent that such acquisitions do not result in such Person owning in the
aggregate 5% or more of any class of such securities; or
(b) acquiring (through merger, stock purchase or sale of all
or substantially all of the assets or otherwise) ownership of or any equity
interest in any Person, provided that the annual revenues of such Person from
any business that competes with the Automotive Business are not more than 15% of
such Person's total annual revenues (based on the most recent full fiscal year
revenues of such Person).
(c) Nothing in this Section 7.13 shall preclude Northrop
Grumman, TRW or any of their respective Subsidiaries or Affiliates from
providing to customers that compete with the Automotive Business (i)
engineering, analysis, design, prototype testing or other similar services;
provided that Northrop Grumman or its appropriate Subsidiary shall offer Parent
an exclusive license to produce and market any products developed pursuant to
such engineering, analysis, design, testing or similar service on commercially
favorable terms, and if Parent elects not to enter into such license, Northrop
Grumman or a Subsidiary may license or transfer such rights to another Person on
terms no less favorable to Northrop Grumman than those offered to Parent; or
(ii) information technology or other similar services.
7.14 Waiver of Bulk Sales Requirement. Each of the parties hereto
waives compliance with any applicable bulk sales laws, including without
limitation the Uniform Commercial Code Bulk Transfer provisions.
7.15 Discharge of Indebtedness. No later than the Closing Date,
Northrop Grumman will discharge, and will cause each of its Subsidiaries and
Affiliates (other than the Company or any of its Subsidiaries) to discharge,
without cost to the Company or any of its Subsidiaries, any and all intercompany
accounts and all intercompany Contracts, except as otherwise provided by this
Agreement and the Ancillary Agreements. With respect to intra-company
Indebtedness of the Company and its Subsidiaries, prior to the Closing Date,
Northrop Grumman shall provide BCP with a schedule listing the debtor and
creditor entities and the amount of such intra-company Indebtedness, and
Northrop Grumman shall discharge or cause to be discharged prior to the Closing
Date any such intra-company Indebtedness requested by BCP to be discharged,
provided that such discharge shall not cause any adverse tax consequences or
other costs to
40
Northrop Grumman and its Affiliates that are not indemnified by Parent pursuant
to this Agreement.
7.16 Cooperation in Financing.
(a) Prior to the Northrop/TRW Closing, Northrop Grumman shall,
and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, reasonably cooperate, and request
TRW's auditors, Ernst & Young LLP, to reasonably cooperate, on a timely basis
with Parent and Parent's auditors in their preparation of any financial
statements that are required by Parent in connection with the financing of the
purchase of the Company and its Subsidiaries. The cooperation required of
Northrop Grumman and TRW (on behalf of itself and the TRW Participants) shall
include providing reasonable and customary management and legal representations
to Ernst & Young LLP, and the cooperation requested of their auditors shall
include providing consent to Parent to to prepare and use their audit reports on
the Company and its Subsidiaries and to provide any necessary "comfort letters".
(b) Without limitation of the foregoing paragraph (a), prior
to the Northrop/TRW Closing, Northrop Grumman shall, and shall use its
reasonable best efforts, so far as is permitted under the Northrop/TRW Merger
Agreement, to cause TRW to, and following the Northrop/TRW Closing, Northrop
Grumman and TRW each shall, provide, and request their respective accountants,
investment bankers, advisors, counsel and other representatives to provide,
reasonable cooperation in connection with the arrangement of financing by Parent
to be consummated prior to or at the Closing in respect of the transactions
contemplated by this Agreement. Such cooperation shall include, to the extent
reasonable and customary, arranging for senior officers of TRW to meet with
prospective lenders and investors in presentations, meetings, road shows and due
diligence sessions, and assistance with the preparation of offering memoranda,
private placement memoranda, prospectuses and similar documents.
7.17 Updated Financial Statements.
(a) Prior to the Northrop/TRW Closing, Northrop Grumman shall,
and shall use its reasonable best efforts, so far as is permitted under the
Northrop/TRW Merger Agreement, to cause TRW to, and following the Northrop/TRW
Closing, Northrop Grumman and TRW each shall, deliver to BCP, promptly upon
their being prepared, audited and unaudited financial statements for the Company
and its Subsidiaries equivalent to and for the dates and periods reflected on
the Financial Statements.
(b) No later than forty-five (45) days after the end of each
calendar quarter (or such shorter period as is then required by the Securities
and Exchange Commission of public reporting companies), (i) prior to the
Northrop/TRW Closing, Northrop Grumman shall, and shall use its reasonable best
efforts, so far as is permitted under the Northrop/TRW Merger Agreement, to
cause TRW to, and (ii) following the Northrop/TRW Closing, Northrop Grumman and
TRW each shall, deliver to BCP, promptly upon their being prepared, true and
complete copies of the unaudited combined balance sheet of the Company and its
Subsidiaries for each calendar quarter after September 30, 2002 and the related
combined statements of operation,
41
changes in stockholder's investment and cash flows for the period beginning on
the preceding January 1 and ending on such quarter end date, together with the
financial statements for the corresponding period in the preceding fiscal year
(collectively, the "UPDATED FINANCIAL STATEMENTS"). Prior to the Northrop/TRW
Closing, Northrop Grumman shall, and shall use its reasonable best efforts, so
far as is permitted under the Northrop/TRW Merger Agreement, to cause TRW to,
and following the Northrop/TRW Closing, Northrop Grumman and TRW each shall, use
its reasonable best efforts to cause TRW's auditors to perform a SAS 71 review
with respect to such Updated Financial Statements. The Updated Financial
Statements will present fairly the combined financial position, results of
operations and cash flows of the Company and its Subsidiaries for the periods
and dates covered thereby and will be prepared in accordance with GAAP,
consistently applied, except for the absence of notes required in connection
with unaudited statements.
(c) If required in order to facilitate Parent's marketing
activity with respect to the financing of the transactions contemplated hereby,
(i) prior to the Northrop/TRW Closing, Northrop Grumman shall, and shall use its
reasonable best efforts, so far as is permitted under the Northrop/TRW Merger
Agreement, to cause TRW to, and (ii) following the Northrop/TRW Closing,
Northrop Grumman and TRW each shall, cause to be prepared an audit of financial
information which would be required to be audited if all or any part of such
financing were to be registered under the Securities Act (whether or not it is
so registered). Such audit will include an unqualified audit report of Ernst &
Young LLP and, concurrently with the delivery of such audit, (i) prior to the
Northrop/TRW Closing, Northrop Grumman shall, and shall use its reasonable best
efforts, so far as is permitted under the Northrop/TRW Merger Agreement, to
cause TRW to, and (ii) following the Northrop/TRW Closing, Northrop Grumman and
TRW each shall, deliver to BCP a copy of a letter from Ernst & Young LLP
addressed to Northrop Grumman and TRW stating that such financial statements
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act.
7.18 Stockholders' Agreement and Transition Services Agreement.
Prior to the Closing, BCP and Northrop Grumman shall negotiate in good faith (a)
a form of stockholders' agreement to be entered into at Closing reflecting the
terms and conditions set forth in Exhibit E attached hereto (the "STOCKHOLDERS'
AGREEMENT") and (b) the schedules to the Transition Services Agreement.
7.19 Transaction and Monitoring Fee Agreement. At the Closing,
Newco and Blackstone Management Partners IV L.L.C. shall execute and deliver a
Transaction and Monitoring Fee Agreement in the form attached hereto as Exhibit
F (the "TRANSACTION AND MONITORING FEE AGREEMENT").
7.20 Agreed Assumed Indebtedness. Promptly following execution of
this Agreement, Northrop shall provide BCP with documentation and other
information concerning the items of Indebtedness reflected on the Summary of
Automotive Debt as of September 30, 2002 attached hereto as Schedule 7.20 or
other items of Indebtedness incurred pursuant to clause 2(o) of Schedule 7.2
(including, without limitation, the obligor and payee thereof, the interest rate
thereon and the amount of each such item currently outstanding, together with
accrued interest and all other amounts payable thereon) and any related
guarantees in respect thereof provided by TRW or one of its Subsidiaries (other
than the Company or one of its Subsidiaries). Northrop
42
Grumman and BCP shall discuss whether any such items of Indebtedness should be
assumed or retained (and any limits thereon) by the Company or one of its
Subsidiaries, it being understood that BCP shall not be required to agree to the
assumption or retention of any such items of Indebtedness for any reason,
regardless of whether such retention or assumption would be acceptable to the
providers of the Debt Financing. Prior to the Northrop/TRW Closing, Northrop
Grumman shall, and shall use its reasonable best efforts, so far as is permitted
under the Northrop/TRW Merger Agreement, to cause TRW to, and following the
Northrop/TRW Closing, Northrop Grumman and TRW each shall, continue to cause TRW
to offer to provide the Company and its Subsidiaries forward contracts of a type
equivalent to those set forth on Annex 5.2(d) to Schedule 5.2(d). Any such items
of Indebtedness that Northrop Grumman and BCP hereafter agree in writing will be
assumed or retained by the Company or one of its Subsidiaries shall constitute
"AGREED ASSUMED INDEBTEDNESS" for purposes of this Agreement and shall be added
to Schedule 12.1(a), and any such guarantees in support thereof shall, pursuant
to such written agreement, be added to Schedule 7.11 for purposes of Section
7.11 hereof. Any such items of Indebtedness as to which such written agreement
is not reached shall remain an Excluded Liability for purposes hereof, and no
such guarantees in support thereof shall be added to Schedule 7.11.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Each Party. The
respective obligations of the BCP Entities, on the one hand, and Northrop
Grumman, TRW and TRW Automotive, on the other hand, to consummate the
transactions contemplated by this Agreement are subject to the fulfillment or
waiver, on the Closing Date, of each of the following conditions:
(a) the Northrop/TRW Closing will have occurred;
(b) any required waiting periods (including any extension
thereof) applicable to the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements under the HSR Act shall have terminated
or expired and any required clearances, approvals or confirmations of the
transactions contemplated by this Agreement and the Ancillary Agreements shall
have been obtained pursuant to the EC Merger Regulation and any other foreign
merger control or foreign investment clearances required by Law to be obtained
before Closing will have been received; and
(c) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby, or be pending any
Legal Proceeding by a Governmental Body of competent jurisdiction that seeks the
same.
8.2 Conditions Precedent to Obligations of BCP. The obligation of
BCP to consummate the transactions contemplated by this Agreement is subject to
the fulfillment, on the Closing Date, of each of the following conditions (any
or all of which may be waived by BCP in whole or in part at its sole
discretion):
43
(a) all representations and warranties of Northrop Grumman,
TRW and TRW Automotive contained herein qualified as to materiality will be true
and correct, and all representations and warranties of Northrop Grumman, TRW and
TRW Automotive contained herein not qualified as to materiality shall be true
and correct in all material respects, at and as of the Closing Date with the
same effect as though those representations and warranties had been made again
at and as of that date, except with respect to those representations and
warranties made as of a particular time which must be true and correct (if
qualified as to materiality) or true and correct (if not so qualified as to
materiality) in all material respects as of such time;
(b) Northrop Grumman, TRW and TRW Automotive shall have
performed and complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Closing Date;
(c) BCP shall have been furnished with certificates (dated the
Closing Date and in form and substance reasonably satisfactory to BCP) executed
by a principal executive officer and the chief financial officer of each of
Northrop Grumman, TRW and the Company, each certifying as to the fulfillment of
the conditions specified in Sections 8.2(a) and 8.2(b) hereof;
(d) the Transfers shall have been consummated in accordance
with the terms of the Transfer Documents;
(e) financing contemplated by the Commitment Letters shall
have been completed on the terms and conditions identified in such Commitment
Letters and either (i) such financing shall not include any funding of the
Senior Subordinated Facility (as such term is defined in the Commitment Letters)
or (ii) such financing shall have been completed on or after March 27, 2003;
(f) no Material Adverse Change shall have occurred;
(g) all Consents listed on Schedule 8.2(g) shall have been
obtained; provided that, in the event BCP waives compliance with this condition,
none of Northrop Grumman, TRW or TRW Automotive shall be in breach of any
provision of this Agreement for the failure to obtain any such Consents;
(h) BCP shall have been furnished with reasonably satisfactory
evidence (including a copy of a certification to The Law Debenture Trust
Corporation plc from the directors and independent auditors of ▇▇▇▇▇ Industries
Limited) confirming that, after giving effect to the transactions contemplated
hereby, no default shall have occurred or be continuing under the terms of the
▇▇▇▇▇ ▇▇▇▇; and
(i) certificates representing the Shares and the Foreign
Shares, or equivalent documentation of title in each relevant non-U.S.
jurisdiction, shall at the Closing be validly delivered and transferred to the
BCP Entities, free and clear of any and all Liens, and all other documents shall
have been delivered pursuant to Section 9.1.
8.3 Conditions Precedent to Obligations of Northrop Grumman, TRW
and TRW Automotive. The obligations of Northrop Grumman, TRW and TRW Automotive
to
44
consummate the transactions contemplated by this Agreement are subject to the
fulfillment, on the Closing Date, of each of the following conditions (any or
all of which may be waived by Northrop Grumman in whole or in part at its sole
discretion):
(a) all representations and warranties of BCP contained herein
qualified as to materiality shall be true and correct, and all representations
and warranties of BCP contained herein not qualified as to materiality shall be
true and correct in all material respects, at and as of the Closing Date with
the same effect as though those representations and warranties had been made
again at and as of that date, except with respect to those representations and
warranties made as of a particular time which must be true and correct (if
qualified as to materiality) or true and correct (if not so qualified as to
materiality) in all material respects as of such time;
(b) the BCP Entities shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by the BCP Entities on or prior to the Closing
Date;
(c) Northrop Grumman shall have received from BCP a solvency
letter from an independent valuation firm reasonably acceptable to Northrop
Grumman (it being understood that the firm providing such letter to Newco's
lenders shall be acceptable to Northrop Grumman) confirming the solvency of
Newco and its Subsidiaries (including the Company and its Subsidiaries) on a
consolidated basis after giving effect to the transactions contemplated by this
Agreement;
(d) Northrop Grumman will have been furnished with a
certificate (dated the Closing Date and in form and substance reasonably
satisfactory to Northrop Grumman) executed by a member of BCP certifying as to
the fulfillment of the conditions specified in Sections 8.3(a) and 8.3(b); and
(e) all documents shall have been delivered pursuant to
Section 9.2.
ARTICLE IX
DOCUMENTS TO BE DELIVERED
9.1 Documents to be Delivered by Northrop Grumman, TRW, TRW
Automotive and Holdings. At the Closing, Northrop Grumman, TRW, TRW Automotive
and Holdings shall deliver, or cause to be delivered, to the BCP Entities the
following:
(a) stock certificates representing the Shares, the LLC
Interests and the Foreign Shares, or equivalent documentation of title in each
relevant non-U.S. jurisdiction, duly endorsed in blank or accompanied by stock
transfer powers;
(b) the certificate referred to in Section 8.2(c);
(c) copies of the Transfer Documents, duly executed by the
parties thereto in form and substance reasonably satisfactory to BCP;
45
(d) copies of the Ancillary Agreements substantially in the
forms attached hereto and the Stockholders' Agreement, each duly executed by
Northrop Grumman or TRW, as the case may be;
(e) certificates duly executed and in form reasonably
satisfactory to BCP, certifying that the transactions contemplated by this
Agreement are exempt from withholding of taxes pursuant to Section 1445 of the
Code and the Treasury Regulations promulgated thereunder; and
(f) such other customary closing documents as BCP shall
reasonably request.
9.2 Documents to be Delivered by the BCP Entities. At the Closing,
the BCP Entities shall deliver to Northrop Grumman, TRW and TRW Automotive, as
appropriate, the following:
(a) evidence of the wire transfers referred to in Section 3.1;
(b) stock certificates representing the Equity Consideration;
(c) the Seller Note;
(d) the certificate referred to in Section 8.3(c);
(e) copies of the Ancillary Agreements and the Transaction and
Monitoring Fee Agreement substantially in the forms attached hereto and the
Stockholders' Agreement, each duly executed by the BCP Entities or the Company,
as the case may be; and
(f) such other customary closing documents as Northrop Grumman
shall reasonably request.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification.
(a) Subject to the other provisions of this Article X and,
except as otherwise provided by Article XI, Northrop Grumman will, or will cause
TRW to, indemnify and hold Parent and each of its directors, officers,
employees, Affiliates, agents, successors and assigns (collectively, the
"PURCHASER INDEMNIFIED PARTIES") harmless from and against any and all Losses
based upon, attributable to or resulting from:
(i) the failure of any representation or warranty of
Northrop Grumman, TRW or TRW Automotive set forth in Article V hereof
or in the Ancillary Agreements, or any representation or warranty
contained in any certificate delivered by or on behalf of any such
party pursuant to this Agreement, to be true and correct as of the date
made;
46
(ii) the breach or default in the performance of any
covenant or other agreement on the part of Northrop Grumman, TRW or TRW
Automotive under this Agreement or any of the Ancillary Agreements; or
(iii) the Excluded Liabilities (including, for the
avoidance of doubt, Excluded Liabilities of any of the Transferred
Entities).
(b) Subject to the other provisions of this Article X, the
parties will cause Parent to cause Newco to indemnify and hold Northrop Grumman,
TRW and TRW Automotive and each of their directors, officers, employees,
Affiliates, agents, successors and assigns (collectively, the "NORTHROP GRUMMAN
INDEMNIFIED PARTIES") harmless from and against any and all Losses based upon,
attributable to or resulting from:
(i) the failure of any representation or warranty of
BCP set forth in Article VI hereof or in the Ancillary Agreements, or
any representation or warranty contained in any certificate delivered
by or on behalf of the BCP Entities pursuant to this Agreement, to be
true and correct as of the date made;
(ii) the breach or default in the performance of any
covenant or other agreement on the part of the BCP Entities under this
Agreement;
(iii) the breach or default in the performance of any
covenant or other agreement on the part of the Company under any of the
Ancillary Agreements to which it is a party; or
(iv) the Automotive Liabilities (other than any such
Automotive Liabilities which are the subject of indemnification Claims
by a Purchaser Indemnified Party under this Article X or any such
Claims themselves).
(c) The parties hereto acknowledge and agree that any matter
that is subject to, or a matter considered for, resolution by the Accounting
Arbitrator pursuant to Section 3.2 (which, for purposes of clarity, is a matter
reflected on the Closing Statement of Net Assets) will not be the basis of an
indemnification claim under Articles X or XI.
10.2 Certain Limitations.
(a) An indemnifying party will not have any liability under
Section 10.1(a)(i) or Section 10.1(b)(i) hereof, as the case may be (other than
with respect to the representations and warranties in Sections 5.2, 5.19 and
6.5) until the aggregate amount of Losses actually incurred by the indemnified
parties with respect to all claims will exceed $50,000,000 (the "BASKET"), in
which event, the indemnifying party will be required to pay the entire amount of
such Losses in excess of the Basket. Claims made pursuant to the representations
and warranties contained in or made pursuant to Sections 5.2, 5.19 and 6.5
hereof will not be subject to the Basket. In addition to the foregoing, except
for Losses arising out of, attributable to or resulting from any breach of the
representations and warranties in Sections 5.2, 5.19 and 6.5, the maximum
aggregate amount of Losses for which indemnity with respect to breaches of
representations and warranties may be sought will be $500,000,000 (the "CAP").
47
(b) Subject to the provisions of Section 3.2 and Article XI
and the indemnifications provisions of any of the Ancillary Agreements, in each
case with respect to the matters covered thereby, the parties hereto agree that,
following the Closing, the indemnification and other provisions set forth in
this Article X will be the sole and exclusive remedy of Parent against Northrop
Grumman, TRW and TRW Automotive or their Affiliates, on the one hand, and of
Northrop Grumman, TRW and TRW Automotive and their Affiliates against Parent or
the Company and their Affiliates, on the other hand, arising out of this
Agreement. Notwithstanding the foregoing, nothing herein will eliminate the
availability to the parties of any equitable remedies with respect to any
dispute that may arise under this Agreement or limit any claim based upon fraud.
10.3 Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be
instituted or that any claim or demand ("CLAIM") shall be asserted by any Person
in respect of which payment may be sought under Section 10.1 hereof (regardless
of the Basket referred to above), the indemnified party shall reasonably and
promptly cause written notice of the assertion of any Claim of which it has
knowledge which is covered by this indemnity to be forwarded to the indemnifying
party; provided, however, that delay or failure in the giving of any such notice
will not relieve the indemnifying party of its obligations hereunder, except to
the extent that it suffers actual material loss and prejudice as the result of
such failure or delay. The indemnifying party will have the right, at its sole
option and expense, to be represented by counsel of its choice, which must be
reasonably satisfactory to the indemnified party, and, so long as the
indemnifying party acknowledges its obligation to indemnify the indemnified
party for Losses related to such Claim, will have the right to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Losses
indemnified against hereunder. If the indemnifying party elects to defend
against, negotiate, settle or otherwise deal with any Claim which relates to any
Losses indemnified against hereunder, it shall within ten (10) days from receipt
of the indemnified party's written notice notify the indemnified party of its
intent to do so. If the indemnifying party elects not to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any Losses
indemnified against hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to indemnify the
indemnified party for such Losses under this Agreement, the indemnified party
may defend against, negotiate, settle or otherwise deal with such Claim. If the
indemnified party defends any Claim, then the indemnifying party shall promptly
reimburse the indemnified party for the reasonable costs and expenses of
defending such Claim upon submission of periodic bills. If the indemnifying
party assumes the defense of any Claim, the indemnified party may participate,
at its own expense, in the defense of such Claim; provided, however, that such
indemnified party will be entitled to participate in any such defense with
separate counsel at the expense of the indemnifying party if (i) so requested by
the indemnifying party to participate or (ii) in the reasonable opinion of
counsel to the indemnified party, a conflict or potential conflict exists
between the indemnified party and the indemnifying party that would make such
separate representation advisable; and provided, further, that the indemnifying
party will not be required to pay for more than one such counsel for all
indemnified parties in connection with any Claim. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such Claim. Notwithstanding the foregoing, under no
circumstances shall either party settle, compromise, or otherwise resolve any
Claim without the prior written consent of the other party,
48
which consent will not be unreasonably withheld, delayed, or conditioned, unless
such settlement, compromise, or other resolution of such Claim includes a duly
executed, written unconditional release of the other party from all Liability in
respect of such claim, which release shall be reasonably satisfactory in form
and substance to counsel for the indemnified party; provided, however, that the
indemnifying party shall not effect a settlement or compromise without the prior
written consent of the indemnified party (which may be withheld in its sole
discretion) under any circumstances if such settlement or compromise contains
injunctive, equitable or other provisions that materially affect the ongoing
business of the indemnified party.
(b) After any final judgment or award shall have been rendered
by a court, arbitration board or administrative agency of competent jurisdiction
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, or the indemnified party and the indemnifying party
shall have arrived at a mutually binding agreement with respect to a Claim
hereunder, the indemnified party shall forward to the indemnifying party notice
of any sums due and owing by the indemnifying party pursuant to this Agreement
with respect to such matter and the indemnifying party shall be required to pay
all of the sums so due and owing to the indemnified party by wire transfer of
immediately available funds within ten (10) Business Days after the date of such
notice.
(c) The failure of the indemnified party to give reasonably
prompt notice of any Claim shall not release, waive or otherwise affect the
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual material loss and prejudice as a
result of such failure. The parties acknowledge and agree that no Legal
Proceeding or Claim is necessary to be entitled to indemnification under this
Agreement.
10.4 Employee Benefits and Labor Indemnity. Northrop Grumman hereby
agrees to indemnify and hold the Purchaser Indemnified Parties harmless from and
against any and all Losses arising out of or based upon or with respect to any
employee benefit plan subject to Title IV of ERISA and solely by reason of the
Company being included as a member of a group under common control within the
meaning of Sections 414(b), (c), (m) or (o) of the Code or treated as a single
employer with Northrop Grumman prior to the Closing Date.
10.5 Environmental Liability Indemnity. Northrop Grumman hereby
agrees to indemnify the Purchaser Indemnified Parties for one-half of the amount
of any and all Losses arising out of or based upon or with respect to any
Environmental Liability. Parent or one of its Affiliates shall manage any
proceedings relating to any Environmental Claim and any remediation arising
therefrom using reasonable and generally accepted environmental management
standards and practices; provided, that Parent or one of its Affiliates shall
provide Northrop Grumman with quarterly updates on these expenditures, and
Northrop Grumman shall have the right of consultation with Parent or such
Affiliate and access to any applicable non-privileged documents; provided,
further, that Parent or one of its Affiliates shall have the right of
consultation with Northrop Grumman and access to any applicable non-privileged
documents; provided, further, that, in managing any Environmental Claim, Parent
shall obey all applicable Laws of any Governmental Body relating thereto. For
the avoidance of doubt, this Section 10.5 shall not apply to, and Northrop
Grumman and its Affiliates shall have no liability under this Agreement for any
asbestos-related product liability Claims or Liabilities. It is understood and
agreed that (a) the indemnification provisions of this Section 10.5 are in
addition to any rights of
49
the Purchaser Indemnified Parties under Section 10.1(a), and (b) nothing herein
shall entitle any Purchaser Indemnified Party to recover any amounts for Losses
hereunder to the extent that such Purchaser Indemnified Party has recovered the
amount of such Losses from Northrop Grumman pursuant to a claim under Section
10.1(a); provided, however, that nothing herein shall preclude a Purchaser
Indemnified Party from pursuing a claim hereunder with respect to any amounts
not payable to a Purchaser Indemnified Party with respect to a claim made under
Section 10.1(a) by virtue of the operation of the Basket and/or the Cap as
provided in Section 10.2(a) but only to the extent that such amounts would
otherwise constitute an "Environmental Liability" subject to indemnification
under this Section 10.5.
10.6 Fruehauf Litigation Indemnity. Northrop Grumman hereby agrees
to indemnify the Purchaser Indemnified Parties for one-half of the amount of any
and all Losses arising out of or based upon or with respect to any Fruehauf
Liability. The parties hereto agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any aspect of the
Fruehauf Matter. Notwithstanding the foregoing, under no circumstances shall
either party settle, compromise, or otherwise resolve any Claim relating to the
Fruehauf Matter without the prior written consent of the other party, which
consent will not be unreasonably withheld, delayed, or conditioned, unless such
settlement, compromise, or other resolution of such Claim includes a duly
executed, written unconditional release of the other party from all Liability in
respect of such Claim, which release shall be reasonably satisfactory in form
and substance to counsel for the other party; provided, however, that Northrop
Grumman shall not effect a settlement or compromise without the prior written
consent of BCP (which may be withheld in its sole discretion) under any
circumstances if such settlement or compromise contains injunctive, equitable or
other provisions that materially affect the ongoing business of the Company and
its Subsidiaries. It is understood and agreed that (a) the indemnification
provisions of this Section 10.6 are in addition to any rights of the Purchaser
Indemnified Parties under Section 10.1(a), and (b) nothing herein shall entitle
any Purchaser Indemnified Party to recover any amounts for Losses hereunder to
the extent that such Purchaser Indemnified Party has recovered the amount of
such Losses from Northrop Grumman pursuant to a claim under Section 10.1(a);
provided, however, that nothing herein shall preclude a Purchaser Indemnified
Party from pursuing a claim hereunder with respect to any amounts not payable to
a Purchaser Indemnified Party with respect to a claim made under Section 10.1(a)
by virtue of the operation of the Basket and/or the Cap as provided in Section
10.2(a) but only to the extent that such amounts would otherwise constitute a
"Fruehauf Liability" subject to indemnification under this Section 10.6.
10.7 Limitation of Liability. Under no circumstances will any party
be liable to any other party for (a) punitive or exemplary damages arising from
breach of this Agreement or any of the Ancillary Agreements, or arising out of
any other provisions of this Agreement or any Ancillary Agreement, (b) damage to
business reputation or (c) any Losses (i) that were not proximately caused by a
breach of this Agreement or any of the Ancillary Agreements or (ii) in the case
of a breach of a representation or warranty, that were not proximately caused by
the facts, events or circumstances that are the subject of such breach of
representation or warranty or (iii) in the case of Sections 10.1(a)(iii),
10.1(b)(iv), 10.4, 10.5, 10.6, 10.9 or Article XI, that were not proximately
caused by the facts, events or circumstances that are the subject of such
Sections (in each case, even if that party has been advised of the possibility
of such Losses) (collectively, "DISCLAIMED DAMAGES"); provided that each party
will remain liable to the other party to the
50
extent any Disclaimed Damages are claimed by a third party and are subject to
indemnification pursuant to this Article X and Article XI hereof or under any
indemnification provisions of any of the Ancillary Agreements contemplated
hereby.
10.8 Survival. The respective representations and warranties of
Northrop Grumman, TRW, TRW Automotive and BCP contained in this Agreement or on
any related schedule hereto or in any certificate or document delivered pursuant
hereto (including the Ancillary Agreements) will survive the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the Closing Date and will continue in full force and effect:
(a) in the case of any such representation or warranty (other
than those set forth in Sections 5.1, 5.2, 5.4, 5.10 or 6.1, or in any related
schedule or in any related certificate or document delivered pursuant hereto),
for 18 months after the Closing Date;
(b) in the case of any such representation or warranty set
forth in Sections 5.1, 5.2, 5.10 or 6.1, or in any related schedule or in any
related certificate or document delivered pursuant hereto, for five (5) years
after the Closing Date; and
(c) in the case of any such representation or warranty set
forth in Section 5.4(e), or in any related schedule or in any related
certificate or document delivered pursuant to Section 5.4(e), for 60 days after
the expiration of the applicable statute of limitations.
and, in each such case, shall thereafter terminate and expire only with respect
to any theretofore unasserted claims arising out of or otherwise in respect of
any falsity, breach or inaccuracy of such representations and warranties.
Notwithstanding the foregoing, the representations and warranties contained in
Sections 5.4 (other than Section 5.4(e)) shall terminate on the Closing Date.
10.9 OPEB Indemnity.
(a) Indemnity. No later than the date which is 60 days
following Northrop Grumman's receipt of each annual report identified in
(g)(ii)(A) (each a "PAYMENT DATE") and subject to claims review verification in
(g)(ii)(B), Northrop Grumman shall pay the Company each of the following amounts
in cash:
(i) For 2003, the excess, if any, of the Actual Cash
Cost in 2003 described in (c) minus the 2003 Projected Cash Cost
identified in (d), but in no event more than the applicable 2003
Maximum Payment identified in (e), subject to the conditions of (g).
(ii) For 2004, the excess, if any, of the Actual Cash
Cost in 2004 described in (c) minus the 2004 Projected Cash Cost
identified in (d), but in no event more than the applicable 2004
Maximum Payment identified in (e), subject to the conditions of (g).
(iii) For 2005, the excess, if any, of the Actual
Cash Cost in 2005 described in (c) minus the 2005 Projected Cash Cost
identified in (d), but in no event
51
more than the applicable 2005 Maximum Payment identified in (e),
subject to the conditions of (g).
(iv) For 2006, the excess, if any, of the Actual Cash
Cost in 2006 described in (c) minus the 2006 Projected Cash Cost
identified in (d), but in no event more than the applicable 2006
Maximum Payment identified in (e), subject to the conditions of (g).
(v) For 2007, the excess, if any, of the Actual Cash
Cost in 2007 described in (c) minus the 2007 Projected Cash Cost
identified in (d), but in no event more than the applicable 2007
Maximum Payment identified in (e), subject to the conditions of (g)
(vi) For 2008, (x) the excess, if any, of the Actual
Cash Cost in 2008 described in (c) minus the 2008 Projected Cash Cost
identified in (d), but in no event more than the applicable 2008
Maximum Payment identified in (e), subject to the conditions of (g),
plus (y) unless an Accelerated Terminal Value Payment has theretofore
been paid, the Terminal Value Amount, if any, described in (f).
Each of the foregoing payments (each, an "INDEMNITY PAYMENT") shall be made net
of any Aggregate Unreimbursed Shortfall Amounts (as defined below) as of the
relevant Payment Date.
(b) Reimbursement. The Company shall be required to reimburse
Northrop Grumman on any Payment Date for any calendar year (the "SUBJECT YEAR")
an amount equal to the Shortfall Amount for such calendar year, provided that
such reimbursement payment shall only be made to the extent of (and in no event
shall it exceed) the Aggregate Unreimbursed Indemnity Amount at such time.
"AGGREGATE INDEMNITY AMOUNT" means, as of any Payment Date, the
aggregate of the amounts payable to the Company in respect of all prior
calendar years from and including 2003 pursuant to Section 10.9(a)
(before taking into account any set-off pursuant to the last sentence
of Section 10.9(a)).
"AGGREGATE SHORTFALL AMOUNT" means, as of any Payment Date, the
aggregate of the Shortfall Amounts for all preceding calendar years
from and including 2003.
"AGGREGATE UNREIMBURSED INDEMNITY AMOUNT" means, as of any Payment
Date, the amount, if any, by which the Aggregate Indemnity Amount as of
such Payment Date exceeds the Aggregate Shortfall Amount as of such
Payment Date.
"AGGREGATE UNREIMBURSED SHORTFALL AMOUNT" means, as of any Payment
Date, the amount, if any, by which the Aggregate Shortfall Amount as of
such Payment Date exceeds the Aggregate Indemnity Amount as of such
Payment Date.
"SHORTFALL AMOUNT" means, with respect to any calendar year, the
excess, if any, of the Projected Cash Cost for such calendar year over
the Actual Cash Cost for such calendar year.
52
(c) Actual Cash Cost. Subject to the exclusions below, the
Actual Cash Cost shall mean the actual Company-paid cash disbursements
(excluding employee payments) for TRW Automotive Participants' and their
dependents and beneficiaries' Post Employment Benefits. "POST EMPLOYMENT
BENEFITS" shall mean retiree medical benefits, retiree life benefits and all
other postretirement welfare benefits of the type subject to financial statement
reporting under Statement of Financial Accounting Standards No. 106.
(i) Actual Cash Costs shall exclude any incremental
retiree medical and retiree life costs with respect to TRW Automotive
Participants who elected to take an early retirement window, benefit or
similar enhancement first offered by the Company or TRW Automotive
Subsidiaries after the Closing Date (such window, benefit or
enhancement a "NEW EARLY RETIREMENT PROGRAM" and such TRW Automotive
Participant a "NEW PROGRAM EARLY RETIREE"); provided that for these
purposes "incremental" costs shall be deemed to mean (x) with respect
to any New Program Early Retiree otherwise eligible for a particular
Post Employment Benefit but who receives an enhanced benefit as a
result of participating in such New Early Retirement Program, the
incremental cash cost to the Company for the calendar year in question
as a result of such enhancement; and (y) with respect to any New
Program Early Retiree who, in the absence of participation in such New
Early Retirement Program, would otherwise subsequently have become
eligible to receive a Post Employment Benefit of the type provided
under such New Early Retirement Program upon the satisfaction of
additional years of service or increased age (or some combination of
age, service or other criteria), the full cost of such Post Employment
Benefit for the calendar year (or portion thereof) in question, but
only until such time as the otherwise applicable condition(s) would
have been satisfied in the absence of early retirement.
(ii) Actual Cash Costs shall exclude all costs
attributable to any individual who is not a TRW Automotive Participant
or their dependents or beneficiaries.
(iii) Actual Cash Costs shall exclude all the
incremental costs of any incremental Post Employment Benefits or
enhancement of Post Employment Benefits resulting from any post-Closing
Date plan change or amendment that increases the cost of Post
Employment Benefits.
(iv) Actual Cash Costs shall exclude the incremental
costs resulting from any incremental Post Employment Benefits or
enhancements of Post Employment Benefits relative to the Post
Employment Benefits provided under applicable welfare plan(s) of TRW or
its Affiliates immediately prior to the Closing Date arising from the
establishment of any new plan or program after the Closing Date,
whether adopted as a replacement or successor plan to a program(s)
maintained by TRW and its Affiliates prior to the Closing Date or
otherwise.
(v) Actual Cash Costs for any given calendar year
shall be deemed to be increased by the amount, if any, then credited to
the Excess Cash Cost Account (as defined below).
53
The Excess Cash Cost Account for each calendar year shall equal the amount, if
any, by which the Actual Cash Cost for the immediately preceding calendar year
(as increased by the Excess Cash Cost Account for such calendar year), less the
Projected Cash Cost for such calendar year, exceeded the Maximum Payment for
such Calendar Year.
(d) Projected Cash Cost. The Projected Cash Costs shall be as
follows, all numbers in millions of dollars:
2003 2004 2005 2006 2007 2008
---- ---- ---- ---- ---- ----
48 50 51 54 55 56
(e) Maximum Payment. The Maximum Payment amounts shall be as
follows, all numbers in millions of dollars:
2003 2004 2005 2006 2007 2008
---- ---- ---- ---- ---- ----
9 11 15 15 18 18
; provided that the Maximum Payment amount for any calendar year shall be deemed
to be increased by an amount, if any, then credited to the Negative Cash Cost
Account (as defined below) .
The Negative Cash Cost Account for each calendar year shall
equal either (x) if the Actual Cash Cost for the immediately preceding calendar
year (the "PRECEDING YEAR") exceeded the Projected Cash Cost for the Preceding
Year, the excess, if any, of (1) the Maximum Payment amount for the Preceding
Year (as increased by the Negative Cash Cost Account for such Preceding Year)
over (2) the excess of the Actual Cash Cost for the Preceding Year over the
Projected Cash Cost for the Preceding Year, or (y) if the Actual Cash Cost for
the Preceding Year was less than the Projected Cash Cost for the Preceding Year,
the sum of (1) the Maximum Payment amount for the Preceding Year (as increased
by the Negative Cash Cost Account for such Preceding Year) and (2) the Shortfall
Amount for the Preceding Year but only to the extent the same has been netted
against any Indemnity Payment pursuant to the last sentence of subparagraph (a)
hereof or has been reimbursed to Northrop Grumman pursuant to subparagraph (b)
hereof.
Notwithstanding the foregoing, the Projected Cash Cost and
Maximum Payment for any calendar year shall be subject to equitable adjustment
to reflect any sale, transfer or other disposition or divestiture of Company
assets (other than a sale referred to in Section 10.9(h)(iii)(x)).
(f) Terminal Value Amount. The Terminal Value Amount shall be
equal to:
(i) The excess, if any, of the Actual Cash Cost in
2008 described in (c) (without application of any adjustment for the
Excess Cash Cost Account) minus the 2008 Projected Cash Cost identified
in (d), but in no event more than the applicable 2008 Maximum Payment
identified in (e) (without any adjustment for the Negative Cash Cost
Account) and subject to the conditions of (g);
54
multiplied by
(ii) 6.5.
(g) Conditions on Northrop Grumman's obligation.
(i) The Company and the TRW Automotive Subsidiaries
shall use their commercially reasonable efforts to effectively manage
and contain the Actual Cash Costs as commercially appropriate and
Northrop Grumman shall not be responsible for any Actual Cash Costs
that result from the negligent or willful failure of the Company or the
TRW Automotive Subsidiaries to do so.
(ii) All payments due under this Section 10.9 are
conditioned upon verification as follows:
(A) For each of the years 2003 through 2008, the
Company shall submit to Northrop Grumman a report of Actual
Cash Costs incurred within 90 days of the end of the relevant
calendar year. Such report shall include annual claim reports
provided by the applicable plan administrators, third party or
otherwiseand eligibility feeds and, to the extent not
previously provided to Northrop Grumman, plan documents and
amendments, summary plan descriptions, summaries of material
modifications, sample enrollment materials and such other
documentation as Northrop Grumman may reasonably request in
order to verify the Actual Cash Cost for the relevant calendar
year as reported by the Company.
(B) All payments under this Section 10.9 shall be
conditioned upon claims review verification, if requested by
Northrop Grumman on a timely basis, whether the payments are
made before or after conclusion of claims review verification.
Northrop Grumman shall have the right to require the Company
and the TRW Automotive Subsidiaries to submit the Actual Cash
Costs for a claims review, at Northrop Grumman's expense by
providing written notice to the Company of such request within
90 days following Northrop Grumman's receipt of the Company
report described in clause (A) above or (h)(ii) below. Such
claims reviews, if any, will be carried out in a commercially
reasonable manner during normal business hours by Northrop
Grumman or an inspection body selected by Northrop Grumman and
composed of independent members in possession of the
appropriate professional qualifications. Northrop Grumman
shall be limited to conducting one claims review with respect
to each payment obligation under this Section. Any such claims
review process will be completed no later than 90 days
following the Company's receipt of Northrop Grumman's notice
of its intent to perform such claims review process.
(iii) In the event that Northrop Grumman becomes
obligated to make an Accelerated Terminal Value Payment described in
(h), all other Northrop Grumman payment obligations under this Section
10.9 arising with respect to periods after the Liquidity Event (as
defined below) occurs, shall immediately become null and void.
55
Subject to any other applicable conditions of (g), payments under (a)
with respect to the year in which the Liquidity Event occurs shall be
equal to the amount derived from clause (B) of (h)(i) multiplied by the
ratio that is the number of days in that calendar year up to and
including the Liquidity Event divided by 365. For example, if an
Accelerated Terminal Value Payment is made in 2004 for the 2003 plan
year, Northrop Grumman shall have no obligation to make the payments
described in (a)(ii) through (a)(vi) and shall adjust the payment
otherwise due under (a)(i) as provided in the prior sentence.
(h) Acceleration of Terminal Value Payment. In the event of a
Liquidity Event (as defined below), an Accelerated Terminal Value Payment shall
become due from Northrop Grumman to the Company as follows:
(i) Amount. Subject to the conditions of (g), the
Amount of the Accelerated Terminal Value Payment shall be equal to
(A) 6.5
multiplied by
(B) The amount equal to (1) minus (2) minus (3), but
in no event greater than the sum of (4) and (5) as follows:
(1) The amount of the Actual Cash Cost as
described in (c) for the 12 calendar months ended as
of the last day of the fiscal quarter ending on or
prior to the date of the Liquidity Event (without any
adjustment for the Excess Cash Cost Account)
minus
(2) The Projected Cash Cost for the calendar
year preceding the year in which the Liquidity Event
occurs ("PRIOR YEAR") multiplied by the number of
fiscal quarters in the Prior Year taken into account
in (1), divided by 4.
minus
(3) The Projected Cash Cost for the calendar
year of the Liquidity Event ("CURRENT YEAR")
multiplied by the number of fiscal quarters in the
Current Year taken into account in (1), divided by 4,
but in no event more than the sum of (4) and
(5) as follows:
(4) The Maximum Payment for the Prior Year
(without adjustment for any Negative Cash Cost
Account) multiplied by the number of fiscal quarters
in the Prior Year taken into account in (1), divided
by 4.
56
(5) The Maximum Payment for the Current Year
multiplied by the number of fiscal quarters in the
Current Year (without adjustment for any Negative
Cash Cost Account) taken into account in (1), divided
by 4.
(ii) Timing. The Accelerated Terminal Value Payment
shall be paid no later than the date (the "ATV PAYMENT DATE") which is
60 days following Northrop Grumman's receipt of the equivalent of the
report of Actual Cash Costs identified in (g)(ii)(A) for the 12
calendar month period referred to in (h)(i)(B)(1).
(iii) Liquidity Event shall mean either (x) any sale,
disposition or other transfer of shares by Blackstone and/or its
Affiliates of Shares representing 10% or more of the aggregate amount
of Shares acquired by Blackstone and its Affiliates as of the Closing
Date or (y) any sale of all or substantially all of the assets of the
Company.
(i) Initial Public Offering. Upon and following the occurrence
of a registered initial public offering of the Company's equity securities, any
payments otherwise payable to the Company under this Section 10.9 shall
thereafter be paid directly to those Closing Date Shareholders (as defined
below) who remain shareholders of the Company as of the date of such payment, in
proportion to their beneficial ownership of the voting securities of the Company
as of such date of payment. "CLOSING DATE SHAREHOLDERS" shall mean each
non-employee shareholder of the Company as of the Closing Date (immediately
after giving effect to the Closing).
(j) Dispute Resolution. Northrop Grumman shall raise any
disagreements with respect to the amount of the Actual Cash Costs or the
calculation of or entitlement to payments hereunder as soon as practicable
during the relevant 90-day claims verification review period. BCP and Northrop
Grumman agree to negotiate in good faith to resolve any such disagreement, and
any resolution agreed to in writing will be final and binding upon the parties
and their successors and assigns. If the parties are unable to resolve all
disagreements properly identified by Northrop Grumman within such 90-day period,
then the disputed matters will be referred to the Chief Financial Officers or
other substantially equivalent executive officers of the respective parties for
resolution. If the Chief Financial Officers or other substantially equivalent
executive officers are unable to resolve all disagreements within fifteen (15)
days after referral of such disagreement, then, within fifteen (15) days
thereafter, the matter will be referred for final determination to an arbiter
from an internationally recognized benefits consulting firm that is not
affiliated with either BCP or Northrop Grumman or their respective Affiliates,
as jointly selected by the parties; if the parties are unable to select such an
arbiter within such time period, the American Arbitration Association will make
such selection (any Person so selected will be referred to herein as the "OPEB
ARBITRATOR"). The OPEB Arbitrator so selected shall only consider those items as
to which the parties have disagreed within the time periods and on the terms
specified above and must resolve the matter in accordance with applicable Law
and the terms and provisions of the Agreement. The OPEB Arbitrator shall deliver
to the parties, as promptly as practicable, and in any event within ninety (90)
days after its appointment, a written report setting forth the resolution of any
such disagreement determined in accordance with the terms of this Agreement.
57
(k) Interest Obligations. In the event that Northrop Grumman
fails to pay to the Company any amounts due under this Section on or prior to
the applicable Payment Date or ATV Payment Date (including, without limitation,
any amount it refuses to pay based upon its claims review process but which is
ultimately determined to be payable to the Company hereunder either by agreement
by the parties or a determination by the OPEB Arbitrator pursuant to clause (i)
above), then such unpaid amounts shall be deemed to accrue interest at the rate
of 10% per annum from the applicable Payment Date or ATV Payment Date through
the actual date such payment is received by the Company. In the event that the
Company returns any Northrop Grumman payment under this Section 10.9 (including,
without limitation, any amount which is ultimately determined to have been
overpaid, either by agreement of the parties or determination by the OPEB
Arbitrator pursuant to clause (i) above but in all cases excluding any Aggregate
Unreimbursed Indemnity Amount), then such returned amounts shall be deemed to
accrue interest at the rate of 10% per annum from (x) the date Northrop
Grumman's original payment was received by the Company to (y) the date payment
is received by Northrop Grumman.
(l) Illustrations. Attached as Exhibit G are illustrative
examples of the parties' intent regarding the calculation of the indemnity
obligations described in this Section 10.9.
ARTICLE XI
TAX MATTERS
11.1 Indemnification Obligations With Respect to Taxes.
(a) Subject to the limitations in Section 11.1(b), Northrop
Grumman shall be responsible for, and shall indemnify, defend and hold harmless
the Purchaser Indemnified Parties from and against (i) all Tax Losses of the
Company and its Subsidiaries based upon, attributable to or resulting from Taxes
that are due with respect to periods ending on or prior to the Closing Date
("PRE-CLOSING PERIODS"), but excluding any Income Taxes resulting from any
extraordinary transaction undertaken on the Closing Date after the Closing; (ii)
all Tax Losses of the Company and its Subsidiaries based upon, attributable to
or resulting from Taxes with respect to any Straddle Period to the extent
attributable to the portion of the Straddle Period ending at the close of
business on the Closing Date; (iii) all Tax Losses of any member of an
affiliated, consolidated, combined or unitary group of which the Company (or any
predecessor) or any of its Subsidiaries is or was a member on or prior to the
Closing Date, including pursuant to Treas. Reg. ss. 1.1502-6 or any analogous or
similar state, local, or foreign law or regulation; (iv) any and all Tax Losses
of any other Person imposed on the Company or any of its Subsidiaries, pursuant
to any Tax sharing agreement or similar arrangement, as a transferee or
successor, by contract or otherwise; (v) any Excluded Liabilities based upon,
attributable to or resulting from Taxes; (vi) any Tax Losses based upon,
attributable to or resulting from any breach of any representation or warranty
in Section 5.4(e) or any covenants or agreements made by Northrop Grumman in
this Article XI; and (vii) any and all Tax Losses relating to the transactions
contemplated by this Agreement. For purposes of this Agreement, "TAX LOSSES"
shall mean Losses based upon, attributable to or resulting from Taxes calculated
without regard to any carryback from Post-Closing Periods and calculated net of
any offsetting Tax benefits as provided for in Section 11.12 of this Agreement.
58
(b) Northrop Grumman's indemnification obligation under
section 11.1(a) for Tax Losses (other than Tax Losses covered under Section
11.1(a)(iii), (iv), (v), or (vii)) arising solely from a challenge made by a
Taxing Authority resulting in such Taxing Authority making an assessment of Tax
shall apply only to the extent such Tax Losses exceed annual limitations of $29
million in tax year 2003, $20 million in tax year 2004, $9 million in tax year
2005 and $9 million in tax year 2006 or an aggregate limitation for all years of
$67 million. In the event that Northrop Grumman indemnifies the Purchaser
Indemnified Parties for such Tax Losses in excess of any annual limitation, such
excess shall be paid back to Northrop Grumman if, to the extent, and at such
time any subsequent annual limitation is not met.
(c) Parent will be responsible for, and will indemnify,
defend, and hold harmless Northrop Grumman and its Affiliates from and against
(i) all Tax Losses of the Company and its Subsidiaries based upon, attributable
to or resulting from Taxes that are due with respect to periods beginning on the
day after the Closing Date ("POST-CLOSING PERIODS"); (ii) all Tax Losses of the
Company and its Subsidiaries based upon, attributable to or resulting from Taxes
with respect to any Straddle Period to the extent attributable to the portion of
the Straddle Period beginning on the day after the Closing Date; (iii) all
Income Taxes resulting from any extraordinary transaction undertaken on the
Closing Date after the Closing; and (iv) any Tax Losses based upon, attributable
to or resulting from any breach of any representation or warranty of any
covenants or agreements made by Parent in this Article XI.
(d) (i) For purposes of this Article XI, whenever it is
necessary to determine the liability for Taxes (other than Taxes
described in Section 11.1(d)(ii)) of the Company and its Subsidiaries
for a Straddle Period, the determination of the Taxes for the portion
of the Straddle Period ending on and including, and the portion of the
Straddle Period beginning after, the Closing Date will be determined by
assuming that the Straddle Period consisted of two taxable years or
periods, one which ended at the close of the Closing Date and the other
which began at the beginning of the day following the Closing Date, and
items of income, gain, deduction, loss or credit, and state and local
apportionment factors of the Company and its Subsidiaries for the
Straddle Period will be allocated between such two taxable years or
periods on a "closing of the books basis" by assuming that the books of
the Company and its Subsidiaries were closed at the close of the
Closing Date. However, (A) exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for
depreciation will be apportioned ratably between such periods on a
daily basis and (B) Income Taxes resulting from an extraordinary
transaction undertaken on the Closing Date after the Closing will be
allocated to the post-Closing Date portion of the Straddle Period.
(ii) In the case of property and ad valorem taxes,
the Tax for the portion of the Straddle Period ending on the Closing
Date shall be the Tax for the Straddle Period multiplied by a fraction
the numerator of which is the number of days in the period on or before
the Closing Date and the denominator of which is the total number of
days in the Straddle Period.
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11.2 Tax Returns and Payment Responsibility.
(a) Northrop Grumman shall be responsible for, and shall cause
to be prepared and duly and timely filed, all Tax Returns of the Company and its
Subsidiaries with respect to the taxable year during which the Closing occurs
that are due before the Closing Date and shall pay or cause to be paid all Taxes
due in respect of such Tax Returns. Northrop Grumman shall be responsible for,
and shall cause to be prepared and duly and timely filed, all Income Tax Returns
of the Company and its Subsidiaries that are prepared on a consolidated,
unitary, or combined basis with Northrop Grumman or any of its Subsidiaries for
all taxable periods ending on or before the Closing Date. Northrop Grumman shall
pay any Income Taxes due in respect of the Tax Returns referred to in the
preceding sentence. Parent shall pay by wire transfer to Northrop Grumman any
Taxes for which the BCP Entities are responsible pursuant to Section 11.1(b),
but which are payable with Tax Returns that are filed by Northrop Grumman
pursuant to this Section. Parent shall be responsible for and shall cause to be
prepared and duly and timely filed all Tax Returns with respect to the Company
and its Subsidiaries that are due after the Closing Date, other than those that
are the responsibility of Northrop Grumman pursuant to this paragraph and pay
any Taxes due in respect of those Tax Returns. Northrop Grumman shall pay by
wire transfer to Parent any Taxes for which Northrop Grumman is responsible
pursuant to Section 11.1(a)(ii), but which are payable with the Tax Returns to
be filed by Parent pursuant to this section on the due date for the payment of
such Taxes.
(b) All Tax Returns that are to be prepared and filed by the
parties pursuant to the preceding paragraph and that relate to Taxes for which
Northrop Grumman is liable under Section 11.1(a) or Taxes for which Parent is
liable under Section 11.1(c)(ii) shall be prepared in a manner that is
consistent with past practice, unless otherwise required by law. Such Tax
Returns shall be submitted to the other party not later than fifteen (15)
Business Days prior to the due date for filing of such Tax Return (or if such
due date is within forty-five (45) days following the Closing Date, as promptly
as practicable following the Closing Date). Such other party shall have the
right to review such Tax Returns. If such other party, within ten (10) Business
Days after delivery of any such Tax Return, notifies the party preparing such
Tax Return that it objects to any of the items in such Tax Return, the parties
shall attempt in good faith to resolve the dispute and, if they are unable to do
so, the disputed items will be resolved (within a reasonable time, taking into
account the deadline for filing such Tax Return) by an internationally
recognized independent accounting firm chosen by both BCP and Northrop Grumman.
Upon resolution of all such items, the relevant Tax Return will be filed on that
basis. The costs, fees and expenses of such accounting firm will be borne
equally by BCP and Northrop Grumman.
(c) None of the parties shall (and shall not cause or permit
Company or their Subsidiaries to) materially amend, refile or otherwise
materially modify (or grant an extension of any statute of limitation with
respect to) any Straddle Period Tax Return of the Company or its Subsidiaries or
any Tax Return of the Company or its Subsidiaries for any period ending on or
before the Closing Date without the prior written consent of the other party,
which consent may not be unreasonably withheld.
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(d) All sales, use, transfer and other similar Taxes relating
to the transactions contemplated by this Agreement, including any stock or asset
transfer stamp Taxes, will be borne by Northrop Grumman.
11.3 Refunds. Northrop Grumman shall be entitled to any refund of
any Pre-Closing Taxes of the Company and its Subsidiaries and any Taxes of the
Company and its Subsidiaries for the pre-Closing portion of a Straddle Period,
including, in each case, interest paid thereon, ("NORTHROP REFUNDS") except for
(a) refunds and interest arising from the carryback of a tax item from a
Post-Closing Period to a Pre-Closing Period ("PURCHASER CARRYBACK REFUNDS") and
(b) any refund of Taxes for Pre-Closing Periods to the extent Parent is
responsible for such Taxes pursuant to Section 11.1(b). Northrop Grumman shall
have the right to determine whether any Northrop Refunds (other than Purchaser
Carryback Refunds) shall be made on behalf of the Company and its Subsidiaries
and if Northrop Grumman elects to make a claim for refund, the BCP Entities, the
Company and its Subsidiaries shall cooperate fully in connection therewith,
unless such claim for refund would adversely affect the liability of Parent, the
Company or any of its Subsidiaries for any Taxes with respect to Post-Closing
Periods and any portion of a Straddle Period beginning on the day after the
Closing Date, and provided that any costs incurred by Parent relating to such
refund claim shall be borne by and reimbursed by Northrop Grumman. Purchaser
Carryback Refunds shall be permitted only after giving effect to any refund
claims by Northrop Grumman based on carrybacks of tax items from any Pre-Closing
Period to other Pre-Closing Periods.
11.4 Contest Provisions.
(a) Notice Requirements. In the event (i) Northrop Grumman or
its Affiliates or (ii) Parent or its Affiliates receive notice of any pending or
threatened Tax audits or assessments or other disputes concerning Taxes with
respect to which the other party may incur liability under this Article XI, the
party in receipt of such notice shall promptly notify the other party of such
matter in writing, provided that failure to comply with this provision will not
affect a party's right to indemnification hereunder unless such failure
materially adversely affects the party's ability to challenge such Tax audits or
assessments.
(b) Contests Pertaining to Pre-Closing Taxes. Northrop Grumman
shall have the sole right to represent the interests of the Company and its
Subsidiaries in any Tax audit or administrative or court proceeding relating to
any Tax for any taxable period ending on or before the Closing Date and any
Taxes of the Company and its Subsidiaries that are paid on a consolidated,
unitary, or combined basis with Northrop Grumman or any of its Subsidiaries, and
to employ counsel of its choice at its expense, provided, that (i) it has
liability for such Taxes pursuant to Section 11.1(a) after giving effect to the
limitations in Section 11.1(b), and (ii) Northrop Grumman shall not be entitled
to settle, either administratively or after the commencement of litigation, any
claim regarding Taxes that would adversely affect the liability of Parent for
any Tax Losses for which it is liable under Section 11.1(c) or which could
adversely affect the Company or any of its Subsidiaries for any portion of a
Straddle Period beginning after the Closing Date or any Tax period beginning
after the Closing Date, which consent shall not be unreasonably withheld and
shall not be required to the extent that Northrop Grumman has indemnified Parent
against the effects of such settlement.
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(c) Contests Pertaining to Post-Closing Taxes. Parent shall
have the sole right to represent the interests of the Company and its
Subsidiaries in any Tax audit or administrative or court proceeding relating to
any Tax for any taxable period beginning on the day after the Closing Date and
to employ counsel of its choice at its expense, provided that (i) it has
liability for such Taxes pursuant to Section 11.1(c) and (ii) Parent shall not
be entitled to settle, either administratively or after the commencement of
litigation, any claim regarding Taxes that would adversely affect the liability
of Northrop Grumman for any Tax Losses for which it is liable under Section
11.1(a) after giving effect to the limitations in Section 11.1(b), which consent
shall not be unreasonably withheld and shall not be required to the extent that
Parent has indemnified Northrop Grumman against the effects of such settlement.
(d) Contests Pertaining to Straddle Periods. Northrop Grumman
and Parent shall jointly control any Tax audit or administrative or court
proceeding relating to any Tax for a Straddle Period and shall cooperate in good
faith to resolve or settle any such proceedings.
11.5 Section 338(h)(10) Election.
(a) At the request of Parent, Northrop Grumman and the Company
shall jointly make a timely and irrevocable election under section 338(h)(10) of
the Code (the "SECTION 338 ELECTION") with respect to the stock of the Company
or its Subsidiaries (other than the stock of Ruling Newco or the Subsidiaries
set forth on Schedule 11.5(a)).
(b) To the extent possible, Northrop Grumman (on behalf of
itself and the Company) and Parent agree to execute at the Closing any and all
forms necessary to effectuate the Section 338 Election (including Internal
Revenue Service Form 8023 (the "SECTION 338 FORMS")). In the event, however, any
completed Section 338 Forms are not executed at the Closing, Northrop Grumman
and Parent agree to prepare and complete each such Section 338 Form no later
than 15 days prior to the date such Section 338 Form is required to be filed.
Northrop Grumman and Parent shall each cause the Section 338 Forms to be duly
executed by an authorized person, and shall duly and timely file the Section 338
Forms in accordance with applicable tax laws and the terms of this Agreement.
(c) With respect to the consideration allocated to the Company
and the Subsidiaries listed on the Purchase Price Allocation Schedule pursuant
to Section 3.1, Parent shall reasonably determine the fair market value of the
assets of each Subsidiary for which a Section 338 Election is made and shall
allocate the relevant portion of the Purchase Price (as required pursuant to
section 338(h)(10) of the Code and regulations promulgated thereunder), together
with applicable Liabilities, among such assets (the "SECTION 338 ALLOCATION").
Parent shall provide the Section 338 Allocation to Northrop Grumman at least 60
days prior to the filing date required therefor and Northrop Grumman shall
provide reasonable comments thereon to Parent within 30 days of receipt thereof.
The parties shall attempt in good faith to resolve any unagreed items with
respect to the Section 338 Allocation and if they are unable to do so, such
unagreed items will be resolved (within a reasonable time, taking into account
the deadline for filing the Section 338 Allocation) by an internationally
recognized independent accounting firm chosen by both Northrop Grumman and
Parent. Northrop Grumman, the Company and Parent shall file all Tax Returns
consistently with the Section 338 Allocation schedule as agreed to under this
Section 11.5(c).
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11.6 Section 338(g) Election. Parent shall not make and shall not
cause or permit any of its Subsidiaries to make an election under Section 338(g)
of the Code with respect to any subsidiaries of the Company that are not U.S.
corporations.
11.7 Tax Sharing Agreement. Any Tax allocation or sharing agreement
or arrangement, whether or not written, that may have been entered into by TRW,
or any of its Affiliates, on the one hand, and the Company and its Subsidiaries,
on the other hand, shall be terminated as to the Company and its Subsidiaries as
of the Closing Date and neither the Company nor any of its Subsidiaries shall
have any obligation or responsibility with respect to such Tax allocation or
sharing agreement or arrangement.
11.8 Assistance and Cooperation. After the Closing Date, Northrop
Grumman and TRW, on the one hand, and Parent, on the other hand, shall (and
shall cause their respective Affiliates to): (a) assist the other party in
preparing and filing any Tax Returns or reports which such other party is
responsible for preparing and filing in accordance with this Article; (b)
cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Company and its Subsidiaries; (c)
make available to the other and to any taxing authority as reasonably requested
all information, records, and documents relating to Taxes of the Company and its
Subsidiaries; and (d) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
11.9 Retention of Records. After the Closing Date, Northrop
Grumman, TRW and Parent (including the Company and its Subsidiaries) shall
preserve all information, records or documents relating to liabilities for Taxes
of the Company and its Subsidiaries until six months after the expiration of any
applicable statute of limitations (including extensions thereof) with respect to
the assessment of such Taxes, provided that neither party shall dispose of any
of the foregoing items without first offering such items to the other party.
11.10 Other Provisions. The provisions of this Article XI (and not
Article X) will exclusively govern all indemnity claims with respect to Tax
matters of the Company and its Subsidiaries and the purchase of the Shares
pursuant to this Agreement and, for the avoidance of doubt, any limitations
under Article X on a party's indemnification obligations will not apply to any
indemnification under this Article XI. Notwithstanding anything to the contrary
in this Agreement (including Article X), none of the representations or
warranties set forth in Section 5.4, or anything else in this Agreement, will
cause Northrop Grumman or TRW to be liable for any Taxes or Losses relating to
Taxes for which Northrop Grumman or TRW is not otherwise expressly liable
pursuant to Section 11.1(a).
11.11 Characterization of Payments. Except for any amount required
to be treated for Tax purposes as interest, all indemnity payments under Article
X and under this Article XI and all payments required to be made under Section
3.2 of this Agreement will be treated as an adjustment to the purchase price
paid for the Shares for tax purposes.
11.12 Tax Indemnification Claims. The amount of any Tax Loss for
which indemnification is provided under this Article XI will (i) be reduced to
take account of any net Tax benefit, as and when actually realized, by the
indemnified party arising from (A) the
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incurrence or payment of any such claim or Tax and (B) any correlative
adjustments or changes in Tax treatment that occur as a result of the adjustment
or change giving rise to such Tax Loss and (ii) increased to take account any
net Tax cost, as and when actually incurred, by the indemnified party arising
from the receipt of indemnity payments hereunder (including any Tax resulting
from the payment under this Section 11.12(ii)), provided that reductions for Tax
benefits will apply solely to Tax Losses arising from a challenge made by a
Taxing Authority resulting in such Taxing Authority making an assessment of Tax
and provided further that no reduction shall be made pursuant to this Section
11.12 for a Tax benefit with respect to any Tax Loss indemnification arising
under Section 11.1(a)(iii),(iv), (v), or (vii).
ARTICLE XII
MISCELLANEOUS
12.1 Certain Definitions. For purposes of this Agreement, the
following terms will have the meanings specified in this Section 12.1:
"ACCOUNTING ARBITRATOR" shall have the meaning ascribed to such term in
Section 3.2(f).
"ACQUISITION STEPS" shall have the meaning ascribed to such term in
Section 1.1(c).
"ACQUISITION STRUCTURE STEPS" shall have the meaning ascribed to such
term in Section 1.1(b).
"ACQUISITION TRANSACTION" shall have the meaning ascribed to such term
in Section 7.8(a).
"ADJUSTED INTERIM BALANCE SHEET" shall have the meaning ascribed to
such term in Section 5.3(a).
"ADJUSTING INDEBTEDNESS" shall mean, as of any date, with respect to
amounts owed by the Company or its Subsidiaries to third parties or (to the
extent not discharged) to the TRW Transferring Companies, the items set forth on
Schedule 12.1(a) in the amounts calculated as set forth thereon, together with
accrued interest and all other amounts payable thereon through such date.
Adjusting Indebtedness denominated in currencies other than U.S. dollars shall
be converted to U.S. dollars at the exchange rate based upon the noon buying
rate in New York City for cable transfers payable in foreign currencies as
certified by the Federal Reserve Bank of New York as of such date of
calculation.
"AFFILIATE" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. For the
avoidance of doubt, from and after the Closing Date, none of Northrop Grumman,
TRW, TRW Automotive or any of their respective Affiliates shall be deemed to be
an "Affiliate" of the BCP Entities or any of their Subsidiaries or Affiliates.
"AGGREGATE INDEMNITY AMOUNT" shall have the meaning ascribed to such
term in Section 10.9(b).
▇▇
"▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇" shall have the meaning ascribed to such
term in Section 10.9(b).
"AGGREGATE UNREIMBURSED INDEMNITY AMOUNT" shall have the meaning
ascribed to such term in Section 10.9(b).
"AGGREGATE UNREIMBURSED SHORTFALL AMOUNT" shall have the meaning
ascribed to such term in Section 10.9(b).
"AGREED ASSUMED INDEBTEDNESS" shall have the meaning ascribed to such
term in Section 7.20.
"AGREED FOREIGN ENTITY" shall have the meaning ascribed to such term in
Section 7.6.
"AGREEMENT" shall have the meaning ascribed to such term in the
preamble.
"ANCILLARY AGREEMENTS" shall have the meaning ascribed to such term in
Section 3.1(e) hereof.
"ASSETS" shall mean any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including the following:
(i) real property interests (including Leases), land, plants,
buildings and improvements and all rights, privileges and easements
which are appurtenant to such real estate;
(ii) machinery, equipment, vehicles, furniture and fixtures,
leasehold improvements, supplies, repair parts, tools, plant,
laboratory and office equipment and other tangible personal property,
together with any rights or claims arising out of the breach of any
express or implied warranty by the manufacturers or sellers of any of
such assets or any component part thereof;
(iii) inventories, including raw materials, work-in-process,
finished goods, parts, accessories;
(iv) cash, cash equivalents, notes, loans and accounts
receivable (whether current or not current), interests as beneficiary
under letters of credit, advances and performance and surety bonds;
(v) banker's acceptances, shares of stock, bonds, debentures,
evidences of indebtedness, certificates of interest or participation in
profit-sharing agreements, collateral-trust certificates, investment
contracts, voting trust certificates, puts, calls, straddles, options,
swaps, collars, caps and other securities or hedging arrangements of
any kind;
(vi) financial, accounting, tax and operating data, files and
records and any rights thereto, including books, records, electronic
data, notes, sales and sales
65
promotional data, advertising materials, credit information, cost and
pricing information, customer and supplier lists, reference catalogs,
payroll and personnel records, minute books, stock ledgers, stock
transfer records and other similar property, rights and information;
(vii) Intellectual Property;
(viii) Contracts and all rights therein;
(ix) prepaid expenses, deferred charges, advance payments and
similar items, deposits and retentions held by third parties;
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied warranties, rights
of recovery, rights of set-off, and rights of subrogation;
(xi) Permits;
(xii) goodwill; and
(xiii) going concern value.
"ATV PAYMENT DATE" shall have the meaning ascribed to such term in
10.9(h)(ii).
"AUDITED BALANCE SHEET" shall have the meaning ascribed to such term in
Section 5.3(a)(i).
"AUTO NEWCO" shall have the meaning ascribed to such term in the
recitals.
"AUTO NEWCO I" shall have the meaning ascribed to such term in Section
1.1(a)(iv).
"AUTOMOTIVE AFFILIATE" shall mean the entities engaged in the
Automotive Business, in which the Company directly or indirectly holds an equity
interest (other than any Subsidiary of the Company), such entities being those
listed on Schedule 12.1(b).
"AUTOMOTIVE ASSETS" shall mean any Assets (other than the Excluded
Assets and the Equity Interests) held by TRW or any of its Subsidiaries which
are used or held primarily in the Automotive Business and any Company
Intellectual Property.
"AUTOMOTIVE BUSINESS" shall mean the business of designing,
manufacturing and selling steering, suspension, braking, engine, safety,
electronic, engineered fastening and other components and systems for passenger
cars, light trucks and commercial vehicles, including inflatable restraint, seat
belt and steering wheel components and systems; braking components systems and
related products; steering and suspension systems and components; chassis
components modules and integrated vehicle control systems; vehicle dynamic
control systems and electronics; access, security and safety electronics
systems; display and heating, ventilating and air conditioning electronics;
engineered and plastic fasteners and precision plastic moldings and assemblies;
engine components and systems; commercial steering systems and components;
66
and aftermarket operations, including parts, service and technical and
diagnostic support, as such businesses are or have been conducted by TRW and
certain of its Subsidiaries and the Automotive Affiliates, which shall include
those business units of TRW identified on Schedule 1.2.
"AUTOMOTIVE BUSINESS EMPLOYEE" shall mean those current employees,
directors, officers or consultants of the Automotive Business (including those
employees who are on vacation, approved leave of absence, lay-off status,
short-term disability or long-term disability).
"AUTOMOTIVE LIABILITIES" shall mean all Liabilities arising primarily
from the conduct of the Automotive Business and the ownership of property
utilized in the Automotive Business, whether arising before or after the
Closing, including (i) all Liabilities that would be reflected on the Adjusted
Interim Balance Sheet (if such Adjusted Interim Balance Sheet were prepared in
accordance with GAAP), (ii) any such Liabilities from discontinued operations or
formerly owned properties, (iii) any such Liabilities arising out of or related
to asbestos-related product liability Claims or Liabilities and (iv) all
Indebtedness identified on Schedule 5.2(d); provided, that none of the foregoing
Liabilities shall include Excluded Liabilities.
"BASKET" shall have the meaning ascribed to such term in Section
10.2(a).
"BCP" shall have the meaning ascribed to such term in the preamble.
"BCP ENTITIES" shall have the meaning ascribed to such term in the
recitals.
"BLACKSTONE" shall have the meaning ascribed to such term in Section
6.4.
"BUSINESS DAY" shall mean a day other than a Saturday, a Sunday or a
day on which banking institutions located in the State of New York are
authorized or obligated by Law or executive order to close.
"BUSINESS PROPERTY" shall have the meaning ascribed to such term in
Section 5.6(a).
"CAP" shall have the meaning ascribed to such term in Section 10.2(a).
"CAPITAL EXPENDITURE BUDGET" shall mean the capital expenditure budget
of the Company and its Subsidiaries, as set forth on Schedule 12.1 to the
Northrop Grumman Disclosure Letter.
"CAPITAL STOCK" of any Person shall mean any and all shares, interests
(including partnership interests), warrants, rights, options or other interests,
participations or other equivalents of or interests in (however designated)
equity of such Person, including common or preferred stock, but excluding any
debt securities convertible into or exchangeable for such equity.
"CLAIM" shall have the meaning ascribed to such term in Section
10.3(a).
"CLOSING" shall have the meaning ascribed to such term in Section
3.1(a).
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"CLOSING ADJUSTING INDEBTEDNESS" means the Adjusting Indebtedness as
of the Closing Date.
"CLOSING BALANCE SHEET" shall have the meaning ascribed to such term in
Section 3.2(b).
"CLOSING DATE" shall have the meaning ascribed to such term in Section
3.1(a).
"CLOSING DATE SHAREHOLDERS" shall have the meaning ascribed to such
term in Section 10.9(i).
"CLOSING STATEMENT" shall have the meaning ascribed to such term in
Section 3.2(c).
"CLOSING WORKING CAPITAL" shall mean the amount calculated by
subtracting the line item "Trade accounts payable" from the sum of the line
items "Cash and cash equivalents", "Accounts receivable", "Interest in
securitized receivables" and "Inventories" as shown on the Closing Balance Sheet
or the Estimated Closing Balance Sheet of the Company and its Subsidiaries, as
applicable, and adding thereto the amount of marketable securities included in
the line item "Other assets" (such marketable securities shall be calculated
using the same accounting methods, policies, practices and procedures, with
consistent classifications, judgments and estimation methodology as was used in
the preparation of the Interim Balance Sheet where marketable securities
comprised $34 million of $225 million of total Other assets). For the avoidance
of doubt, the calculation of Closing Working Capital shall not include (i) any
amounts related to accounts receivable that have been sold or securitized as of
the date of the calculation of Closing Working Capital (but before giving effect
to the financing of the transactions contemplated hereby) other than the
"Interest in securitized receivables" reflected on the Closing Balance Sheet or
(ii) any other amounts not reflected on the Closing Balance Sheet.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITMENT LETTERS" shall have the meaning ascribed to such term in
Section 6.4.
"COMPANY" shall have the meaning ascribed to such term in the recitals.
"COMPANY INTELLECTUAL PROPERTY" shall mean Intellectual Property that
is owned by TRW or any of its Subsidiaries that is primarily related to,
primarily used in or the development of which was primarily funded by the
Automotive Business. Without limiting the generality of the foregoing, Company
Intellectual Property shall include all Trademarks and domain names containing
the "TRW" word or symbol, any variations or derivations thereof, or any other
Trademark or domain name confusingly similar thereto, in any language and under
the laws or registries of any jurisdiction throughout the world. For the
avoidance of doubt, Company Intellectual Property shall not include any
Intellectual Property created or conceived by TRW or its Subsidiaries or
acquired from a third party after the Closing Date.
"COMPANY PLANS" shall have the meaning ascribed to such term in Section
5.10(a).
"CONFIDENTIAL INFORMATION" shall mean with respect to any party
hereto, (a) any Information concerning such party, its business or any of its
Affiliates that was obtained by another party hereto prior to the Closing Date,
and (b) any other Information obtained by, or
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furnished to, another party hereto that (i) is marked "Proprietary" or "Company
Private" or words of similar import by the party owning such Information, or any
Affiliate of such party, or (ii) the party owning such Information has notified
such other party in writing is confidential or secret.
"CONFIDENTIALITY AGREEMENT" shall have the meaning ascribed to such
term in Section 7.1(a) hereof.
"CONSENT" shall mean consents, waivers, approvals, allowances,
declarations, novations, authorizations, permits, filings, orders, registrations
and notifications.
"CONTRACT" shall mean any contract, agreement, lease, license, sales
order, purchase order, indenture, note, bond, loan, instrument, lease,
commitment or other arrangement or agreement that is binding on any Person or
any part of its property under applicable Law.
"COPYRIGHT" shall have the meaning ascribed to such term in the
definition of Intellectual Property below.
"CURRENT YEAR" shall have the meaning ascribed to such term in Section
10.9(h)(i)(B)(3).
"DEBT COMMITMENT LETTERS" shall have the meaning ascribed to such term
in Section 6.4.
"DEBT FINANCING" shall have the meaning ascribed to such term in
Section 6.4.
"DISCLAIMED DAMAGES" shall have the meaning ascribed to such term in
Section 10.7.
"EC MERGER REGULATION" shall have the meaning ascribed to such term in
Section 6.1(c).
"EMPLOYEE BENEFIT PLANS" shall have the meaning ascribed to such term
in Section 5.10(a).
"EMPLOYEE MATTERS AGREEMENT" shall have the meaning ascribed to such
term in Section 3.1(e).
"ENVIRONMENTAL CLAIM" shall mean any Claim, Legal Proceeding,
directive, investigation, Lien, demand letter, or written notice of alleged
noncompliance, violation or Liability, by any Person asserting an Environmental
Liability.
"ENVIRONMENTAL LAW" shall mean all Laws relating to human health or
the environment, including Hazardous Substances.
"ENVIRONMENTAL LIABILITIES" shall mean any and all Liabilities arising
under, from or related to Environmental Laws or Hazardous Substances with
respect to the present and historic operation or ownership of the Automotive
Business on or prior to the Closing Date, regardless of whether such Liabilities
arise before, on or after the Closing Date (other than any Liabilities
69
arising out of or related to asbestos-related product liability Claims or
Liabilities), including, without limitation, costs of investigation, removal,
cleanup, remediation and corrective or responsive action with respect to any
Hazardous Substances located at current or former facilities of the Automotive
Business.
"EQUITY COMMITMENT LETTERS" shall have the meaning ascribed to such
term in Section 6.4.
"EQUITY CONSIDERATION" shall have the meaning ascribed to such term in
Section 1.1(b)(ii).
"EQUITY FINANCING" shall have the meaning ascribed to such term in
Section 6.4.
"EQUITY INTERESTS" shall mean all of the equity interests (all of
which are listed on Schedule 1.2) of the Transferred Entities held by TRW or its
Subsidiaries.
"ERISA" shall have the meaning ascribed to such term in Section
5.10(a).
"ESTIMATED ADJUSTING INDEBTEDNESS" shall have the meaning ascribed to
such term in Section 3.2(a).
"ESTIMATED CLOSING BALANCE SHEET" shall have the meaning ascribed to
such term in Section 3.2(a).
"ESTIMATED WORKING CAPITAL" shall have the meaning ascribed to such
term in Section 3.2(a).
"EXCHANGE ACT" shall have the meaning ascribed to such term in the
Section 5.1(c).
"EXCLUDED ASSETS" shall mean any and all of the following (other than
Equity Interests), but only to the extent not included in the Final Closing
Statement for purposes of the Final Closing Balance Sheet:
(i) the TRW Intellectual Property subject to the Intellectual
Property License Agreements;
(ii) all causes of action, judgments, claims, reimbursements
and demands, of whatever nature (including rights under and pursuant to all
warranties, representations and guarantees made by suppliers of products,
materials or equipment, or components thereof), in favor of any TRW Asset
Transferring Company to the extent primarily related to the Excluded Assets or
the Excluded Liabilities;
(iii) any claims under insurance policies maintained by any of
the TRW Asset Transferring Companies to the extent primarily related to the
Excluded Assets or Excluded Liabilities or to the extent allocated to the TRW
Asset Transferring Companies pursuant to the Insurance Allocation Agreement; and
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(iv) such other rights, properties and assets set forth on
Schedule 12.1(c) hereto.
"EXCLUDED LIABILITIES" shall mean the following Liabilities, whether
known or unknown, and, except as specifically noted below, whether arising
before or after the Closing, of TRW or any of its Affiliates:
(i) any and all Liabilities existing as of the Closing Date,
other than under the Ancillary Agreements, where the obligee is TRW or any
Affiliate of TRW which will remain an Affiliate of TRW after the consummation of
the transactions contemplated by this Agreement;
(ii) any and all Indebtedness of TRW or any of its
Subsidiaries or Affiliates (including, for the avoidance of doubt, any
Indebtedness set forth on Schedule 7.20 which does not become Agreed Assumed
Indebtedness) other than Indebtedness set forth on Schedule 5.2(d) (including,
for the avoidance of doubt, any Agreed Assumed Indebtedness);
(iii) any and all Liabilities (including Taxes) to the extent
arising out of the Excluded Assets;
(iv) except for those Liabilities with respect to TRW
Automotive Participants (as defined in the Employee Matters Agreement) expressly
assumed or retained by Newco pursuant to the Employee Matters Agreement, any and
all Liabilities with respect to current and former employees of TRW or its
Affiliates (including, without limitation, any Liabilities with respect to
"Divested Business Employees" who are not "Divested TRW Automotive Business
Employees", as each such term is defined in the Employee Matters Agreement);
(v) any and all Liabilities expressly assumed by Northrop
Grumman, TRW or any of their respective Affiliates pursuant to this Agreement or
the other Ancillary Agreements; and
(vi) any and all Liabilities arising out of any business
(whether currently owned or operated or previously divested or otherwise
disposed of) of any TRW Participant or any of their Subsidiaries other than the
Automotive Business.
"FEE PAYMENT DATE" shall have the meaning ascribed to such term in
Section 4.3(b).
"FINAL CLOSING ADJUSTING INDEBTEDNESS" shall have the meaning ascribed
to such term in Section 3.2(f).
"FINAL CLOSING BALANCE SHEET" shall have the meaning ascribed to such
term in Section 3.2(f).
"FINAL CLOSING STATEMENT" shall have the meaning ascribed to such term
in Section 3.2(f).
"FINAL CLOSING WORKING CAPITAL" shall have the meaning ascribed to such
term in Section 3.2(f).
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"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term in
Section 5.3(a).
"▇▇▇▇▇" shall have the meaning ascribed to such term in Section
1.1(b)(v).
"FOREIGN ACQUIRORS" shall have the meaning ascribed to such term in
Section 1.1(b)(vi).
"FOREIGN ENTITIES" shall have the meaning ascribed to such term in
Section 1.1(c)(ii).
"FOREIGN SHARES" shall have the meaning ascribed to such term in
Section 1.1(c)(ii).
"FOREIGN STOCK CLOSING THRESHOLD DATE" shall mean the date on which
the aggregate amounts under the heading "Percentage of Aggregate Benefit" on
Schedule 12.1(d) set forth opposite the name of each Agreed Foreign Entity
equals or exceeds 90%.
"FRENCH FOREIGN ACQUIROR" shall mean a company to be organized by BCP
under the laws of the Republic of France prior to the Closing Date.
"FRUEHAUF LIABILITIES" shall mean shall mean any and all Losses arising
under, from or related to the facts, circumstances, events or actions that are
the subject of the Fruehauf Matter.
"FRUEHAUF MATTER" shall mean the matter described in the third
paragraph under the heading "Contingencies" in the Notes to the Interim
Financial Statements on page F-38 of Amendment No. 2 to the Registration
Statement on Form S-1 dated August 20, 2002 filed by TRW Automotive relating to
the criminal investigation of ▇▇▇▇▇▇-▇▇▇▇▇ Company (formerly known as Fruehauf
Corporation) by the U.S. Attorney for the Southern District of Illinois.
"GAAP" shall mean generally accepted United States accounting
principles as of the date hereof.
"GOVERNMENTAL BODY" shall mean any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"HAZARDOUS SUBSTANCE" shall mean all substances or materials regulated
as hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including, but not limited to, (i) petroleum and
polychlorinated biphenyls and (ii) in the United States, all substances defined
as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5 but
not including asbestos except where used in the construction or insulation of
premises.
"HOLDINGS" shall have the meaning ascribed to such term in the
recitals.
"HSR ACT" shall have the meaning ascribed to such term in Section
5.1(c).
"INCOME TAX" means any income, franchise or similar Tax and in each
instance any interest, penalties or additions to tax attributable to such Tax.
"INCOME TAX RETURN" shall mean any Tax Return relating to Income
Taxes.
72
"INDEBTEDNESS" shall mean: (i) indebtedness for borrowed money or for
the deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), including indebtedness evidenced by a
note, bond, debenture or similar instrument; (ii) guarantees or other contingent
obligations in respect of items in clause (i); (iii) obligations required to be
classified and accounted for as capital leases on a balance sheet under GAAP;
(iv) obligations in respect of outstanding letters of credit, acceptances and
similar obligations created for the account of such Person; (v) Liabilities
under interest rate cap Contracts, interest rate swap Contracts, foreign
currency exchange Contracts and other hedging or similar Contracts; and (vi) to
the extent not otherwise included in the foregoing, any financing of accounts
receivable or inventory.
"INDEMNITY PAYMENT" shall have the meaning ascribed to such term in
Section 10.9(a).
"INFORMATION" shall mean all records, books, contracts, instruments,
computer data and other data and information.
"INFRINGE" shall have the meaning ascribed to such term in Section
5.7(b)(ii).
"INTELLECTUAL PROPERTY" shall mean all intellectual property under any
Law, treaty, compact and the like, whether registered or unregistered,
including, without limitation: (i) inventions, discoveries, processes, designs,
techniques, developments, technology, and related improvements, whether or not
patentable; (ii) patents and applications therefor and all divisionals,
reissues, renewals, registrations, confirmations, re-examinations, certificates
of inventorship, extensions, continuations and continuations-in-part thereof
(collectively, "PATENTS"); (iii) trademarks, trade dress, service marks, service
names, trade names, brand names, logo, business symbols, or other source
indicators whether registered or unregistered, and applications to register the
foregoing, including all extensions and renewals thereof and all goodwill
associated therewith and all common law rights, relating thereto (collectively,
"TRADEMARKS"); (iv) copyrights and works of authorship in any media, including
writings, designs, software, mask works, algorithms, marketing materials,
internet site content, proprietary or copyrightable elements of works of
authorship, functional or utilitarian objects and all other author's rights
including "moral rights", whether registered or unregistered, and applications
to register the same (collectively, "COPYRIGHTS"); (v) technical, scientific,
and other know-how, trade secrets, confidential or proprietary information,
data, methods, processes, practices, formulas and techniques, computer software
programs and software systems, including all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in interpretive code, source code, object code or human
readable form; (vi) internet domain names; and (vii) rights of publicity and
privacy, "name and likeness" rights and other similar rights.
"INTELLECTUAL PROPERTY AGREEMENTS" shall have the meaning ascribed to
such term in Section 3.1(e) hereof.
"INTENDED TRANSFEREE" shall have the meaning ascribed to such term in
Section 1.5.
"INTENDED TRANSFEROR" shall have the meaning ascribed to such term in
Section 1.5
"INTERIM BALANCE SHEET" shall have the meaning ascribed to such term in
Section 5.3(a).
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"INTERIM FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 5.3(a).
"INTERMEDIATE HOLDCO" shall have the meaning ascribed to such term in
the recitals.
"KNOWLEDGE OF TRW" shall mean the actual knowledge, after reasonable
inquiry, of the officers of TRW listed on Schedule 12.1(e).
"LAW" shall mean any federal, state, local or foreign law (including
common law), regulation, Order, constitution, treaty, compact, directive, code,
ordinance, permit, authorization, variance, rule, statute, judicial decision,
government agreements or other requirement.
"LEASED PROPERTY" shall have the meaning ascribed to such term in
Section 5.6(a).
"LEASES" shall have the meaning ascribed to such term in Section
5.6(a).
"LEGAL PROCEEDING" shall mean any action, suit, audit, hearing,
litigation, petition, grievance, complaint, charge, claim, inquiry, or other
proceeding, whether administrative, civil or criminal, in law or in equity, or
before any Governmental Body.
"LIABILITY" shall mean any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising (including whether arising out of any Contract or tort based
on negligence or strict liability) and whether or not the same would be required
by generally accepted accounting principles to be reflected in financial
statements or disclosed in the notes thereto.
"LIBOR" shall have the meaning ascribed to such term in Section 3.2(g).
"LIEN" shall mean any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"LLC INTERESTS" shall the meaning ascribed to such term in the
recitals.
"LOSSES" shall mean all losses, Liabilities, claims, obligations,
demands, judgments, damages, dues, penalties, assessments, fines (civil or
criminal), costs, liens, expenses, forfeitures, settlements or fees, reasonable
attorneys' fees and court costs of any nature or kind, whether or not the same
would be properly reflected on a statement of assets and liabilities or balance
sheet.
"▇▇▇▇▇-VARITY" shall have the meaning ascribed to such term in the
recitals.
"▇▇▇▇▇-VARITY CAPITAL STOCK" shall have the meaning ascribed to such
term in the recitals.
"MATERIAL ADVERSE CHANGE" shall mean any material adverse change, or
any event, circumstance, condition or matter that has caused or resulted in, or
is reasonably likely to cause or result in, a material adverse change, in the
business, properties, results of operation, condition
74
(financial or otherwise), assets or liabilities of the Company and its
Subsidiaries, taken as a whole; provided, however, that Material Adverse Change
shall not include any change resulting from (i) announcement of the execution of
this Agreement and the transactions contemplated hereby or (ii) general economic
conditions or other conditions affecting the industry in which the Company
operates.
"MATERIAL ADVERSE EFFECT" shall mean any effect that has resulted in,
or is reasonably likely to result in, a Material Adverse Change.
"NEWCO" shall the meaning ascribed to such term in the recitals.
"NEWCO SUB" shall have the meaning ascribed to such term in Section
1.1(b)(vii).
"NEW EARLY RETIREMENT PROGRAM" shall have the meaning ascribed to such
term in Section 10.9(c)(i).
"NEW PROGRAM EARLY RETIREE" shall have the meaning ascribed to such
term in Section 10.9(c)(i).
"NON-U.S. PLANS" shall have the meaning ascribed to such term in
Section 5.10(j).
"NORTHROP GRUMMAN" shall have the meaning ascribed to such term in the
preamble.
"NORTHROP GRUMMAN DISCLOSURE LETTER" shall have the meaning ascribed to
such term in Article V.
"NORTHROP GRUMMAN INDEMNIFIED PARTIES" shall have the meaning ascribed
to such term in Section 10.1(b).
"NORTHROP REFUNDS" shall have the meaning ascribed to such term in
Section 11.3.
"NORTHROP/TRW CLOSING" shall have the meaning ascribed to such term in
the recitals.
"NORTHROP/TRW MERGER" shall have the meaning ascribed to such term in
the recitals.
"NORTHROP/TRW MERGER AGREEMENT" shall have the meaning ascribed to such
term in the recitals.
"OPEB ARBITRATOR" shall have the meaning ascribed to such term in
Section 10.9(j).
"ORDER" shall mean any order, injunction, judgment, decree, award,
settlement or stipulation, decision, determination, writ, ruling, subpoena or
verdict entered, issued, made or rendered by any court, administrative agency,
arbitration tribunal or other Governmental Body.
"OWNED PROPERTY" shall have the meaning ascribed to such term in
Section 5.6(a).
"PARENT" shall have the meaning ascribed to such term in the recitals.
75
"PARENT RULING NEWCO STOCK" shall have the meaning ascribed to such
term in Section 1.1(b)(i).
"PATENT" shall have the meaning ascribed to such term in the definition
of Intellectual Property above.
"PAYMENT DATE" shall have the meaning ascribed to such term in Section
10.9(a).
"PBGC" shall have the meaning ascribed to such term in Section 5.10(c).
"PERMITS" shall mean any approvals, authorizations, consents,
franchises, licenses, permits or certificates.
"PERMITTED LIENS" shall have the meaning ascribed to such term in
Section 5.5.
"PERSON" shall mean any individual, corporation, partnership, firm,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"POST-CLOSING PERIODS" shall have the meaning ascribed to such term in
Section 11.1(c).
"POST EMPLOYMENT BENEFITS" shall have the meaning ascribed to such term
in Section 10.9(c)
"PRECEDING YEAR" shall have the meaning ascribed to such term in
Section 10.9(e).
"PRE-CLOSING PERIODS" shall have the meaning ascribed to such term in
Section 11.1(a).
"PRELIMINARY STEPS" shall have the meaning ascribed to such term in
Section 1.1(a).
"PRIOR YEAR" shall have the meaning ascribed to such term in Section
10.9(h)(i)(B)(2).
"PURCHASE PRICE" shall have the meaning ascribed to such term in
Section 3.1(b).
"PURCHASE PRICE ALLOCATION SCHEDULE" shall have the meaning ascribed to
such term in Section 1.1(b)(i).
"PURCHASER CARRYBACK REFUNDS" shall have the meaning ascribed to such
term in Section 11.3.
"PURCHASER INDEMNIFIED PARTIES" shall have the meaning ascribed to such
term in Section 10.1(a).
"QUALIFIED PLANS" shall have the meaning ascribed to such term in
Section 5.10(b).
"RULING NEWCO" shall have the meaning ascribed to such term in Section
1.1(b)(i).
"SECTION 338 ALLOCATION" shall have the meaning ascribed to such term
in Section 11.5(c).
76
"SECTION 338 ELECTION" shall have the meaning ascribed to such term in
Section 11.5(a).
"SECTION 338 FORMS" shall have the meaning ascribed to such term in
Section 11.5(b).
"SELLER NOTE" shall mean the promissory note in the face amount of
$600,000,000, a summary of key terms for which is attached as Exhibit H, to be
issued at Closing in accordance with Section 3.1(d) by Intermediate Holdco in
favor of TRW and TRW Automotive.
"SELLER PLANS" shall have the meaning ascribed to such term in Section
5.10(a).
"SHARES" shall have the meaning ascribed to such term in the recitals.
"SHORTFALL AMOUNT" shall have the meaning ascribed to such term in
Section 10.9(b).
"SMLLC" shall have the meaning ascribed to such term in the recitals.
"STOCKHOLDERS' AGREEMENT" shall have the meaning ascribed to such term
in Section 7.18.
"STRADDLE PERIOD" shall mean a taxable period that commences before
and ends after the Closing Date.
"SUBSIDIARY" shall mean any Person of which a majority of the
outstanding equity interests or voting securities are owned, directly or
indirectly, by another Person.
"SUBJECT YEAR" shall have the meaning ascribed to such term in Section
10.9(b).
"TARGET WORKING CAPITAL" means $1,067,000,000.
"TAXES" shall mean all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
property and estimated taxes, customs duties, and any fees, assessments and
charges in the nature of a tax and all interest, penalties, fines, additions to
tax or additional amounts imposed by any taxing authority in respect of the
foregoing.
"TAX LOSSES" shall have the meaning ascribed to such term in Section
11.1(a).
"TAX RETURN" shall mean all return declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes,
including any amendment thereto.
"TERMINATION FEE" shall have the meaning ascribed to such term in
Section 4.3(b).
"TRADEMARK" shall have the meaning ascribed to such term in the
definition of Intellectual Property above.
"TRANSACTION AND MONITORING FEE AGREEMENT" shall have the meaning
ascribed to such term in Section 7.19.
77
"TRANSACTION STEPS" shall have the meaning ascribed to such term in
Section 1.1.
"TRANSFER DOCUMENTS" shall mean those certain documents of transfer or
of assignment and assumption providing for the Transfers, including deeds,
assignments, assignments of leases and bills of sale, in form and substance
reasonably satisfactory to Parent. Any deeds delivered for Owned Properties
shall be special warranty deeds with covenants against grantor acts.
"TRANSFEREE" shall mean any Person that will receive a transfer of
Automotive Assets or Equity Interests or Excluded Assets pursuant to Article I.
"TRANSFEROR" shall mean any Person that will make a transfer of
Automotive Assets or Equity Interests or Excluded Assets pursuant to Article I.
"TRANSFERRED ENTITIES" shall mean those entities listed on Schedule
1.2.
"TRANSFERS" shall have the meaning ascribed to such term in Section
1.3(c).
"TRUST DEED" shall have the meaning ascribed to such term in Section
5.2(d).
"TRW" shall have the meaning ascribed to such term in the recitals.
"TRW ASSET TRANSFERRING COMPANIES" shall mean TRW and certain of its
direct and indirect Subsidiaries that are identified in Schedule 1.2 (which
schedule also identifies the Subsidiary of the Company to which its Automotive
Assets and Automotive Liabilities are being transferred, on Schedule 1.2).
"TRW AUTOMOTIVE" shall have the meaning ascribed to such term in the
recitals.
"TRW EQUITY TRANSFERRING COMPANIES" shall mean TRW and certain of its
direct and indirect Subsidiaries that are identified in Schedule 1.2 (which
schedule also identifies the Transferred Entity the equity of which it is
transferring and the Affiliate of TRW to which all Excluded Liabilities of such
Transferred Entity have been transferred).
"TRW EXECUTION DATE" shall have the meaning ascribed to such term in
Section 7.12.
"TRW FEE" shall have the meaning ascribed to such term in Section
4.3(b).
"TRW INTELLECTUAL PROPERTY" shall mean all Intellectual Property that
TRW owns or has the right to use, excluding Company Intellectual Property, that
is used in the Automotive Business, as presently being conducted and operated.
"TRW PARTICIPANTS" shall mean TRW and TRW Automotive and any other TRW
Transferring Companies.
"TRW TRANSFERRING COMPANIES" shall mean, collectively, the TRW Asset
Transferring Companies and the TRW Equity Transferring Companies.
"TRW UK CAPITAL STOCK" shall have the meaning ascribed to such term in
the recitals.
78
"UPDATED FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 7.17(b).
"VSSI" shall have the meaning ascribed to such term in Section
1.1(b)(i).
12.2 Interpretation. For the purposes of this Agreement, (i) words
in the singular will be held to include the plural and vice versa and words of
one gender shall be held to include the other gender as the context requires,
(ii) the terms "hereof," "herein," and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless otherwise specified, (iv) the word "or"
shall not be exclusive and (v) the word "parties" will be held to include
Northrop Grumman and Parent and, on and following the TRW Execution Date, TRW
and TRW Automotive.
12.3 Costs and Expenses. Except as otherwise provided in this
Agreement, Northrop Grumman, TRW and TRW Automotive, and BCP shall each bear its
own costs and expenses incurred in connection with the negotiation and execution
of this Agreement and each other agreement, document and instrument contemplated
by this Agreement and the consummation of the transactions contemplated hereby
and thereby, it being understood that in no event shall the Company bear any of
such costs and expenses incurred by Northrop Grumman or TRW and TRW Automotive.
12.4 Submission to Jurisdiction; Consent to Service of Process;
Waiver of Jury Trial.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of Delaware over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any Legal Proceeding
related thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable Law, any
objection that they may now or hereafter have to the laying of venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any Legal Proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 12.8.
(c) THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY LEGAL
PROCEEDING BROUGHT BY ANY OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
12.5 Entire Agreement; Amendments and Waivers. This Agreement
(including the Northrop Grumman Disclosure Letter and exhibits and schedules
hereto), the Confidentiality Agreement, the other Ancillary Agreements, the
letter referred to in Section 5.16(b) and the letter
79
agreement between Northrop Grumman and BCP dated the date hereof represent the
entire understanding and agreement and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, will be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement will not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder will operate as a waiver thereof, nor will any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER NORTHROP GRUMMAN NOR TRW
MAKES ANY REPRESENTATION OR WARRANTY CONCERNING THE AUTOMOTIVE ASSETS AND EQUITY
INTERESTS OR THE AUTOMOTIVE BUSINESS, INCLUDING AS TO THE QUALITY, CONDITION,
MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A
PARTICULAR PURPOSE THEREOF. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE
SOLD PURSUANT HERETO "AS IS AND WHERE IS."
12.6 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware.
12.7 Table of Contents and Headings. The table of contents and the
article, section, paragraph and other headings contained in this Agreement are
for reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
12.8 Notices. All notices and other communications under this
Agreement will be in writing and will be deemed given when (a) delivered
personally, (b) three Business Days after being mailed by certified mail, return
receipt requested and postage prepaid, (c) one Business Day after being sent by
a nationally recognized express courier service, postage or deliver charges
prepaid, or (d) transmitted by facsimile if confirmed within 24 hours thereafter
by a signed original sent in the manner provided in clause (a), (b) or (c), to
the parties at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this provision):
If to Northrop Grumman, TRW or TRW Automotive to:
Northrop Grumman Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
80
Attention: Vice President and General Counsel
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to BCP to:
BCP Acquisition Company L.L.C.
c/o The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
12.9 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement will remain in full force and
effect, provided that the essential terms and conditions of this Agreement for
both parties remain valid, binding and enforceable and provided, further, that
the economic and legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. In the event of any such
determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intent and purposes
hereof. To the extent permitted by Law, the parties hereby waive to the same
extent any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
12.10 Binding Effect; Assignment. This Agreement will be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement will create or be
deemed to create any third party beneficiary rights in any Person not a party to
this Agreement. TRW and TRW Automotive shall not be construed to have any
obligations hereunder unless and until it becomes party hereto. No assignment of
this Agreement or of any rights or obligations hereunder may be made by Northrop
Grumman, TRW and TRW Automotive or BCP (by operation of Law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents will be null and void; provided,
however, that BCP may assign any or all of its rights, in whole
81
or in part, to one or more Affiliates of BCP, but no such assignment will
relieve BCP of its obligations under this Agreement.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts and any party may execute any such counterpart, each of which when
executed and delivered will be deemed to be an original and all of which
counterparts taken together will constitute but one and the same instrument.
This Agreement will become binding when one or more counterparts taken together
will have been executed and delivered (including by facsimile) by the parties.
It will not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
NORTHROP GRUMMAN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Corporate V.P. & Treasurer
BCP ACQUISITION COMPANY L.L.C.
By: BLACKSTONE CAPITAL PARTNERS IV
MERCHANT BANKING FUND L.P.,
its Sole Member
By: BLACKSTONE MANAGEMENT
ASSOCIATES IV L.L.C.,
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Member