ASSET PURCHASE AND SALE AGREEMENT
between
LOCKHEED ▇▇▇▇▇▇ CORPORATION
a Maryland corporation,
and
GENERAL DYNAMICS CORPORATION,
a Delaware corporation.
Dated as of November 6, 1996
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") made as of
November 6, 1996, between Lockheed ▇▇▇▇▇▇ Corporation ("Seller"), a
Maryland corporation, and General Dynamics Corporation ("Buyer"), a
Delaware corporation.
WITNESSETH:
WHEREAS, Seller develops, manufactures, and sells armament
systems and ordnance products for military and other governmental
applications through a division known as Lockheed ▇▇▇▇▇▇ Armament
Systems ("LMAS Division");
WHEREAS, Seller also develops, manufactures and sells submarine
launch control and guidance systems, ballistic missile guidance
systems, shipboard air defense systems, combat vehicle and
continuously variable transmissions, turret systems, gun
stabilization systems, artillery systems, automotive airbags and
diagnostics and electronic documentation through a division known as
Lockheed ▇▇▇▇▇▇ Defense Systems ("LMDS Division"). The LMAS Division
and the LMDS Division are together hereinafter referred to as the
"Divisions";
WHEREAS, Buyer desires to acquire substantially all of the
assets and is willing to assume certain specified liabilities of the
Divisions, and Seller is willing to convey and assign the same all on
the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, and covenants and agreements below, the
parties agree with legal and binding effect as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
Section I.1 Acquired Assets. Seller hereby agrees to sell,
assign, transfer, convey and deliver to Buyer, and Buyer hereby
agrees to purchase, acquire and accept from Seller, all of Seller's
right, title and interest in and to all of the assets, properties,
rights and contracts held or used primarily in connection with the
Divisions wherever located (collectively, the "Assets"), free and
clear of all liens, claims, charges, security interests, restrictions
or other encumbrances of any kind or nature (collectively, "Liens")
except those set forth in the relevant schedules to this Agreement or
otherwise specifically assumed pursuant to this Agreement, including
the following:
I.1.1 Equipment. All machinery, equipment, computers,
laboratory and test equipment and apparatus, furniture, fixtures,
furnishings, tools, dies, vehicles, spare parts and other tangible
assets and properties (collectively, the "Equipment");
I.1.2 Inventory. All materials, work in process and
finished goods inventories, supplies and spare parts, as the same
exist on the Closing Date (collectively, the "Inventory").
I.1.3 Receivables. All accounts and notes receivable,
unbilled revenues arising from the sale of goods or materials and the
rendering of services in connection with the operation of the
Divisions, together with any unpaid interest accrued thereon from the
respective obligors, and any security or collateral therefor, as the
same exist on the Closing Date (collectively, the "Receivables");
I.1.4 Certain Rights. All rights of Seller under or
pursuant to all warranties, representations and guarantees made by
suppliers, manufacturers and contractors in connection with products
or services purchased by Seller or affecting the Equipment or the
Inventory;
I.1.5 Contracts. All contracts, subcontracts and
agreements and other arrangements, proposals, bids, quotations,
purchase orders and commitments, and sales orders and commitments, of
any kind, whether written or oral, including confidentiality,
licensing, joint venture, teaming, partnership and transition
services agreements not otherwise referenced in Subsection 1.1.8
below (the "Contracts"), including without limitation all contracts,
subcontracts, agreements and other arrangements, proposals or bids
between Seller and (i) the United States government (including
contracts under the foreign military sales program), (ii) any prime
contractor of the United States government or (iii) any subcontractor
with respect to any contract described in clause (i) or (ii) (such
contracts, together with such government contracts relating to LM
Ordnance Systems and AV Tech and the GOCO Management Contracts
referred to in Subsection 1.1.8 below, collectively the "Government
Contracts");
I.1.6 Real Property. The real property interests used
by LMAS in Burlington, VT (the "Real Property");
I.1.7 Facility Leases. All facility, office and storage
leases (the "Facility Leases");
I.1.8 Government Facility Management Contracts. All
contracts, subcontracts and agreements and other arrangements for the
management and operation of United States government owned plant and
facilities (the "GOCO Management Contracts");
I.1.9 Equipment Leases. All rights and interests of
Seller in the leases of personal property and equipment (the
"Equipment Leases");
I.1.10 AV Technology Interest. The member's interest in
AV Technology LLC ("AV Tech"), a Maryland limited liability company,
held by Seller (the "AV Tech Interest");
I.1.11 Ordnance Systems Shares. All of the issued and
outstanding capital stock of Lockheed ▇▇▇▇▇▇ Ordnance Systems, Inc.
("LM Ordnance Systems"), a Delaware corporation (the "Ordnance
Systems Shares");
I.1.12 Business Records. All business and financial
records, ledgers, sales invoices, accounts and payroll records,
files, books and documents including, but not limited to, manuals,
data, sales and advertising materials, customer and supplier lists
and reports, sales, distribution and purchase correspondence,
engineering drawings, notebooks and logbooks, and all original and
duplicate copies thereof (but excluding certain business records
relating solely to the "Excluded Assets" and the "Excluded
Liabilities" set forth in Sections 1.2 and 1.4 herein, respectively)
(collectively, the "Business Records");
I.1.13 Computer Software. All right, title and interest
of Seller in and to the computer programs (including computer
modeling programs, design and operational software and computer
source and object codes), computer data bases, and related
documentation, developed or used for accounting, marketing,
engineering, manufacturing or any other purpose, and which have been
primarily used, are primarily used currently, or have been developed
or are under development, by or for the primary use, in the
Divisions, such rights and interests of Seller to include without
limitation the right to license such software to the United States
government for a government purpose license;
I.1.14 Patents and Technology. All right, title and
interest of Seller in and to patents, patent applications and
disclosed inventions and all right, title and interest of Seller in
and to research and development results, processes, trade secrets,
know-how, formulae, chip designs, mask works, inventions, and
manufacturing, engineering, quality control, testing, operational,
logistical, maintenance and other technical information and
technology used by Seller primarily in the operation of the Divisions
(collectively the "Patents and Technology");
I.1.15 Trademarks and Copyrights. All right, title,
interest and goodwill of Seller in and to trademarks, trade names and
service marks, and registrations and applications for such
trademarks, trade names and service marks, used primarily by the
Divisions and the products and services associated therewith (but
excluding the names "Lockheed ▇▇▇▇▇▇", "Lockheed", "▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"
or any derivative or genesis thereof, and the Lockheed ▇▇▇▇▇▇ logo
and trade dress), and all right, title and interest of Seller in and
to copyrights, and registrations and applications for copyrights;
I.1.16 Permits. To the extent legally assignable, all
permits, consents and authorizations issued by any governmental
authority for the operations of the Divisions or otherwise relating
to the Assets (collectively, the "Permits");
I.1.17 Prepaid Charges. All deferred and prepaid
charges, recoverable deposits, advances, expenses, sums and fees of
Seller which relate to the Divisions and Assumed Liabilities;
I.1.18 Claims. All claims, defenses, causes of action,
rights of recovery and rights of offset relating to the Divisions,
the Assets or the Assumed Liabilities;
I.1.19 Pension Assets. The pension assets to be
transferred as described in Section 5.12 herein;
I.1.20 AV Tech Revolving Credit Agreement. All benefits
and rights as lender under the Revolving Credit Agreement by and
between Seller and AV Tech dated as of August 2, 1995, as amended
(the "AV Tech Revolving Credit Agreement"); and
I.1.21 General. All other personal property, tangible or
intangible, of every kind and description used or held for use
primarily in connection with the Divisions, whether or not reflected
on the books and records of Seller or the Divisions.
Section I.2 Excluded Assets. Notwithstanding anything to the
contrary contained in Section 1.1 herein, Seller is under no
obligation to sell, assign, transfer or convey, and Buyer is under no
obligation to accept or purchase any of the following assets, rights
and properties of Seller (the "Excluded Assets"):
I.2.1 Cash. Cash and cash equivalents;
I.2.2 Affiliate Transactions. Any agreements,
transactions, accounts, contracts, commitments or arrangements with
other divisions, subsidiaries and affiliates of Seller relating to
corporate overhead support, centralized purchasing or similar
services;
I.2.3 Benefit Plans. The assets and rights under the
pension or other employee benefit plans to be retained by Seller as
described in Section 5.12 herein;
I.2.4 Insurance. Policies of insurance and any proceeds
or return of premiums thereunder (other than workers' compensation
policies maintained by Seller in the ordinary course of its operation
of the Divisions); and
I.2.5 Tax Refunds. Any Tax refund relating to the
Divisions for periods ending on or prior to the Closing Date, except
as expressly provided in Subsection 5.17.5.
Section I.3 Assumed Liabilities. Buyer hereby agrees to
assume, perform, pay and discharge, and to indemnify Seller in
accordance with Article VIII, with respect to the following
liabilities and obligations of Seller relating to or arising out of
the operation, business and affairs of the Divisions or the Assets
(collectively, the "Assumed Liabilities"):
I.3.1 Balance Sheet and Scheduled Liabilities. All
liabilities, debts, obligations, judgments, fines, penalties, and
claims relating to the Divisions and the Assets whether accrued,
liquidated, contingent, matured or unmatured, at or prior to the
Closing, which are (a) disclosed in any of the Schedules delivered
hereunder, (b) are reflected on the Final Closing Net Asset Statement
as determined in accordance with Section 2.4 herein (including
without limitation accounts payable and reserves reflected as contra-
asset accounts, and liabilities reflected in the estimates at
completion shown on Schedule 2.4.1), or (c) are otherwise a liability
or obligation Buyer is expressly assuming pursuant to this Agreement;
I.3.2 Contracts; Leases. All liabilities and
obligations arising under the Contracts, the Government Contracts,
the GOCO Management Contracts, the Facility Leases and the Equipment
Leases, including without limitation any such liabilities or
obligations arising from or relating to Buyer's performance or non-
performance of the Contracts, the Government Contracts, the GOCO
Management Contracts, the Facility Leases or the Equipment Leases
from and after the Closing Date;
I.3.3 Employment. All liabilities and obligations
provided in Sections 5.11 and 5.12 herein in respect of employment on
and after the Closing Date for those individuals (collectively, the
"Employees") who (i) are employed by or otherwise working in either
Division as of the Closing Date and who accept employment with Buyer
as of the Closing Date, (ii) are on vacation, other authorized leave,
leave under the Family and Medical Leave Act, short term disability,
illness absence (excluding however liabilities and obligations in
respect of those individuals on long term disability as of the
Closing Date that may arise during their absence from work until such
time as such individuals begin active employment with Buyer, if
ever), or military service leave of absence from either Division, or
(iii) have recall rights with respect to either Division arising
under collective bargaining agreements;
I.3.4 Benefit Plans; Workers' Compensation. The
liabilities and obligations under the pension or other employee
benefit plans to be assumed by Buyer as described in Section 5.12
herein, and all liabilities and obligations relating to any workplace
injury or death, workers' compensation law, regulation or policy of
insurance or coverage, including any claims arising or incurred prior
to but not reported or to be paid until after Closing;
I.3.5 Product Warranty and Liability Claims. Any and
all claims relating to warranty obligations or services, or claims of
manufacturing or design defects, with respect to any product or
service sold or provided by the Divisions whether prior to, on or
after the Closing Date, whether or not such claims were accrued,
liquidated, contingent, or known or unknown to Seller at or prior to
the Closing;
I.3.6 Taxes and Charges. All federal, state, local and
foreign taxes, and any charges, penalties, interest, fees, imposts,
duties or other assessments with respect thereto (collectively
"Taxes"), arising out of the operation of the Divisions or relating
to the Assets with respect to any period ending prior to, on or after
the Closing Date, including without limitation gross receipts,
excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, occupation, environmental, customs
duties, tariffs, ad valorem, value added or other taxes or fees, and
including further without limitation Taxes on net income or gain
("Income Taxes") with respect to a period ending on or before the
Closing Date (a "Pre-Closing Period") imposed by a state or local
government; provided however that Buyer's agreement to assume,
perform, pay and discharge and indemnify Seller with respect to the
liabilities and obligations contemplated by this Section 1.3.6 with
respect to (i) state income taxes, (ii) state franchise taxes where
the amount of such tax is measured by reference to income, and (iii)
payroll taxes, in each case which are not reflected on the Final
Closing Net Asset Statement, is expressly limited to that amount of
such Taxes which are actually recovered by Buyer from the United
States government pursuant to the principles of Part 31 of the
Federal Acquisition Regulation ("FAR Part 31") following commercially
reasonable efforts by Buyer to effect such recovery; provided further
however that nothing herein shall require Buyer to assume, perform,
pay or discharge any Income Taxes imposed by the federal government
with respect to a Pre-Closing Period;
I.3.7 OSHA Liabilities. Subject to the provisions of
Subsection 8.3.2, all liabilities and obligations relating to the
Occupational, Safety and Health Act of 1970 and any regulations,
decisions or orders promulgated thereunder, including any state or
local law, regulation or ordinance pertaining to worker, employee or
occupational safety or health in effect as of the Closing Date or as
thereinafter may be amended or superseded;
I.3.8 AV Tech Revolving Credit Agreement Liabilities.
All liabilities and obligations as lender under the AV Tech Revolving
Credit Agreement;
I.3.9 LM Ordnance Systems Former Employees. Any claims
or causes of action by persons currently or formerly employed by LM
Ordnance Systems alleging wrongful termination or discharge, or
discrimination, or otherwise relating to the terms and conditions of
their employment;
I.3.10 Litigation. Any and all matters of governmental,
judicial or adversarial proceedings (public or private), litigation,
arbitration, disputes, claims, causes of action or investigations
(collectively, "Proceedings") of a civil nature arising from or
directly or indirectly relating to any of the enumerated "Assumed
Liabilities" in Subsections 1.3.1 through 1.3.9, whether or not such
matters were accrued, liquidated, contingent, matured, unmatured, or
known or unknown to Seller at or prior to the Closing; and
I.3.11 Post-Closing Liabilities. Any and all
liabilities, obligations and other debts relating to Buyer's
ownership of the Assets or its conduct of the Divisions and any
related operations from and after the Closing Date including without
limitation any and all Proceedings in respect thereof.
Section I.4 Excluded Liabilities. Notwithstanding the
provisions of Section 1.3, the following obligations and liabilities
relating to the Divisions or the Assets are not being assumed by
Buyer under Section 1.3 herein and are being retained by Seller (the
"Excluded Liabilities"):
I.4.1 Change in Control Agreements. Any and all
obligations relating to an agreement or understanding (if any) with
any Employee providing for a parachute payment (as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), but without regard to the payment thresholds set forth in
Section 280G(b)(2) (other than customary severance payments and
changes arising under a qualified pension or benefit plan), due to
any change in control or ownership of Seller, the Divisions, LM
Ordnance Systems or AV Tech;
I.4.2 Certain Claims. Those claims and causes of action
identified on Schedule 1.4.2 delivered hereunder and (a) any criminal
investigations, grand jury proceedings, or counts in any causes of
action specifically alleging criminal conduct; (b) counts or actions
alleging civil fraud or intentional misconduct; (c) counts or actions
alleging infringement or misappropriation of the intellectual
property rights of a third party; (d) except for the claims set forth
on Schedule 3.13.1, claims by persons formerly employed by either
Division alleging wrongful termination or discharge, or
discrimination; and (e) claims for severance or other benefits by any
individual employed by or otherwise working in either Division as of
the Closing Date and who refuses to accept an offer of employment by
Buyer as contemplated by Section 5.11 herein; and
I.4.3 Other Excluded Liabilities. Any liabilities or
obligations not expressly assumed by Buyer pursuant to this
Agreement.
Section I.5 Assignment of Contracts and Rights. Anything to the
contrary notwithstanding, this Agreement shall not operate to assign
any Asset or any claim, right or benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the
consent of a third party thereto, would constitute a breach, default
or other contravention thereof or in any way adversely affect the
rights of Seller or Buyer thereunder. Prior to Closing, Seller will
give such notices to third parties and will use commercially
reasonable efforts to obtain all third party consents that are
material to the transactions contemplated by this Agreement. After
the Closing Date, Seller and Buyer will cooperate and will each use
commercially reasonable efforts to obtain such third party consents
that are not obtained prior to the Closing Date.
ARTICLE II
CLOSING; PURCHASE PRICE
Section II.1 Closing. The closing ("Closing") of the sale and
purchase of the Assets and the assignment and assumption of the
Assumed Liabilities shall take place at the office of ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ at
9:00 a.m., local time on the first business day after satisfaction or
waiver of the conditions set forth in Articles VI and VII herein, or
at such place, date and time as the parties may agree (the "Closing
Date"), but in any event no later than December 31, 1996.
Section II.2 Purchase Price.
II.2.1 Delivery. At the Closing, Buyer shall cause to
be delivered the sum of $450,000,000 (the "Purchase Price") to Seller
by bank wire transfer in immediately available funds to an account
designated in writing by Seller within three business days prior to
the Closing Date. The Purchase Price shall be subject to adjustment
after the Closing as provided in Section 2.4 herein.
II.2.2 Allocation.
(a) Within 120 days after the Closing Date, or within
90 days after the date the Purchase Price is finally adjusted
pursuant to Section 2.4 herein, whichever is later, Buyer will
provide to Seller copies of IRS Form 8594 and any required exhibits
thereto (the "Asset Acquisition Statement") with Buyer's proposed
allocation of the Purchase Price and the Assumed Liabilities and the
assets and liabilities of LM Ordnance Systems. Within 30 days after
the receipt of such Asset Acquisition Statement, Seller will propose
to Buyer any changes to such Asset Acquisition Statement or will be
deemed to have indicated its concurrence therewith. Thereafter,
Buyer will provide to Seller from time to time revised copies of the
Asset Acquisition Statement (each, a "Revised Statement") so as to
report any matters on the Asset Acquisition Statement that require
updating. Within 30 days after the receipt of any Revised Statement,
Seller will propose to Buyer any changes to such Revised Statement or
will be deemed to have indicated its concurrence therewith. Buyer
and Seller will endeavor in good faith to resolve any differences
with respect to the Asset Acquisition Statement or any Revised
Statement within 30 days after Buyer's receipt of notice of objection
or suggested changes from Seller.
(b) Subject to the provisions of the following sentence
of this Subsection 2.2.2(b), the Purchase Price and the Assumed
Liabilities and the assets and liabilities of LM Ordnance Systems
will be allocated in accordance with the Asset Acquisition Statement
or, if applicable, the last Revised Statement, provided by Buyer to
Seller pursuant to Subsection 2.2.2(a), and subject to the
requirements of any applicable tax law or election, all Tax Returns
and reports filed by Buyer and Seller will be prepared consistently
with such allocation. If Seller withholds its consent to such
allocation and Buyer and Seller have acted in good faith to resolve
any differences with respect to the items on the Asset Acquisition
Statement or any Revised Statement and thereafter Buyer and Seller
are unable to resolve any differences that, in the aggregate, are
material in relation to the Purchase Price, then any remaining
disputed matters will be finally and conclusively determined by an
independent accounting firm of recognized national standing (the
"Allocation Arbiter") selected by Buyer and Seller, which firm will
not be the regular accounting firm of Buyer or Seller. Promptly, but
not later than 10 days after its acceptance of its appointment, the
Allocation Arbiter will determine (based solely on presentations by
Seller and Buyer and not by independent review) only those matters in
dispute and will render a written report as to the disputed matters
and the resulting allocation of the Purchase Price and the Assumed
Liabilities, which report will be conclusive and binding upon the
parties. Buyer and Seller will, subject to the requirements of any
applicable tax law or election, file all Tax Returns and reports
consistent with the allocation provided in the Asset Acquisition
Statement or the last Revised Statement and, if applicable, the
determination of the Allocation Arbiter.
Section II.3 Other Agreements. In addition to the assignment and
transfer of the Assets in accordance with Section 1.1 herein, and the
assumption of the Assumed Liabilities in accordance with Section 1.3
herein, the parties further agree as follows:
II.3.1 Transfer of Title. As of 12:01 a.m. on the
Closing Date, title to all of the Assets and risk of loss shall pass
to Buyer, and Buyer shall assume and be responsible for all Assumed
Liabilities. Seller shall deliver to Buyer (a) an executed original
of a ▇▇▇▇ of Sale substantially in the form of Exhibit A attached
hereto, (b) a certificate duly endorsed in blank, or a stock transfer
power attached thereto, representing the Ordnance Systems Shares
together with the minute book, seal and stock transfer book or ledger
for LM Ordnance Systems, and (c) in a form suitable for transfer, the
AV Tech Interest. Buyer shall deliver to Seller an executed original
of a Certificate of Assumption substantially in the form of Exhibit B
attached hereto.
II.3.2 Ancillary Agreements. At the Closing, Buyer and
Seller shall enter into the following agreements:
(a) A services agreement for a period of 6 months after
Closing (with an option for Buyer to extend for a further period of 6
months) relating to the provision by Seller to the Divisions
following Closing of certain data processing, purchasing, accounting,
payroll and other similar services of a type provided by Seller or
its affiliates to the Divisions as of the date hereof at prices to be
agreed (the "Services Agreement") which is to be negotiated by the
parties hereto in good faith prior to Closing. The prices under the
Services Agreement are to provide for Seller's recovery of its fully
allocated costs and direct expenses, but not to provide for a profit
to Seller. Buyer shall use commercially reasonable efforts to
transition away from Seller as the source for such services as soon
as practical following Closing upon 60 days notice to Seller;
(b) Certain assignments in respect of the registered
patents, trademarks and copyrights, and other Assets being
transferred and sold to Buyer for purposes of recording such
transfers with the United States Patent and Trademark Office, state
and local recording or title offices, and similar agencies of foreign
governments;
(c) A fully paid up, world wide, non-exclusive,
perpetual license ("Buyer's License to Seller") for Seller to use the
Patents and Technology in all fields of use which is to be executed
by the parties at Closing;
(d) A fully paid up, world wide, non-exclusive,
perpetual license ("Seller's License to Buyer") to such patents,
copyrights or trade secrets owned by Seller or its affiliates which
are not being conveyed or assigned to Buyer hereunder to the extent
such patents, copyrights or trade secrets are being used by the
Divisions in connection with products currently produced by either
Division or products which are actively under development by either
Division, which license shall be negotiated by the parties hereto in
good faith prior to the Closing and which license shall not be
applicable to any other product, activity, field, line of business or
use; and
(e) Deeds to the Real Property appropriate in form for
the conveyance of the interests in the Real Property as obtained by
Seller from General Electric Company, a New York corporation ("GE"),
pursuant to the deeds included in Schedule 2.3.2(e) delivered
hereunder.
II.3.3 Closing Deliveries. At the Closing, Seller and
Buyer shall cause to be delivered the certificates and other
documents respectively required to be delivered pursuant to Articles
I, VI and VII herein, and such other certificates or instruments of
title as one party may reasonably request of the other to consummate
the transactions contemplated by this Agreement.
Section II.4 Purchase Price Adjustment.
II.4.1 June Statements. Schedule 2.4.1 delivered
hereunder set forth at June 30, 1996 (i) a balance sheet of the LMAS
Division (the "Armament June Balance Sheet"), (ii) a balance sheet of
the LMDS Division (the "Defense June Balance Sheet"), and (iii) a
combined balance sheet of the Assets and Assumed Liabilities (the
"June Net Asset Statement") which reflects the net working capital of
the current Assets and current Assumed Liabilities at June 30, 1996
to be $100,668,000 (the "June Working Capital"), and (iv) a
reconciliation of the Armament June Balance Sheet and the Defense
June Balance Sheet to the June Net Asset Statement. Each of the
Armament June Balance Sheet, the Defense June Balance Sheet and the
June Net Asset Statement (a) have been prepared in all material
respects in accordance with generally accepted accounting principles
consistently applied ("GAAP") except as set forth on Schedule 2.4.1
and except that such balance sheets do not include financial
footnotes or normal year end adjustments, (b) have been prepared on a
basis consistent with the accounting principles, practices,
classifications, estimates, assumptions and methodologies of Seller,
and (c) take into account all accruals and other adjustments required
to present the Divisions as stand alone entities (except for the
Excluded Assets and Excluded Liabilities), including the recording
thereon of certain liabilities and reserves which may have been
previously recorded at the sector or corporate headquarters of
Seller. Schedule 2.4.1 includes a description of the accounting
principles, practices, classifications, estimates, assumptions and
methodologies used in the preparation of the Armament June Balance
Sheet, the Defense June Balance Sheet and the June Net Asset
Statement.
II.4.2 Closing Statements. Within 30 days after the
Closing Date, Seller shall prepare or cause to be prepared as at the
Closing Date (i) a balance sheet of the LMAS Division (the "Armament
Closing Balance Sheet"), (ii) a balance sheet of the LMDS Division
(the "Defense Closing Balance Sheet"), (iii) a combined balance sheet
of the Assets and Assumed Liabilities (the "Preliminary Closing Net
Asset Statement") and (iv) a reconciliation of the Armament Closing
Balance Sheet and the Defense Closing Balance Sheet to the
Preliminary Closing Net Asset Statement. The Armament Closing
Balance Sheet, the Defense Closing Balance Sheet and the Preliminary
Closing Net Asset Statement shall be prepared consistent with the
Armament June Balance Sheet, the Defense June Balance Sheet and the
June Net Asset Statement, respectively, and shall be prepared using
the assumptions, methods, principles, procedures, earnings
recognition rates, estimating techniques or schedules used by Seller
in determining the "Estimates at Completion" of the Contracts, the
Government Contracts and the GOCO Management Contracts set forth on
Schedule 2.4.1.
II.4.3 Examination. No later than five days after the
Closing Date, Seller shall engage Ernst and Young LLP ("Seller's
Firm") to conduct an examination in accordance with generally
accepted auditing standards of the Armament Closing Balance Sheet,
the Defense Closing Balance Sheet and the Preliminary Closing Net
Asset Statement; provided that: (a) such examination shall not
include a physical count of the Inventory or the Equipment; (b) in
performing its examination, Seller's Firm shall use the same
accounting principles, practices, classifications, estimates,
assumptions and methodologies as were used by Seller in preparing the
Armament June Balance Sheet, the Defense June Balance Sheet and the
June Net Asset Statement; and (c) Seller's Firm shall make no
adjustments (i) to the value recorded by Seller in respect of any
claims made by Seller under any Government Contracts so long as the
value recorded as at the Closing Date for a particular claim does not
exceed the value reflected for such claim on Schedule 2.4.1, (ii) to
the value recorded by Seller on the June Net Asset Statement in
respect of the GAU-19 capitalized assets and inventory, or (iii) to
the value recorded by Seller on the June Net Asset Statement in
respect of the lightweight 155 towed howitzer capitalized
demonstration asset. Seller shall require that Seller's Firm
complete such examination and deliver to Buyer within 70 days of the
Closing Date an unqualified report and attestation (the "Auditor's
Attestation") that the Armament Closing Balance Sheet, the Defense
Closing Balance Sheet and the Preliminary Closing Net Asset Statement
have been prepared in accordance with the provisions of this
Agreement.
II.4.4 Objections; Resolutions. Within 30 days after
the receipt of the Auditor's Attestation, Buyer will deliver written
notice to Seller of any objections thereto, and will attempt in good
faith to reach an agreement with Seller as to any matters in dispute;
provided however that Buyer shall have no right to object to any
estimates or assumptions used therein or the result thereof
including: (a) the value recorded by Seller in respect of any claims
made by Seller under any Government Contracts so long as the value
recorded as at the Closing Date for a particular claim does not
exceed the value reflected on Schedule 2.4.1; (b) the value recorded
by Seller in respect of the GAU-19 capitalized assets and inventory
so long as the value thereof does not exceed the value recorded by
Seller on Schedule 2.4.1; (c) the value recorded by Seller in respect
of the lightweight 155 towed howitzer capitalized demonstration asset
so long as the value thereof does not exceed the value recorded by
Seller on Schedule 2.4.1; and (d) the assumptions, methods,
principles, procedures, estimating techniques or schedules used by
Seller in determining the "Estimates at Completion" of the Contracts,
the Government Contracts and the GOCO Management Contracts as
reflected on the Preliminary Closing Net Asset Statement so long as
such assumptions, methods, principles, procedures, estimating
techniques and schedules are consistent with those used in preparing
the June Net Asset Statement. If Buyer and Seller, notwithstanding
such good faith effort, fail to resolve all matters in dispute within
20 days after Buyer advises Seller of its objections, then any
remaining disputed matters will be finally and conclusively
determined by an independent auditing firm of recognized national
standing (the "Arbiter") selected by Buyer and Seller, which firm
will not be the regular auditing firm of Buyer or Seller. Promptly,
but not later than 10 days after its acceptance of its appointment,
the Arbiter will determine (based solely on presentations by Seller
and Buyer and not by independent review) only those matters in
dispute and will prepare and deliver to the parties a final balance
sheet as at the Closing Date of the Assets and Assumed Liabilities
(the "Final Closing Net Asset Statement") in accordance with this
Agreement, and a reconciliation of the disputed matters from the
Preliminary Closing Net Asset Statement to the Final Closing Net
Asset Statement, which Final Closing Net Asset Statement shall be
conclusive and binding upon the parties. Buyer's failure to timely
notify Seller in writing of any objections to the Auditor's
Attestation shall be deemed for all purposes Buyer's acceptance of
the Auditor's Attestation.
II.4.5 Workpapers. For purposes of complying with the
terms set forth herein, each party will cooperate with and make
available to the other party and its auditors and representatives all
information, records, data and auditors' working papers, and will
permit access to its facilities and personnel, as may be reasonably
required in connection with the preparation and analysis of the
Armament Closing Balance Sheet, the Defense Closing Balance Sheet,
and the Preliminary Closing Net Asset Statement, and the resolution
of any disputes thereunder. Without limiting the generality of the
foregoing, Seller will cause Seller's Firm to make available at its
offices to Buyer and Buyer's outside accountants within three
business days after delivery of the Auditor's Attestation pursuant to
Subsection2.4.3 the workpapers therefor. After the Closing, Buyer's
accountants will also have access to Seller's Firm's workpapers for
the Armament Closing Balance Sheet, the Defense Closing Balance
Sheet, and the Preliminary Closing Net Asset Statement, as necessary
for the purpose of providing regular auditing services to the
Divisions at Buyer's expense.
II.4.6 Final Adjustments.
(a) If the net working capital of the current Assets
and current Assumed Liabilities as reflected on the Final Closing Net
Asset Statement ("Final Working Capital") is less than the June
Working Capital minus $1,000,000, then Seller shall pay to Buyer the
absolute difference between the Final Working Capital and the June
Working Capital, with simple interest thereon at the per annum rate
equal to the rate announced by Citibank, N.A. in the City of New York
as its base or prime rate in effect at the close of business on the
Closing Date (the "Interest Rate"), from and including the Closing
Date to but not including the date of payment. If the Final Working
Capital is greater than the sum of the June Working Capital plus
$1,000,000, Buyer shall pay Seller the absolute difference between
the Final Working Capital and the June Working Capital with simple
interest thereon at the Interest Rate from and including the Closing
Date to but not including the date of payment under this Subsection
2.4.6(a). If the Final Working Capital is equal to or within
$1,000,000 of the June Working Capital, there shall be no adjustment
to the Purchase Price. Any payment pursuant to this
Subsection2.4.6(a) will be made within five business days following
the final determination of the Final Working Capital in accordance
with this Subsection 2.4.6(a) by bank wire transfer of immediately
available funds to an account designated in writing by Buyer or
Seller, as the case may be.
(b) If the total sum of the amount transferred to the
Buyer Pension Plans in accordance with Subsection 5.12.3(c) plus the
amount transferred in accordance with Subsection 5.12.3(d) (the
"Pension Transfer Amount") is less than PBO (as defined below), then,
in addition to the adjustment described in Subsection 2.4.6(a), if
any, Seller shall pay to Buyer the product of .27 multiplied by the
difference between PBO and the Pension Transfer Amount. Any payment
pursuant to this Subsection 2.4.6(b) will be made within five
business days following the payment of the True-up Amount pursuant to
Subsection 5.12.3(d) by bank wire transfer of immediately available
funds to an account designated in writing by Buyer. For purposes of
this Subsection 2.4.6(b), "PBO" shall mean 100% of the Projected
Benefit Obligation with respect to the Employees participating in the
Salaried Plans and Union Plan, determined as of the Closing Date
using Seller's actuarial assumptions as in effect for IRS funding
purposes for the 1996 Plan Year (and assuming escalation of the limit
set forth in Section 401(a)(17) of the Code as provided within
Seller's most recent GAAP financial statements) as set forth on
Schedule 2.4.6(b) delivered hereunder. The "PBO" shall be determined
by an enrolled actuary designated by Seller, subject to the review
and conflict resolution procedures described in Subsection 5.12.3(e)
for determining the Accrued Liability. For the purposes of this
Subsection 2.4.6(b), the Pension Transfer Amount shall be determined
without regard to the adjustments for interest and benefit payments
contemplated by Subsection 5.12.3(c) and 5.12.3(d).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the date
hereof, and as of the Closing Date, as set forth below. To the
extent any such representation and warranty is qualified by the
knowledge of Seller, such knowledge shall refer only to the actual
knowledge, obtained in the ordinary course of their duties and after
review of the representations and warranties contained herein and the
disclosure schedules delivered hereunder, of the officers and
employees of Seller identified on Schedule 3 delivered hereunder.
Section III.1 Organization; Capitalization.
III.1.1 Seller. Seller is duly incorporated, validly existing
and in good standing under the laws of the State of Maryland, and has the
requisite corporate power and authority to own, operate or lease the Assets
and to conduct its business in all material respects as such is now being
conducted. Except for its ownership interests in LM Ordnance Systems and
AV Tech, Seller in connection with the Divisions does not control directly
or indirectly or have any direct or indirect equity participation in any
entity.
III.1.2 AV Tech. AV Tech is duly organized, validly existing
and in good standing as a limited liability company under the laws of
Maryland, and has the requisite company power and authority to own, operate
or lease the assets held by it and to conduct its business in all material
respects as such is now being conducted. True, correct and complete copies
of the limited liability company articles of organization and the operating
agreement of AV Tech (the "AV Tech Charter Documents") are included in
Schedule 3.1.2 delivered hereunder. The AV Tech Interest is beneficially
owned by Seller free and clear of any Lien, has been duly authorized and is
validly issued. Schedule 3.1.2 sets forth a table showing the ownership
of all of the outstanding members' interests in AV Tech, and except as set
forth in such Schedule, to the knowledge of Seller, there are no outstanding
options, warrants or other rights to acquire any members' interests in AV
Tech, any outstanding securities which are convertible into a members'
interest in AV Tech, or any capital commitment obligations of AV Tech. The
offer and sale of the AV Tech Interest hereunder has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any state "Blue Sky" law or regulation, in reliance by Seller in part on the
representations by Buyer in Section 4.7 herein.
III.1.3 LM Ordnance Systems.
LM Ordnance Systems is duly incorporated, validly existing and in good
standing under the laws of Delaware, and has the requisite corporate power
and authority to own, operate or lease the assets held by it and to conduct
its business in all material respects as such is now being conducted. True,
correct and complete copies of the Certificate of Incorporation and By-laws
of LM Ordnance Systems (the "LM Ordnance Systems Charter Documents") are
included in Schedule 3.1.3 delivered hereunder. The Ordnance Systems
Shares have been duly authorized, validly issued and are fully paid and non
assessable, constitute all of the issued and outstanding capital stock of
LM Ordnance Systems, and are all beneficially owned by Seller as the holder
of record free and clear of any Lien. There are no outstanding options,
warrants or other rights to acquire any of the authorized capital stock of
LM Ordnance Systems, any outstanding securities which are convertible into
capital stock of LM Ordnance Systems. The offer and sale of the Ordnance
Systems Shares hereunder have not been registered under the Securities Act,
or under any state "Blue Sky" law or regulation, in reliance by Seller in part
on the representations by Buyer in Section 4.7 herein.
Section III.2 Qualifications. Each of Seller, AV Tech and LM
Ordnance Systems is duly qualified or licensed as a foreign
corporation or limited liability company, as applicable, to do
business, and is in good standing, in each jurisdiction where the
character of the Assets or the Divisions makes such qualification or
license necessary, except those jurisdictions, if any, in which the
failure to so qualify would not have a material adverse effect on the
results of operations or financial condition of either of the
Divisions. Schedule 3.2 delivered hereunder identifies each state in
which AV Tech and LM Ordnance Systems is qualified to do business.
Section III.3 Corporate Authorization.
III.3.1 Authority. Seller has all requisite corporate power
and authority to enter into and perform this Agreement and to consummate the
transactions contemplated hereby. Subject to the authorizations, consents,
approvals and filings referenced in Subsection 3.17.1 herein, this Agreement
is a valid and binding obligation of Seller enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights, or by general equitable principles.
III.3.2 No Conflict. Except as set forth in Schedule 3.3.2,
execution, delivery and performance of this Agreement by Seller and
consummation of the transactions contemplated hereby will not cause a
breach or default or otherwise conflict with any term or provision of the
following:
(a) Seller's charter documents, the AV Tech Charter
Documents or the LM Ordnance Systems Charter Documents;
(b) Any note, bond, mortgage, or indenture to which
Seller, AV Tech or LM Ordnance Systems is a party or by which Seller,
AV Tech or LM Ordnance Systems or any of the Assets is bound; or
(c) Any court or administrative order, writ or
injunction or process, or any consent decree to which Seller, AV Tech
or LM Ordnance Systems is a party or by which Seller, AV Tech or LM
Ordnance Systems or any of the Assets is bound.
Section III.4 Financial Statements.
III.4.1 Schedules. Schedule 2.4.1 delivered hereunder sets
forth correct and complete copies of the unaudited Armament June Balance
Sheet and the unaudited Defense June Balance Sheet (the Armament June Balance
Sheet and the Defense June Balance Sheet collectively, the "June Balance
Sheets"). The June Balance Sheets and the related statements of income and
cash flow for the six-month period ended June 30, 1996 set forth on
Schedule 3.4.1 delivered hereunder are hereafter referred to collectively
as the "Financial Statements." The Financial Statements present fairly the
financial condition and the results of operations of the respective Divisions
as of the dates and for the periods indicated therein, and were prepared in
all material respects in accordance with GAAP, except as set forth on Schedule
2.4.1 and except such Financial Statements do not include footnotes and
normal year-end adjustments, and have been prepared on a basis consistent
with the accounting principles, practices, classifications, assumptions,
estimates and methodologies of Seller as set forth on Schedule 2.4.1.
III.4.2 Reserves. Set forth on Schedule 2.4.1 is a correct
and complete list for each Division of all program cost reserves, reserves
for product warranties, reserves for defective pricing, reserves for
cost disallowances and other liability reserves (including reserves provided
for in contract estimates at completion) maintained by or with respect to
such Division as of the date of the June Balance Sheets.
III.4.3 No Undisclosed Liabilities. To the knowledge of
Seller, neither Division has any liabilities or obligations of any nature,
secured or unsecured (absolute, accrued, contingent or otherwise and whether
due or to become due), of a nature required to be reflected on a balance
sheet of such Division prepared in accordance with GAAP which were not fully
reflected or reserved in the Financial Statements except that the Financial
Statements do not reflect all federal and state Income Taxes.
III.4.4 Absence of Changes. Other than as set forth in
Schedule 3.4.4 delivered hereunder, since June 30, 1996, there has not been
any material adverse change in the business, financial condition, operations,
or results of operations of either Division, or:
(a) Any increase in the rate or terms of compensation
payable by the Divisions to any of its officers or Employees, except
increases occurring in the ordinary course of business in accordance
with their customary practices (which shall include normal periodic
performance reviews and related compensation and benefit increases);
(b) Any material increase in the rate or terms of any
bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any of the officers or Employees of
the Divisions, except increases occurring in the ordinary course of
business in accordance with their customary practices (which shall
include normal periodic performance reviews and related compensation
and benefit increases) or consistent with Seller's consolidation of
its businesses;
(c) Any loan to, or guarantee or assumption of any loan
or obligation by the Divisions on behalf of, any officer or Employee
of the Divisions except advances occurring in the ordinary course of
business in accordance with customary practices;
(d) Any entry into any agreement, commitment, or
transaction (including without limitation any borrowing, capital
expenditure or capital financing or any acquisition of the securities
or assets of any other entity) by the Divisions except agreements,
commitments or transactions contemplated by this Agreement or entered
into in the ordinary course of business (which, for purposes hereof,
shall include the agreements, commitments and transactions
contemplated by the long range plans of each of the Divisions, copies
of which have heretofore been provided to Buyer);
(e) Any sale, lease, transfer or assignment of any of
the assets of the Divisions, tangible or intangible, other than
retirement or other disposition of assets or the sale of finished
products and spare parts in the ordinary course of the operation of
the Divisions;
(f) Any acceleration, termination, cancellation or
material modification (by any party including Seller) of any
agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) either involving more
than $500,000 or outside the ordinary course of business to which
Seller is a party or by which it is bound;
(g) Any material delay or postponement by Seller of the
payment of accounts payable and other liabilities outside the
ordinary course of business;
(h) Any cancellation, compromise, waiver or release by
Seller of any right or claim (or series of related rights and claims)
either involving more than $500,000 or outside the ordinary course of
business; or
(i) Any material change by Seller in its accounting
methods, practices or principles relating to each Division not
otherwise required by any changes in GAAP.
Section III.5 Real Property; Leases.
III.5.1 Identification; Title and Related Matters. Schedule
2.3.2(e) sets forth all of the right, title and interests held by Seller in
the Real Property which Seller obtained from GE. With respect to each such
parcel of Real Property and except as set forth on Schedule 3.5.1 and
Schedule 5.31:
(a) There are no pending or, to Seller's knowledge,
overtly threatened condemnation proceedings, lawsuits or
administrative actions relating to such property or other matters
affecting adversely the current use, occupancy or value thereof;
(b) To Seller's knowledge, no fact or condition exists
which is reasonably likely to result in discontinuation of presently
available (or otherwise necessary for current use) water, sewer, gas,
electric, telephone, drainage facilities and other utilities and
services, or vehicular access, to and from, the Real Property; and
(c) To Seller's knowledge, neither Seller nor its
affiliates, agents or employees have taken any action or failed to
take any action which caused or could lead to any defect in title to
the Real Property since April 2, 1993.
III.5.2 Facility Leases. Schedule 3.5.2 lists all Facility
Leases. With respect to each Facility Lease and except as set forth on
Schedule 3.5.2:
(a) Such lease or sublease constitutes the entire
agreement to which Seller is a party with respect to the real
property leased or subleased thereunder;
(b) Seller has not assigned, sublet, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(c) There is no action, suit or proceeding pending
against Seller or, to Seller's knowledge, overtly threatened against
Seller or any third party that would materially interfere with the
quiet enjoyment by Buyer after the Closing Date of the real property
leased or subleased thereunder; and
(d) To Seller's knowledge, no fact or condition exists
which is reasonably likely to result in discontinuation of presently
available (or otherwise necessary for current use) water, sewer, gas,
electric, telephone, drainage facilities and other utilities and
services, or vehicular access, to and from, the facilities leased or
subleased thereunder.
III.5.3 Condition. All Real Property and real property leased
or subleased under the Facility Leases and all buildings and fixtures
appurtenant thereto are in such condition and repair as is consistent with
the uses with which the Divisions presently employ them.
III.5.4 Related Agreements. Other than options, rights of first
refusal or other similar arrangements in favor of Seller under the Facility
Leases, Seller has not entered into any contract, arrangement or
understanding with respect to the future ownership, development, use,
occupancy or operation of the Real Property or any of the real property
leased or subleased under the Facility Leases.
Section III.6 Tangible Assets.
III.6.1 Assets of Seller.
(a) Except as set forth on Schedule 3.6.1 (a), Seller
now has, and on the Closing Date will have and will convey to Buyer,
good and marketable title to all of the Assets, free and clear of all
Liens.
(b) The Assets are sufficient to enable Buyer to
conduct the business and operations of each Division immediately
after the Closing substantially as Seller presently conducts them.
All material items of tangible personal property owned or leased by
Seller in connection with the Divisions are in good operating
condition and repair, ordinary wear and tear excepted, and are
suitable for the purposes for which they are presently being used.
Each item of tangible personal property owned or used by Seller in
connection with the Divisions immediately prior to the Closing will
be owned or available for use by Buyer immediately subsequent to the
Closing.
III.6.2 Assets of LM Ordnance Systems and AV Tech.
(a) Except as set forth on Schedule 3.6.2(a), each of
LM Ordnance Systems and AV Tech now has and on the Closing Date will
have good and marketable title to all of the assets, rights and
properties owned by them and used or held for use by them as of the
date of this Agreement, free and clear of all Liens.
(b) All material items of tangible personal property
owned or leased by LM Ordnance Systems and AV Tech are in good
operating condition and repair, ordinary wear and tear excepted, and
are suitable for the purposes for which they are presently being
used. Each item of tangible personal property owned or used by the
LM Ordnance Systems or AV Tech immediately prior to the Closing will
be owned or available for use by LM Ordnance Systems or AV Tech, as
applicable, immediately subsequent to the Closing.
Section III.7 Government Furnished Equipment. Schedule 3.7
delivered hereunder incorporates the most recent schedule delivered
to the United States government which identifies by description or
inventory number certain equipment and fixtures loaned, bailed or
otherwise furnished to or held by each Division by or on behalf of
the United States. Schedule 3.7 identifies each Government Contract
or Contracts to which each such item of equipment or fixture relates.
To Seller's knowledge, such Schedule was materially accurate and
complete on the date thereof and, if dated as of the Closing Date,
would contain only those additions and omit only those deletions of
equipment and fixtures that have occurred in the ordinary course of
business.
Section III.8 Accounts Receivable. The billed Receivables
reflected on the June Balance Sheets are, and all billed Receivables
reflected on the Final Closing Net Asset Statement will be, bona fide
receivables, accounted for in accordance with GAAP subject to any
reserves reflected on the Final Closing Net Asset Statement, and
represent amounts due with respect to actual transactions in the
ordinary course of the operation of the Divisions. All billed
Receivables reflected on the Final Closing Net Asset Statement, net
of any reserves reflected thereon, will be collectable in the
ordinary course of business. The unbilled Receivables reflected on
the June Balance Sheets are, and all unbilled Receivables reflected
on the Final Closing Net Asset Statement will be, bona fide unbilled
receivables, accounted for in accordance with GAAP subject to any
reserves reflected on the Final Closing Net Asset Statement, and
represent amounts due with respect to actual transactions in the
ordinary course of the operation of the Divisions.
Section III.9 Inventories. All Inventory, including price
adjustment accruals, relating to the Divisions reflected on the June
Balance Sheets is, and all Inventory, including price adjustment
accruals, reflected on the Final Closing Net Asset Statement will be
of, in all material respects, good and merchantable quality, saleable
(in the case of Inventory held for sale) or currently usable (in the
case of other Inventory) in the ordinary course of business, subject
to any reserves reflected on the Final Closing Net Asset Capital
Statement. The value of all items of Inventory recorded on the June
Balance Sheets and to be recorded on the Final Closing Net Asset
Statement, including finished goods, work-in-process and raw
materials, and any reserves therefore, have been and will be
determined in accordance with Seller's historical practices
consistently applied.
Section III.10 Intellectual Property. A listing of all patents,
registered trademarks and trade names, and registered copyrights held
by Seller in connection with the Divisions, AV Tech and LM Ordnance
Systems is set forth in Schedule 3.10. Except as set forth in
Schedule 3.10, Seller, AV Tech and LM Ordnance Systems own or are
licensed to use inventions, processes, know-how, formulas, trade
secrets, patents, trademarks, trade names, brand names and copyrights
sufficient to conduct, as presently conducted, the business of the
Divisions, without, to the knowledge of Seller, material infringement
of or material conflict with any rights of third parties. Except as
set forth in Schedule 3.10 delivered hereunder, Seller, AV Tech and
LM Ordnance Systems have not been served as a party in or, to the
knowledge of Seller, become or been made a party to, or been overtly
threatened to be made a party to, any suit, action or proceeding
challenging the use or ownership of Seller, AV Tech or LM Ordnance
Systems of any patents, trademarks, trade names and copyrights, trade
secrets, or any applications therefor, or with respect to any
agreement or license relating to technology, know-how or processes
for which Seller is licensed or uses in connection with the
Divisions.
Section III.11 Certain Contracts.
III.11.1 Material Contracts. Except as set forth in
Schedule 3.11.1, Seller with respect to the Divisions, AV Tech and LM
Ordnance Systems are not a party to or otherwise bound by or subject
to:
(a) Any written employment, severance, consulting or
sales representative Contract which contains an obligation to pay
more than $75,000 per year;
(b) Any distribution or similar Contract, which is not
terminable without penalty or further obligation on the part of
Seller, LM Ordnance Systems or AV Tech within 30 days or which
contains an obligation to pay more than $175,000 per year;
(c) Any Contract which could result in the imposition
on any person of an excise tax under Section 4999 of the Code;
(d) Any Contract or guarantee or indemnification by
Seller, LM Ordnance Systems or AV Tech on behalf of the Divisions
running to any person which involves, individually or in the
aggregate, an amount of more than $500,000;
(e) Any indebtedness of Seller, LM Ordnance Systems or
AV Tech on behalf of the Divisions for borrowed money;
(f) Any indebtedness of whatsoever nature (including,
without limitation, open account indebtedness) to any affiliate of
Seller, or any Contract with any affiliate of Seller involving an
amount of more than $500,000;
(g) Any mortgage on real property;
(h) Any Contract containing any covenant limiting the
freedom of Seller, LM Ordnance Systems or AV Tech in respect of the
business or operations of the Divisions to engage in any line of
business or compete with any person or in any geographic area;
(i) Any Contract relating to the disposition or
acquisition of the assets of, or any interest in, any business
enterprise which relates to the Divisions;
(j) Any offset agreement;
(k) Any Contract relating to capital expenditures in
respect of the Divisions not reflected in the long range plans of
each of the Divisions, copies of which have been provided to Buyer,
and involving future payments which, together with future payments
under all other Contracts relating to the same capital project,
exceed $500,000;
(l) Any intellectual property license to receive or pay
royalties in excess of $50,000 per year; or
(m) Any other Contract having a total value (excluding
unexercised options) of $1,000,000 or greater.
III.11.2 Full Force and Effect; No Defaults. All the
Contracts set forth on Schedule 3.11.1 are in full force and effect
and are valid, binding and enforceable in accordance with their terms
on Seller, AV Tech or LM Ordnance Systems, as the case may be, and,
to Seller's knowledge, the other parties thereto, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity). Except as set forth in
Schedule 3.11.2, there are no material defaults or threatened
material defaults by Seller, AV Tech or LM Ordnance Systems under any
such Contract or, to Seller's knowledge, by any other party under
such a Contract and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not
constitute a violation of, or be in conflict with, or constitute a
material default under any such Contract.
III.11.3 Review by Buyer. Seller will make available
prior to Closing complete and correct copies of all the Contracts set
forth on Schedule 3.11.1.
Section III.12 Government Contracts.
III.12.1 Compliance. Except as set forth in Schedule
3.12.1, with respect to each and every Government Contract or bid or
proposal which, if accepted, would result in a Government Contract (a
"Government Bid"): (i) to Seller's knowledge, Seller, AV Tech and LM
Ordnance Systems have complied with all material terms and conditions
of such Government Contract or Government Bid; (ii) to Seller's
knowledge, Seller, AV Tech and LM Ordnance Systems have complied with
all requirements of all material laws or agreements pertaining to
such Government Contract or Government Bid; (iii) all representations
and certifications executed, acknowledged or set forth in or
pertaining to such Government Contract or Government Bid were, to
Seller's knowledge, complete and correct as of their effective date,
and to Seller's knowledge, Seller, AV Tech and LM Ordnance Systems
have complied in all material respects with all such representations
and certifications; (iv) neither the United States government nor any
prime contractor, subcontractor or other person has notified Seller,
either in writing or, to Seller's knowledge, orally, that Seller, AV
Tech or LM Ordnance Systems has breached or violated any statute,
regulation, certification, representation, clause, provision or
requirement pertaining to such Government Contract or Government Bid;
(v) no termination for convenience, termination for default, cure
notice or show cause notice is currently in effect pertaining to such
Government Contract or Government Bid; (vi) to Seller's knowledge, no
material cost incurred by Seller, AV Tech or LM Ordnance Systems
pertaining to such Government Contract or Government Bid has been
formally questioned or challenged, is the subject of any
investigation or has been disallowed by the United States government;
(vii) to Seller's knowledge, no money due to Seller, AV Tech or LM
Ordnance Systems pertaining to such Government Contract or Government
Bid has been withheld or set off nor has any claim been made to
withhold or set off money and Seller, AV Tech or LM Ordnance Systems
is entitled to all progress payments received with respect thereto;
and (viii) each Government Contract is valid and subsisting.
III.12.2 Investigations. Except as set forth in
Schedule 3.12.2, with respect to the Divisions: (i) Seller, AV Tech,
LM Ordnance Systems and, to Seller's knowledge, Seller's directors,
officers or employees are not under administrative, civil or criminal
investigation known to Seller, AV Tech or LM Ordnance Systems,
indictment or information by any United States government entity or
any audit or investigation by Seller, AV Tech or LM Ordnance Systems
with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or Government
Bid; and (ii) during the last three years, Seller, AV Tech and LM
Ordnance Systems have not conducted or initiated any internal
investigation or made a voluntary disclosure to the United States
government, with respect to any alleged irregularity, misstatement or
omission arising under or relating to a Government Contract or
Government Bid. Except as set forth in Schedule 3.12.2, to Seller's
knowledge, there exists no irregularity, misstatement or omission
arising under or relating to any Government Contract or Government
Bid that has led to any of the consequences set forth in clause (i)
or (ii) of the immediately preceding sentence or any other damage,
penalty assessment, recoupment of payment or disallowance of cost.
III.12.3 Absence of Claims. Except as set forth in
Schedule 3.12.3, with respect to the Divisions, to Seller's
knowledge, there exist (i) no outstanding material claims against
Seller, AV Tech or LM Ordnance Systems, either by the United States
government or by any prime contractor, subcontractor, vendor or other
third party, arising under or relating to any Government Contract or
Government Bid; and (ii) to Seller's knowledge, no material disputes
between Seller, AV Tech or LM Ordnance Systems and the United States
government under the Contract Disputes Act or any other federal
statute or between Seller, AV Tech or LM Ordnance Systems and any
prime contractor, subcontractor or vendor arising under or relating
to any Government Contract or Government Bid. To Seller's knowledge,
except as set forth in Schedule 3.12.3, Seller, AV Tech and LM
Ordnance Systems have no interest in any pending or potential claim
against the United States government or any prime contractor,
subcontractor or vendor arising under or relating to any Government
Contract or Government Bid. Schedule 3.12.3 lists each Government
Contract which to Seller's knowledge is currently under audit (other
than routine audits conducted in the ordinary course of business) by
the United States government or any other person that is a party to
such Government Contract.
III.12.4 Eligibility. Except as set forth in Schedule
3.12.4, since April 2, 1993, neither of the Divisions has been
debarred or suspended from participation in the award of contracts
with the United States Department of Defense or any other United
States government entity (excluding for this purpose ineligibility to
bid on certain contracts due to generally applicable bidding
requirements). To Seller's knowledge, there exist no facts or
circumstances that would warrant the institution of suspension or
debarment proceedings or the finding of nonresponsibility or
ineligibility on the part of Seller with respect to the Divisions, AV
Tech, LM Ordnance Systems or any director or officer of Seller, AV
Tech or LM Ordnance Systems in respect of the Divisions. To Seller's
knowledge, no payment has been made by Seller, AV Tech or LM Ordnance
Systems, or by any person on behalf of Seller, AV Tech or LM Ordnance
Systems, in connection with any Government Contract in violation of
applicable procurement laws or regulations or in violation of, or
requiring disclosure pursuant to, the Foreign Corrupt Practices Act.
Except as set forth on Schedule 3.12.4, to Seller's knowledge,
Seller's cost accounting and procurement systems and the associated
entries reflected in Seller's financial statements with respect to
the Government Contracts are in compliance in all material respects
with all material laws.
III.12.5 Test and Inspection Results. Except as set
forth in Schedule 3.12.5, to Seller's knowledge, all material test
and inspection results provided by Seller, AV Tech or LM Ordnance
Systems to the United States government pursuant to any Government
Contract or to any other person pursuant to a Government Contract or
as a part of the delivery to the United States government or to any
other person pursuant to a Government Contract of any article
designed, engineered or manufactured in the Divisions were complete
and correct in all material respects as of the date so provided.
Except as set forth in Schedule 3.12.5, Seller, AV Tech or LM
Ordnance Systems, as the case may be, has provided all material test
and inspection results to the United States government or to any
other person pursuant to a Government Contract as required by
applicable law and the terms of the applicable Government Contract.
Section III.13 Litigation and Investigation.
III.13.1 General. Except as set forth in Schedule
3.13.1 delivered hereunder:
(a) Each of Seller in connection with the
Divisions, LM Ordnance Systems and AV Tech is not subject to any
unsatisfied monetary judgment, order or decree that would materially
affect Buyer's ability to conduct the business and operations of the
Divisions immediately after Closing as Seller presently conducts
them;
(b) Other than routine audits of Government
Contracts conducted in the ordinary course of business, each of
Seller, AV Tech and LM Ordnance Systems has not been served as a
party in, or, to the knowledge of Seller, have not become or been
made a party to, any pending suit, action or proceeding, or any
investigation by a governmental authority, whether civil or criminal,
relating to the Divisions, the Assets or the Assumed Liabilities; and
(c) To the knowledge of Seller, each of Seller,
AV Tech and LM Ordnance Systems has not been overtly threatened to be
made a party to any material suit, action, proceeding or
investigation, whether civil or criminal, relating to the Divisions
or any of the Assets or Assumed Liabilities, nor any which question,
challenge or seek to enjoin this Agreement, or any act taken or to be
taken in connection herewith.
III.13.2 General Electric Company. There are no
outstanding claims or demands by Seller for indemnification relating
to the Assets or the Assumed Liabilities against GE or any of its
affiliates pursuant to the "GE Agreement" referred to in Subsection
5.12.10 herein, and, to Seller's knowledge, no basis for any such
claim or demand presently exists.
Section III.14 Taxes.
III.14.1 Tax Returns. All material tax returns, reports
and forms (collectively, the "Tax Returns") required to be filed on
or before the Closing Date by Seller with respect to the Assets or
the Divisions with any domestic or foreign taxing authority have been
or will be filed in accordance with all applicable laws, are in all
material respects true, complete and correct, and all taxes, which
were shown to be due on such Tax Returns have been or will be paid
(either directly by Seller or indirectly through applicable tax
sharing arrangements) prior to their due dates; provided however,
that the representations and warranties set forth in this Section
3.14 are made only to the extent that taxes (i) are or may become
liens on the Assets or (ii) for which Buyer is or may be liable in
the capacity of transferee of the Assets.
III.14.2 Allocations. Seller is not a party to any tax
allocation or sharing agreement with respect to the Divisions
(including any such agreement between Seller and LM Ordnance Systems
or AV Tech).
III.14.3 Non-deductible Payments. Seller with respect
to the Divisions or the Assets has not made any payments, is not
obligated to make any payments and is not a party to any agreement
that could obligate it to make any future payments that will not be
fully deductible under Sections 162(m) or 280G of the Code.
III.14.4 Tax Liens. Except as set forth on Schedule
3.14.4, none of the Assets and none of the assets or properties of LM
Ordnance Systems or AV Tech (i) is subject to any Lien arising in
connection with any failure or alleged failure to pay any Tax, (ii)
secures any debt the interest on which is tax-exempt under Section
103(a) of the Code, (iii) is "tax-exempt use property" within the
meaning of Section 168(h) of the Code, (iv) is "tax exempt bond
financing property" within the meaning of Section 168(g)(5) of the
Code, (v) is "limited use property" with the meaning of Revenue
Procedure 76-30 or (vi) will be treated as owned by any other person
pursuant to the provisions of Section 168(f)(8) of the Code. The
transactions contemplated by this Agreement are not subject to tax
withholding pursuant to the provisions of Section 3406 or Subchapter
A of Chapter 3 of the Code or any other provision of applicable Law.
Seller is not a corporation other than a United States corporation
within the meaning of the Code.
III.14.5 AV Tech. AV Tech has always been treated as a
partnership for federal, state and local income tax purposes. Except
as set forth on Schedule 3.14.5, there does not exist any agreement
for the sale of additional interests in the capital or profits of AV
Tech. Seller has provided, or will provide prior to Closing, Buyer
with correct and complete copies of the federal, state and local
income Tax Returns filed on behalf of AV Tech and all Schedules K-1
delivered to Seller with respect to AV Tech. There is no partnership
minimum gain or partnership nonrecourse debt minimum gain, as such
terms are defined in Treasury Regulations Section 1.704-2(b)(2) and
1.704-2(i)(2), respectively, currently allocable to Seller's interest
in AV Tech. The members' capital accounts of AV Tech have not been
increased or decreased because of a revaluation of property or AV
Tech under Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and no
event has occurred that would allow such a revaluation to be made.
No audit, appeal or other judicial or administrative proceeding is
pending or, to Seller's knowledge, overtly threatened with respect to
any item involving AV Tech.
Section III.15 Employees; Compensation; Labor.
III.15.1 Employees and Compensation. Seller has
delivered to Buyer prior to the date of this Agreement complete and
correct copies of all written employment agreements which,
individually or collectively, are material to the conduct of the
business and operations of either Division. As promptly as
practicable after the date of this Agreement, Seller will deliver a
list (such list to be identified as Schedule 3.15.1 delivered
hereunder) of all Employees, together with each Employee's present
rate of compensation and vacation benefits.
III.15.2 Certain Labor Matters. Except as set forth on
Schedule 3.15.2 delivered hereunder:
(a) To the knowledge of Seller, no employee identified
on Schedule 3.15.1 has formally indicated his or her intention to
cancel or otherwise terminate his or her relationship with either
Division or his or her relationship with Buyer after Closing;
(b) Other than the unions identified in Schedule
3.15.2, there are no unions representing the interests of any of the
Employees and, to the knowledge of Seller, there are no such
Employees seeking or attempting to organize other union
representation;
(c) Other than the collective bargaining agreements
identified on Schedule 3.15.2, there are no other agreements between
Seller, AV Tech and LM Ordnance and any labor organizations
representing any of the Employees;
(d) There are neither pending nor, to the knowledge of
Seller, overtly threatened any strikes, work stoppages, work
disruptions or employment disruptions by any of the Employees;
(e) There are neither pending nor, to the knowledge of
Seller, overtly threatened any suits, actions, administrative
proceedings, hearings, arbitrations or other proceedings between
Seller, AV Tech or LM Ordnance Systems and any of the Employees;
(f) With respect to the Divisions and the Employees,
during the past three (3) years each of Seller, AV Tech and LM
Ordnance Systems (i) has complied in all material respects with all
federal, state and local laws and regulations relating to the
employment of labor, including any provisions thereof relating to
wages, hours, collective bargaining and the payment of social
security and similar taxes, (ii) is not liable for any material
arrearages of wages or any taxes or penalties for failure to comply
with any of the foregoing, (iii) has not committed any material
unfair labor practices, and (iv) has complied in all material
respects with all applicable provisions of the Occupational Safety
and Health Act of 1970 and regulations promulgated pursuant thereto;
and
(g) To the knowledge of Seller, none of the Employees,
within the three (3) year period prior to the date hereof, has filed
any complaint relating to the Divisions or employment of the
Employees with any governmental or regulatory authority or brought
any action in law or in equity with respect thereto.
III.15.3 Employee Benefit Plans; ERISA. Schedule 3.15.3
delivered hereunder lists each employee benefit plan or arrangement
maintained or contributed to by Seller which covers the Employees,
that is either an "employee pension benefit plan," or "employee
welfare benefit plan" as such terms are defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder ("ERISA") (each such
plan is hereinafter referred to as an "ERISA Plan", and each ERISA
Plan that is an employee pension benefit plan may hereinafter be
referred to as a "Retirement Plan"). Except as set forth on Schedule
3.15.3 and with respect to the Divisions:
(a) Seller has never contributed to a multi-employer
plan, as defined in Section 3(37) of ERISA which could result in any
liability to Buyer as a result of this transaction;
(b) To the knowledge of Seller, no fiduciary of any
Retirement Plan has engaged in a "prohibited transaction" (as that
term is defined in Section 4975 of the Code and Section 406 of ERISA)
which could subject Seller to a penalty tax imposed by Section 4975
of the Code which would have a material adverse affect on the results
of operations or financial condition of either of the Divisions;
(c) All contributions to the Retirement Plans have been
timely made and no Retirement Plan has an "accumulated funding
deficiency" within the meaning of Section 412 of the Code;
(d) No Retirement Plan subject to Title IV of ERISA has
incurred any material liability under such title other than for the
payment of premiums to the Pension Benefit Guaranty Corporation
("PBGC"), all of which have been paid when due;
(e) No Retirement Plan has been terminated; nor have
there been any "reportable events" (as that term is defined in
Section 4043 of ERISA and the regulations thereunder) which would
present a material risk that a Retirement Plan would be terminated
and that such termination would have a material adverse effect on the
results of operations or financial condition of either of the
Divisions; and
(f) Each Retirement Plan which is a defined benefit
plan intended to qualify under Section 401 of the Code is so
qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the Code. No event has
occurred with respect to any such Retirement Plan which could cause
the loss of such qualification or exemption.
Section III.16 Compliance with Law.
III.16.1 General. Seller, AV Tech and LM Ordnance
Systems are not in violation of any applicable federal, state, local
or foreign laws, rules or regulations relating to the Divisions, the
Assets or the Assumed Liabilities except for such violations, if any,
which would not have, in the aggregate, a material adverse effect on
the results of operations or financial condition of either of the
Divisions.
III.16.2 Permits. Each of Seller in connection with the
Divisions, LM Ordnance Systems and AV Tech holds all Permits that are
appropriate to permit Buyer to conduct the business of the Divisions
as presently conducted in all material respects and to operate the
Assets in all material respects as they are presently operated. Each
material Permit is listed on Schedule 3.16.2. No suspension,
cancellation or termination of any of such Permit is pending or, to
Seller's knowledge, overtly threatened.
III.16.3 Export Control. Each of Seller in connection
with the Divisions, LM Ordnance Systems and AV Tech has (a) all
licenses for any pending export transactions, (b) all licenses and
clearances for the disclosure of information to foreign persons and
(c) all registrations with United States governmental entities with
authority to implement applicable export control laws that are
appropriate to permit it to conduct the business of the Divisions as
presently conducted in all material respects and to operate the
Assets in all material respects as they are presently operated.
Seller in connection with the Divisions, LM Ordnance Systems and AV
Tech have not participated directly or indirectly in any boycotts or
other similar practices in violation of the regulations of the United
States Department of Commerce or Section 999 of the Code.
III.16.4 Environmental Conditions.
(a) As promptly as practicable after the date of this
Agreement, Seller will provide to Buyer (to the extent Seller is not
prohibited from doing so by an existing agreement with a third party)
information currently known to Seller as to the environmental
conditions existing on or at the parcels of real property currently
used by the Divisions which are being transferred to Buyer hereunder,
either by deed or pursuant to a leasehold interest. Documents
delivered pursuant to this Subsection 3.16.4(a) will disclose in
reasonable detail all material information known to Seller regarding
such environmental conditions and shall be as of the date to which
the information and data in such documents relates. All such
documents shall be indexed on Schedule 3.16.4 hereto.
(b) Except as set forth on Schedule 3.16.4, to the
knowledge of Seller, no notices by any governmental authority of any
violation or alleged violation of, non-compliance or alleged non-
compliance with or any liability under, any Environmental Law
relating to the operations or properties of the Divisions have been
received by Seller or LM Ordnance Systems since April 2, 1993, or by
AV Tech since August 2, 1995.
(c) Except as set forth on Schedule 3.16.4, there are
no administrative, civil or criminal writs, injunctions, decrees,
orders or judgments outstanding or any administrative, civil or
criminal actions, suits, claims, proceedings or investigations
pending or, to Seller's knowledge, overtly threatened, relating to
compliance with or liability under any Environmental Law affecting
the Divisions.
Section III.17 Government Authorizations.
III.17.1 United States Authority. Execution, delivery
and performance of this Agreement by Seller, and consummation of the
transactions contemplated hereby, will not require any consent,
approval, authorization, or permit from, or any filing with or
notification to, any United States, state or local governmental or
regulatory authority except with respect to the following:
(a) The pre-merger notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, 15 U.S.C.
18a, and the regulations promulgated pursuant thereto (the "HSR
Act");
(b) The facilities clearance requirements of the
Defense Investigative Service of the United States Department of
Defense ("DIS"), as set forth in the DIS Industrial Security
Regulation and the DIS Industrial Security Manual, as may be amended
from time to time;
(c) The novation of the Government Contracts as
contemplated by Section 5.13 herein;
(d) Such other consents, approvals, authorizations,
permits and filings identified on Schedule 3.17.1 delivered
hereunder; and
(e) Such other consents, approvals, authorizations,
permits and filings the failure to obtain or make would not have, in
the aggregate, a material adverse effect on the results of operations
or financial condition of either of the Divisions.
III.17.2 Foreign Authority. Except as set forth on
Schedule 3.17.2 delivered hereunder, execution, delivery and
performance of this Agreement by and consummation of the transactions
contemplated hereby will not require any consent, approval,
authorization, or permit from, or any filing with or notification to,
any governmental or regulatory authority outside the United States.
Section III.18 Bank Accounts and Powers. Schedule 3.18 lists
each bank, trust company, savings institution, brokerage firm, mutual
fund or other financial institution with which Seller, LM Ordnance
Systems or AV Tech has an account or safe deposit box used by the
Divisions and the names and identification of all persons authorized
to draw thereon or to have access thereto, other than accounts or
safe deposit boxes which Seller uses for other parts of its business
and operations and not solely in connection with the Divisions.
Schedule 3.18 lists the names of each person holding powers of
attorney or agency authority from Seller in connection with the
Divisions, LM Ordnance Systems or AV Tech and a summary of the terms
thereof.
Section III.19 Security Clearances. Except to the extent
prohibited by the National Industrial Security Program Operating
Manual, Schedule 3.19 sets forth all facility security clearances
held by Seller in connection with the Divisions, LM Ordnance Systems
or AV Tech.
Section III.20 Brokers' Fees. Seller has no liability or
obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement
for which Buyer could become liable or obligated.
Section III.21 Insurance. Schedule 3.21 contains a correct and
complete list of all policies of insurance owned by Seller that
Seller has procured specifically with respect to the operation of the
Divisions, other than workers' compensation policies.
Section III.22 Full Disclosure. To the knowledge of Seller, no
representation or warranty of Seller contained in this Agreement and
no Schedule delivered hereunder contains any untrue statement of
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, that the statements
contained in this Section 4 are correct and complete as of the date
hereof and as of the Closing Date.
Section IV.1 Organization. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own,
operate or lease the assets that it requires to carry on its business
in all material respects as such is now being conducted.
Section IV.2 Corporate Authorization.
IV.2.1 Authority. Buyer has all requisite power and
authority to enter into and perform this Agreement and to consummate
the transactions contemplated hereby. Subject to the authorizations,
consents, approvals and filings referenced in Subsection 4.6.1
herein, this Agreement is a valid and binding obligation of Buyer
enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application referring to or affecting
enforcement of creditor's rights, or by general equitable principles.
IV.2.2 No Breach or Violation. Execution, delivery and
performance of this Agreement by Buyer and consummation of the
transactions contemplated hereby will not cause a breach or default
or otherwise conflict with any term or provision of the following:
(a) Buyer's Certificate of Incorporation and By-laws;
(b) Any note, bond, mortgage or indenture to which
Buyer is a party or is bound; or
(c) Any court or administrative order, writ or
injunction or process, or any consent decree to which Buyer is a
party or is bound.
Section IV.3 Sufficient Funds. Buyer has sufficient funds to deliver
the Purchase Price to Seller at the Closing.
Section IV.4 Security Clearance. Buyer controls facilities classified
for United States government security purposes as high as the level
of "Top Secret", and employs individuals holding United States
government security clearances as high as the level of "Top Secret".
Section IV.5 Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to Buyer's
knowledge, overtly threatened that question the validity of this
Agreement or any of the ancillary agreements or any action taken or
to be taken by Buyer in connection with this Agreement or any of the
ancillary agreements or that, if adversely determined, would have a
material adverse effect upon Buyer's ability to enter into or perform
its obligations under this Agreement or any of the ancillary
agreements.
Section IV.6 Government Authorizations.
IV.6.1 United States Authorities. Execution, delivery
and performance of this Agreement by Buyer and consummation of the
transactions contemplated hereby, will not require any consent,
approval, authorization, or permit from, or any filing with or
notification to, any United States, state or local governmental or
regulatory authority except with respect to the following:
(a) The pre-merger notification requirements of the HSR
Act;
(b) The facilities clearance requirements of the DIS,
as set forth in the DIS Industrial Security Regulation and the DIS
Industrial Security Manual, as may be amended from time to time;
(c) The novation of the Government Contracts as
contemplated by Section 5.13 herein;
(d) Such other consents, approvals, authorizations,
permits and filings identified on Schedule 3.17.1 delivered
hereunder; and
(e) Such other consents, approvals, authorizations,
permits and filings the failure to obtain or make would not have, in
the aggregate, a material adverse effect on the business, results of
operations or financial position of Buyer on a consolidated basis.
IV.6.2 Foreign Authority. Execution, delivery and
performance of this Agreement by Buyer and consummation of the
transactions contemplated hereby, will not require any consent,
approval, authorization, or permit from, or any filing with or
notification to, any governmental or regulatory authority outside the
United States.
Section IV.7 Investment Representations. Buyer is acquiring the AV
Tech Interest and the Ordnance Systems Shares for the purpose of
investment and not with a view to the distribution thereof, and Buyer
has no present intention of selling or otherwise disposing of the AV
Tech Interest and the Ordnance Systems Shares. Buyer acknowledges
that the offer and sale of the AV Tech Interest and the Ordnance
Systems Shares have not been registered under the Securities Act or
any state Blue Sky law, and that Seller is transferring the AV Tech
Interest and the Ordnance Systems Shares to Buyer pursuant to an
exemption of the registration requirements of the Securities Act
under Section 4(2) thereof. Buyer is an "accredited investor" within
the meaning of paragraph (a)(3) of Rule 501 under the Securities Act.
Section IV.8 Brokers. Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect
to the transactions contemplated by this Agreement for which Seller
could become liable or obligated.
ARTICLE V
COVENANTS
Section V.1 General. Each of the parties will use commercially
reasonable efforts to take all action and to do all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Articles VI and VII).
Section V.2 Conduct of the Divisions. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the
Closing, Seller will (i)maintain the owned and leased properties used
or held for use in connection with the Divisions in good operating
condition and repair, (ii) carry on the operations of the Divisions
consistent with the past operation of the Divisions and continue to
make capital expenditures in accordance with the long range plans of
each of the Divisions, and (iii) not make or institute any methods of
manufacture, purchase, sale, lease, management, accounting or
operation not in the ordinary course of business.
Section V.3 No General Increases. Other than (a) in the ordinary
course of its business; (b) consistent with Seller's consolidation of
its businesses; or (c) consistent with those changes approved by the
United States government with respect to LM Ordnance Systems, and
except for any increase required under the terms of any collective
bargaining agreement or consulting or employment agreement in effect
on the date of this Agreement or in connection with customary and
periodic performance reviews and cost of living increases, Seller
will not (i) grant any general or uniform increase in the rates of
pay of employees of the Divisions, nor grant any general or uniform
increase in the benefits under any bonus or pension plan or other
contract or commitment; or (ii) increase the compensation payable or
to become payable to officers, salaried employees with a base salary
in excess of $75,000 per year or agents of the Divisions or increase
any bonus, insurance, pension or other benefit plan, payment or
arrangement made to, for or with any such officers, salaried
employees or agents.
Section V.4 Contracts and Commitments. Other than in the ordinary
course of business and consistent with the past operation of the
Divisions, Seller, in connection with the Divisions, will not enter
into any contract or commitment or engage in any transaction
involving an amount in excess of $500,000, including any contract,
commitment or engagement with any other division, unit or affiliate
of Seller, or effect any change to any program.
Section V.5 Sale of Capital Assets. Other than pursuant to this
Agreement or in the ordinary course of business, Seller will not sell
or otherwise dispose of any material capital asset relating to the
Divisions.
Section V.6 Preservation of Organization. Seller will use
commercially reasonable efforts to preserve the business organization
of the Divisions intact, to preserve for Buyer the present
relationships of the Divisions with its suppliers, customers and
agents and to keep available to Buyer the present key officers and
employees of the Divisions, provided that Seller shall be under no
obligation to offer any payment or other inducement to any such
officer or employee to secure their availability to Buyer.
Section V.7 Access to Information.
V.7.1 Access. Between the date of this Agreement and
the Closing Date, Seller shall, during mutually agreeable hours (i)
give Buyer and its authorized representatives reasonable access to
all Business Records, contracts, offices and other facilities and
properties of the Divisions, (ii) permit Buyer to make such
inspections thereof as Buyer may reasonably request (including
conducting a Phase I environmental assessment of the Real Property
and real property leased under the Facility Leases), and (iii)
furnish Buyer with such financial and operating data and other
information with respect to the Divisions, or the results of
operations and properties of the Divisions as Buyer may from time to
time reasonably request; provided however, that any such inquiry
shall be conducted in such a manner as not to interfere unreasonably
with the business operations of Seller; and provided further, that
Seller is under no obligation to disclose to Buyer any (a)
"Classified Information" not in compliance with the DIS Industrial
Security Regulation, the DIS Industrial Security Manual and any other
applicable government security regulations; (b) information the
disclosure of which is restricted by contract except in strict
compliance with the applicable contract; or (c) any information
regarding contracts, proposals or bids for which Seller and Buyer are
competitors or potential competitors.
V.7.2 Confidentiality. Any information provided or
obtained pursuant to Subsection 5.7.1 shall be held by Buyer and its
representatives in accordance with and shall be subject to the terms
of the Confidentiality Agreement among Buyer and Seller dated June25,
1996 (the "Confidentiality Agreement"), except all obligations of
Buyer in this regard will terminate upon completion of the Closing.
V.7.3 Notice to Seller. Buyer agrees to notify Seller
in writing, promptly upon Buyer's or its authorized representatives'
discovery, of any information received by Buyer prior to the Closing
Date relating to the Assets, the Assumed Liabilities or the
operations of the Divisions which to the belief of Buyer constitutes
(or would constitute) or indicates (or would indicate) a breach of
any representation, warranty or covenant made by Seller herein.
Section V.8 Filings and Authorizations. Seller and Buyer shall,
unless they mutually agree to the contrary, as promptly as
practicable after the date hereof, file or supply, or cause to be
filed or supplied, or will make, or cause to be made, the following:
(a) All notifications and information required to be
filed or supplied pursuant to the HSR Act (including any request for
additional information or production of personnel for administrative
interviews made pursuant to such Act) and all information or
interviews reasonably requested by state officials in connection with
the sale and transfer of the Assets;
(b) All such other filings and submissions under laws,
rules and regulations applicable to them, or to their subsidiaries
and affiliates, as may be required for it to consummate the
transactions contemplated by this Agreement;
(c) Will use their respective commercially reasonable
efforts to take, or cause to be taken, all other actions necessary,
proper and reasonable for them to fulfill their obligations hereunder
and to consummate the transactions contemplated by this Agreement.
Section V.9 Tax Matters. On or prior to the Closing Date, Seller
will provide Buyer, at Buyer's request, with all clearance
certificates or similar documents that may be required by any state,
local or other taxing authority in order to relieve Buyer of any
obligation to withhold or escrow any portion of the Purchase Price.
On or prior to the Closing Date, Seller will furnish to Buyer an
affidavit stating, under penalty of perjury, Seller's United States
taxpayer identification number and that Seller is not a foreign
person, pursuant to Section1445(b)(2) of the Code.
Section V.10 Financial Information. Seller shall deliver to Buyer,
within 15 days after the end of each monthly accounting period after
the date of this Agreement and prior to the Closing Date, copies of
the regularly prepared monthly unaudited balance sheets and
statements of income and cash flow for each Division and, to the
extent permitted by law, copies of all other material financial and
accounting reports regularly prepared with respect to each Division
during such period.
Section V.11 Employees.
V.11.1 Employment. Buyer shall make an offer of
employment to each Employee commencing on the Closing Date and each
individual on long term disability from the Divisions at such time as
such individual is fit for active employment with Buyer. In the case
of an Employee on vacation, on authorized leave or illness absence,
or on military service leave of absence, such offer shall remain open
until the Employee is able or otherwise required to return to work.
In the case of an Employee entitled to recall rights arising under
collective bargaining agreements, such offer shall be deemed
effective on the day such Employee is recalled (if ever). Each
Employee shall be offered a position similar to his or her position
immediately prior to the Closing Date (or if on vacation, authorized
leave or illness absence, or military leave of absence, immediately
prior to the date such vacation, leave, disability or absence
commenced), at the same position and salary or wage levels as those
provided by Seller immediately prior to the Closing Date. Such
offers of employment shall be at the same respective locations as
those at which the Employees are working (or on vacation, leave,
disability or absence from) immediately prior to the Closing Date.
Notwithstanding the foregoing, the Employees shall be deemed
employees at will of Buyer and nothing express or implied herein
shall obligate Buyer to provide continuing employment to any Employee
after the Closing for a specified period of time following the
Closing Date or, subject to the provisions of Section 5.12, to
continue in effect the present terms and conditions of employment of
any Employee. Buyer shall perform, meet and discharge any
obligations in respect of the Divisions which may arise following the
Closing under the Worker Adjustment and Retraining Notification Act
of 1988, 19 U.S.C. 2101, et seq., or any similar state or local law
or regulation;
V.11.2 Collective Bargaining Agreements. Buyer shall
expressly recognize any collective bargaining representative
recognized by Seller or any of its affiliates as of the Closing Date
under the collective bargaining agreements listed on Schedule 3.15.2.
Buyer shall expressly assume any and all of Seller's obligations
under such collective bargaining agreements existing on the Closing
Date with respect to the Employees. Buyer will assume Seller's
responsibilities with respect to recall rights of represented
employees laid off from the Divisions. Buyer shall perform, meet and
discharge all obligations as a successor employer to the represented
Employees, including without limitation any and all obligations
arising by contract, in law, pursuant to an at will relationship (if
any), or under any applicable collective bargaining agreement, in all
such cases irrespective of whether such obligations are based on
events occurring before or after the Closing.
Section V.12 Employee Benefit Matters.
V.12.1 Employee Benefits Definitions. The following
terms, as used herein, shall have the following meanings:
(a) "Affiliate Plan" means each Employee Plan and
Benefit Arrangement which is sponsored, maintained, or contributed to
by AV Tech or LM Ordnance Systems and which covers Employees and
former employees of AV Tech and LM Ordnance exclusively.
(b) "Employee Plans" means each "employee benefit
plan," as such term is defined in Section 3(3) of ERISA, which (i) is
or has been entered into, maintained or contributed to by Seller or
any of its affiliates and (ii) covers any Employee.
(c) "Welfare Plans" means each "employee welfare plan"
as such term is defined in Section 3(1) of ERISA.
V.12.2 Welfare Plans Following the Closing.
(a) Except to the extent changes are required by
applicable law or collective bargaining, from the Closing Date to
December 31, 1997, Buyer will maintain its own Welfare Plans for the
benefit of the Employees that provide benefits that are substantially
equivalent to the medical, disability, vision, dental, life
insurance, flexible spending accounts and severance benefits offered
to Employees by Seller during that period. In addition, after
December 31, 1997, Buyer will provide substantially equivalent post-
retirement medical benefits for those Employees who are at least age
55 with five years of service on December 31, 1997, post-retirement
life insurance for those non-union Employees who were at least age 50
as of December 31, 1994 and have ten years of service at retirement,
and post-retirement medical benefits and life insurance to union
Employees in accordance with applicable collective bargaining
agreements. Buyer will give each Employee full credit for purposes
of eligibility and vesting under any such plans or arrangements
maintained by Buyer pursuant to this Subsection 5.12.2 to the extent
such Employee's service is recognized for such purposes under
Seller's plans.
(b) Buyer's Welfare Plans shall not contain a clause
excluding coverage for preexisting conditions (other than pre-
existing conditions excluded by Seller's Welfare Plans) and shall
provide that any expenses incurred by an Employee on or before the
Closing Date shall be taken into account for the purposes of
satisfying deductible and coinsurance requirements and satisfaction
of maximum out-of-pocket provisions under the Buyer's Welfare Plans
to the extent such expenses are incurred during the same plan year in
which the Closing Date takes place.
(c) For purposes of providing "group health plan" (as
that term is described in ERISA Section 607(1)) continuation coverage
pursuant to the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, coverage under the group health plans
offered by Buyer to Employees pursuant to this Subsection 5.12.2 will
be considered to have commenced on the Closing Date and all Employees
and their dependents shall be considered as of the Closing Date to be
covered by a "group health plan" which does not contain any exclusion
or limitation with respect to any preexisting condition.
V.12.3 Defined Benefit Plans.
(a) Effective as of the Closing Date, Buyer shall
establish defined benefit plans (the "Buyer Pension Plans") for the
benefit of salaried and union Employees covered by the Lockheed
▇▇▇▇▇▇ Retirement Income Plan, the Lockheed ▇▇▇▇▇▇ Retirement Income
Plan (II) (collectively, "Salaried Plans") and the Lockheed ▇▇▇▇▇▇
Pension Plan for Employees in Participating Bargaining Units ("Union
Plan"). For those Employees who are currently participating in the
Lockheed ▇▇▇▇▇▇ Supplementary Pension Plan for Employees of
Transferred GE Operations, Buyer will assume Seller's obligations to
Employees under such plan and will provide an equivalent plan during
the term of their employment with Buyer and its affiliates. Buyer
shall also provide an excess benefit plan to eligible Employees
(including coverage for benefits based on compensation in excess of
the limit in Section 401(a)(17) of the Code) from the Closing Date
until December 31, 1997.
(b) Buyer shall take all action necessary to qualify
each such Buyer Pension Plan under the applicable provisions of the
Code and shall make any and all filings and submissions to the
appropriate governmental agencies required to be made by Buyer as are
appropriate. The Buyer Pension Plans and any successor plans thereto
shall contain appropriate provisions providing that (i)with respect
to assets transferred to the Buyer Pension Plans from the Salaried
Plans and the Union Plan, such assets shall be held by trusts,
forming a part of such Buyer Pension Plan(s) and shall be held for
the exclusive benefit of the participants in such Buyer Pension
Plan(s) and, to the extent assets are transferred from Seller's
Salaried and Union Plans, may not upon termination of the Buyer
Pension Plan(s) revert to the employer or sponsor of such Buyer
Pension Plan(s); (ii)in accordance with Section 411(d)(6) of the
Code, the accrued benefits as of the Closing Date of the Employees
under such Buyer Pension Plan(s) may not be decreased by amendment,
or otherwise; (iii)each Employee shall be entitled to receive his or
her benefit accrued through the Closing Date in any optional form
provided under the respective Salaried Plans and Union Plan; (iv)each
Employee retiring under Buyer Pension Plans will be entitled to
receive pension benefits no less than what would have been received
under the GE Pension Plan as in effect as of April5, 1993, taking
into account the Employee's combined service with Buyer, Seller and
GE; (v) until December 31, 1997, the Buyer Pension Plans shall
provide for benefit formulas equivalent to those provided in the
Salaried Plans and the Union Plan; and (vi) after December 31, 1997,
each non-union Employee upon his or her retirement will be entitled
to receive the sum of (A) his or her accrued benefit under the Buyer
Pension Plans as of December 31, 1997, as determined using any
increase in compensation (as such term shall be defined under the
Buyer Pension Plans, as amended from time to time) after December 31,
1997, plus (B) any benefit accrued subsequent to December 31, 1997,
but taking into account, for the purpose of vesting and eligibility
for pension benefit subsidies, the Employee's combined service with
Buyer, Seller and GE. Assets transferred shall be separately
accounted for under the Buyer Pension Plans.
(c) As soon as practicable, but in no event after the
later of 20 days following the Closing Date or the date Seller has
been provided evidence reasonably satisfactory to it that the Buyer
Pension Plans are qualified under Section 401(a) of the Code and the
trust holding such assets is tax exempt under Section 501(a) of the
Code, Seller shall cause the Salaried Plans and the Union Plan to
transfer assets to the respective Buyer Pension Plans equal to
approximately 85% of the Accrued Liability (as such term is defined
below) associated with the Employees participating in each such plan.
That amount shall be in cash and shall be adjusted to reflect (i)
interest from the Closing Date until the date of transfer based on
the interest rate paid on a 90-Day Treasury ▇▇▇▇ on the auction date
coincident with or immediately preceding the Closing Date; and (ii)
any benefit payments made by Seller in respect of Employees on or
after the Closing Date. The amount transferred, as so adjusted,
shall be referred to as the "Initial Transfer Amount."
(d) As soon as practicable following the transfer of
the Initial Transfer Amount, Seller shall cause a second transfer to
be made of the "True-up Amount." The "True-up Amount" shall be
transferred in cash and shall be equal to the difference between the
Accrued Liability and the Initial Transfer Amount, adjusted to
reflect interest from the Closing Date until the date of transfer
based on the interest rate paid on a 90-Day Treasury ▇▇▇▇ on the
auction date coincident with or immediately preceding the Closing
Date and any benefit payments made by Seller. For the purposes of
this Subsection 5.12.3, the term "Accrued Liability" shall mean the
lump sum present value of the accrued benefit of the Employee,
determined on a termination basis using the interest factors
specified by the Pension Benefit Guaranty Corporation for an
immediate or deferred annuity, as appropriate for that Employee, and
the other methods and factors specified in the regulations of the
Pension Benefit Guaranty Corporation for the valuation of accrued
benefits upon plan termination, including expected retirement ages
and expense load assumptions published by the Pension Benefit
Guaranty Corporation, and the 1983 Group Annuity Mortality Table.
The interest factors used to determine Accrued Liability shall be
those factors in effect on the Closing Date. Notwithstanding
anything contained herein to the contrary, the transfers contemplated
by this Subsection 5.12.3 shall be determined in accordance with
Section 414(l) of the Code and Treasury Regulation 1.414(l)-1. The
amounts to be transferred pursuant to this Subsection 5.12.3(d) shall
be reduced to the extent necessary to satisfy Section 414(l) of the
Code, any regulations promulgated thereunder, ERISA Section 4044, and
any regulations promulgated thereunder.
(e) The Accrued Liability shall be determined by an
enrolled actuary designated by Seller. Seller shall provide any
actuary designated by Buyer with all information reasonably necessary
to review the calculation of the Accrued Liability in all material
respects and to verify that such calculations have been performed in
a manner consistent with the terms of this Agreement. In the event
of a disagreement between Seller's designated actuary and Buyer's
designated actuary as to the amount of the Accrued Liability, which
disagreement remains unresolved for a period in excess of 45 business
days or such additional period as Seller and Buyer may agree upon in
writing (a "Disagreement"), the Disagreement shall be submitted to
the Chief Financial Officer of each of Seller and Buyer for their
review and resolution in such manner as they deem necessary or
appropriate. In the event such Disagreement remains unresolved for
an additional 60 business days, then any remaining disputed matters
will be finally and conclusively determined by a qualified
independent actuary selected by Seller and Buyer, which actuary will
not be the regular actuary of Buyer or Seller. Promptly, but in no
event later than 60 days after its acceptance of its appointment, the
actuary will determine (based solely on presentations by Seller and
Buyer and not by independent review) only those matters in dispute
and will render a written report as to the disputed matters and the
resulting calculation of the pension assets required to be
transferred by Seller in accordance with the provisions of this
Subsection 5.12.3, which report will be conclusive and binding upon
the parties. The fees and expenses of the actuary will be shared
equally by Buyer and Seller.
(f) In the event the Initial Transfer Amount exceeds
the Accrued Liability (adjusted to reflect ERISA Section 4044, if
applicable), as soon as practicable following such determination
Buyer shall cause a transfer to be made to Salaried Plans and the
Union Plan, as applicable, equal to the difference between the
Accrued Liability (adjusted to reflect ERISA Section 4044, if
applicable) and the Initial Transfer Amount, adjusted to reflect
interest from the date of the transfer of the Initial Transfer Amount
until the date of transfer at the rate paid on a 90-Day Treasury ▇▇▇▇
on the auction date coincident with or immediately preceding the
Closing.
(g) Employees shall cease to accrue benefits under the
Salaried Plans and the Union Plan respectively as of the Closing
Date. Subject to the consummation of the asset transfer described in
Subsection 5.12.3(c), Buyer shall, effective as of the Closing Date,
assume all of the obligations and liabilities of Seller, its
affiliates, the Salaried Plans and the Union Plan in respect of
benefits accrued by such Employees under the Salaried Plans and the
Union Plan on or prior to the Closing Date. Except as expressly
provided herein, Buyer shall not assume or be deemed to assume
liabilities associated with any employee or former employee of Seller
who is not an Employee.
(h) Buyer shall notify Seller in the event an
individual returns to active employment with Buyer following a period
of long term disability which began prior to the Closing Date. The
Seller shall cause a transfer to be made to the Buyer Pension Plans
in an amount equal to the individual's Accrued Liability determined
under Subsection 5.12.2(d) as of the date the individual returns to
active employment. Such trust to trust transfer shall be made within
a reasonable period of time following the close of the applicable
plan year, at which time Buyer shall assume all obligations and
liabilities with respect to pension benefits of such individual under
this Section 5.12.3.
V.12.4 Savings Program. On the Closing Date, Employees
eligible to participate in the Lockheed ▇▇▇▇▇▇ Employees Performance
Sharing Plan ("Seller's Savings Plan") shall commence participating
in a defined contribution plan or plans sponsored by Buyer. Buyer
shall cause such plans to be amended to waive any waiting period for
eligibility to participate in such plans. To the extent permitted by
Section 401(k)(10) of the Code, each Employee shall be permitted
during the period between the Closing and the end of the second
calendar year following the Closing Date, to receive a distribution
from Seller's Savings Plan, make a direct rollover in accordance with
Section 401(a)(31) of the Code, or leave his or her account balances
in Seller's Savings Plan. Seller shall take such action as may be
necessary, if any, to permit each Employee to make a direct rollover
to Seller's Savings Plan in accordance with Section 401(a)(31) of the
Code. The assets transferred in the direct rollover shall be in the
form of cash except that participant loan balances shall be
transferred in the form of notes. Buyer agrees to facilitate through
payroll deduction any loan repayments due on behalf of Employees who
do not elect to make a direct rollover to Buyer's defined
contribution plan.
V.12.5 Vacation and Holidays. As of the Closing Date,
Buyer shall adopt at its expense, vacation and holiday plans for the
Employees to succeed Seller's vacation and holiday plans. Until
December 31, 1997, such plans shall be substantially equivalent to
the plans Seller would have provided to such Employees had they
remained employees of Seller, and Seller shall have no liability or
obligation to pay or provide any vacation or holiday payments claimed
on or after the Closing Date. Thereafter, any such plans shall
provide vacation and holidays to each eligible Employee on the basis
of his or her combined service with Seller, Buyer and with GE. As of
the Closing Date, Seller will provide Buyer with a list of the
Employees and their accrued vacation time.
V.12.6 Affiliate Plans.
(a) Effective as of the Closing Date, Seller or its
affiliates shall cease to sponsor, administer or contribute to any
Affiliate Plan and shall thereby cease to be responsible for any
acts, omissions, and transactions under or in connection with any
such Affiliate Plan which occur on or after the Closing Date.
Effective as of the Closing Date, Buyer shall become the sponsor of
each Affiliate Plan, shall assume all obligations of Seller and its
affiliates under each such Affiliate Plan and shall become
responsible for all acts, omissions and transactions under or in
connection with such Affiliate Plans which occur on or after the
Closing Date. Seller agrees to transfer any plan assets held by any
such Affiliate Plan to Buyer and to otherwise assist in the transfer
of sponsorship contemplated by this Subsection 5.12.6.
(b) On or after the Closing Date, Buyer shall assume
all obligations and liabilities of Seller with respect to all acts,
omissions, and transactions under or in connection with the Affiliate
Plans covering LM Ordnance Systems employees which occurred prior to
the Closing Date. Seller and Buyer agree to cooperate in obtaining a
determination letter for the Milan Savings Plan as applicable to tax
years prior to the Closing Date.
V.12.7 Other Employee Plans.
(a) Other than with respect to the Affiliate Plans
covered in Subsection 5.12.6, Seller shall retain all obligations and
liabilities under all employee pension and welfare plans in respect
of any former employee or any independent contractor (including any
beneficiary or dependent thereof) who is not an Employee.
(b) Buyer shall assume financial liability (i) for
expenses incurred by the Employees but not reported as of the Closing
Date respecting claims arising under Seller's medical plans and (ii)
for tuition and related expenses incurred by Employees for
educational programs commenced prior to the Closing Date and which
would be reimbursable pursuant to Seller's tuition reimbursement
program.
(c) Buyer shall pay all bonuses accrued and payable in
respect of Employees by Buyer under the Lockheed ▇▇▇▇▇▇ Management
Incentive Compensation Plan for the year 1996. Seller shall
determine the amount of such bonuses for the applicable Employees
consistent with past practices (and consistent with the practices
followed by Seller for its other employees for the 1996 calendar
year), and shall so advise Buyer of its determination. Buyer shall
pay such bonuses when Seller pays incentive compensation bonuses to
its other employees for the 1996 calendar year.
(d) The flexible spending accounts established on
behalf of the Employees will be maintained through the end of the
applicable plan year in which the Closing occurs in a manner that
ensures that each Employee receives no more and no less than he or
she would have received had the transactions contemplated by this
Agreement not occurred. Buyer and Seller will coordinate management
of their respective flexible spending accounts to achieve an
equitable result.
V.12.8 Access to Information. Upon request of Buyer,
Seller shall provide Buyer reasonable access to data before and after
the Closing (including computer data and personnel records) regarding
the ages, dates of hire, benefits, compensation and job description
of Employees. Seller shall provide Buyer with reasonable
opportunities to enter into discussions with and to advise any of the
Employees concerning the terms of future employment of such
individuals by Buyer and shall permit Buyer reasonable access upon
request to Employees for such purpose. Seller shall not discourage
any Employees from accepting an offer of employment made by Buyer to
such Employees. Buyer and Seller shall cooperate in preparing and
disbursing materials concerning the transaction contemplated by this
Agreement or the effect of the transaction upon the Employees'
employment or the terms or conditions of the Employees' employment.
Buyer and Seller shall provide each other with reasonable opportunity
to review any written materials and to attend any scheduled meetings
concerning the foregoing.
V.12.9 Necessary Action. Each of Seller and Buyer agree
to take all action which may be necessary in order to effectuate the
transactions contemplated by this Agreement, including, without
limitation, adopting any necessary amendments to their respective
Employee Plans and making all filings and submissions to the
appropriate governmental agencies required to be made in connection
with the transfers of assets contemplated herein. Seller shall
provide Buyer reasonable assistance in establishing its plans and
benefit arrangements, including assistance in duplicating or
transferring contracts applicable to such benefits. Seller agrees to
provide administrative services with respect to those Buyer Employee
Plans that provide benefits identical to those being provided
simultaneously to Seller's employees under its Employee Plans. The
terms of the arrangement will be governed by the Services Agreement
referenced in Subsection 2.3.2(a), except that Seller shall not be
obligated to provide services with regard to Buyer Pension Plans
after June 30, 1997 or with regard to Buyer's Welfare Plans after
December 31, 1997.
V.12.10 GE Special Benefits Protection. Pursuant to
Section V.II of Exhibit V to a Transaction Agreement (the "GE
Agreement") dated November 22, 1992, as amended, among GE, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Corporation, a Maryland corporation, and Seller, Seller has
agreed to reimburse GE (the "GE Reimbursement Obligations") for
certain specified expenses relating to benefits for certain
individuals who were formerly employed by GE and who became employees
of Seller as a result of the transactions contemplated by the GE
Agreement (the "Former GE Employees"). Buyer shall assume, effective
on the Closing Date, all of the GE Reimbursement Obligations in
respect of Employees for such specified expenses, and shall indemnify
and hold harmless Seller from any and all such GE Reimbursement
Obligations. Seller shall provide Buyer with copies of any
documentation it receives from GE documenting the basis for such
expenses.
V.12.11 Limitation on Benefits.
(a) Subject to the terms of this Agreement and any
applicable bargaining agreement, the terms of Buyer's Employee Plans
may be amended or terminated at any time after the Closing Date.
This Agreement shall not, in any way or at any time, create any third
party beneficiary rights for or on behalf of any person.
(b) Nothing in this Agreement shall be construed to
require Buyer to provide any benefit to any current or former
employee of Seller or any of its affiliates other than the benefits
specifically described herein. Without limiting the generality of
the foregoing, except as expressly provided in Subsection 5.12.6,
Buyer shall have no obligation to provide any pension or welfare
benefit to any individual who is not an Employee as defined herein or
an alternate payee or qualified beneficiary of an Employee.
(c) Buyer shall be obligated to provide hourly
Employees with the benefits described in this Section 5.12 only until
the expiration of any collective bargaining agreement that requires
such benefits to be provided to such Employees.
V.12.12 ▇▇▇▇▇▇▇▇ v. G.E. Buyer shall not by reason of
the transactions contemplated by this Agreement or otherwise be
deemed to have assumed any liability or obligation with respect to
any claim or cause of action asserted against GE or Seller in the
lawsuit ▇▇▇▇▇▇▇▇ v. G.E. filed in the federal district court in
Connecticut in March, 1993, which relates to facts, transactions or
events occurring prior to the date of this Agreement, including
without limitation any purported claim or purported cause of action
filed in connection with such lawsuit prior to, on or after the date
of this Agreement. All such claims and causes of action shall
constitute Excluded Liabilities for purposes of this Agreement.
Nothing in this Subsection 5.12.12 or elsewhere, however, shall be
deemed to require Seller to indemnify or otherwise to relieve Buyer
of any liability or obligation it may incur as a result of a
purported claim or purported cause of action asserted against Buyer
which is based on this Agreement, the transactions contemplated by
this Agreement, or any actions or transactions that occur on or after
the date of this Agreement, regardless of whether such claim or cause
of action is filed as an additional count in, or is consolidated
with, ▇▇▇▇▇▇▇▇ v. G.E., or in another proceeding.
Section V.13 Novation of Government Contracts. As soon as
practicable following the Closing, Seller shall in accordance with
Federal Acquisition Regulations Part 42, 42.12, submit in writing
to each Responsible Contracting Officer (as such term is defined in
Federal Acquisition Regulations Part 42, 42.1202(a)) a request (the
"Request") for the United States government (i) to recognize Buyer as
its successor in interest to all of the Government Contracts being
sold, assigned, transferred and conveyed to Buyer in accordance with
this Agreement; and (ii) to enter into a novation agreement
("Novation Agreement") substantially in the form of Exhibit C
attached hereto.
V.13.1 Contents of the Request. The Request shall
include:
(a) Three copies of the Novation Agreement signed by
Seller and Buyer;
(b) An authenticated copy of this Agreement duly signed
by Seller and Buyer;
(c) A list of all affected Government Contracts
remaining unsettled between Seller and the United States government
showing for each the: (i) contract number and type, (ii) name and
address of the contracting office, (iii) total dollar value as
amended, and (iv) remaining unpaid balance;
(d) A certified copy of each resolution of Seller's and
Buyer's respective boards of directors authorizing the transfer of
assets;
(e) Copies of the opinions of counsel for Seller and
for Buyer stating that the transfer was properly effected under
applicable law and the effective date of transfer;
(f) Evidence of Buyer's capability to perform the
contracts;
(g) Balance sheets of Seller and Buyer as of the dates
immediately before and after the transfer of the Assets, certified
for accuracy by an independent accounting firm of nationally
recognized standing;
(h) Evidence that any security clearances requirements
have been met; and
(i) The consent of sureties on all Government Contracts
listed under paragraph (c) of this Subsection 5.13.1 if bonds are
required or a statement from Seller that none are required.
V.13.2 Cooperation. Buyer shall provide to Seller
promptly the information regarding Buyer in paragraphs (d), (f), (g)
and (h) of Subsection 5.13.1, above. Seller and Buyer each shall use
commercially reasonable efforts to obtain all consents, approvals and
waivers required for the purpose of processing, entering into and
completing the Novation Agreement with regard to any of the
Government Contracts, including responding to any requests for
information by the United States government with regard to such
Novation Agreement.
Section V.14 Nonassignable Contracts. In the event that a third
party consent required to assign any Contract is not obtained on or
prior to the Closing Date, then, subject always to the terms of the
applicable Contract and to the extent permitted by law, the parties
will use commercially reasonable efforts to (i) provide to Buyer the
benefits of the applicable Contract to the extent related to the
Divisions, (ii) to the extent possible, to relieve Seller of the
performance obligations of the applicable Contracts, (iii) cooperate
in any reasonable and lawful arrangement designed to provide the
benefits to Buyer, including entering into subcontracts for
performance, and (iv) enforce at the request of Buyer and for the
account of Buyer any rights of Seller arising from any such Contract
(including the right to elect to terminate such Contract in
accordance with the terms thereof upon the request of Buyer).
Section V.15 Administration of Accounts.
V.15.1 In Trust For Buyer. All payments and
reimbursements made by any third party in the name of or to Seller in
connection with or arising out of the Assets and Assumed Liabilities
after the Closing Date shall be held by Seller in trust to the
benefit of Buyer and, promptly upon receipt by Seller of any such
payment or reimbursements, Seller shall pay over to Buyer the amount
of such payment or reimbursement without right of set off.
V.15.2 In Trust For Seller. All payments and
reimbursements made by any third party in the name of or to Buyer in
connection with or arising out of the Excluded Assets and Excluded
Liabilities after the Closing Date shall be held by Buyer in trust to
the benefit of Seller and, promptly upon receipt by Buyer of any such
payment or reimbursement, Buyer shall pay over to Seller the amount
of such payment or reimbursement without right of set off.
Section V.16 Litigation Support.
V.16.1 Access. In the event and for so long as any
party is actively contesting or defending against any charge,
complaint, action, audit, suit, proceeding, hearing, investigation,
claim or demand in connection with (i)any transaction contemplated
under this Agreement or (ii)any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the
Closing Date involving the Divisions, the other party will cooperate
with the contesting or defending party and its counsel in the contest
or defense, make available its personnel and provide such testimony
and access to its books and records as may be reasonably necessary in
connection with the contest or defense, at the sole cost and expense
of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Article
VIII). To the extent that this Subsection 5.16.1 requires one party
to make available to the other party documents or information which
are subject to a claim of attorney-client privilege or attorney work
product, the parties shall enter into an appropriate and customary
joint defense agreement to protect the privileged nature and
confidentiality of such documents or information.
V.16.2 Corporate Overhead. In addition to providing
reasonable access to books, records, files and other written
materials that relate to the Divisions in connection with litigation
as described in Subsection 5.16.1, Seller hereby agrees to provide
Buyer, subject to an appropriate confidentiality agreement, with
reasonable access to its books and records relating to indirect
corporate general and administrative expenses invoiced or allocated
to the Divisions prior to the Closing Date. Access to the foregoing
books and records will be provided only to the extent reasonably
necessary to permit Buyer to contest or defend governmental audits or
investigations, to complete required government reports or contract
closures relating to periods prior to the Closing Date or as required
by law or legal process.
V.16.3 Maintenance of Files. Buyer will maintain all
original books, records, files, documents, papers and agreements
pertaining to the operations of the Divisions as conducted prior to
the Closing Date that are included in the Assets for at least five
years following the Closing Date or such longer period as may be
required by law. Seller will maintain all original books, records,
files, documents, papers and agreements pertaining to the operations
of the Divisions as conducted prior to the Closing Date that are not
included in the Assets for at least five years following the Closing
Date or such longer period as may be required by law. Each of Seller
and Buyer agrees that before destroying or discarding any materials
required to be retained pursuant to this Subsection 5.16.3, it will
notify the other party in writing (which notice will include a
description of the materials to be destroyed or discarded) and such
other party may, at its expense, remove or make copies of such
materials within 90 days following the date of such written notice.
In the event the other party has not removed such materials within
such 90-day period, the party desiring to destroy or discard such
materials may proceed with such action without any liability to the
other party.
V.16.4 Legal Privileges. Seller acknowledges and agrees
that all attorney-client, work product and other legal privileges
that may exist with respect to the Assets or the Assumed Liabilities
shall, from and after the Closing Date, be deemed joint privileges of
Seller and Buyer. Both Buyer and Seller shall use all commercially
reasonable efforts after the Closing Date to preserve all such
privileges and neither Seller nor Buyer shall knowingly waive any
such privilege without the prior written consent of the other party
(which consent will not be unreasonably withheld or delayed).
Section V.17 Agreements Regarding Tax Matters.
V.17.1 Tax Returns. Seller and Buyer will each provide
the other party with such assistance as may reasonably be requested
in connection with the preparation of any Tax Return, audit or other
examination by any taxing authority or judicial or administrative
proceeding relating to liability for Taxes, will each retain and
provide to the other party all records and other information that may
be relevant to any such Tax Return, audit or examination, proceeding
or determination and will each provide the other party with any final
determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax
Return of the other party for any period. Without limiting the
generality of the foregoing, each of Buyer and Seller will retain,
until the expiration of the applicable statutes of limitation
(including any extensions thereof) copies of all Tax Returns,
supporting work schedules and other records relating to tax periods
or portions thereof ending on or prior to the Closing Date.
V.17.2 Tax Return Packages. Buyer will cause
appropriate Division employees and employees of LM Ordnance Systems
and AV Tech to prepare usual and customary Tax Return packages with
respect to the tax period beginning January1, 1996 and ending as of
the Closing Date. Buyer will use its commercially reasonable efforts
to cause such Tax Return packages to be delivered to Seller on or
before March 31, 1997, but in any event not later than May 31, 1997.
V.17.3 Payroll Records. Seller and Buyer agree that
Buyer has purchased substantially all of the property used in the
Divisions and that in connection therewith Buyer will employ
individuals who immediately before the Closing Date were employed in
such trade or business by Seller. Accordingly, pursuant to Rev.
Proc. 84-77, 1984-2 C.B. 753, provided that Seller makes available to
Buyer all necessary payroll records for the calendar year that
includes the Closing Date, Buyer will furnish a Form W-2 to each
employee employed by Buyer who had been employed by Seller,
disclosing all wages and other compensation paid for such calendar
year, and Taxes withheld therefrom, and Seller will be relieved of
the responsibility to do so.
V.17.4 Sale. Buyer and Seller agree that the
transactions contemplated by this Agreement constitute a sale of a
trade or business within the meaning of Section41(f)(3) of the Code.
Seller will provide to Buyer upon request all information necessary
in order to permit Buyer to apply the provisions of
Section41(f)(3)(A) of the Code.
V.17.5 Tax Refunds on Included Costs. If Seller
receives any Tax refund relating to the Divisions for periods prior
to the Closing Date and the Tax liability to which such refund
relates was included as a cost in a cost-reimbursement or fixed-price
incentive (cost-redeterminable) Government Contract, then Seller will
cooperate with Buyer to determine the appropriate portion of such Tax
refund due to any governmental entity as if Buyer had pursued and
obtained an identical Tax refund. Once the appropriate portion due
any governmental entity is determined, Seller will promptly remit to
Buyer such amount to be paid to such governmental entity in an
appropriate manner to be determined by Buyer. If Buyer is liable for
any taxes (net of any tax benefit to Buyer in making payment to the
governmental entity) as a result of such reimbursement by Seller,
Seller will also pay to Buyer such additional amounts required to pay
such taxes.
V.17.6 Tax Sharing Agreements With Subsidiaries. Any
tax sharing agreements between Seller and LM Ordnance Systems or AV
Tech will terminate as of the Closing Date and will have no further
effect for any taxable year (whether past, current or future).
V.17.7 Stub Period For Subsidiaries. Seller will
include the taxable income or loss of LM Ordnance Systems and AV Tech
(including any deferred income triggered into income under Treasury
Regulation Sections 1.1502-13 and 1.1502-14 and any excess loss
accounts taken into income under Treasury Regulation Section 1.1502-
9) on Seller's consolidated federal income Tax Returns for all
periods through the Closing Date and pay any federal income taxes
attributable to such income. The income of LM Ordnance Systems and
AV Tech will be apportioned through the period up to and including
the Closing Date and the period after the Closing Date by closing the
books of LM Ordnance Systems and AV Tech as of the Closing.
V.17.8 338(h)(10) Election. Buyer and Seller will join
in making an election under Sections 338(g) and 338(h)(10) of the
Code and any corresponding elections under state, local or foreign
law (collectively, a "Section 338(h)(10) Election") with respect to
the purchase of the shares of the capital stock of LM Ordnance
Systems by Buyer pursuant to this Agreement. Seller will pay any tax
attributable to the making of the Section 338(h)(10) Election and
will indemnify Buyer and its Affiliates (including LM Ordnance
Systems) from and against any tax liability or other adverse
consequences arising out of any failure to pay such tax. Seller will
also pay any state, local or foreign tax (and will indemnify Buyer
and its Affiliates (including LM Ordnance Systems) from and against
any tax liability or other adverse consequence arising out of any
failure to pay such tax) attributable to an election under state,
local or foreign law similar to the election available under Section
338(h) of the Code (or which results from the making of any election
under Section 338(h) of the Code) with respect to the purchase of the
shares of LM Ordnance Systems pursuant to this Agreement where the
state, local or foreign tax jurisdiction does not provide for or
recognize the Section 338(h)(10) Election.
Section V.18 Utilities. Buyer shall be responsible for all electric,
gas, telephone, water, sewer and similar utility charges relating to
the Divisions beginning on the Closing Date, and, with Seller's
assistance, shall make such arrangements with the utility service
providers prior to the Closing for Buyer to be charged directly for
utility services beginning on such date.
Section V.19 Seller Guarantees; Letters of Credit and Other
Obligations.
V.19.1 Assumption of Guarantees; Letters of Credit and
Other Obligations. Prior to, but effective as of, the Closing Date,
Buyer shall use its commercially reasonable efforts to assume (or
provide replacements thereof) (i) the obligations of Seller under any
guarantee, letter of credit, bond, or indemnity identified on
Schedule 5.19.1; (ii) the obligations as lender under the AV tech
Revolving Credit Agreement; and (iii) under any joint and several
obligation of Seller, relating to the Divisions and identified on
Schedule 5.19.1 delivered hereunder, so as to relieve Seller of all
liability with respect to such guarantees and other obligations, and
Buyer shall cooperate with Seller in making such arrangements;
provided however, that nothing in the foregoing shall require Buyer,
or allow Seller, to amend or modify the terms of any obligation of
Seller to be assumed by Buyer hereunder in any respect that would
provide for less favorable terms either to Seller or any subsequent
guarantor.
V.19.2 Demand for Payment. To the extent that Seller is
not relieved of liabilities with respect to guarantees and other
obligations pursuant to Subsection 5.19.1, if at any time after the
Closing Date, demand shall be made of Seller for payment under any
guarantee or other obligation identified on Schedule 5.19.1, Seller
shall notify Buyer in writing of such demand, and Buyer shall make
such payment on Seller's behalf in accordance with the requirements
of such guarantee or other obligation as specified in such notice.
Failing such payment by Buyer, Seller shall make such payment and
Buyer shall promptly, upon Seller's written demand, reimburse Seller
without right of recourse or set off, for the full amount of such
payment, plus interest from the date of such payment by Seller to the
date of reimbursement by Buyer, at the publicly-announced base
interest rate of Citibank, N.A., New York, New York, in effect from
time to time during such period, plus 500 basis points.
Section V.20 Name and Marks.
V.20.1 Buyer's Obligations. Buyer acknowledges and
agrees that by this Agreement it is obtaining no rights or licenses
with respect to the name "Lockheed ▇▇▇▇▇▇", "Lockheed", "▇▇▇▇▇▇
▇▇▇▇▇▇▇▇" or any derivative thereof or genesis therefrom, or to the
Lockheed ▇▇▇▇▇▇ logo or trade dress, or to any other names,
trademarks or logos owned by or associated with Seller or its
affiliates. To that end, as soon as practicable after Closing but no
later than 180 days after the Closing Date, Buyer shall remove and
change signage, change and substitute promotional and advertising
material in whatever medium, change stationery and packaging and take
all such other steps as may be required or appropriate to indicate
that there no longer exists any connection or relationship between
Seller and its affiliates on the one hand, and the Assets and Assumed
Liabilities on the other; provided however that nothing herein shall
obligate Buyer to change or copy over any engineering drawings,
prints or copies of correspondence, invoices and other documents
prepared prior to the Closing Date or to replace or alter any tools
or dies included in the Assets.
V.20.2 Seller's Obligations. Seller shall cease all use
of the names and trademarks conveyed to Buyer under this Agreement
from and after the Closing Date.
Section V.21 Notice to Buyer. Throughout the period between the date
of this Agreement and the Closing, Seller shall promptly notify Buyer
in writing of any event or development known to Seller and materially
affecting the business, results of operations or financial condition
of either of the Divisions taken as a whole, any item or matter which
would constitute a breach of the representations and warranties of
Seller contained in this Agreement or affecting the ability of the
parties to consummate the transaction contemplated by this Agreement.
Subject to Seller's right to supplement and update the Schedules
delivered hereunder pursuant to Subsection 5.24.2 herein, no such
notice of a material development will be deemed to have amended such
Schedules, to have qualified the representations and warranties
contained herein and to have cured any misrepresentations or breach
of warranty that otherwise might have existed hereunder by reason of
such material development.
Section V.22 Further Assurances. From time to time after the
Closing, the parties agree that each shall, at their own expense,
execute and deliver, or cause to be executed and delivered, such
documents and instruments of title as may be reasonably requested by
the other in order more effectively to consummate the transactions
contemplated by this Agreement.
Section V.23 Public Announcements. Prior to Closing, Seller and
Buyer will consult with each other in good faith before issuing any
press release or otherwise making any public statement with respect
to this Agreement and the transactions contemplated hereby, shall
endeavor to provide each other with a copy in advance of filing or
public disclosure of any document, written release or periodic report
on Form 8-K or Form 10-Q which discusses the transactions
contemplated hereby.
Section V.24 Schedules.
V.24.1 Interpretation. Matters reflected on the
Schedules delivered hereunder are not necessarily limited to matters
required by this Agreement to be reflected in such Schedules. Any
such additional matters are set forth for informational purposes and
do not necessarily include other matters of a similar nature.
Disclosures relating to pending or threatened litigation, violations
of law and similar liabilities of the Divisions contained in any of
the Schedules delivered hereunder constitute disclosures for all
Schedules to the extent this Agreement requires such disclosure. The
exhibits and attachments to the Schedules form an integral part of
the Schedules and are incorporated by reference for all purposes as
if set forth fully therein.
V.24.2 Delivery. Prior to the date hereof, Seller has
delivered to Buyer, and Buyer has received to its satisfaction,
Schedules 1.4.2, 2.4.1, 2.4.6(b), 3, 3.4.1, 3.12 and 3.13.1. No
later than 25 business days after the date of this Agreement, Seller
shall deliver to Buyer the remaining Schedules referenced herein,
together with such supplements or amendments to Schedules 3.12 and
3.13.1 previously delivered as may be required to update such
Schedules. After delivery of the remaining Schedules, and any
supplements or amendments to Schedules 3.12 and 3.13.1 previously
delivered, Seller shall be entitled further to supplement or amend
any Schedule only if required to update such Schedule to reflect
events or occurrences after the date of delivery of the remaining
Schedules. In the event that any item included on any Schedule
delivered after the date hereof, or any supplement or amendment
thereto or to the Schedules previously delivered, reveals any facts
or circumstances which, in the reasonable opinion of Buyer, reflect
in a material adverse way on the Assets, or the Assumed Liabilities,
or the results of operations or financial condition of either of the
Divisions, or Buyer's ability to conduct the business of either
Division immediately following the Closing substantially as such is
presently conducted, Buyer may, by written notice to Seller within 5
business days after delivery of the remaining Schedules, or such
amendments or supplements as contemplated herein, terminate this
Agreement.
Section V.25 Exclusivity. During the period from the date of this
Agreement until the date of termination of this Agreement pursuant to
Section 9.1 of this Agreement, Seller will not solicit, initiate or
encourage the submission of any proposal or offer from any person, or
negotiate any unsolicited offer or proposal, relating to any
(a)liquidation, dissolution or recapitalization, (b)merger or
consolidation, (c)acquisition or purchase of securities or assets or
(d)similar transaction or business combination involving either
Division. Seller will notify Buyer promptly if any person makes any
proposal, offer, inquiry or contact with respect to any of the
foregoing.
Section V.26 Five Year Limited Non-Compete.
V.26.1 Non-Compete. Subject to Subsection 5.26.2
herein, for a period of five years from and after the Closing Date,
neither Seller nor any of its affiliates shall engage directly or
indirectly in the development, production, sale or support of tracked
or wheeled combat land vehicles, tracked or wheeled combat
land/amphibious vehicle turrets, turret drives or transmissions for
tracked or wheeled combat land vehicles, or conventional ordnance or
conventional munitions, in each case of the types being sold or
actively developed by the Divisions as of the Closing Date. The
foregoing covenant shall not prohibit Seller or its affiliates from
(a) engaging in any business conducted by them as of the date of this
Agreement other than through the Divisions (including any
derivatives, upgrades or improvements to products or services
currently offered by, or under active development by, Seller or its
affiliates other than through the Divisions), (b) acting as a
subsystem or subcomponent developer, producer, supplier or supporter
to any developer, producer, supplier or supporter of any of the
aforementioned products or systems, (c) acting as a prime contractor
for the development, production or supply for any of the
aforementioned vehicular products, provided that Seller or its
affiliates offer to subcontract to Buyer or its affiliates the
development, production or supply of the vehicle frame, chassis,
passive armor, transmission and drive train, (d) engaging in any
business providing general military base or military installation
support or maintenance services to the United States, any foreign
military or a national guard, (e) acting as a developer, producer,
supplier or supporter of any guidance systems or products, or smart
weapon systems or products (exclusive of the conventional ordnance or
conventional munitions portion thereof), (f) acting as a developer,
producer, supplier or supporter of any indirect fire systems (or
vehicles as to which indirect fire systems are an integral part)
other than conventional cannons, or (g) competing as a prime
contractor on the U.S. Army's Future Scout Vehicle Program or the
U.K. Ministry of Defence's Tracer Program in accordance with clause
(c), above.
V.26.2 Investment; Acquisition Exceptions.
Notwithstanding the provisions of Subsection 5.26.1, nothing herein
shall prohibit Seller or its affiliates from:
(a) Acquiring no more than five percent of the voting
securities of any person or entity engaged in any of the businesses
prohibited to Seller and its affiliates by Subsection 5.26.1;
(b) Acquiring any non-voting securities of any person
or entity engaged in any of the businesses prohibited to Seller and
its affiliates by Subsection 5.26.1;
(c) Acquiring assets or securities from, or
effectuating a merger, business combination, reorganization, exchange
or recapitalization with, any person or entity (collectively, a
"Transaction") where an effect of the Transaction would be to cause
Seller or its affiliates to own or control directly or indirectly one
or more businesses having collectively gross annualized revenues of
$100,000,000 or less, and where an effect of such ownership or
control would otherwise cause Seller or its affiliates to be in
noncompliance with Subsection 5.26.1; or
(d) Consummating a Transaction where an effect thereof
would be to cause Seller or its affiliates to own or control directly
or indirectly one or more businesses having collectively gross
annualized revenues in excess of $100,000,000, and where an effect of
such ownership or control would otherwise cause Seller or its
affiliates to be in noncompliance with Subsection 5.26.1; provided
that Seller or its affiliates (as applicable) offer to sell and
assign such assets (and associated liabilities) obtained and assumed
in such Transaction for cash to Buyer or its affiliates within 90
days of the consummation of the Transaction at the fair market value
of such assets (and associated liabilities) with the benefit of
substantially similar representations, warranties and indemnification
periods from the prior owner of such business(es) as are received by
Seller in such Transaction. For purposes of determining the fair
market value of such assets (and associated liabilities), Buyer and
Seller or their representatives shall meet within 15 days of the date
such offer is made and attempt mutually to determine in good faith
such fair market value. If Buyer and Seller are unable to determine
the fair market value mutually acceptable within 20 days after their
initial meeting, Buyer and Seller shall mutually engage (and share
equally in the fees and expenses of) an investment banking firm to
determine within 20 days of such firm's engagement the fair market
value of such assets (and associated liabilities), which
determination shall be binding upon Buyer and Seller for purposes of
Seller's offer to Buyer as contemplated herein. Seller shall not be
obligated to keep such offer open to Buyer more than 20 days after
final determination of the fair market value of such assets (and
associated liabilities), and Buyer shall, if it accepts such offer,
be obligated to consummate its purchase of such assets and its
assumption of the associated liabilities within 75 days of such
acceptance, otherwise Seller and its affiliates shall be permitted to
keep and operate, or divest, such assets (and associated liabilities)
in Seller's sole discretion.
V.26.3 Remedies. Seller acknowledges that in the event
of its or its affiliates' breach of the covenants contained in this
Section 5.26, money damages would be an inadequate remedy.
Accordingly, without prejudice to the rights of Buyer also to seek
such damages or other remedies available to it, Buyer may seek, and
Seller shall not contest the appropriateness of the availability of,
injunctive or other equitable relief in any proceeding which Buyer
may bring to enforce the covenants contained in this Section 5.26 in
its express and explicit terms. No waiver of any breach of the
covenants contained in this Section 5.26 shall be implied from
forbearance or failure of Buyer to take action in respect thereof.
V.26.4 Severability. Seller and Buyer agree that, if
any provision of this Section 5.26 should be adjudicated to be
invalid or unenforceable, such provision shall be deemed deleted
herefrom with respect, and only with respect, to the operation of
such provision in the particular jurisdiction in which such
adjudication was made. To the extent any such provision may be valid
and enforceable in such jurisdiction by limitations on the scope of
the activities, geographical area or time period covered, Buyer and
Seller agree that such provision instead shall be deemed limited to
the extent, and only to the extent, necessary to make such provision
enforceable to the fullest extent permissible under the laws and
public policies in such jurisdiction.
Section V.27 No Defaults. Seller will not commit or omit to take any
act that will cause a termination of or material breach or default
under any material contract, commitment or obligation to which Seller
is a party or by which its assets are bound relating to the
Divisions, including the Contracts identified on Schedule 3.11.1.
Section V.28 Compliance With Laws. Seller will use commercially
reasonable efforts to comply in the operation of the Divisions in all
material respects with all material laws applicable to the Divisions
or the Assets or as may be required for the valid and effective
transfer to Buyer of the Assets.
Section V.29 Confidential Information. For a period of five years
after the Closing Date, Seller and its affiliates will treat and hold
as such, and will not use for the benefit of themselves or others,
any confidential information concerning the operations or affairs of
the Divisions. In the event Seller or any of its affiliates is
requested or required (by oral request or written request for
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose
any such confidential information, then Seller will notify Buyer
promptly in writing of the request or requirement so that Buyer may
seek an appropriate protective order or waive compliance with this
Section 5.29. If, in the absence of a protective order or receipt of
a waiver hereunder, Seller or any of its affiliates is, on the advice
of counsel, compelled to disclose any confidential information
concerning the operations or affairs of the Divisions to any
governmental entity or else stand liable for contempt, then Seller or
its affiliate may disclose such confidential information to such
governmental entity, provided that Seller or such affiliate will use
its reasonable efforts to obtain at the request of Buyer an order or
other assurance that confidential treatment will be accorded to such
confidential information. The provisions of this Section 5.29 will
not be deemed to prohibit the use of confidential information
concerning the operations or affairs of the Divisions by Seller to
the extent reasonably required to prepare any required Tax Returns or
financial statements or in connection with routine governmental
audits of corporate overhead expenses.
Section V.30 Solicitation of Employees. For a period of two years
from and after the Closing Date, Seller will not, and will not cause
or permit any of its affiliates to, solicit the employment of any
executive, technical or engineering Employee employed by the
Divisions, provided however, that the foregoing shall not apply to
responses to or follow-up hiring in respect of general solicitations
or advertisements for job positions not specifically directed to
Employees of the Divisions.
Section V.31 Real Property. Buyer has obtained a title report to for
each parcel of Real Property from a nationally recognized title
company, which report is accompanied by a title commitment suitable
for the purchase by Buyer at its discretion and expense of title
insurance from and after the Closing Date. The title report and
related title commitment shall comprise Schedule 5.31 delivered
hereunder.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Section VI.1 Conditions. The obligations of Buyer under this
Agreement to perform Articles I and II herein shall be subject to the
fulfillment, to its reasonable satisfaction, on or prior to the
Closing Date, of all of the following conditions precedent:
VI.1.1 Representations and Warranties Accurate. All
representations and warranties of Seller contained in Article III
herein shall be true in all material respects at and as of the
Closing Date as if such representations and warranties were made at
and as of the Closing Date (except (i) that representations and
warranties that are made as of a specific date need be true in all
material respects only as of such date, and (ii) as contemplated or
permitted by this Agreement, to change between the date of this
Agreement and the Closing Date).
VI.1.2 Performance by Seller. Seller shall have
performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date.
VI.1.3 Certificates. Buyer shall have received from
Seller a certificate, dated the Closing Date, signed on behalf of a
duly authorized officer of Seller, respectively, to the effect that
the conditions set forth in Subsections 6.1.1 and 6.1.2 herein have
been satisfied.
VI.1.4 Resignations. Seller shall have obtained and
delivered to Buyer written resignations, to become effective as of
the Closing Date, from each of the directors and officers of LM
Ordnance Systems and from each of the managers of AV Tech designated
by Seller;
VI.1.5 AV Tech Interest. Seller shall have obtained the
consent of the minority members of AV Tech with respect to the
transfer of the AV Tech Interest to Buyer as contemplated hereunder
to the extent such consent is required by the AV Charter Documents.
VI.1.6 Real Property; Material Facility Leases.
(a) Buyer shall have obtained a survey for each parcel
of Real Property, which surveys shall be prepared in accordance with
the 1992 ALTA/ACSM standards, and such survey shall not reveal the
existence of any fact, encumbrance, restriction or condition that
would, if not corrected by Seller prior to the Closing, materially
impair immediately following the Closing Buyer's use of the affected
parcel of Real Property consistent with Seller's and the LMAS
Division's current use thereof.
(b) Buyer shall have received, to its reasonable
satisfaction, an estoppel certificate or consent to assignment or
assumption (i) from GE that would permit Buyer to assume the Facility
Lease(s) of the LMDS Division for the properties leased from GE in
Pittsfield, MA, and (ii) from the landlords under those Facility
Leases relating to the properties currently used by the LMDS Division
located in Dalton, MA and Balston Spa, NY, and at the Apple Tree
Radar Range, that would permit Buyer to assume such Facility Leases,
to the extent that the lack of any such estoppel certificate or
consent in respect of any such Facility Lease would materially impair
Buyer's operation of the LMDS Division immediately after Closing.
VI.1.7 Authorizations.
(a) All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(b) All authorizations, approvals, consents and waivers
of third parties (the lack of which prior to the Closing, under any
applicable law, rule or regulation, would render legally
impermissible the transfer of a material portion the Assets, or would
have a material adverse effect on the business, results of
operations or financial condition of either of the Divisions) shall
have been obtained.
(c) Buyer shall have received by valid assignment from
Seller or by reissuance in Buyer's name by the applicable
governmental entities all material Permits reasonably required by
Buyer to operate the business of the Divisions substantially as
presently conducted. For the avoidance of doubt, this Subsection
6.1.7(c) shall not apply to the novation of Government Contracts.
(d) There shall not have been filed any action, suit or
proceeding of reasonable merit which remains pending as of the
Closing Date before any court or administrative agency wherein an
unfavorable judgment, order or decree would (i) prevent the
consummation of any of the transactions contemplated by this
Agreement or cause any such transaction to be rescinded after
consummation or (ii) affect materially and adversely the right of
Buyer after the Closing Date to operate the business of the Divisions
substantially as presently operated (and no such judgment, order or
decree shall be in effect).
Section VI.2 Waiver. Buyer may, at its sole discretion, waive in
writing fulfillment of any or all the conditions set forth in Section
6.1 of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Section VII.1 Conditions. The obligations of Seller under this
Agreement to perform Articles I and II herein shall be subject to the
fulfillment, to its reasonable satisfaction, on or prior to the
Closing Date, of all of the following conditions precedent:
VII.1.1 Representations and Warranties Accurate. All
representations and warranties of Buyer contained in Article IV
herein shall be true in all material respects at and as of the
Closing Date as if such representations and warranties were made at
and as of the Closing Date.
VII.1.2 Performance by Buyer. Buyer shall have
performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date.
VII.1.3 Certificates. Seller shall have received from
Buyer a certificate, dated the Closing Date, signed on behalf of a
duly authorized officer of Buyer, to the effect that the conditions
set forth in Subsections 7.1.1 and 7.1.2 herein have been satisfied.
VII.1.4 AV Tech Interest. Seller shall have obtained
the consent of the minority members of AV Tech with respect to the
transfer of the AV Tech Interest to Buyer as contemplated hereunder
to the extent such consent is required by the AV Charter Documents.
VII.1.5 Authorizations.
(a) All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(b) All authorizations, approvals, consents and waivers
of governmental authorities and third parties (the lack of which
prior to the Closing, under any applicable law, rule or regulation,
would render legally impermissible the assignment of the Assumed
Liabilities) shall have been obtained.
(c) There shall not have been filed any action, suit or
proceeding of reasonable merit which remains pending as of the
Closing Date before any court or administrative agency wherein an
unfavorable judgment, order or decree would (i) prevent the
consummation of any of the transactions contemplated by this
Agreement or cause any such transaction to be rescinded after
consummation, (ii) affect materially and adversely the right of Buyer
after the Closing Date to operate the business of the Divisions
substantially as presently operated (and no such judgment, order or
decree shall be in effect) or (iii) prevent the assumption by Buyer
of the Assumed Liabilities.
Section VII.2 Waiver. Seller may, at its sole discretion, waive in
writing fulfillment of any or all of the conditions set forth in
Section 7.1 of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section VIII.1 Survival of Representations and Warranties. All
representations and warranties contained in Articles III and IV
herein shall survive the Closing and shall remain in full force and
effect until the second anniversary of the Closing Date, provided
however that (a) the representations and warranties contained in
Sections 3.1 and 4.1 (Organization; Capitalization), 3.2
(Qualifications), 3.3 and 4.2 (Authorization), 3.6.1(a) and 3.6.2(a)
(Title), and 3.20 and 4.8 (Brokers) shall survive the Closing and
shall remain in full force and effect until the seventh anniversary
of the Closing Date, (b) that the representations and warranties
contained in Section 3.14 (Taxes) or 3.15.3 (ERISA), shall survive
the Closing and shall remain in full force and effect until 30 days
after the expiration of the applicable statute of limitations with
respect to the matter to which the claim relates, as such limitation
period may be tolled from time to time, and (c) the representations
and warranties contained in Section 3.12 (Government Contracts) and
Section 3.16.4 (Environmental Matters) shall survive the Closing and
shall remain in full force and effect, respectively, until the fourth
and eighth anniversaries of the Closing Date.
Section VIII.2 General Indemnity.
VIII.2.1 Coverage. After the Closing Date, Seller and
Buyer (in either case, an "Indemnitor") shall each indemnify and hold
harmless the other, each of their respective affiliates (including LM
Ordnance Systems and AV Tech), and each of their and their
affiliates' respective directors, officers, employees and agents (the
"Indemnified Parties") to the extent provided in this Section 8.2
from and against any and all losses, damages, liabilities, claims,
demands, judgments, settlements, reasonable costs and expenses
(including reasonable attorneys', accountants' and experts' fees and
expenses but excluding opportunity costs or lost profits), with such
amounts to be determined net of any Tax refund, credit or other
reduction in Taxes actually received or realized by the Indemnified
Party and any reimbursement or other refund of any portion of such
amounts actually received or realized by the Indemnified Party,
including without limitation reimbursement by way of insurance, third
party indemnification or the actual recovery of such amounts (or
portions thereof) as reimbursable costs under any cost-type, flexibly-
priced or fixed price contract for the provision of goods or services
to the United States government (collectively, "Losses") resulting
from or arising out of:
(a) any breach of any representation or warranty (or in
the event that a third party alleges facts that, if true, would
constitute a breach of any representation or warranty) of the
Indemnitor contained in Article III or IV, as applicable;
(b) the nonperformance, partial or total, of any
covenant or agreement of the Indemnitor contained in this Agreement;
in either case to the extent not waived by the Indemnified Parties;
(c) in the case where Buyer is the Indemnitor, the
Indemnitor's failure to perform or in due course pay and discharge
any Assumed Liability; and
(d) in the case where Seller is the Indemnitor, the
Indemnitor's failure to perform or in due course pay and discharge
any Excluded Liability.
Notwithstanding the above, neither Buyer nor Seller shall be
obligated to indemnify an Indemnified Party for punitive or exemplary
damages except to the extent such damages are assessed in connection
with a third party claim with respect to which the party against
which such damages are assessed is entitled to indemnification
hereunder. Except as expressly provided in Section 8.4, Buyer shall
not be obligated to seek to recover any Losses as reimbursable costs
under any Government Contract or to include any Losses as costs in
its corporate overhead expenses or forward pricing rates as a
condition to obtaining indemnification from Seller pursuant to this
Agreement. In the event Seller is entitled to indemnification under
Section 8.2.1(c) with respect to any Assumed Liability, Seller will
be entitled to be indemnified against the entirety of the Losses
arising out of or relating to such Assumed Liability notwithstanding
the fact that such Assumed Liability may also constitute a breach of
Buyer's representations and warranties set forth in this Agreement.
In the event Buyer is entitled to indemnification under Subsection
8.2.1(d) with respect to any Excluded Liability, Buyer will be
entitled to be indemnified against the entirety of the Losses arising
out of or relating to such Excluded Liability notwithstanding the
fact that such Excluded Liability may also constitute a breach of
Seller's representations and warranties set forth in this Agreement.
VIII.2.2 Limitation. For purposes solely of Subsection
8.2.1(a) (and not with respect to any other provision relating to
indemnification in this Agreement):
(a) No indemnification shall be required in respect of
any misrepresentation or breach of representation or warranty by
Seller (other than claims with respect to Sections 3.1, 3.2, 3.3 and
3.20 herein) with respect to either Division unless the aggregate of
all amounts for which indemnity would otherwise be due with respect
to such Division exceeds $2.5 Million in which case Seller shall be
responsible only for such indemnifiable amount in excess of $2.5
Million, and no indemnification shall be required with respect to
such Division (other than claims made with respect to Sections 3.1,
3.2, 3.3 and 3.20 herein) as to any amounts in excess of $25 Million;
and
(b) Neither Seller nor Buyer shall be entitled to make
any claim for indemnification under Subsection 8.2.1(a), with respect
to the breach of any particular representation and warranty contained
herein, after the date on which such representation and warranty
ceases to survive pursuant to Section 8.1 herein; provided however,
that, if prior to the date on which such representation and warranty
ceases to survive, the Indemnitor shall have received written
notification of a claim for indemnity hereunder specifying in
reasonable detail the basis of any such claim, and such claim shall
not have been finally resolved or disposed of at such date, such
claim shall continue as a basis for indemnity until it is finally
resolved or disposed of, subject to applicable statutes of limitation
which shall continue to run in all circumstances absent the written
consent of the Indemnitor to toll the applicable limitations period.
Section VIII.3 Environmental Matters.
VIII.3.1 Environmental Liabilities. On and after the
Closing Date, and subject to the further provisions of this Section
8.3, Buyer shall assume, perform, pay and discharge all liabilities,
obligations, claims, fines, penalties, judgments, injunctions and
orders in respect of the Divisions, the Assets and the operation and
affairs of the Divisions and Assets prior to the Closing, which
relate to, are based upon or arise from or are in connection with the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act, the Solid Waste
Disposal Act, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Water Act, the Clean Air Act, the
Safe Drinking Water Act, the National Environmental Policy Act of
1969, the Superfund Amendments and Reauthorization Act of 1986, Title
III of the Superfund Amendments and Reauthorization Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the provisions of the
Occupational Safety and Health Act of 1970 relating to the handling
of and exposure to hazardous or toxic materials and similar
substances, and any other federal, state or local environmental laws,
ordinances, permits, rules or regulations, or any such laws,
ordinances, permits, rules or regulations concerning hazardous or
toxic substances or materials including without limitation petroleum
and petroleum by-products, asbestos and PCBs, as in effect as of the
Closing Date or as thereinafter may be amended or superseded
(collectively, the "Environmental Laws"), including without
limitation any and all Proceedings and items of compliance,
correction, contamination, cleanup, removal and remediation, relating
to the Environmental Laws, whether such liabilities, obligations,
claims, fines, penalties, judgments, injunctions and orders are made
or imposed or have been made or imposed by any federal, state or
local governmental agency or authority or by any private party, and
whether or not such claims, liabilities or obligations were accrued,
liquidated, contingent, or known or unknown to Seller at or prior to
the Closing;
VIII.3.2 Indemnity. For a period of twenty (20) years
following the Closing Date should Buyer:
(a) actually pay any judgments, claims, fines or
penalties or incur reasonable costs and expenses in the defense of
any action (i) arising under the Environmental Laws then in force and
(ii) relating to a condition, act or omission that existed, occurred
or failed to occur prior to the Closing in connection with the
Divisions (an "Environmental Penalty"); or
(b) actually pay any judgments, claims, fines or
penalties or incur reasonable costs and expenses in the defense of
any actions alleging wrongful exposure prior to the Closing to any
Hazardous Materials in connection with the Divisions (the payments,
costs and expenses contemplated by this paragraph (b) being
collectively "Exposure Costs");
(c) actually incur reasonable costs or fees for the
services of attorneys, consultants, experts and laboratories in
connection with the investigation, characterization, remediation or
mitigation (including the preparation of feasibility studies or
reports and the performance of clean-up, remediation, removal,
abatement, elimination, containment, restoration or monitoring work)
(collectively, "Remediation") of Hazardous Materials on or under the
Real Property or the real property subject to the Facility Leases or
the GOCO Management Contracts where such Remediation (i) related to
Hazardous Materials to the extent such Hazardous Materials were on or
under the Real Property or such other real property on the Closing
Date and (ii) is required by an Environmental Law then in force or by
order of a governmental entity or is otherwise necessary to allow
Buyer to make use of the Real Property or such other real property in
a manner consistent with its use by Seller immediately prior to the
Closing Date (the costs and fees contemplated by this paragraph (c)
being collectively referred to as "Remediation Costs"), then, to the
extent that such Environmental Penalty, Exposure Costs or Remediation
Costs, net of any third party indemnification or insurance recovery
actually received by Buyer with respect thereto, and net of any Tax
refund, credit or other Tax benefit actually received or realized by
Buyer with respect thereto (x) are not directly paid or reimbursed
under one or more government owned, contractor operated facility
contracts (including without limitation any of the GOCO Management
Contracts) for which Buyer shall use commercially reasonable efforts
to seek recovery, or (y) are not recovered by Buyer under one or more
prime or subcontracts (for which recovery may be sought by Buyer in
its sole discretion) providing for the provision of goods or services
to the United States government and to which Buyer or any of its
affiliates may be a party (including without limitation any of the
Government Contracts), and (z) exceed $10,000,000 (the "Excess
Environmental Costs"), and subject to the remaining provisions of
this Section 8.3, Seller shall indemnify Buyer for sixty percent
(60%) of such Excess Environmental Costs within thirty (30) days of
delivery by Buyer to Seller of a statement (certified thereto for
accuracy and completeness by Buyer's Chief Financial Officer and
Buyer's Senior Executive whose primary responsibility is compliance
with Environmental Laws) setting forth in reasonable detail the basis
for the initial $10,000,000 expenditure and the amounts representing
such Excess Environmental Costs.
VIII.3.3 Procedure; Remediation. Until such time as
Subsection 8.3.2 is no longer in effect, Buyer will notify Seller in
writing before commencing any Remediation and shall select attorneys,
consultants, experts and laboratories to perform such Remediation of
recognized standing and competence in consultation with Seller.
Buyer shall pursue such Remediation as if all Remediation Costs were
for its own account and shall act in good faith and with reasonable
prudence to minimize such Remediation Costs. Buyer and Seller agree
that Buyer shall direct and control such Remediation but that Buyer
shall permit Seller and its representatives at Seller's expense the
right to participate fully in, but not vote with respect to, all
decisions regarding any Remediation, including affording Seller and
its representatives reasonable access to any site where Remediation
is being conducted, reasonable access to all documents, data,
reports, correspondence, samples (and will provide duplicate samples
to Seller on Seller's request) or information regarding the
Remediation and reasonable access to employees of Buyer and Buyer's
attorneys, consultants, experts and laboratories with knowledge of
relevant facts concerning the Remediation, and the right to attend
all meetings and participate in any telephone conference with any
government agency or third-party regarding the Remediation. Seller's
right to receive information and participate in decisions regarding
Remediations pursuant to this Subsection 8.3.3 shall not be construed
to require Seller's consent to any Remediation activities undertaken
by Buyer in accordance with this Subsection. If Buyer fails to allow
Seller to participate fully in a Remediation as contemplated by this
paragraph, then Buyer will not be entitled to any indemnity with
respect to the Remediation Costs related to such Remediation nor
shall such Remediation Costs be included in any calculation of Excess
Environmental Costs.
VIII.3.4 Procedure, Environmental Penalties. Until such
time as Subsection 8.3.2 is no longer in effect, Buyer will provide
Seller prompt notice of the assertion of any claim or the
commencement of any suit, action or proceeding which may result in
any Environmental Penalty, Exposure Costs or Remediation Costs in
accordance with the provisions of Subsection 8.5.1(a) herein and if
it is not likely that the matter, if decided adversely to Buyer, will
result in Excess Environmental Cost, Buyer shall assume the defense
and control of such matter, but shall allow Seller a reasonable
opportunity to participate in the defense thereof with its own
counsel and at its own expense. Buyer shall select counsel of
recognized competence and standing reasonably acceptable to Seller.
In conducting the defense thereof, Buyer shall at all times act as if
all Environmental Penalties, Exposure Costs and Remediation Costs
were for its own account and shall act in good faith and with
reasonable prudence to minimize such Environmental Penalties,
Exposure Costs and Remediation Costs. Alternatively, if it is or
becomes likely that the matter, if decided adversely to Buyer, would
result in Excess Environmental Costs, then Seller may assume the
defense of such matter in accordance with the provisions of
Subsection 8.5.1(b) herein.
VIII.3.5 Final Assumption. Buyer shall be liable for
any Environmental Penalty, Exposure Costs and Remediation Costs
incurred from and after the twentieth anniversary of the Closing
Date.
VIII.3.6 Definition. For purposes of this Section 8.3,
the term "Hazardous Materials" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste
or other toxic substance that is defined, determined or identified as
hazardous or toxic under Environmental Law or the release of which is
prohibited under any Environmental Law. Without limiting the
generality of the foregoing, such term shall include petroleum,
petroleum products and by-products and asbestos.
Section VIII.4 Certain Claims. From and after the Closing Date,
Buyer shall use commercially reasonable efforts to recover from the
United States government on the GOCO Management Contract for LM
Ordnance Systems at Milan, TN, or any successor contract thereto, any
Losses incurred by Buyer, LM Ordnance Systems or their affiliates
relating to or arising from any claims or causes of action referred
to in Subsections 1.3.9 and 5.12.6(b) herein, or relating to or
arising from the "29 Palms" litigation referred to in Schedule
3.13.1, and to the extent such Losses are not recovered from the
United States government by Buyer, LM Ordnance Systems or their
affiliates, Seller shall fully indemnify and hold harmless Buyer, LM
Ordnance Systems and their affiliates from and against such
unrecovered Losses net of any Tax refund, credit or other reduction
in Taxes actually received or realized by Buyer, LM Ordnance Systems
or their affiliates.
Section VIII.5 Claims Procedure.
VIII.5.1 Notice; Defense. For the purposes of
administering the indemnification provisions of this Agreement, the
following procedures shall apply from and after the Closing Date:
(a) Each Indemnified Party shall notify the Indemnitor
in writing within 30 days following the receipt of notice of the
commencement of any action or proceeding or within 60 days of (i) the
assertion of any claim against such Indemnified Party or (ii) the
discovery by such Indemnified Party of any Loss, giving rise to
indemnity pursuant to this Agreement (any 30 or 60 day notification
requirement shall begin to run, in the case of a claim which is
amended so as to give rise to a right to indemnification hereunder,
from the first day such claim is amended to include any claim which
relates to a right of indemnification hereunder) and shall indicate
in such notification whether such Indemnified Party is requesting
indemnification with respect to such indemnification event. The
failure to give notice as required by this Subsection 8.5.1(a) in a
timely fashion shall not result in a waiver of any right to
indemnification hereunder except to the extent that the Indemnitor's
ability to defend against the event with respect to which
indemnification is sought is materially adversely affected by the
failure of the Indemnified Party to give notice in a timely fashion
as required by this Subsection 8.5.1(a);
(b) After notification is given as aforesaid, the
Indemnitor shall be entitled (but not obligated, except with respect
to Assumed Liabilities, as to which Buyer shall be so obligated and
the Excluded Liabilities, as to which Seller shall be so obligated)
to assume the defense or settlement of any such action or proceeding,
or to participate in any negotiations or proceedings to settle or
otherwise eliminate any claim; provided however that in the event the
Indemnitor assumes any such defense or settlement or any such
negotiations, it shall actively pursue such defense, settlement or
negotiations in good faith. If the Indemnitor fails to elect in
writing within 10 business days after the notification referred to
above to assume the defense, the Indemnified Party may engage counsel
to defend, settle or otherwise dispose of such action or proceeding;
(c) In cases where the Indemnitor has assumed the
defense or settlement with respect to an indemnification event, the
Indemnitor shall be entitled to assume the defense or settlement
thereof with counsel of its own choosing, which counsel shall be
reasonably satisfactory to the Indemnified Party, provided that the
Indemnitor's right to settle, compromise, decline to appeal, or
otherwise dispose of any such action, proceeding or claim shall be
subject to the provisions of Subsection 8.5.2;
(d) In any case in which the Indemnitor assumes the
defense or settlement thereof, the Indemnified Party shall be
entitled to participate at its own cost in any such action or
proceeding or in any negotiations or proceedings to settle or
otherwise eliminate any claim for which indemnification is being
sought and shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the employment of such
counsel shall have been authorized in writing by the Indemnitor in
connection with the defense of such suit, action, claim or
proceeding, (ii) the Indemnitor shall not have employed counsel
(reasonably satisfactory to the Indemnified Party) to take charge of
the defense of such action, suit, claim or proceeding within 10
business days after notice of commencement of the action, suit, claim
or proceeding, or (iii) such Indemnified Party shall have reasonably
concluded that there may be defenses available to it which are
different from or additional to those available to the Indemnitor
which, if the Indemnitor and the Indemnified Party were to be
represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the
events specified in clauses (ii) or (iii) of the preceding sentence
shall have occurred or shall otherwise be applicable, then the
reasonable fees and expenses of one counsel or firm of counsel
selected by the Indemnified Party shall be borne by the Indemnitor
and, in the event of clause (iii), such counsel shall be reasonably
acceptable to the Indemnitor. In no event shall an Indemnitor be
liable to any Indemnified Party for the cost of employing or using in-
house legal counsel regardless of whether such Indemnitor has, or has
not, assumed the defense or settlement of such action, proceeding or
claim;
(e) In the event indemnification is requested, the
relevant Indemnitor, its representatives and agents shall have access
to the premises, books and records of the Indemnified Party or
parties seeking such indemnification to the extent reasonably
necessary to assist it in defending or settling any action,
proceeding or claim; provided however that such access shall be
conducted in such manner as not to interfere unreasonably with the
operation of the business of the Indemnified Party or parties and
shall only take place in the presence of a representative of the
Indemnified Party or parties unless otherwise so agreed and the
Indemnified Party shall not be required to disclose any information
with respect to itself or any of its affiliates or former affiliates,
and shall not be required to participate in the defense of any claim
to be indemnified hereunder (except as otherwise expressly set forth
herein), unless such disclosure or participation is otherwise
required or reasonably necessary in the defense of any claim to be
indemnified hereunder; and
(f) Any amount which is required to be paid by an
Indemnitor to any party, including any reimbursement to which the
Indemnified Party is entitled, shall be paid by such Indemnitor
promptly.
VIII.5.2 Settlement. Any Indemnified Party shall give
written notice to the Indemnitor of any proposed settlement of any
third party claim. The Indemnitor shall have the right to settle any
claim for which indemnification has been sought hereunder, subject to
the consent or agreement of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed); provided that if the
terms of the settlement provide only for payment of monies and do not
provide for any agreement to act or refrain from acting in any manner
and such consent is withheld, then the Indemnitor's liability shall
be limited to the amount for which the Indemnitor agreed with the
claimant to settle together with the Indemnitor's costs and
attorneys' fees to the date such settlement was rejected by the
Indemnified Party. Except following the refusal by an Indemnified
Party to consent to a settlement proposed by the Indemnitor, under
the condition set forth in the preceding sentence, no Indemnified
Party may settle a claim for which indemnification has been sought
hereunder.
VIII.5.3 Cooperation. Any Indemnified Party shall make
available to any Indemnitor and its attorneys and accountants, all
books, records and documents relating to any claim hereunder and the
parties shall render to each other reasonable assistance in the
defense of any claim hereunder which arises as the result of claims
made by persons not a party to this Agreement.
ARTICLE IX
TERMINATION
Section IX.1 Termination Events. Subject to the provisions of
Section 9.2 herein, this Agreement may, by written notice given at or
prior to the Closing in the manner hereinafter provided, be
terminated and abandoned:
(a) By either Seller or Buyer, if a material default or
breach shall be made by the other, with respect to the due and timely
performance of any of its respective covenants and agreements
contained herein, or with respect to the due compliance with any of
its respective representations and warranties contained in Article
III or IV, as applicable, and such default cannot be cured prior to
Closing and has not been waived;
(b) By mutual written consent of Seller and Buyer;
(c) By either Seller or Buyer, if the Closing shall not
have occurred on December 31, 1996 or such later date as may be
agreed upon by the parties; provided however, that the right to
terminate this Agreement under this paragraph (c) of this Section 9.1
shall not be available to a party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or
(d) By Buyer as provided in Subsection 5.24.2.
Section IX.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 9.1, all further rights and
obligations of the parties hereunder shall terminate, except that the
obligations set forth in Section 10.3 herein, under the
Confidentiality Agreement and any confidentiality agreement entered
pursuant to Subsection 5.16.2 herein, shall survive; it being
specifically agreed that, if this Agreement is so terminated by
either of Buyer or Seller because one or more of the conditions to
such party's obligations hereunder is not satisfied as a result of
the other such party's failure to comply with its obligations
relating to filings and authorizations under Section 5.8 herein, or
any other provision of this Agreement, it is expressly agreed and
understood that the rights of the terminating party to pursue all
legal remedies for breach of contract and damages shall survive such
termination.
ARTICLE X
MISCELLANEOUS
Section X.1 Bulk Sales Laws. Buyer hereby waives compliance by
Seller, in connection with the transactions contemplated by this
Agreement, with the provisions of Article 6 of the Uniform Commercial
Code as adopted in the States of Maryland, Michigan, Massachusetts,
Tennessee and Vermont, and as adopted in any other states where any
of the Assets are located, and any other applicable bulk sales laws
with respect to or requiring notice to Seller's creditors, in effect
as of the Closing Date.
Section X.2 Remedies. The remedies expressly set forth in this
Agreement following the Closing with respect to any breach of any
representation or warranty herein contained, are the sole and
exclusive remedies for any such breach, and are intended to be non-
cumulative with respect to any other remedies which would otherwise
have been available in common law or by statute. Neither party shall
have the right after the Closing to assert any cause of action or
make any claim to recover or seek any relief on any basis other than
as expressly provided under this Agreement, including but not limited
to, any cause of action or claim based in contract or tort (including
fraud and fraudulent misrepresentation), at law or in equity, under
common law, statute or otherwise.
Section X.3 Expenses. The parties shall share equally all transfer,
documentary, stamp, recording and similar taxes arising in connection
with the transactions contemplated by this Agreement and all expenses
arising in connection with the preparation of the Asset Acquisition
Statement and any supporting materials (including any appraisals,
except that Seller's share of any appraisal expenses shall be capped
at $100,000), the fees and expenses of the Allocation Arbiter as
contemplated by Subsection 2.2.2, the fees and expenses arising in
connection with the preparation of the Auditor's Attestation as
contemplated by Subsection 2.4.3, the fees and expenses of the
Arbiter as contemplated by Subsection 2.4.4, the filing of a
Notification and Report Form pursuant to the HSR Act as contemplated
by Section 5.8, the obtaining of all required third party consents as
contemplated by Section 5.14 and the obtaining of a title report and
accompanying title commitment as contemplated by Section 5.31.
Except as otherwise provided herein, each of the respective parties
to this Agreement shall pay their own costs and expenses (including
all legal, accounting, broker, finder and investment banker fees
relating to this Agreement, the negotiations leading up to this
Agreement, and the transactions contemplated by this Agreement
(whether or not consummated).
Section X.4 Amendment. This Agreement shall not be amended or
modified except by a writing duly executed by Seller and Buyer.
Section X.5 Entire Agreement. This Agreement, including the Exhibits
hereto, and the Confidentiality Agreement, contain all of the terms,
conditions and representations and warranties agreed upon by the
parties relating to the subject matter of this Agreement and
supersede all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and communications of the parties, oral
or written, respecting such subject matter. EXCEPT AS MAY BE
SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS
ANY IMPLIED WARRANTY OR REPRESENTATIONS AS TO THE CONDITION,
MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE ASSETS OR OF THE
DIVISIONS, AND EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS
AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT BUYER TAKES THE ASSETS OF
THE DIVISIONS "AS IS" AND "WHERE IS".
Section X.6 Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in
writing and shall be deemed to have been duly given on the date of
delivery, if personally delivered to the persons identified below, or
three (3) days after mailing if mailed by certified or registered
mail, postage prepaid, return receipt requested, addressed as fol
lows:
If to Seller:
Lockheed ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Senior Vice President and General Counsel
with a copy to:
▇▇▇▇▇▇▇ ▇. O'▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
If to Buyer:
General Dynamics Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Jenner & Block
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Such addresses may be changed, from time to time, by means of a
notice given in the manner provided in this Section. Copies
delivered to outside counsel shall not constitute notice.
Section X.7 Severability. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other
provisions of this Agreement shall be deemed valid and enforceable to
the full extent possible.
Section X.8 Waiver. Waiver of any term or condition of this
Agreement by either of the respective parties shall only be effective
if in writing and shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition, of this Agreement.
Section X.9 Binding Effect; Assignment. No party to this Agreement
may assign or delegate, by operation of law or otherwise, all or any
portion of its rights, obligations or liabilities under this
Agreement without the prior written consent of the other party to
this Agreement, which it may withhold in its absolute discretion;
provided that Buyer, by delivery of written notice to Seller prior to
the Closing Date, may assign its rights and obligations to one or
more of its subsidiaries. No such assignment by Buyer shall release
Buyer from any of its obligations to Seller pursuant to this
Agreement, including without limitation the obligations contained in
Sections 5.11, 5.12, 8.2 and 8.3.
Section X.10 No Third Party Beneficiaries. There are no third party
beneficiaries to this Agreement and nothing herein shall confer any
rights upon any person or entity which is not a party to this
Agreement.
Section X.11 Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures to
each counterpart were upon a single instrument, and all such
counterparts together shall be deemed an original of this Agreement.
Section X.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland
without giving effect to the doctrine of conflicts of laws.
Section X.13 Interpretation and Construction of this Agreement. The
definitions in this Agreement shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine,
feminine or neuter form. The term "affiliate" when used with respect
to either party hereto shall mean any entity in control of,
controlled by or under common control with such party where "control"
is evidenced by the beneficial ownership of more than 50% of the
equity securities or equity interest of an entity. For purposes of
clarity, the term "affiliate" shall not mean any savings, pension or
benefit plan or trust associated therewith. The words "include,"
"includes" and "including" shall be deemed to be followed by the
phrase "without limitation." The headings contained in this
Agreement are inserted for convenience only and shall not constitute
a part hereof. All references herein to Articles and Sections (other
than references to Sections of the Code) shall be deemed to be
references to Articles and Sections of this Agreement unless the
context shall otherwise require. Unless the context shall otherwise
require or provide, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument,
statute or regulation as amended and supplemented from time to time
(and, in the case of a statute or regulation, to any successor
provision), provided however, that no covenant herein shall be deemed
to have been breached because of a change in law or regulation issued
subsequent to the completion of the action or conduct which is the
subject of the covenant. This Agreement shall be construed in
accordance with its fair meaning and shall not be construed strictly
against either party. References in this Agreement to any Article
shall include all Sections, Subsections, Paragraphs in such Article;
references in this Agreement to any Section shall include all
Subsections and Paragraphs in such Section; and references in this
Agreement to any Subsection shall include all Paragraphs in such
Subsection.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement with legal and binding effect as of the date
and year first above written.
LOCKHEED ▇▇▇▇▇▇ CORPORATION
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
GENERAL DYNAMICS CORPORATION
By:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES 1
1.1 Acquired Assets 1
1.1.1 Equipment 1
1.1.2 Inventory 2
1.1.3 Receivables 2
1.1.4 Certain Rights 2
1.1.5 Contracts 2
1.1.6 Real Property 2
1.1.7 Facility Leases 2
1.1.8 Government Facility Management Contracts. 2
1.1.9 Equipment Leases 2
1.1.10 AV Technology Interest. 3
1.1.11 Ordnance Systems Shares. 3
1.1.12 Business Records 3
1.1.13 Computer Software 3
1.1.14 Patents and Technology 3
1.1.15 Trademarks and Copyrights 3
1.1.16 Permits 4
1.1.17 Prepaid Charges 4
1.1.18 Claims 4
1.1.19 Pension Assets 4
1.1.20 AV Tech Revolving Credit Agreement 4
1.1.21 General 4
1.2 Excluded Assets 4
1.2.1 Cash 4
1.2.2 Affiliate Transactions 4
1.2.3 Benefit Plans 4
1.2.4 Insurance 4
1.2.5 Tax Refunds 5
1.3 Assumed Liabilities 5
1.3.1 Balance Sheet and Scheduled Liabilities 5
1.3.2 Contracts; Leases 5
1.3.3 Employment 5
1.3.4 Benefit Plans; Workers' Compensation 5
1.3.5 Product Warranty and Liability Claims 6
1.3.6 Taxes and Charges 6
1.3.7 OSHA Liabilities 6
1.3.8 AV Tech Revolving Credit Agreement
Liabilities 6
1.3.9 LM Ordnance Systems Former Employees 6
1.3.10 Litigation 6
1.3.11 Post-Closing Liabilities 7
1.4 Excluded Liabilities 7
1.4.1 Change in Control Agreements 7
1.4.2 Certain Claims 7
1.4.3 Other Excluded Liabilities 7
1.5 Assignment of Contracts and Rights 7
ARTICLE II CLOSING; PURCHASE PRICE 8
2.1 Closing 8
2.2 Purchase Price 8
2.2.1 Delivery 8
2.2.2 Allocation 8
2.3 Other Agreements 9
2.3.1 Transfer of Title 9
2.3.2 Ancillary Agreements 9
2.3.3 Closing Deliveries 10
2.4 Purchase Price Adjustment 10
2.4.1 June Statements 10
2.4.2 Closing Statements 11
2.4.3 Examination 11
2.4.4 Objections; Resolutions 12
2.4.5 Workpapers 12
2.4.6 Final Adjustments 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 14
3.1 Organization; Capitalization 14
3.1.1 Seller 14
3.1.2 ▇▇ ▇▇▇▇ ▇▇
3.1.3 LM Ordnance Systems 15
3.2 Qualifications 15
3.3 Corporate Authorization 15
3.3.1 Authority 15
3.3.2 No Conflict 15
3.4 Financial Statements 16
3.4.1 Schedules 16
3.4.2 Reserves 16
3.4.3 No Undisclosed Liabilities 16
3.4.4 Absence of Changes 17
3.5 Real Property; Leases 18
3.5.1 Identification; Title and Related Matters 18
3.5.2 Facility Leases 18
3.5.3 Condition 19
3.5.4 Related Agreements 19
3.6 Tangible Assets 19
3.6.1 Assets of Seller 19
3.6.2 Assets of LM Ordnance Systems and ▇▇ ▇▇▇▇ ▇▇
3.7 Government Furnished Equipment 20
3.8 Accounts Receivable 20
3.9 Inventories 20
3.10 Intellectual Property 20
3.11 Certain Contracts 21
3.11.1 Material Contracts 21
3.11.2 Full Force and Effect; No Defaults 22
3.11.3 Review by Buyer 22
3.12 Government Contracts 22
3.12.1 Compliance 22
3.12.2 Investigations 23
3.12.3 Absence of Claims 23
3.12.4 Eligibility 24
3.12.5 Test and Inspection Results 24
3.13 Litigation and Investigation 25
3.13.1 General 25
3.13.2 General Electric Company 25
3.14 Taxes 25
3.14.1 Tax Returns 25
3.14.2 Allocations 26
3.14.3 Non-deductible Payments 26
3.14.4 Tax Liens 26
3.14.5 ▇▇ ▇▇▇▇ ▇▇
3.15 Employees; Compensation; Labor 26
3.15.1 Employees and Compensation 26
3.15.2 Certain Labor Matters 27
3.15.3 Employee Benefit Plans; ERISA 28
3.16 Compliance with Law 29
3.16.1 General 29
3.16.2 Permits 29
3.16.3 Export Control 29
3.16.4 Environmental Conditions 29
3.17 Government Authorizations 30
3.17.1 United States Authority 30
3.17.2 Foreign Authority 30
3.18 Bank Accounts and Powers 30
3.19 Security Clearances 31
3.20 Brokers' Fees 31
3.21 Insurance 31
3.22 Full Disclosure 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 31
4.1 Organization 31
4.2 Corporate Authorization 31
4.2.1 Authority 31
4.2.2 No Breach or Violation 32
4.3 Sufficient Funds 32
4.4 Security Clearance 32
4.5 Litigation 32
4.6 Government Authorizations 32
4.6.1 United States Authorities 32
4.6.2 Foreign Authority 33
4.7 Investment Representations 33
4.8 Brokers 33
ARTICLE V COVENANTS 33
5.1 General 33
5.2 Conduct of the Divisions 33
5.3 No General Increases 34
5.4 Contracts and Commitments 34
5.5 Sale of Capital Assets 34
5.6 Preservation of Organization 34
5.7 Access to Information 34
5.7.1 Access 34
5.7.2 Confidentiality 35
5.7.3 Notice to Seller 35
5.8 Filings and Authorizations 35
5.9 Tax Matters 36
5.10 Financial Information 36
5.11 Employees 36
5.11.1 Employment 36
5.11.2 Collective Bargaining Agreements 36
5.12 Employee Benefit Matters 37
5.12.1 Employee Benefits Definitions 37
5.12.2 Welfare Plans Following the Closing. 37
5.12.3 Defined Benefit Plans. 38
5.12.4 Savings Program 41
5.12.5 Vacation and Holidays 41
5.12.6 Affiliate Plans 42
5.12.7 Other Employee Plans. 42
5.12.8 Access to Information 43
5.12.9 Necessary Action 43
5.12.10 GE Special Benefits Protection 43
5.12.11 Limitation on Benefits 44
5.12.12 ▇▇▇▇▇▇▇▇ v. G.E. 44
5.13 Novation of Government Contracts 44
5.13.1 Contents of the Request 45
5.13.2 Cooperation 45
5.14 Nonassignable Contracts 45
5.15 Administration of Accounts 46
5.15.1 In Trust For Buyer 46
5.15.2 In Trust For Seller 46
5.16 Litigation Support 46
5.16.1 Access 46
5.16.2 Corporate Overhead 46
5.16.3 Maintenance of Files 47
5.16.4 Legal Privileges 47
5.17 Agreements Regarding Tax Matters 47
5.17.1 Tax Returns 47
5.17.2 Tax Return Packages 48
5.17.3 Payroll Records 48
5.17.4 Sale 48
5.17.5 Tax Refunds on Included Costs 48
5.17.6 Tax Sharing Agreements With Subsidiaries 48
5.17.7 Stub Period For Subsidiaries 49
5.17.8 338(h)(10) Election 49
5.18 Utilities 49
5.19 Seller Guarantees; Letters of Credit and Other
Obligations 49
5.19.1 Assumption of Guarantees;
Letters of Credit and Other Obligations 49
5.19.2 Demand for Payment 50
5.20 Name and Marks 50
5.20.1 Buyer's Obligations 50
5.20.2 Seller's Obligations 50
5.21 Notice to Buyer 50
5.22 Further Assurances 51
5.23 Public Announcements 51
5.24 Schedules 51
5.24.1 Interpretation 51
5.24.2 Delivery 51
5.25 Exclusivity 52
5.26 Five Year Limited Non-Compete 52
5.26.1 Non-Compete 52
5.26.2 Investment; Acquisition Exceptions 53
5.26.3 Remedies 54
5.26.4 Severability 54
5.27 No Defaults 54
5.28 Compliance With Laws 54
5.29 Confidential Information 54
5.30 Solicitation of Employees 55
5.31 Real Property 55
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER 55
6.1 Conditions 55
6.1.1 Representations and Warranties Accurate 55
6.1.2 Performance by Seller 55
6.1.3 Certificates 55
6.1.4 Resignations 56
6.1.5 AV Tech Interest. 56
6.1.6 Real Property; Material Facility Leases 56
6.1.7 Authorizations 56
6.2 Waiver 57
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 57
7.1 Conditions 57
7.1.1 Representations and Warranties Accurate 57
7.1.2 Performance by Buyer 57
7.1.3 Certificates 57
7.1.4 AV Tech Interest. 57
7.1.5 Authorizations 58
7.2 Waiver 58
ARTICLE VIII INDEMNIFICATION 58
8.1 Survival of Representations and Warranties 58
8.2 General Indemnity 59
8.2.1 Coverage 59
8.2.2 Limitation 60
8.3 Environmental Matters 60
8.3.1 Environmental Liabilities 60
8.3.2 Indemnity 61
8.3.3 Procedure; Remediation 62
8.3.4 Procedure, Environmental Penalties 63
8.3.5 Final Assumption 63
8.3.6 Definition 63
8.4 Certain Claims 63
8.5 Claims Procedure 64
8.5.1 Notice; Defense 64
8.5.2 Settlement 65
8.5.3 Cooperation 66
ARTICLE IX TERMINATION 66
9.1 Termination Events 66
9.2 Effect of Termination 66
ARTICLE X MISCELLANEOUS 67
10.1 Bulk Sales Laws 67
10.2 Remedies 67
10.3 Expenses 67
10.4 Amendment 68
10.5 Entire Agreement 68
10.6 Notices 68
10.7 Severability 69
10.8 Waiver 69
10.9 Binding Effect; Assignment 69
10.10 No Third Party Beneficiaries 69
10.11 Counterparts 69
10.12 Governing Law 70
10.13 Interpretation and Construction of this Agreement 70
Defined Terms
Accrued Liability 39
Affiliate 70
Affiliate Plan 37
Agreement 1
Allocation Arbiter 9
Arbiter 12
Armament Closing Balance Sheet 11
Armament June Balance Sheet 10
Asset Acquisition Statement 8
Assets 1
Assumed Liabilities 5
Auditor's Attestation 12
AV Tech 3
AV Tech Charter Documents 14
AV Tech Interest 3
AV Tech Revolving Credit Agreement 4
Business Records 3
Buyer 1
Buyer Pension Plans 38
Buyer's License to Seller 10
Closing 8
Closing Date 8
Code 7
Confidentiality Agreement 35
Contracts 2
Defense Closing Balance Sheet 11
Defense June Balance Sheet 10
DIS 30
Disagreement 40
Divisions 1
Employee Plans 37
Employees 5
Environmental Laws 61
Environmental Penalty 61
Equipment 2
Equipment Leases 2
ERISA 28
ERISA Plan 28
Estimates at Completion 12
Excess Environmental Costs 62
Excluded Assets 4
Excluded Liabilities 7
Exposure Costs 61
Facility Leases 2
FAR Part 31 6
Final Closing Net Asset Statement 12
Final Working Capital 13
Financial Statements 16
Former GE Employees 43
GAAP 11
GE 10
GE Agreement 43
GE Reimbursement Obligation 43
GOCO Management Contracts 2
Government Bid 22
Government Contracts 2
HSR Act 30
Income Taxes 6
Indemnified Party 59
Indemnitor 59
Initial Transfer Amount 39
Interest Rate 13
Inventory 2
June Balance Sheets 16
June Net Asset Statement 10
June Working Capital 11
Liens 1
LM Ordnance Systems 3
LM Ordnance Systems Charter Documents 15
LMAS Division 1
LMDS Division 1
Losses 59
Novation Agreement 44
Ordnance Systems Shares 3
Patents and Technology 3
PBGC 28
PBO 13
Pension Transfer Amount 13
Permits 4
Pre-Closing Period 6
Preliminary Closing Working Capital Statement 11
Proceedings 7
Purchase Price 8
Real Property 2
Receiveables 2
Remediation 61
Remediation Costs 61
Request 44
Retirement Plan 28
Revised Statement 8
Salaried Plans 38
Section 338(h)(10) Election 49
Securities Act 15
Seller 1
Seller's Firm 11
Seller's License to Buyer 10
Seller's Savings Plan 41
Services Agreement 10
Tax Returns 25
Taxes 6
Transaction 53
True-up Amount 39
Union Plan 38
Welfare Plans 37
Schedules
Schedule 1.4.2 Excluded Litigation
Schedule 2.3.2(e) Deeds to Real Property from GE
Schedule 2.4.1 June Statements
Schedule 2.4.6(b) Seller's Actuarial Assumptions for 1996 Plan Year
Schedule 3 Officers and Employees of Seller; Knowledge
Schedule 3.1.2 AV Technology Charter Documents; Members' Interests
Schedule 3.1.3 LM Ordnance Systems Charter Documents
Schedule 3.2 Foreign Qualifications
Schedule 3.3.2(a) Conflicts
Schedule 3.4.1 Financial Statements
Schedule 3.4.4 Absence of Changes
Schedule 3.5.1 Real Property
Schedule 3.5.2 Facility Leases
Schedule 3.6.1(a) Tangible Assets; Seller's Title
Schedule 3.6.2(a) Tangible Assets, Title of AV Technology and LM
Ordnance Systems
Schedule 3.7 Government Furnished Equipment
Schedule 3.9 Inventory
Schedule 3.10 Intellectual Property
Schedule 3.11.1 Material Contracts
Schedule 3.11.2 Defaults
Schedule 3.12.1 Government Contract Compliance
Schedule 3.12.2 Government Contract Investigations
Schedule 3.12.3 Government Contract Claims
Schedule 3.12.4 Government Contract Eligibility
Schedule 3.12.5 Government Contract Test and Inspection Results
Schedule 3.13.1 Litigation and Investigation
Schedule 3.14.4 Tax Liens
Schedule 3.14.5 AV Technology Interests
Schedule 3.15.1 Employees
Schedule 3.15.2 Labor Matters
Schedule 3.15.3 Employee Benefits
Schedule 3.16.2 Permits
Schedule 3.16.4 Environmental
Schedule 3.17.1 Government Authorizations
Schedule 3.17.2 Foreign Authorizations
Schedule 3.18 Bank Accounts and Powers
Schedule 3.19 Security Clearances
Schedule 3.21 Insurance of Divisions
Schedule 5.19.1 Guarantees, Letters of Credit and Other Obligations
Schedule 5.31 Title Report and Commitment
Exhibits
Exhibit A ▇▇▇▇ of Sale
Exhibit B Certificate of Assumption
Exhibit C Novation Agreement
AMENDMENT NO. 1 TO
ASSET PURCHASE AND SALE AGREEMENT
Amendment No. 1, dated as of December 20, 1996 (the "Amendment")
to the Asset Purchase and Sale Agreement, dated as of November 6,
1996 (the "Agreement") between Lockheed ▇▇▇▇▇▇ Corporation, a
Maryland corporation, and General Dynamics Corporation, a Delaware
corporation. Capitalized terms used herein within definition shall
have the meaning specified in the Agreement.
WHEREAS, pursuant to the Agreement, Seller has agreed to sell
and assign and Buyer has agreed to purchase and assume all of the
Assets and Assumed Liabilities held or used primarily in connection
with the LMAS Division and the LMDS Division.
WHEREAS, Seller and Buyer wish to make certain amendments to the
Agreement as specifically provided herein.
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Modifications to Agreement. The Agreement is hereby
modified and amended as follows:
1.1 List of Schedules. The reference to Schedule 3.3.2(a)
is hereby replaced by a reference to Schedule 3.3.2. The reference
to Schedule 3.9 "Inventory" is hereby deleted.
1.2 Section 2.1. The last line of Section 2.1 is hereby
amended to delete "December 31, 1996" and to substitute therefore
"January 1, 1997."
1.3 Subsection 2.4.2. The second line of Subsection 2.4.2
is hereby amended to delete "as at the Closing Date" and to
substitute therefore "as at close of business on the day before the
Closing Date".
1.4 Subsection 2.4.3. The twelfth line of Subsection
2.4.3 is hereby amended to delete "as at the Closing Date" and to
substitute therefore "as at close of business on the day before the
Closing Date".
1.5 Subsection 2.4.4. The seventh line of Subsection
2.4.4 is hereby amended to delete "as at the Closing Date" and to
substitute therefore "as at close of business on the day before the
Closing Date".
1.6 Subsection 2.4.6(b). The twelfth line of Subsection
2.4.6(b) is hereby amended to delete "as of the Closing Date" and to
substitute therefore "as of 11:59 p.m. on the day before the Closing
Date".
1.7 Subsection 5.12.1(a). The definition of "Affiliate
Plan" is hereby amended and restated in its entirety as follows:
"'Affiliate Plan" means each Employee Plan which is
sponsored, maintained, or contributed to by AV Tech or LM Ordnance
Systems and which covers Employees and former employees of AV Tech
and LM Ordnance Systems exclusively."
1.8 Subsection 5.12.3(b). Clause (B) of Clause (vi) of
Subsection 5.12.3(b) is hereby amended and restated in its entirety
as follows:
"(B) any benefit accrued subsequent to December 31, 1997,
but taking into account, for the purpose of vesting and eligibility
for pension benefits, the Employee's combined service with Buyer,
Seller and GE."
For purposes of clarity, there is no change to the last
sentence of Subsection 5.12.3(b).
1.9 Subsection 5.12.3(d). The ninth line of Subsection
5.12.3(d) is hereby amended to insert "as of 11:59 p.m. on the day
before the Closing Date" after the word "determined". The
seventeenth line of Subsection 5.16.3(d) is hereby amended to delete
"on the Closing Date" and to substitute therefore "on the day before
the Closing Date".
1.10 Subsection 5.12.3(g). The second line of Subsection
5.12.3(g) is hereby amended to delete "as of the Closing Date" and to
substitute therefore "as of 11:59 p.m. on the day before the Closing
Date".
1.11 New Subsection 5.12.3(i). A new Subsection 5.12.3(i)
is hereby added following the existing Subsection 5.12.3(h) as
follows:
"(i) Employees covered by the Lockheed ▇▇▇▇▇▇ Retirement
Plan for Certain Salaried Employees shall be treated as newly hired
employees for purposes of pension benefits; provided however, such
Employees shall be immediately eligible to participate in the
applicable Buyer Pension Plan. The benefit payable with respect to
each such Employee under Buyer's Pension Plan shall take into
account, for the purposes of vesting and eligibility for pension
benefits, the Employee's combined service with Buyer and Seller."
1.12 Subsection 5.12.4. The third to last sentence of
Subsection 5.12.4 is hereby amended and restated in its entirety as
follows:
"Seller shall take such action as may be necessary, if any,
to permit each Employee to make a direct rollover to a defined
contribution plan or plans sponsored by Buyer in accordance with
Section 401(a)(31) of the Code."
1.13 Subsection 5.12.6. The first line of Subsection
5.12.6 is hereby amended to delete "as of the Closing Date" and to
substitute therefore "as of 11:59 p.m. on the day before the Closing
Date".
1.14 Section 9.1(c). The second line of Section 9.1(c) is
hereby amended to delete "December 31, 1996" and to substitute
therefore "January 1, 1997".
2. Miscellaneous. The provisions of Sections 10.4, 10.6,
10.7, 10.10, 10.11, 10.12 and 10.13 of the Agreement are incorporated
herein by reference, and such provisions shall apply to this
Amendment as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first above written.
LOCKHEED ▇▇▇▇▇▇ CORPORATION
By:
Name:
Title:
GENERAL DYNAMICS CORPORATION
By:
Name:
Title: