EXHIBIT 99(e)
CONTRIBUTION AND ASSUMPTION AGREEMENT
dated
OCTOBER 31, 1997
between
LOCKHEED ▇▇▇▇▇▇ CORPORATION
and
LMT SUB INC.
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.01. Definitions.............................................2
ARTICLE 2
Transactions at Closing
Section 2.01. Contribution of the Transferred Assets and Assumption
of the Assumed Liabilities...........................2
Section 2.02. Contribution of the ▇▇ ▇▇▇▇ Contribution
Amount...............................................2
Section 2.03. Issuance of Company Capital Stock.......................2
Section 2.04. Contribution Closing....................................3
Section 2.05. LM Estimate of Net Worth; Closing Balance
Sheets...............................................3
Section 2.06. Adjustments to ▇▇ ▇▇▇▇ Contribution Amount..............5
Section 2.07. Excluded Liabilities....................................7
Section 2.08. License to Intellectual Property Rights.................7
Section 2.09. Delivery of Transfer Documents..........................8
Section 2.10. Assignment of Contracts and Rights......................8
Section 2.11. Conduct of the Businesses on the Closing Date...........9
ARTICLE 3
Representations and Warranties of LM
Section 3.01. Representations and Warranties of LM...................10
ARTICLE 4
Covenants of the Parties
Section 4.01. Conduct of the Businesses Until the Closing............10
Section 4.02. Confidentiality........................................11
Section 4.03. Retention of Assets....................................11
Section 4.04. Change of Lockbox Accounts.............................12
Section 4.05. Maintenance and Enforcement of Insurance
Policies............................................12
Section 4.06. Transitional Services Agreement........................14
Section 4.07. Thrust Reverser Business...............................14
Section 4.08. Agreement with Sun.....................................16
Section 4.09. Loan...................................................16
Section 4.10. Protection of Businesses; Non-Solicitation.............16
Section 4.11. Baltimore Facility Lease...............................18
Section 4.12. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ Claims...............................18
Section 4.13. Certain LM Arrangements................................19
Section 4.14. Customer Introductions.................................20
Section 4.15. Financial Support Arrangements.........................20
Section 4.16. No Inconsistent Positions..............................22
Section 4.17. Equity Securities......................................22
Section 4.18. Certain Contribution...................................22
ARTICLE 5
Tax Matters
Section 5.01. Tax Matters............................................23
ARTICLE 6
Employment and Employee Benefit Matters
Section 6.01. Employment and Employee Benefit Matters................23
ARTICLE 7
Survival; Indemnification
Section 7.01. Survival...............................................23
Section 7.02. Indemnification........................................24
Section 7.03. Indemnification of Company by LM for Certain Assumed
Liabilities.........................................25
Section 7.04. Procedures for Third Party Claims......................26
Section 7.05. Procedures for Direct Claims...........................30
Section 7.06. Indemnification of the Company by LM for Certain Product
Matters.............................................30
ARTICLE 8
Miscellaneous
Section 8.01. Miscellaneous..........................................32
Section 8.02. Termination............................................32
EXHIBITS
Exhibit I -- Definitions
Exhibit II -- Representations and Warranties of LM
Exhibit III -- Tax Matters
Exhibit IV -- Employment and Employee Benefit Matters
ATTACHMENTS
Attachment A -- [Intentionally Omitted]
Attachment B -- Terms for Technical Consulting Agreement
Attachment C -- Terms for Loan(s)
Attachment D -- Terms for Baltimore Facility Lease
Attachment E -- Terms and Conditions of Company Preferred Stock
Attachment F -- Form of Tax Assurance Agreement
Attachment G -- Balance Sheets
CONTRIBUTION DISCLOSURE SCHEDULE
Section 4.13 -- Certain LM Arrangements
Section I.01 -- LM Knowledge Standard
Section II.03 -- Government Authorization
Section II.04 -- Noncontravention
Section II.05 -- Ownership of the Equity Securities; Access Graphics
Foreign Subsidiaries
Section II.06 -- Consents
Section II.08 -- Absence of Certain Changes
Section II.09 -- Sufficiency of and Title to the Transferred Assets
Section II.10 -- No Undisclosed Material Liabilities
Section II.11 -- Litigation; Contract-Related Matters
Section II.12 -- Material Contracts and Bids; Backlog
Section II.15 -- Environmental Compliance
Section II.16 -- Compliance with Laws
Section II.17 -- Government Contracts
Section II.18 -- Intellectual Property
Section III.02 -- Tax Matters
Section IV.02 -- ERISA Representations
Section IV.03 -- Employees and Offers of Employment
CONTRIBUTION AND ASSUMPTION AGREEMENT
This Agreement is made this 31st day of October, 1997, between
Lockheed ▇▇▇▇▇▇ Corporation, a Maryland corporation and the parent corporation
of the Company ("LM"), and LMT Sub Inc., a Delaware corporation (the
"Company"), with reference to the following background.
A. Simultaneously with the execution of this Agreement, General
Electric Company, a New York corporation ("GE"), GE Investments, Inc., a
Nevada corporation ("GEII"), GE Government Services, Inc., a Delaware
corporation ("GEGS"), Client Business Services, Inc., a Delaware corporation
("CBSI", and together with GE, GEII and GEGS, the "GE Entities"), LM and the
Company are entering into an Exchange Agreement dated October 31, 1997 (the
"Exchange Agreement") pursuant to which LM desires to exchange with the GE
Entities, and the GE Entities desire to exchange with LM, all of the
outstanding capital stock of the Company for all of the preferred stock (or
common stock or a combination thereof) of LM owned by the GE Entities (the
"Exchange").
B. LM, among other things, directly and through the Transferor
Subsidiaries, conducts the Thrust Reverser Business and the Access Graphics
Business (each, a "Business" and together, the "Businesses").
C. Under the Exchange Agreement, it is a condition precedent to
the obligations of the GE Entities to consummate the Exchange that LM
contribute all of the assets used or held for use primarily in the conduct of
the Businesses (other than the Excluded Assets), the Equity Securities and an
amount in cash to the Company, and the Company assume certain liabilities
associated with the Businesses.
D. Upon the terms and subject to the conditions of this
Agreement, LM desires to, or desires to cause the Transferor Subsidiaries
to, contribute all of the assets used or held for use primarily in the
conduct of the Businesses (other than the Excluded Assets), the Equity
Securities and an amount in cash to the Company, and the Company desires to
assume certain liabilities associated with the Businesses.
E. LM and the Company are entering into this Agreement and the
Exchange Agreement as a plan of reorganization intended to qualify under
Section 368(a)(1)(D) of the Code.
F. LM and the Company intend that each of the various steps
of the Internal Restructuring will be tax-free either as a reorganization
qualifying under Section 368(a)(1) of the Code, a liquidation qualifying
under Section 332(a) of the Code, or a transfer qualifying under Section
351(a) of the Code.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Defined terms used in this
Agreement shall have the meanings specified in this Agreement or in Exhibit I.
ARTICLE 2
Transactions at Closing
Section 2.01. Contribution of the Transferred Assets and
Assumption of the Assumed Liabilities. (a) Upon the terms and subject to the
conditions set forth in this Agreement, at the Contribution Closing (i) LM
agrees to, or will cause the Transferor Subsidiaries to, transfer, assign and
deliver to the Company all of the right, title and interest of LM and the
Transferor Subsidiaries in, to and under the Transferred Assets as further
described in Section 2.04 below, and (ii) the Company agrees to accept all of
the right, title and interest of LM and the Transferor Subsidiaries in, to and
under all of such Transferred Assets, and the Company agrees to assume, pay,
perform and discharge promptly and in full when due, all of the Assumed
Liabilities (clauses (i) and (ii) and the Cash Contribution, collectively, the
"Contribution and Assumption").
(b) LM and the Company agree that the aggregate fair market
value of the Businesses is not less than $771,300,000 (before giving effect
to the adjustments contemplated by Section 2.06).
Section 2.02. Contribution of the ▇▇ ▇▇▇▇ Contribution Amount.
Upon the terms and subject to the conditions set forth in this Agreement, at
the Contribution Closing LM agrees to contribute the ▇▇ ▇▇▇▇ Contribution
Amount to the Company (the "Cash Contribution").
Section 2.03. Issuance of Company Capital Stock. Upon the
terms and subject to the conditions set forth in this Agreement, at the
Contribution Closing and in consideration for the Contribution and Assumption,
the Company agrees to issue to LM an appropriate number of shares of Company
Common Stock and the number of shares of Company Preferred Stock determined
under Section 2.01(b) of the Exchange Agreement.
Section 2.04. Contribution Closing. The closing (the
"Contribution Closing") of the Contribution and Assumption shall take place at
the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ the same day as, but immediately prior to, the closing of the
Exchange (the "Closing"). The parties agree that at the Contribution Closing:
(a) (i) LM shall transfer, assign and deliver, or cause the
Transferor Subsidiaries to transfer, assign and deliver, to the Company all of
the right, title and interest of LM and the Transferor Subsidiaries in, to and
under the Transferred Assets, in the case of the Transferred Assets (other
than the Equity Securities and the capital stock of the Access Graphics
Foreign Subsidiaries), free and clear of all Liens other than Permitted Liens
and, in the case of the Equity Securities and the capital stock of the Access
Graphics Foreign Subsidiaries, as described in Section 2.04(b), and (ii) the
Company shall assume and pay, perform and discharge promptly and in full when
due all of the Assumed Liabilities.
(b) LM shall deliver to the Company (i) certificates for the
Equity Securities to be delivered by LM pursuant to this Agreement and (ii)
certificates for all of the issued and outstanding capital stock of each of
the Access Graphics Foreign Subsidiaries, in each case, free and clear of
all Liens, preemptive or similar rights or any other limitation or
restriction (other than limitations on offers and sales under foreign,
federal and state securities laws), duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps affixed
thereto.
(c) LM shall deliver to the Company the ▇▇ ▇▇▇▇ Contribution
Amount in immediately available funds by wire transfer to an account of the
Company at a bank designated in writing by the Company at least two Business
Days prior to the Contribution Closing.
(d) The Company shall issue to LM an appropriate number of
shares of Company Common Stock and the number of shares of Company
Preferred Stock determined under Section 2.01(b) of the Exchange Agreement,
in such denominations as LM shall designate in writing to the Company not
less than two Business Days prior to the Contribution Closing.
Section 2.05. LM Estimate of Net Worth; Closing Balance Sheets.
(a) Not less than three Business Days prior to the Closing Date, LM will
deliver to GE LM's calculations of the Estimate of Thrust Reverser Closing Net
Worth and the Estimate of Access Graphics Closing Net Worth.
(b) As promptly as practicable, but no later than 60 days
after the Closing Date, the Company (with the assistance of LM to the
extent requested by the Company) will cause to be prepared and delivered to
LM the Closing Balance Sheets (as defined below) and certificates based on
the Closing Balance Sheets setting forth the Company's calculations of
Thrust Reverser Closing Net Worth and Access Graphics Closing Net Worth.
The Closing Balance Sheets (the "Closing Balance Sheets") will consist of
(i) a balance sheet of the Transferred Assets and Assumed Liabilities of
the Thrust Reverser Business as of the close of business on the Closing
Date (the "Thrust Reverser Closing Balance Sheet") and (ii) a balance sheet
of the Transferred Assets and Assumed Liabilities of the Access Graphics
Business as of the close of business on the Closing Date (the "Access
Graphics Closing Balance Sheet") and, in each case, will present fairly, in
all material respects, the financial position of the Transferred Assets and
Assumed Liabilities of each of the Businesses as of the close of business
on the Closing Date in conformity and on a basis consistent with the
Transaction Accounting Principles, and include line items substantially
consistent with those in the Thrust Reverser Balance Sheet and the Access
Graphics Balance Sheet, as the case may be. Without limiting the
generality of the foregoing, assets not constituting Transferred Assets,
liabilities not constituting Assumed Liabilities, the Equity Securities and
the ▇▇ ▇▇▇▇ Contribution Amount shall be excluded from the calculations of
Thrust Reverser Closing Net Worth and Access Graphics Closing Net Worth.
Notwithstanding anything in the foregoing to the contrary, the Closing
Balance Sheets shall reflect, and the Balance Sheets shall be adjusted to
reflect, the actual amount of any deferred tax asset or liability. In
addition, if in connection with the preparation of the Closing Balance
Sheets or the calculations of Thrust Reverser Closing Net Worth or Access
Graphics Closing Net Worth, any errors are discovered that affect the value
of the Transferred Assets or the amount of Assumed Liabilities set forth on
the Balance Sheets, except as otherwise provided in the Transaction
Accounting Principles and in Section 7.08 of the Exchange Agreement, the
Balance Sheets shall be adjusted to correct for the effect of such errors.
(c) If LM disagrees with the Company's calculation of Thrust
Reverser Closing Net Worth or Access Graphics Closing Net Worth delivered
pursuant to Section 2.05(b) or with any assertion by the Company that there
were errors that affect the value of the Transferred Assets or the amount
of the Assumed Liabilities set forth on the Balance ▇▇▇▇▇▇, ▇▇ may, within
30 days after delivery of the documents referred to in Section 2.05(b),
deliver a notice to the Company disagreeing with the Company's calculation
of Thrust Reverser Closing Net Worth or Access Graphics Closing Net Worth
or any such asserted errors. Any such notice of disagreement shall specify
those items or amounts as to which LM disagrees, and LM shall be deemed to
have agreed with all other items and amounts contained in the Closing
Balance Sheets and the Company's calculations of Thrust Reverser Closing
Net Worth and Access Graphics Closing Net Worth delivered pursuant to
Section 2.05(b).
(d) If a notice of disagreement shall be duly delivered
pursuant to Section 2.05(c), the Company and LM shall, during the 30 days
following such delivery, consult with each other to determine if any such
disputed items or amounts may be resolved to the mutual written
satisfaction of the Company and LM in order to determine Thrust Reverser
Closing Net Worth and Access Graphics Closing Net Worth. If any such
disputed items or amounts shall not have been resolved to the mutual
written satisfaction of the Company and LM within such 30-day period, the
Company and LM shall promptly thereafter retain a nationally recognized
accounting firm (the "Accounting Referee") other than KPMG Peat Marwick LLP
or Ernst & Young LLP to promptly review this Agreement and the disputed
items or amounts. In resolving any such disputed items or making any
calculation of Thrust Reverser Closing Net Worth and Access Graphics
Closing Net Worth, the Accounting Referee shall consider only those items
or amounts in the Balance Sheets or the Closing Balance Sheets or the
Company's calculations of Thrust Reverser Closing Net Worth and Access
Graphics Closing Net Worth as to which LM has disagreed and, in considering
such items and amounts, shall apply the Transaction Accounting Principles
and Section 7.08 of the Exchange Agreement. The Accounting Referee shall
deliver to the Company and LM, as promptly as practicable, a report setting
forth each such determination and such calculation. Such report shall be
final and binding upon the Company and LM. The cost of such review and
report shall be borne equally by the Company and LM.
(e) The Company and LM agree that they will, and, to the
extent reasonably required, will cause their respective independent
accountants to, cooperate and assist in the preparation of the Closing
Balance Sheets and the calculation of Closing Net Worth and in the conduct
of the matters referred to in this Section 2.05, including, without
limitation, except as may be deemed appropriate to ensure compliance with
any Applicable Laws (including, without limitation, any requirements with
respect to security clearances) and subject to any applicable privileges
(including, without limitation, the attorney-client privilege), making
available to the extent reasonably required, the books, records and work
papers of the internal and external accountants and personnel of the
Company and LM and, to the extent appropriate, their Affiliates.
Section 2.06. Adjustments to ▇▇ ▇▇▇▇ Contribution Amount. (a)
The ▇▇ ▇▇▇▇ Contribution Amount shall be subject to adjustment as follows:
(i) Thrust Reverser. If Thrust Reverser Closing Net
Worth, as finally determined pursuant to Section 2.05, is less than the
Estimate of Thrust Reverser Closing Net Worth, then LM shall pay to the
Company as an adjustment to the ▇▇ ▇▇▇▇ Contribution Amount, in the
manner provided in Section 2.06(b), an amount equal to the sum of (A)
the amount of such difference plus (B) an amount computed in the manner
of interest as described in Section 2.06(c) on the amount referred to in
clause (A) above. If Thrust Reverser Closing Net Worth, as finally
determined pursuant to Section 2.05, is greater than the Estimate of
Thrust Reverser Closing Net Worth, then the Company shall pay to LM as
an adjustment to the ▇▇ ▇▇▇▇ Contribution Amount, in the manner provided
in Section 2.06(b), an amount equal to the sum of (C) the amount of such
difference plus (D) an amount computed in the manner of interest as
described in Section 2.06(c) on the amount referred to in clause (C).
(ii) Access Graphics. If Access Graphics Closing Net
Worth, as finally determined pursuant to Section 2.05, is less than the
Estimate of Access Graphics Closing Net Worth, then LM shall pay to the
Company as an adjustment to the ▇▇ ▇▇▇▇ Contribution Amount, in the
manner provided in Section 2.06(b), an amount equal to the sum of (E)
the amount of such difference plus (F) an amount computed in the manner
of interest as described in Section 2.06(c) on the amount referred to in
clause (E). If Access Graphics Closing Net Worth, as finally determined
pursuant to Section 2.05 is greater than the Estimate of Access Graphics
Closing Net Worth, then the Company shall pay to LM as an adjustment to
the ▇▇ ▇▇▇▇ Contribution Amount, in the manner provided in Section
2.06(b), an amount equal to the sum of (G) the amount of such difference
plus (H) an amount computed in the manner of interest as described in
Section 2.06(c) on the amount referred to in clause (G).
(b) Any payment pursuant to Section 2.06(a) shall be made at a
mutually convenient time and place, within five Business Days after Thrust
Reverser Closing Net Worth and Access Graphics Closing Net Worth have been
finally determined pursuant to Section 2.05, by delivery by LM or the Company,
as the case may be, of immediately available funds by wire transfer to an
account of the Company or LM, as the case may be, at a bank designated by the
Company or LM, as the case may be, by notice to LM or the Company, as the case
may be, not later than two Business Days prior to the payment date. A single
payment will be made pursuant to Section 2.06(a), the amount of which payment
will, if applicable, be determined by netting the amounts described in
Sections 2.06(a)(i) and 2.06(a)(ii).
(c) The amounts referred to in clauses (B), (D), (F) and (H) of
Section 2.06(a) shall be calculated in the manner of interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the one month London Interbank Offered Rate as published in the
Wall Street Journal, Eastern Edition, in effect from time to time during the
period from the Closing Date to the date of payment, calculated daily on the
basis of a year of 360 days and the actual number of days elapsed.
Section 2.07. Excluded Liabilities. The parties agree that the
Company does not hereby agree to, and shall not otherwise, assume or be
responsible for any of the Excluded Liabilities.
Section 2.08. License to Intellectual Property Rights. (a) In
consideration of the grant described in Section 2.08(b), pursuant to an
Intellectual Property License (the "Intellectual Property License") to be
negotiated prior to Closing consistent with the provisions of this Section
2.08, LM shall, and shall cause the Transferor Subsidiaries and any of their
Affiliates to, grant to the Company (with the right of the Company to extend
such license to its Affiliates for so long as they remain Affiliates),
effective as of the Closing Date, a fully paid-up, worldwide, non-exclusive
license in respect of all Intellectual Property Rights owned by LM, any
Transferor Subsidiary or any of their Affiliates other than the LM Trademarks
and Trade Names (as defined in the Exchange Agreement) that are available to,
and used or currently planned for use by, the Businesses (but not constituting
Transferred Assets) on or prior to the Closing Date, to continue such use or
currently planned use in the Businesses with respect to substantially similar
products, services or activities of the Businesses.
(b) In consideration of the grant described in Section 2.08(a),
pursuant to the Intellectual Property License, the Company shall grant to LM
(with the right of LM to extend such license to its Affiliates for so long as
they remain Affiliates), effective as of the Closing Date, a fully paid-up,
worldwide, non-exclusive license in respect of all Intellectual Property
Rights constituting Transferred Assets, for use by LM and its Affiliates in
making, using or selling products, providing services or in conducting other
business activities, subject to Section 4.10(a); provided, that no license
shall be granted with respect to the manufacture or sale of commercial thrust
reversers and parts thereof.
(c) The Company acknowledges and agrees that it shall hold all
Intellectual Property Rights constituting part of the Transferred Assets
subject to any licenses thereof granted by LM, any Transferor Subsidiary or
their Affiliates prior to the Closing Date.
(d) Subject to Section 2.08(b), the transfer of Intellectual
Property Rights to the Company shall not affect LM's or the Transferor
Subsidiaries' right to use, disclose or otherwise freely deal with any
know-how, trade secrets and other technical information that is resident on
the Closing Date at businesses of LM, the Transferor Subsidiaries or any of
their Affiliates other than the Businesses. However, with respect to
documented technical information relating to the Thrust Reverser Business that
is a Transferred Asset and resides at LM, any Transferor Subsidiary or any of
their Affiliates at Closing and is maintained as proprietary by LM, any
Transferor Subsidiary or any of their Affiliates at Closing, LM shall use the
care and caution it affords its other proprietary data to protect such
technical information from disclosure to third parties, unless provided to a
third party pursuant to an agreement providing for like protection by the
recipient, for a period of five years from the Closing Date or until such
technical information is in the public domain through no fault of LM,
whichever first occurs.
Section 2.09. Delivery of Transfer Documents. Subject to
Section 2.10, at the Contribution Closing, LM shall deliver, or cause the
Transferor Subsidiaries to deliver, to the Company such deeds (which, in the
case of real property, shall be bargain and sale deeds without covenants and
warranties), bills of sale, endorsements, consents, assignments and other good
and sufficient instruments of conveyance and assignment as the parties and
their respective counsel shall deem reasonably necessary or appropriate to
vest in the Company all of LM's and the Transferor Subsidiaries' right, title
and interest in, to and under the Transferred Assets.
Section 2.10. Assignment of Contracts and Rights. (a)
Anything in this Agreement or the Exchange Agreement to the contrary
notwithstanding, neither this Agreement nor the Exchange Agreement shall
constitute an agreement to assign any Transferred Asset or any claim or right
or any benefit arising under such Transferred Asset or resulting therefrom if
such assignment, without the consent of a third party thereto, would
constitute a breach or other contravention of such Transferred Asset, be
ineffective with respect to any party thereto or in any way adversely affect
the rights of the Company or LM with respect to such Transferred Asset. LM
and the Company shall use their best efforts (including, for purposes hereof,
the obligation to expend funds to obtain such consents to the same extent as
GE would have been so obligated under Section 2.03 of the Transfer Agreement
dated November 22, 1992, as amended as of March 28, 1993 among GE, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Corporation and LM) to obtain the consent of the other parties to any
such Transferred Asset or any claim or right or any benefit arising under any
such Transferred Asset for the assignment of such Transferred Asset to the
Company as the Company may request.
(b) If any such consent is not obtained, or if an attempted
assignment of any Transferred Asset would be ineffective or would adversely
affect the rights of the Company with respect to any such Transferred Asset so
that the Company would not in fact receive all such rights, as among the
parties hereto, the Company will obtain the claims, rights and benefits of LM
or its Subsidiary, as applicable, and assume the obligations under such
Transferred Asset in accordance with this Agreement, and LM will enforce for
the benefit of the Company, with the Company assuming LM's or such Subsidiary's
obligations (excluding any Excluded Liability), any and all claims, rights and
benefits of LM or such Subsidiary, against a third party to such Transferred
Asset. In such event, LM and the Company shall, to the extent the benefits
therefrom and obligations under any such Transferred Asset have not been
provided by alternate arrangements satisfactory to LM and the Company,
negotiate in good faith an amount to be paid by LM to the Company or by the
Company to LM, as the case may be.
(c) LM will promptly pay to the Company when received all monies
received by LM with respect to any Transferred Asset or any claim or right or
any benefit arising under any Transferred Asset, except to the extent the same
represents an Excluded Asset.
(d) The Company will promptly pay to LM when received all
monies received by the Company with respect to any Excluded Asset or any
claim or right or any benefit arising under any Excluded Asset, except to
the extent the same represents a Transferred Asset.
Section 2.11. Conduct of the Businesses on the Closing Date.
The Company agrees that, from the Closing until the close of business on
the Closing Date, it shall operate the Businesses in accordance with the
historical and customary operating practices relating to the conduct of the
Businesses and, without limiting the foregoing, the Company agrees that it
will not engage in any transaction, other than in the ordinary course of
business consistent with past practices of the Business, that would have an
adverse effect on the Thrust Reverser Closing Net Worth or the Access
Graphics Closing Net Worth.
ARTICLE 3
Representations and Warranties of LM
Section 3.01. Representations and Warranties of LM. LM
represents and warrants to the Company as set forth in Exhibit II.
ARTICLE 4
Covenants of the Parties
Section 4.01. Conduct of the Businesses Until the Closing.
Except as otherwise provided herein, from the date of this Agreement until the
Closing, LM shall, and shall cause each Transferor Subsidiary to, conduct the
Businesses in accordance with the historical and customary operating practices
relating to the conduct of the Businesses. In addition, from the date of this
Agreement through the Closing Date, subject to any exceptions deemed
appropriate to ensure compliance with Applicable Laws, without the Company's
prior consent, which shall not be unreasonably withheld, LM will not, and will
cause each of the Transferor Subsidiaries not to, take or commit to take any
of the following actions:
(i) capital expenditure, or group of related capital
expenditures, relating to the Businesses or the Transferred
Assets in excess of $2,000,000, individually, or $5,000,000,
in the aggregate;
(ii) sale or other disposal of assets (other than
Inventory) with a value in excess of $2,000,000 that would
constitute Transferred Assets if owned, held or used by LM or
any Transferor Subsidiary on the Closing Date;
(iii) amendment of, or modification to, any Contract
where the effect of such amendment or modification would be a
decrease in the backlog value of the relevant Contract of at
least $10,000,000;
(iv) submission of any Bid which, if accepted, would
result in a fixed price Contract that would constitute a
Transferred Asset with a backlog value in excess of
$10,000,000 or a Loss Contract;
(v) permit the Businesses to enter into or engage in a
line of business not conducted by the Businesses on the date
of this Agreement; or
(vi) directly or indirectly through an Affiliate, execution
of a Contract or entering into of a commitment with Airbus
relating to the A340-500/600 on terms materially less
favorable to the Thrust Reverser Business than those in the
proposal delivered to Airbus by LM on or about October 1,
1997.
Section 4.02. Confidentiality. LM agrees that, except as
otherwise provided in Section 7.03 of the Exchange Agreement, all
confidential non-public information provided pursuant to this Agreement or
the Exchange Agreement to LM or any of its Representatives, and, from and
after the Closing, all confidential non-public information relating to the
Company, the Businesses, the Transferred Assets and Assumed Liabilities,
will be held in confidence, except to the extent that such information (i)
can be shown to have become generally known to the public other than as a
result of disclosure by LM, any of its Affiliates or any of its
Representatives, or (ii) is disclosed to LM, any of its Affiliates or any
of its Representatives on a non-confidential basis from a source other than
the Company, any of its Affiliates or any of its Representatives, provided
that such source is not known by LM, any of its Affiliates or any if its
Representatives to be bound by a confidentiality agreement with, or other
obligation of secrecy to, the Company. In the event that LM or any of its
Affiliates becomes legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or any law, rule,
regulation or stock exchange requirement or otherwise) to disclose any such
information, LM agrees to provide the Company with prompt notice of such
requirement so that the Company may seek a protective order or other
appropriate remedy. In the event that such protective order or remedy is
not obtained, LM agrees that it will furnish, and will cause any such
Affiliate to furnish, only that portion of such information which LM is
advised by counsel is legally required and to cooperate in the Company's
efforts to obtain assurance that confidential treatment will be accorded
such information.
Section 4.03. Retention of Assets. From and after the date
of this Agreement, LM shall ensure that no assets of any Business are
distributed or otherwise transferred (by dividend, intercompany or
intracompany loan or otherwise, other than by intercompany or intracompany
loan that is consistent with past cash management practices) to LM or any
Affiliate of LM (other than in the ordinary course consistent with past
practices for payments to or allocated to LM or any Affiliate of LM
relating to (i) materials or services used in the Businesses, (ii) costs
advanced to or on behalf of the Businesses or (iii) allocations of
corporate overhead costs). For purposes of the foregoing, LM shall treat
each Business as if it were a separate, incorporated Subsidiary of LM. To
the extent that, from and after the day after the Balance Sheet Date but
prior to the Closing Date, more than a de minimis amount of assets
(including, without limitation, cash) of any Business has been so
distributed or otherwise transferred (by dividend or otherwise) to LM or
any Affiliate of LM, LM shall, and shall cause any such Affiliate of LM to,
prior to the Contribution Closing, to cause such assets (or an equivalent
amount in cash) to be contributed or otherwise transferred to such
Business. Any intercompany or intracompany loans made from and after the
date of this Agreement to or from any of the Businesses consistent with
past cash management practices shall be repaid at or prior to the Closing.
Section 4.04. Change of Lockbox Accounts. Immediately after
the Closing, LM shall take, and shall cause each of its Subsidiaries to
take, such steps as the Company may reasonably request, to cause the
Company or any other Person, as determined by the Company, to be
substituted as the sole party having control over any lockbox or similar
bank account to which customers of LM or any of its Subsidiaries directly
make payments related to the Businesses.
Section 4.05. Maintenance and Enforcement of Insurance
Policies. (a) On and after the date of this Agreement (including after
the Closing Date), LM shall not, and shall not permit any Transferor
Subsidiary to, take or fail to take any action if such action or inaction,
as the case may be, would adversely affect the applicability of any
insurance (including reinsurance and any established reserves under any
self-insurance or deductible programs) in effect on the date of this
Agreement that covers all or any part of the Transferred Assets, the
Businesses or the Transferred Employees in respect of periods ending as of
the Closing. Notwithstanding the foregoing, neither LM nor any Transferor
Subsidiary shall have any obligation to maintain the effectiveness of any
such insurance policy on or after the Closing Date or to make any monetary
payment (other than with respect to reserves under self-insurance or
deductible programs) in connection with any such policy.
(b) Notwithstanding any provision to the contrary in this
Agreement, this Section 4.05(b) shall constitute the parties' agreement
regarding the allocation of insurance proceeds with respect to claims for
Environmental Liabilities that relate to the operation of the Businesses prior
to, or the condition of the Transferred Assets on, the Closing Date
("Environmental Insurance Claims"). The Company acknowledges that insurance
carriers of LM and its predecessor corporations have generally denied
coverage, that LM is diligently pursuing recovery from such carriers and that
LM has a substantial interest in maximizing its recovery from such carriers.
LM shall control the Environmental Insurance Claims and shall have the right
to compromise or settle any Environmental Insurance Claims. LM will act in
good faith and with reasonable prudence to maximize recovery with respect to
Environmental Insurance Claims and will allocate a portion of any recovery
received with respect to such Environmental Insurance Claims as follows:
(i) LM shall first deduct its costs to collect such
recovery and all net tax costs related to such recovery.
(ii) LM shall then deduct any amounts it owes to a
Governmental Authority, prime contractor or subcontractor
pursuant to a Government Contract in respect of such
Environmental Liabilities.
With respect to any recovery remaining after the amounts
specified in clauses (i) and (ii) have been deducted (the "Remaining
Recovery"):
(A) if the recovery applies to Environmental
Liabilities that are Assumed Liabilities and to
Environmental Liabilities that are not Assumed
Liabilities, and the recovery was not designated as
arising from specific Environmental Liabilities (e.g., a
global settlement with a carrier), LM will pay the
Company an amount equal to the Remaining Recovery
multiplied by X multiplied by (one minus Y); where X
equals the total of the Environmental Insurance Claims
(estimated as of the date of recovery) under said
insurance policies divided by the total environmental and
toxic tort claims by LM under said insurance policies;
and Y equals LM's past expenditures on said Environmental
Liabilities divided by the total estimated expenditures
in respect of said Environmental Liabilities (estimated
as of the Closing Date), or
(B) if the recovery was designated as arising from a
specific Environmental Liability that is an Assumed
Liability, LM will pay the Company the Remaining Recovery
multiplied by (one minus Y).
Any obligations assumed in such compromise or settlement will be
apportioned between LM and the Company in the same proportion as a recovery
would be allocated pursuant to this Section 4.05(b).
(c) The Company agrees that all insurance policies covering the
Transferred Assets, the Businesses and the Transferred Employees (but with
respect to workers compensation insurance, subject to Exhibit IV) maintained
by or on behalf of LM or any Transferor Subsidiary may be terminated or may
terminate by their terms as of the Closing and that, from and after the Closing
Date, LM and each of the Transferor Subsidiaries shall have no obligation of
any kind to maintain any form of insurance (other than reserves for
self-insurance and deductible programs) covering all or any part of the
Transferred Assets, the Businesses or the Transferred Employees.
Section 4.06. Transitional Services Agreement. From and after
the Closing and until the third anniversary of the Closing Date, (i) LM shall,
or shall cause its Subsidiaries to, provide to the Company certain transitional
services to the Businesses and (ii) the Company shall provide to LM certain
transitional services to the VLS Business and the other LM affiliated entities
co-located at the Baltimore Facility, namely, the Lockheed ▇▇▇▇▇▇ Federal
Credit Union, Lockheed ▇▇▇▇▇▇ Enterprise Information Systems, LMC Properties,
Inc. and Lockheed ▇▇▇▇▇▇ Unmanned Systems Division, in each case, pursuant to
a transitional services agreement (the "Transitional Services Agreement") to
be negotiated prior to the Closing. Such services shall be provided by the
providing party using the cost methodology currently used by LM or the
applicable Subsidiary of LM to assess to the applicable Business the same or
similar services, and if there is no such current assessment, then at the
actual cost of the providing party. Except as provided in Exhibit IV, the
Company or LM may elect to terminate any particular service provided to it
upon 180 days' notice to the other party and in the event of a conflict between
this Section and Exhibit IV, the provisions of Exhibit IV will control.
Section 4.07. Thrust Reverser Business. (a) Technical
Consulting Agreement. From and after the Closing Date, (i) LM shall, or shall
cause its Subsidiaries to, provide certain research, development and
engineering support services to the Thrust Reverser Business, and (ii) the
Company shall cause the Thrust Reverser Business to provide certain research,
development and engineering support services to LM, in each case, pursuant to
a Technical Consulting Agreement (the "Technical Consulting Agreement") to be
negotiated prior to the Closing on terms and subject to conditions set forth in
Attachment B.
(b) Option to Purchase Northrop Grumman Thrust Reverser Business.
For a period of six months (the "Option Period") after LM completes its
acquisition of Northrop Grumman Corporation ("Northrop Grumman"), the Company
shall have the option (the "Northrop Grumman Option") to acquire the Northrop
Grumman Commercial Thrust Reverser Business. The Company may exercise the
Northrop Grumman Option at any time during the Option Period by delivery of
written notice to LM. If the Company elects to exercise the Northrop Grumman
Option, the purchase price for the Northrop Grumman Commercial Thrust Reverser
Business (the "Northrop Grumman Purchase Price") shall be an amount equal to
the product of (A) the 1996 earnings before interest, taxes, depreciation and
amortization of the Northrop Grumman Commercial Thrust Reverser Business
multiplied by (B) 11.3. During the Option Period, upon written notice by the
Company to LM and provided that the Company has entered into a customary
confidentiality agreement with LM, for a three-week period, LM will, and will
cause each Subsidiary of LM to, (i) give the Company and its Representatives
reasonable access to the offices, properties, books and records of LM and such
Subsidiary relating to the Northrop Grumman Commercial Thrust Reverser
Business, (ii) furnish to the Company and its Representatives such financial
and other operating data and other information relating to the Northrop
Grumman Commercial Thrust Reverser Business as the Company may reasonably
request and (iii) instruct its employees and Representatives to cooperate with
the Company in its investigation of the Northrop Grumman Commercial Thrust
Reverser Business, in each case, except as may be deemed appropriate to ensure
compliance with Applicable Laws (including, without limitation, any
requirements with respect to security clearances) and subject to any
applicable privileges (including, without limitation, the attorney-client
privilege). If the Northrop Grumman Option is exercised during the Option
Period, from the date of exercise of the Northrop Grumman Option through the
closing of the acquisition by the Company of the Northrop Grumman Commercial
Thrust Reverser Business, LM will, and will cause each Subsidiary to, comply
again with the provisions of clauses (i), (ii) and (iii) above. The closing
of the acquisition by the Company of the Northrop Grumman Commercial Thrust
Reverser Business will be subject to representations, warranties, covenants
and agreements consistent with this Agreement and the Exchange Agreement and
closing conditions consistent with the Exchange Agreement with such
adjustments as are appropriate to reflect the expected tax treatment of the
transaction and restrictions applicable to employee benefit plans.
(c) Survival of Certain Rights and Obligations. The parties
hereby acknowledge and agree that the 1993 Thrust Reverser Agreement and
any and all implementing agreements related thereto (including, without
limitation, the related License Agreement and the Thrust Reverser Product
Support Agreement) constitute Transferred Assets and that, with the
exceptions set forth in the next sentence, the liabilities and obligations
of LM associated with the 1993 Thrust Reverser Agreement that otherwise
meet the definition of "Assumed Liabilities" in Exhibit I and which are not
Excluded Liabilities constitute Assumed Liabilities. Notwithstanding the
foregoing or anything to the contrary in Article XXVII of the 1993 Thrust
Reverser Agreement, from and after the Closing, LM shall continue to be
bound only by the obligations set forth in the third and fourth sentences
of Article VIII A, and paragraphs B - E of Article VIII (Information and
Data) and Article XX (Release of Information) of the 1993 Thrust Reverser
Agreement as provided therein, and the provisions of Article XXIX
(Miscellaneous) thereof shall continue to apply with respect to such
obligations.
(d) Parts Manufacturing Authorization. From and after the
Closing, LM shall not exercise its rights under any parts manufacturing
authorization from the Federal Aviation Administration issued to LM for the
Products (as such term is defined in the 1993 Thrust Reverser Agreement).
Section 4.08. Agreement with Sun. From the date of this
Agreement until the Closing, LM shall use best efforts to cause Access
Graphics (i) to enter into a master reseller agreement with Sun
Microsystems Computer Company ("Sun") effective not later than January 1,
1998 (the "Sun Master Reseller Agreement") that contains terms
substantially similar to those contained in the master reseller agreement
relating to the 1998 calendar year executed by Access Graphics, a copy of
which was provided to GE, pursuant to which Sun agrees to permit Access
Graphics or its Affiliates to sell returned goods and to continue to sell
goods directly to LM and its Affiliates and (ii) to obtain the assignment
of the rights and obligations of Access Graphics under any existing
contract with Sun and such Sun Master Reseller Agreement to the Company.
Section 4.09. Loan. The Company shall provide to LM, (i) on or
after the third calendar day following the Closing Date but prior to the
payment of any adjustment to the ▇▇ ▇▇▇▇ Contribution Amount pursuant to
Section 2.06, loans in an aggregate principal amount not to exceed 90.0% of
the ▇▇ ▇▇▇▇ Contribution Amount as of the Closing Date and (ii) on or after
the Closing Date, after the payment of any adjustment to the ▇▇ ▇▇▇▇
Contribution Amount pursuant to Section 2.06, loans in an aggregate principal
amount (including the principal amount of any loan provided pursuant to clause
(i)) not to exceed the ▇▇ ▇▇▇▇ Contribution Amount as adjusted pursuant to
Section 2.06, in either case, on the terms and subject to the conditions set
forth in Attachment C; provided, that the Company shall not be obligated to
provide any such loan to LM, in the case of clause (i), unless the Company
receives a notice in writing from LM requesting such a loan not later than 45
Business Days following the Closing Date and, in the case of clause (ii), not
later than 45 Business Days following the payment of any adjustment to the ▇▇
▇▇▇▇ Contribution Amount pursuant to Section 2.06, or in the event that there
is no such adjustment, not later than 45 Business Days following the parties'
agreement on the Closing Balance Sheets.
Section 4.10. Protection of Businesses; Non-Solicitation.
(a) In consideration of the benefits of this Agreement to LM and in order
to induce the Company to enter into this Agreement, LM hereby covenants and
agrees that, from and after the Closing and until the fourth anniversary of
the Closing Date, LM shall not, directly or indirectly, engage anywhere in
the world in any activities that compete, in any material respect, with any
of the Businesses as conducted on the Closing Date (a "Competing
Business"); provided, that this Section 4.10 shall not (i) prevent LM or
any of its Affiliates from engaging anywhere in the world in any activity
that LM or any of its Affiliates is engaged in on the Closing Date after
the transfer of the Businesses, (ii) apply to investments by LM or any of
its Affiliates in securities of another entity which constitute, in the
aggregate, less than 5% of the outstanding shares of such entity entitled
to vote generally in the election of directors or similar persons, (iii)
prohibit the acquisition (by merger or otherwise) of the securities or
assets of a business where the gross revenues of such business attributable
to Competing Businesses constitute less than 15% of the total gross
revenues of such business and where the entry into Competing Businesses is
not the principal purpose of such acquisition, (iv) in any manner limit the
ability of LM to consummate the acquisition of Northrop Grumman and to own
and operate the business of Northrop Grumman as conducted on the closing
date of LM's acquisition of Northrop Grumman, provided that (A) LM and its
Affiliates (including Northrop Grumman and its Affiliates after LM's
acquisition of Northrop Grumman) may not, directly or indirectly, until the
fourth anniversary of the Closing Date, engage anywhere in the world in the
commercial thrust reverser business with respect to engines with thrust in
excess of 30,000 pounds, other than with respect to commercial derivatives
of Northrop Grumman's C-17 military engine or contracts for any products
(including thrust reversers and components) with The Boeing Company,
provided that LM shall not, directly or indirectly, bid in response to any
requests for proposals of The Boeing Company for any such products issued
to two or more suppliers, (B) if the Company exercises the Northrop Grumman
Option, LM shall not, directly or indirectly, until the fourth anniversary
of the Closing Date, engage anywhere in the world in the commercial thrust
reverser business, other than with respect to commercial derivatives of
Northrop Grumman's C-17 military engine or contracts for any products
(including thrust reversers and components) with The Boeing Company,
provided that LM shall not, directly or indirectly, bid in response to any
requests for proposals of The Boeing Company for any such products issued
to two or more suppliers, and (C) if, at the time of the closing of LM's
acquisition of Northrop Grumman, Northrop Grumman has, directly or
indirectly, acquired since the date of this Agreement any business that
competes anywhere in the world with the Access Graphics Business, the
Company shall have an option, exercisable at any time during the 90-day
period following such closing, to acquire such business at its fair market
value or (v) in any manner limit the ability of LM or any of its
Subsidiaries to dispose of real property and related personalty.
(b) From and after the date of this Agreement until the second
anniversary of the Closing Date, LM shall not, without prior written approval
of the Company, directly or indirectly solicit any person who is an employee of
any of the Businesses (or the Northrop Grumman Commercial Thrust Reverser
Business if the Company exercises the Northrop Grumman Option) at any time on
or after the date of this Agreement to terminate his or her relationship with
any of the Businesses (or the Northrop Grumman Commercial Thrust Reverser
Business if the Company exercises the Northrop Grumman Option); provided, that
the foregoing shall not apply to persons hired as a result of the use of an
independent employment agency (so long as the agency was not directed to
solicit such person) or as a result of the use of a general solicitation (such
as an advertisement) not specifically directed to employees of the Businesses
(or the Northrop Grumman Commercial Thrust Reverser Business if the Company
exercises the Northrop Grumman Option). Notwithstanding the foregoing, if the
Company exercises the Northrop Grumman Option, the Company agrees that, if LM
requests the Company's approval to solicit certain employees of the Northrop
Grumman Commercial Thrust Reverser Business, the Company will not unreasonably
withhold its written approval.
(c) If any provision contained in this Section 4.10 shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section 4.10, but this Section 4.10 shall be construed
as if such invalid, illegal or unenforceable provision had never been
contained in this Section 4.10. It is the intention of the parties that if
any restriction or covenant contained in this Section 4.10 is held to cover
a geographic area or to be for a length of time that is not permitted by
Applicable Law, or is in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable
under Applicable Law, a court of competent jurisdiction shall construe and
interpret or reform this Section 4.10 to provide for a covenant having the
maximum enforceable geographic area, time period and other provisions (not
greater than those contained in this Section 4.10) as shall be valid, legal
and enforceable under such Applicable Law. LM acknowledges that the
Company would be irreparably harmed by any breach of this Section 4.10 and
that there would be no adequate remedy at law or in damages to compensate
the Company for any such breach. LM agrees that the Company shall be
entitled to injunctive relief requiring specific performance by LM of this
Section 4.10, and LM consents to the entry of such injunctive relief.
Section 4.11. Baltimore Facility Lease. On the Closing Date,
LMC Properties, Inc. and the Company shall enter into a lease agreement (the
"Baltimore Facility Lease") relating to the Premises (as defined in Attachment
D) on terms and subject to the conditions set forth in Attachment D.
Section 4.12. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ Claims. LM, as the
Indemnifying Party, shall be entitled to settle in accordance with Section
7.04(b)(iv) all claims referred to in clause (j) of the definition of Excluded
Liabilities; provided, that LM has not agreed and shall not agree, as a part
of or in connection with such settlement, to any settlement terms that would
affect the remaining performance, as of the Closing Date, of the P&W Agreement
in a manner that would be adverse to the interests of the Company or any of its
Affiliates arising under such contract.
Section 4.13. Certain LM Arrangements. (a) On the Closing
Date, LM will enter into agreements with the Company, effective as of the
Closing Date, such that:
(i) until the second anniversary of the Closing Date, LM
will
(A) continue in all material respects the purchasing
agreements (including, without limitation, the assignment
to the Company of the master purchase order) and
relationships with the Access Graphics Business existing
as of the date of this Agreement whereby LM, on behalf of
itself and certain of its Subsidiaries for its or their
internal use only, purchases a substantial portion of
LM's and such Subsidiaries' requirements for purchase of
Sun, Silicon Graphics, Inc. and other Unix-based products
and related services (including, without limitation, Help
Desk services), on terms no less favorable to the Company
(or its Affiliates providing such products or services)
than the terms in existence on the date of this Agreement
and at levels consistent with purchases of such products
and services during calendar year 1997, provided, that
(x) LM shall be required to purchase Sun products and
services from the Company only to the extent the Company
is permitted by Sun to sell such products and services to
LM, and (y) following LM's acquisition of Northrop
Grumman, this clause shall not apply to any similar
requirements of Northrop Grumman, and
(B) purchase from the Company (or its Affiliates)
all requirements for products and services currently
procured under Intra Lockheed ▇▇▇▇▇▇ Work Transfer
Agreements existing as of the date of this Agreement or
as contemplated in the Aerostructures 1998 Long Range
Plan and set forth in Section 4.13 of the Contribution
Disclosure Schedule,
provided, that the obligations of LM pursuant to clauses (A)
and (B) shall continue during such two-year period for so long
as the cost, quality and schedule requirements generally
prevailing on the date of this Agreement are met, and provided
further, that LM shall be afforded terms no less favorable
than historically provided to LM for such products and
services and the profit margins charged on products and
services of the Thrust Reverser Business purchased from the
Company shall be no different than those assumed for such
products and services in the Aerostructures 1998 Long Range
Plan; and
(ii) for a period of three years following the second
anniversary of the Closing Date, LM shall afford the Company
(and its Affiliates) the opportunity to bid to provide any of
the products or services referred to in clauses (A) and (B) of
clause (i) above, provided, that, with respect to any bids for
such products or services having an aggregate value in excess
of $1,000,000, in the case of the Thrust Reverser Business,
$2,000,000, in the case of services provided by the Access
Graphics Business, and $5,000,000, in the case of products
provided by the Access Graphics Business, the Company shall
have the right to match the offer of any other Person to
supply such products or services to LM and its Subsidiaries
and, so long as the terms on which the Company (or such
Affiliate) offers to provide such products or services are at
least as favorable to LM and its Subsidiaries on the basis of
cost, schedule and quality as any offer received from such
other Person with respect to such products and services, LM
shall accept the Company's (or such Affiliate's) offer in
priority to the offer of such other Person.
(b) From and after the Closing until the third anniversary of
the Closing Date, LM agrees that if it or any of its Subsidiaries purchases
CF6-80C engines for re-engining with respect to C5M aircraft, LM or such
Subsidiary will purchase the thrust reverser for such engines on terms
consistent with the pricing and other standards set forth in GE's September
29, 1997 proposal provided to LM.
Section 4.14. Customer Introductions. From and after the
Closing until the second anniversary of the Closing Date, LM shall, and
shall cause each Transferor Subsidiary to, upon the request of the Company,
to the extent reasonably practicable, introduce the Company, or arrange for
a personal introduction of the Representatives of the Company, to customers
of the Businesses for the purpose of ensuring good customer relationships
following the Closing.
Section 4.15. Financial Support Arrangements. (a) The Company
agrees that not later than July 31, 1998 (the "Release Date"), and in a manner
reasonably satisfactory to LM, the Company will assume, or otherwise ensure
that LM, each Transferor Subsidiary and their Affiliates are released from all
obligations of LM, such Transferor Subsidiary or any of their Affiliates under
all letters of credit, surety bonds and other financial support arrangements
maintained as of the Closing Date by LM, such Transferor Subsidiary or any of
their Affiliates in connection with the Businesses (collectively, the
"Financial Support Arrangements"). As promptly as practicable after the
Closing Date, LM shall provide the Company with a list of such Financial
Support Arrangements to the extent not listed in Section II.10 of the
Contribution Disclosure Schedule.
(b) LM will use best efforts to cause each Financial Support
Arrangement to remain in full force and effect in accordance with its terms
until the earliest of (i) the Release Date on which the Company assumes, or
otherwise ensures that LM, each Transferor Subsidiary and their Affiliates
are released from, all obligations of LM, each Transferor Subsidiary and
their Affiliates under such Financial Support Arrangement in accordance
with Section 4.15(a), (ii) July 31, 1998 and (iii) the date such Financial
Support Arrangement terminates in accordance with its terms. After the
Closing Date and prior to the Release Date for any such Financial Support
Arrangement, LM will not, and will not permit any Transferor Subsidiary to,
waive any requirements of or agree to amend such Financial Support
Arrangement without the prior written consent of the Company. Upon the
receipt of a written (i) will cause (or, if the consent of another party is
required, will endeavor to cause) the principal or stated amount, as
applicable, of such Financial Support Arrangement to be increased or
decreased as requested and (ii) will cause other provisions thereof to be
modified or amended as requested.
(c) If, after the Closing Date, (i) any amounts are drawn on or
paid under any Financial Support Arrangement where LM, each Transferor
Subsidiary or their Affiliates are obligated to reimburse the Person making
such payment or otherwise to make payment in accordance with the Financial
Support Arrangement or (ii) LM, each Transferor Subsidiary or their Affiliates
pay any fees, costs or expenses relating to any Financial Support Arrangement,
the Company shall pay LM, the applicable Transferor Subsidiary or applicable
Affiliate such amounts promptly after receipt from LM of notice thereof
accompanied by written evidence of the underlying payment obligation.
(d) In the event that the Company fails to assume, or otherwise
ensure that LM, each Transferor Subsidiary and their Affiliates are released
from, all obligations of LM, each Transferor Subsidiary and their Affiliates
under the Financial Support Arrangements not later than July 31, 1998, the
Company shall (i) promptly deposit with LM or the applicable Transferor
Subsidiary or applicable Affiliate cash in an amount equal to the aggregate
principal or stated amount, as may be applicable, of the Financial Support
Arrangements with respect to which the Release Date has not occurred or (ii)
subject to the prior approval of the Treasurer of LM, provide back-up letters
of credit in form and substance satisfactory to the Treasurer of LM with
respect to such Financial Support Arrangements. Any cash deposited with LM or
the applicable Transferor Subsidiary or applicable Affiliate in accordance
with clause (i) shall be held by LM or the applicable Transferor Subsidiary or
applicable Affiliate in a segregated account, shall be used by LM or the
applicable Transferor Subsidiary or applicable Affiliate solely to satisfy its
payment obligations in respect of such Financial Support Arrangements and the
unused portion of such cash relating to a Financial Support Arrangement shall
be returned to the Company promptly after the occurrence of the Release Date
with respect to such Financial Support Arrangement.
Section 4.16. No Inconsistent Positions. LM and the Company
covenant and agree not to, and to cause their Affiliates not to, take any
position after the Closing inconsistent with the fair market value of the
Businesses on the Closing Date being not less than the amount stated in
paragraph (85) of the Officers' Certificate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ referred to in Section 8.02(d)(i) of the Exchange Agreement or in
paragraph (c) of the Officer's Certificate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ referred to
in Section 8.03(b)(i) of the Exchange Agreement.
Section 4.17. Equity Securities. (a) At Closing, LM shall
deliver to the Company certificates for the Equity Securities, free and clear
of all Liens, preemptive rights or any other limitation or restriction (other
than any applicable limitations on offers and sales under federal and state
securities laws, it being understood that the terms of this parenthetical
clause do not limit or affect LM's obligations under clauses (b) and (c) of
this Section 4.17), duly endorsed or accompanied by stock powers duly endorsed
in blank, with any required transfer stamps fixed thereto, together with the
most recent Warrant Share Offering Prospectus provided by Globalstar to LM
with respect to the Globalstar S-3.
(b) Prior to the Closing Date, LM shall provide a notice to
Globalstar indicating that LM is distributing its Warrant Shares (as such term
is defined in the Warrant Acceleration and Registration Rights Agreement) to
the Company effective on the Closing Date pursuant to the plan of distribution
in the Globalstar S-3.
(c) Prior to the Closing Date, LM shall use best efforts to
(i) deliver to the Company at Closing the Equity Securities on a basis that
such securities are freely transferable under the federal and state
securities laws, and certificates for the Equity Securities without any
restrictive legend of any kind whatsoever, and (ii) assuming compliance
with Sections 4(f) and 8(c) of the Warrant Acceleration and Registration
Rights Agreement, assign to the Company its rights and obligations as a
Warrant Holder under the Warrant Acceleration and Registration Rights
Agreement effective as of the Closing.
Section 4.18. Certain Contribution. Prior to the Closing, LM
shall cause the approximately $66,000,000 payable by Access Graphics B.V.
(Netherlands) to LM to be contributed to the capital of Access Graphics
B.V. (Netherlands). LM agrees that in the event that such contribution
has not been made prior to or at the Contribution Closing, such amount
shall be an Excluded Liability.
ARTICLE 5
Tax Matters
Section 5.01. Tax Matters. The parties agree as to Tax matters
as set forth in Exhibit III.
ARTICLE 6
Employment and Employee Benefit Matters
Section 6.01. Employment and Employee Benefit Matters. The
parties agree as to employment and employee benefit matters as set forth in
Exhibit IV.
ARTICLE 7
Survival; Indemnification
Section 7.01. Survival. (a) None of the covenants, agreements,
representations and warranties of the parties contained in this Agreement or
the certificates to be delivered pursuant to Sections 8.02(a)(iii) and
8.03(a)(iii) of the Exchange Agreement shall survive the Closing except for
those contained in Articles 2, 4 (other than Sections 4.01, 4.03, 4.08, 4.11
and 4.17) and 7, Sections 8.01, II.01 (other than with respect to the
qualification to do business in any state other than Maryland), II.02,
II.03(a), II.04 (with respect to clauses (i) and (ii) thereof), II.05, Exhibit
III and Exhibit IV (other than Section IV.01), and those covenants and
agreements which, by their terms, are to have effect after the Closing Date
(each, a "Surviving Representation or Covenant"). It is understood and agreed
that, except as explicitly provided in this Agreement, after the Closing there
shall be no liability or obligation under this Agreement in respect of a
breach or alleged breach of any representation, warranty, covenant or
agreement contained in this Agreement or such certificates. It is further
understood and agreed that none of the representations and warranties that
have been made by any of the parties in any other Transaction Document shall
survive the Closing, except to the extent the survival thereof is expressly
provided for in any Transaction Document.
(b) Except with respect to the Excluded Liabilities and except as
otherwise provided in the Transaction Documents, the Company for itself, its
Affiliates and their respective Representatives, effective as of the Closing,
release and discharge LM, its Affiliates and their respective Representatives
from any and all claims, demands, debts, liabilities, accounts, obligations,
costs, expenses, liens, actions, causes of action (whether in law, in equity or
otherwise), rights of subrogation and contribution and remedies of any nature
whatsoever, known or unknown, relating to or arising out of Environmental
Liabilities or Environmental Laws, in either case, arising in connection with
or in any way relating to the Businesses or the Transferred Assets.
Section 7.02. Indemnification. (a) Effective as of the
Closing, LM hereby indemnifies the Company and its Affiliates and, to the
extent actually indemnified by the Company or any such Affiliate from time to
time, their respective Representatives against and agrees to hold each of them
harmless on an after-Tax basis from any and all Damages incurred or suffered
by any of them arising out of or related in any way to:
(i) any misrepresentation or breach of (A) any Surviving
Representation or Covenant made or to be performed by LM or
any Transferor Subsidiary pursuant to this Agreement, other
than Section 2.01(b) or 4.16, or (B) subject in each case to
Section 9.02(b) of the Exchange Agreement, the Tax Assurance
Agreement or Section 2.01(b) or 4.16 of this Agreement; or
(ii) any Excluded Liability (including, without
limitation, LM's or any Transferor Subsidiary's failure to
perform or in due course pay and discharge any Excluded
Liability).
(b) Effective as of the Closing, the Company hereby indemnifies LM
and its Affiliates and, to the extent actually indemnified by LM or any such
Affiliate from time to time, their respective Representatives against and
agrees to hold each of them harmless on an after-Tax basis from any and all
Damages incurred or suffered by any of them arising out of or related in any
way to:
(i) any misrepresentation or breach of (A) any Surviving
Representation or Covenant made or to be performed by the
Company after the Closing Date pursuant to this Agreement,
other than Section 2.01(b) or 4.16, or (B) subject to Section
9.02(d) of the Exchange Agreement, the Tax Assurance Agreement
or Section 2.01(b) or 4.16 of this Agreement; or
(ii) subject to Sections 7.03 and 7.06, any Assumed
Liability (including, without limitation, any failure by the
Company to perform or in due course pay and discharge any
Assumed Liability).
Section 7.03. Indemnification of Company by LM for Certain
Assumed Liabilities. (a) LM hereby indemnifies the Company and its Affiliates
and, to the extent actually indemnified by the Company or such Affiliate from
time to time, each of their respective directors, officers, employees and
agents, against and agrees to hold them harmless on an after-Tax basis from:
(i) in the case of any Matter described in clause
7.03(b)(ii), Actual Net Expenditures; and
(ii) in the case of any Matter described in clause
7.03(b)(i), Actual Net Expenditures and Economic Harm (without
duplication),
in each case only to the extent such Actual Net Expenditures were made by
or such Economic Harm was actually realized by any of them before the tenth
anniversary of the Closing Date; provided, however, that LM shall not have
any obligation to indemnify with respect to any such Matter until the
amount of such Actual Net Expenditures made or Actual Net Expenditures made
and Economic Harm realized, as the case may be, exceeds $15,000,000 (each,
an "Excess Amount"); and further, provided, that LM shall have received (A)
notice from the Company specifying such Excess Amount and (B) evidence
reasonably satisfactory to LM that the Company has made such Actual Net
Expenditures or suffered such Economic Harm. Promptly after receipt of
such notice and evidence, LM shall pay any Excess Amount in cash or by wire
transfer of immediately available funds to such account of the Company as
the Company shall specify in a written notice. Any notice made pursuant to
this Section 7.03(a) may not be delivered later than sixty days after the
tenth anniversary of the Closing Date.
(b) For purposes of this Agreement and the Exchange Agreement, a
single matter ("Matter") shall consist of:
(i) Environmental Liabilities which arise out of a
common root cause and which relate to the operation of the
Businesses prior to, or the condition of the Transferred
Assets as of, the Closing Date; or
(ii) liabilities to the U.S. Government arising out of a
common root cause, related to Government Contracts, and based
upon allegations of knowing or intentional misconduct on the
part of LM employees which occurred prior to the Closing Date
in connection with the operation of the Businesses.
(c) No Person shall be entitled to payment of any Excess
Amount if, without LM's prior written consent, the Company (i) other than
in good faith, rejected a settlement proposal in respect of such Matter or
failed to settle such Matter for an amount that would have resulted in
Actual Net Expenditures of less than $15,000,000 in respect of such Matter;
(ii) settled any such Matter, or consented to the entry of judgment in
respect of such Matter, where such settlement or judgment resulted in an
Excess Amount; or (iii) did not allow LM to participate in a substantial
manner with the Company in the defense of such Matter (substantially in the
manner contemplated by Section 7.04(b)(ii)).
Section 7.04. Procedures for Third Party Claims. (a) Notice.
The party or parties seeking indemnification under Section 7.02 or the Company
under Section 7.06 (the "Indemnified Parties") agrees to give prompt notice to
the parties against whom indemnity is sought (the "Indemnifying Parties") of
the assertion of any third party claim, or the commencement of any suit, action
or proceeding in respect of which indemnity may be sought under Section 7.02
or 7.06 (the "Third Party Claims"). The failure by any Indemnified Party so
to notify the Indemnifying Parties shall not constitute a waiver of any
Indemnified Party's claims to indemnification in the absence of material
prejudice to the Indemnifying Parties. Any such notice shall be accompanied
by a copy of any papers theretofore served on the Indemnified Party in
connection with the applicable Third Party Claim.
(b) Defense and Settlement of Claims.
(i) Assumption of Defense by LM. Except as provided in
Sections 7.04(b)(ii) and (v), upon receipt of notice from any
Indemnified Party with respect to any Third Party Claim as to
which indemnity is available pursuant to Section 7.02(a) or as
to which indemnity may be available to the Company pursuant to
Section 7.06(a), LM will, subject to the provisions of Section
7.04(b)(ii), (iii), (iv), (vi) and (vii) assume the defense
and control of such Third Party Claim but shall allow the
Indemnified Parties a reasonable opportunity to participate in
the defense thereof with their own counsel and at their own
expense. LM shall select counsel, contractors and consultants
of recognized standing and competence after consultation with
the Company, shall take all steps necessary in the defense or
settlement thereof, and shall at all times diligently and
promptly pursue the resolution thereof. In conducting the
defense thereof, LM shall at all times act as if all Damages
or Product Damages, as the case may be, relating to such Third
Party Claim were for its own account and shall act in good
faith and with reasonable prudence to minimize Damages or
Product Damages, as the case may be, therefrom. The Company
shall, and shall cause each of its Affiliates, directors,
officers, employees, and agents to, cooperate fully with LM in
the defense of any Third Party Claim defended by LM.
(ii) Assumption of Defense by the Company. Except as
provided in Section 7.04(b)(i) or 7.04(b)(v), upon receipt of
notice from any Indemnified Party with respect to any Third
Party Claim as to which indemnity is available pursuant to
Section 7.02(b), the Company will, subject to the provisions
of Section 7.04(b)(iii), (iv), (vi) and (vii), assume the
defense and control of such Third Party Claim, but shall allow
the Indemnified Parties a reasonable opportunity to
participate in the defense thereof with their own counsel and
at their own expense. Notwithstanding Section 7.04(b)(i), the
Company may retain the defense and control of any Third Party
Claim to the extent it relates to a Product Matter; provided
that (A) the amount of potential Product Damages in respect of
such claim is less than $5,000,000, and (B) the Company, in
good faith, expects that the resolution of the Product Matter
to which such claim relates will not result in Product Damages
in excess of $15,000,000; and provided further that the
Company shall allow LM a reasonable opportunity to participate
in the defense thereof with its own counsel and at its own
expense. The Company shall select counsel, contractors and
consultants of recognized standing and competence after
consultation with LM, shall take all steps necessary in the
defense or settlement thereof, and shall at all times act as
if all Damages or Product Damages, as the case may be,
relating to such Third Party Claim were for its own account
and shall act in good faith and with reasonable prudence to
minimize Damages or Product Damages, as the case may be,
therefrom. LM shall, and shall cause each of its Affiliates,
directors, officers, employees, and agents to, cooperate fully
with the Company in the defense of any Third Party Claim
defended by the Company.
(iii) Continuing Notice of Certain Claims. Each
Indemnifying Party conducting a defense pursuant to Section
7.04(b)(i) or 7.04(b)(ii) shall give prompt and continuing
notice to the Indemnified Parties in respect of such Third
Party Claim that the Indemnifying Party reasonably believes
may: (A) result in the assertion of criminal liability on the
part of the Indemnified Party or any of its Affiliates,
directors, officers, employees or agents; (B) adversely
affect the ability of the Indemnified Party to do business in
any jurisdiction or with any customer; or (C) materially
affect the reputation of the Indemnified Party or any of its
Affiliates, directors, officers, employees or agents.
(iv) Settlement of Claims. Except as provided in
Section 7.04(b)(v) or Section 4.12, the Indemnifying Party
shall be authorized to consent to a settlement of, or the
entry of any judgment arising from any Third Party Claim,
without the consent of any Indemnified Party; provided, that
the Indemnifying Party shall (A) pay or cause to be paid all
amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; (B) shall not
encumber any of the assets of any Indemnified Party or agree
to any restriction or condition that would apply to such
Indemnified Party or to the conduct of that party's business;
and (C) shall obtain, as a condition of any settlement or
other resolution, a complete release of each Indemnified
Party.
(v) Tax Claims. Sections 7.04(b)(i) through
7.04(b)(iv), 7.04(b)(vi) and 7.04(b)(vii) shall not be
applicable to any Third Party Claim relating to income or
franchise taxes. Each of LM and the Company shall keep the
other fully advised with respect to, and shall grant the other
full rights of consultation in connection with, any such Third
Party Claim and the defense or other handling of any audit,
litigation or other proceeding involving the tax treatment of
the Contemplated Transactions.
(vi) Shared Defense. Each party may elect to share the
defense of a Third Party Claim the defense of which has been
assumed or retained by the other party pursuant to Section
7.04(b)(i) or (ii). In that event, the Indemnified Party will
so notify the other party in writing. Thereafter, the Company
and LM shall participate on an equal basis in the defense,
management and control of any such claim. LM and the Company
shall select mutually satisfactory counsel, contractors and
consultants to conduct the defense or settlement thereof, and
shall at all times diligently and promptly pursue the
resolution thereof. LM and the Company shall each be
responsible for one-half of all Damages or Product Damages, as
the case may be, incurred after the Indemnified Party has
provided notice as specified herein, including costs of
defense and investigation, with respect to such claim,
provided, that (A) the Company's Actual Net Expenditures and
Economic Harm with respect to any Matter governed by Section
7.03 shall in no event exceed $15,000,000, (B) the Company's
liability pursuant to Section 7.06(a) shall in no event exceed
the amount set forth therein and (C) the election by the
Company to share in the defense of a Third Party Claim as to
which indemnity is available pursuant to Section 7.06(a) shall
not increase LM's liability under such Section 7.06(a).
Notwithstanding the foregoing, the Company shall manage all
Remedial Actions conducted with respect to facilities which
constitute Transferred Assets, provided, that LM and its
Representatives shall have the right, consistent with the
Company's right to manage such Remedial Actions as aforesaid,
to participate fully in all decisions regarding any Remedial
Action, including reasonable access to sites where any
Remedial Action is being conducted, reasonable access to all
documents, data, reports or information regarding the Remedial
Action, reasonable access to employees and consultants of the
Businesses with knowledge of relevant facts about the Remedial
Action and the right to attend all meetings with any
government agency or third party regarding the Remedial
Action.
(vii) Dispute Resolution. If LM and the Company are
unable to agree with respect to a procedural matter arising
under Section 7.04(b)(vi), LM and the Company shall, within
ten days after notice of disagreement given by either party,
agree upon a third-party referee ("Third Party Referee"), who
shall be an attorney and who shall have the authority to
review and resolve the disputed matter. The parties shall
present their differences in writing (each party
simultaneously providing to the other a copy of all documents
submitted) to the Third Party Referee and shall cause the
Third Party Referee promptly to review any facts, law or
arguments either LM or the Company may present. The Third
Party Referee shall be retained to resolve specific
differences between the parties within the range of such
differences. Either party may request that all oral arguments
presented to the Third Party Referee by either party be in
each other's presence. The decision of the Third Party
Referee shall be final and binding unless both LM and the
Company agree otherwise. The parties shall share equally all
costs and fees of the Third Party Referee.
(viii) Defense of Criminal/Civil Matters. LM, as the
Indemnifying Party, shall, subject to the obligations set
forth in Section 7.04(b)(iii) and (iv), assume the defense and
control of any claim arising out of any alleged criminal
violation, as referred to in clause (h) of the definition of
"Excluded Liabilities" in Exhibit I ("Criminal Claim"), but
shall allow the Indemnified Parties a reasonable opportunity
to participate in the defense of the claim with their own
counsel and at their own expense. In defending a Criminal
Claim, LM shall select counsel, contractors and consultants of
recognized standing and competence after consultation with the
Company, shall take all steps necessary in the defense or
settlement of the claim, and shall at all times diligently and
promptly pursue the resolution of the claim. LM shall defend
such claim with the same diligence and effort as if the claim
were asserted directly against it and any Damages were sought
directly from it, and LM shall act prudently and in good faith
to minimize such Damages. The Company shall, and shall cause
each of its Affiliates, directors, officers, employees, and
agents to, cooperate fully with LM in the defense of any
Criminal Claim defended by LM. In the event that any civil
action arises out of the Criminal Claim, or arises out of the
facts underlying the Criminal Claim, as referred to in clause
(h) of the definition of "Excluded Liabilities" in Exhibit I
("Civil Claim"), the Company shall assume the defense and
control of such Civil Claim. LM shall, and shall cause each
of its Affiliates, directors, officers, employees, and agents
to cooperate fully with the Company in the defense of any
Civil Claim defended by the Company.
Section 7.05. Procedures for Direct Claims. In the event any
Indemnified Party should have a claim for indemnity against any Indemnifying
Party that does not involve a Third Party Claim, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying
Party. The failure by any Indemnified Party so to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability that it may
have to such Indemnified Party with respect to any claim made pursuant to this
Section 7.05 in the absence of material prejudice to the Indemnifying Party.
The Indemnifying Party shall use best efforts to notify the Indemnified Party
within 30 calendar days following its receipt of such notice whether the
Indemnifying Party disputes or accepts its liability to the Indemnified Party
under this Article 7; provided, that the failure by the Indemnifying Party to
so notify the Indemnified Party shall not create any presumption that the
Indemnifying Party has accepted its liability to the Indemnified Party under
this Article 7. If the Indemnifying Party accepts its liability to the
Indemnified Party under this Article 7, the Indemnifying Party shall pay the
amount of such liability to the Indemnified Party on demand or, in the case of
any notice in which the amount of the claim (or any portion of the claim) is
estimated, on such later date when the amount of such claim (or such portion
of such claim) becomes finally determined. If the Indemnifying Party has
disputed its liability with respect to such claim as provided above, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation.
Section 7.06. Indemnification of the Company by LM for
Certain Product Matters. (a) Effective as of the Closing, LM hereby
indemnifies the Company and its Affiliates and, to the extent actually
indemnified by the Company or such Affiliate from time to time, each of
their respective Representatives against and agree to hold them harmless on
an after-Tax basis from any and all Product Damages arising out of or
related in any way to a Product Matter (as defined below), but only if the
event (other than the common root cause, including, by way of example, an
accident involving a commercial aircraft while in service but not including
design of a product incorporated in the aircraft) giving rise to such
Product Matter occurs before the tenth anniversary of the Closing Date;
provided, that LM shall not have any obligation to indemnify the Company or
its Affiliates with respect to any Product Matter unless the aggregate
amount of Product Damages arising out of or related in any way to such
Product Matter exceeds $15,000,000 (such amount exceeding $15,000,000, the
"Product Matter Excess Amount") and in that event such obligation to
indemnify with respect to such Product Matter shall equal 75% of the
Product Matter Excess Amount. Product Damages shall not be increased as a
result of (i) action by the Company after the Closing to amend, modify or
waive any provision of a contract or agreement relating to a Product or
(ii) any work performed after the Closing by the Company as a concession to
a customer granted after the Closing. With respect to each such Product
Matter, the Company shall be obligated to pay (or cause to be paid) the
first $15,000,000 of all Product Damages and 25% of the Product Matter
Excess Amount.
(b) For purposes of this Agreement a Product Matter shall
consist of:
(i) Personal and Property Claims which arise out of a
common root cause; or
(ii) Product Liability Claims which arise out of a
common root cause;
provided, that if a particular common root cause gives rise to liabilities
or claims under both clauses (i) and (ii) above, all such liabilities or
claims arising out of such common root cause shall be deemed to constitute
a single Product Matter for purposes of determining whether Product Damages
exceed $15,000,000.
(c) The Company shall provide written notice (a "Product Matter
Indemnity Notice") to LM promptly after becoming aware of any Product Matter,
together with the Company's good faith assessment of whether the Product
Matter will likely result in more than $15,000,000 in Product Damages. In the
event that either the Company or LM becomes aware of any third party claim, or
the commencement of any suit, action or proceeding, in respect of a Product
Matter, the Company or LM, as the case may be, shall promptly notify the other
party of such claim, which shall be treated as a Third Party Claim for
purposes of Section 7.04.
(d) Any party seeking reimbursement of Product Damages from
the other party in accordance with Section 7.06(a) shall notify the other
party specifying the amount so claimed, together with evidence reasonably
satisfactory to the notified party that the notifying party has actually
incurred such Product Damages and is entitled to payment in accordance with
the allocation of Product Damages set forth in Section 7.06(a). Promptly
after receipt of such notice and evidence, the notified party shall pay any
amount due in cash or by wire transfer of immediately available funds to
such account of the notifying party as the notifying party shall specify in
a written notice.
ARTICLE 8
Miscellaneous
Section 8.01. Miscellaneous. The provisions of Article 11 of
the Exchange Agreement are incorporated into this Agreement by reference.
Section 8.02. Termination. This Agreement shall terminate upon
the termination of the Exchange Agreement in accordance with Article 10
thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective authorized officers on the day and year first
above written.
LOCKHEED ▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, Financial Strategies
LMT SUB INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
EXHIBIT I
Definitions
I.01. Definitions. (a) The following terms, as used in any
Transaction Document, have the following meanings:
"Access Graphics" means Access Graphics, Inc., a Delaware
corporation.
"Access Graphics Business" means the business that LM conducts
through Access Graphics (directly or through one or more of its Subsidiaries)
that distributes computer hardware, software and services through independent
resellers to a wide variety of end users by providing "channel integration"
services, which allow hardware manufacturers, software publishers and service
providers to outsource various functions for the management and support of
their indirect sales channels.
"Access Graphics Closing Net Worth" means the excess of (i) the
book value of the Transferred Assets of the Access Graphics Business over (ii)
the amount of the Assumed Liabilities of the Access Graphics Business, in each
case as shown on the Access Graphics Closing Balance Sheet.
"Access Graphics Foreign Subsidiaries" means Access Graphics
S.A. de C.V. (Mexico), Access Graphics (U.K.) Limited, Access Graphics Canada
Inc. and Access Graphics B.V. (Netherlands).
"Access Graphics Initial Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Access Graphics Business over
(ii) the amount of the Assumed Liabilities of the Access Graphics Business, in
each case as shown on the Access Graphics Balance Sheet.
"Actual Net Expenditures" means the actual expenditures made by
a Person (net of any resulting tax benefit and net of any refund or
reimbursement of any portion of such actual expenditures, including, without
limitation, reimbursement by way of insurance, third party indemnification or
the inclusion of any portion of such actual expenditures as a cost under
Government Contracts) in respect of any Matter.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such other Person. It is understood that a Person's Affiliates do not
include its employee benefit and compensation plans or any related trusts or
plan funding mechanisms and it is further understood that the Company is an
Affiliate of LM prior to the Closing and is an Affiliate of GE at and after
the Closing.
"Aggregate Shares of Globalstar Common Stock" means 5,022,380.
"Aggregate Shares of LM Common Stock" means the sum of (i) the
aggregate number of shares of LM Common Stock into which any of the 20,000,000
shares of LM Preferred Stock outstanding as of the Closing Date is convertible
as of such date and (ii) to the extent that any of the 20,000,000 shares of LM
Preferred Stock have been converted into LM Common Stock prior to the Closing
Date, the aggregate number of shares of LM Common Stock into which any of such
shares of LM Preferred Stock have been converted.
"Applicable Law" means, with respect to any Person, any
domestic or foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any Governmental Authority (including
any Environmental Law) applicable to such Person or any of its Affiliates or
any of their respective properties, assets or Representatives (in connection
with such Representative's activities on behalf of such Person or any of its
Affiliates).
"Assumed Liabilities" means all debts, obligations, contracts,
and liabilities of LM or any of its Affiliates to the extent arising out of
the conduct of the Businesses of any kind, character or description, whether
known or unknown, accrued, absolute, contingent, determined, determinable, or
otherwise, whether presently in existence or arising hereafter, including,
without limitation, to the same extent, the following:
(a) all liabilities set forth on, or referred to in, the
Balance Sheets;
(b) all liabilities and obligations of LM or any of its
Affiliates arising under or relating to Contracts and Bids (other
than Contracts or Bids entered into or made after the date of
this Agreement in violation of this Agreement or the Exchange
Agreement), including, without limitation, obligations arising
from progress ▇▇▇▇▇▇▇▇;
(c) all obligations and liabilities arising from any action,
suit, investigation, or proceeding relating to or arising out of
the Businesses or the Transferred Assets against LM or any
Transferor Subsidiary or any Transferred Asset before or with any
court or arbitrator or any Governmental Authority;
(d) all liabilities and obligations relating to any products
designed, manufactured or sold, or services rendered, by the
Businesses on or prior to the Closing Date, including, without
limitation warranty obligations and product liabilities;
(e) all deferred income relating primarily to the
Businesses;
(f) all Environmental Liabilities;
(g) all liabilities and obligations with respect to the
Transferred Employees, the Employee Plans and the Benefit
Arrangements, to the extent assumed by the Company as provided in
Exhibit IV; and
(h) all liabilities and obligations under the Financial
Support Agreements;
provided, that in no event shall Assumed Liabilities include any Excluded
Liability.
"Baltimore Facility" means the premises located at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ consisting of approximately
1,481,813 square feet and used by LM primarily for the Thrust Reverser
Business.
"best efforts" by any party to this Agreement or any other
agreement incorporating by reference the definitions in this Agreement means
those efforts that would be made by a reasonable businessperson consistent
with ordinary commercial practice, taking into account the magnitude of the
cost, risk or other consequences both to such party and to the other party or
parties to this Agreement or such other agreement (and to the Affiliates of
such parties), as the case may be, as if borne by such party, were such
efforts not made. Best efforts do not require any party to propose or agree
to any material change in the nature or composition of the Transferred Assets,
or to undertake any action that is impractical or unduly burdensome. If
efforts that are (or otherwise would be) best efforts require a party to incur
any material out-of-pocket costs (other than any cost otherwise required to be
incurred by such party), then (i) such party will provide the other party or
parties to this Agreement or such other agreement, as the case may be, written
notice of the character and a good faith estimate of the amount of such costs,
(ii) each notified party will promptly instruct the notifying party in writing
whether or not such notified party desires that such costs be incurred at the
expense of such notified party, (iii) if the notified party or parties so
instruct(s), the notifying party will undertake such efforts and the notified
party or parties will reimburse such party for such costs, and (iv) in the
absence of instructions from a notified party to incur such costs, best
efforts shall not require such costs.
"Bid" means any written quotation, bid or proposal made by LM
or any Transferor Subsidiary in connection with the Businesses that, if
accepted or awarded, would lead to a Contract with the U.S. Government or any
other Person for the design, manufacture and sale of products or the provision
of services by the Businesses.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any rules or
regulations promulgated under such Act.
"CF6 Products" means all products and associated spare parts
manufactured, assembled, sold, distributed, overhauled, repaired or retrofitted
by the Thrust Reverser Business pursuant to the 1993 Thrust Reverser Agreement.
"Closing Date" means the date of the Closing as defined in the
Exchange Agreement.
"Closing Price of LM Common Stock" means the average closing
price of LM Common Stock as traded on the New York Stock Exchange for the 10
consecutive trading days preceding the third Business Day prior to the Closing
Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Capital Stock" means the Company Common Stock and the
Company Preferred Stock.
"Company Common Stock" means the common stock, par value $.01
per share, of the Company.
"Company Preferred Stock" means preferred stock, par value $.01
per share, of the Company having the terms and preferences set forth in
Attachment E.
"Confidentiality Agreement" means the Confidentiality Agreement
dated June 19, 1997 between GE and LM.
"Consolidated Subsidiaries" means as to any Person each
Subsidiary of such Person the financial statements of which would be
consolidated with the financial statements of such Person in accordance with
generally accepted accounting principles.
"Contemplated Transactions" means the transactions contemplated
by the Transaction Documents (including, without limitation, the Internal
Restructuring).
"Contracts" means all contracts, agreements, leases,
licenses, commitments, sales and purchase orders, internal work orders
(with respect to work by or for other LM businesses) and other instruments
of any kind, whether written or oral, that relate primarily to the
Businesses, other than any contracts, agreements or other arrangements or
instruments of any kind relating to Tax.
"Contribution Disclosure Schedule" means the Disclosure
Schedule relating to this Agreement.
"Damages" means all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement,
including, without limitation, costs, fees and expenses of attorneys, experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents or representatives of such Person (with such amounts to be determined
net of any resulting Tax benefit and net of any refund or reimbursement of any
portion of such amount, including, without limitation, reimbursement by way of
insurance, third party indemnification or the inclusion of any portion of such
amounts as a cost under Government Contracts).
"Economic Harm" means the loss of a revenue producing facility
caused by an action of LM or any of its Subsidiaries prior to the Closing,
provided, that the Company and each of its Affiliates at all times after the
Closing take reasonable management actions to minimize such Economic Harm, and
provided further, that the Company shall have at all times after the Closing
honored LM's right to participate in any and all actions undertaken by the
Company in connection with the events giving rise to such Economic Harm to the
extent provided in Article 7 of this Agreement or Article 9 of the Exchange
Agreement (with such amounts to be determined net of any resulting Tax benefit
and net of any refund or reimbursement of any portion of such amounts,
including, without limitation, reimbursement by way of insurance, third party
indemnification or the inclusion of any portion of such amounts as a cost
under Government Contracts).
"Environmental Laws" means any and all past, present or
future (except where otherwise noted) federal, state, local and foreign
statutes, laws (including case or common law), regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements or any other
restrictions relating to human health, safety, the environment or to
emissions, discharges or releases of or exposures to pollutants,
contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water,
facilities, structures or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling of pollutants, contaminants, Hazardous Substances or wastes or the
investigation, clean-up or other remediation thereof. Without limiting the
generality of the foregoing, "Environmental Laws" include: (i) The
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.;
(ii) The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 26 U.S.C. Section 4611 and 42 U.S.C. Section 9601 et seq.
("CERCLA"); (iii) The Superfund Amendment and Reauthorization Act of
1984; (iv) The Clean Air Act, 42 U.S.C. Section 7401 et seq.; (v)
The Ctolean Water Act, 33 U.S.C. Section 1251 et seq.; (vi) The Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and (vii) the
Occupational Safety and Health Act of 1970, 29 U.S.C.A. Section 651, and
all rules, regulations, standards, requirements, orders, guidance and
permits promulgated thereunder.
"Environmental Liabilities" means all liabilities to the extent
arising in connection with or in any way relating to the Businesses or LM's or
its Affiliates' use or ownership thereof, whether vested or unvested,
contingent or fixed, actual or potential, which arise under or relate to
Environmental Laws including, without limitation, (i) Remedial Actions,
(ii) personal injury, wrongful death, economic loss or property damage
claims, (iii) claims for natural resource damages, (iv) violations of law or
(v) any other cost, loss or damage with respect thereto.
"Environmental Permits" means all permits, licenses,
franchises, certificates, approvals and other similar authorizations of any
Governmental Authority relating to or required by Environmental Laws and
affecting, or relating in any way to, the Businesses.
"Equity Securities" means the 5,022,380 shares of common
stock, par value $1.00 per share, of Globalstar, beneficially owned by LM
as of the date hereof, and any other securities or consideration which the
holder thereof receives or is entitled to receive as a result of any
dividend, distribution, subdivision, split, combination, consolidation,
merger, reclassification or other similar transaction, it being understood
that the term Equity Securities shall not include any other shares of such
common stock held by LM or any of its Affiliates as security for the
obligations of Loral Space & Communications, Ltd.
"Estimate of Access Graphics Closing Net Worth" means a good
faith estimate of LM of the excess of (i) the book value of the Transferred
Assets of the Access Graphics Business over (ii) the amount of the Assumed
Liabilities of the Access Graphics Business, in each case as of the Closing
Date.
"Estimate of Thrust Reverser Closing Net Worth" means a good
faith estimate of LM of the excess of (i) the book value of the Transferred
Assets of the Thrust Reverser Business over (ii) the amount of the Assumed
Liabilities of the Thrust Reverser Business, in each case as of the Closing
Date.
"Excluded Assets" means:
(a) all original books and records that LM or any of its
Affiliates is required to retain pursuant to any Applicable Law
(in which case copies of such books and records shall be provided
to the Company), or that contain information relating to any
business or activity of LM or any of its Affiliates not forming a
part of, or any employee of LM or any of its Affiliates not
primarily employed in connection with, the Businesses or the
Transferred Assets;
(b) any rights to receive refunds with respect to any and all
Taxes of LM or any of its Affiliates attributable to any Pre-
Closing Tax Period, including, without limitation, interest
payable with respect thereto;
(c) all assets of LM and its Affiliates not used primarily in
connection with the Businesses (other than the Equity Securities,
the securities of the Access Graphics Foreign Subsidiaries and
the ▇▇ ▇▇▇▇ Contribution Amount);
(d) all assets of LM or any of its Affiliates held or used in
connection with the provision of services, or the sale of goods,
to the Businesses;
(e) the Baltimore Facility, including, without limitation,
that portion of the land and buildings located at the Baltimore
Facility that is used primarily in connection with the Thrust
Reverser Business, which portion of such land and buildings shall
be leased to the Company pursuant to the Baltimore Facility Lease
as referred to in Section 4.11 of this Agreement;
(f) all rights of LM under any of the Transaction Documents
and the agreements and instruments delivered to LM by GE, the
other GE Entities or the Company pursuant to any of the
Transaction Documents; and
(g) any assets of any Employee Plan or Benefit Arrangement
retained by LM or any of its Affiliates pursuant to Exhibit IV.
"Excluded Liabilities" means:
(a) all debts, obligations, contracts and liabilities of LM
or any of its Affiliates not arising primarily out of the conduct
of the Businesses, except as otherwise specifically provided in
the Transaction Documents;
(b) all Indebtedness for Borrowed Money;
(c) any liability or obligation relatin exclusively any
Excluded Asset;
(d) any liability whether presently in existence or arising
after the date of this Agreement in respect of accounts payable
to or allocated to LM or any Affiliate of LM, except for
practices relating to (i) materials or services used in the
businesses, (ii) costs advanced to or on behalf of the Businesses
and (iii) allocations of corporate overhead costs;
(e) Environmental Liabilities of the Thrust Reserver
Business, other than any such Environmental Liabilities expressly
assumed by the Company pursuant to the Baltimore Facility Lease;
(f) all liabilities or obigations for all Taxes referred to
in Section III.02(b);
(g) any obligation or liability retained by LM or any of its
Affiliates pursuant to Exhibit IV or relating to any employee of
the Businesses who is not a Transferred Employee;
(h) any liability or obligation whether presently in
existence or arising after the date of this Agreement arising out
of any criminal violation or alleged criminal violation of
occurring or existing prior to the Closing, other than any of,
relating to or in conection with any such liability or
obligation;
(i) any liability or obligation whether presently in
existence or arising after the date of this Agreement relating to
fees, commissions or expenses owed to any broker, finder,
investment banker, accountant, attorney or other intermediary or
advisor employed by LM, any Transferor Subsidiary or any of their
Affiliates in connection with the Contemplated Transactions;
(j) the existing claim (and all liabilities and obligations
related thereto) by ▇▇▇▇▇ & ▇▇▇▇▇▇▇ against LM (including
liabilities under any settlement arrangement relating thereto)
which relates to late deliveries of Fan Thrust Reversers for use
in connection with PW4000-powered Airbus Industrie Model A330
aircraft;
(k) any liability relating to periods prior to the 1998
calendar year arising as a result of any price adjustments under
or related to Government Contracts;
(l) any liability or obligation relating to or arising from
the Lease Agreement among LM and EBC Enterprises AFC. Inc. dated
September 9, 1997 relating to the property located at ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇ Financial Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ and the Lease Agreement among LM and Overseas Partners
(AFC), Inc. dated September 18, 1997 relating to the property
located at Suite 150, Atlanta Financial Center, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and any costs (whether previously
incurred and not paid in full or incurred from and after the date
of this Agreement) associated with the planned relocation of a
portion of the Access Graphics Business to Atlanta; and
(m) any liability whether in existence on the date of this
Agreement or arising after such date in connection with the
operations of the Businesses (prior to the Closing or after the
Closing) to the extent that LM, any Subsidiary of LM or any of
their Affiliates receives reimbursement for or payment of such
liability under any insurance policy (subject to Section 4.05) or
established reserves under any self-insurance or deductible
programs.
"Globalstar" means Globalstar Telecommunications Limited, a
Bermuda corporation.
"Globalstar Common Stock Closing Price" means the average
closing price of the common stock of Globalstar, as traded on the Nasdaq
National Market for the 10 consecutive trading days preceding the third
Business Day prior to the Closing.
"Globalstar S-3" means the Registration Statement on Form S-3 of
Globalstar, No. 333-22063, containing a "Rights Offering Prospectus" and a
"Warrant Share Offering Prospectus", as amended.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or
other agency, or any political or other subdivision, department or branch of
any of the foregoing.
"Government Contract" means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind in writing relating exclusively to the Businesses
between LM or any Transferor Subsidiary and (i) the U.S. Government (acting
on its own behalf or on behalf of another country or international
organization), (ii) any prime contractor of the U.S. Government where LM is
acting as subcontractor to the prime contractor on the Government Contract at
issue or (iii) any subcontractor with respect to any contract described in
clauses (i) or (ii) above.
"Hazardous Substances" means any pollutant, contaminant, waste
or chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substance, waste or material or any substance, waste or
material having any constituent elements displaying any of the foregoing
characteristics including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Indebtedness for Borrowed Money" means all obligations for
borrowed money, including (a) any obligation owed for all or any part of
the purchase price of property or other assets or for services or for the
cost of property or other assets constructed or of improvements to such
property or other assets, other than trade accounts payable included in
liabilities and incurred in respect of property or services purchased in
the ordinary course of business, (b) any capital lease obligation, (c) any
obligation (whether fixed or contingent) to reimburse any bank or other
Person in respect of amounts paid or payable under a standby letter of
credit (other than obligations under standby letters of credit securing
performance under Contracts or Bids), (d) any guarantee with respect to
indebtedness for borrowed money (of the kind otherwise described in this
definition) of another Person, (e) any factored or sold receivables and (f)
negative cash and cash-in-transit; provided, that Financial Support
Arrangements shall not constitute Indebtedness for Borrowed Money.
"Intellectual Property Right" means patents, copyrights,
trademarks, trade names, service marks, service names, technology, know-how,
processes, trade secrets, inventions, proprietary data, formulae, research and
development data, computer software programs and other intellectual property
(other than the LM Trademarks and Tradenames) and applications for the same
owned by LM or the Transferor Subsidiaries on the Closing Date.
"Inventory" means all items of inventory notwithstanding how
classified in LM's or any Transferor Subsidiary's financial records, including
all raw materials, work-in-process and finished goods.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such property or asset.
"▇▇ ▇▇▇▇ Contribution Amount" means $1,781,464,467 adjusted as
follows: (i) if the Estimate of Thrust Reverser Closing Net Worth is less than
the Thrust Reverser Initial Net Worth, increased by an amount equal to the
amount of such difference, (ii) if the Estimate of Thrust Reverser Closing Net
Worth is greater than the Thrust Reverser Initial Net Worth, decreased by an
amount equal to the amount of such difference, (iii) if the Estimate of Access
Graphics Closing Net Worth is less than the Access Graphics Initial Net Worth,
increased by an amount equal to the amount of such difference, (iv) if the
Estimate of Access Graphics Closing Net Worth is greater than the Access
Graphics Initial Net Worth, decreased by an amount equal to the amount of such
difference, (v) if the LM Common Stock Closing Price is greater than
$102.7625, increased by an amount equal to (A) the Aggregate Shares of LM
Common Stock multiplied by (B) the difference between the LM Common Stock
Closing Price and $102.7625 multiplied by (C) 0.937, (vi) if the LM Common
Stock Closing Price is less than $102.7625, decreased by an amount equal to
(A) the Aggregate Shares of LM Common Stock multiplied by (B) the difference
between $102.7625 and the LM Common Stock Closing Price multiplied by (C)
0.937, (vii) if the Globalstar Common Stock Closing Price is greater than
$52.1565, decreased by an amount equal to (A) the difference between the
Globalstar Common Stock Closing Price and $52.1565 multiplied by (B) the
Aggregate Shares of Globalstar Common Stock multiplied by (C) 0.96, and (viii)
if the Globalstar Common Stock Closing Price is less than $52.1565, increased
by an amount equal to (A) the difference between $52.1565 and the Globalstar
Common Stock Closing Price multiplied by (B) the Aggregate Shares of
Globalstar Common Stock multiplied by (C) 0.96, and (ix) increased by an
amount equal to the LM Preferred Stock Adjustment Factor; provided, that if at
any time during the period between the date of this Agreement and the Closing
Date, any change in the outstanding shares of capital stock of LM or
Globalstar shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period,
the items in clauses (v) through (viii) shall be adjusted appropriately.
"LM Common Stock" means the common stock, par value $1.00 per
share, of LM.
"LM Common Stock Closing Price" means the average closing price
of LM Common Stock as traded on the New York Stock Exchange for the 10
consecutive trading days preceding the third Business Day prior to the Closing
Date; provided, that (i) if such average closing price is greater than 110% of
the LM Common Stock Reference Price, the LM Common Stock Closing Price shall
be deemed to be a price equal to 1.1 multiplied by the LM Common Stock
Reference Price and (ii) if such average closing price is less than 90% of the
LM Common Stock Reference Price, the LM Common Stock Closing Price shall be
deemed to be a price equal to 0.9 multiplied by the LM Common Stock Reference
Price.
"LM Common Stock Reference Price" means the average of (i)
$102.7625, which is the average closing price of LM Common Stock as traded on
the New York Stock Exchange for the 10 consecutive trading days ending on and
including October 24, 1997, and (ii) the average closing price of LM Common
Stock as traded on the New York Stock Exchange for the 10 consecutive trading
days beginning on and including October 27, 1997.
"LM Preferred Stock" means the Series A Convertible Preferred
Stock, par value $1.00 per share, of LM.
"LM Preferred Stock Adjustment Factor" means the product of
(i) $164,383.56 multiplied by (ii) the number of calendar days from but not
including the date of the latest calendar quarter end to and including the
earlier of (A) the Closing Date and (B) the date on which all or a portion of
the LM Preferred Stock is converted into LM Common Stock; provided, that if
less than all of the LM Preferred Stock is converted into LM Common Stock, the
product shall be increased by an amount equal to (I) $164,383.56 multiplied by
(II) a fraction, the numerator of which is the number of shares of LM Preferred
Stock outstanding after such portion of the LM Common stock has been converted
into LM Common Stock and the denominator of which is 20,000,000, multiplied by
(III) the number of calendar days from but not including the date on which
such portion of the LM Common Stock was converted into LM Common Stock to and
including the Closing Date.
"Loss" means, with respect to any Contract, the excess, if any,
of the (x) sum of the projected direct costs to be incurred by LM and the
Transferor Subsidiaries in the performance of such Contract and the projected
selling, general and administrative costs to be allocated by LM and the
Transferor Subsidiaries to the performance of such Contract over (y) total
projected revenues to be derived from the performance of such Contract.
"Loss Contract" means any Contract with respect to which, at
the time of submission or acceptance (but only to the extent that LM has the
right to withdraw such Contract at the time of acceptance), LM knew would
result in a Loss at the mid-point conservatism.
"Material Adverse Effect" means (i) with respect to the
Businesses, an effect with respect to the Businesses or Transferred Assets, in
either case, taken as a whole, that is of such seriousness and significance
that a reasonable businessperson would not proceed with the Contemplated
Transactions on the basis of the terms set forth in the Transaction Documents,
(ii) with respect to the Company, an effect with respect to the assets or
businesses of the Company, in either case, taken as a whole, that is of such
seriousness and significance that a reasonable businessperson would not
proceed with the Contemplated Transactions on the basis of the terms set forth
in the Transaction Documents or (iii) with respect to GE or the GE Entities,
an effect with respect to the assets or business of GE or the GE Entities, in
either case taken as a whole, that is of such seriousness and significance
that a reasonable businessperson would not proceed with the Contemplated
Transactions on the basis of the terms set forth in the Transaction Documents.
"Nacelle Major Components" means all products and associated
spare parts manufactured, assembled, sold, distributed, overhauled, repaired or
retrofitted by the Thrust Reverser Business (or by the Company after the
Closing) pursuant to the P&W Agreement.
"1993 Thrust Reverser Agreement" means the Thrust Reverser
Agreement dated as of November 1, 1993 between GE and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Corporation (the predecessor of LM), as amended.
"Northrop Grumman Commercial Thrust Reverser Business" means
Northrop Grumman's commercial aircraft division's nacelle systems business
producing nacelle systems for business jet engines and thrust reverser
components for high-bypass engines as currently conducted at Northrop
Grumman's Stuart, Florida and Milledgeville, Georgia facilities, but excluding
any contracts for any products (including thrust reversers and components) with
The Boeing Company.
"P&W Agreement" means the Growth PW4000 Nacelle Participation
Agreement between United Technologies Corporation ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Group
Commercial Engine Business and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Corporation dated as of July
25, 1990, as amended.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a Governmental Authority.
"Personal and Property Claims" means all liabilities and claims
arising from or relating to an event resulting in or giving rise to any
personal injury or death, and any property damage or loss resulting from such
event or any other event involving a commercial aircraft while in service,
where such event is attributable to (i) the material or workmanship of any
Product (A) completely manufactured or assembled, (B) completely overhauled,
repaired or retrofitted, or (C) sold or provided as a replacement (other than
sourced parts sold or distributed as spare parts), in each case prior to the
Closing, or (ii) the design (as the same exists at the Closing) of any Nacelle
Major Component manufactured, assembled, sold or provided as a replacement,
and as the same may be or have been overhauled, repaired or retrofitted (it
being understood that the Person performing any overhaul, repair or retrofit
shall be responsible for liabilities and claims attributable to its own
defective workmanship or its use of defective materials in connection
therewith), if such Product was completely manufactured, assembled, sold or
provided as a replacement prior to the Closing or during the two-year period
following the Closing.
"Product Damages" means (i) in the case of any Product Matter
described in clause (i) of Section 7.06(b) of the Contribution Agreement or
Section 9.06(b) of the Exchange Agreement, Damages determined without regard
to any refund or reimbursement of any amount by way of insurance and (ii) in
the case of any Product Matter described in clause (ii) of Section 7.06(b) of
the Contribution Agreement or Section 9.06(b) of the Exchange Agreement,
Damages.
"Product Liability Claims" means all liabilities and claims
(other than Personal and Property Claims) arising (i) directly under the terms
and conditions of the Contracts relating to the Products, (ii) indirectly as
a result of the failure, if any, to disclaim warranties arising under
Applicable Law or (iii) notwithstanding the contractual terms, as a result of
the imposition of warranties under Applicable Law or other obligations arising
as a matter of Applicable Law (in each of clause (i) through (iii), taking
into account the terms and conditions of such Contracts in effect as of the
Closing), in each case, attributable to (A) the material or workmanship of any
Product (I) completely manufactured or assembled, (II) completely overhauled,
repaired or retrofitted, or (III) sold or provided as a replacement (other
than sourced parts sold or distributed as spare parts), in each case prior to
Closing, or (B) the design (as the same exists at the Closing) of any Nacelle
Major Component manufactured, assembled, sold or provided as a replacement,
and as the same may be or have been overhauled, repaired or retrofitted (it
being understood that the Person performing any overhaul, repair or retrofit
shall be responsible for liabilities and claims attributable to its own
defective workmanship or its use of defective materials in connection
therewith), if such Product was completely manufactured, assembled, sold or
provided as a replacement prior to the Closing or during the one-year period
following the Closing.
"Products" means CF6 Products, Nacelle Major Components and
products designated by GE before the Closing in accordance with Section
9.06(e) of the Exchange Agreement, if any.
"Remedial Action(s)" means the investigation, removal, clean-up
or remediation of contamination, environmental degradation or damage caused by,
related to or arising from the generation, use, handling, treatment, storage,
transportation, disposal, discharge, release, or emission of Hazardous
Substances, including, without limitation, investigations, response and
remedial actions under CERCLA, corrective action under the Resource
Conservation and Recovery Act, 42 U.S.C. sections 3004(u), 3004(v), 3008(h)
and 7003, and cleanup requirements under similar Environmental Laws.
"Representatives" means with respect to any Person, the
officers, directors, employees, accountants, counsel, consultants, advisors
and agents of such Person.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by such Person.
"Tax Allocation Agreement" means the Tax Allocation Agreement
dated as of October 31, 1997 among each of the GE Entities, LM and the Company.
"Tax Assurance Agreement" means the Tax Assurance Agreement
between LM and the Company, substantially in the form of Attachment F.
"Thrust Reverser Business" means the business that LM conducts
through the division of LM commonly referred to as Middle River Aerostructures
at the Baltimore Facility that (i) (A) manufactures, sells and distributes
CF6 Products and Nacelle Major Components and associated spare parts, (B)
manufactures aerostructure detail parts for various customers, including among
others, The Boeing Company, ▇▇▇▇ Helicopter and Affiliates of LM and (C)
operates aircraft maintenance centers that overhaul CF6 Products and TF-39
thrust reversers, (ii) but excluding the VLS Business and the other LM
affiliated entities co-located at the Baltimore Facility, namely, the Lockheed
▇▇▇▇▇▇ Federal Credit Union, Lockheed ▇▇▇▇▇▇ Enterprise Information Systems,
LMC Properties, Inc. and Lockheed ▇▇▇▇▇▇ Unmanned Systems Division.
"Thrust Reverser Closing Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Thrust Reverser Business over
(ii) the amount of the Assumed Liabilities of the Thrust Reverser Business,
in each case as shown on the Thrust Reverser Closing Balance Sheet.
"Thrust Reverser Initial Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Thrust Reverser Business over
(ii) the amount of the Assumed Liabilities of the Thrust Reverser Business,
in each case as shown on the Thrust Reverser Balance Sheet.
"to the best of the knowledge of LM" (or any similar phrase)
means, except as otherwise explicitly provided, to the best of the knowledge
of the individuals whose names are set forth on Section I.01 of the
Contribution Disclosure Schedule.
"Transaction Accounting Principles" means generally accepted
accounting principles consistently applied, taking into account (i) the
accounting policies within generally accepted accounting principles and (ii)
the exceptions to generally accepted accounting principles, in each case,
accompanying the Balance Sheets attached as Attachment G.
"Transaction Documents" means this Agreement, the Exchange
Agreement, the Intellectual Property License, the Transitional Services
Agreement, the Technical Consulting Agreement, the Baltimore Facility Lease,
the Tax Assurance Agreement and the Tax Allocation Agreement.
"Transferor Subsidiaries" means any Subsidiary or Affiliate of
LM that owns, leases or is otherwise in possession of any of the Transferred
Assets or is liable or obligated in respect of any of the Assumed Liabilities,
and prior to the Closing, unless the context requires otherwise, the Company;
provided, that for purposes of Exhibit II of this Agreement and Exhibit I of
the Exchange Agreement, the Transferor Subsidiaries shall not include the
Access Graphics Foreign Subsidiaries.
"Transferred Assets" means all of the assets, properties,
rights, licenses, Permits, Contracts, Bids, causes of action and business of
every kind and description as the same shall exist on the Closing Date,
wherever located, real, personal or mixed, tangible or intangible, owned by,
leased by or in the possession of LM or any Transferor Subsidiary, whether or
not reflected in the books and records thereof, and held or used primarily in
the conduct of the Businesses as the same shall exist on the Closing Date,
including but not limited to all assets reflected on the Balance Sheets and
not disposed of in the ordinary course of business or as permitted or
contemplated by the Transaction Documents, and all assets of the Businesses
acquired by LM or any Transferor Subsidiary, on or prior to the Closing Date
and not disposed of as permitted or contemplated by the Transaction Documents,
and including, without limitation, all right, title and interest of LM, any
Transferor Subsidiary or any of their Affiliates in, to and under:
(a) all real property and leases, whether
capitalized or operating, of, and other interests in, real
property, owned by LM, any Transferor Subsidiary or any of their
Affiliates that are used primarily in the Businesses, in each
case together with all buildings, fixtures, easements, rights of
way, and improvements thereon and appurtenances thereto, but
excluding the Baltimore Facility;
(b) all personal property and interests therein,
including machinery, equipment, furniture, office equipment,
software (to the extent transferable), communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and
other tangible personal property (and interests in any of the
foregoing) owned by LM, any Transferor Subsidiary or any of their
Affiliates that are used primarily in connection with the
Businesses;
(c) all raw materials, work-in-process, finished
goods, supplies and other inventories that are owned by LM, any
Transferor Subsidiary or any of their Affiliates and held for
sale, use or consumption primarily in the Businesses;
(d) all Contracts (including, without limitation,
the 1993 Thrust Reverser Agreement and all implementing
agreements relating thereto) and the Warrant Acceleration and
Registration Rights Agreement;
(e) all Bids (with any Contracts awarded to LM, any
Transferor Subsidiary or any of their Affiliates on or before the
Closing Date in respect of such Bids to be deemed Contracts);
(f) all accounts, notes and other receivables
(including, without limitation, intercompany receivables relating
to commercial goods and services), together with any unpaid
interest or fees accrued on such accounts, notes and other
receivables or other amounts due with respect to such accounts,
notes and other receivables, of LM, any Transferor Subsidiary or
any of their Affiliates that relate primarily to the Businesses,
and any security or collateral for any of the foregoing;
(g) all expenses that have been prepaid by LM, any
Transferor Subsidiary or any of their Affiliates to the extent
relating primarily to the operation of the Businesses, including
but not limited to ad valorem taxes, lease and rental payments;
(h) (i) working capital held in the form of cash
in an amount of $21,300,000 reflected on the Access Graphics
Balance Sheet and all cash and cash equivalents of LM and any
Transferor Subsidiary arising out of or relating to the operation
of the Businesses after the Balance Sheet Date, including all
▇▇▇▇▇ cash located at the operating facilities of the Businesses,
and (ii) cash on the Balance Sheets in an amount equal to the
amount to be transferred by LM pursuant to Section IV.10(e) of
Exhibit IV relating to the Forfeited Options;
(i) all assets transferred from the Spinoff Plans
to the Successor Plans pursuant to Exhibit IV;
(j) all of LM's, any Transferor Subsidiary's or any
of their Affiliates' rights, claims, credits, causes of action or
rights of set-off against third parties relating primarily to the
Businesses or the Transferred Assets, including, without
limitation, unliquidated rights under manufacturers' and vendors'
warranties;
(k) all Intellectual Property Rights administered
by and used primarily in the Businesses;
(l) all transferable Permits owned by, or granted
to, or held or used by LM, any Transferor Subsidiary or any of
their Affiliates and primarily affecting the Businesses;
(m) all business books, records, files and papers,
whether in hard copy or computer format, of LM, any Transferor
Subsidiary or any of their Affiliates, used primarily in the
Businesses, including, without limitation, bank account records,
books of account, invoices, engineering information, sales and
promotional literature, manuals and data, sales and purchase
correspondence, lists of present and former suppliers, lists of
present and former customers, personnel and employment records of
present and former employees, documentation developed or used for
accounting, marketing, engineering, manufacturing, or any other
purpose relating to the conduct of the Businesses at any time
prior to the Closing;
(n) LM's, any Transferor Subsidiary's or any of
their Affiliates' interests in partnerships and joint ventures
where such ownership relates primarily to the Businesses or the
Transferred Assets;
(o) all goodwill primarily associated with the
Businesses or the Transferred Assets, together with the right to
represent to third parties that the Company is the successor to
the Businesses;
(p) all of the issued and outstanding capital stock
of the Access Graphics Foreign Subsidiaries; and
(q) the Equity Securities;
provided, that in no event shall Transferred Assets include any Excluded
Asset.
"U.S. Government" means the United States Government and all
agencies, instrumentalities and departments of the United States Government.
"VLS Business" means the business conducted by the division of
LM commonly referred to as Vertical Launching Systems or Naval Launching
Systems which is responsible for the design, development and production of the
MK41Vertical Launching Systems, a shipboard fixed, vertical multi-missile
storage and firing system ("VLS"), as well as new missile integration and life
cycle support under contracts with the U.S. Navy and eight international
navies. Management reporting for VLS moved to Lockheed ▇▇▇▇▇▇ Electronics
Sector under Government Electronics Systems in Moorestown, New Jersey in
January 1997, however, program management, engineering and production
operations are co-located with the Thrust Reverser Business at the Baltimore
Facility.
"Warrant Acceleration and Registration Rights Agreement" means
the Warrant Acceleration and Registration Rights Agreement dated as of
February 12, 1997 among Globalstar Telecommunications Limited, Globalstar,
L.P., Loral/Qualcomm Satellite Services, L.P., Loral Space & Communications
Ltd., Space Systems/Loral, Inc., Lockheed ▇▇▇▇▇▇ Tactical Systems, Inc.,
QUALCOMM China, Inc. and DASA Globalstar Limited Partner, Inc.
(b) Each of the following terms is defined in the Section
set forth opposite such term:
Term Section
--------- -------
Access Graphics Balance Sheet 2.05(b)
Access Graphics Closing Balance Sheet 2.05(b)(ii)
Accounting Referee 2.05(d)
Aerospace Plan IV.02(l)
Affiliate Plan IV.01
Anniversary Date IV.10(e)
Balance Sheets II.07(a)
Balance Sheet Date II.07(a)
Baltimore Facility Lease 4.11
Benefit Arrangement IV.01
Business preamble
Businesses preamble
Cash Contribution 2.02
CBSI preamble
Civil Claim 7.04(b)
Closing 2.04
Closing Balance Sheets 2.05(b)
Code III.01
Company preamble
Company Entities III.01
Company Savings Plans IV.07(a)
Competing Business 4.10(a)
Contribution and Assumption 2.01(a)(ii)
Contribution Closing 2.04
Criminal Claim 7.04(b)
Direct Rollover IV.07(a)
Disagreement IV.06(i)
Employee Plan IV.01
Employee Plan Documentation IV.02(a)
Encumbrances II.09(b)
Environmental Insurance Claims 4.05(b)
ERISA IV.01
Excess Amount 7.03(a)
Exchange preamble
Exchange Agreement preamble
Final Determination III.01
Final Pension Transfer Amount IV.06(b)
Financial Support Arrangements 4.15(a)
Forfeited Options IV.10(e)
GE preamble
GE Entities preamble
GEGS preamble
GEII preamble
Government Bid II.17(a)
Government Claim IV.06(i)
Indemnified Parties 7.04(a)
Indemnifying Parties 7.04(a)
Initial Pension Transfer Amount IV.06(b)
Intellectual Property License 2.08(a)
Internal Restructuring III.01
LM preamble
LM Assumptions IV.06(b)
LM Savings Plan IV.07(a)
Matter 7.03(b)
Northrop Grumman 4.07(b)
Northrop Grumman Option 4.07(b)
Northrop Grumman Purchase Price 4.07(b)
Option Period 4.07(b)
Payment IV.10(e)
PBO IV.06(b)(i)
Permits II.13
Permitted Liens II.09(b)
Post-Closing Tax Period III.01
Pre-Closing Tax Period III.01
Product Matter 7.06(b)
Product Matter Excess Amount 7.06(a)
Product Matter Indemnity Notice 7.06(c)
Release Date 4.15(a)
Remaining Recovery 4.05(b)(ii)
Required Consents II.06
RIP I IV.02(b)
RIP II IV.02(l)
Spinoff Plans IV.06(a)
Successor Plan IV.06(a)
Sun 4.08
Sun Master Reseller Agreement 4.08
Surviving Representation or Covenant 7.01
Tax III.01
Taxpayer III.05(a)
Technical Consulting Agreement 4.07(a)
Third Party Claims 7.04(a)
Third Party Referee 7.04(b)
Thrust Reverser Balance Sheet II.07(a)
Thrust Reverser Closing Balance Sheet 2.05(b)(i)
Transferred Employees IV.01
Transitional Services Agreement 4.06
Trustees IV.06(b)
WARN IV.03(b)
EXHIBIT II
Representations and Warranties of LM
LM hereby represents and warrants to the Company as of the date
of this Agreement and as of the Closing Date that:
II.01. Corporate Existence and Power. Each of LM and each
Transferor Subsidiary is a corporation or other entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all corporate or other
similar powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on the Businesses as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals has not had, and may not reasonably be expected to have, a Material
Adverse Effect on the Businesses. Each of LM and each Transferor Subsidiary
is duly qualified to do business as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities make such qualification necessary to carry on the Businesses as now
conducted, except where the failure to be so qualified has not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses.
II.02. Corporate Authorization. Except as otherwise disclosed
to the Company prior to the date of this Agreement, the execution, delivery and
performance by LM and each Transferor Subsidiary of the Transaction Documents
to which it is a party and the consummation of the Contemplated Transactions
are within its corporate or other similar powers and have been (or, in the
case of the Transferor Subsidiaries, by the Closing, will be) duly authorized
by all necessary corporate action on the part of LM and such Transferor
Subsidiary. Each Transaction Document to which LM or any Transferor
Subsidiary is a party constitutes a legal, valid and binding agreement of LM
or such Transferor Subsidiary, enforceable against LM or such Transferor
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding in equity or at law). There is no vote or other approval of any
stockholders of LM required to permit consummation of the Contemplated
Transactions.
II.03. Governmental Authorization. (a) Except as set forth
in Section II.03 of the Contribution Disclosure Schedule, the execution,
delivery and performance by LM and each Transferor Subsidiary of the
Transaction Documents to which it is a party and the consummation of the
Contemplated Transactions require no action by or in respect of, or consent or
approval of, or filing with, any Governmental Authority other than (i)
compliance with any applicable requirements of the HSR Act; (ii) compliance
with any applicable foreign antitrust regulatory approvals; (iii) compliance
with any applicable requirements of the Securities Exchange Act; (iv)
compliance with any applicable requirements of any relevant state
environmental laws; (v) any necessary approvals of the U.S. Government,
including, without limitation, the Department of Defense, the United States
Air Force or any agencies, departments or instrumentalities thereof; and (vi)
any actions, consents, approvals or filings otherwise expressly referred to in
this Agreement.
(b) To LM's knowledge, there are no facts relating to the
identity or circumstances of LM or any of its Affiliates, that would
prevent or materially delay obtaining any of the consents referred to above
in Section II.03(a), it being understood that LM has been, and currently
is, involved in a number of disputes with the U.S. Government.
II.04. Noncontravention. Except as set forth in Section II.04
of the Contribution Disclosure Schedule, the execution, delivery and
performance by LM and each Transferor Subsidiary of the Transaction Documents
to which it is a party and the consummation of the Contemplated Transactions
do not and will not (i) violate the certificate of incorporation or bylaws or
other organizational documents of LM or such Transferor Subsidiary, (ii)
assuming compliance with the matters referred to in Section II.03, violate any
Applicable Law, (iii) assuming the obtaining of all Required Consents,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of LM or such
Transferor Subsidiaries or any Access Graphics Foreign Subsidiary or to a loss
of any benefit relating primarily to the Businesses to which LM or such
Transferor Subsidiary or any Access Graphics Foreign Subsidiary is entitled
under, any provision of any agreement, contract or other instrument binding
upon LM or such Transferor Subsidiary or any Access Graphics Foreign
Subsidiary and relating primarily to the Businesses or by which any of the
Transferred Assets is or may be bound or any license, franchise, permit or
similar authorization held by LM or such Transferor Subsidiary or any Access
Graphics Foreign Subsidiary relating primarily to the Businesses or (iv)
result in the creation or imposition of any Lien on any Transferred Asset,
other than Permitted Liens, except for such violation referred to in clause
(ii), default, termination, cancellation, acceleration or loss referred to in
clause (iii) or creation or imposition of any Lien on any Transferred Asset
referred to in clause (iv), that could not reasonably be expected to have a
Material Adverse Effect on the Businesses.
II.05. Ownership of the Equity Securities. LM is the
beneficial and record owner of the Equity Securities and, except as set forth
in Section II.05 of the Contribution Disclosure Schedule, LM owns such
securities free and clear of any Lien and any other limitation or restriction
(including any restriction on the right to vote, transfer, sell or otherwise
dispose of such securities, other than limitations on offers and sales under
foreign, federal and state securities laws). Section II.05 of the
Contribution Disclosure Schedule sets forth a true and complete list of the
Access Graphics Foreign Subsidiaries, all of the issued and outstanding
capital stock of which is owned, directly or indirectly, by Access Graphics.
Upon consummation of the Contemplated Transactions, the Company shall be the
owner of the Equity Securities and all of the issued and outstanding capital
stock of each of the Access Graphics Foreign Subsidiaries, in each case, free
and clear of all Liens, preemptive or similar rights or any other limitation
or restriction (other than limitations on offers and sales under foreign,
federal and state securities laws). LM has registration rights under the
Warrant Acceleration and Registration Rights Agreement with respect to the
Equity Securities.
II.06. Consents. Section II.06 of the Contribution Disclosure
Schedule sets forth each material agreement, contract or other instrument
binding upon LM, any Transferor Subsidiary or any Access Graphics Foreign
Subsidiary or any Permit requiring a consent or other action by any Person as
a result of the execution, delivery and performance of the Transaction
Documents and the consummation of the Contemplated Transactions (the "Required
Consents"), except for such consents or actions which, if not received or
taken by the Closing, would not, individually or in the aggregate, have a
Material Adverse Effect on the Businesses.
II.07. Financial Statements. The unaudited pro forma balance
sheets as of June 29, 1997, in the case of the Thrust Reverser Business, and
June 30, 1997, in the case of the Access Graphics Business (each such date for
the relevant Business, the "Balance Sheet Date") for each of the Thrust
Reverser Business (the "Thrust Reverser Balance Sheet") and the Access Graphics
Business (the "Access Graphics Balance Sheet" and, together with the Thrust
Reverser Balance Sheet, the "Balance Sheets"), and the related statements of
income for the six months then ended present fairly, in all material respects,
in conformity with the Transaction Accounting Principles, the financial
position of the Transferred Assets and Assumed Liabilities of each of the
Thrust Reverser Business and the Access Graphics Business, as the case may be,
as of the date thereof and their respective results of operation for the
period then ended (subject to normal year-end adjustments). True and correct
copies of the Balance Sheets are set forth in Attachment G to this Agreement.
II.08. Absence of Certain Changes. Since the Balance Sheet
Date and except as set forth in Section II.08 of the Contribution Disclosure
Schedule, the Businesses have been conducted in all material respects in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts that has had a Material Adverse Effect on the
Businesses, other than those resulting from changes, whether actual or
prospective, in general conditions applicable to the industries in which
the Businesses are involved or general economic conditions;
(b) any incurrence, assumption or guarantee by LM or any
Transferor Subsidiary of any Indebtedness for Borrowed Money that is an
Assumed Liability and that is material to the Businesses taken as a whole,
other than in the ordinary course of business;
(c) any damage, destruction or other casualty loss affecting
the Businesses or any Transferred Asset that has had a Material Adverse
Effect on the Businesses;
(d) any transaction or commitment made, or any Contract
entered into by LM or any Transferor Subsidiary relating primarily to the
Businesses or any Transferred Asset (including the acquisition or
disposition of any assets) or any relinquishment by LM or any Transferor
Subsidiary of any contract or other right relating primarily to the
Businesses, in either case, material to the Businesses taken as a whole,
other than transactions and commitments in the ordinary course of business
consistent with past practices and the Contemplated Transactions; or
(e) except as permitted under Section 4.03, any distribution
or transfer of any assets of any Business (by dividend, intercompany or
intracompany loan or otherwise, other than by intercompany or intracompany
loan that is consistent with past cash management practices) to LM or any
Affiliate of LM (other than in the ordinary course consistent with past
practices for payments to or allocated to LM or any Affiliate of LM
relating to (i) materials or services used in the Businesses, (ii) costs
advanced to or on behalf of the Businesses or (iii) allocations of
corporate overhead costs).
II.09. Sufficiency of and Title to the Transferred Assets.
(a) The Transferred Assets, together with the rights and services to be
provided to the Company pursuant to the Intellectual Property License, the
Transitional Services Agreement, the Technical Consulting Agreement and the
Baltimore Facility Lease, constitute and on the Closing Date will constitute,
all of the assets and services that are necessary to permit the operation of
the Businesses in substantially the same manner as such operations have
heretofore been conducted.
(b) Upon consummation of the Contemplated Transactions, the
Company will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Transferred Assets that are necessary to
permit the operation of the Businesses in substantially the same manner as
operations have heretofore been conducted, free and clear of all Liens, except
for (i) Liens, title defects, easements, restrictions and invalidities of
leasehold interests (collectively, "Encumbrances") that have not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses, (ii) Liens for taxes not yet due or being contested in good faith,
(iii) Encumbrances in favor of the U.S. Government arising in the ordinary
course of business, (iv) rights and licenses granted to others in Intellectual
Property Rights and (v) Encumbrances disclosed in Section II.09 of the
Contribution Disclosure Schedule or on the Balance Sheets. Liens and
Encumbrances included or referred to in clauses (i) through (v) of this
Section II.09(b) are herein referred to as "Permitted Liens".
II.10. No Undisclosed Material Liabilities. There are no
liabilities of LM or any Transferor Subsidiary relating to the Businesses that
constitute Assumed Liabilities or liabilities of any Access Graphics Foreign
Subsidiary, in each case, of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise other than:
(a) liabilities disclosed or provided for in the Balance
Sheets;
(b) liabilities (i) disclosed in Section II.10 of the
Contribution Disclosure Schedule, (ii) related to any Contract disclosed in
the Contribution Disclosure Schedule or (iii) related to any Employee Plan
or Benefit Arrangement disclosed in Section IV.02 of the Contribution
Disclosure Schedule;
(c) Environmental Liabilities;
(d) liabilities incurred in the ordinary course of business
since the Balance Sheet Date consistent with past practices and not in
violation of this Agreement or the Exchange Agreement which in the
aggregate have not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Businesses; and
(e) liabilities other than those referred to in the foregoing
clauses (a)-(d) that have not had, and may not reasonably be expected to have,
a Material Adverse Effect on the Businesses.
II.11. Litigation; Contract-Related Matters. (a) Except as
set forth in Section II.11 of the Contribution Disclosure Schedule or referred
to in the Balance Sheets, there is no action, suit, investigation or
proceeding (except for actions, suits or proceedings referred to in Section
II.11(b)) pending against, or to the best of the knowledge of LM, threatened
against or affecting, the Businesses or any Transferred Asset before any
Governmental Authority as to which there is a substantial likelihood of a
determination or resolution adverse to the Businesses and which, if so
adversely determined or resolved, may reasonably be expected to have a
Material Adverse Effect on the Businesses or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Contemplated
Transactions.
(b) Except as set forth in Section II.11 of the Contribution
Disclosure Schedule or referred to in the Balance Sheets, there is no action,
suit, investigation or proceeding relating to any Government Contract or Bid,
or relating to any proposed suspension or debarment of LM or any Transferor
Subsidiary or any of their employees, pending against, or to the best of the
knowledge of LM, threatened against or affecting, the Businesses or any
Transferred Asset before any Governmental Authority as to which there is a
substantial likelihood of a determination or resolution adverse to the
Businesses and which, if so adversely determined or resolved, may reasonably
be expected to have a Material Adverse Effect on the Businesses.
II.12. Material Contracts and Bids; Backlog. (a) Except
as set forth in Section II.12 of the Contribution Disclosure Schedule and
except for inaccuracies in the following clauses (i) and (ii) which,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect on the Businesses, all Government Contracts and
Bids with a backlog value in excess of $10,000,000 in the case of fixed
price Government Contracts (and Bids for such Contracts) and $10,000,000 in
the case of "cost plus" Government Contracts (and Bids for such Contracts)
(i) are being performed or were submitted, as the case may be, in the
ordinary course of business and (ii) are or would be, as the case may be,
capable of performance in accordance with their terms without loss
(determined in accordance with LM's accounting principles consistently
applied), if LM retained the Transferred Assets and made all currently
planned expenditures therefor.
(b) Except as set forth in Section II.12 of the Contribution
Disclosure Schedule, all cost or pricing data submitted or certified in
connection with Bids and Government Contracts are current, accurate and
complete in accordance with the Truth in Negotiation Act, as amended, and the
rules and regulations thereunder, except any failures to be current, accurate
and complete which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Businesses. The total
funded backlog of the Businesses in respect of awarded Government Contracts as
of September 30, 1997 was in excess of $14,000,000.
(c) Except as set forth in Section II.12 of the Contribution
Disclosure Schedule, each Government Contract and each other material Contract
relating to the Businesses is a legal, valid and binding obligation of LM or a
Transferor Subsidiary and, to the best of the knowledge of LM, each other
party to such Contract, enforceable against LM or such Transferor Subsidiary
and, to the best of the knowledge of LM, each such other party in accordance
with its terms (except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers, and subject to
the limitations imposed by general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in equity), and
neither LM nor such Transferor Subsidiary nor, to the best of the knowledge of
LM, any other party to such Contract is in material default or has failed to
perform any material obligation under such Contract, and there does not exist
any event, condition or omission which would constitute a material breach or
material default (whether by lapse of time or notice or both), except for any
such default, failure or breach as has not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses.
II.13. Licenses and Permits. LM, the Transferor Subsidiaries
and the Access Graphics Foreign Subsidiaries have all licenses, franchises,
permits and other similar authorization affecting, or relating in any way to,
the Businesses (the "Permits") required by law to be obtained by LM, any
Transferor Subsidiary or any Access Graphics Foreign Subsidiary to permit LM,
any Transferor Subsidiary or any Access Graphics Foreign Subsidiary to conduct
the Businesses in substantially the same manner as the Businesses have
heretofore been conducted, except where the failure to obtain any such
licenses, franchises, permits or authorizations could not reasonably be
expected to have a Material Adverse Effect on the Businesses.
II.14. Finders' Fees. Other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. and
Bear, ▇▇▇▇▇▇▇ & Co. Inc., whose fees will be paid by LM, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of LM or the Transferor
Subsidiaries who might be entitled to any fee or commission from the
Company in connection with the Contemplated Transactions.
II.15. Environmental Compliance. (a) Except as set forth in
Section II.15 of the Contribution Disclosure Schedules or referred to in the
Balance Sheets, there are no Environmental Liabilities (other than Excluded
Liabilities) arising under Environmental Laws in effect and applicable to the
Businesses or Transferred Assets as of the date of this Agreement that have
had or may reasonably be expected to have a Material Adverse Effect on the
Businesses.
(b) Except as set forth in Section II.15 of the Contribution
Disclosure Schedule, none of the Transferred Assets is located in New Jersey or
Connecticut.
II.16. Compliance with Laws. Except as set forth in Section
II.16 of the Contribution Disclosure Schedule, except for violations or
infringements of Environmental Laws or Applicable Laws, orders, writs,
injunctions or decrees relating to Contracts or Bids, and except for
violations or infringements as have not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses, the operation
of the Businesses and condition of the Transferred Assets have not violated or
infringed, and do not violate or infringe, in any material respect any
material Applicable Law or any order, writ, injunction or decree of any
Governmental Authority.
II.17. Government Contracts. (a) Except as set forth in
Section II.17 of the Contribution Disclosure Schedule, and except for
inaccuracies in the following as have not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses, with respect to
each fixed price Government Contract with a backlog value in excess of
$10,000,000, each "cost plus" Government Contract with a backlog value in
exceeds of $10,000,000 and each Bid which, if accepted, would result in such a
Government Contract (a "Government Bid") to which LM or any Transferor
Subsidiary is a party with respect to the Businesses, (i) LM or any such
Transferor Subsidiary has complied with all material terms and conditions of
such Government Contract or Government Bid, including all clauses, provisions
and requirements incorporated expressly, by reference or by operation of law
therein; (ii) LM or any Transferor Subsidiary has complied with all
requirements of all material Applicable 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 complete and correct as of their
effective date, and LM or any Transferor Subsidiary has complied in all
material respects with all such representations and certifications; (iv)
neither the U.S. Government nor any prime contractor, subcontractor or other
Person has notified LM or any Transferor Subsidiary that LM or any such
Transferor Subsidiary has breached or violated any Applicable Law,
certification, representation, clause, provision or requirement pertaining to
such Government Contract or Government Bid where there is a substantial
likelihood that the matter notified to LM or any such Transferor Subsidiary
will be resolved in a manner adverse to LM or any such Transferor Subsidiary,
(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 the best of the knowledge of LM, no cost
incurred by LM or any Transferor Subsidiary pertaining to such Government
Contract or Government Bid has been questioned or challenged, is the subject
of any investigation or has been disallowed by the U.S. Government where, with
respect to any question, challenge or investigation, there is a substantial
likelihood of a determination adverse to LM or any such Transferor Subsidiary;
and (vii) to the best of the knowledge of LM, no money due to LM or any
Transferor Subsidiary pertaining to such Government Contract or Government Bid
has been (or has attempted to be) withheld or set off where there is a
substantial likelihood that LM or any such Transferor Subsidiary will not
ultimately be deemed to be entitled to such money.
(b) Except as set forth in Section II.17 of the
Contribution Disclosure Schedule: (i) to the best of the knowledge of LM,
none of LM's or any Transferor Subsidiary's respective employees,
consultants or agents is (or during the last year has been) under
administrative, civil or criminal investigation, indictment or information
by any Governmental Authority, or any audit or investigation by LM or any
Transferor Subsidiary 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 year, LM or any
Transferor Subsidiary has not conducted or initiated any internal
investigation or, to the best of the knowledge of LM, had reason to
conduct, initiate or report any internal investigation, or made a voluntary
disclosure to the U.S. Government, with respect to any alleged
irregularity, misstatement or omission arising under or relating to a
Governmental Contract or Government Bid. Neither LM nor any Transferor
Subsidiary has any knowledge or reason to know of any irregularity,
misstatement or omission arising under or relating to any Government
Contract or Government Bid that has led or could reasonably be expected to
lead, either before or after the Closing Date, to any of the consequences
set forth in clauses (i) or (ii) of the immediately preceding sentence or
any other material damage, penalty assessment, recoupment of payment or
disallowance of cost.
(c) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, or as has not had, and may not reasonably be expected to
have, a Material Adverse Effect with respect to the Businesses, there exist
(i) no outstanding claims against LM or any Transferor Subsidiary, either by
the U.S. Government or by any prime contractor, subcontractor, vendor or other
third party, arising under or relating to any Government Contract or
Government Bid referred to in Section II.17(a) where there is a substantial
likelihood of a determination adverse to LM or any such Transferor Subsidiary
and (ii) no disputes between LM or any Transferor Subsidiary and the U.S.
Government under the Contract Disputes Act or any other Federal statute or
between LM or any Transferor Subsidiary and any prime contractor,
subcontractor or vendor arising under or relating to any such Government
Contract or Government Bid where there is a substantial likelihood of a
determination adverse to LM or any Transferor Subsidiary. LM has no knowledge
or reason to know of any fact which could reasonably be expected to result in
a claim or a dispute under clause (i) or (ii) of the immediately preceding
sentence.
(d) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, neither LM nor any Transferor Subsidiary (with respect to
the Businesses), nor to the best of the knowledge of LM, any employees,
consultants or agents of any of the Businesses, is (or during the last five
years has been) suspended or debarred from doing business with the U.S.
Government or is (or during such period was) the subject of a finding of a
nonresponsibility or ineligibility for U.S. Government contracting. LM does
not know or have any reason to know of any facts or circumstances that would
warrant the suspension or debarment, or the finding of nonresponsibility or
ineligibility, on the part of LM or any Transferor Subsidiary or any employees,
consultants or agents of any of the Businesses.
(e) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, and except for any of the following as has not had, and
may not reasonably be expected to have, a Material Adverse Effect on the
Businesses, all material test and inspection results LM or any Transferor
Subsidiary has provided to the U.S. Government pursuant to any Government
Contract referred to in Section II.17(a) or to any other Person pursuant to
any such Government Contract or as a part of the delivery to the U.S.
Government pursuant to any such Government Contract of any article designed,
engineered or manufactured in the Businesses were complete and correct in all
material respects as of the date so provided. Except as set forth in Section
II.17 of the Contribution Disclosure Schedule, and except for any of the
following as has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Businesses, LM or any Transferor Subsidiary has
provided all material test and inspection results to the U.S. Government
pursuant to any such Government Contract as required by Applicable Law and the
terms of the applicable Government Contracts.
(f) Except for any of the following as has not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses, no statement, representation or warranty made by LM or any
Transferor Subsidiary in any Government Contract, any exhibit thereto or in
any certificate, statement, list, schedule or other document submitted or
furnished to the U.S. Government in connection with any Government
Contract or Government Bid (i) contained on the date so furnished or
submitted any untrue statement of a material fact, or failed to state a
material fact necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading or (ii)
contains on the date hereof any untrue statement of a material fact, or
fails to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not
misleading, except in the case of both clauses (i) and (ii) any untrue
statement or failure to state a material fact that would not result in any
material liability to the Businesses as a result of such untrue statement
or failure to state a material fact.
II.18. Intellectual Property. With respect to Intellectual
Property Rights that constitute Transferred Assets, except as set forth in
Section II.18 of the Contribution Disclosure Schedule:
(a) LM, the Transferor Subsidiaries or any Access Graphics
Foreign Subsidiaries own, free and clear of all Liens other than Permitted
Liens, all right, title and interest in such Intellectual Property Rights.
To the best of the knowledge of LM, the use of such Intellectual Property
Rights in connection with the operation of the Businesses as heretofore
conducted does not conflict with, infringe upon or violate any patent,
patent licenses, patent application, trademark, trade name, trademark or
trade name registration, copyright, copyright registration, service ▇▇▇▇,
brand ▇▇▇▇ or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes of any third person, firm
or corporation, except for conflicts, infringements or violations that have
not had and may not reasonably be expected to have a Material Adverse
Effect on the Businesses;
(b) LM, the Transferor Subsidiaries or any Access Graphics
Foreign Subsidiaries have the right to use all inventions, processes,
computer programs, know-how, formulae, trade secrets, patents, chip design,
mask works, trademarks, trade names, brandnames and copyrights which are
used by the Businesses and which are necessary for the continued operation
of the Businesses in substantially the same manner as its operations have
heretofore been conducted except where the failure to have any such right
has not had, and may not reasonably be expected to have, a Material Adverse
Effect on the Businesses; and
(c) Upon the consummation of the Closing, (A) the Company
will be vested with all of LM's, the Transferor Subsidiaries' and the
Access Graphics Foreign Subsidiaries' rights, title and interest in, and
LM's and the Transferor Subsidiaries' and the Access Graphics Foreign
Subsidiaries' rights and authority to use in connection with the
Businesses, all of the Intellectual Property Rights that constitute
Transferred Assets and (B) such Intellectual Property Rights together with
the Intellectual Property Rights licensed to the Company in accordance with
Section 2.08 and any other interests in intellectual property transferred
hereunder will collectively constitute such rights and interests in
intellectual property which are necessary for the continued operation of
the Businesses as a whole in substantially the same manner as its
operations have heretofore been conducted except where any inaccuracy of
clause (B) has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Businesses.