COMPOSITE COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
LOCKHEED ▇▇▇▇▇▇ CORPORATION,
HURRICANE SUB, INC.
and
NORTHROP GRUMMAN CORPORATION
Dated as of July 2, 1997
As Amended as of September 29, 1997
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER..................................................... 1
1.1. The Merger............................................ 1
1.2. The Closing........................................... 1
1.3. Effective Time........................................ 2
1.4. Certificate of Incorporation and By-Laws.............. 2
1.5. Directors of the Surviving Corporation................ 2
1.6. Officers of the Surviving Corporation................. 2
ARTICLE 2 CONVERSION AND EXCHANGE OF SECURITIES.......................... 2
2.1 Merger Sub Stock...................................... 2
2.2. Company Stock......................................... 2
2.3. Exchange of Certificates Representing
Company Common Stock.................................. 3
2.4. Adjustment of Exchange Ratio.......................... 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 5
3.1. Existence; Good Standing; Corporate
Authority; Compliance With Law........................ 5
3.2. Authorization, Validity and Effect of
Agreements............................................ 6
3.3. Capitalization........................................ 6
3.4. [Reserved]............................................ 7
3.5. No Violation.......................................... 7
3.6. SEC Documents......................................... 7
3.7. Investigations; Litigation............................ 8
3.8. Absence of Certain Changes............................ 8
3.9. Taxes................................................. 8
3.10. Contracts............................................. 9
3.11. Employee Benefit Plans................................ 9
3.12. No Brokers............................................ 10
3.13. Opinion of Financial Advisor.......................... 10
3.14. Parent Stock Ownership................................ 11
3.15. Pooling of Interests; Tax Reorganization.............. 11
3.16. Environmental Matters................................. 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB............................................... 11
4.1. Existence; Good Standing; Corporate
Authority; Compliance With Law........................ 11
4.2. Authorization, Validity and Effect of
Agreements............................................ 12
4.3. Capitalization........................................ 12
4.4. Merger Sub............................................ 13
4.5. No Violation.......................................... 13
4.6. SEC Documents......................................... 13
4.7. Investigations; Litigation............................ 14
4.8. Absence of Certain Changes............................ 14
4.9. Taxes................................................. 14
4.10. Contracts............................................. 14
4.11. Employee Benefit Plans................................ 15
4.12. No Brokers............................................ 15
4.13. Opinion of Financial Advisor.......................... 16
4.14. Company Stock Ownership............................... 16
4.15. Pooling of Interests; Tax Reorganization.............. 16
4.16. Environmental Matters................................. 16
ARTICLE 5 COVENANTS..................................................... 16
5.1. Alternative Proposals................................. 16
5.2. Interim Operations of the Company..................... 17
5.3. Interim Operations of Parent.......................... 19
5.4. Meetings of Stockholders.............................. 20
5.5. Filings; Other Actions................................ 20
5.6. HSR Act............................................... 20
5.7. Inspection of Records................................. 21
5.8. Publicity............................................. 21
5.9. Registration Statement................................ 21
5.10. Listing Application................................... 22
5.11. Affiliate Letters..................................... 22
5.12. Expenses.............................................. 22
5.13. Indemnity; Insurance.................................. 23
5.14. Employee Benefits..................................... 23
5.15. Reorganization........................................ 24
5.16. Shareholder Rights Plan............................... 24
5.17. [Reserved]............................................ 24
5.18. Agreements............................................ 24
5.19. Parent Board of Directors............................. 25
5.20. Takeover Statute...................................... 25
ARTICLE 6 CONDITIONS.................................................... 25
6.1. Conditions to Each Party's Obligation to
Effect the Merger..................................... 25
6.2. Conditions to Obligation of the Company to
Effect the Merger..................................... 26
6.3. Conditions to Obligation of Parent and
Merger Sub to Effect the Merger....................... 26
ARTICLE 7 TERMINATION................................................... 27
7.1. Termination by Mutual Consent......................... 27
7.2. Termination by Either Parent or the Company........... 27
7.3. Termination by the Company............................ 28
7.4. Termination by Parent................................. 28
7.5. Effect of Termination and Abandonment................. 28
7.6. Extension; Waiver..................................... 29
ARTICLE 8 GENERAL PROVISIONS............................................ 29
8.1. Nonsurvival of Representations, Warranties
and Agreements........................................ 29
8.2. Notices............................................... 29
8.3. Assignment; Binding Effect............................ 30
ii
8.4. Entire Agreement........................................ 30
8.5. Amendment............................................... 31
8.6. Governing Law........................................... 31
8.7. Counterparts............................................ 31
8.8. Headings................................................ 31
8.9. Interpretation.......................................... 31
8.10. Waivers................................................. 31
8.11. Incorporation of Exhibits............................... 31
8.12. Severability............................................ 32
8.13. Enforcement of Agreement................................ 32
8.14. Subsidiaries............................................ 32
EXHIBITS A Form of Affiliate Letter
SCHEDULES
Company Disclosure Schedules
3.5. No Violations
3.7. Litigation
3.10. Contracts
3.15. Investigations; Litigation
3.10. Contracts
3.11. Employee Benefit Plans
3.15. Pooling of Interests
3.16. Environmental Matters
5.2. Interim Operations
5.14. Employee Benefit Agreements
Parent Disclosure Schedules
4.7. Litigation
4.10. Contracts
4.11. Employee Benefit Plans Investigations; Litigation
4.10. Contracts
4.11. Employee Benefit Plans
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 2, 1997,
between Lockheed ▇▇▇▇▇▇ Corporation, a Maryland corporation ("Parent"),
Hurricane Sub, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Northrop Grumman Corporation, a Delaware corporation
(the "Company").
RECITALS
The Boards of Directors of Parent and the Company each have determined that a
business combination between Parent and the Company is in the best interests of
their respective companies and stockholders and presents an opportunity for
their respective companies to achieve long-term strategic and financial
benefits, and accordingly have agreed to effect the merger provided for herein
upon the terms and subject to the conditions set forth herein.
It is intended that for federal income tax purposes, the merger provided for
herein shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and that for
financial accounting purposes the Merger shall be accounted for as a pooling of
interests.
Merger Sub is a wholly owned subsidiary of Parent and has been formed solely to
facilitate the Merger (as defined herein) and will conduct no business or
activity other than in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into the Company in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). The
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and will be a wholly owned
subsidiary of Parent. The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2. The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article 6 shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as Parent and the Company may agree. The date on
which the Closing occurs is hereinafter referred to as the "Closing Date."
1.3. Effective Time. If all the conditions set forth in Article 6 shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated as provided in Article 7, the parties hereto shall
cause a Certificate of Merger meeting the requirements of Section 251 of the
DGCL to be properly executed and filed in accordance with such Section on the
Closing Date. The Merger shall become effective at the time of filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the DGCL or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time").
1.4. Certificate of Incorporation and By-laws. The Certificate of
Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, until duly amended in accordance with applicable law.
1.5. Directors of the Surviving Corporation. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law.
1.6. Officers of the Surviving Corporation. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law.
ARTICLE 2
CONVERSION AND EXCHANGE OF SECURITIES
2.1. Merger Sub Stock. At the Effective Time, each share of common stock,
par value $.01 per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paidand non- andnon- non-assessable share of common stock, par value $1.00
per share, of the Surviving Corporation.
2.2. Company Stock. (a) At the Effective Time, each share of common stock,
par value $1.00 per share (the "Company Common Stock"), of the Company issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive 1.1923 shares of common stock, par value $1.00 per
share (the "Parent Common Stock"), of Parent (the "Exchange Ratio").
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Company Common Stock shall
cease to be outstanding and shall be cancelled and retired and shall cease to
exist, and each holder of shares of Company Common Stock shall thereafter cease
to have any rights with respect to such shares of Company Common Stock, except
the right to receive, without interest, the Exchange Ratio and cash for
2
fractional shares of Parent Common Stock in accordance with Sections 2.3(b) and
2.3(e) upon the surrender of a certificate (a "Certificate") representing such
shares of Company Common Stock.
(c) Each share of Company Common Stock issued and held in the Company's
treasury at the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) At the Effective Time, each option to purchase shares of Company
Common Stock outstanding at the Effective Time under any Company stock option
plan (a "Company Option") shall, by virtue of the Merger and without any further
action on the part of the Company or the holder of any such Company Option, be
assumed by Parent and shall be converted into an option to purchase Parent
Common Stock. Each Company Option assumed by Parent shall be exercisable upon
the same terms and conditions as under the applicable Company stock option plan
and the applicable option agreement issued thereunder, except that (i) each such
Company Option shall be exercisable for that whole number of shares of Parent
Common Stock (rounded to the nearest whole share) into which the number of
shares of Company Common Stock subject to such Company Option immediately prior
to the Effective Time would be converted under Section 2.2(a), and (ii) the
option price per share of Parent Common Stock shall be an amount equal to the
option price per share of Company Common Stock subject to such Company Option
divided by the Exchange Ratio (the option price per share being rounded to the
nearest full cent). No payment shall be made for fractional interests, rather,
the aggregate number of shares to be issued under any assumed Company Option
shall be rounded to the nearest whole number. At the Effective Time, each share
of Company Common Stock subject to transfer or vesting restrictions (the
"Restricted Stock") shall upon conversion into the Parent Common Stock under
Section 2.2(a) be subject to the same terms and conditions, including transfer
restrictions and vesting schedule, as the Restricted Stock. The number of shares
of Company Common Stock issued as of the Effective Time for the restricted
performance stock rights shall be determined in accordance with the provisions
of the Company's 1993 Long Term Incentive Plan and shall be converted into
Parent Common Stock under Section 2.2(a).
2.3. Exchange of Certificates Representing Company Common Stock.
(a) As of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with an exchange agent selected by Parent (the "Exchange Agent"), for
the benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article 2, certificates representing the shares of Parent
Common Stock to be issued in connection with the Merger and Parent's good faith
estimate of the cash in lieu of fractional shares expected to be payable in
connection with the Merger (such cash and certificates for shares of Parent
Common Stock, together with any dividends or distributions with respect thereto
(relating to record dates for such dividends or distributions after the
Effective Time), being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 2.2 and paid pursuant to this Section 2.3 in exchange
for outstanding shares of Company Common Stock.
(b) Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record of shares of Company Common Stock (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to such shares of Company Common Stock shall pass, only
upon delivery of the Certificates representing such shares to the
3
Exchange Agent and which shall be in such form and have such other provisions as
Parent may reasonably specify and (ii) instructions for use in effecting the
surrender of such Certificates in exchange for the Exchange Ratio and cash in
lieu of fractional shares. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of the shares
represented by such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of Parent
Common Stock and (y) a check representing the amount of cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article 2, after giving effect to any
required withholding tax, and the shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash payable to holders of shares of Company Common Stock. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock, together with a check for the cash to be paid may
be issued to such a transferee if the Certificate representing such Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends
or other distributions declared after the Effective Time on Parent Common Stock
shall be paid with respect to any shares of Company Common Stock represented by
a Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Parent Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon, and (ii)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any withholding taxes which may be required
thereon.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for certificates for shares of Parent Common
Stock and cash deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article 2. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(the "Securities Act"), shall not be exchanged until Parent has received a
written agreement from such person as provided in Section 5.11.
(e) No fractional shares of Parent Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Parent Common Stock,
cash adjustments will be paid to holders in respect of any fractional share of
Parent Common Stock that would otherwise be issuable, and the amount of such
cash adjustment shall be equal to such fractional
4
proportion of the "Average Price" of a share of Parent Common Stock. The
"Average Price" of a share of Parent Common Stock shall be the average of the
closing sales prices thereof as reported on The New York Stock Exchange (the
"NYSE") Composite Tape (as reported by The Wall Street Journal or, if not
reported thereby, by another authoritative source) over the ten (10) business
days immediately preceding the Closing Date.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Parent Common Stock) that remains
unclaimed by the former stockholders of the Company one year after the Effective
Time shall be delivered to the Surviving Corporation. Any former stockholders
of the Company who have not theretofore complied with this Article 2 shall
thereafter look only to the Surviving Corporation for payment of their shares of
Parent Common Stock, cash and unpaid dividends and distributions on Parent
Common Stock deliverable in respect of each share of Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(g) None of Parent, the Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Parent Common Stock and cash deliverable in respect thereof pursuant to this
Agreement.
2.4. Adjustment of Exchange Ratio.
In the event that, subsequent to the date of this Agreement but prior to
the Effective Time, the outstanding shares of Parent Common Stock or Company
Common Stock, respectively, shall have been changed into a different number of
shares or a different class as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction, the Exchange Ratio shall be
appropriately adjusted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to Parent (the "Company Disclosure Schedule") or in the Company
Reports (as defined below), the Company represents and warrants to Parent as of
the date of this Agreement as follows:
3.1. Existence; Good Standing; Corporate Authority; Compliance With Law.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company is
duly licensed or qualified to do business
5
as a foreign corporation and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing would not have a Company Material Adverse Effect. For the purposes
of this Agreement, "Company Material Adverse Effect" means a material adverse
effect on the business, results of operations or financial condition of the
Company and its Subsidiaries (as defined in Section 8.14) taken as a whole,
other than any effects or changes arising out of, resulting from or relating to
general economic, financial or industry conditions. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted. Each of the Company's Significant
Subsidiaries (as defined in Section 8.14 hereof) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or partnership
power and authority to own its properties and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, governmental rule or regulation to
which the Company or any of its Subsidiaries or any of their respective
properties or assets is subject, other than any violations which would not have
a Company Material Adverse Effect. The Company and its Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their business as now conducted, except where the failure to obtain any
such item or to take any such action would not have a Company Material Adverse
Effect.
3.2. Authorization, Validity and Effect of Agreements. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of Company Common Stock, the
consummation by the Company of the transactions contemplated hereby has been
approved by the Board of Directors of the Company and duly authorized by all
requisite corporate action. This Agreement constitutes, and all agreements and
documents contemplated hereby (when executed and delivered pursuant hereto for
value received) will constitute, the valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
3.3. Capitalization. The authorized capital stock of the Company
consists of 200,000,000 shares of Company Common Stock and 10,000,000 shares
of preferred stock, par value $1.00 per share (the "Company Preferred Stock").
As of May 31, 1997, there were 58,050,08558,059,010 shares of Company Common
Stock, and no shares of Company Preferred Stock, issued and outstanding.
From such date to the date of this Agreement, no additional shares of capital
stock of the Company have been issued, except pursuant to the exercise of
options outstanding under Company Stock Option Plans. As of May 31, 1997,
options to acquire 3,505,996 shares of Company Common Stock were outstanding.
From such date to the date of this Agreement, no additional options have been
granted. The Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. All issued and outstanding
shares of Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as described above, and
except for 1,818,143 restricted performance stock rights, 40,290 restricted
stock rights, and 5,750 restricted award shares of the Company outstanding
as of the date hereof, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments (other than the Agreement and Plan
of Merger, dated May 4, 1997, between the Company, Logicon, Inc. and
NG Acquisition, Inc. (the "Logicon Merger Agreement")) which obligate the
Company or any of its Subsidiaries to issue, transfer or sell any shares of
capital stock of the Company or any of its Subsidiaries. After the Effective
Time, the Surviving Corporation will have no obligation to issue, transfer or
sell any shares of capital stock or other securities of the Company or the
Surviving Corporation pursuant to any Company Benefit Plan (as defined in
Section 3.11).
6
3.4. [Reserved].
3.5. No Violation. Except as set forth in Section 3.5 of the Company
Disclosure Schedule, neither the execution and delivery by the Company of this
Agreement nor the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of the Certificate of Incorporation or Bylaws of
the Company; (ii) result in a breach or violation of, a default under, or the
triggering of any payment or other material obligations pursuant to, or
accelerate vesting under, any existing Company Stock Option Plan, or any grant
or award made under any of the foregoing; (iii) violate, conflict with, result
in a breach of any provision of, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
material obligations pursuant to, result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of the
Company or its Subsidiaries under, or result in being declared void, voidable,
or without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound or affected, except for any of the foregoing matters which
would not have a Company Material Adverse Effect; or (iv) other than the filings
provided for in Article 1, applicable federal, state and local regulatory
filings, filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), or applicable state securities and "Blue Sky" laws or filings
in connection with the maintenance of qualification to do business in other
jurisdictions (collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, other than approvals or filings
which, if not obtained or made would not have a Company Material Adverse Effect.
3.6. SEC Documents. For the purposes of this Agreement, the "Company
Reports" means each registration statement, report, proxy statement or
information statement (as defined in Regulation 14C under the Exchange Act) of
the Company prepared by it since January 1,
7
1995, in the form (including exhibits and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC"). As of their respective dates,
the Company Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the consolidated balance
sheets of the Company included in or incorporated by reference into the Company
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its Subsidiaries as of its
date, and each of the consolidated statements of income, retained earnings and
cash flows of the Company included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presents the
results of operations, retained earnings or cash flows, as the case may be, of
the Company and its Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments which
would not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations required to be disclosed in a
balance sheet or the notes thereto prepared in accordance with generally
accepted accounting principles consistently applied, except (a) liabilities or
obligations reflected on, or reserved against in, a balance sheet of the Company
or in the notes thereto, and included in the Company Reports and (b) liabilities
or obligations incurred since March 31, 1997 in the ordinary course of business.
3.7. Investigations; Litigation. Except as set forth in Section 3.7 or
Section 3.10 of the Company Disclosure Schedule, (a) to the knowledge of the
Company, no material investigation by any governmental entity with respect to
the Company or any of its Subsidiaries is pending or threatened nor has any
governmental entity indicated to the Company an intention to conduct the same
except for any of the foregoing which would not have a Company Material Adverse
Effect; and (b) there are no actions, suits or proceedings pending against the
Company or its Subsidiaries or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality, that
are reasonably likely to have a Company Material Adverse Effect.
3.8. Absence of Certain Changes. Since December 31, 1996, the Company has
conducted its business only in the ordinary course of such business, and there
has not been (i) any Company Material Adverse Effect or any event which is
reasonably likely to result in a Company Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock (other than the regular quarterly cash dividends of
$0.40 per share, payable on Company Common Stock); or (iii) any material change
in its accounting principles, practices or methods.
3.9. Taxes. The Company and each of its Subsidiaries (i) have timely
filed all material federal, state and foreign tax returns required to be filed
by any of them for tax years ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request shall have
been granted and not expired, and all such returns are complete in all material
respects, (ii) have paid or accrued all taxes shown to be due and payable on
such returns
8
and (iii) have properly accrued all such taxes for such periods subsequent to
the periods covered by such returns.
3.10. Contracts. (a) Except as disclosed in Section 3.7 or Section 3.10 of
the Company Disclosure Schedule, to the knowledge of the Company, with respect
to Government Contracts, there is, as of the date hereof, no (i) civil fraud or
criminal investigation by any government investigative agency that is reasonably
likely to have a Company Material Adverse Effect, (ii) suspension or debarment
proceeding (or equivalent proceeding) against the Company or any of its
Subsidiaries that is reasonably likely to have a Company Material Adverse
Effect, (iii) request by the government for a contract price adjustment based on
a claimed disallowance by Defense Contract Audit Agency or claim of defective
pricing in excess of $40 million, (iv) dispute between the Company or any of its
Subsidiaries and the U.S. Government which, since June 30, 1996, has resulted in
a government contracting officer's determination and finding final decision
where the amount in controversy exceeds or is expected to exceed $40 million or
(v) claim or equitable adjustment by the Company or any of its Subsidiaries
against the U.S. Government or any third party in excess of $40 million.
(b) For the purposes of this Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, teaming agreement
or arrangement, joint venture, basic ordering agreement, pricing agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind between such party or any of its Subsidiaries 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 or
(iii) any subcontractor with respect to any contract of a type described in
clauses (i) or (ii) above. For the purposes of this Agreement, with respect to
any party, "Bid" means any quotation, bid or proposal made by such party or any
of its Subsidiaries 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. For the purposes of this Agreement, with
respect to any party, "Contracts" means all contracts, agreements, leases
(including leases of real property), licenses, commitments, sales and purchase
orders, intercompany work transfer agreements) with respect to work by or for
another of such party's businesses) and other instruments of any kind, whether
written or oral.
3.11. Employee Benefit Plans.
For the purpose of this Agreement, "Company Benefit Plans" means all
employee benefit plans and other benefit arrangements covering employees or
former employees of the Company and its Subsidiaries and all employee agreements
providing compensation, severance or other benefits to any employee or former
employee of the Company or any of its Subsidiaries. With respect to each
Company Benefit Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Internal Revenue Code (the "Code"), either the
Internal Revenue Service (the "IRS") has issued a favorable determination letter
that has not been revoked, or an application for a favorable determination
letter was timely submitted to the IRS for which no final action has been taken
by the IRS. To the knowledge of the Company, there is no reason that is not
susceptible to cure why the qualified status under Section 401(a) of the Code of
any Company Benefit Plan would be denied or revoked, whether retroactively or
prospectively. Except as would not have a Company Material Adverse Effect, no
Company Benefit Plan, any fiduciary thereof, nor the Company has incurred any
liability or penalty under Section 4975 of the Code or Section 502(i)
9
of ERISA. Except as would not have a Company Material Adverse Effect, each
Company Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code to the extent
applicable thereto. Except as would not have a Company Material Adverse Effect,
neither the Company nor any ERISA Affiliate (during the period of its affiliated
status and prior thereto, to its knowledge) has any existing liability currently
due and payable that has not been satisfied in full under Title IV of ERISA or
Section 412 of the Code. To the knowledge of the Company, there are no current
plans to terminate, whether voluntarily or involuntarily any materially
underfunded pension plans of the Company or any ERISA Affiliate that are subject
to Title IV of ERISA. Except as would not have a Company Material Adverse
Effect, to the knowledge of the Company, there are no pending or anticipated
claims against or otherwise involving any of the Company Benefit Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of the Company Benefit Plan activities) has been brought against
or with respect to any such Company Benefit Plan, except for any of the
foregoing which would not have a Company Material Adverse Effect. All material
contributions required to be made as of the date hereof to the Company Benefit
Plans have been made or provided for. Except as set forth in Section 3.11 of the
Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
benefit plan, policy, arrangement or agreement or any trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. The only material
severance agreements or severance policies applicable to the Company or its
Subsidiaries are the agreements and policies specifically referred to in Section
3.11 of the Company Disclosure Schedule.
For purposes of this Agreement "ERISA Affiliate" means any business or
entity which is a member of the same "controlled group of corporations," under
"common control" or an "affiliated service group" with an entity within the
meanings of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing Sections.
3.12. No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that the Company has retained Salomon Brothers Inc as its
financial advisor, the arrangements with which have been disclosed in writing to
Parent prior to the date hereof. Other than the foregoing arrangements, the
Company is not aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
3.13. Opinion of Financial Advisor. The Company has received the opinion of
Salomon Brothers Inc to the effect that, as of the date hereof, the Exchange
Ratio is fair to the holders of Company Common Stock from a financial point of
view.
10
3.14. Parent Stock Ownership. Neither the Company nor any of its
Subsidiaries owns any shares of Parent Common Stock or other securities
convertible into Parent Common Stock.
3.15. Pooling of Interests; Tax Reorganization. In the judgment of the
Company, the Company and its Subsidiaries have not taken (or as of the date
hereof failed to take) any action which would prevent the accounting for the
Merger as a pooling of interests in accordance with Accounting Principles Board
Opinion ▇▇. ▇▇ ("▇▇▇ ▇▇. ▇▇"), the interpretative releases issued pursuant
thereto, and the pronouncements of the SEC. To the knowledge of the Company, the
Company has not taken or failed to take any action which would prevent the
Merger from constituting a reorganization within the meaning of section 368(a)
of the Code.
3.16. Environmental Matters. Except as set forth in Section 3.16 of the
Company Disclosure Schedule or as described in the Company Reports, the Company
and each of its Subsidiaries are in material compliance with all applicable
federal, state and local laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for instances of noncompliance that
individually or in the aggregate do not, and, insofar as reasonably can be
foreseen, in the future would not, have a Company Material Adverse Effect. Such
compliance includes, but is not limited to, the possession by the Company and
its Subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Neither the Company nor any of its Subsidiaries has received
written notice of, or to the knowledge of the Company, is the subject of, any
actions, causes of action, claims, investigations, demands or notices by any
person or entity alleging liability under or noncompliance with any
Environmental Law ("Environmental Claims") that individually or in the aggregate
would have a Company Material Adverse Effect. To the knowledge of the Company,
there are no circumstances that are reasonably likely to prevent or interfere
with such material compliance in the future.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to the Company (the "Parent Disclosure Schedule") or in the
Parent Reports (as defined below), Parent and Merger Sub represent and warrant
to the Company as of the date of this Agreement as follows:
4.1. Existence; Good Standing; Corporate Authority; Compliance With Law.
Each of Parent and Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Parent is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing would not
have a Parent Material Adverse Effect. For the purposes of this Agreement,
"Parent Material Adverse Effect" means a material adverse effect on the
business, results of operations or financial condition of Parent and its
Subsidiaries taken as a
11
whole, other than effects or changes arising out of, resulting from or relating
to general economic, financial or industry conditions. Parent has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now conducted. Each of Parent's Significant Subsidiaries is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has the
corporate or partnership power and authority to own its properties and to carry
on its business as it is now being conducted, and is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not have a Parent Material Adverse Effect. Neither Parent nor any
Parent Subsidiary is in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which Parent or any of its Subsidiaries or any of their
respective properties or assets is subject, other than any violations which
would not have a Parent Material Adverse Effect. Parent and its Subsidiaries
have obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their business as now conducted, except where the failure to obtain any
such item or to take any such action would not have a Parent Material Adverse
Effect.
4.2. Authorization, Validity and Effect of Agreements. Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby.
Subject only to the approval of the issuance of Parent Common Stock pursuant to
this Agreement by the holders of a majority of the outstanding shares of Parent
Common Stock (the "Parent Stockholder Approval"), the consummation by Parent and
Merger Sub of the transactions contemplated hereby has been approved by the
Board of Directors of Parent and duly authorized by all requisite corporate
action. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of Parent
and Merger Sub, enforceable in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
4.3. Capitalization. The authorized capital stock of Parent consists of
750,000,000 shares of Parent Common Stock, 50,000,000 shares of Series Preferred
Stock, par value $1.00 per share (the "Parent Series Preferred Stock") and
20,000,000 shares of Series A preferred stock, par value $1.00 per share (the
"Parent Preferred Stock"). As of April 30, 1997, there were 193,128,187 shares
of Parent Common Stock and 20,000,000 shares of Parent Preferred Stock issued
and outstanding. From such date to the date of this Agreement, no additional
shares of capital stock of Parent have been issued, except pursuant to the
exercise of options outstanding under Parent's stock option and employee stock
purchase plans (the "Parent Stock Option Plans"). As of May 30, 1997, options
to acquire 11,833,826 shares of Parent Common Stock were outstanding. From such
date to the date of this Agreement, no additional options have been granted.
Parent has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
Parent on any matter. All such issued and outstanding shares of Parent Common
Stock are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as contemplated by this Agreement, there are not at
the date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other
12
rights, agreements or commitments which obligate Parent or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock of Parent or
any of its Subsidiaries (other than under Parent Stock Option Plans).
4.4. Merger Sub. The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $.01 per share, all of which shares are issued
and outstanding and owned by Parent. Notwithstanding any provisions to the
contrary, Parent may, in its sole discretion, increase the number of shares of
authorized common stock of Merger Sub and the number of shares of common stock
of Merger Sub issued and outstanding owned by Parent. Merger Sub has not engaged
in any activities other than in connection with the transactions contemplated by
this Agreement.
4.5. No Violation. Neither the execution and delivery by Parent and
Merger Sub of this Agreement, nor the consummation by Parent and Merger Sub of
the transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub; (ii) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the Parent
Stock Option Plans, or any grant or award under any of the foregoing; (iii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Parent or its Subsidiaries under, or
result in being declared void, voidable, or without further binding effect, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which Parent or any
of its Subsidiaries is a party, or by which Parent or any of its Subsidiaries or
any of their respective properties is bound or affected, except for any of the
foregoing matters which would not have a Parent Material Adverse Effect; or (iv)
other than the Regulatory Filings, require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, other than approvals or filings which, if
not obtained or made would not have a Parent Material Adverse Effect.
4.6. SEC Documents. For the purposes of this Agreement, the "Parent
Reports" means each registration statement, report, proxy statement or
information statement of Parent prepared by it since January 1, 1995, in the
form (including exhibits and any amendments thereto) filed with the SEC. As of
the respective dates, the Parent Reports (i) complied as to form in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent Reports (including the related notes and schedules) fairly presents the
consolidated financial position of Parent and its Subsidiaries as of its date,
and each of the consolidated statements of income, retained earnings and cash
flows included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents the results of
operations, retained
13
earnings or cash flows, as the case may be, of Parent and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Neither Parent nor any of its Subsidiaries has any liabilities or
obligations required to be disclosed in a balance sheet of Parent or in the
notes thereto prepared in accordance with generally accepted accounting
principles consistently applied except (a) liabilities or obligations reflected
on, or reserved against in, a balance sheet of Parent or in the notes thereto,
and included in the Parent Reports and (b) liabilities or obligations incurred
since March 31, 1997 in the ordinary course of business.
4.7. Investigations; Litigation. Except as set forth in Section 4.7 of the
Parent Disclosure Schedule, (a) to the knowledge of Parent, no material
investigation by any governmental entity with respect to Parent or any of its
Subsidiaries is pending (or, to Parent's knowledge, threatened) nor has any
governmental entity indicated to Parent an intention to conduct the same; and
(b) there are no actions, suits or proceedings pending against Parent or its
Subsidiaries or, to the knowledge of Parent, threatened against Parent or its
Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that are reasonably likely
to have a Parent Material Adverse Effect.
4.8. Absence of Certain Changes. Since December 31, 1996, Parent has
conducted its business only in the ordinary course of such business, and there
has not been (i) any Parent Material Adverse Effect or any event which is
reasonably likely to result in a Parent Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock (other than the regular quarterly cash dividends of
$0.40 per share, payable on Parent Common Stock); or (iii) any material change
in its accounting principles, practices or methods.
4.9. Taxes. Parent and each of its Subsidiaries (i) have timely filed all
material federal, state and foreign tax returns required to be filed by any of
them for tax years ended prior to the date of this Agreement or requests for
extensions have been timely filed and any such request shall have been granted
and not expired, and all such returns are complete in all material respects,
(ii) have paid or accrued all taxes shown to be due and payable on such returns
and (iii) have properly accrued all such taxes for such periods subsequent to
the periods covered by such returns.
4.10. Contracts. Except as disclosed in Section 4.10 of the Parent
Disclosure Schedule, to the knowledge of Parent, with respect to Government
Contracts, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any government investigative agency that is reasonably likely
to have a Parent Material Adverse Effect, (ii) suspension or debarment
proceeding (or equivalent proceeding) against Parent or any of its Subsidiaries
that is reasonably likely to have a Parent Material Adverse Effect, (iii)
request by the government for a contract price adjustment based on a claimed
disallowance by Defense Contract Audit Agency or claim of defective pricing in
excess of $120 million, (iv) dispute between Parent or any of its Subsidiaries
and the U.S. Government which, since June 30, 1996, has resulted in a government
contracting officer's determination and finding final decision where the amount
in controversy exceeds or is expected to exceed $120 million or (v) claim or
equitable adjustment by Parent or any of its Subsidiaries against the U.S.
Government or any third party in excess of $120 million.
14
4.11. Employee Benefit Plans.
For the purpose of this Agreement, "Parent Benefit Plans" means all
employee benefit plans and other benefit arrangements covering employees or
former employees of Parent and its Subsidiaries and all employee agreements
providing compensation, severance or other benefits to any employee or former
employee of Parent or any of its Subsidiaries. With respect to each Parent
Benefit Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code, either the IRS has issued a favorable determination
letter that has not been revoked, or an application for a favorable
determination letter was timely submitted to the IRS for which no final action
has been taken by the IRS. To the knowledge of Parent, there is no reason that
is not susceptible to cure why the qualified status under Section 401(a) of the
Code of any Parent Benefit Plan would be denied or revoked, whether
retroactively or prospectively. Except as would not have a Parent Material
Adverse Effect, no Parent Benefit Plan, any fiduciary thereof, nor Parent has
incurred any liability or penalty under Section 4975 of the Code or Section
502(i) of ERISA. Except as would not have a Parent Material Adverse Effect,
each Parent Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with the ERISA, and the Code to the
extent applicable thereto. Except as would not have a Parent Material Adverse
Effect, neither Parent nor any ERISA Affiliate (during the period of its
affiliated status and prior thereto, to its knowledge) has any existing
liability currently due and payable that has not been satisfied in full under
Title IV of ERISA or Section 412 of the Code. To the knowledge of Parent, there
are no current plans to terminate, whether voluntarily or involuntarily, any
materially underfunded pension plans of Parent or any ERISA Affiliate that are
subject to Title IV of ERISA. Except as would not have a Parent Material Adverse
Effect, to the knowledge of Parent, there are no pending or anticipated claims
against or otherwise involving any of the Parent Benefit Plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of the Parent Benefit Plan activities) has been brought against
or with respect to any such Parent Benefit Plan, except for any of the foregoing
which would not have a Parent Material Adverse Effect. All material
contributions required to be made as of the date hereof to the Parent Benefit
Plans have been made or provided for. Except as set forth in Section 4.11 of the
Parent Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
benefit plan, policy, arrangement or agreement or any trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee.
4.12. No Brokers. Parent has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company or Parent to pay any finder's fee, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Parent has retained Bear, ▇▇▇▇▇▇▇ & Co. Inc. and ▇▇▇▇▇▇ Brothers as its
financial advisors. Other than the foregoing arrangements, the Company is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
15
4.13. Opinion of Financial Advisor. Parent has received the opinion of
Bear, ▇▇▇▇▇▇▇ & Co. Inc. to the effect that as of the date hereof, the
consideration to be paid by Parent pursuant to the Merger is fair to Parent from
a financial point of view.
4.14. Company Stock Ownership. Neither Parent nor any of its Subsidiaries
owns any shares of Company Common Stock or other securities convertible into
shares of Company Common Stock.
4.15. Pooling of Interests; Tax Reorganization. In the judgment of Parent,
Parent and its Subsidiaries have not taken (or as of the date hereof failed to
take) any action which would prevent the accounting for the Merger as a pooling
of interests in accordance with APB No. 16, the interpretative releases issued
pursuant thereto, and the pronouncements of the SEC. To the knowledge of the
Parent, Parent has not taken or failed to take any action which would prevent
the Merger from constituting a reorganization within the meaning of section
368(a) of the Code.
4.16. Environmental Matters. Except as described in Parent Reports, Parent
and each of its Subsidiaries are in material compliance with all applicable
Environmental Laws, except for instances of noncompliance that individually or
in the aggregate do not, and, insofar as reasonably can be foreseen, in the
future would not, have a Parent Material Adverse Effect. Such compliance
includes, but is not limited to, the possession by Parent and its Subsidiaries
of all material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Neither Parent nor any of its Subsidiaries has received written notice
of, or to the knowledge of Parent, is the subject of, any Environmental Claims
that individually or in the aggregate would have a Parent Material Adverse
Effect. To the knowledge of Parent, there are no circumstances that are
reasonably likely to prevent or interfere with such material compliance in the
future.
ARTICLE 5
COVENANTS
5.1. Alternative Proposals. The Company, its affiliates and their
respective officers, directors, employees, representatives and agents shall
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any acquisition of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its Significant Subsidiaries or any business combination with the Company or
any of its Significant Subsidiaries. The Company may, directly or indirectly,
furnish information and access, in each case only in response to unsolicited
requests therefor, to any corporation, partnership, person or other entity or
group pursuant to confidentiality agreements, and may participate in discussions
and negotiate with such entity or group concerning any merger, sale of material
assets, sale of shares of capital stock or similar transaction involving the
Company or any Significant Subsidiary (a "Transaction"), if such entity or group
has submitted a written proposal to the Board relating to any such transaction
(an "Alternative Proposal") and the Board by a majority vote determines in its
good faith judgment, based as to legal matters on the advice of legal counsel,
that failing to take such action would constitute a breach of the Board's
fiduciary duty. The Board shall provide a copy of any such written proposal to
Parent or Merger Sub immediately after receipt
16
thereof. Except as set forth above, neither the Company or any of its
affiliates, nor any of its or their respective officers, directors, employees,
representatives or agents, shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent and Merger Sub, any affiliate or associate of Parent and
Merger Sub or any designees of Parent and Merger Sub) concerning any merger,
sale of material assets, sale of shares of capital stock or similar transaction
involving the Company or any Significant Subsidiary; provided, however, that
nothing herein shall prevent the Board from taking, and disclosing to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offers, provided,
further, that the Board shall not recommend that the stockholders of the Company
tender their Shares in connection with any such tender offer unless the Board by
a majority vote determines in its good faith judgment, based as to legal matters
on the advice of legal counsel, that failing to take such action would
constitute a breach of the Board's fiduciary duty. Nothing in this Section 5.1
shall (x) permit the Company to terminate this Agreement (except as specifically
provided in Article 7 hereof), (y) permit the Company to enter into any
agreement with respect to a Transaction during the term of this Agreement (it
being agreed that during the term of this Agreement, the Company shall not enter
into any agreement with any person that provides for, or in any way facilitates,
a Transaction (other than a confidentiality agreement in customary form)), or
(z) affect any other obligation of the Company under this Agreement. Nothing in
this Section 5.1 shall preclude the Company from consummating the transactions
contemplated by the Logicon Merger Agreement.
5.2. Interim Operations of the Company.
(a) Prior to the Effective Time, except as set forth in Section 5.2 of the
Company Disclosure Schedule or as contemplated by any other provision of this
Agreement and except as contemplated by the Logicon Merger Agreement, unless
Parent has consented in writing thereto, the Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) shall use its reasonable efforts, and shall cause each of its
Subsidiaries to use its reasonable efforts, to preserve intact their business
organizations and goodwill, keep available the services of their respective
officers and employees and maintain satisfactory relationships with those
persons having business relationships with them;
(iii) shall not, and shall cause its Subsidiaries not to, amend their
respective Certificates of Incorporation or Bylaws or comparable governing
instruments (other than amendments which are not material to the Company or to
the consummation of the transactions contemplated by this Agreement);
(iv) shall promptly notify Parent of (x) any material change in its
condition (financial or otherwise), business, properties, assets, liabilities or
the normal course of its business or of its properties, (y) any material
litigation or material governmental complaints,
17
investigations or hearings (or communications indicating that the same may be
contemplated), or (z) the breach of any representation or warranty contained
herein;
(v) shall promptly deliver to Parent true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(vi) shall not, and shall not permit any of its Subsidiaries to,
except (x) in the ordinary course of business consistent with past practice, (y)
as otherwise provided in this Agreement, enter into or amend any employment,
severance or similar agreements or arrangements with any of their respective
directors or executive officers;
(vii) subject to the provisions of Section 5.1, shall not, and shall
not permit any of its Subsidiaries to, authorize, propose or announce an
intention to authorize or propose, or enter into an agreement with respect to,
any merger, consolidation or business combination (other than the Merger), any
acquisition of assets or securities, any disposition of assets or securities or
any release or relinquishment of any contract rights in which, in any such case,
the aggregate consideration for such transaction is in excess of $100 million or
which would have an adverse impact on the Company's ability to consummate the
Merger;
(viii) shall not, and shall not permit any of its Subsidiaries to,
issue any shares of their capital stock or securities, except upon exercise of
options outstanding as of the date hereof to purchase up to 914,000 shares of
Company Common Stock under Company Stock Option Plans, or effect any stock split
or otherwise change its capitalization;
(ix) shall not, and shall not permit any of its Subsidiaries to,
grant, confer or award any options, appreciation rights, warrants, conversion
rights, restricted stock, stock units, performance shares or other rights, not
existing on the date hereof, with respect to any shares of its capital stock or
other securities of the Company or its Subsidiaries;
(x) shall not, and shall not permit any of its Subsidiaries to, take
any actions which would, or would be reasonably likely to, prevent the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
Code;
(xi) shall not, and shall not permit any of its Subsidiaries to, amend
in any material respect the terms of the Company Benefit Plans, including,
without limitation, any employment, severance or similar agreements or
arrangements in existence on the date hereof, or adopt any new employee benefit
plans, programs or arrangements or any employment, severance or similar
agreements or arrangements;
(xii) shall not, and shall not permit any of its Subsidiaries to, (x)
incur, create, assume or otherwise become liable for borrowed money or assume,
guarantee, endorse or otherwise become responsible or liable for the obligations
of any other individual,
18
corporation or other entity or (y) make any loans or advances to any other
person, except in each case in the ordinary course of business;
(xiii) shall not, and shall not permit any of its Subsidiaries to,
make any material tax election other than in the ordinary course, or without the
consent of Parent, which shall not unreasonably be withheld, settle or
compromise any material tax liability;
(xiv) shall not, and shall not permit any of its Subsidiaries to, (y)
declare, set aside or pay any dividend or make any other distribution or payment
with respect to any shares of its capital stock or other ownership interests
(other than regular quarterly cash dividends not to exceed $0.40 per share of
Company Common Stock and dividends and distributions from Subsidiaries of the
Company to the Company or another of its Subsidiaries) or (z) directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of any of its Subsidiaries, or make any commitment for any such
action; and
(xv) shall not, and shall not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions or take any
action which would make any representation or warranty in Article 3 hereof
untrue or incorrect as of the Closing Date.
5.3. Interim Operations of Parent.
(a) Prior to the Effective Time, except for the transactions currently
being considered by Parent, which have been described to the Company (and which
Parent shall not consummate prior to the Effective Time unless and until it
shall have received a fairness opinion from an independent investment banking
firm of national reputation reasonably satisfactory to the Company), or as
contemplated by any other provision of this Agreement, unless the Company has
consented in writing thereto, Parent:
(i) shall not, and shall cause its Subsidiaries not to, amend their
respective Certificates of Incorporation or Bylaws or comparable governing
instruments (other than amendments which are not material to Parent or to the
consummation of the transactions contemplated by this Agreement);
(ii) shall promptly deliver to the Company true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(iii) shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or enter
into an agreement with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of assets or securities,
any disposition of assets or securities or any release or relinquishment of any
contract rights in which, in any such case, the aggregate consideration for such
transaction is in excess of $500 million or which would have an adverse impact
on Parent's ability to consummate the Merger;
(iv) shall promptly notify the Company of (x) any material change in
its condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its business or of its properties, (y) any
material litigation or material
19
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or (z) the breach of any
representation or warranty contained herein;
(v) shall not, and shall not permit any of its Subsidiaries to, take
any actions which would, or would be reasonably likely to, prevent the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
Code;
(vi) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock
(other than regular quarterly cash dividends not to exceed $0.40 per share of
Parent Common Stock and regular dividends on Parent Preferred Stock); and
(vii) shall not, and shall not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions or take any
action which would make any representation or warranty in Article 4 hereof
untrue or incorrect as of the Closing Date.
5.4. Meetings of Stockholders. Each of Parent and the Company will take
all action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon (i) in the case of Parent, the approval of
the issuance of the shares of Parent Common Stock pursuant to the Merger
contemplated hereby and (ii) in the case of the Company, the approval of this
Agreement and the transactions contemplated hereby. The Board of Directors of
each of Parent and the Company shall recommend such approval and Parent and the
Company shall each take all lawful action to solicit such approval, including,
without limitation, timely mailing the Proxy Statement/Prospectus (as defined in
Section 5.9); provided, however, that such recommendation or solicitation shall
not be required if and to the extent that the Board of Directors of Parent or
the Company, as the case may be, determines, after the date hereof, and upon the
advice of outside counsel, that the making of such recommendation or
solicitation would involve a breach of its fiduciary duties to its stockholders
imposed by law.
5.5. Filings; Other Actions. Subject to the terms and conditions herein
provided, the Company and Parent shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which other filings are required to be made prior to
the Effective Time with, and which other consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
5.6. HSR Act. Subject to the following sentence, the parties shall take
all actions necessary or appropriate to cause the prompt expiration or
termination of any applicable waiting period under the HSR Act in respect of the
Merger, including, without limitation, complying as
20
promptly as practicable with any requests for additional information. Without
limiting the generality of the foregoing, if it is necessary in order to
terminate the waiting period under the HSR Act or otherwise to permit the
Closing to take place, Parent agrees to use all reasonable efforts to divest any
assets held as of the date of this Agreement by Parent or the Company (or their
Subsidiaries), to use all reasonable efforts to hold such assets separate
pending such divestiture, or to enter into a consent decree requiring it to use
all reasonable efforts to divest such assets, and to take such further action in
connection therewith as may be necessary to enable the Closing to take place on
or prior to March 31, 1998; provided that Parent shall not be required to take
any action pursuant to this Section 5.6 if the taking of such action would have
a significant adverse effect on the business, results of operations or financial
condition of Parent and the Company (and their Subsidiaries), taken as a whole
following the Effective Time.
5.7. Inspection of Records. From the date hereof to the Effective Time,
each of the Company and Parent shall, and shall cause its Subsidiaries to, (i)
allow all designated officers, attorneys, accountants and other representatives
of the other party reasonable access at all reasonable times to its respective
offices, records and files, correspondence, audits and properties, as well as to
all information relating to its respective commitments, contracts, titles and
financial position, or otherwise pertaining to its respective business and
affairs, (ii) furnish to the other party and the other party's counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such persons may reasonably request
and (iii) instruct its respective employees, counsel and financial advisors to
cooperate with the other party in the other party's investigation of its
respective business.
5.8. Publicity. The initial press release relating to this Agreement
shall be a joint press release and thereafter the Company and Parent shall,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.
5.9. Registration Statement. Parent and the Company shall cooperate and
promptly prepare and Parent shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Parent Common Stock issuable in the Merger, which
Registration Statement shall contain the joint proxy statement with respect to
the meetings of the stockholders of the Company and of Parent in connection with
the Merger (the "Proxy Statement/Prospectus"). The parties will cause the Proxy
Statement/Prospectus, and Parent will cause the Form S-4, to comply as to form
in all material respects with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder. Parent shall use all
reasonable efforts, and the Company will cooperate with Parent, to have the Form
S-4 declared effective by the SEC as promptly as practicable. Parent shall use
its best efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement. The information
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement/Prospectus and the Form S-4 shall not (i) at the time the Form S-4 is
declared effective, (ii) at the time the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to holders of Company
Common Stock or
21
holders of Parent Common Stock, (iii) at the time of the Company Stockholders'
Meeting or the Parent Stockholder's Meeting and (iv) at the Effective Time,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
information supplied by Parent for inclusion or incorporation by reference in
the Proxy Statement/Prospectus and the Form S-4 shall not (i) at the time the
Form S-4 is declared effective, (ii) at the time the Proxy Statement/Prospectus
(or any amendment thereof or supplement thereto) is first mailed to holders of
Company Common Stock or holders of Parent Common Stock, (iii) at the time of the
Company Stockholders' Meeting or the Parent Stockholder's Meeting and (iv) at
the Effective Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. No amendment or supplement to the Proxy Statement/Prospectus
will be made by the Company without the approval of Parent. Parent will advise
the Company, promptly after it receives notice thereof, of the time when the
Form S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
5.10. Listing Application. Parent shall promptly prepare and submit to
the NYSE a listing application covering the shares of Parent Common Stock
issuable in the Merger, and shall use its best efforts to obtain, prior to the
Effective Time, approval for the listing of such Parent Common Stock, subject to
official notice of issuance.
5.11. Affiliate Letters. At least 30 days prior to the Closing Date, the
Company shall deliver to Parent a list of names and addresses of those persons
who were, in the Company's reasonable judgment, at the record date for its
stockholders' meeting to approve the Merger, "affiliates" (each such person, an
"Affiliate") of the Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall use all reasonable efforts to
deliver or cause to be delivered to Parent, prior to the Closing Date, from each
of the Affiliates of the Company identified in the foregoing list, an Affiliate
Letter in the form attached hereto as Exhibit A. Parent shall be entitled to
place legends as specified in such Affiliate Letters on the certificates
evidencing any Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the Parent Common Stock, consistent with the terms of
such Affiliate Letters.
5.12. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that the filing fee in connection with the
filing of the Form S-4 or Proxy Statement/Prospectus with the SEC and the
expenses incurred in connection with printing and mailing the Form S-4 and the
Proxy Statement/Prospectus shall be shared equally by the Company and Parent.
22
5.13. Indemnity; Insurance. Parent agrees (i) that all rights to
indemnification for acts or omissions occurring prior to the Effective Time in
favor of the current or former directors or officers of the Company as provided
in the Certificate of Incorporation or Bylaws of the Company shall survive the
Merger and shall continue in full force and effect in accordance with their
terms from the Effective Time of the Merger until the expiration of the
applicable statute of limitations with respect to any claims against the current
or former directors or officers of the Company arising out of such acts or
omissions and (ii) to cause the Surviving Corporation to indemnify such current
and former directors and officers in accordance with such rights of
indemnification. For a period of six years after the Effective Time, Parent
shall cause the Surviving Corporation to maintain officers' and directors'
liability insurance for all persons currently covered under the Company's
officers' and directors' liability insurance policies, in their capacities as
officers and directors, on terms substantially no less advantageous to the
covered persons than such existing insurance; provided, however, that Parent
shall not be required in order to maintain or procure such coverage to pay an
annual premium in excess of 150% of the current annual premium paid by the
Company for its existing coverage (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of 150% of the Cap, Parent shall only be required to
obtain as much coverage as can be obtained by paying an annual premium equal to
the Cap.
5.14. Employee Benefits.
(a) For a period of two years following the Effective Time (or, in the
case of employees covered by collective bargaining agreements, for the period
required therein), Parent shall provide to persons who are employees of the
Company or any of its Subsidiaries at the Effective Time (the "Company
Personnel") employee benefit plans, programs and arrangements which in the
aggregate are substantially comparable to those employee benefit plans, programs
and arrangements generally provided to the employees of the Company or its
Subsidiaries immediately prior to the Effective Time; provided, however, that
subject to the foregoing, Parent shall not be precluded from amending or
terminating any particular plan, program or arrangement.
(b) Following the Effective Time, Parent shall cause the Company Benefit
Plans to continue to recognize the service credit of the Company Personnel
accrued as of the Effective Time under the Company Benefit Plans for purposes of
participation, eligibility, vesting of benefits and benefit accrual, subject to
the terms of such Company Benefit Plans, and such service credit shall also be
recognized for purposes of participation, eligibility and vesting under any
successor plans.
(c) In the event of any change in coverage that applies generally to the
Company Personnel during the two-year period following the Effective Time under
any Company Benefit Plan that provides medical or health benefits, Parent shall
cause such plan to recognize credit toward satisfying deductible expense
requirements, out-of-pocket expense limits and maximum lifetime benefit limits
of such Company Personnel or their eligible dependents, and to waive any pre-
existing condition, exclusion or limitation, as and to the extent any such
matter would previously have been recognized or waived (as the case may be)
under the applicable Company Benefit Plan.
23
(d) Parent shall cause the Surviving Corporation to honor in accordance
with their terms and to perform the obligations of the Company under the
severance and retention plans and agreements listed on Section 5.14 of the
Company Disclosure Schedule.
(e) Prior to the Effective time, the Company may (a) enter into retention
agreements with corporate headquarters key employees to be identified and
selected by the Company after consultation with Parent; provided that the
maximum amount payable under all such retention agreements in the aggregate
shall not exceed $15 million; and (b) adopt a general retention program for
corporate headquarter employees; provided that the maximum amount payable under
such program in the aggregate shall not exceed $18 million; and provided
further, however, that if the employees are covered by more than one Company
retention or severance agreement, plan or program, an offset shall be applied to
avoid any duplication of benefits.
(f) Prior to the Effective Time, the Company shall cause to be amended each
of the Company Benefit Plans (and/or related funding arrangements) listed on
Section 5.14 of the Company Disclosure Schedule to eliminate all provisions that
would become effective upon a "Change in Control" of the Company (or any similar
triggering event), as and to the extent such amendments are consistent with
requirements of law.
(g) Following the Effective Time, Parent shall cause Company Personnel who
have previously been granted Company stock options to be eligible to participate
in the Parent stock option plan. At the first meeting of the Compensation
Committee of the Parent Board of Directors following the Effective Time at which
stock options are granted to Parent employees generally, Parent shall cause a
recommendation to be made to the Compensation Committee to grant options under
the Parent stock option plan to such Company Personnel on a basis that takes
into consideration the Company stock options previously granted to such Company
Personnel. If the Effective Time occurs after the first such meeting of the
Compensation Committee, in 1998 or thereafter, Parent shall present its
recommendation for granting Parent stock options in accordance with the
foregoing at the next regularly scheduled meeting of the Compensation Committee
or sooner if schedules and agendas permit.
5.15 Reorganization. From and after the date hereof and until the
Effective Time, neither Parent nor the Company nor any of their respective
subsidiaries or other affiliates shall (i) knowingly take any action, or
knowingly fail to take any action, that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code; or
(ii) enter into any contract, agreement, commitment or arrangement with respect
to the foregoing.
5.16. Shareholder Rights Plan. The Company shall take all action necessary
to render the Rights Agreement, dated September 21, 1988 between Northrop
Corporation and Manufacturers Hanover Trust Company (the "Shareholder Rights
Plan") and the rights issued pursuant to the Shareholder Rights Plan
inapplicable to the transactions contemplated hereby.
5.17. [Reserved]
5.18. Agreements. Between the date hereof and the Closing Date, neither
Parent nor the Company shall enter into any agreement which Parent or the
Company, as the case may be, knows or has reason to know is reasonably likely to
cause any major customer of Parent or the
24
Company (or their respective subsidiaries) to terminate any material contracts,
agreements or other obligations that exist between that customer on the one
hand, and Parent, the Company (or Parent and the Company following the Merger)
or any subsidiary of either, on the other hand and Parent and the Company shall
take all reasonable action appropriate to an effort to avoid such termination.
5.19. Parent Board of Directors. The Company shall be entitled to designate
for appointment or election to Parent's Board of Directors following
consummation of the Merger, three persons to be mutually agreed upon by Parent
and the Company. Parent's Board of Directors shall take all necessary action to
cause ▇▇▇▇ ▇▇▇▇▇ to be elected as Vice Chairman of Parent's Board of Directors
following the Merger.
5.20. Takeover Statute. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
ARTICLE 6
CONDITIONS
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the holders of the issued and outstanding shares of capital
stock of the Company and the Parent Stockholder Approval shall have been
obtained.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction in the United States which
prohibits the consummation of the transactions contemplated by this Agreement.
In the event any such order or injunction shall have been issued, each party
agrees to use its best efforts to have any such injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at the
Effective Time, and no stop order suspending effectiveness of the Form S-4 shall
have been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be continuing,
and all material approvals under state securities laws relating to the issuance
or trading of the Parent Common Stock to be issued to the Company stockholders
in connection with the Merger shall have been received.
25
(e) The Parent Common Stock to be issued to the Company stockholders in
connection with the Merger shall have been approved for listing on the NYSE,
subject only to official notice of issuance.
(f) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a material
adverse effect on the business of Parent and the Company (and their respective
Subsidiaries), taken as a whole, following the Effective Time.
6.2. Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Parent shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date, the representations and warranties of Parent and Merger Sub contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct in all material respects as of the Closing Date, except that
those representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date, and the
Company shall have received a certificate of the President or a Vice President
of Parent, dated the Closing Date, certifying to such effect.
(b) The Company shall have received the opinion of Fried, Frank, Harris,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel to the Company, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
(c) The Company shall have received a letter of its independent public
accountants, dated the Effective Time, in form and substance reasonably
satisfactory to it, stating that such accountants concur with management's
conclusion that the Merger will qualify as a transaction to be accounted for in
accordance with the pooling of interests method of accounting under the
requirements of APB No. 16, provided that if such accountants are not able to
deliver such letter due to a transaction of the type currently being considered
by Parent, which has been described to the Company, such letter shall not be a
condition to the Company's obligations hereunder.
(d) From the date of this Agreement through the Effective Time, there shall
not have occurred a Parent Material Adverse Effect.
6.3. Conditions to Obligation of Parent and Merger Sub to Effect the
Merger. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
26
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, the representations and warranties of the Company contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct in all material respects as of the Closing Date, except that
those representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date, and Parent
shall have received a certificate of the President or a Vice President of the
Company, dated the Closing Date, certifying to such effect.
(b) Parent shall have received the opinion of King & Spalding, special
counsel to Parent, dated the Closing Date, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that the Company and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the Code.
(c) Parent shall have received a letter of its independent public
accountants, dated the Effective Time, in form and substance reasonably
satisfactory to it, stating that such accountants concur with management's
conclusion that the Merger will qualify as a transaction to be accounted for in
accordance with the pooling of interests method of accounting under the
requirements of APB No. 16, provided that if such accountants are not able to
deliver such letter due to a transaction of the type currently being considered
by Parent which has been described to the Company, such letter shall not be a
condition to Parent's obligations hereunder.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred a Company Material Adverse Effect.
ARTICLE 7
TERMINATION
7.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of the Company, by the
mutual consent of Parent and the Company.
7.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if (a) the Merger shall not have been
consummated by March 31, 1998, or (b) the approval of the Company's stockholders
required by Section 6.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof, or (c) the approval of Parent's
stockholders required by Section 6.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof, or (d) a United
States federal or state court of competent jurisdiction or United States federal
or state governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; provided, that
27
the party seeking to terminate this Agreement pursuant to this clause (d) shall
have used all reasonable efforts to remove such injunction, order or decree; and
provided, in the case of a termination pursuant to clause (a) above, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Merger by March 31, 1998.
7.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of the Company referred to in
Section 6.1(a), by action of the Board of Directors of the Company, if (a) in
the exercise of its good faith judgment as to fiduciary duties to its
stockholders imposed by law based on the written opinion of outside counsel, the
Board of Directors of the Company determines that such termination is required
by reason of an Alternative Proposal being made, or (b) there has been a breach
by Parent or Merger Sub of any representation or warranty contained in this
Agreement that has had or will have a Parent Material Adverse Effect, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to Parent, or (c) there has been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Company to Parent. Notwithstanding the foregoing, the Company's ability to
terminate this Agreement pursuant to Section 7.2 or this Section 7.3 is
conditioned upon the prior payment by the Company of any amounts owed by it
pursuant to Section 7.5(a).
7.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of Parent referred to in Section 6.1(a), by
action of the Board of Directors of Parent, if (a) the Board of Directors of the
Company shall have (i) withdrawn or modified in a manner materially adverse to
Parent its approval or recommendation of this Agreement or the Merger or (ii)
recommended an Alternative Proposal to the Company stockholders, or (b) there
has been a breach by the Company of any representation or warranty contained in
this Agreement that has had or will have a Company Material Adverse Effect,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by the Company to Parent, or (c) there
has been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company.
7.5. Effect of Termination and Abandonment.
(a) If this Agreement is terminated by the Company or Parent pursuant to
Section 7.2(b) or 7.4(a)(i), and, prior to such termination, (x) a proposal with
respect to a Transaction shall have been made, and (y) within six (6) months
after such termination, the Company enters into any agreement with respect to a
Transaction, or any third party shall acquire beneficial ownership of 50.1% or
more of the Company's outstanding shares of voting stock, then within two
business days after the execution of such an agreement or the consummation of
such acquisition (whichever shall first occur), the Company shall pay Parent, by
wire transfer of immediately available funds, a fee (the "Termination Fee") of
$200 million. If this Agreement is terminated by the Company pursuant to clause
(a) of Section 7.3 or by Parent pursuant to clause (a)(ii) of Section 7.4, then
the Company shall pay Parent the Termination Fee, which fee shall be
28
payable by wire transfer of same day funds either at the time contemplated in
the last sentence of Section 7.3 if applicable or, otherwise, within two
business days after such termination. The Company acknowledges that the
agreements contained in this Section 7.5(a) are an integral part of the
transactions contemplated in this Agreement, and that, without these agreements,
Parent and Merger Sub would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 7.5(a),
and, in order to obtain such payment, Parent or Merger Sub commences a suit
which results in a judgment against the Company for the fee set forth in this
Section 7.5(a), the Company shall pay to Parent its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
on the amount of the fee at the rate of 12% per annum from the date such fee was
required to be paid.
(b) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties set forth in this Section
7.5 and Section 5.12 and except for the provisions of Sections 8.3, 8.4, 8.6,
8.8, 8.9, 8.12, 8.13 and 8.14 and except for the Confidentiality Agreement
previously executed between the Company and Parent (the "Confidentiality
Agreement"). Moreover, in the event of termination of this Agreement pursuant
to Section 7.2, 7.3 or 7.4, nothing herein shall prejudice the ability of the
nonbreaching party from seeking damages from any other party for any wilful
breach of this Agreement, including without limitation, attorneys' fees and the
right to pursue any remedy at law or in equity.
7.6. Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1. Nonsurvival of Representations, Warranties and Covenants. All
representations, warranties and agreementscovenants in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
provided, however, that the agreementscovenants contained in Article 2, the last
sentence of Section 5.135.11, Section 5.12, Section 5.13, Section 5.14, Section
5.19 and this Article 8 shall survive the Merger, but not beyond the extent, if
any, specified therein. Nothing in this Section 8.1 shall affect Section 7.5(b)
of this Agreement.
8.2. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Merger Sub:
29
Lockheed ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Senior Vice President and General Counsel
with copies to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to the Company:
Northrop Grumman Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Corporate Vice President and General Counsel
with copies to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3. Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.13, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.4. Entire Agreement. This Agreement, the Exhibits, the Company
Disclosure Schedule, the Parent Disclosure Schedule, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this
30
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company and Parent, but after any such stockholder approval,
no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of the Company and Parent hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
8.7. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8. Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11. Incorporation of Exhibits. The Company Disclosure Schedule, the
Parent Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
31
8.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Delaware Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
8.14. Subsidiaries. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner. When a reference is made in this Agreement to Significant
Subsidiaries, the words "Significant Subsidiaries" shall refer to Subsidiaries
(as defined above) which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act.
32
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
LOCKHEED ▇▇▇▇▇▇ CORPORATION
By:
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President
and Chief Financial Officer
HURRICANE SUB, INC.
By:
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
NORTHROP GRUMMAN CORPORATION
By:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Corporate Vice President and Chief
Financial Officer
33
EXHIBIT A
TO MERGER
AGREEMENT
FORM OF AFFILIATE LETTER
Lockheed ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Northrop Grumman Corporation, a Delaware corporation (the
"Company"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of July 2, 1997 (the "Agreement"), between Lockheed ▇▇▇▇▇▇ Corporation, a
Delaware corporation ("Parent"), Hurricane Sub, Inc., a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and the Company, Merger Sub
will be merged with and into the Company (the "Merger").
As a result of the Merger, I will receive shares of Common Stock, par value
$1.00 per share, of Parent (the "Parent Securities") in exchange for shares
owned by me of Common Stock, par value $1.00 per share, of the Company.
I represent, warrant and covenant to Parent that in the event I receive any
Parent Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the Parent
Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the Parent Securities to the extent I
felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of the
Company, I may be deemed to have been an affiliate of the Company and the
distribution by me of the Parent Securities has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the Parent Securities
issued to me in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale,
A-1
transfer or other disposition is made in conformity with Rule 145 promulgated by
the Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Parent, or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Securities by me or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Securities and that there
will be placed on the certificates for the Parent Securities issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED ___ BETWEEN THE REGISTERED
HOLDER HEREOF AND LOCKHEED ▇▇▇▇▇▇ CORPORATION, A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICES OF LOCKHEED ▇▇▇▇▇▇ CORPORATION."
F. I also understand that unless the transfer by me of my Parent
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired the Parent Securities received in the Merger and the
provisions of
A-2
Rule 145(d)(2) are then available to the undersigned, (ii) two years shall have
elapsed from the date the undersigned acquired the Parent Securities received in
the Merger and the provisions of Rule 145(d)(3) are then available to the
undersigned, or (iii) Parent has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer apply
to the undersigned.
I further represent to and covenant with Parent that I will not sell,
transfer or otherwise dispose of any Parent Securities received by me in the
Merger or any other shares of the capital stock of Parent until after such time
as results covering at least 30 days of combined operations of the Company and
Parent have been published by Parent, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes such combined results of operations. Parent shall
notify the "affiliates" of the publication of such results. Notwithstanding the
foregoing, I understand that I will not be prohibited from selling up to 10% of
the Parent Securities received by me in the Merger during the aforementioned
period.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------
Name:
Accepted this day of
, 1997 by
LOCKHEED ▇▇▇▇▇▇ CORPORATION
By:
------------------------
Name:
Title:
A-3