Exhibit 10(ff)
STOCK PURCHASE AGREEMENT
Dated as of December 13, 1995
By and Among
THE BLACK & ▇▇▇▇▇▇ CORPORATION
("Seller's Parent")
PRC INVESTMENTS INC.
("Seller")
PRC INC.
("PRC")
and
▇▇▇▇▇▇ INDUSTRIES, INC.
("Buyer")
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (together with the Schedules and Exhibits
hereto, this "Agreement") is made as of this 13th day of December, 1995, by and
among PRC Investments Inc., a Delaware corporation with its principal office at
▇▇▇▇▇▇▇▇ Plaza Office Park, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Seller"), The Black & ▇▇▇▇▇▇ Corporation, a Maryland corporation with its
principal office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Seller's
Parent"), PRC Inc., a Delaware corporation with its principal office at ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("PRC"), and ▇▇▇▇▇▇ Industries, Inc., a Delaware
corporation with its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock of PRC;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, in accordance with the terms and conditions of this Agreement, all
of the issued and outstanding shares of capital stock of PRC; and
WHEREAS, Seller's Parent and PRC desire to join in this Agreement for
the purpose of making certain representations, warranties, covenants and
agreements;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Action. "Action" means any action, complaint, petition,
investigation, suit or other proceeding, whether civil or criminal, in law or in
equity, or before any arbitrator or Governmental Entity.
Section 1.2. Affiliate. "Affiliate" shall mean any Person that directly
or indirectly controls, is controlled by, or is under common control with the
Person in question. For purposes of determining whether a Person is an
Affiliate, the term "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of securities, contract or otherwise.
Section 1.3. Affiliated Groups. "Affiliated Groups" shall have the
meaning set forth in Section 3.16.
Section 1.4. Allocation. "Allocation" shall have the meaning set forth
in Section 11.2.
Section 1.5. Benefit Arrangements. "Benefit Arrangements" shall mean
all life and health insurance, hospitalization, savings, bonus, deferred
compensation, incentive compensation, severance pay, disability, and fringe
benefit plans, individual employment and severance contracts and other policies
and practices providing employee or executive compensation or benefits to
Employees or their dependents, maintained or contributed to by any of the PRC
Companies, other than Employee Benefit Plans.
Section 1.6. Bid. "Bid" shall mean any quotation, bid or proposal
made by Seller, Seller's Parent or any PRC Company that, if accepted or awarded,
would lead to a contract with the U.S. Government for the design, manufacture
and sale of products or the provision of services by any PRC Company.
Section 1.7. Bridge Period. "Bridge Period" shall have the meaning set
forth in Section 11.1.
Section 1.8. Buyer. "Buyer" shall have the meaning set forth above.
Section 1.9. Buyer Group. "Buyer Group" shall have the meaning set
forth in Section 11.1.
Section 1.10. Buyer Period. "Buyer Period" shall have the
meaning set forth in Section 11.1.
Section 1.11. Carpal Tunnel Litigation. "Carpal Tunnel Litigation"
means any pending or threatened action against any of the PRC Companies arising
out of or relating to (i) carpal tunnel syndrome, or (ii) cumulative trauma
disorder, tendinitis, nerve entrapment, repetitive motion or stress injury or
any similar illness or ailment causing injury or damage to an individual's hand,
wrist or arm.
Section 1.12. Closing. "Closing" shall mean the consummation
of the events described in ARTICLE IX.
Section 1.13. Closing Date. "Closing Date" shall mean the
date on which the Closing shall occur.
Section 1.14. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.15 Competing Business. "Competing Business" shall have the
meaning set forth in Section 5.10.
Section 1.16. Confidentiality Agreement. "Confidentiality Agreement" shall
mean the agreement dated October 24, 1995, between PRC and Buyer relating to,
among other things, the confidential nature of certain information in respect of
PRC shared by PRC with Buyer.
Section 1.17. Consolidated Returns. "Consolidated Returns" shall have the
meaning set forth in Section 3.16.
Section 1.18. Consolidated Taxes. "Consolidated Taxes" shall have the
meaning set forth in Section 3.16.
Section 1.19. Contest. "Contest" shall mean any administrative or judicial
Tax or foreign Tax audit, examination, proceeding or litigation involving any
Tax Authority.
Section 1.20. Contract Loss. "Contract Loss" shall exist with respect to a
contract or Bid (i) if in the case of a Government Contract, after consideration
of existing reserves, the sales price therefor is more than $100,000 less than
the sum of the cost incurred to date and the estimated cost to complete, with
all costs determined in accordance with GAAP on a basis consistent with prior
periods, or (ii) if in the case of a contract involving the business of PRC
Public Sector, Inc., the expected gross margin for the contract for the year
ending December 31, 1995 is less than 20%.
Section 1.21. DOL. "DOL" shall mean the United States Department of Labor.
Section 1.22. ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.23. ERISA Affiliate."ERISA Affiliate," as applied to any Person,
shall mean (i) any corporation which is a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code of which that
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Code of which that Person is a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is a
member. Any former ERISA Affiliate of a Person shall continue to be considered
an ERISA Affiliate within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of such Person and with respect to
liabilities arising after such period for which such Person could be liable
under the Code or ERISA.
Section 1.24. Emhart. "Emhart" shall mean Emhart Corporation, a Virginia
corporation with its principal office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇.
Section 1.25. Employee Benefit Plan. "Employee Benefit Plan" shall mean
each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained or
contributed to by any of the PRC Companies, which provides or may provide
benefits to Employees or their dependents but excluding Multiemployer Plans.
Section 1.26. Employees. "Employees" shall mean all current employees,
former employees and retired employees of the PRC Companies.
Section 1.27. Environmental Laws. "Environmental Laws" shall mean all Laws
relating to the protection of human health, safety or the environment including:
(i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public.
Section 1.28. Final Net Asset Amount. "Final Net Asset Amount" shall have
the meaning set forth in Section 2.3.
Section 1.29. Financial Statements. "Financial Statements" shall mean
the unaudited Special Purpose Statements of Net Assets of PRC, exclusive of PRC
Environmental Management, Inc. and PRC Realty Systems, Inc., formerly wholly
owned subsidiaries of PRC, as of September 30, 1995 and December 31, 1994, and
the Special Purpose Statements of Operating Income for the years ended December
31, 1994, 1993 and 1992, and for the nine months ended
September 30, 1995 and 1994, together with all notes thereto, copies of which is
attached hereto as Exhibit A.
Section 1.30. GAAP. "GAAP" shall mean generally accepted accounting
principles.
Section 1.31. Government Contract. "Government Contract" means any
prime contract, subcontract, teaming agreement or arrangement, joint venture,
basic ordering agreement, letter contract, purchase order, delivery order, Bid,
change order or other legally binding commitment of any kind relating to any
business between any PRC Company and (i) the U.S. Government, (ii) any prime
contractor of the U.S. Government to the extent it relates to such prime
contract, or (iii) any subcontractor with respect to any contract described in
clauses (i) or (ii).
Section 1.32. Government Contract Novation. "Government Contract
Novation" shall mean, with respect to a Prime Government Contract, an instrument
reasonably satisfactory in form and substance to Buyer and Seller pursuant to
which all of PRC's rights, claims, benefits and liabilities thereunder shall
have been validly conveyed, transferred, assigned, assumed and novated to Buyer
by all parties thereto.
Section 1.33. Governmental Entity. "Governmental Entity" means any
government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
Section 1.34. Guarantees. "Guarantees" shall mean any obligations,
contingent or otherwise, of a Person in respect of any indebtedness, obligation
or liability (including assumed
indebtedness, obligations or liabilities) of another Person, including but not
limited to direct or indirect guarantees, endorsements (except for collection or
deposit in the ordinary course of business), notes co-made or discounted,
recourse agreements, take-or-pay agreements, keep-well agreements, agreements to
purchase or repurchase such indebtedness, obligation or liability or any
security therefor or to provide funds for the payment or discharge thereof,
agreements to maintain solvency, assets, level of income, or other financial
condition, agreements to make payment other than for value received and any
other financial accommodations.
Section 1.35. Hazardous Substances. "Hazardous Substances" shall mean
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
Section 1.36. H-S-R Act. "H-S-R Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
Section 1.37. IRS. "IRS" shall mean the Internal Revenue Service.
Section 1.38. Incentive Compensation Plans. "Incentive Compensation Plans"
shall mean any cash bonus or other incentive
compensation plan or arrangement maintained or contributed to by any of the PRC
Companies or Seller's Parent, and any successor plan or arrangement covering
Employees for 1995 or thereafter.
Section 1.39. Income Taxes. "Income Taxes" shall mean any income, gross
receipts, gains, net worth, surplus, franchise or with respect to any interest,
dividends or royalties, withholding taxes (including interest, penalties or
other additions to Tax) imposed by a Tax Authority, payable by any PRC Company
for federal, state, local or foreign income Tax purposes (as the context
requires) with respect to any Pre-Closing Period or any Post-Closing Period.
Section 1.40. Indemnified Party. "Indemnified Party" shall have the meaning
set forth in Section 11.5.
Section 1.41. Indemnifying Party. "Indemnifying Party" shall have the
meaning set forth in Section 11.5
Section 1.42. Individual Returns. "Individual Returns" shall have the
meaning set forth in Section 3.16.
Section 1.43. Individual Taxes. "Individual Taxes" shall have the meaning
set forth in Section 3.16.
Section 1.44. Intellectual Property. "Intellectual Property" shall mean
all brand names, corporate names, copyrights, patents, service marks,
trademarks, trade names, know-how, trade secrets, and all registrations or
applications for registration of any of the foregoing, that are (a) owned by or
licensed to a PRC Company (other than generally available software licensed from
third parties) and (b) used in the operation of the business of a PRC Company.
Section 1.45. Law. "Law" or "Laws" means any valid constitutional
provision, statute, ordinance or other law (including common law), rule,
regulation or interpretation of any Governmental Entity and any Order, as any of
these may be in effect from time to time.
Section 1.46. Loss. "Loss" means any action, claim, cost, damage,
disbursement, expense, liability, loss, deficiency, obligation, sanction or
penalty of any kind or nature, whether foreseeable or unforeseeable, including
but not limited to interest, judgments, reasonable legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified Person.
Section 1.47. Material Adverse Effect. "Material Adverse Effect" when used
with reference to a Person or Persons shall mean a material adverse effect on
the business, operations or financial condition of the Person or Persons.
Section 1.48. Material Contract. "Material Contract" shall mean (i) any
contract, agreement, commitment or other arrangement (oral or written) to which
a PRC Company is party and which reasonably could be expected to result in
revenues to the PRC Companies over the expected term of such contract,
agreement, commitment or arrangement in excess of $2,000,000 and (ii) those
contracts defined to be material in Section 3.13.
Section 1.49. Multiemployer Plan. "Multiemployer Plan" shall mean a plan
described in Sections 3(37) and 4001(a)(3) of ERISA to
which any of the PRC Companies has an obligation to contribute or had an
obligation to contribute within the past five years.
Section 1.50. Net Assets. "Net Assets" shall mean total assets minus total
liabilities, calculated in accordance with Section 2.3.
Section 1.51. OCI Clause. "OCI Clause" means any clause or provision of
any agreement providing for compliance with the Organizational Conflict of
Interest ("OCI") rules of Subpart 9.5 of the Federal Acquisition Regulations, as
they may be amended or modified from time to time, whether or not the agreement
makes explicit reference to Subpart 9.5 of the Federal Acquisition Regulations.
Section 1.52. Order. "Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
Section 1.53. PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
Section 1.54. PRC. "PRC" shall have the meaning set forth above.
Section 1.55. PRC Companies. "PRC Companies" shall mean PRC and the PRC
Subsidiaries.
Section 1.56. PRC Shares. "PRC Shares" shall mean all of the issued and
outstanding shares of common stock, par value $.01 per share, of PRC.
Section 1.57. PRC Subsidiaries. "PRC Subsidiaries" shall mean the
Subsidiaries of PRC listed in Schedule 3.4 and PRC Aviation LLC, a Virginia
limited liability company.
Section 1.58. Pension Plan. "Pension Plan shall mean any Employee Benefit
Plan that is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA.
Section 1.59. Person. "Person" shall mean any individual, corporation,
unincorporated association, business trust, estate, partnership, limited
liability company, limited liability partnership, trust, state, the United
States or any other entity.
Section 1.60. Post-Closing Claims. "Post-Closing Claims" means any
Action or Order, or any third party claim which would reasonably be expected to
lead to an Action by such third party if not otherwise resolved or settled with
such party, relating to the PRC Companies to the extent arising from facts or
circumstances that occurred after the Closing.
Section 1.61. Pre-Closing Claims. "Pre-Closing Claims" means any
pending or threatened Action or Order, or any third party claim which would
reasonably be expected to lead to an Action by such third party if not otherwise
resolved or settled with such party, relating to the PRC Companies to the extent
arising from facts or circumstances that occurred on or prior to the Closing,
whether pending or threatened at the Closing or thereafter.
Section 1.62. Post-Closing Period. "Post-Closing Period" shall have the
meaning set forth in Section 11.1.
Section 1.63. Pre-Closing Period. "Pre-Closing Period" shall have the
meaning set forth in Section 11.1.
Section 1.64. Prime Government Contract. "Prime Government Contract" shall
mean any Government Contract the parties to which include (i) any PRC Company
and (ii) the U.S. Government.
Section 1.65. Proposed Final Net Asset Amount. "Proposed Final Net Asset
Amount" shall have the meaning set forth in Section 2.3.
Section 1.66. Purchase Price. "Purchase Price" shall have the meaning set
forth in Section 2.2.
Section 1.67. Section 338(h)(10) Election. "Section 338(h)(10) Election"
shall have the meaning set forth in Section 11.2.
Section 1.68. Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
Section 1.69. Seller. "Seller" shall have the meaning set forth above.
Section 1.70. Seller Group. "Seller Group" shall have the meaning set forth
in Section 11.3.
Section 1.71. Seller Period. "Seller Period" shall have the meaning set
forth in Section 11.1.
Section 1.72. Seller's Parent. "Seller's Parent" shall have the meaning set
forth above.
Section 1.73. Special Severance Plans. "Special Severance Plans" shall mean
the PRC Inc. Special Severance Plan and the PRC Inc. Senior Management Severance
Plan, copies of which are attached hereto as Exhibit B.
Section 1.74. Subsidiary. "Subsidiary," as it relates to any Person,
shall mean any other corporation, unincorporated association, business trust,
partnership, limited liability company or limited liability partnership (other
than any such entity formed as part of a teaming arrangement or other venture
for the purpose of pursuing or performing a contract in the ordinary course of
business) more than 50% of whose outstanding securities such Person has the
right, other than as affected by events of default, directly or indirectly, to
vote generally.
Section 1.75. Tax Authority. "Tax Authority" shall mean a foreign or United
States federal, state, or local Governmental Entity having jurisdiction over the
assessment, determination, collection or imposition of any Tax, as the context
requires.
Section 1.76. Tax Returns. "Tax Returns" shall mean all returns (including
information returns), declarations, reports, estimates and statements regarding
Taxes, required to be filed with any Tax Authority.
Section 1.77. Taxes. "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Tax Authority.
Section 1.78. U.S. Government. "U.S. Government" shall mean the United
States Government, including any agencies, commissions, branches,
instrumentalities and departments thereof.
ARTICLE II
PURCHASE AND SALE OF PRC SHARES
Section 2.1. Sale of PRC Shares. On the terms and subject to the conditions
set forth in this Agreement, Seller hereby agrees
to sell, transfer, assign and deliver to Buyer, and Buyer hereby agrees to
purchase from Seller, the PRC Shares on the Closing Date.
Section 2.2. Purchase Price and Payment for PRC Shares. The consideration
to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and
delivery to Buyer of the PRC Shares shall be $425,000,000 (the "Purchase
Price"), which shall be paid by Buyer to Seller at the time of Closing by wire
transfer of immediately available funds into an account designated in writing by
Seller to Buyer at least two days prior to the Closing Date. The Purchase Price
shall be subject to adjustment as provided in Section 2.3.
Section 2.3. Adjustment of Purchase Price.
(a) As promptly as practicable following the Closing
Date, but in no event later than 90 days after the Closing Date, Seller shall
prepare and submit to Buyer an audited schedule setting forth, in reasonable
detail, Seller's calculation of the Net Assets of PRC immediately prior to the
Closing (the "Proposed Final Net Asset Amount") certified by Ernst & Young LLP.
Buyer shall cause personnel of the PRC Companies to be reasonably available to
assist Ernst & Young LLP in its preparation of the Proposed Final Net Asset
Amount. In the event Buyer disputes the correctness of the Proposed Final Net
Asset Amount, Buyer shall notify Seller of its objections within six months of
the Closing Date and shall set forth, in reasonable detail, the reasons for
Buyer's objections. If Buyer fails to deliver such notice within such time,
Buyer shall be deemed to have accepted Seller's calculation. Buyer and Seller
shall endeavor in good faith to resolve any disputed items within 20 days after
Seller's receipt of
Buyer's notice of objections. If they are unable to do so, Seller's Parent and
Buyer shall select a nationally known independent accounting firm to resolve the
dispute, and the determination of such firm in respect of the correctness of
each item remaining in dispute shall be conclusive and binding on Buyer and
Seller. The amount of Net Assets immediately prior to the Closing, as finally
determined pursuant to this Section 2.3(a) (whether by failure of Buyer to
deliver notice of objection, by agreement of the parties or by determination of
the accountants selected as set forth above), is referred to herein as the
"Final Net Asset Amount."
(b) The Proposed Final Net Asset Amount and the Final Net
Asset Amount shall be determined in accordance with GAAP (except as otherwise
set forth in the Financial Statements), in a manner consistent with the Special
Purpose Statement of Net Assets as of September 30, 1995, and as provided in the
Financial Statements. The accounting firm selected to resolve any disputes will
be instructed to determine the Final Net Asset Amount in the same manner.
(c) If the Final Net Asset Amount is greater than
$205,333,000, the difference shall be paid to Seller by Buyer with interest
thereon from the Closing Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by Citibank, N.A. as
its prime rate in effect. If the Final Net Asset Amount is less than
$205,333,000, the difference shall be paid to Buyer by Seller with interest
thereon from the Closing Date to the date of payment at a rate per annum equal
to the per annum interest rate announced from time to time by
Citibank, N.A. as its prime rate in effect. Such payment shall be made in
immediately available funds not later than two business days after the
determination of the Final Net Asset Amount by wire transfer to a bank account
designated by the party entitled to receive the payment.
(d) The fees and expenses, if any, of the accounting firm
selected to resolve any disputes between Buyer and Seller in accordance with
Section 2.3(a) shall be paid one-half by Seller and one-half by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally represent and warrant to
and for the benefit of Buyer as follows:
Section 3.1.Organization and Good Standing. Each of Seller and Seller's
Parent, and each of the PRC Companies, is a corporation or other entity duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has full corporate power and authority to
carry on its business as it is now being conducted. Schedule 3.1 sets forth the
jurisdiction in which each PRC Company was organized and each jurisdiction in
which each PRC Company is qualified or licensed to do business as a foreign
Person. Each of the PRC Companies is qualified as a foreign corporation or other
entity and is in good standing under the laws of each jurisdiction in which the
conduct of its business or the ownership of its properties requires such
qualification, except as set forth in Schedule 3.1 and except where the failure
to be so qualified would not have a Material Adverse Effect on the PRC Companies
taken as a whole. Schedule 3.1
correctly lists the current directors and executive officers of each PRC Company
as of the date hereof. True, correct and complete copies of the respective
charter documents of each of the PRC Companies as in effect on the date hereof
have been delivered or otherwise made available to Buyer.
Section 3.2. Capitalization. The authorized capital stock of PRC
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are outstanding. Each of the PRC Shares has been validly issued, is fully paid
and nonassessable and was issued in conformity with applicable Laws. No shares
of capital stock of PRC are held in treasury, and there are no other issued or
outstanding equity securities of PRC and no other issued or outstanding
securities of PRC convertible or exercisable at any time into equity securities
of PRC. PRC is subject to no commitment or obligation that would require the
issuance or sale of additional shares of capital stock of PRC at any time under
options, subscriptions, warrants, rights or any other obligations.
Section 3.3. Ownership of PRC Shares. Seller is the record and
beneficial owner of the PRC Shares, which are free of any lien, security
interest, charge, encumbrance or claim whatsoever. At the Closing, Buyer will
acquire good and marketable title to and complete ownership of the PRC Shares,
free of any lien, security interest, charge, encumbrance or claim whatsoever.
Section 3.4. PRC Subsidiaries. Schedule 3.4 sets forth the authorized
capital stock and the record ownership of the outstanding shares of capital
stock of each of the PRC Subsidiaries, and a brief summary of each PRC
Subsidiary's business. PRC's ownership of shares of the capital stock of the
PRC Subsidiaries as shown on Schedule 3.4 is free of any lien, security
interest, charge, encumbrance or claim whatsoever. PRC does not have any
Subsidiaries other than the PRC Subsidiaries. All of the outstanding shares of
capital stock of each of the PRC Subsidiaries have been validly issued and are
fully paid and nonassessable and were issued in conformity with applicable Laws.
Other than as set forth in Schedule 3.4, there are no other issued or
outstanding equity securities of any of the PRC Subsidiaries and there are no
other issued or outstanding securities of any of the PRC Subsidiaries
convertible or exercisable at any time into equity securities of any of the PRC
Subsidiaries. None of the PRC Subsidiaries is subject to any commitment or
obligation that would require the issuance or sale of additional shares of its
capital stock at any time under options, subscriptions, warrants, rights or any
other obligations. Except as described in Schedule 3.4, PRC does not own any
equity securities of any Person that is not a Subsidiary.
Section 3.5.Execution and Effect of Agreement. Each of Seller and Seller's
Parent has all necessary corporate power and authority to execute, deliver and
perform this Agreement and any related agreements to which it is a party. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Seller and Seller's Parent and by all other necessary corporate
action of Seller and Seller's Parent. This Agreement has been duly executed and
delivered by Seller and Seller's Parent and constitutes a legal, valid and
binding obligation of Seller and Seller's Parent, enforceable against Seller and
Seller's Parent in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other Laws affecting the
rights of creditors generally.
Section 3.6. Restrictions. Except as set forth in Schedule 3.6, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Seller, Seller's Parent or any PRC Company, (b) violate
any Law, (c) result in the imposition of any lien, security interest, charge,
encumbrance or claim whatsoever against any asset or property of any PRC
Company, or (d) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller, Seller's Parent or any PRC Company is a party or
to which it or its property is subject, or constitute a default thereunder
(whether or not any such conflict, breach, right of termination, acceleration or
default will occur only upon lapse of time and/or the occurrence of any act or
event or otherwise), except where such conflict, breach, right of termination,
acceleration or default (i) arises out of any OCI Clauses as a result of the
consummation of the transactions contemplated by this Agreement and the business
of the Buyer and its Affiliates on the one hand and the PRC Companies on the
other hand or (ii) except with respect to clause (a) above, would not have a
Material Adverse Effect on Seller's Parent and its Subsidiaries taken as a whole
or the PRC Companies taken as a whole, as the case may be.
Section 3.7. Consents. Except (a) for filings, consents, approvals and
authorizations that the failure to obtain or make would not have a Material
Adverse Effect on the PRC Companies taken as a whole, (b) as set forth in
Schedule 3.6 or Schedule 3.7 or referred to in Section 3.6, or (c) for filings,
consents, waivers, approvals or authorizations pursuant to the H-S-R Act, no
filing, consent, waiver, approval or authorization of any Governmental Entity or
of any third party on the part of Seller, Seller's Parent or any of the PRC
Companies is required in connection with the execution and delivery by Seller,
Seller's Parent and PRC of this Agreement or any instrument contemplated hereby
or the consummation of any of the transactions contemplated hereby.
Section 3.8. Financial Statements. Except as set forth in the Notes to
the Financial Statements, the Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis and present fairly the
financial position of the PRC Companies at the dates and for the periods set
forth therein. The Financial Statements have been certified by the chief
financial officer of PRC. Seller has made available to Buyer copies of each
management letter or other letter delivered to Seller, Seller's Parent or any
PRC Company by such accountants in connection with the Financial Statements or
relating to any review by such accountants of the internal controls of any PRC
Company for the periods covered by the Financial Statements, and has made
available for inspection, or will make available for inspection upon request,
all reports and working papers produced or developed by Ernst & Young LLP or
management in connection with their review of such Financial Statements, as well
as all such reports and working
papers for prior periods for which any tax liability of any PRC Company has not
been finally determined or barred by applicable statutes of limitation. Since
January 1, 1992, there has been no change in any of the significant accounting
policies, practices or procedures of any PRC Company that would be required by
GAAP to be disclosed in the Financial Statements.
Section 3.9. No Undisclosed Liabilities. Except as (a) set forth or
reserved against in the Financial Statements, (b) set forth in Schedule 3.9, (c)
incurred since September 30, 1995 in compliance with Section 5.2 hereof (as if
such Section was in effect since September 30, 1995), or (d) arising under this
Agreement, the PRC Companies do not have as of the date hereof, and will not
have as of the Closing Date, any liabilities whatsoever of a type required to be
accrued for in accordance with GAAP.
Section 3.10. Litigation. Except as set forth in Schedule 3.10, there
is no Order or Action pending, or to the knowledge of Seller, Seller's Parent or
any of the PRC Companies threatened, against Seller, Seller's Parent or any of
the PRC Companies in respect of this Agreement or any of the transactions
contemplated hereby that could reasonably be expected to prevent the
consummation of any of the transactions contemplated hereby. Except as set forth
in Schedule 3.10, there is no Order or Action pending, or to the knowledge of
Seller, Seller's Parent or any of the PRC Companies threatened, against or
involving any of the businesses, properties, rights or assets of any of the PRC
Companies which (i) reasonably could be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole or (ii) as of the date of this
Agreement, involves a claim or potential claim
that reasonably could be expected to have aggregate liability to the PRC
Companies in excess of $100,000, or that enjoins or compels or seeks to enjoin
or to compel any activity by any PRC Company. Except as set forth in Schedule
3.10, there is no matter as to which any PRC Company has received any notice,
claim or assertion, or, to the knowledge of Seller, Seller's Parent and the PRC
Companies, which otherwise has been threatened against or affecting any
director, officer, employee, agent or representative of any PRC Company or any
other Person, nor to the knowledge of Seller, Seller's Parent and the PRC
Companies is there any reasonable basis therefor, in connection with which any
such Person has or may reasonably be expected to have any right to be
indemnified by any PRC Company, except as could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
Section 3.11. Real and Personal Property.
(a) None of the PRC Companies owns any real property.
Schedule 3.11 sets forth a complete list of all real property leased by the PRC
Companies as of the date of this Agreement. All leasehold properties listed on
Schedule 3.11 are held by PRC Companies under valid, binding and enforceable
leases. None of the PRC Companies is in default, or has received written notice
of default, under any lease of real property, which default reasonably could be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole. There is no Action pending or, to the knowledge of Seller, Seller's
Parent and the PRC Companies, threatened that could reasonably be expected to
materially interfere with the quiet enjoyment of any of the leasehold properties
listed on Schedule 3.11.
(b) Except as could not reasonably be expected to have a
Material Adverse Effect on the PRC Companies taken as a whole, the PRC Companies
have good and marketable title to all owned assets and properties used in their
business, including but not limited to all assets that they respectively purport
to own as of September 30, 1995, as reflected in the Financial Statements. All
owned assets and property as are material to the business of the PRC Companies,
including but not limited to all assets that they respectively purport to own as
of September 30, 1995 as reflected in the Financial Statements, are held free of
any liens, security interests, charges, encumbrances or claims, except for liens
for Taxes not yet due and except for liens, security interests, charges,
encumbrances or claims that could not reasonably be expected to have a Material
Adverse Effect on the PRC Companies taken as a whole. All material tangible
properties of the PRC Companies are in a good state of maintenance and repair
(except for ordinary wear and tear).
(c) The assets of the PRC Companies are sufficient for
the conduct of their business and operations.
Section 3.12. Intellectual Property. Schedule 3.12 sets forth, as of
the date of this Agreement, a complete list of all Intellectual Property (except
for brand names, know-how, unregistered copyrights, unregistered service marks,
unregistered trademarks, unregistered tradenames and trade secrets and except
for licensed Intellectual Property). Except as otherwise indicated in Schedule
3.12 and except as could not reasonably be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole, (x) the PRC Companies own or
license the Intellectual
Property free and clear of any royalty, lien, encumbrance or charge, subject in
the case of licensed Intellectual Property to the terms of the respective
license agreements, and (y) all such Intellectual Property is valid and
enforceable. Except as set forth in Schedule 3.12 and except as could not
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole, none of the PRC Companies has received any notice or claim
that any Intellectual Property is not valid or enforceable, or of any
infringement upon or conflict with any patent, trademark, service ▇▇▇▇,
copyright, trade name, trade secret or other proprietary right of any third
party by the PRC Companies or of any claim by any third party alleging any such
infringement or conflict. Except as set forth in Schedule 3.12 and except as
could not reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole, no PRC Company has any knowledge of any infringement
by any third party upon any of the Intellectual Property listed in Schedule
3.12. Except as set forth in Schedule 3.12 and except as could not reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole, as of the Closing Date the PRC Companies will not be infringing any third
party's patent, copyright, trademark, service ▇▇▇▇, trade name, know-how, trade
secret or other intellectual property rights.
Section 3.13. Material Contracts. Schedule 3.13 sets forth, as of the
date of this Agreement, a list of or brief description of all Material Contracts
(other than Material Contracts that the PRC Companies are limited by applicable
Laws or Orders or by contract from disclosing to Buyer and other than leases of
real property).
Each contract, agreement, commitment or other arrangement (oral or written) to
which any of the PRC Companies is a party or by which any of the PRC Companies
is obligated, embodying or evidencing any of the following transactions shall be
deemed to be a Material Contract and is identified on Schedule 3.13: (a)
guarantees by any of the PRC Companies of any obligations other than guarantees
of obligations of other PRC Companies; (b) indentures, notes, mortgages,
installment obligations, capital leases or other instruments relating to the
borrowing of money in excess of $250,000; (c) agreements or contracts that
involved the receipt of monies by any of the PRC Companies and constituted the
(i) 20 largest contracts or agreements by revenue of the PRC Companies as a
whole for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (ii) 10 largest contracts or agreements by revenue of the
Information Technologies Group of the PRC Companies for the year ended December
31, 1994, and for the nine months ended September 30, 1995, (iii) 10 largest
contracts or agreements by revenue of the Information Systems Group of the PRC
Companies for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (iv) 10 largest contracts or agreements by revenue of the
Systems Integration Group of the PRC Companies for the year ended December 31,
1994, and for the nine months ended September 30, 1995 and (v) 10 largest
contracts or agreements by revenue of the Applied Engineering Group of the PRC
Companies for the year ending December 31, 1994 and for the nine months ended
September 30, 1995; (d) contracts or agreements (including subcontracts) that
involved the payment of at least $250,000 by any of the PRC Companies during the
nine months ended
September 30, 1995; (e) contracts or agreements limiting or restricting the
ability of any PRC Company to compete or otherwise to conduct any business in
any manner or place other than those relating to OCI Clauses and provisions of
teaming and other similar agreements relating to the pursuit or performance of a
contract; (f) grants of power of attorney, agency or similar authority to
another Person (other than to a PRC Company or any director, officer or employee
of a PRC Company); (g) contracts or agreements containing a right of first
refusal; (h) any contract or agreement to which any Affiliate, officer or
director of Seller, Seller's Parent, or any PRC Company is party (other than
those constituting an Employee Benefit Plan or Benefit Arrangement); (i) any
sales, marketing or international consulting or similar contract or agreement
and any lobbying agreement; (j) any material distributor or sales representative
contract or agreement (other than those where the PRC Company is the distributor
or sales representative); and (k) any contract or agreement not made in the
ordinary course of business that was entered into by a PRC Company in 1995 or
that involves an executory obligation on the part of a PRC Company on the date
of this Agreement or hereafter. Except as set forth on Schedule 3.13, to the
knowledge of Seller, Seller's Parent and the PRC Companies, each Material
Contract is valid and subsisting, and none of the PRC Companies is in default
under any Material Contract, has waived any material rights under any Material
Contract (other than releases executed in the ordinary course of business in
connection with closing contracts or task orders) or has knowledge or notice
that any party with whom it has a Material Contract is in default in a material
respect under the Material
Contract. Unless otherwise so noted on Schedule 3.13, each Material Contract was
entered into in the ordinary course of business. True copies of the Material
Contracts, including all amendments and supplements, have been delivered or
otherwise will be made available to Buyer.
Section 3.14. Employee Benefit Matters.
(a) Schedule 3.14 sets forth, as of the date of this
Agreement, a list of all Employee Benefit Plans, all Multiemployer Plans and all
collective bargaining agreements of the PRC Companies, and all material Benefit
Arrangements. Except as set forth in Schedule 3.14, with respect to each of such
Employee Benefit Plans, Multiemployer Plans, collective bargaining agreements
and Benefit Arrangements, Seller has delivered or made available to Buyer, as
applicable, copies of (i) the text of the formal plan document or other
agreements, written policies or guidelines actually maintained by Seller's
Parent, Seller, PRC or any of their Affiliates evidencing the terms of such
Employee Benefit Plans and Benefit Arrangements, including amendments and, if
applicable, the summary plan description, (ii) in the case of a collective
bargaining agreement, the text of the collective bargaining agreement, (iii) in
the case of a Pension Plan that is intended to qualify under Section 401 of the
Code, the most recent IRS determination letter relating to the Pension Plan's
qualification under Section 401 of the Code and the related trust's
qualification under Section 501 of the Code, (iv) the trust agreements,
insurance contracts or other documents that constitute all or a part of the
funding vehicle, and (v) the most recent annual reports (IRS Form 5500s),
including the schedules thereto.
(b) Except as set forth in Schedule 3.14, all Employee Benefit
Plans comply in all material respects with ERISA, the Code and any other
applicable Law, each Benefit Arrangement has been maintained in material
compliance with its terms and all applicable Laws, and the PRC Companies have
performed in all material respects their obligations under each Employee Benefit
Plan and Benefit Arrangement.
(c) Except as set forth in Schedule 3.14, there are no Actions
or Orders pending, or to the knowledge of Seller, Seller's Parent or PRC,
threatened, including proceedings before the IRS, the DOL or the PBGC, against
any Employee Benefit Plan, Benefit Arrangement or any administrator or fiduciary
thereof, and, to the best knowledge of Seller and Seller's Parent, no facts
exist which could give rise to any such Actions or Orders, other than benefit
claims arising in the normal course of operation of such Employee Benefit Plans
or Benefit Arrangements.
(d) Except as set forth in Schedule 3.14, no PRC Company has
any current or projected liability for any unfunded post-retirement medical or
life insurance benefits in connection with any Employee of any of the PRC
Companies.
(e) Except as set forth in Schedule 3.14, none of the PRC
Companies and, to the knowledge of Seller, Seller's Parent and the PRC
Companies, no other Person has engaged in any non-exempt "Prohibited
Transaction," as defined in Section 406 of ERISA or Section 4975 of the Code,
with respect to any Employee Benefit Plan.
(f) Except as set forth in Schedule 3.14, none of the
PRC Companies has incurred an outstanding "Accumulated Funding
Deficiency," as defined in Section 302(a) of ERISA or Section 412(a) of the
Code, with respect to any Pension Plan, nor is any Pension Plan subject to Title
IV of ERISA.
(g) Except as set forth in Schedule 3.14, none of the PRC
Companies nor their ERISA Affiliates has incurred a "withdrawal" or "partial
withdrawal," as defined in Section 4203 and 4205 of ERISA, from any
Multiemployer Plan, which has resulted in an unpaid liability or could
reasonably be expected to result in a liability of any of the PRC Companies.
Section 3.15. Guarantees by Others. Schedule 3.15 sets forth a complete
list of all Guarantees of Seller's Parent (or any of its Affiliates (other than
a PRC Company)) for the benefit of Persons doing business with any of the PRC
Companies.
Section 3.16. Tax Matters.
(a) Each of the affiliated groups (as that term is defined in
Section 1504(a) of the Code) of corporations of which the PRC Companies were
members prior to and subsequent to April 28, 1989 (the "Affiliated Groups"), has
filed consolidated federal Income Tax Returns and state Income Tax Returns filed
on a consolidated or combined basis (the "Consolidated Returns") for all taxable
years (other than years beginning on or after January 1, 1995) during which the
PRC Companies were members of the Affiliated Groups. The Affiliated Groups have
paid or adequately provided for (or will adequately provide for) all federal
Income Taxes, state Income Taxes with respect to Tax Returns filed on a
consolidated or combined basis, additions to tax, penalties and interest
(collectively, the "Consolidated Taxes") applicable to the Affiliated Groups or
to any members thereof, and the affiliated
group of corporations of which the PRC Companies are members as of the date of
this Agreement has adequately provided (or will adequately provide for) for all
Consolidated Taxes that would be due if the current tax period ended at the
close of business on the Closing Date. Other than the PRC Companies' membership
in the Affiliated Groups, the PRC Companies have not been members of any
affiliated group for any period not barred by the statute of limitations.
(b) Except as set forth in Schedule 3.16, each of the PRC
Companies has filed all federal, state, local and other Tax Returns (other than
Consolidated Returns) (the "Individual Returns") required to be filed by it
under applicable Laws, including estimated tax returns and reports, and each of
the PRC Companies has paid all required federal, state and local income (other
than Consolidated Taxes) and other taxes, additions to taxes, penalties and
interest (the "Individual Taxes") due and payable on or before the date hereof
(and will duly and timely pay all such amounts required to be paid between he
date hereof and the Closing Date), except where such failure to file the
Individual Returns or pay the Individual taxes would not have a Material Adverse
Effect on the PRC Companies taken as a whole. Each of the PRC Companies has
paid, withheld or adequately provided for (or will adequately provide for) any
and all Individual Taxes in respect of the conduct of its business or the
ownership of its property and in respect of any transaction for which such taxes
are due or would be due if the current tax period ended at the close of business
on the Closing Date.
(c) The federal Income Tax Returns of Seller, Seller's Parent
and the PRC Companies have been audited by the IRS (or the time for the IRS to
make an assessment for additional federal Income Taxes has expired) for the
taxable years ended on or before September 30, 1990, but no taxable years ending
thereafter. Except as set forth in Schedule 3.16, all deficiencies asserted as a
result of such examinations have been paid or finally settled and no issue has
been raised by the IRS on audit or otherwise that, by application of the same or
similar principles, might result in a proposed deficiency affecting any of the
PRC Companies for any other period not so examined.
(d) Except as set forth in Schedule 3.16, no material proposed
Taxes, addition to tax, interest, or penalties have been asserted against the
Affiliated Groups or any member of the Affiliated Groups including any of the
PRC Companies, except those that have been paid in full and those that would not
have a Material Adverse Effect on the PRC Companies taken as a whole. Except as
set forth in Schedule 3.16, there are no material agreements, waivers, or other
arrangements providing for extensions of time in respect of the assessment or
collection of any material unpaid Tax against the Affiliated Groups or any
member of the Affiliated Groups affecting any of the PRC Companies, except those
that would not have a Material Adverse Effect on the PRC Companies taken as a
whole.
(e) No election or consent under Section 341(f) of the Code
has been made or shall be made on or prior to the Closing Date by or on behalf
of any of the PRC Companies. None of the PRC Companies has made any payments, is
obligated to make any payments,
or is a party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Section 280G of the
Code. None of the PRC Companies has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of the
PRC Companies has disclosed on its federal Income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
Income Tax within the meaning of Section 6662 of the Code. Except as set forth
on Schedule 3.16, none of the PRC Companies is a party to any Tax allocation or
sharing agreement. None of the PRC Companies has any liability for the Taxes of
any Person (other than any of the PRC Companies or the Affiliated Groups) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign
Law), as a transferee or successor, by contract, or otherwise.
Section 3.17. Environmental Matters.
(a) Except as set forth in Schedule 3.17 and except as
would not have a Material Adverse Effect on the PRC Companies taken as a whole,
each of the PRC Companies is in compliance with all applicable environmental
Laws. Except as set forth in Schedule 3.17, the PRC Companies have obtained all
permits, licenses and other authorizations that are required under applicable
Laws relating to the protection of the environment, except where the failure to
obtain such permits, licenses and other authorizations could not reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole. Except as set forth in Schedule 3.17, the PRC Companies are in compliance
with the terms and conditions under which the permits, licenses and other
authorizations referenced in the preceding sentence were issued or granted,
except where the failure to be in compliance could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole.
(b) Except as set forth on Schedule 3.17 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, (i)
none of the PRC Companies has generated, used, transported, treated, stored,
released or disposed of, or has suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous Substance in
violation of any Laws; (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the business of any PRC Company or
in connection with the conduct of the business of any PRC Company or in
connection with the use of any current or former property or facility of any PRC
Company, which has created or might reasonably be expected to create any
condition or liability under any Laws or which would require investigation by,
reporting to or notification of any Governmental Entity; (iii) no asbestos or
polychlorinated biphenyl or underground storage tank is or has been contained in
or located at any facility of any PRC Company; and (iv) any Hazardous Substance
handled or dealt with in any way in connection with the businesses of the PRC
Companies, whether before or during Seller's ownership thereof, has been and is
being handled or dealt with in all respects in compliance with applicable Laws.
Section 3.18. Insurance. The PRC Companies are, and at all times during
the past five years have been, insured with reputable insurers against all risks
normally insured against by companies in similar lines of business of a similar
size, except for professional liability insurance. Schedule 3.18 sets forth a
list of the material insurance coverage in effect as of the date of this
Agreement. None of the insurance carriers listed on Schedule 3.18 are related to
or affiliated with Seller, Seller's Parent or the PRC Companies (other than
Shenandoah Insurance, Inc.). None of the PRC Companies is in default under any
of its insurance policies. None of Seller, Seller's Parent or any PRC Company
has received notice or other indication from any insurer or agent of any intent
to cancel or not so renew any of such insurance policies, except for
cancellations deemed to occur as a result of the Closing of the transactions
contemplated by this Agreement. Each of the PRC Companies has complied with and
implemented all outstanding (i) requirements of and recommendations of any
insurance company that has issued a policy to it and (ii) requirements and
recommendations of the Board of Fire Underwriters or any other body exercising
similar functions or any Governmental Entity with respect to any such insurance
policy.
Section 3.19. Banks. Schedule 3.19 sets forth, as of the date of this
Agreement, the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which the PRC Companies
maintain safe deposit boxes or accounts of any nature, and the names of all
Persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
Section 3.20. Extraordinary Transactions and Material Adverse Effects.
Except as set forth in Schedule 3.20, since September 30, 1995, (x) none of the
PRC Companies has taken any action which would have required the consent of
Buyer under Section 5.2 had such Section been in effect since September 30,
1995, (y) whether or not in the ordinary course of business, there has not been,
occurred or arisen any change in or event affecting any of the PRC Companies
that has had or could reasonably be expected to have a Material Adverse Effect
on the PRC Companies taken as a whole, and (z) none of the PRC Companies has
made any management decisions involving any material change in its policies with
regard to the provision of services, sales, purchasing or other business,
financial, accounting (including reserves and amounts thereof, but excluding
those required by GAAP) or Tax policies or practices.
Section 3.21. Licenses; Permits. Except as set forth in Schedule 3.21,
the PRC Companies have all licenses and permits (except as may be required under
federal or state Tax Laws) of all Governmental Entities necessary to the conduct
of the business of the PRC Companies on the date hereof, except where the
failure to obtain such licenses or permits could not reasonably be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole. Except as
set forth in Schedule 3.21, all such licenses and permits are valid and in full
force and effect and will remain so upon consummation of the transactions
contemplated by this Agreement. To the best knowledge of Seller, Seller's Parent
and the PRC Companies, no suspension, cancellation or termination of any of such
licenses or permits is threatened or imminent that
could reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole.
Section 3.22. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Seller or Seller's Parent,
or by or on behalf of any director, officer, employee, agent or Affiliate of
Seller or Seller's Parent.
Section 3.23. Government Contracts.
(a) During the past five (5) years no payment has been
made by PRC or by any Person authorized to act on its behalf, to any Person in
connection with any Government Contracts, in violation of applicable procurement
Laws or in violation of (or requiring disclosure pursuant to) the Foreign
Corrupt Practices Act or other Laws.
(b) Except as set forth in Schedule 3.23, PRC's cost
accounting and procurement systems with respect to Government Contracts are in
compliance in all material respects with all applicable Laws.
(c) Except as set forth on Schedule 3.23 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, with
respect to each and every Government Contract or Bid (including any exception
taken therein), of the PRC Companies: (i) the PRC Companies have complied in all
respects with all terms and conditions of each Government Contract and Bid,
including all clauses, provisions and requirements incorporated expressly, by
reference or by operation of Law therein; (ii) the PRC Companies
have complied in all respects with all requirements of all applicable Law or
agreements pertaining to each Government Contract or Bid; (iii) all statements
representations and certifications executed, acknowledged or set forth in, or
pertaining to each Government Contract or Bid were, when given, complete and
correct in all respects as of their effective date, and the PRC Companies have
complied in all respects with all such statements, representations and
certifications; (iv) neither the U.S. Government nor any prime contractor,
subcontractor or other Person has notified the PRC Companies, either orally or
in writing, that the PRC Companies have breached or violated any applicable Law,
certification, representation or requirement pertaining to any Government
Contract or Bid; (v) no termination for convenience, termination for default,
cure notice or show cause notice is currently in effect pertaining to any
Government Contract; (vi) no Governmental Entity has provided the PRC Companies
with written notice of any cost incurred by the PRC Companies pertaining to such
Government Contract which has been questioned, challenged or disallowed or has
been the subject of any investigation; and (vii) no money due to the PRC
Companies under any Government Contract has been (or has been attempted to be)
withheld or set off, except for amounts withheld under contracts in the ordinary
course of business.
(d) Except as set forth in Schedule 3.23, neither the PRC
Companies nor, to the best knowledge of Seller and Seller's Parent, any of their
directors, officers, employees, consultants or agents engaged in the business of
the PRC Companies is (or during the last three years has been) under
administrative, civil or
criminal investigation, indictment or information or equivalent official
governmental charge or allegation by any Governmental Entity with respect to any
alleged irregularity, misstatement or omission or other matter arising under or
relating to any Government Contract. Except as previously disclosed to Buyer in
a writing by the PRC Companies specifically referencing this Section, (i) during
the last two years, the PRC Companies have not conducted or initiated any
internal investigation or made a voluntary disclosure to the U.S. Government,
with respect to any alleged irregularity, misstatement, omission or other matter
arising under or relating to any Government Contract or Bid (other than those
relating to employment and other similar Laws), and (ii) there is no
irregularity, misstatement or omission or other matter arising under or relating
to any Government Contract or Bid that has led or could reasonably be expected
to lead, either before or after the Closing Date, to any of the consequences set
forth in clause (i) of this sentence or the immediately preceding sentence or
any other damage, penalty, assessment recoupment of payment or disallowance of
cost that would have a Material Adverse Effect on the PRC Companies taken as a
whole.
(e) Except as set forth on Schedule 3.23 and except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, there
exist (i) no outstanding claims, requests for equitable adjustment or other
contractual action for relief against the PRC Companies, either by the U.S.
Government or by any prime contractor, subcontractor, vendor or other Person,
arising under or relating to any Government Contract or Bid and (ii) no disputes
between the PRC Companies and the U.S. Government under the
Contract Disputes Act or any other federal statute or between any PRC Company
and any prime contractor, subcontractor, vendor or other Person arising under or
relating to any Government Contract or Bid. To the best knowledge of Seller and
Seller's Parent, except as set forth in Schedule 3.23 and except as would not
have a Material Adverse Effect on the PRC Companies taken as a whole, no PRC
Company has any interest in any pending or potential claim under the Contract
Disputes Act against the U.S. Government or any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or Bid.
(f) Except as set forth on Schedule 3.23, no PRC Company nor,
to the best knowledge of Seller and Seller's Parent, any of their directors,
officers, employees, consultants or agents is (or during the last three years
has been) suspended or debarred from doing business with any Governmental Entity
or is (or during such period was) the subject of a finding of nonresponsibility
or ineligibility for contracting with any Governmental Entity.
(g) The Government Contracts that contain OCI Clauses or other
similar provisions that might restrict or preclude Buyer or any of its
Affiliates from supplying products or services to any Governmental Entity or
supplier thereto are set forth on Schedule 3.23.
Section 3.24. Certain Labor Matters. Except as set forth on Schedule
3.24, there is no organized labor strike, dispute, slowdown or stoppage, or
collective bargaining or unfair labor practice claim pending or to the best
knowledge of Seller, Seller's Parent and the PRC Companies, threatened against
or affecting any PRC Company.
Section 3.25. Minute Books. The minute books of the PRC Companies
accurately reflect all actions and proceedings taken to date by the respective
shareholders, boards of directors and committees of the PRC Companies. The stock
record books of the PRC Companies reflect accurately all transactions in their
respective capital stock of all classes.
Section 3.26. Compliance with Law. Except as disclosed in the Schedules
to this Agreement and except as would not have a Material Adverse Effect, the
PRC Companies have conducted their respective businesses in accordance with
applicable Laws in all respects, the forms, procedures and practices of the PRC
Companies are in compliance with applicable Laws in all respects, and the use
and operation of the assets of the PRC Companies are in compliance with
applicable Laws in all respects.
Section 3.27. Certain Interests. Except as set forth on Schedule 3.14
or 3.27 or disclosed in the Financial Statements, no Affiliate of Seller,
Seller's Parent or any PRC Company, nor any officer or director of any thereof,
has any material interest in any property used in or pertaining to the PRC
Companies; no such Person is indebted or otherwise obligated to any PRC Company;
and no PRC Company is indebted or otherwise obligated to any such Person, except
for amounts due under normal arrangements applicable to all employees generally
as to salary or reimbursement of ordinary business expenses not unusual in
amount or significance. Except as set forth on Schedule 3.27, the consummation
of the transactions contemplated by this Agreement will not (either alone, or
upon the occurrence of any act or event, or with the lapse of time, or both)
result in any benefit or payment (severance or
other) arising or becoming due from any PRC Company or the successor or assign
of any thereof to any Person.
Section 3.28. Intercompany Transactions. Except as set forth on
Schedule 3.28 or disclosed in the Financial Statements, (x) no PRC Company has
engaged in any transaction with Seller or Seller's Parent, (y) no PRC Company
has any liabilities or obligations to Seller or Seller's Parent and (z) neither
Seller or Seller's Parent has any obligations to any PRC Company. Except as set
forth on Schedule 3.27 or as otherwise expressly provided for in this Agreement,
the consummation of the transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment arising or becoming due from any PRC
Company or the successor or assign of any thereof to Seller or Seller's Parent.
Section 3.29. Accuracy of Information. None of the information supplied
or to be supplied by or on behalf of Seller, Seller's Parent or any PRC Company
to any Person for inclusion in any document or application filed with any
Governmental Entity having jurisdiction over or in connection with the
transactions contemplated by this Agreement did contain, or at the respective
times such information is or was delivered, will contain any untrue statement of
a material fact, or omitted or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of the
Closing Date, Seller shall have notified Buyer of any such information that
shall have become untrue or misleading in any material respect subsequent to
delivery, and shall have notified Buyer in writing of the reason
for such change. All documents required to be filed by Seller, Seller's Parent,
or any PRC Company with any Governmental Entity in connection with this
Agreement or the transactions contemplated by this Agreement will comply in all
material respects with the provisions of applicable Law.
Section 3.30. Inventories; Receivables; Loss Contracts.
(a) Except as set forth or reserved against in the
Financial Statements, all inventories of the PRC Companies are of good
merchantable quality and salable or currently usable in the ordinary course of
business.
(b) All receivables of the PRC Companies arose from bona fide
transactions in the normal and ordinary course of business consistent with past
practice and, except as set forth or reserved against in the Financial
Statements, are the valid and legally binding obligations of the Persons
obligated to pay such accounts receivable.
(c) Except as set forth on Schedule 3.30 or as set forth or
reserved against in the Financial Statements, no Contract Loss exists with
respect to any Government Contracts or other contracts to which any PRC Company
is a party or with respect to any Bids. Those Government Contracts, contracts or
Bids for which a Contract Loss is not deemed to exist because, after
consideration of existing reserves, the sales price therefor is equal to or less
than $100,000 less than the sum of the cost incurred to date and the expected
cost to complete, with all costs determined in accordance with GAAP on a basis
consistent with prior periods, could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole.
Section 3.31. Bids. Except as disclosed in Schedule 3.31, no PRC
Company has submitted any Bid relating to its business which is currently
outstanding and which, if accepted or awarded, would result in a Government
Contract where the volume of purchases of materials, supplies, goods, services,
equipment or other assets from such PRC Company in connection with its business
under any such resulting Government Contract could be reasonably expected to
exceed $2,000,000. Schedule 3.31 identifies each such Bid. All cost or pricing
data submitted or certified in connection with Bids are current, accurate and
complete in accordance with the Truth in Negotiations Act, as amended, and the
rules and regulations thereunder.
Section 3.32. Customer-Furnished Property or Equipment. Except as would
not have a Material Adverse Effect on the PRC Companies taken as a whole, all
personal property, equipment and fixtures loaned, bailed or otherwise furnished
to a PRC Company by or on behalf of the U.S. Government that are or should be in
the possession of a PRC Company ("Customer-Furnished Items") are in a good state
of maintenance and repair (except for ordinary wear and tear), have been
regularly and appropriately maintained and repaired in accordance with all
contractual, legal and regulatory requirements and, unless returned to the U.S.
Government, shall be in the possession of a PRC Company on the Closing Date.
Except as would not have a Material Adverse Effect on the PRC Companies taken as
a whole, each PRC Company has complied in all respects with all of its
obligations relating to the Customer-Furnished Items, and upon the return
thereof to the U.S. Government in the condition thereof on the date hereof,
would have no liability to the U.S.
Government with respect thereto. Except as would not have a Material Adverse
Effect on the PRC Companies taken as a whole, Buyer will incur no liability to
the U.S. Government as a result of any PRC Company's failure to keep records,
maintain or possess property furnished to a PRC Company by or on behalf of the
U.S. Government.
Section 3.33. Product Warranty; Product Liability. Except as set forth on
Schedule 3.33 or provided for in the Financial Statements, no PRC Company has
committed any act, and there has been no omission by any PRC Company, which may
reasonably be expected to result in, and there has been no occurrence relating
to any product or service of any PRC Company which may reasonably be expected to
result in product liability or liability for breach of warranty (whether covered
by insurance or not) on the part of any PRC Company, with respect to products
designed, manufactured, assembled, repaired, maintained, delivered or installed
or services rendered prior to or on the Closing Date, except where such act,
omission or occurrence would not have a Material Adverse Effect on the PRC
Companies taken as a whole.
Section 3.34. Backlog. PRC has provided to Buyer a copy of its written
policies and procedures concerning backlog. Schedule 3.34 sets forth the backlog
of the PRC Companies as of September 30, 1995, together with the dollar amount
of the backlog that is characterized as "funded" in accordance with PRC's
policies and procedures.
Section 3.35. Clearances. Each PRC Company and each officer, director,
employee, consultant or agent (to the extent such agent or consultant is
material to the performance by a PRC Company of
any contract) has all facility clearances or personnel clearances, as the case
may be, that, if transferred to Buyer, are sufficient to allow Buyer to conduct
each PRC Company's business as now conducted by such PRC Company. Except as
disclosed in Schedule 3.35, Seller has no knowledge of any proposed or
threatened termination of any material personnel or facility security clearance
relating to the business of any PRC Company (whether or not such clearance is
collateral or special access).
Section 3.36. Government Contracting Audits. Schedule 3.36 sets forth a
list and description of each open audit or investigation report, or in the
absence thereof, a draft thereof, received by any PRC Company by any
Governmental Entity (other than routine audits by resident auditors, none of
which is material to the business or prospects of the business of the PRC
Companies), which pertains to any Government Contract and which has resulted in
an allegation or a notice of violation of any applicable Law or Government
Contract or of any violation of or deficiency in company policies or procedures
by any PRC Company, and which has not been closed or otherwise resolved.
Section 3.37. Government Contracting Audits Settlement Agreements.
Schedule 3.37 sets forth a list and description of each settlement agreement
between any PRC Company and the U.S. Government which will have a binding effect
on any PRC Company after the Closing Date, and under which any PRC Company has
material unperformed obligations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to and for the benefit of Seller and
Seller's Parent as follows:
Section 4.1.Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its state of
incorporation, and has full corporate power and authority to carry on its
businesses as it is now being conducted. Buyer is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on Buyer and its Subsidiaries taken as a whole.
Section 4.2. Investment Representation. Buyer is aware that the PRC
Shares are not registered under the Securities Act. Buyer possesses such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investments hereunder. Buyer is acquiring
the PRC shares for its own account, for investment purposes only and not with a
view to the distribution thereof. Buyer agrees that the PRC Shares will not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act, except pursuant to a valid
exemption from registration under the Securities Act.
Section 4.3. Execution and Effect of Agreement. Buyer has the corporate
power and authority to enter into this Agreement, and the execution and delivery
of this Agreement and the consummation
of the transactions and contemplated hereby have been duly authorized by all
necessary corporate action of Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other Laws affecting the rights of creditors
generally.
Section 4.4. Restrictions. Except as set forth in Schedule 4.4, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Buyer, or (b) conflict with or result in a beach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which Buyer is a party or to which it or
its property is subject, or constitute a default thereunder, except where such
conflict, breach, right of termination or default would not have a Material
Adverse Effect on Buyer.
Section 4.5. Consents. Except (a) for filing, consents, approvals and
authorizations the failure to obtain or make would not have a Material Adverse
Effect on Buyer and its Subsidiaries taken as a whole, (b) as set forth in
Schedule 4.4 or Schedule 4.5, and (c) for filings, consents, approvals and
authorizations pursuant to the H-S-R Act, no filing, consent, approval or
authorization of any Governmental Entity or of any third party on the part of
Buyer is required in connection with the execution and
delivery of this Agreement or any instrument contemplated hereby or the
consummation of any of the transactions contemplated hereby.
Section 4.6. Litigation. Except as set forth in Schedule 4.6, there is
no action at law or in equity, arbitration proceeding or a governmental
investigation pending, or to the knowledge of Buyer threatened, against Buyer in
respect of this Agreement or any of the Transactions contemplated hereby that
would prevent the consummation of any of the transactions contemplated hereby.
Section 4.7. Financing. Buyer has available to it sufficient financing to
enable it to consummate the transaction contemplated by this Agreement.
Section 4.8. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Buyer or by or on behalf of
any director, officer, employee, agent or Affiliate of Buyer.
ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally covenant and agree for
the benefit of Buyer as follows:
Section 5.1. Access to Information. Except as prohibited or limited by
Law, Seller and Seller's Parent shall cause the PRC Companies, from and after
the date of this Agreement and until the Closing Date, to give Buyer and its
employees, counsel and advisors, full and complete access upon reasonable notice
during normal business hours, to all properties, agreements, books,
records and all other information (including any routinely prepared reports and
financial information) with respect to the business of the PRC Companies as
Buyer may from time to time request, and to make copies of such books, records
and other documents and to discuss their respective businesses with such other
Persons as Buyer considers necessary or appropriate for the purposes of
familiarizing itself with the business of the PRC Companies, obtaining any
necessary approvals of or permits for the transactions contemplated by this
Agreement and conducting an evaluation of the organization and business of the
PRC Companies.
Section 5.2. Conduct and Preservation of Business Prior to Closing.
(a) Except as contemplated by this Agreement, Seller and
Seller's Parent shall use their best efforts to preserve the business of each of
the PRC Companies and to preserve the goodwill of customers, suppliers and
others having business relations with the PRC Companies. Seller will consult
with Buyer concerning, and Seller will cooperate to keep available to Buyer, the
services of the officers and employees of the PRC Companies that Buyer may wish
to have the PRC Companies retain. Nothing in this Section shall obligate Buyer
or the PRC Companies after the Closing to retain or offer employment to any
officer or employee of the PRC Companies.
(b) Seller agrees that the business of the PRC Companies will
be conducted in the ordinary course and, except as required by this Agreement or
pursuant to the written consent of Buyer (which consent shall not be
unreasonably withheld), the PRC Companies shall not:
(i) amend their charters or by-laws (or other
similar organizational document);
(ii) except (x) as required by applicable Laws or
existing collective bargaining agreements, Employee Benefit Plans, Multiemployer
Plans or Benefit Arrangements or (y) as otherwise required by this Agreement or
the Schedules hereto, enter into or amend any collective bargaining agreement,
Employee Benefit Plan, Multiemployer Plan or Benefit Arrangements;
(iii) sell, mortgage, pledge, or otherwise dispose
of any substantial portion of their assets or properties;
(iv) merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or
substantially all of the assets of, or otherwise acquire, any other
business entity;
(v) authorize for issuance, issue or sell any
additional shares of their capital stock or any securities or obligations
convertible into shares of their capital stock or issue or grant any option,
warrant or other right to purchase any shares of its capital stock;
(vi) except for any indebtedness or obligations
that will be eliminated or cancelled in accordance with Section 5.6, incur or
agree to incur any obligation for borrowed money;
(vii) except as required by their terms, amend in
any material respect, terminate, renew/fail to renew or renegotiate in any
material respect any Material Contract, or default (or take or omit to take any
action that, with or without the giving of notice or passage of time, would
constitute a default) in any of
its obligations under any Material Contract or enter into any new Material
Contract other than pursuant to a Bid outstanding as the date of this Agreement,
or take any action that would jeopardize the continuance of its material
supplier or customer relationships;
(viii) terminate, amend or fail to renew any
existing insurance coverage;
(ix) terminate or fail to renew or preserve any
material permits, except to the extent such permit is no longer
required;
(x) except pursuant to an Employee Benefit Plan or
Benefit Arrangement in effect on the date of this Agreement and except for any
indebtedness or obligations that will be eliminated or cancelled in accordance
with Section 5.6, make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee, stockholder or any of
their respective associates or Affiliates;
(xi) except for cash dividends or distributions,
declare, issue, make or pay any dividend or other distribution of assets to its
shareholders, or split, combine, dividend, distribute or reclassify any shares
of its equity securities;
(xii) make any capital expenditures or commitments
with respect thereto aggregating more than $7,000,000;
(xiii) except in the ordinary course of business in
connection with the performance of a contract, dispose of, license or permit to
lapse any rights to the use of any Intellectual Property or dispose of, license
or disclose any Intellectual Property not a matter of public knowledge;
(xiv) make any Tax election or make any change in
any method or period of accounting or in any accounting policy, practice or
significant procedure; or
(xv) agree to or make any commitment to take any
actions prohibited by this Section 5.2.
Section 5.3. Public Statements. Neither Seller nor Seller's Parent, nor
any of their Affiliates, shall release any information concerning this Agreement
or the transactions contemplated hereby that is intended for or may result in
general public dissemination thereof without the prior consent of Buyer, unless
(a) in the opinion of counsel to Seller and Seller's Parent, the release of such
information is required by Law, and (b) prior to the release of such information
Seller's Parent shall provide Buyer with a copy of such counsel's opinion.
Section 5.4. H-S-R Act. Seller and Seller's Parent shall promptly make
any and all filings that are or may be required under the H-S-R Act. Seller
shall cooperate and use reasonable efforts to ensure that any pre-acquisition
waiting period required by the H-S-R Act expires or is otherwise terminated, and
shall cause the PRC Companies to comply promptly with any requests made pursuant
to such act or the regulations thereunder.
Section 5.5. Consents. Seller and Seller's Parent each shall use
reasonable efforts to obtain all consents, waivers and authorizations and make
all filings with and give all notices that may be necessary or reasonably
required to consummate the transactions contemplated hereby. If as a condition
to receiving any such consents, waivers or authorizations money must be paid to
any third party, Seller and Seller's Parent shall be responsible for one-half of
all such amounts.
Section 5.6. Certain Indebtedness and Intercompany Accounts. On or
before the Closing Date, Seller's Parent shall cause Seller and each of Seller's
Parent's Subsidiaries to contribute to the equity of PRC all net intercompany
amounts due between Seller's Parent and its Subsidiaries (other than the PRC
Companies) on the one hand, and the PRC Companies on the other hand (including
but not limited to amounts relating to intercompany accounts receivable and
promissory notes but excluding amounts relating to intercompany accounts that
are of a type included in the Financial Statements as Corporate Pass Through
Charges and contemplated by Note 2 to the Financial Statements), and shall cause
such intercompany amounts to be eliminated or cancelled on or prior to the
Closing Date. The transactions contemplated by this Section will have no
Material Adverse Effect on any PRC Company.
Section 5.7. Delivery of Information After Closing. Within 30 days of
the Closing Date, Seller and Seller's Parent shall deliver to Buyer all books
and records of PRC in Seller's and Seller's Parent's possession.
Section 5.8. Use of Certain Words, Trademarks and Tradenames. Within 30
calendar days after the Closing Date, Seller and Seller's Parent shall cause
Seller, Seller's Parent and their Affiliates not to use the letters PRC. In
addition, neither Seller nor Seller's Parent, or any of their Affiliates, shall
use any trademark, logo or tradename of PRC or any Affiliate of PRC, or any
trademarks, logos or tradenames that are confusingly similar thereto or that are
a translation or transliteration thereof into
any language or alphabet on any of its signs, products, correspondence, forms,
manuals, shipping cartons, buildings or vehicles, or any other manner
whatsoever. Within 60 calendar days after the Closing, Seller shall take and
cause to be taken all action necessary to change Seller's corporate name to
delete "PRC" therefrom.
Section 5.9. Notification of Certain Matters. Seller will promptly notify
Buyer of any event of which Seller obtains knowledge which has had or could
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole or which if known as of the date hereof would have been
required to be disclosed to Buyer. Seller will promptly notify Buyer of (i) the
occurrence, or failure to occur, of any event that would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Closing Date and (ii) any failure of Seller to comply with or satisfy, in
any material respect, any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement. No such notification shall affect the
representations or warranties of Seller or the conditions to Buyer's obligations
hereunder.
Section 5.10. Noncompetition.
(a) Restrictions on Competitive Activities. Seller agrees that
after the Closing Buyer and PRC shall be entitled to the goodwill and going
concern value of the business of the PRC Companies and to protect and preserve
the same to the maximum extent permitted by Law. Seller also acknowledges that
its management contributions to the business of the PRC Companies have
been uniquely valuable and involve proprietary information that would be
competitively unfair to make available to any competitor of the PRC Companies.
For these and other reasons and as an inducement to Buyer to enter into this
Agreement, Seller agrees that for a period of three years after the date hereof
neither Seller nor any of Seller's Affiliates will, directly or indirectly, for
its own benefit or as agent for another carry on or participate in the
ownership, management or control of, or the financing of, or allow its name or
reputation to be used in or by any other present or future business enterprise
that competes with Buyer or the PRC Companies in activities in which any of the
PRC Companies is engaged as of the Closing Date (a "Competing Business").
(b) Exceptions. Nothing contained herein shall limit the right
of Seller as an investor to hold and make investments in securities of any
corporation or limited partnership that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided Seller's equity interest
therein does not exceed 5% of the outstanding shares or interests in such
corporation or partnership. Notwithstanding any provisions of this Section 5.10
to the contrary, if Seller's Parent or any of its Affiliates acquires any Person
that is engaged in a Competing Business, Seller's Parent and its Affiliates
shall not be deemed to be in violation of this Section 5.10 provided that (i)
the Competing Business represents less than one-third of the gross revenues of
the acquired Person for the acquired Person's most recent completed fiscal year
and (ii) Seller's Parent or its Affiliates use reasonable and diligent efforts
to divest the
operations of such Competing Business subsequent to such acquisition.
(c) Restrictions on Soliciting Employees. In addition, to
protect Buyer against any efforts by Seller or any of Seller's Affiliates to
cause employees of the PRC Companies as of the date of this Agreement to
terminate their employment, Seller agrees that for a period of three years
following the Closing Date, neither Seller nor any of its Affiliates will,
directly or indirectly (i) induce any employee of the PRC Companies as of the
date of this Agreement with a then current compensation of more than $50,000
annually to leave any of the PRC Companies or to accept any other employment or
position, or (ii) assist (other than normal employment recommendations) any
other Person in hiring any such employee.
(d) Special Remedies and Enforcement. Seller recognizes and
agrees that a breach by Seller or any of its Affiliates of any of the covenants
set forth in this Section 5.10 could cause irreparable harm to Buyer, that
Buyer's remedies at law in the event of such breach would be inadequate, and
that, accordingly, in the event of such breach a restraining order or injunction
or both may be issued against Seller and its Affiliates, in addition to any
other rights and remedies which are available to Buyer. If this Section 5.10 is
more restrictive than permitted by the Laws of the jurisdiction in which Buyer
seeks enforcement hereof, this Section 5.10 shall be limited to the extent
required to permit enforcement under such Laws.
Section 5.11. Nondisclosure of Proprietary Data. Neither Seller nor
any of its Affiliates or representatives shall, at any
time, make use of, divulge or otherwise disclose, directly or indirectly, any
trade secret or other proprietary data (including, but not limited to, any
customer list, record or financial information) concerning the business or
policies of the PRC Companies that Seller or any Affiliate or representative of
Seller may have learned as a shareholder, employee, officer or director of the
PRC Companies. In addition, except as required by Law or legal process neither
Seller nor any of its Affiliates or representatives shall make use of, divulge
or otherwise disclose, directly or indirectly, to persons other than Buyer, any
confidential information concerning the business or policies of the PRC
Companies which may have been learned in any such capacity.
Section 5.12. No Solicitation. From the date of this Agreement to the
Closing Date or earlier termination of this Agreement, Seller and its Affiliates
and representatives will not directly or indirectly make, entertain, solicit or
encourage inquiries or proposals, enter into or conduct discussions, or
negotiate or enter into an agreement with any party other than Buyer for the
divestiture of any or all of the PRC Companies or their respective assets,
whether by way of an asset or stock sale, partnership, joint venture, merger,
consolidation or other transaction.
Section 5.13. Novations. In the event any Governmental Entity requires
Government Contract Novations, Seller and Seller's Parent shall cooperate with
the PRC Companies to promptly obtain such Government Contract Novations and
shall execute the novation agreements required by any Governmental Entity.
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees for the benefit of Seller and Seller's
Parent as follows:
Section 6.1. Public Statements. Buyer shall not release any information
concerning this Agreement or the transactions contemplated hereby that is
intended for or may result in general public dissemination thereof without the
prior consent of Seller's Parent, unless (a) in the opinion of counsel to Buyer,
the release of such information is required by Law, and (b) prior to the release
of such information Buyer shall provide Seller's Parent with a copy of such
counsel's opinion.
Section 6.2. H-S-R Act. Buyer shall promptly make any and all filings
that are or may be required under the H-S-R Act. Buyer shall cooperate and use
reasonable efforts to ensure that any pre-acquisition waiting period required by
the H-S-R Act expires or is otherwise terminated, and shall comply promptly with
any requests made pursuant to the H-S-R Act or the regulations thereunder.
Section 6.3. Consents. Buyer shall use reasonable efforts to obtain all
consents, waivers and authorizations and make all filings with and give all
notices that may be necessary or reasonably required to consummate the
transactions contemplated hereby. If as a condition to receiving any such
consents, waivers or authorizations money must be paid to any third party, Buyer
shall be responsible for one-half of all such amounts.
Section 6.4. Guarantees. Buyer shall take all steps reasonably necessary to
provide Guarantees for or on all contracts, documents, instruments and other
agreements or obligations for
which Seller's Parent or any of its Subsidiaries (other than Subsidiaries that
are PRC Companies) has issued Guarantees for the benefit of Persons doing
business with any of the PRC Companies that are listed in Schedule 3.15 and any
such Guarantees executed by Seller's Parent or any of its Subsidiaries (other
than Subsidiaries that are PRC Companies) subsequent to the date of this
Agreement and prior to Closing in compliance with Section 5.2. Buyer will
endeavor to provide all such Guarantees within 60 days of the Closing Date.
Buyer shall use reasonable efforts to assist Seller's Parent and its
Subsidiaries (other than Subsidiaries that are PRC Companies) to obtain full and
complete releases on each of the Guarantees referenced in the preceding
sentence, which reasonable efforts shall include but not be limited to providing
any financial information about Buyer reasonably requested by the Persons for
whose benefit the respective Guarantees were made. The provisions of this
Section 6.4 shall not apply to any Guarantees relating to payments under the
"PRC Supplemental Executive Retirement Plan."
Section 6.5. Certain Employee Benefit Matters.
(a) Buyer shall take all action required or appropriate
to cause each of the PRC Companies to fulfill its obligations under all Benefit
Arrangements, Employee Benefit Plans and Multiemployer Plans listed in Schedule
3.14 that are sponsored or maintained by any of the PRC Companies for so long as
any such Arrangements and Plans are sponsored or maintained by any of the PRC
Companies.
(b) Buyer acknowledges that certain Employees of the PRC
Companies may be entitled to benefits under the Incentive Compensation Plans,
the Special Severance Plans or other Benefit
Arrangements involving severance or termination benefits. Buyer assumes the
obligations of Seller's Parent and the PRC Companies under the Incentive
Compensation Plans, the Special Severance Plans and such other Benefit
Arrangements in respect of the Employees and agree to pay any benefits to the
Employees that the Employees may be entitled to receive under the Incentive
Compensation Plans, the Special Severance Plans and such other Benefit
Arrangements. Buyer shall not assume or have any obligations with respect to (x)
the "Black & ▇▇▇▇▇▇ -- PRC Inc. Change in Control Agreements" and (y) the "PRC
Supplemental Executive Retirement Plan."
(c) For at least 12 months following the Closing Date, Buyer
will ensure that the PRC Companies continue to provide benefits that are, in the
aggregate, substantially comparable to those provided under the Employee Benefit
Plans and Benefit Arrangements as in effect immediately prior to the Closing
Date for the benefit of all eligible Employees and their dependents. Nothing in
this Section 6.5 shall obligate Buyer or any PRC Company to sponsor or maintain
any specific Employee Benefit Plan or Benefit Arrangement for any period of time
after the Closing Date.
Section 6.6. Preservation of and Access to Certain Information After
Closing. Except as prohibited or limited by Law, Buyer shall cause the PRC
Companies, until three years after the Closing Date or, with respect to Tax
matters, until the expiration of the applicable statute of limitations
(including any extensions thereof), to give Seller and Seller's Parent, and
Seller's and Seller's Parent's employees, counsel and advisors, full and
complete access upon reasonable notice during normal business
hours, to all properties, agreements, records and affairs of the PRC Companies,
and will provide copies of such information concerning the PRC Companies (with
respect to periods prior to the Closing) as Seller and Seller's Parent may
reasonably request, including but not limited to full and complete access in
connection with the preparation and determination of the Proposed Net Asset
Amount and the Final Net Asset Amount (and the resolution of any disputes in
respect thereof), or the preparation of any Tax Returns for the Affiliated
Groups, or in connection with or in anticipation of any audit by any federal,
state or local Tax Authorities of the Affiliated Groups. From and after the
Closing Date, Buyer shall preserve all books and records of PRC in Buyer or any
of the PRC Companies' possession for a period of eight years, provided, however,
that Buyer shall not destroy or dispose of such books and records without giving
notice to Seller and Seller's Parent of such pending destruction or disposal and
offering Seller and Seller's Parent the right and opportunity to copy such books
and records.
Section 6.7. Use of Certain Words, Trademarks and Tradenames. Whether
or not Buyer or any of the PRC Companies has obtained, directly or indirectly,
any right, title or interest in or to the use of the words "The Black & ▇▇▇▇▇▇
Corporation" or "Emhart Corporation," or any derivatives thereof, or the letters
B&D, by virtue of Buyer's purchase of the PRC Shares or otherwise, neither Buyer
nor any of the PRC Companies shall use, and Buyer and each of the PRC Companies
shall cause after the Closing Date the PRC Companies not to use, the words "The
Black & ▇▇▇▇▇▇ Corporation" or "Emhart Corporation," or any derivative thereof,
or the letters B&D. In addition, neither Buyer nor any of the PRC
Companies shall use, and Buyer and each of the PRC Companies shall cause within
90 calendar days after the Closing Date the PRC Companies not to use, any
trademark, logo or tradename of Seller's Parent or Emhart, or any Affiliate of
Seller's Parent or Emhart (other than those relating exclusively to the business
of the PRC Companies and transferred to Buyer or the PRC Companies under the
terms of this Agreement), or any trademarks, logos or tradenames that are
confusingly similar thereto or that are a translation or transliteration thereof
into any language or alphabet on any of its signs, products, correspondence,
forms, manuals, shipping cartons, buildings or vehicles, or in any other manner
whatsoever.
Section 6.8. Intercompany Accounts. Buyer shall take, and shall cause
PRC and its successors and Subsidiaries to take, all actions and to do, or cause
to be done, all things necessary, proper and appropriate to give effect to the
contribution to the equity of PRC all net intercompany amounts contemplated to
be contributed, eliminated or cancelled on or prior to the Closing Date by
Section 5.6.
Section 6.9. Notification of Certain Matters. Buyer shall give prompt
notice to Seller of (i) the occurrence, or failure to occur, of any event that
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing Date and (ii) any failure of Buyer to
comply with or satisfy, in any material respect, any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement. No such
notification shall affect the
representations or warranties of Buyer or the conditions to Buyer's
obligations hereunder.
ARTICLE VII
CONDITIONS OF OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the purchase of the PRC Shares
on the Closing Date and to perform their other covenants and agreements in
accordance with the terms and conditions of this Agreement are subject to each
of the conditions set forth below:
Section 7.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Seller and Seller's Parent contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of the Closing Date.
Section 7.2. Covenants and Agreements -- No Default. Neither Seller nor
Seller's Parent shall be in material default in respect of any obligation under
this Agreement and Seller and Seller's Parent shall have performed or complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Seller or Seller's Parent prior to
or as of the Closing Date.
Section 7.3. No Material Adverse Change. Since the date of this Agreement,
none of the PRC Companies shall have suffered a change in its business or
financial condition that has had or could reasonably be expected to have a
Material Adverse Effect on the PRC Companies taken as a whole
Section 7.4. H-S-R Act. All applicable waiting periods in respect of
the transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 7.5. Consents. Seller and Seller's Parent shall have obtained all
third-party and governmental consents required for the consummation of the
transactions contemplated by this Agreement that are set forth in Schedule 7.5.
Section 7.6. Closing Documents. Seller and Seller's Parent shall have
provided Buyer with all of the documents required by Section 9.2 to be delivered
at Closing by Seller.
Section 7.7. No Orders; Legal Proceedings. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity which prohibits or restricts the transfer of the PRC Shares. No Action
shall be pending or threatened by any Governmental Entity (i) challenging or
seeking to make illegal or otherwise directly or indirectly restrain or prohibit
or make materially more costly the consummation of the transactions contemplated
hereby, or seeking to obtain material damages in connection with such
transactions or (ii) which has had or would be reasonably likely to have a
Material Adverse Effect on the PRC Companies taken as a whole, and no Order
shall have been issued which would have the effect of or require anything set
forth in clause (i) or clause (ii) above.
Section 7.8. Resignation of Directors. Any directors of the PRC
Companies who are also employees or officers of Seller's Parent or any of its
Affiliates (other than the PRC Companies) shall have submitted their
resignations in writing to such PRC Companies.
Such resignations of directors (in such capacity) shall be effective as of the
Closing.
Section 7.9. Resignation of Officers. Any officers or employees of the
PRC Companies who are also employees or officers of Seller's Parent or any of
its Affiliates (other than the PRC Companies) shall have submitted their
resignations in writing to such PRC Companies. Such resignations of officers and
employees (in such capacity) shall be effective as of the Closing.
Section 7.10 OCI Clauses. The OCI Clauses contained in contracts or
agreements to which any of the PRC Companies is a party or by which any of the
PRC Companies is obligated could not reasonably be expected in the aggregate to
have a Material Adverse Effect on either the PRC Companies taken as a whole or
any significant business division or line of business of Buyer and its
Subsidiaries.
ARTICLE VIII
CONDITIONS OF OBLIGATIONS OF SELLER AND SELLER'S PARENT
The obligation of Seller and Seller's Parent to consummate the sale of
the PRC Shares on the Closing Date and to perform its other covenants and
agreements in accordance with the terms and conditions of this Agreement are
subject to each of the conditions set forth below.
Section 8.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in
all material respects on and as of the Closing Date as though made on and as of
the Closing Date.
Section 8.2. Covenants and Agreements -- No Default. Buyer shall not be
in material default in respect of any obligation under this Agreement and Buyer
shall have performed or complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by Buyer
prior to or as of the Closing Date.
Section 8.3. H-S-R Act. All applicable waiting periods in respect of
the transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 8.4. Consents. Buyer shall have obtained all third-party and
governmental consents required for the consummation of the transactions
contemplated by this Agreement that are set forth in Schedule 8.4.
Section 8.5. Closing Documents. Buyer shall have provided Seller with all
of the documents required by Section 9.3 to be delivered at Closing by Buyer.
Section 8.6. No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity
which prohibits or restricts the transfer of the PRC Shares. No Action shall be
pending or threatened by any Governmental Entity challenging or seeking to make
illegal or otherwise directly or indirectly restrain or prohibit or make
materially more costly the consummation of the transactions contemplated hereby,
or seeking to obtain material damages in connection with such transactions and
no Order shall
have been issued which would have the effect of or require anything set forth
above.
ARTICLE IX
CLOSING
Section 9.1. Closing. The Closing shall take place at the offices of
O'Melveny & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, at 10:00 a.m.,
on January 31, 1996, or at such other place and at such other time and date as
may be mutually agreed upon by Buyer and Seller, upon fulfillment of (a) all the
conditions set forth in ARTICLE VII that have not been waived by Buyer, and (b)
all the conditions set forth in ARTICLE VIII that have not been waived by
Seller. If such conditions have not been fulfilled or waived by such date, the
Closing shall take place within five business days after fulfillment or waiver
of all such conditions but in no event later than March 31, 1996, unless
otherwise mutually agreed to in writing by Buyer and Seller. All proceedings to
be taken and all documents to be executed and delivered by Seller and Seller's
Parent in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to Buyer and its
counsel. All proceedings to be taken and all documents to be executed and
delivered by Buyer in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Seller and its counsel. All proceedings to be taken and all documents to be
executed and delivered at the Closing shall be deemed to have been taken and
executed simultaneously, and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed or
delivered.
Section 9.2. Documents to be Delivered by Seller and Seller's Parent. At
the Closing, Seller and Seller's Parent shall deliver, or shall cause to be
delivered, to Buyer the following:
(a) Certificates representing the PRC Shares, which
certificates shall be duly endorsed in blank or, in lieu thereof, shall have
affixed thereto stock powers executed in blank and in proper form for transfer
on the books of PRC;
(b) A certificate of the Secretary or an Assistant Secretary
of each of Seller and Seller's Parent, dated the Closing Date, setting forth the
resolutions of the Boards of Directors of Seller and Seller's Parent,
respectively, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and certifying that such
resolutions have not been amended or rescinded and are in full force and effect;
(c) A certificate of a senior executive officer of each of
Seller and Seller's Parent certifying that (i) except as otherwise permitted or
contemplated by this Agreement and except for representations and warranties
that by their terms speak as of a specified date other than the Closing Date
each of the representations and warranties of Seller and Seller's Parent
contained in this Agreement are true and correct in all material respects on and
as of the Closing Date as though made on and as of the Closing Date and (ii)
neither Seller nor Seller's Parent is in material default in respect of any
obligation under this Agreement and Seller and Seller's Parent have performed or
complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by Seller or Seller's Parent prior to or as of
the Closing Date;
(d) A good standing certificate and certified charter
documents, dated as of a date reasonably close to the Closing Date,
in respect of PRC;
(e) Modifications to Schedules 3.10, 3.12 and 3.13 reflecting
events occurring subsequent to the date hereof, provided that (i) no item may be
added to Schedule 3.10 unless (x) Seller confirms in writing that such item is a
Pre-Closing Claim subject to Section 11.4 hereof and (y) Seller acknowledges in
writing that Buyer may assert such item, alone or together with other matters,
as the basis of a material adverse change as contemplated by Section 7.3 (it
being understood that such acknowledgement is not a concession by Seller that
such item constitutes a material adverse change as contemplated by Section 7.3),
(ii) no item may be deleted from Schedule 3.12, and (iii) no Material Contract
shall be added to or deleted from Schedule 3.13 unless a PRC Company entered
into or terminated such Material Contract, or permitted such Material Contract
to expire, in compliance with Section 5.2; and
(f) Such other documents, instruments or agreements as
may be reasonably requested by Buyer to effectuate the transactions
contemplated by this Agreement.
Section 9.3. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver, or cause to be delivered, to Seller and Seller's Parent the
following:
(a) A wire transfer of funds to the account designated
by Seller in an amount equal to the Purchase Price, as provided in
Section 2.2;
(b) A certificate of the Secretary or an Assistant Secretary
of Buyer, dated the Closing Date, setting forth copies of the resolutions of the
Board of Directors of Buyer authorizing the execution and delivery of this
Agreement and the Consummation of the transactions contemplated hereby, and
certifying that such resolutions have not been amended or rescinded and are in
full force and effect;
(c) A certificate of a senior executive officer of each of
Buyer certifying that (i) except as otherwise permitted or contemplated by this
Agreement and except for representations and warranties that by their terms
speak as of a specified date other than the Closing Date, each of the
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects on and as of the Closing Date as though made on
and as of the Closing Date and (ii) Buyer is not in material default in respect
of any obligation under this Agreement and Buyer has performed or complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Buyer prior to or as of the
Closing Date; and
(d) Such other documents, instruments or agreements as may be
reasonably requested by Seller and Seller's Parent to effectuate the
transactions contemplated by this Agreement.
ARTICLE X
TERMINATION
Section 10.1. Right to Terminate Agreement. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to Closing only as follows:
(a) by mutual written consent of Buyer and Seller and
Seller's Parent; and
(b) by any of the parties to this Agreement, upon written
notice to the other parties, at any time after March 31, 1996, except that the
right to terminate this Agreement pursuant to this Section 10.1(b) shall not be
available to (i) Seller and Seller's Parent if the failure to consummate the
Closing on or before such date was caused by or resulted from Seller's or
Seller's Parent's failure to fulfill any of its obligations under this Agreement
or (ii) Buyer if the failure to consummate the Closing on or before such date
was caused by or resulted from Buyer's failure to fulfill any of their
obligations under this Agreement.
Section 10.2.Effect of Termination.
(a) In the event this Agreement is terminated pursuant
to Section 10.1(a), then all further obligations of the parties hereto shall
become null and void and no party shall have any liability to any other party.
(b) In the event this Agreement is terminated by Buyer
pursuant to Section 10.1(b) at a time when any of the conditions to its
obligations set forth in ARTICLE VII shall not have been satisfied or waived in
writing, then Buyer shall be entitled to pursue all legal and equitable remedies
for breach of contract and damages, including but not limited to any
out-of-pocket expenses actually incurred by Buyer.
(c) In the event this Agreement is terminated by Seller and
Seller's Parent pursuant to Section 10.1(b) at a time when any of the conditions
to their obligations set forth in ARTICLE VIII shall not have been satisfied or
waived in writing, then Seller and Seller's Parent shall be entitled to pursue
all legal and equitable remedies for breach of contract and damages, including
but not limited to any out-of-pocket expenses actually incurred by Seller and
Seller's Parent.
(d) Notwithstanding the provisions of this Section 10.2, the
obligations of the parties hereto under the Confidentiality Agreement shall
survive any termination of this Agreement by either party to this Agreement.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS; INDEMNIFICATION
Section 11.1. Taxes.
(a) Seller's Parent or Seller (on behalf of the PRC Companies)
shall timely and accurately file or cause to be filed all Tax Returns for Income
Taxes and all foreign Taxes (including the filing of any state or local Tax
Returns that include the result of the Section 338(h)(10) Election) of the PRC
Companies due after the date hereof for any taxable year or taxable period
ending on or before the Closing Date, including any taxable period that ends at
the end of the Closing Date as a result of the Section 338(h)(10) Election (a
"Pre-Closing Period").
(b) Subject to the provisions of Section 11.1(c), Seller's
Parent and Seller shall pay and be responsible for, shall indemnify and hold
harmless Buyer and the PRC Companies (the "Buyer Group") against, and shall be
entitled to all refunds and credits
of, (i) Income Taxes and all foreign Taxes (together with reasonable attorneys'
fees and any legal or other expenses for investigating or defending any actions
with respect to such Taxes) with respect to the PRC Companies for any
Pre-Closing Period, including any liability for Income Taxes and all foreign
Taxes arising out of the inclusion of any of the PRC Companies in any
Consolidated Returns, and further including any liability for Income Taxes
arising as a result of the Section 338(h)(10) Election, and (ii) all Taxes
(together with reasonable attorneys' fees and any legal or other expenses for
investigating or defending any actions with respect to Taxes) with respect to
Seller's Parent and any member of the Affiliated Groups (other than the PRC
Companies) for all taxable periods whatsoever. Buyer shall, promptly after the
receipt thereof, remit to Seller's Parent any Income Tax or foreign Tax refund
received by Buyer, Buyer's Parent or any of the PRC Companies to the extent such
refund relates to a Pre-Closing Period. Seller's Parent or Seller shall
promptly, after the receipt thereof, remit to Buyer any Tax refund received by
Seller's Parent or Seller to the extent such refund relates to any Tax paid by
or on behalf of the PRC Companies, other than an Income Tax or foreign Tax
refund related to a Pre-Closing Period. Notwithstanding the provision of this
Section 11.1(b), neither Seller nor Seller's Parent shall be responsible for or
shall be required to indemnify or hold harmless Buyer or any of the PRC
Companies for any Taxes that are reimbursed under any contracts of any of the
PRC Companies; provided, however, that Buyer shall cause the appropriate PRC
Company to use its reasonable best efforts to seek reimbursement for such Taxes
under the applicable contract.
(c) No member of the Buyer Group shall be entitled to
indemnification under Section 11.1(b) for any Taxes for which a reserve with
respect to such Taxes is included in or taken into account in the calculation or
determination of the Final Net Asset Amount, except for the Taxes exceeding the
amount of such reserve.
(d) Buyer shall be responsible for, and shall indemnify and
hold harmless Seller and Seller's Parent against, (i) the Taxes described in
Section 12.3, (ii) the timely preparation and filing of all Tax Returns of the
PRC Companies for any taxable year or taxable period beginning after the Closing
Date (the "Post-Closing Period"), and (iii) the preparation and filing of all
Tax Returns required to be filed by any of the PRC Companies after the Closing
Date other than those Tax Returns for Income Taxes and all foreign Taxes
described in Section 11.1(a).
(e) Buyer shall pay and be responsible for, shall indemnify
and hold harmless Seller and Seller's Parent against, and shall be entitled to
all refunds and credits of, all Taxes (together with reasonable attorneys' fees
and any legal or other expenses for investigating or defending any actions with
respect to Taxes) with respect to the PRC Companies for any Post-Closing Period.
(f) Subject to the provisions of Section 11.2, if, for any
federal, State or local Income Tax or foreign Tax purpose, a taxable year or
taxable period of any of the PRC Companies which begins before the Closing Date
and ends after the Closing Date (a "Bridge Period") does not terminate on the
Closing Date, and Buyer has the responsibility to pay Taxes for all or a portion
of the Bridge Period, the parties hereto will, to the extent permitted by
applicable Law, elect with the relevant Tax Authority to treat the portion of
the Bridge Period on or before the Closing Date (a "Seller Period") for all
purposes as a short taxable period ending as of the close of the Closing Date
and such short taxable period shall be treated as a Pre-Closing Period for
purposes of this Agreement and the portion of the Bridge Period after the
Closing Date (the "Buyer Period") shall be treated as a Post-Closing Period for
purposes of this Agreement. In any case where applicable Law does not permit
such an election to be made, then, for purposes of this Agreement, Income Taxes
and all foreign Taxes for the Bridge Period shall be allocated between the
Seller Period and the Buyer Period using an interim-closing-of-the-books method
assuming that such taxable period ended at the close of business on the Closing
Date, except that exemptions, allowances or deductions that are calculated on an
annual basis (such as the deduction for depreciation) shall be apportioned on a
per diem basis.
(g) Buyer shall cause the PRC Companies to prepare and file
all Tax Returns and pay all Taxes due, if any, with respect to the PRC Companies
for any Bridge Period that does not terminate on the Closing Date, for which it
is responsible to pay Taxes in whole or in part, provided that Seller satisfies
its obligations as set forth in this Section 11.1(g). Seller shall promptly
deliver to Buyer work papers relating to Taxes due for the Seller Period,
certified by a duly authorized officer of Seller, setting forth in detail all
information required to complete the applicable Tax Returns. Upon notice from
Buyer, Seller shall pay to Buyer the Income Taxes and all foreign Taxes for the
Seller Period on or before the second business day prior to the due date for the
payment of such Income Taxes and all foreign Taxes, by wire transfer of
immediately available funds to the account designated by Buyer. In the event
that Seller fails to make the payments required by this Section 11.1(g) to Buyer
prior to the date any payment for Income Taxes and all foreign Taxes as
described in this Section 11.1(g) is due, such required payment shall bear
interest from such due date until paid, at the underpayment rate of interest
determined under Section 6621 of the Code.
(h) Buyer shall have exclusive control over and responsibility
to conduct any Contest for a Post-Closing Period and for a Bridge Period if the
Contest for a Bridge Period relates solely to the Buyer; provided, however, that
Buyer shall not enter into any agreement in compromise or settlement of such
Contest which could affect a Pre-Closing Period or a Seller Period without the
written consent of Seller.
(i) Unless Buyer agrees in writing to waive any claim for
indemnification under Section 11.1(b) with respect thereto, Seller and Seller's
Parent shall have exclusive control over and responsibility to conduct any
Contest for a Pre-Closing Period and for a Bridge Period if the Contest for a
Bridge Period relates solely to the Seller Period; provided, however, that
neither Seller not Seller's Parent shall enter into any agreement in compromise
or settlement of such Contest which could affect a Post-Closing Period or a
Buyer Period without the written consent of Buyer.
(j) Buyer shall notify Seller's Parent in writing promptly
upon receipt by any PRC Company of notice of any Contest or assessment relating
thereto for Pre-Closing Period or a Bridge Period. Failure of Buyer to so notify
Seller's Parent shall not
relieve Seller's Parent or Seller from any liability under this Section 11.1,
except to the extent it is proven that Seller's Parent or Seller suffered actual
prejudice in connection with or in defending against a Contest. Seller or
Seller's Parent shall notify Buyer in writing promptly upon receipt by Seller or
Seller's Parent of notice of any Contest or assessment relating to a
Post-Closing Period or a Bridge Period.
(k) Buyer and Seller agree to jointly control and conduct any
Contest for a Bridge Period that relates to both the Seller Period and the Buyer
Period. Seller, Seller's Parent and Buyer agree to cooperate fully with each
other with respect to defending or answering any such Contest and to provide
each other with all materials, information and documents as reasonably requested
by the other. Neither Buyer, Seller, nor Seller's Parent shall be liable for any
portion of any settlement of any Contest for a Bridge Period that relates to
both the Seller Period and the Buyer Period effected without its written
consent, provided such consent was not unreasonably withheld.
(l) Except as otherwise provided in this Agreement and subject
to the allocation of liabilities for Taxes, Seller, Seller's Parent and Buyer
agree to cooperate fully with each other with respect to the preparation of all
Tax Returns and with respect to all matters relating to Taxes, and to keep each
other advised as to any issue relating to Taxes which could have a bearing on
such other party's responsibilities hereunder.
(m) In any Contest controlled by Seller, Buyer will take, and
will cause each PRC Company to take, such action as Seller may by written notice
reasonably request in connection with
such Contest (including the payment of a Tax preparatory to filing a claim for
refund of such Tax; provided that Seller shall first pay the amount of such Tax
to Buyer).
Section 11.2. Section 338(h)(10) Election.
(a) Seller, Seller's Parent, and each of the PRC
Companies agree, if so directed by the Buyer, to join with Buyer in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
under state, local or foreign tax law) (collectively, a "Section 338(h)(10)
Election") with respect to the purchase and sale of the stock of the PRC
Companies hereunder. Seller will pay any Income Tax, including any liability of
the PRC Companies for Income Tax resulting from the application to it of Treas.
Reg. ss. 1.338(h)(10)-1(f)(5), attributable to the making of the Section
338(h)(10) Election (but only to the extent that application causes an increase
in taxable gain resulting from the deemed purchase of assets pursuant to Section
338 of the Code) and will indemnify the Buyer and the PRC Companies against any
Material Adverse Effect arising out of any failure to pay such Income Tax. If
the Section 338(h)(10) Election is made, Seller and Seller's Parent will also
pay any state, local or foreign Income Tax (and indemnify Buyer and the PRC
Companies against any Material Adverse Effect arising out of any failure to pay
such Income Tax) attributable to an election under state, local, or foreign law
similar to the election available under Section 338(g) of the Code (or which
results from the making of an election under Section 338(g) of the Code) with
respect to the purchase and sale of the stock of the PRC Companies hereunder.
(b) Except as provided below, on or before the date that is 60
days after the Closing Date, Buyer shall prepare a schedule, in the form of
Exhibit C, which reflects an allocation (the "Allocation") of Buyer's "adjusted
grossed-up basis" and Seller's "deemed sale price" among the Class I, Class II,
Class III and Class IV Assets (as such terms are defined in Section 338 of the
Code and the Department of Treasury regulations thereunder). Provided the
Allocation is reasonable, Seller's Parent agrees to accept the Allocation. Buyer
shall be under no obligation to have the Allocation prepared or approved by an
independent appraiser. Buyer shall be responsible for the preparation of all
forms and filings required to be filed with any Tax Authority to claim the
Section 338(h)(10) Election and Buyer and Seller's Parent shall reflect the
Allocation in all Income Tax returns in which the Section 338(h)(10) Election is
relevant, the effect of which is to treat the purchase of the shares of PRC by
Buyer as the purchase of the assets of PRC by Buyer. If the Final Net Asset
Amount is not determined within 60 days of the Closing Date, then Exhibit C
shall be prepared promptly after the Final Net Asset Amount is determined.
Section 11.3. Indemnification by Buyer. Buyer agrees to indemnify,
defend and hold harmless Seller, Seller's Parent and their respective directors,
officers, employees, Affiliates, agents, successors and assigns from and against
any and all Losses suffered or incurred by an Indemnified Party resulting from,
related to or arising out of:
(a) any inaccuracy in any of the representations and
warranties made by Buyer in this Agreement or in any agreement or
certificate delivered pursuant hereto or in connection herewith;
(b) any breach or nonperformance of any of the covenants of
Buyer or its Affiliates contained in this Agreement (including those in Sections
8.1 and 8.2) or in any agreement or document delivered pursuant hereto or in
connection herewith;
(c) any Post-Closing Claim, but only to the extent that the
Losses suffered or incurred result from facts and circumstances that occurred
after the Closing Date (excluding Losses suffered or incurred resulting from
facts or circumstances that occur after the Closing Date but which relate to
Hazardous Substances present at properties or facilities of the PRC Companies on
the Closing Date); and
(d) any Guarantees (other than those relating to payments
under the "PRC Supplemental Executive Retirement Plan") of Seller's Parent (or
any of its Affiliates) to the extent they were issued for the benefit of Persons
doing business with any of the PRC Companies. To the extent, but only to the
extent, that any Loss for which Buyer has indemnification obligations under
Section 11.3(c) arises as a result of any fact, circumstance or condition that
also causes the inaccuracy of any representation or warranty of Seller, Seller's
Parent or PRC contained in this Agreement or in any agreement or certificate
delivered pursuant hereto or in connection herewith, or otherwise is the basis
for an indemnification claim by Buyer under Section 11.4, Buyer shall not have
liability under Section 11.3(c).
Section 11.4. Indemnification by Seller and Seller's Parent. Seller and
Seller's Parent agree, jointly and severally, to indemnify, defend and hold
harmless Buyer, the PRC Companies and their respective directors, officers,
employees, Affiliates, agents, successors and assigns from and against any and
all Losses suffered or incurred by an Indemnified Party resulting from, relating
to, or arising out of:
(a) any inaccuracy in any of the representations and
warranties made by Seller, Seller's Parent or the PRC Companies in this
Agreement or in any agreement or certificate delivered pursuant hereto or in
connection herewith;
(b) any breach or nonperformance of any of the covenants of
Seller, Seller's Parent or the PRC Companies or their Affiliates contained in
this Agreement (including those in Sections 8.1 and 8.2) or in any agreement or
document delivered pursuant hereto or in connection herewith;
(c) any Pre-Closing Claim (including Pre-Closing Claims listed
on, or arising from matters listed on, Schedules to this Agreement), but only to
the extent that the Losses suffered or incurred result from facts and
circumstances that occurred on or prior to the Closing Date;
(d) any divestitures, sales or other dispositions by any PRC
Company of divisions, product lines, businesses, real property or intellectual
property (other than dispositions of Intellectual Property in the ordinary
course of business in connection with the provision of products or services to
customers of the PRC Companies), Subsidiaries and interests in other Persons
effected prior to the Closing Date, whether as a result of breaches of
purchase or sales agreements, under indemnification provisions, under guarantees
by a PRC Company not yet assumed by the purchaser in such divestitures, sales or
dispositions, or otherwise;
(e) actions taken by Buyer and the PRC Companies after the
Closing Date to bring into compliance with Environmental Laws as in effect at
the Closing Date any violation or noncompliance existing as of the Closing Date,
and from Losses arising from the operations of any PRC Company subsequent to the
Closing Date and prior to the correction of such items of noncompliance as a
result of such violation or noncompliance; provided that, as to Losses arising
from the operations of any PRC Company subsequent to the Closing Date action is
taken to correct such noncompliance reasonably promptly upon discovery of such
noncompliance by Buyer or any of the PRC Companies;
(f) the following employee benefit matters: (x) the
maintenance of or contribution to a Pension Plan subject to Title IV of ERISA,
or obligation to contribute to a Multiemployer Plan, by an ERISA Affiliate of
any of the PRC Companies (which ERISA Affiliate is not itself one of the PRC
Companies), (y) any post-retirement medical or life insurance benefits and (z)
any "change of control" or similar payments to be made to Employees of PRC
Companies as a result of the transactions contemplated hereby (other than any
such payments made under plans or Benefit Arrangements assumed by Buyer pursuant
to Section 6.5);
(g) the "PRC Supplemental Executive Retirement Plan"
referred to in Schedule 3.14 and the Financial Statements; and
(h) the conduct of the business of Seller, Seller's
Parent and any of its Affiliates other than the PRC Companies.
For purposes of Section 11.4(a), all such representations and warranties shall
be read as if references therein to the materiality to the PRC Companies or any
of them of any condition, fact, statement, event or act (including without
limitation all references to "Material Adverse Effects" and "in all material
respects") were deleted and the effect of any such references were eliminated
altogether. Thus, for example: (i) any representation that a statement is true
and correct in all material respects shall be read as a representation that the
statement is true and correct; (ii) any representation that a condition exists
except to the extent that its failure to exist would not have a Material Adverse
Effect on the PRC Companies shall be read as a representation that such
condition exists; and (iii) any representation that no incidents of a specific
nature have occurred that would have a Material Adverse Effect on the PRC
Companies shall be read as a representation that no incidents of such nature
have occurred.
Section 11.5. Procedure.
(a) Promptly after acquiring knowledge of any claim in respect
of which a party (the "Indemnified Party") may seek indemnification from the
other party (the "Indemnifying Party") hereunder, the Indemnified Party shall
give written notice thereof to the Indemnifying Party describing such claim and
demanding indemnification hereunder. Notwithstanding the foregoing, failure to
provide the aforementioned notice will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party under this Agreement, except
to the extent that (i) such failure to provide notice causes the amounts paid by
the Indemnifying Party to be greater than they would have been had such
notice been given on a reasonably timely basis or (ii) such notice is not
delivered to the Indemnifying Party prior to the expiration of any applicable
survival period under Section 11.6. The Indemnifying Party will be entitled to
assume control of the defense of any claim, and to settle or compromise such
claim in its discretion, subject to the provisions of Sections 11.5(b) and
11.5(c). After written notice by the Indemnifying Party to the Indemnified Party
of its election to assume control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder for
any legal expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. Notwithstanding anything in this Section 11.5 to the
contrary, if the Indemnifying Party does not promptly assume control of the
defense of such action as provided in this Section 11.5, the Indemnified Party
shall have the right to defend such action in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor
(subject, if applicable, to the limitations contained in Section 11.7). An
Indemnifying Party may, at its option and expense, participate in the defense of
any indemnifiable claim.
(b) To the extent that any of the Losses by any of the Persons
entitled to indemnification under Section 11.3 or Section 11.4 relate to facts
and circumstances that occur both prior to and after the Closing, or relate to
both a Pre-Closing Claim and a Post-Closing Claim, then the Indemnifying Party
and the Indemnified Party shall jointly determine at all times thereafter the
actions
to be taken with respect to such claims and the control, investigation,
prosecution, defense and settlement thereof.
(c) Neither the Indemnifying Party nor the Indemnified Party
shall, without the written consent of the other party, settle or compromise any
indemnifiable claim or permit a default or consent to entry of any judgment. If
a settlement offer solely for money damages is made by the applicable third
party claimant, and the Indemnifying Party notifies the Indemnified Party in
writing of the Indemnifying Party's willingness to accept the settlement offer
and pay the amount called for by such offer without reservation of any rights or
defenses against the Indemnified Party, the Indemnified Party may withhold its
consent and continue to contest such claim, free of any participation by the
Indemnifying Party, and the amount of any ultimate liability with respect to
such indemnifiable claim that the Indemnifying Party shall have an obligation to
pay thereunder (regardless of the ultimate Loss sustained by the Indemnified
Party) shall be equal to the amount of the settlement offer that the Indemnified
Party declined to accept plus the previously unpaid Losses of the Indemnified
Party relating to such indemnifiable claim through the date of its rejection of
the settlement offer. If the Indemnifying Party makes any payment on any
indemnifiable claim, the Indemnifying Party shall be subrogated, to the extent
of such payment, to all rights and remedies of the Indemnified Party to any
insurance benefits or other claims of the Indemnified Party with respect to such
claim.
(d) With respect to any claim for which Seller or Seller's
Parent is the Indemnifying Party and for which the Indemnifying Party has
assumed control of the defense, Buyer shall
make employees of the PRC Companies reasonably available to assist the
Indemnifying Party in defending such claim, provided that the costs of providing
such assistance are paid by the Indemnifying Party or, if paid by Buyer or any
PRC Company, reimbursed to Buyer or the PRC Company, as appropriate, by the
Indemnifying Party.
(e) Any amounts to which an Indemnified Party is entitled
under this Article shall be paid by the Indemnifying Party promptly upon
request.
Section 11.6. Survival.
(a) The representations and warranties contained in or made
pursuant to this Agreement (other than those set forth in Section 3.30) shall
survive the Closing as provided in this Section 11.6(a). The representations and
warranties contained in or made pursuant to Section 3.30 shall expire on the
Closing Date. The representations and warranties contained (w) in Sections 3.1,
3.2 and 3.3, shall survive indefinitely, (x) in Sections 3.12 and 3.26 shall
expire on the third anniversary of the Closing Date, (y) in Section 3.16 shall
expire at the end of the applicable statute of limitations period (including
extensions) for the Tax matters referenced therein, and (z) in Section 3.17
shall expire on the fifth anniversary of the Closing Date. Except as otherwise
provided in this Section 11.6, all other representations and warranties set
forth in this Agreement or in any agreement or certificate delivered pursuant
hereto or in connection herewith shall expire on the second anniversary of the
Closing Date. The indemnifications set forth in Sections 11.1 and 11.2 shall
survive until the end of the applicable statute of limitations period (including
extensions) for the Tax matters referenced therein. The
indemnification set forth in Sections 11.3(a) and 11.4(a) shall survive for as
long as the pertinent representation and warranty survives. The indemnification
set forth in Sections 11.3(c), 11.4(c) and 11.4(f) shall survive until the third
anniversary of the Closing Date. The indemnification set forth in Section
11.4(e) shall survive until the fifth anniversary of the Closing Date. The
indemnification set forth in Sections 11.3(b), 11.3(d), 11.4(b), 11.4(d),
11.4(g) and 11.4(h) shall survive indefinitely.
(b) Except as set forth in this Section 11.6(b), any matter as to which
a claim has been asserted by notice to the other party that is pending or
unresolved at the end of any applicable limitation or survival period, including
any matter disclosed in this Agreement, shall continue to be covered by this
Article XI notwithstanding any applicable statute of limitations or the
expiration of any survival period until such matter is finally terminated or
resolved. Notwithstanding the previous sentence, the indemnification obligations
of Seller and Seller's Parent under Section 11.4(c) shall not survive beyond the
third anniversary of the Closing Date unless an Action shall have been commenced
as of the third anniversary of the Closing Date. Notice demanding
indemnification for the items set forth on Schedule 3.10 (as modified under
Section 9.2(e)) is acknowledged by the parties to have been given as of the
Closing Date.
Section 11.7. Limitations on Indemnification.
(a) Buyer shall not be required to indemnify Seller,
Seller's Parent or any of their Affiliates under Section 11.3(a) unless the
aggregate of all amounts for which indemnity would otherwise be payable
thereunder exceeds $1,500,000, and, in such
event, Buyer shall be responsible for only the amount in excess of such
$1,500,000. The total indemnification that Buyer may be required to pay under
Section 11.3(a) shall not exceed $100,000,000.
(b) Seller and Seller's Parent shall not be required to
indemnify Buyer or any of its Affiliates under Sections 11.4(a) and 11.4(e)
unless the aggregate of all amounts for which indemnity would otherwise be
payable thereunder exceeds $1,500,000 (for both such Sections in the aggregate),
and, in such event, Seller and Seller's Parent shall be responsible for only the
amount in excess of such $1,500,000. The total indemnification that Seller and
Seller's Parent may be required to pay under Sections 11.4(a) and 11.4(e) (in
the aggregate) shall not exceed $100,000,000.
(c) Seller and Seller's Parent shall not be required to
indemnify Buyer or any of its Affiliates under Section 11.4(c) (other than those
items set forth on Schedule 3.10 (or which otherwise were pending as of the
Closing Date) and any Carpal Tunnel Litigation) unless the aggregate of all
amounts for which indemnity would otherwise be payable thereunder exceeds
$1,500,000, and, in such event, Seller and Seller's Parent shall be responsible
for only the amount in excess of such $1,500,000. No credit will be given to
Seller and Seller's Parent for any reserves for litigation set forth on the
Financial Statements or included in the calculation of the Final Net Asset
Amount. Those items set forth on Schedule 3.10 and all Carpal Tunnel Litigation
are indemnifiable from the first dollar of Loss by Buyer or any of its
Affiliates.
(d) For purposes of Section 11.4(g), no credit will be
given to Seller and Seller's Parent for any reserves for the "PRC
Supplemental Executive Retirement Plan" set forth on the Financial Statements or
included in the calculation of the Final Net Asset Amount.
(e) For purposes of Section 11.3, any claim for
indemnification that might be brought under more than one provision of Section
11.3 may be brought under any applicable provision at Seller's discretion. For
purposes of Section 11.4, any claim for indemnification that might be brought
under more than one provision of Section 11.4 may be brought under any
applicable provision at Buyer's discretion.
(f) Losses for which an Indemnified Party shall be indemnified
hereunder shall be net of any insurance proceeds received by the Indemnified
Party from insurance companies, including affiliated insurance companies.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Limitation of Representations and Warranties.
(a) The parties hereto acknowledge and agree that
neither Seller nor Seller's Parent makes, and neither Seller nor Seller's Parent
has made, any representations or warranties relating to Seller, Seller's Parent
or any of the PRC Companies, or any of the transactions contemplated by this
Agreement, other than the representations and warranties expressly set forth in
this Agreement or in any agreement or certificate delivered pursuant hereto or
in connection herewith. Without limiting the generality of the disclaimer set
forth in the preceding sentence, other than the representations and warranties
expressly set forth in this Agreement or in any agreement or certificate
delivered pursuant
hereto or in connection herewith, neither Seller nor Seller's Parent makes, has
made or shall be deemed to have made any representations or warranties, in any
presentation or written information relating to the business of any of the PRC
Companies given or to be given in connection with the transactions contemplated
by this Agreement, in any filing made or to be made by or on behalf of any of
the PRC Companies with any Governmental Entity, and no statement, made in any
such presentation or written materials, made in any such filing or contained in
any such other information shall be deemed a representation or warranty
hereunder or otherwise. No Person has been authorized by Seller, Seller's Parent
or any of the PRC Companies to make any representation or warranty in respect of
Seller, Seller's Parent or any of the PRC Companies, or in connection with the
transactions contemplated by this Agreement, unless contained in this Agreement.
(b) Whenever any statement herein or in any schedule,
exhibit, certificate or other document delivered to any party pursuant to this
Agreement is made "to [its] knowledge" or "to [its] best knowledge" or words of
similar intent or effect of any party or its representative, such statement
shall be deemed to be made to the best knowledge of (x) with respect to the PRC
Companies, Senior Vice Presidents or higher ranking officials of PRC, (y) with
respect to Seller and Seller's Parent, the President, Vice President and Chief
Financial Officer and Vice President and General Counsel of Seller's Parent, and
shall be deemed to include a representation that a reasonable investigation of
the subject matter thereof has been conducted, and (z) with respect to Buyer,
Senior Vice Presidents or higher ranking officials of Buyer. With
respect to Seller and Seller's Parent, a reasonable investigation shall mean
that senior management of the pertinent corporation have shown the Employees set
forth on Schedule 12.1(b) hereto the relevant statement and have consulted with
such individuals as to whether they have knowledge of any fact or circumstance
that would make such statement untrue.
Section 12.2. Disclosure. Certain information set forth in the
Schedules has been included and disclosed solely for informational purposes and
may not be required to be disclosed pursuant to the terms and conditions of this
Agreement. The disclosure of any such information shall not be deemed to
constitute an acknowledgement or agreement that the information is required to
be disclosed in connection with the representations and warranties made in this
Agreement or that the information is material, nor shall any information so
included and disclosed be deemed to establish a standard of materiality or
otherwise used to determine whether any other information is material.
Section 12.3. Expenses; Certain Taxes. Except as otherwise contemplated
by Section 10.2, all legal, accounting and other costs and fees incurred by
Seller or Seller's Parent in connection with the transactions contemplated by
this Agreement shall be borne and paid for by Seller or Seller's Parent. Except
as otherwise contemplated by Section 10.2, all legal, accounting and other costs
and fees incurred by Buyer in connection with the transactions contemplated by
this Agreement shall be borne and paid for by Buyer. All Taxes (other than taxes
on, relating to or measured by income or gains), stamp duties, notarial,
registration and recording fees and similar Taxes resulting from or relating to
the
transfer of the PRC Shares to Buyer shall be borne one-half by Buyer and
one-half by Seller (including any Taxes (other than Income Taxes) on the deemed
sale of assets under the Section 338(h)(10) Election). Buyer and Seller agree to
treat the transactions contemplated by this Agreement as a sale of the PRC
Shares for purposes of such Taxes.
Section 12.4. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in respect of the matters
set forth herein, and all prior negotiations, writings and understandings
relating to the subject matter of this Agreement, other than the Confidentiality
Agreement, are merged herein and are superseded and cancelled by this Agreement.
Other than as set forth in this Agreement, no representations, warranties,
covenants, agreements or conditions, express or implied, whether by statute or
otherwise, have been made by the parties hereto.
Section 12.5. Amendment and Waiver. This Agreement may be amended,
modified, supplemented or changed in whole or in part only by an agreement in
writing making specific reference to this Agreement and executed by each of the
parties hereto. Any of the terms and conditions of this Agreement may be waived
in whole or in part, but only by an agreement in writing making specific
reference to this Agreement and executed by the party that is entitled to the
benefit thereof.
Section 12.6. Binding Agreement and Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that this
Agreement and the rights of
the parties hereunder may not be assigned, and the obligations of the parties
hereunder may not be delegated, in whole or in part, without the prior written
consent of the other party hereto, except that Buyer may assign its rights
hereunder to any wholly-owned Subsidiary of Buyer so long as Buyer is not
released from its obligations hereunder. If Seller's Parent in one or a series
of transactions sells, disposes of or otherwise transfers all or substantially
all of its assets, prior to any such sales, dispositions or transfers, Seller's
Parent shall, without being released from its obligations hereunder, cause the
transferee to assume the obligations of Seller's Parent under this Agreement.
Section 12.7. No Third Party Beneficiaries. Other than as specifically
provided in Sections 11.3 and 11.4, nothing in this Agreement is intended or
shall be construed to confer upon any Person other than the parties hereto and
their Subsidiaries and Affiliates any rights or remedies.
Section 12.8. Notices. Any notice, request, instruction or other
document or communication required or permitted to be given under this Agreement
shall be in writing and shall be deemed to be given upon delivery in person or
by telecopier, three business days after being deposited in the mail, postage
prepaid, for mailing by certified or registered mail, or one business day after
being deposited with an overnight courier, charges prepaid, as follows:
If to Seller or Seller's Parent, delivered or mailed to:
c/o The Black & ▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Vice President and General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy delivered or mailed to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Miles & Stockbridge,
a Professional Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer (or, after the Closing, any of the PRC Companies),
delivered or mailed to:
▇▇▇▇▇▇ Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Senior Vice President and
General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy delivered or mailed to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esquire
O'Melveny & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses as may be specified in writing at any time
or from time to time by either party to the other party hereto.
Section 12.9. Further Assurances. The parties hereto each agree to
execute, make, acknowledge, and deliver such instruments, agreements and other
documents as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
Section 12.10. Article and Section Headings. The Article and Section
headings contained in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning or interpretation of this
Agreement or any of its terms and conditions.
Section 12.11. Governing Law. This Agreement shall be construed and
enforced in accordance with and shall be governed by the Laws of the State of
Delaware, without regard to the conflict of laws and principles thereof.
Section 12.12. Construction. As used in this Agreement, any reference
to the masculine, feminine or neuter gender shall include all genders, the
plural shall include the singular, and the singular shall include the plural.
With regard to each and every term and condition of this Agreement and any and
all agreements and instruments subject to the terms hereof, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party hereto actually prepared, drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto.
Section 12.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 12.14. Reference of Disputes to Senior Officers. Any dispute
between Seller and Seller's Parent, on the one hand, and Buyer, on the other
hand, arising out of or in connection with this Agreement or any alleged breach
hereof may, at the option of either Seller or Buyer, be submitted for discussion
and possible resolution by senior officers of Seller's Parent and Buyer, as
designated by their respective chief executive officers, for a period of 30 days
(or such longer period as the parties may in particular cases so decide) before
initiating any arbitration pursuant to Section 12.15.
Section 12.15. Arbitration. Except as specifically provided for
elsewhere in this Agreement, all claims and controversies arising out of or in
connection with this Agreement shall be subject to binding arbitration in
Virginia by a single arbitrator in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA") or the existing Rules of
Practice and Procedures of the Judicial Arbitration and Mediation Services, Inc.
("JAMS"), and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The party filing the arbitration shall
have the right to select either AAA or JAMS. The parties shall be entitled to
discovery in accordance with the provisions of Virginia law. The prevailing
party in any arbitration proceeding hereunder as determined by the arbitrator or
in any legal proceedings or actions arising from or in connection with this
Agreement shall be entitled to recover reasonable attorneys' fees and costs.
Nothing herein shall prohibit a party from seeking equitable relief in a court
of law to maintain the status quo while an arbitration is pending hereunder. The
parties agree that the arbitrator shall not have the right to award punitive
damages.
IN WITNESS WHEREOF, Seller, Seller's Parent, PRC and Buyer have
executed this Agreement as of the day and year first above written.
THE BLACK & ▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and General
Counsel
PRC INVESTMENTS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
PRC INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ INDUSTRIES, INC.
By: /s/ H. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
Schedules and Exhibits omitted.