SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 16, 1995
LOGICON, INC.
DELAWARE
(State or other jurisdiction of incorporation or organization)
1-7777 95-2126773
(Commission File Number) (IRS Employer
identification number)
3701 Skypark Drive, Torrance, California 90505-4794
(Address of principal executive offices) (Zip Code)
(310) 373-0220
Registrant's telephone number, including area code
<PAGE>
Item 2. Acquisition or Disposition of Assets
(a) On February 16, 1995, Logicon, Inc., a Delaware corporation and
the Registrant, acquired all of the outstanding stock of Syscon
Corporation, a District of Columbia corporation, located at 8110
Gatehouse Road, Falls Church, VA 22042, which operated as an
indirectly wholly-owned subsidiary of Harnischfeger Industries,
Inc., a Delaware corporation, for a purchase price of $45 million
in cash.
(b) The acquisition will be accounted for as a purchase and will be
paid for using Logicon's available working capital balances.
Syscon Corporation will operate as a wholly-owned subsidiary of
Logicon, Inc.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial statements of businesses acquired.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholder of Syscon Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and retained earnings and
of cash flows present fairly, in all material respects, the financial
position of Syscon Corporation and its subsidiaries ("Syscon") at
October 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended October 31,
1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Syscon's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
As more fully explained in Note 8, Logicon, Inc. has acquired 100% of
Syscon's outstanding common stock. The accompanying financial
statements do not reflect any purchase accounting adjustments that may
result from this purchase.
PRICE WATERHOUSE LLP
Washington, D.C.
December 8, 1994, except as to Note 8,
which is as of February 24, 1995.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Statement of Operations and Retained Earnings
(Dollar amounts in thousands)
Year Ended October 31,
--------------------------
1994 1993 1992
Sales $132,260 $137,829 $135,322
------- ------- -------
Operating costs and expenses 112,059 114,938 112,001
Selling, general and
administrative expenses 17,799 14,147 15,151
HII management fee 2,645 2,757 2,706
Goodwill amortization 2,535 2,535 2,535
------- ------- -------
Operating (loss) income -2,778 3,452 2,929
Interest income,
primarily from HII 1,315 836 606
------- ------- -------
(Loss) income before provision
for income taxes -1,463 4,288 3,535
Provision for income taxes 434 2,693 2,473
------- ------- -------
Net (loss) income -1,897 1,595 1,062
Retained earnings, beginning of year 16,457 14,862 13,800
------- ------- -------
Retained earnings, end of year $14,560 $16,457 $14,862
======= ======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Balance Sheet
(Dollar amounts in thousands)
October 31,
------------------
1994 1993
ASSETS
Current assets
Cash and cash equivalents $ 713 $ 471
Contract receivables 27,819 38,604
Other current assets 2,284 3,718
------- -------
30,816 42,793
------- -------
Receivable from HII - net 43,563 32,944
------- -------
Property and equipment
Land and buildings 2,505 2,833
Leasehold improvements 1,191 2,258
Furniture and equipment 10,626 16,869
------- -------
14,322 21,960
Accumulated depreciation -9,190 -14,409
------- -------
5,132 7,551
------- -------
Goodwill 43,054 45,589
Other assets 1,876 1,337
------- -------
Total assets $124,441 $130,214
======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Balance Sheet
(Dollar amounts in thousands)
October 31,
------------------
1994 1993
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Trade accounts payable $ 2,424 $ 3,222
Employee compensation and benefits 9,021 9,612
Deferred income taxes 556 2,649
Other accrued liabilities 1,552 1,821
------- -------
13,553 17,304
Non-current liabilities
Deferred income taxes 2,428 2,553
------- -------
Total liabilities 15,981 19,857
------- -------
Shareholder's equity
Common stock (par value, $.05 per share
1,000 shares authorized, 1,000 shares
issued and outstanding) 1 1
Capital in excess of par value 93,899 93,899
Retained earnings 14,560 16,457
------- -------
Total shareholder's equity 108,460 110,357
------- -------
Commitments and contingencies
Total liabilities and shareholder's equity $124,441 $130,214
======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Statement of Cash Flows
(Dollar amounts in thousands)
Year Ended October 31,
-----------------------
1994 1993 1992
Cash flows from operating activities:
Net (loss) income $-1,897 $ 1,595 $ 1,062
Add (deduct) items not affecting cash:
Depreciation 1,876 2,092 2,268
Amortization 2,535 2,535 2,535
Loss on dispositions of property
and equipment 1,276 79 150
Deferred income taxes -2,218 1,169 -2,396
Changes in working capital:
Decrease in receivables from HII 4,681 4,393 7,160
Decrease (increase) in contract
receivables 10,785 -4,769 11,909
Decrease (increase) in other
current assets 1,434 1,209 -20
(Decrease) increase in trade
accounts payable -798 -118 362
(Decrease) increase in employee
compensation and benefits -591 112 3,567
Decrease (increase) in other
accrued liabilities -269 -750 465
------ ------ -------
Net cash provided by operating activities 16,814 7,547 27,062
------ ------ -------
Cash flows from investing activities:
Additions to property and
equipment and other assets -1,540 -3,373 -1,857
Proceeds from sale of property
and equipment 268 0 0
Purchase of remaining 30% interest
in joint venture 0 0 -275
------ ------ ------
Net cash used in investing activities -1,272 -3,373 -2,132
------ ------ ------
Cash flows from financing activities:
Cash remitted to HII -15,300 -6,525 -24,350
------ ------ -------
Increase (decrease) in cash and
cash equivalents 242 -2,351 580
Cash and cash equivalents at
beginning of year 471 2,822 2,242
------ ------ ------
Cash and cash equivalents at end of year $ 713 $ 471 $ 2,822
====== ====== ======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Notes to Financial Statements
(Dollar amounts in thousands unless otherwise indicated)
NOTE 1 - Significant Accounting Policies
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - SYSCON Corporation
("Syscon") is engaged principally in the business of providing systems
development, systems integration, and systems services to the United
States Government and commercial enterprises. Syscon is a wholly-owned
subsidiary of HIHC, Inc. ("HIHC"), which is a wholly-owned subsidiary of
Harnischfeger Industries, Inc. ("HII") (See Note 8). The consolidated
financial statements include the accounts of all Syscon subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
REVENUE RECOGNITION - Revenue on cost-plus-fee contracts is recognized
to the extent of costs incurred plus a proportionate amount of fees
earned. Revenue on time-and-materials contracts is recognized based
upon hours incurred extended at contract rates. Revenue on fixed-price
contracts is recognized on the percentage-of-completion method based on
costs incurred in relation to total estimated costs. Anticipated losses
are recognized as soon as they become known.
OPERATING COSTS AND EXPENSES - Operating costs and expenses include
direct and indirect costs of services and products provided.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Buildings are depreciated on a straight-line basis over their estimated
useful lives of 20 to 30 years. Furniture and equipment are depreciated
by the straight-line and double-declining balance methods over their
estimated useful lives ranging from 3 to 10 years. Leasehold
improvements are amortized over the terms of the related leases using
the straight-line method.
CASH EQUIVALENTS - Syscon considers all highly liquid debt instruments
with an original maturity of three months or less at the date of
purchase to be cash equivalents.
GOODWILL - Goodwill represents the excess of the purchase price paid by
HII in December, 1986 over the estimated fair value of identifiable net
assets at the date of acquisition. Fair values were assigned based on
appraisals, evaluations, estimations and other studies. Syscon is
amortizing goodwill on a straight-line basis over a twenty-five year
period. Accumulated amortization was $19,672 and $17,137 at October 31,
1994 and 1993, respectively. Syscon periodically assesses the carrying
value of goodwill. Such assessments include a comparison of estimated
future operating cash flows anticipated to be generated during the
remaining life of the goodwill to the net carrying value of goodwill.
To date, such assessments have not resulted in recognition of an
impairment loss.
INCOME TAXES - Since its acquisition, Syscon has been included in HII's
consolidated tax return. In accordance with the intercompany tax
allocation policy with HII, the consolidated income tax liability has
generally been allocated to Syscon as if Syscon filed separate income
tax returns. Syscon has recorded Federal taxes payable as amounts due
to HII.
Provisions for income taxes recognize the tax effect of all transactions
entering into the determination of net income for financial reporting
purposes, irrespective of when such transactions are reported for tax
purposes. Temporary differences relate primarily to depreciation,
differences in revenue recognition, and certain provisions, primarily
employee benefit related items. Syscon has adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109), through retroactive restatement of prior years' results. The
effect of the adoption of FAS 109 was not significant.
INDEPENDENT RESEARCH AND DEVELOPMENT EXPENSES - Independent research and
development costs are expensed as incurred. Such costs incurred in the
development of new products or significant improvements to existing
products amounted to $490, $638 and $971 in 1994, 1993 and 1992,
respectively, and are included in Selling, General and Administrative
expenses.
NOTE 2 - Contract Receivables
Contract receivables at October 31 consisted of the following:
1994 1993
Billed receivables $14,807 $20,070
Unbilled receivables:
Amounts currently billable 7,897 7,804
Fixed-price contracts in progress,
billable upon milestones/completion 1,354 3,121
Retainages billable upon contract
completion 3,936 4,517
Amounts billable upon execution of
contractual documents 268 2,165
Amounts billable upon contractual
modification 1,807 2,994
Amounts billable upon approval of
actual billing rates 547 620
Allowance for doubtful accounts
and contract losses -2,797 -2,687
------ ------
$27,819 $38,604
====== ======
Subsequent to year-end, contractual documents have been executed or are
being negotiated for $228 of the October 31, 1994 amounts reported as
"Amounts billable upon execution of contractual documents" and "Amounts
billable upon contractual modification". Approximately $1,252 of the
"Retainages billable upon contract completion" at October 31, 1994
should be collected within one year.
Revenues derived from Syscon's principal customer, the U.S. Government,
account for approximately 95% of total revenue.
NOTE 3 - Income Taxes
The provision for income taxes for the years ended October 31 consisted
of the following:
<PAGE>
1994 1993 1992
Current provision:
Federal $2,264 $1,136 $4,031
State 386 388 838
----- ----- -----
2,650 1,524 4,869
----- ----- -----
Deferred provision (benefit):
Federal -1,920 1,011 -2,102
State -296 158 -294
----- ----- -----
-2,216 1,169 -2,396
----- ----- -----
Provision for income taxes $ 434 $2,693 $2,473
===== ===== =====
A reconciliation of the Federal statutory tax rate to the consolidated
effective tax rate for the years ended October 31 follows:
1994 1993 1992
Federal statutory tax rate 35.0% 34.0% 34.0%
Nondeductible goodwill amortization -60.6 20.6 24.4
State taxes, net of federal benefit -4.1 8.3 10.2
R&D credits utilized 0.0 -1.4 -3.4
Other items - net 0.0 1.3 4.8
----- ----- -----
Consolidated effective income tax rate -29.7% 62.8% 70.0%
===== ===== =====
Deferred income taxes are provided for temporary differences between book
and tax basis of Syscon's assets and liabilities. The following table
summarizes the temporary differences comprising the current deferred tax
liability:
1994 1993
Differences in revenue recognition
for book and tax purposes $1,834 $3,801
Employee benefit related items -1,278 -1,152
----- -----
Total deferred income taxes - current $ 556 $2,649
===== =====
The temporary differences comprising non-current deferred income taxes
were as follows:
1994 1993
Tax depreciation in excess of book expense $1,559 $1,785
Tax R&D credit carryovers -801 -906
Limited partnership distributions 1,119 1,023
Other 551 651
----- -----
Total deferred income taxes - non current $2,428 $2,553
===== =====
Income taxes paid to HII and to various states were $2,689, $1,988 and
$4,354 in 1994, 1993 and 1992, respectively.
NOTE 4 - Employee Benefit Plans
Syscon has a qualified profit sharing plan and a qualified employee stock
bonus plan, both of which are defined contribution plans and cover
<PAGE>
approximately 68% of its employees. Contributions to the plans are
determined by Syscon's Board of Directors. For the years ended October
31, 1994, 1993 and 1992, Syscon provided $1,561, $2,119 and $2,136 for
the profit sharing plan and $2,066, $2,119 and $2,136 for the employee
stock bonus plan, respectively.
Syscon is a participant in the HII 401(k) savings plan. All employees
may participate by contributing 1% to 20% of their compensation.
Approximately 100 employees receive employer contributions based upon
contract award fees received, not to exceed 3% of the participating
employee's gross wages. For the years ended October 31, 1994, 1993 and
1992, Syscon provided $129, $111 and $108 for the 401(k) plan,
respectively.
Syscon does not provide postretirement health care and life insurance
benefits to its employees.
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (FAS 112), must be adopted for
the fiscal year beginning November 1, 1994. Syscon has not yet completed
its analysis of the effect of implementing FAS 112, but it is anticipated
that the impact on Syscon's result of operations and financial position
will not be material.
NOTE 5 - Operating Leases
Syscon leases certain office space as well as reproduction and other
equipment. Certain of the leases have renewal options at competitive
rates and provisions requiring Syscon to pay maintenance, property taxes
and insurance. Generally, all rental payments are fixed.
Total rental expense under operating leases, excluding maintenance, taxes
and insurance, was $4,937, $5,615 and $5,983 in 1994, 1993 and 1992,
respectively.
At October 31, 1994, the future payments for all operating leases with
remaining lease terms in excess of one year and excluding maintenance,
taxes and insurance, were as follows:
Fiscal Year:
1995. . . . . . . . . $3,371
1996. . . . . . . . . .2,608
1997. . . . . . . . . .2,160
1998. . . . . . . . . .1,349
1999. . . . . . . . . . .858
Thereafter . . . . . . . .4,114
Syscon has interests in three limited partnerships, accounted for under
the cost method, for ownership of buildings. Syscon shares in profits;
however, losses are limited to its investments, which are carried at zero
for financial reporting purposes.
Syscon has recently restructured a portion of its operations, has severed
employees and reduced its operations at certain field offices. In
connection with these reductions in personnel, Syscon has fully reserved
the costs related to reducing its leased office space at certain
locations. The total reserve at October 31, 1994 amounted to $550.
NOTE 6 - Commitments and Contingencies
Syscon is a party to litigation matters and claims which are normal in
the course of its operations and, while the results of litigation and
<PAGE>
claims cannot be predicted with certainty, management believes that the
final outcome of such matters will not have a materially adverse effect
on Syscon's consolidated financial position or results of operations.
As a contractor with various agencies of the U.S. Government, principally
the Department of Defense, Syscon is subject to strict procurement
regulations, with non-compliance found by any one agency possibly
resulting in fines, penalties, debarment or suspension from receiving
additional contracts with some or all agencies. In July 1993, the U.S.
Air Force rescinded a contract with Syscon for procurement of database
machines for an estimated value of $71,000. As a result of internal
reviews conducted by both HII and Syscon attorneys in connection with a
post-award protest of the contract by another bidder, Syscon determined
that evidence exists to indicate that an inaccurate certificate of
compliance of the equipment proposed in connection with the contract may
have been submitted. Syscon has been accepted into the Government's
voluntary disclosure program. Historically, contractors accepted into
this program have generally not been subjected to suspension or debarment
from future contracting with the Government. The Government
investigation of this matter is ongoing, but based on the facts known to
date, management believes that the final outcome of the matter will not
have a materially adverse effect on Syscon's consolidated financial
position or results of operations.
Substantially all payments to Syscon on U.S. Government contracts and
subcontracts are provisional payments which are subject to adjustments
upon audit by the Defense Contract Audit Agency (DCAA). Audits through
1991 have been completed and final rates established. The audit years
1992 through 1994 continue to be under review by DCAA. In the opinion of
management, resulting audit findings, if any, will not have a materially
adverse effect on Syscon's consolidated financial position or results of
operations.
On May 19, 1993, a subsidiary of a former corporate affiliate of Syscon
instituted an action in Canada against a customer for breach of contract
and for collection of amounts due. From 1990 to 1992, Syscon provided
services to the customer as a subcontractor of the former affiliate and
later in the project as a direct contractor to the customer. On January
13, 1994, the customer provided Syscon and its former affiliate with a
draft statement of claim jointly against Syscon and its former affiliate
for damages for breach of contract arising from the same project. The
customer has not instituted legal proceedings based on its draft
statement of claim and the parties are currently engaged in settlement
negotiations. HII will indemnify Syscon for any losses that it might
incur with respect to this matter in excess of the amount of Syscon's
accounts receivable. However, Syscon is obligated to cover one-half of
all costs incurred in the defense of this matter and to provide technical
support at its own expense. Management believes that the ultimate
resolution of these matters will not have a materially adverse effect on
Syscon's financial position or results of operations.
NOTE 7 - Transactions with Affiliated Companies
Syscon and HII have entered into a management arrangement whereby Syscon
is provided with certain services including, but not limited to, matters
of organization and administration, cash management, labor relations,
ERISA, relations with the general public and governmental authorities,
financial policies and practices, taxation and legal affairs. Syscon is
charged a fee equal to 2% of Syscon's consolidated net sales for these
services. Management believes that the management fee charged is
reasonable in light of the level of services provided by HII. Interest
income on intercompany receivables is paid at the 13-week treasury bill
rate.
Transactions with HII and affiliated companies for the years ending
October 31, were as follows:
1994 1993 1992
Sales $ 1,028 $ 3,043 $ 3,296
Receivables 43,563 32,944 30,812
Management fee 2,645 2,757 2,706
Interest income 1,289 822 577
NOTE 8 - Subsequent Event
Subsequent to year end, HII decided to terminate its plan to spin-off
Syscon and on February 16, 1995, Logicon, Inc. purchased 100% of the
outstanding stock of Syscon from HII for $45,000. As a result of this
transaction, Syscon has become a wholly-owned subsidiary of Logicon.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
and Shareholder of Syscon Corporation
Our audits of the consolidated financial statements of Syscon Corporation
referred to in our report dated December 8, 1994, except as to Note 8, which is
as of February 24, 1995, appearing on page 2 of this Current Report on Form 8-K
also included an audit of the Financial Statement Schedules appearing on pages
14 and 15 of this Current Report on Form 8-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PRICE WAREHOUSE LLP
Washington, D.C.
December 8, 1994
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Schedule IV - Indebtedness of and to Related Parties - Not Current
(Dollar amounts in thousands)
Balance at Balance at
Beginning End
Debtor of Year Additions Deductions of Year
- -------------------------------------------------------------------------
Harnischfeger Industries, Inc.
For the year ended October 31,
1994 $32,944 $15,300 $4,681 $43,563
1993 $30,812 $ 6,525 $4,393 $32,944
1992 $13,622 $24,350 $7,160 $30,812
The above schedule represents the transactions that have affected the
intercompany balance between Syscon Corporation and Harnischfeger
Industries, Inc. ("HII") for the last three fiscal years. Additions
represent net cash remitted to HII and Deductions represent net
intercompany charges, federal tax provisions and other items paid by HII
on Syscon's behalf. The intercompany balance is due on demand and
accrues interest on the daily balance at the 13 week treasury bill yield.
<PAGE>
SYSCON CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a Subsidiary of Harnischfeger Industries, Inc.)
Schedule VIII - Valuation and Qualifying Accounts
(Dollar amounts in thousands)
Balance at Additions Balance at
Beginning Charged Deductions End
Classification of Year to Expenses (1) of Year
- -------------------------------------------------------------------------
Allowances deducted in balance
sheet from accounts receivable
for possible contract losses
and doubtful accounts:
For the year ended October 31,
1994 $2,687 $730 $620 $2,797
1993 $2,890 $ 0 $203 $2,687
1992 $2,774 $303 $187 $2,890
(1) Represents write-off of bad debts, net of recoveries.
(b) Pro forma financial information.
The unaudited pro forma condensed combined statement of income of
Logicon, Inc. (Logicon) and Syscon Corporation (Syscon) for the most
recent nine month period and for the most recent fiscal year reflect
adjustments as if the transaction had occurred on April 1, 1993. The
unaudited pro forma condensed combined balance sheet is presented as if
the transaction had been consummated as of the end of Logicon's third
fiscal quarter. The acquisition has been accounted for using the
purchase method.
The unaudited pro forma condensed combined financial statements reflect
Logicon's allocation of the purchase price including transaction costs of
approximately $45.3 million to the assets and liabilities of Syscon based
upon Logicon's current estimates of the relative values of the assets
acquired and liabilities assumed. The final allocation of the purchase
price may vary as additional information is obtained, and, accordingly,
the ultimate allocations may differ from those used in the unaudited pro
forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the separate historical financial statements and
related notes of Syscon, appearing in answer to Item 7(a) of this form
8-K and the historical financial statements, related notes and
"Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations" of Logicon previously filed with the
Securities and Exchange Commission. The pro forma information is not
necessarily indicative of the results that would have been reported had
the acquisition actually occurred on the dates specified, nor is it
<PAGE>
necessarily indicative of the future results of the combined Company.
LOGICON, INC. AND SYSCON CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (Unaudited)
Nine-Month Period Ended
(Dollars and shares in thousands, except per share data)
1/31/95
12/31/94 SYSCON Pro Forma
Logicon Note 2 Adjustments Combined
Historical Historical Note 1 Pro Forma
- -------------------------------------------------------------------------
Revenues and interest $236,569 $93,127 -$1,522(a) $326,800
-1,374(b)
Costs of services & systems 193,662 78,092 271,754
Selling and administrative
expenses 20,784 13,094 33,878
HII management fee 1,834 -1,834(c) 0
Amortization of goodwill 1,902 -1,902(d) 850
850(e)
------- ------ ----- -------
Income before taxes on income 22,123 -1,795 -10 20,318
Provision for taxes on income 8,938 53 -439(f) 8,552
------- ------ ----- -------
Net income $13,185 -$1,848 $429 $11,766
====== ===== ===== =======
Earnings per share of
common stock: $1.85 $1.65
===== =====
Average number of common
shares, including common
stock equivalents 7,139 7,139
- ------------------------- ===== =====
Note 1 - Pro forma adjustments to nine month period (Dollars in
thousands)
(a) To reflect a reduction in interest income from the use of
$45,300, in cash, for the purchase price plus transaction
costs to acquire Syscon Corporation.
(b) To eliminate interest income paid to Syscon by its former
parent, Harnischfeger Industries, Inc. (HII).
(c) To eliminate management fees charged to Syscon by its former
parent HII.
(d) To eliminate amortization of goodwill charged to Syscon by its
former parent HII.
<PAGE>
(e) To reflect nine months amortization of goodwill of $22,667 over
a twenty year period. This amount represents the current
estimate of the excess of purchase price over the relative
values of the assets acquired and liabilities assumed.
(f) To reflect the income tax effect of pro forma adjustments
calculated at applicable federal and state statutory rates.
Note 2 - Historical results of operations of Syscon Corporation for the
nine month period include certain pre-tax non-recurring items as follows:
Severance pay $ 800
Expenses to pursue international
business opportunity 1,064
Write off of management information
system capitalized software 688
Facility relocation 550
-----
$3,102
=====
Had these non-recurring items not been included in the nine month pro
forma financial statements, pro forma earnings per share would have been
$1.91.
<PAGE>
LOGICON, INC. AND SYSCON CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (Unaudited)
Year Ended
(Dollars and shares in thousands, except per share data)
3/31/94 1/31/94 Pro Forma
Logicon SYSCON Adjustments Combined
Historical Historical Note 3 Pro Forma
- -------------------------------------------------------------------------
Revenues and interest $320,192 $140,530 -$1,450(a) $458,411
-861(b)
Costs of services & systems 258,165 116,887 375,052
Selling and administrative
expenses 27,511 14,022 41,533
HII management fee 2,794 -2,794(c) 0
Amortization of goodwill 2,535 -2,535(d) 1,133
1,133(e)
------- ------- ------ -------
Income before taxes on income 34,516 4,292 1,885 40,693
Provision for taxes on income 14,109 2,735 263(f) 17,107
------- ------- ------ -------
Income before cumulative effect
of a change in accounting
principle 20,407 1,557 1,622 23,586
Cumulative effect, on prior
years, of change in accounting
for taxes on income 635 635
------- ------- ------ -------
Net income $21,042 $1,557 $1,622 $24,221
======= ======= ====== =======
Earnings per share of
common stock:
Before cumulative effect of
a change in accounting
principle $2.72 $3.15
Cumulative effect, on prior
years, of change in accounting
for taxes on income 0.08 0.08
----- -----
Net income $2.80 $3.23
===== =====
Average number of common
shares, including common
stock equivalents 7,502 7,502
===== =====
Note 3 - Pro forma adjustments to annual period (Dollars in thousands)
(a) To reflect a reduction in interest income from the use of
$45,300, in cash, for the purchase price including transaction
costs to acquire Syscon Corporation.
(b) To eliminate interest income paid to Syscon by its former
parent Harnischfeger Industries, Inc. (HII).
(c) To eliminate management fees charged to Syscon by its former
parent HII.
(d) To eliminate amortization of goodwill charged to Syscon by its
former parent HII.
(e) To reflect the amortization of goodwill of $22,667 over a
twenty year period. This amount represents the current
estimate of the excess of purchase price over the relative
values of the assets acquired and liabilities assumed.
(f) To reflect the income tax effect of pro forma adjustments
calculated at applicable federal and state statutory rates.
LOGICON, INC. AND SYSCON CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET (Unaudited)
(Dollars in thousands)
12/31/94 1/31/95 Pro Forma
Logicon SYSCON Adjustments Combined
Historical Historical Note 4 Pro Forma
- -------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $40,968 $ 471 -$25,600(a) $16,586
747(b)
Marketable securities 29,173 -19,700(a) 9,473
Accounts receivable 35,730 27,257 62,987
Prepaid expenses 1,479 360 1,839
Deferred income
tax benefits 6,831 -1,211(c) 5,620
------- ------ ------ -------
Total current assets 114,181 28,088 -45,764 96,505
Equipment and leasehold
improvements, net 5,205 4,907 10,112
Receivable from HII - net 747 -747(b) 0
Excess of purchase price
over net assets of business
acquired, net of accumulated
amortization 6,190 42,419 -42,419(d) 28,857
22,667(d)
Other assets 1,203 1,203
------- ------ ------ -------
$125,576 $77,364 -$66,263 $136,677
======= ====== ====== =======
Current liabilities:
Accounts payable & other
accrued liabilities $5,155 $3,258 $8,413
Accrued salaries, wages
and employee benefits 17,912 6,288 24,200
Deferred income taxes 556 -556(c) 0
Estimated taxes on income 1,280 -218 551(c) 1,613
------- ------ ------ -------
Total current liabilities 24,347 9,884 -5 34,226
Deferred income taxes 2,428 -1,206(c) 1,222
Stockholders' equity 101,229 65,052 -45,300(a) 101,229
-19,752(d)
------- ------ ------ -------
$125,576 $77,364 -$66,263 $136,677
======= ====== ====== =======
Note 4 - Pro forma adjustments (Dollars in thousands)
(a) To reflect the payment of $45,300, in cash for the purchase price
plus transaction costs to acquire Syscon Corporation.
(b) To reflect the payment on February 16, 1995 to Syscon by its
former parent, Harnischfeger Industries, Inc. (HII), of HII's
intercompany balance.
(c) To reclassify income taxes payable and deferred tax benefits and
liabilities consistent with Logicon's presentation.
(d) To eliminate goodwill recorded in Syscon's accounts by its former
parent HII and to record Logicon's current estimate of the excess
of purchase price over the relative values of the assets acquired
and liabilities assumed.
(c) Exhibits.
Exhibit 2: Agreement of Acquisition
Exhibit 23: Consent of Independent Accountants
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Logicon, Inc.
(Registrant)
March 2, 1995 By: RALPH L. WEBSTER
Ralph L. Webster
Vice President -
Chief Financial Officer
<PAGE>
Exhibit 2. AGREEMENT OF ACQUISITION
This Agreement of Acquisition (this "Agreement") is dated as
of the 20th day of January, 1995 by and among Harnischfeger Industries,
Inc., a Delaware corporation ("Harnischfeger"), HIHC, Inc., a Delaware
corporation ("HIHC") and Logicon, Inc., a Delaware corporation
("Logicon").
WITNESSETH
WHEREAS, the Boards of Directors of Logicon, Harnischfeger
and HIHC deem it advisable and in the best interests of their respective
companies and stockholders, that Logicon acquire all of the stock (the
"Acquisition") of Harnischfeger's indirect wholly-owned subsidiary,
Syscon Corporation, a District of Columbia corporation (together with
all of its subsidiaries, "Syscon") from HIHC.
NOW, THEREFORE, in order to consummate the Acquisition and
the transactions contemplated hereby, and in consideration of the mutual
representations, warranties, covenants and agreements contained herein,
the Parties agree as follows:
ARTICLE I
THE ACQUISITION
SECTION 1.1 PURCHASE PRICE. Subject to the provisions of
this Agreement, Logicon shall acquire from HIHC all of the Stock of
Syscon ("Stock") for Forty-Five Million Dollars ($45,000,000) (the
"Purchase Price"), subject to adjustment as provided in Section 1.4
hereof, in currency of the United States.
SECTION 1.2 CLOSING DATE. The Closing of the Acquisition
(the "Closing") shall take place at 10:00 o'clock a.m. Pacific Time at
the corporate office of Logicon, Inc., 3701 Skypark Drive, #200,
Torrance, CA 90505 on the tenth business day following the date on which
all of the respective conditions to the Parties obligations hereunder
(other than conditions to be satisfied at the Closing), have been
satisfied or waived (the "Closing Date"), or at such other place or time
as the Parties may determine by mutual agreement. All matters at the
Closing shall be considered to take place simultaneously and no delivery
of any document shall be deemed complete until all transactions and
deliveries of documents are completed.
SECTION 1.3 PRE-CLOSING STATEMENT. (a) As soon as
practicable Harnischfeger shall cause Syscon to prepare a pre-closing
statement (the "Pre-Closing Statement") reflecting the Net Asset Value of
Syscon, as defined in (b) below, as of December 31, 1994. The Pre-Closing
Statement shall be prepared on a basis consistent with the
October 31, 1994 Certified Financial Statements (referred to in Section
3.17 below). There shall be no changes to the asset valuation reserves
included in the October 31, 1994 Certified Financial Statements unless
the assets subject to such reserves have been converted to cash. To the
extent the Net Asset Value as of December 31, 1994 (as reflected on the
Pre-Closing Statement) is less than Twenty-One Million Eight Hundred
Forty-Three Thousand Dollars ($21,843,000) (the "Stipulated Amount"),
HIHC shall promptly deposit to the account of Syscon as a capital
contribution an amount of cash necessary to bring the Net Asset Value up
to an amount equal to the Stipulated Amount before the Closing Date.
(b) For purposes of this Agreement, the term "Net Asset
Value" shall mean Syscon's total shareholder's equity determined in
accordance with generally accepted accounting principles applied on a
basis consistent with those applied in the preparation of the October 31,
1994 Certified Financial Statements, adjusted as follows; (a) reduced by
goodwill, (b) reduced by any and all receivables from Harnischfeger and
HIHC, and (c) increased by any and all payables to Harnischfeger and
HIHC. For purposes of this Agreement and all statements prepared
hereunder, the amount owed to Syscon from Harnischfeger shall never
exceed the amount shown in the October 31, 1994 Certified Financial
Statements of Forty-Three Million Five Hundred Sixty-Three thousand
Dollars ($43,563000).
(c) As soon as reasonably practicable after the date hereof,
(a) Harnischfeger will pay to Syscon the amount of the intercompany
receivable owed by it to Syscon as of the date of such payment, (b)
Harnischfeger will advance to Syscon an additional amount of working
capital equal to Forty-Three Million Five Hundred Sixty-Three Thousand
Dollars ($43,563,000) minus the amount of the receivable payment, which
working capital advance (and any subsequent cash advances of working
capital) will be recorded as a payable to Harnischfeger, and (c) Syscon
will pay Forty-Three Million Five Hundred Sixty-Three Thousand Dollars
($43,563,000) as a dividend to HIHC.
SECTION 1.4 PURCHASE PRICE ADJUSTMENT. (a) The Purchase
Price shall be adjusted in the manner provided in this Section 1.4.
Within 45 days after the Closing Date, Logicon shall cause Syscon to
prepare and deliver to Harnischfeger a Balance Sheet showing the Net
Asset Value of Syscon as of the Closing Date (the "Closing Statement').
The Closing Statement shall be prepared on a basis consistent with the
October 31,1994 Certified Financial Statements. There shall be no
changes to the asset valuation reserves included in the October 31, 1994
Certified Financial Statements unless the assets subject to such reserves
have been converted to cash. The parties agree that the deferred income
taxes in the October 31, 1994 Certified Financial Statements may be
misstated, but for purposes of this Agreement and preparation of the Pre-
closing and Closing Statements, no adjustment will be made to that amount
except for adjustments resulting directly from the results of operations
for the period November 1, 1994 through Closing. The Closing Statement
shall also set forth a calculation of all working capital advanced to
Syscon by Harnischfeger or HIHC in the form of cash during the period
after October 31, 1994 through the Closing Date. During the period
from the Closing Date until the date of delivery of the Closing Statement
and during the period of any dispute within the contemplation of Section
1.4(b), Logicon shall cause Syscon to provide Harnischfeger reasonable
access to the assets, books, records, facilities and employees of Syscon
and shall cause Syscon to cooperate in the normal course of business with
Harnischfeger in order to enable it to review the preparation of the
Closing Statement.
(b) (I) Harnischfeger shall have a period of 20 business
days after receipt of the Closing Statement to dispute any amounts
reflected on the Closing Statement, provided that Harnischfeger shall
notify Logicon in writing of each disputed item in reasonable detail and
shall specify the amount thereof in dispute within such 20 business day
period. If no objections are raised within such 20 business day period,
the Closing Statement shall be deemed to be and shall be final, binding,
and conclusive on the Parties hereto, and a supplemental closing (the
"Supplemental Closing") if necessary, shall take place five business days
following the expiration of such 20 business day period, or on such other
date as may be mutually agreed upon in writing by Logicon and
Harnischfeger. At the Supplemental Closing, (a) if the Net Asset Value
<PAGE>
at the Closing Date is less than the Stipulated Amount, Harnischfeger (on
behalf of HIHC) shall pay Logicon an amount equal to the difference, and
(b) if the Net Asset Value at the Closing Date is greater than the
Stipulated Amount, Logicon shall cause Syscon to pay Harnischfeger an
amount equal to the difference, provided that the payment pursuant to
this Clause (b) shall not exceed the amount of working capital advanced
by Harnischfeger during the period after October 31, 1994 through the
Closing. Any payment to be made at the Supplemental Closing (the "Post-
Closing Adjustment") shall be made in immediately available funds by wire
transfer to a bank account designated in writing by the party to receive
such payment.
(ii) In the event of a dispute which cannot be resolved by
Logicon and Harnischfeger within 20 days of Harnischfeger's written
notice of dispute to Logicon, then the specific matters in dispute shall
be submitted to Price Waterhouse for resolution or, if such firm declines
to act in such capacity, such other firm of independent public
accountants of national reputation mutually acceptable to Logicon and
Harnischfeger, (Price Waterhouse or such other accounting firm being
herein referred to as the "Independent Accounting Firm"), which firm
shall make a final and binding determination as to such matter or
matters. If the Parties are unable to agree upon an independent
accounting firm 40 days after such notice, the matter in dispute shall be
decided by arbitration as provided by Article VIII of this Agreement.
The Independent Accounting Firm shall send its written determination to
the Parties and the appropriate Party shall pay the Post-Closing
Adjustment, if any, within five business days following the receipt of
such determination. The fees and disbursements of the Independent
Accounting Firm shall be allocated equally between Logicon, on the one
hand, and Harnischfeger and HIHC, on the other hand.
(iii) The Parties agree to cooperate with each other and
each other's authorized representatives and with the Independent
Accounting Firm pursuant to Section 1.4(b)(ii) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(c) Any payment required to be made at the Supplemental
Closing shall bear interest from the Closing Date through the date of
payment at the publicly announced prime interest rate as published in the
Wall Street Journal in effect at the Closing.
SECTION 1.5 DOCUMENTS TO BE DELIVERED. (a) At the Closing,
Harnischfeger and HIHC shall deliver the following documents to Logicon:
(I) Certificates representing the Stock duly endorsed in
blank for transfer or accompanied by duly executed stock
powers assigning the Stock in blank;
(ii) Evidence from Harnischfeger that it has secured the
resignation or termination of Terrance Bruggeman and Kathleen
Van Sleen;
(iii) The minute books and stock transfer books of
Syscon.
(iv) The certificate required to be delivered pursuant to
Article III and Section 6.3 hereof;
(v) An opinion of Counsel to Harnischfeger and HIHC, in
substantially the form of Exhibit A attached hereto;
(vi) A receipt for the Purchase Price;
(b) At the Closing, Logicon shall deliver to Harnischfeger
and HIHC or its designee the following:
(I) Forty-Five Million Dollars ($45,000,000) to HIHC in
immediately available funds by wire transfer to an account
designated by Harnischfeger;
(ii) The certificate required to be delivered pursuant to
Section 6.2 hereof;
(iii) An opinion of General Counsel to Logicon, in
substantially the form of Exhibit B attached hereto;
(iv) A receipt for the certificates representing the Stock.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LOGICON
Logicon hereby makes the following representations and
warranties to Harnischfeger and HIHC which representations and warranties
are true and correct upon the execution of this Agreement and shall
remain true and correct on the Closing Date.
SECTION 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Logicon
is a corporation organized, validly existing and in good standing under
the laws of the State of Delaware. Logicon has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by Logicon's Board of Directors. No other corporate
proceedings on the part of Logicon are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Logicon and constitutes the legal,
valid and binding obligation of Logicon enforceable in accordance with
its terms.
SECTION 2.2 NO VIOLATIONS IN RESPECT OF TRANSACTION. (a)
Neither the execution and delivery of this Agreement by Logicon nor the
consummation of the transactions contemplated hereby nor compliance by
Logicon with any of the provisions hereof will: (I) violate, conflict
with, or result in breach of any provision of, require any consent,
approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of Logicon under any of the terms, conditions
or provisions of (x) the charter or By-Laws of Logicon, or (y) any note,
bond, mortgage, indenture, deed of trust, lease, agreement, lien,
contract or other instrument or obligation to which Logicon is a party or
to which Logicon, or any of its properties or assets, may be subject or
by which Logicon is bound; or (ii) subject to compliance with the
statutes and regulations referred to in Section 2.2(b), violate any
judgment, ruling, order, writ, injunction, determination, award, decree,
statute, ordinance, rule or regulation applicable to Logicon or any of
Logicon's properties or assets (except, in the case of clause (ii) above,
for such violations, which would not, individually or in the aggregate,
have any material adverse effect on the ability of Logicon to consummate
the transactions contemplated hereby).
(b) Other than in connection with or in compliance with the
<PAGE>
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "Hart-Scott-Rodino Act"), no filing or registration with,
or authorization, consent or approval of, any domestic public body or
authority is necessary for the execution, delivery or consummation by
Logicon of the transactions contemplated by this Agreement, except for
(I) such filings or registrations which, if not made, or for such
authorizations, consents or approvals, which, if not received, would not,
individually or in the aggregate, have any material adverse effect on the
business, operations, properties, results of operations or financial
condition of Logicon and its subsidiaries, taken as a whole, or on the
ability of Logicon to consummate the transactions contemplated hereby,
and (ii) the Clearances (as defined in Section 5.6), if any.
SECTION 2.3 LITIGATION. There is no suit, action or
proceeding pending against or affecting Logicon or any of its
subsidiaries that individually or in the aggregate could reasonably be
expected to (a) impair the ability of Logicon to perform its obligations
under this Agreement or (b) prevent the consummation of the Acquisition
or any other transactions contemplated by this Agreement, nor is there
any judgment, decree, injunction, rule or order of any court or
governmental authority or arbitrator outstanding against Logicon or any
of its subsidiaries having, or which is reasonably likely to have, any
effect referred to in clause (a) or (b) above.
SECTION 2.4 BROKERS. No broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
this Agreement or the transactions contemplated herein based upon
arrangements made by or on behalf of Logicon or any of its subsidiaries.
Logicon shall indemnify and hold harmless Harnischfeger and its
subsidiaries and shareholders against any loss, cost, liability or
expense (including reasonable attorneys' fees and costs and the fees and
costs of any appeals) arising out of any claim for a fee or commission
(as described above) based upon arrangements made by or on behalf of
Logicon or any of its subsidiaries.
SECTION 2.5 INVESTMENT. Logicon acknowledges that the offer
and sale of Stock contemplated hereby has not been registered under any
federal or state securities law. Logicon is acquiring the Stock for
investment purposes and not with a view to distribution. Logicon will
not transfer the Stock to any other person except in any transaction
which is either registered under federal and any applicable state
securities laws or exempt from such registration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HARNISCHFEGER AND HIHC
Harnischfeger and HIHC hereby make the following
representations and warranties to Logicon which representations and
warranties are true and correct upon the execution of this Agreement and
shall remain true and correct on the Closing Date.
SECTION 3.1 ORGANIZATION AND QUALIFICATION. Syscon is a
corporation organized, validly existing and in good standing under the
laws of the District of Columbia and has the requisite corporate power
and authority to carry on its business as it is now being conducted.
Each of Syscon's subsidiaries are duly organized and validly existing and
in good standing in the State of their incorporation. Syscon and each
subsidiary are duly qualified to do business and each is in good standing
in each jurisdiction in which the character of its properties, owned or
<PAGE>
leased, or the nature of their activities make such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, operations, properties, results
of operations or financial condition of Syscon and its subsidiaries taken
as a whole (a "Material Adverse Effect'). Copies of the Certificate of
Incorporation and By-Laws of Syscon heretofore delivered to Logicon are
accurate and complete as of the date hereof. Neither Syscon nor any of
its subsidiaries is a general partner of any partnership or a participant
in any joint venture other than those disclosed in Schedule 3.1. All
Syscon teaming agreements in effect at the signing of this Agreement are
disclosed in Schedule 3.1.
SECTION 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT.
Harnischfeger and HIHC are corporations organized, validly existing and
in good standing under the laws of the State of Delaware. Each of
Harnischfeger and HIHC has the requisite corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by
Harnischfeger's and HIHC's Boards of Directors and by Harnischfeger as
the sole shareholder of HIHC. No other corporate proceedings on the part
of Harnischfeger or HIHC are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Harnischfeger and HIHC and constitutes the
legal, valid and binding obligation of each of Harnischfeger and HIHC
enforceable in accordance with its terms.
SECTION 3.3 NO VIOLATIONS IN RESPECT OF TRANSACTION. (a)
Except as set forth in Schedule 3.3 to this Agreement, neither the
execution and delivery of this Agreement by Harnischfeger and HIHC nor
the consummation of the transactions contemplated hereby nor compliance
by Harnischfeger and HIHC with any of the provisions hereof will: (I)
violate, conflict with, or result in breach of any provision of, require
any consent, approval or notice under, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Syscon under any of
the terms, conditions or provisions of (x) the charter or By-Laws of
Harnischfeger, HIHC or Syscon, or (y) any note, bond, mortgage,
indenture, deed of trust, lease, agreement, lien, contract or other
instrument or obligation to which Harnischfeger, HIHC or Syscon is a
party or to which either of them, or any of the properties or assets of
Syscon, may be subject or by which Syscon is bound; or (ii) subject to
compliance with the statutes and regulations referred to in Section
3.3(b), violate any judgment, ruling, order, writ, injunction,
<PAGE>
determination, award, decree, statute, ordinance, rule or regulation
applicable to Harnischfeger, HIHC or Syscon or any of Syscon's properties
or assets (except, in the case of clause (I) above, for such violations,
conflicts, breaches, defaults or failures to obtain consent or approval,
which would not, individually or in the aggregate, have a Material
Adverse Effect or any Material Adverse Effect on the ability of
Harnischfeger and HIHC to consummate the transactions contemplated
hereby); or (iii) cause the suspension or revocation of any
authorization, consent, contract, approval or license currently in effect
which would have a Material Adverse Effect.
(b) Other than in connection with or in compliance with the
provisions of the Hart-Scott-Rodino Act, and except as set forth in
Schedule 3.3 to this Agreement, no filing or registration with, or
authorization, consent or approval of, any domestic public body or
authority is necessary for the execution, delivery or consummation by
Harnischfeger and HIHC of the transactions contemplated by this
Agreement, except for (I) such filings or registrations which, if not
made, or for such authorizations, consents or approvals, which, if not
received, would not, individually or in the aggregate, have a Material
Adverse Effect or any material adverse effect on the ability of
Harnischfeger and HIHC to consummate the transactions contemplated
hereby, and (ii) the Clearances, if any.
SECTION 3.4 CAPITALIZATION. As of the date hereof, (a) the
total issued and outstanding shares of HIHC are owned by Harnischfeger
and there are no shares subject to options held by employees, directors
and/or third Parties, and (b) the total issued and outstanding shares of
Syscon are owned by HIHC and there are no shares subject to options held
by employees, directors and/or third parties. There are no options,
warrants or other rights, agreements or commitments of any character
whatsoever requiring the issuance, sale or transfer by Syscon of any
shares of capital stock of Syscon or any securities convertible into, or
exchangeable or exercisable for, or otherwise evidencing a right to
acquire, any shares of capital stock of Syscon. All of the outstanding
Stock of Syscon has been duly authorized and validly issued and is fully
paid and non-assessable and is not subject to, nor was issued in
violation of, any preemptive rights.
SECTION 3.5 BROKERS. Other than Lehman Brothers whose fees
and expenses are the sole responsibility of Harnischfeger, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with this Agreement or the transactions
contemplated herein based upon arrangements made by or on behalf of
Harnischfeger or any of its subsidiaries. Harnischfeger shall indemnify
and hold harmless Logicon and its subsidiaries and shareholders against
any loss, cost, liability or expense (including reasonable attorneys'
fees and costs and the fees and costs of any appeals) arising out of any
claim for a fee or commission (as described above) based upon
arrangements made by or on behalf of Harnischfeger or any of its
subsidiaries.
SECTION 3.6 NO VIOLATION OF LAW. (a) Except as set forth
in Schedule 3.6(a) to this Agreement, Syscon is not in violation of, or,
to the knowledge of Harnischfeger, HIHC or Syscon, under investigation
with respect to nor has Syscon been given written notice or been formally
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or
regulatory body or authority. Syscon has all material permits, licenses,
franchises and other governmental authorizations, consents and approvals
<PAGE>
necessary to conduct its business as presently conducted.
(b) Except as set forth in Schedule 3.6(b) to this
Agreement, Syscon is not aware of any material cost allowability or
material cost allocability issues between Syscon, the Defense Contract
Audit Agency or the Defense Contract Management Agency.
SECTION 3.7 COMPLIANCE WITH AGREEMENTS. Except as set forth
in Schedule 3.7 to this Agreement, Syscon is not in breach or violation
of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (I) its charter
or By-Laws or (ii) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which Syscon is a party or by which it is bound or to
which any of its property is subject, which breaches, violations and
defaults, in the case of clause (ii) of this Section 3.7, would have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
set forth in any of the Schedules to this Agreement, Syscon does not have
any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except liabilities, obligations or
contingencies (I) accrued or reserved against in the October 31, 1994
Certified Financial Statements or reflected in the notes thereto, (ii)
not required to be so accrued, reserved or reflected in accordance with
generally accepted accounting principles applied on a consistent basis,
and which in the aggregate will not have an Material Adverse Effect, or
(iii) incurred after October 31, 1994 in the ordinary course of business
consistent in nature and amount with past practices and which would not
individually or in the aggregate have a Material Adverse Effect.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
may have resulted from matters set forth in any of the Schedules to this
Agreement, (a) there has not been since October 31, 1994 any material
adverse change in the business, operations, properties, backlog, results
of operations or financial condition of Syscon and its subsidiaries taken
as a whole (including, but not limited to, the loss of key customers and
key personnel).
SECTION 3.10 EMPLOYEE BENEFIT PLANS, ETC. Except as set
forth in the Schedule 3.10 to this Agreement or in the October 31, 1994
Certified Financial Statements:
(a) Syscon does not maintain or contribute to any employee
benefit, retirement or severance plans, including employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any employment contracts
or other arrangements (other than Syscon's standard employment practices,
termination benefits and insurance programs) for the provision of
employee benefits . Syscon is not a party to any collective bargaining
agreement. To the best of Harnischfeger's and Syscon's knowledge, there
is no union organizing effort being made or threatened involving the
employees of Syscon. The consummation of the Acquisition will not
accelerate rights or vest or increase benefits under any Syscon plan or
any employment or consulting contract to which Syscon is a party or by
which it is bound. Syscon is not in violation of the applicable
provisions of ERISA, the regulations and published authorities
thereunder, or any other laws applicable with respect to such Syscon
plans. Syscon has performed all of its obligations under all such Syscon
plans. To the best knowledge of Harnischfeger and Syscon, there are no
actions (other than routine claims for benefits) pending or threatened
<PAGE>
against such plans or their assets, or arising out of such Syscon plans,
and, to the best knowledge of Harnischfeger and Syscon, no facts exist which
could give rise to any such actions. With respect to the Syscon
plans, with immaterial exceptions, there has been no act or omission by
Syscon that has given rise to or may give rise to fines, penalties,
taxes, or related charges under ERISA or the Internal Revenue Code of
1986, as amended (the "Code").
(b) Each Plan which is a stock bonus, pension or profit-
sharing plan within the meaning of Section 401(a) of the Code has been
duly authorized by Syscon's Board of Directors. Each such Plan is
qualified in form and operation under Section 401(a) of the Code and each
trust under each such Plan is exempt from tax under Section 501(a) of the
Code. No event has occurred that will or could give rise to
disqualification or loss of tax-exempt status of any such plan or trust
under such sections. No event has occurred that will or could subject
any such Plan to tax under Section 511 of the Code. No prohibited
transaction (within the meaning of Section 4975 of the Code) or
party-in-interest transaction (within the meaning of Section 406 of ERISA)
has occurred with respect to any of such Plans.
(c) No Syscon Plan is a "multi-employer plan" (within the
meaning of Section 3(37) of ERISA) or a plan subject to Title IV of
ERISA. Syscon has never contributed to or had an obligation to
contribute to any multi-employer plan.
(d) All group health Plans of Syscon have been operated in
compliance with the group health plan continuation coverage requirements
of Section 162(k) and Section 4980B of the Code to the extent such
requirements are applicable. None of Syscon's Plans provide any post-
retirement medical, post-retirement life insurance or other post-retirement
welfare benefits except as may be required by law.
(e) Syscon employees at the Closing will not be participants
or entitled to any benefits nor will Syscon have any continuing
obligations under any Harnischfeger benefit plans.
SECTION 3.11 EMPLOYEE AGREEMENTS. Except as set forth in
Schedule 3.11 to this Agreement, Syscon has no agreements with its
directors, officers or employees which cannot be terminated without
penalty or payment of consideration within 30 days.
SECTION 3.12 LITIGATION. Except as set forth in Schedule
3.12 to this Agreement, there is no suit, action or proceeding pending
and, to the best knowledge of Harnischfeger or Syscon, neither has in the
two years preceding the execution hereof, received written notice from a
prospective plaintiff's attorney to an executive officer of
Harnischfeger, HIHC or Syscon, threatening litigation against Syscon or
any of its subsidiaries that individually or in the aggregate could
reasonably be expected to (a) have a Material Adverse Effect, or (b)
prevent the consummation of the Acquisition or any other transactions
contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any court or governmental authority or
arbitrator outstanding against Syscon or any of its subsidiaries having,
or which is reasonably likely to have, any effect referred to in clause
(a) or (b) above.
SECTION 3.13 REAL PROPERTY. Other than those properties
listed in Schedule 3.13 hereto, Syscon and its subsidiaries holds no
ownership interest in any parcel of real property. Each of the material
leases, subleases, licenses and other agreements with respect to real
property to which Syscon is a party (the "Syscon Real Property Leases")
<PAGE>
is, to the best knowledge of Harnischfeger and Syscon, valid, binding,
and in full force and effect. No uncured default on the part of Syscon
exists under any Syscon Real Property Lease. To the best knowledge of
Harnischfeger and Syscon, Syscon has a good and marketable leasehold
interest in each parcel of real property that is subject to a Syscon Real
Property Lease and is free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except such as have not materially
adversely affected the ability of Syscon to conduct its business as
presently conducted at such location. Syscon has not pledged or made a
collateral assignment of any Syscon Real Property Lease. The transfer of
the Stock will not require any consent or approval under the terms of any
Syscon Real Property Lease.
SECTION 3.14 ENVIRONMENTAL MATTERS. (a) Except as set
forth in Schedule 3.14 to this Agreement, to the knowledge of
Harnischfeger, (A) Syscon has not (I) generated, used, transported,
treated, stored, released or disposed of, or (ii) suffered or permitted
anyone else to generate, use, transport, treat, store, release or dispose
of any Hazardous Material (as defined in Section 3.14(b)) in violation of
any Environmental Requirement (as defined in Section 3.14(c)); (B) there
has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Material in connection with the
conduct of the business of Syscon or the use of any property or facility
of Syscon (the "Syscon Properties") or any nearby or adjacent properties
or facilities which has created or might reasonably be expected to create
any liability under any Environmental Requirement or which would require
reporting to or notification of any governmental entity; (C) Syscon is in
compliance with all Environmental Requirements (I) regarding Hazardous
Materials on or under any of the Syscon Properties, or (ii) which are
applicable to the conduct of its business; and (D) no notice has been
received by Syscon nor to the best knowledge of Syscon has been
threatened alleging that Syscon is in violation in any material respect
of any Environmental Requirement.
(b) For the purposes of this Agreement, a "Hazardous
Material" is any material, chemical or substance that is defined or
listed in, or otherwise classified pursuant to, any applicable
Environmental Requirement as a hazardous substance, hazardous material,
toxic substance or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, radioactivity, carcinogenicity,
reproductive toxicity or "EP toxicity", including, without limitation,
asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation,
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.
(c) For the purposes of this Agreement, an "Environmental
Requirement" is any law, statute, code, act, ordinance, order, judgment,
decree, injunction, rule, regulation, permit, license, authorization,
direction or requirement of any government, department, commission,
board, court, authority, agency, official or officer, foreseen or
unforeseen, ordinary or extraordinary relating to (I) the generation,
use, storage, transportation or disposal of any Hazardous Material or
(ii) the protection of the environment, including, without limitation,
the Clean Air Act, the Clean Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act and the Toxic
Substances Control Act, each as amended or supplemented and any analogous
future or present local, state or federal statute and any regulations
promulgated pursuant thereto.
<PAGE>
SECTION 3.15 TAXES. Except as set forth in Schedule 3.15 or
covered by the reserves for taxes shown on the Closing Statement (a)
Syscon has filed, or Harnischfeger has filed on behalf of Syscon, with
the appropriate governmental agencies all United States and foreign, federal,
state and local income, franchise, excise, sales, use, real and
personal property, and other tax returns and reports required to be filed
by it; (b) all taxes owed by Syscon (whether or not shown on any tax
return) have been paid; (c) the net operating losses of Syscon, if any,
set forth on the most recently filed federal income tax return of
Harnischfeger are in all material respects accurately reported as of the
date of such return; (d) Syscon is not (I) delinquent in the payment of
any taxes shown on such returns or reports or on any assessments received
by it for such taxes; (ii) aware of any pending or threatened examination
for any year by the Internal Revenue Service ("IRS") or any foreign or
state tax agency; (iii) subject to any agreement extending the period for
assessment or collection of any federal, foreign or state tax; or (iv) a
party to any action or proceeding with, nor has any claim been asserted
against it by any governmental authority for assessment or collection of
taxes; (e) none of the tax returns of Syscon have been audited by the IRS
or any foreign or state tax agency; (f) Syscon is not, to the knowledge
of Harnischfeger, the subject of any threatened action or proceeding by
any governmental authority for assessment or collection of taxes; (g)
Syscon has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owning to any employee,
independent contractor, creditor, stockholder, or other third party.
The reserves for taxes in the October 31, 1994 Certified
Financial Statements of Syscon are adequate to cover all of the tax
liabilities of Syscon (including, without limitation, income, payroll,
franchise, excise, sales, use, real and personal property, and any other
applicable taxes) that may become payable in future years in respect to
any transactions consummated prior to October 31, 1994. Syscon has not
and, to Harnischfeger's knowledge, will not have any material liability
for taxes of any nature for or in respect of the operation of its
business or ownership of its assets from October 31, 1994, up to and
including the Closing, except to the extent reflected on the October 31,
1994 Certified Financial Statements or otherwise reflected in the books
and records of Syscon for the subsequent periods following the October
31, 1994 Certified Financial Statements through the Closing Date.
Except as set forth in Schedule 3.15, Syscon has made no
payments, is not obligated to make any payments, and is not a party to
any agreement that under certain circumstances could obligate it to make
payments that will not be deductible under Code Section 280G. Syscon has
not been a United States real property holding corporation within the
meaning of Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). Syscon 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
Code Section 6662.
Schedule 3.15 sets forth the following information with
respect to Syscon as of the most recent practicable date: (A) the
various tax basis of Syscon in its assets other than in the stock of its
subsidiaries; (B) the amount of any net operating loss, net capital loss,
unused investment or R&D credit, unused foreign tax credit, or excess
charitable contribution allocable to Syscon; and (C) the amount of any
deferred gain or loss allocable to Syscon arising out of any deferred
intercompany transaction.
Harnischfeger will make available, in a reasonable time after
<PAGE>
Closing, all records including copies of Syscon's or Syscon's portion of
the previous three years tax returns (including income, sales and use,
real and personal property tax, etc.), related work papers, including
working papers regarding intercompany eliminations relating to Syscon,
and supporting documents (such as balance sheet and profit and loss
support, computations of all Schedule M-1's, state tax adjustments,
apportionment computations, AMT and ACE adjustments, all investment or
R&D credit computations and all tax related fixed asset computations) and
will make available upon request all records necessary to compute the
stock basis computation of Syscon in each of its subsidiaries under
Regulation 1.1502-32.
Harnischfeger will include the income of Syscon (including
any deferred income triggered into income by Reg. Section 1.1502-13 and
Reg. Section 1.1502-14 and any excess loss accounts taken into income
under Reg. Section 1.1502-19) on the Harnischfeger consolidated federal
income tax returns for all periods through the Closing Date and pay any
federal income taxes attributable to such income. In addition,
Harnischfeger will pay to Syscon the amount of the tax benefit, if any,
attributable to the inclusion of Syscon's net operating loss, net capital
loss, investment credit, R&D credit, foreign tax credit, or excess
charitable contribution tax attributes in the October 31, 1995
consolidated tax return of Harnischfeger pursuant to Section 3(a) of the
amended Inter-Company Tax Allocation Agreement dated June 19, 1987.
Likewise, Harnischfeger will include in income similar amounts required
in its respective state filings. Syscon will furnish tax information to
Harnischfeger for inclusion in Harnischfeger's federal consolidated
income tax return for the period from October 31, 1994 through Closing
Date in accordance with Harnischfeger's past custom and practice.
Harnischfeger will allow Logicon an opportunity to review and comment
upon such tax returns (including any amended returns) to the extent that
they relate to Syscon and its subsidiaries. Harnischfeger will take no
position on such returns that relate to Syscon and its subsidiaries that
would adversely affect Syscon and its subsidiaries after the Closing
Date. The income of Syscon and its subsidiaries for the period from
October 31, 1994 to the Closing Date will be determined by closing the
books of Syscon as of the end of the Closing Date.
Net operating loss carryforwards, capital loss carryforwards,
investment and R&D credit carryforwards, and contribution carryforwards
allocable by Harnischfeger to Syscon under the Code Section 1.1502
Regulations and any related state law or regulations shall be available
to Syscon after the Logicon acquisition. Harnischfeger will not elect to
retain any net operating loss carryovers or capital loss carryovers of
Syscon under Reg. Section 1.1502-20(g).
There has been no "ownership change" (as defined in Code
Section 382(g)) of Syscon, or of Harnischfeger which would cause any
limitation on the use of any net operating losses otherwise attributable
to Syscon.
SECTION 3.16 [Intentionally left blank]
SECTION 3.17 FINANCIAL STATEMENTS. (a) Harnischfeger has
delivered to Logicon the October 31, 1994 Certified Financial Statements
of Syscon which include the Balance Sheet and the related consolidated
Statements of Operations and Retained Earnings, and of Cash Flows for the
year ended October 31,1994, together with the report thereon of Price
Waterhouse, Independent Accountants. The October 31, 1994 Certified
Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, and present
fairly the financial position of Syscon at such date, and the results of
<PAGE>
its operations and cash flows for such period.
(b) Harnischfeger will on a timely basis provide to Logicon
all regular monthly unaudited financial statements of Syscon from October
31, 1994 through Closing, prepared on a basis consistent with the
October 31, 1994 Certified Financial Statements and a list of all transactions
between Harnischfeger and Syscon from October 31, 1994
through the Closing Date.
SECTION 3.18 ACCOUNTS RECEIVABLE. To the best of
Harnischfeger's knowledge and belief, the aggregate gross receivables
reflected in the October 31, 1994 Certified Financial Statements of
Syscon represented bona fide claims against debtors for sales or other
charges arising on or before that date and are not subject to discount
except for normal cash discounts. The amount carried for doubtful
accounts and allowances in such Certified Financial Statements is
sufficient to provide for any losses which may be sustained on
realization of such receivables.
SECTION 3.19 INDEBTEDNESS WITH OFFICERS AND DIRECTORS.
Syscon is not, and on the Closing Date will not be, indebted to any of
those persons who are on the date hereof, Officers or Directors of Syscon
or any of its subsidiaries, or to members of their immediate families,
provided that this section shall not apply to current salaries or
reimbursement for expenses incurred in the ordinary course of business.
No such person is indebted to Syscon on the date of this Agreement or
will be so indebted on the Closing Date.
SECTION 3.20 SENSITIVE PAYMENTS. To the best knowledge of
Harnischfeger, Syscon has not, from the date of its inception to the date
hereof, had "sensitive" receipts or disbursements. To the best knowledge
of Harnischfeger, Syscon has not, from the date of its inception to the
date hereof, had any material unrecorded cash or noncash funds out of
which any such payments might be made. As used in this paragraph,
"sensitive" receipts and disbursements, whether or not illegal, include
(a) receipts from or payments to government officials or employees in
their personal or official capacity; (b) commercial bribes or kickbacks;
(c) amounts received with an understanding that rebates or refunds will
be made in contravention of the laws of any jurisdiction, either directly
or through a third party; (d) political contributions; (e) payments or
commitments (whether cast in the form of commissions, payments or fees
for goods or services rendered, or otherwise) made with the understanding
or under circumstances that would indicate that all or part thereof is to
be paid by the recipient to governmental officials or employees, or as a
commercial bribe, influence payment or kickback; (f) material payments or
receipts improperly or inaccurately recorded on the books of Syscon or
its subsidiaries; (g) the disbursement or receipt of funds outside the
normal system of accountability; and (h) any payments or other actions in
violation of the Foreign Corrupt Practices Act.
SECTION 3.21 CONFLICTS OF INTEREST. Schedule 3.21 lists all
of Syscon's current contracts with the United States Government which
contain an organizational conflict of interest clause and all of Syscon's
current material commercial contracts with conflict of interest clauses
or covenants not to compete.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE ACQUISITION
<PAGE>
SECTION 4.1 CONDUCT OF BUSINESS BY SYSCON PRIOR TO THE
CLOSING DATE. Harnischfeger and HIHC covenant and agree that, following
October 31, 1994 (except as otherwise provided below) and prior to the
Closing Date, unless Logicon shall otherwise agree in writing:
(a) The business of Syscon shall be conducted only in, and
Syscon shall not take any action except in, the ordinary course of
business, and Syscon shall use all reasonable efforts to maintain and preserve
its business organization, assets, and advantageous business
relationships.
(b) Syscon shall not directly or indirectly do any of the
following: (I) amend its Certificate of Incorporation or By-Laws; (ii)
other than a dividend which shall not exceed Forty-Three Million Five
Hundred Sixty-Three Thousand Dollars ($43,563,000) as described in
Section 1.3(b) of this Agreement declare, set aside or pay any dividend
or other distribution or payment (whether in cash, stock or property) in
respect to shares of its capital stock owned by any person or entity;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or
pledge any shares of capital stock of Syscon or securities convertible
into or exchangeable or exercisable for, or otherwise evidencing a right
to acquire, shares of capital stock of Syscon; (iv) redeem, purchase or
otherwise acquire any outstanding shares of its capital stock or other
securities; (v) split, combine or reclassify any shares of its capital
stock; (vi) except as contemplated herein or by the fiduciary obligations
of Syscon's Board of Directors, adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or reorganization of Syscon; (vii) subsequent to the
execution of this Agreement, enter into any real estate lease agreement
without the prior written consent of Logicon which shall not be
unreasonably withheld; or (viii) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing, except as permitted herein, or as may be required by law or
under the terms of any contract, agreement, commitment or arrangement.
(c) Except in the ordinary course of business or as set
forth in Schedule 4.1(c), Syscon shall not directly or indirectly do any
of the following: (I) sell, pledge, dispose of or encumber any material
asset of Syscon; (ii) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business
organization or division thereof, or (except for cash transfers pursuant
to Harnischfeger's consolidated cash management system) make any
investment either by purchase of stock or securities, contributions of
capital, property transfer, or purchase of any property or assets of any
other individual or entity; (iii) except for obligations not exceeding
$50,000 in the aggregate, incur any indebtedness for borrowed money or
any other material liability or obligation or issue any debt securities
or assume, guarantee, endorse or otherwise as an accommodation become
responsible for, the obligations of any other individual or entity, or
make any loans or advances; (iv) pay, discharge or satisfy any material
claims, liabilities or obligations other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected
or reserved against in Syscon's October 31, 1994 Certified Financial
Statements or incurred in the ordinary course of business and consistent
with past practices after the date thereof or as anticipated by this
Agreement; (v) waive, release, grant or transfer any rights of value or
modify or change in any material respect any right existing under any
material license, lease, contract or other document; or (vi) authorize or
propose any of the foregoing, or enter into or modify any material
contract, agreement, commitment or arrangement to do any of the
foregoing; or (vii) make any capital expenditures, including those made
in the ordinary course of business, totaling an amount in excess of Five
<PAGE>
Hundred Thousand Dollars ($500,000) since October 31, 1994 without the
prior written consent of Logicon which shall not be unreasonably
withheld.
(d) Syscon shall not grant any severance or termination pay
to, or enter into any employment or severance agreement with, any
director, officer or other employee of Syscon, except (I) pursuant to the
existing terms of the employment agreements identified in a Schedule
4.1(d) hereto (the "Employment Agreements"), or (ii) as is necessary to comply
with the law; or (iii) severance or termination benefits
consistent with written employment practices of Syscon identified on
Schedule 4.1(d);
(e) Except as set forth in Schedule 4.1(e), Syscon shall not
increase any salaries or bonus agreements with employees except for
annual salary adjustments made in the normal course of business.
Subsequent to the execution of this Agreement no such annual increase
shall exceed four percent (4%) without the prior written approval of
Logicon. In addition, Schedule 4.1(e), as a minimum, shall set forth the
current individual weekly salaries and annual bonuses paid for Fiscal
1994 of all Syscon officers.
(f) Syscon shall not adopt or amend any bonus, profit
sharing, stock option, pension, retirement, deferred compensation,
employment agreement or other similar plan, for the benefit of directors,
officers or employees nor grant any rights or awards thereunder without
Logicon's prior written approval except (I) as may be required under the
terms of any such existing plan, agreement, trust, fund or arrangement,
and (ii) as is necessary to comply with the law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 REASONABLE EFFORTS AND GOOD FAITH. Subject to
the terms and conditions herein provided, each of the Parties hereto
agrees to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to fulfill all conditions to and to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement and to cooperate with each other in connection with the
foregoing, including using all reasonable efforts (a) to obtain all
necessary consents, approvals, authorizations and Clearances as are
required to be obtained under any federal, state or foreign law or
regulations, (b) to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated hereby, (c) to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the
ability of the Parties to consummate the transactions contemplated
hereby, and (d) to effect all necessary registrations and other filings,
including, but not limited to, filings under the Hart-Scott-Rodino Act
and submissions of information requested by governmental authorities.
For purposes of this Agreement, the obligation of the Parties to use
"reasonable efforts" to obtain waivers, consents and approvals to loan
agreements, leases and other contracts shall not include any obligation
to agree to an adverse modification of the terms of such documents or to
prepay or incur additional financial or other material obligations to
such other Parties.
SECTION 5.2 FEES AND EXPENSES. Subject to any contrary
provision of this Agreement, all fees, costs and expenses incurred in
<PAGE>
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such cost or expense. Harnischfeger
shall pay all fees and expenses incurred on behalf of Syscon in
connection with the transactions contemplated herein.
SECTION 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY. From
the date hereof until the Closing Date, Harnischfeger and HIHC shall
cause Syscon to, and Syscon shall cause its officers, directors,
employees and agents to, afford to Logicon and to the officers, employees
and agents of Logicon complete access at all reasonable times to its
officers, employees, agents, properties, books, records and contracts,
and shall furnish Logicon all financial, operating and other data and
information as Logicon may reasonably request. Logicon and such persons
shall hold in confidence all such information and, if this Agreement is
terminated prior to the Closing Date, shall return to Syscon all such
confidential information. Logicon and such persons shall use the
confidential information only in furtherance of the purposes of this
Agreement, and in compliance with the confidentiality agreement between
Harnischfeger and Syscon dated December 19, 1994 (the "Confidentiality
Agreement"). Harnischfeger and HIHC shall cause Syscon to cooperate with
Logicon to provide reasonable access to Syscon's customers for
appropriate purposes and under circumstances to be arranged by Syscon..
SECTION 5.4 PUBLIC ANNOUNCEMENTS. The Parties will consult
with each other before issuing (and will provide each other the
opportunity to review, comment upon and concur with) any press release or
public statements with respect to this Agreement or the transactions
contemplated by this Agreement, including, without limitation, the
Acquisition, and shall not issue any such press release or make any such
public statement prior to such consultation, except (after a good faith
attempt to consult with the other) as may be required by applicable law,
court process or by obligations pursuant to any listing agreement with
any national securities exchange.
SECTION 5.5 TAXES. (a)(I) Syscon shall not elect to
carryback for income tax return purposes to any taxable period beginning
on or before the Closing Date any income tax attribute, including without
limitation, any net operating or other loss or credit arising in any
taxable period beginning after the Closing Date. To the extent that any
such carryback is made, Harnischfeger shall be entitled to retain for
itself any refund or tax benefit obtained from such carryback. With
respect to any such carryback which must be carried back to Harnischfeger
and its subsidiaries under applicable law, Harnischfeger agrees to file
such claims for refund and other returns as may be required to claim the
income tax refund attributable to such carryback items and to pay Syscon
the cash amount of such refunds plus the amount of any interest paid by
the Internal Revenue Service or other taxing authority resulting from the
utilization of such attributes.
(ii) In the event that any income tax attribute for which
Harnischfeger has made a payment to Syscon pursuant to this Section 5.5
is subsequently reduced or disallowed, Syscon shall reimburse
Harnischfeger immediately upon demand therefor and shall indemnify and
hold Harnischfeger harmless from any tax liability arising from or
incurred by reason of such reduction or disallowance.
(b) Syscon shall agree to any election or consent reasonably
requested by Harnischfeger in connection with the returns to be filed by
Harnischfeger which include Syscon.
(c) The amount of the R&D tax credit carryover allowable to
Syscon for R&D tax credits generated and unused as of the Closing Date
<PAGE>
for periods ending on or prior to the Closing Date under Code Section 41
shall be determined by (I) the ratio equal to Syscon's qualified research
expenses for each such period divided by the total qualified research
expenses of Harnischfeger and its subsidiaries for each such period;
times (ii) the total credits generated and unused (as of the Closing
Date) by Harnischfeger and its subsidiaries for such period.
(d) Harnischfeger and Syscon shall cooperate with each
other, as each may reasonably request, in any governmental inquiry,
examination or proceeding that could result in a determination with
respect to income taxes due or payable by Harnischfeger or Syscon
pursuant to this Agreement including, without limitation, executing
powers of attorney, consents, waivers of statutes of limitations, closing
agreements or any other documents which each shall reasonably request.
Each party shall bear all expenses related to income taxes payable by
such party.
(e) Upon the filing of the federal consolidated income tax
returns for Harnischfeger and its subsidiaries for the periods ended
October 31, 1994 and October 31, 1995, the federal income tax expense of
Syscon computed for such periods using information at the date of the
Closing Statement (as if Syscon had filed a separate federal consolidated
income tax return for such periods) shall be recomputed in the same
manner by Harnischfeger based upon the information then available. Such
recomputed amount shall be provided to Syscon not later than July 20,
1995 or July 20, 1996 with respect to the federal consolidated income tax
return for the periods ended October 31, 1994 and October 31, 1995,
respectively. If the recomputed amount determined pursuant to this
Section 5.5(e) exceeds the amount so determined using information at the
date of the Closing Statement, then Syscon shall pay the difference to
Harnischfeger not later than forty-five (45) days after being presented
with an invoice for such amount, accompanied by detailed workpapers
supporting such invoice; provided that payment shall be required under
this Section 5.5(e) only if the income tax reserves identified in the
October 31, 1994 Certified Financial Statements and carried forward to
the Closing Statement, were adequate to cover such payment. If the
recomputed amount determined pursuant to this Section 5.5(e) is less than
the amount so determined using information at the date of the Closing
Statement, then Harnischfeger shall pay the difference to Syscon not
later than July 31, 1995 or July 31, 1996 with respect to the periods
ended October 31, 1994 and October 31, 1995, respectively, and such
payment shall be considered to increase the income tax reserves existing
on the Closing Statement.
(f) (I) In the event a final determination of tax causes an
increase in Harnischfeger's federal income tax liability (such increase
to be computed as if Syscon had filed a separate federal consolidated
income tax return for such period) as a result of an adjustment to any
item of income, gain, loss, deduction, credit, recapture of credit or any
other item related to Syscon (a "Syscon Tax Item"), Syscon shall pay
Harnischfeger the amount of such increase attributable to the Syscon Tax
Item and any related interest (as computed by the Internal Revenue
Service) in immediately available funds within thirty (30) days after
notice of such increase is provided to Syscon pursuant to Section 5.5(f)
(iii) of this Agreement; provided that payment shall be required under
this Section 5.5(f)(I) only if the income tax reserves reflected on the
Closing Statement were adequate to cover such payment.
(ii) In the event a final determination of tax causes a
decrease in Harnischfeger's federal income tax liability (such decrease
to be computed as if Syscon had filed a separate federal consolidated
income tax return for such period) as a result of a Syscon Tax Item,
<PAGE>
Harnischfeger shall pay Syscon the amount of such decrease attributable
to the Syscon Tax Item and any related interest (as computed by the
Internal Revenue Service) in immediately available funds within thirty
(30) days after notice of such decrease is provided to Syscon pursuant to
Section 5.5(f)(iii) of this Agreement and such payment shall be
considered to increase the income tax reserves existing on the Closing
Statement.
(iii) Harnischfeger shall give Syscon notice of an
increase or decrease described in this Section 5.5(f) within ten (10)
business days of the final determination of tax that resulted in such
increase or decrease.
(g) All state tax returns of Syscon for the period ended
October 31, 1994 and for the period including the Closing Date shall be
prepared and filed by Syscon. Harnischfeger will make available copies
of Syscon's portion of Harnischfeger's federal consolidated income tax
returns for such periods at least thirty (30) days prior to the due dates
for filing such state tax returns.
(h) If a taxing authority determines that Syscon is entitled
to an unused alternative minimum tax credit carryover as of the Closing
Date, Syscon will remit the amount of such carryover to Harnischfeger
within 30 days after Harnischfeger notifies and provides adequate proof
to Syscon of such determination.
(I) Harnischfeger will take appropriate action to terminate
the tax sharing agreement dated June 19, 1987 between Harnischfeger and
Syscon effective on the Closing Date.
SECTION 5.6 CLEARANCES. Each of the Parties will use all
reasonable efforts (a) to determine whether any contract novation or
similar agreement or any security or facility clearance will be required
by the Department of Defense or other United States governmental agency
in connection with the consummation of the Acquisition (collectively,
"Clearances") and (b) to obtain or fulfill all conditions necessary to
obtaining all Clearances prior to or effective as of the Closing Date.
SECTION 5.7 TAIWAN CONTRACT. Syscon shall not, as of the
signing of this Agreement and will not prior to the Closing Date, enter
into any contractual relationship with the Republic of China without the
prior written approval of Logicon; provided, that Logicon will not assert
any claim or condition based on or arising out of Syscon's failure to
enter into any such relationship and following the Closing will hold HIHC
and Harnischfeger harmless with respect thereto.
SECTION 5.8 CORPORATE NAMES. Effective as of the Closing
Date Harnischfeger and HIHC shall convey all of their title, right, use
and ownership of the name Syscon to Logicon. As soon as practicable
after the Closing, Harnischfeger and HIHC shall dispose of any and all
materials bearing the Syscon name. Syscon shall not use the name
"Harnischfeger" after the Closing Date.
SECTION 5.9 SCHEDULES. The Parties acknowledge and agree
that the Schedules described in this Agreement have not been delivered to
Logicon as of the date of this Agreement. Harnischfeger agrees to
deliver such Schedules to Logicon as soon as practicable and, in any
event, not later than the seventh business day after the date hereof.
During the period commencing on the date when all of such Schedules have
been delivered and ending on the fifth business day thereafter, Logicon
shall be permitted to terminate this Agreement unilaterally if (a) any
such Schedule discloses a fact not previously known to Logicon and such
fact modifies a representation or warranty in Article III in a manner
that has or could reasonably be expected to have a Material Adverse
Effect, or (b) the confidential documents relating to Syscon's AFCAC
matter that were provided to Logicon's counsel prior to the date hereof
but which Logicon's counsel has not yet reviewed, disclosed a fact not
previously known to Logicon that has or could reasonably be expected to
have a Material Adverse Effect.
SECTION 5.10 COSTS OF ABANDONED SPIN-OFF. All costs and
expenses incurred by or charged to Syscon relating to the proposed
dividend of Syscon stock to Harnischfeger shareholders shall be
reimbursed by Harnischfeger to Syscon prior to or at the Closing or as
soon as thereafter practicable.
SECTION 5.11 CERTAIN EMPLOYMENT TERMINATION COSTS. All
costs and expenses incurred by or charged to Syscon relating to the
termination of the employment and delivery of the certificates required
under Section 1.5(ii) shall be reimbursed by Harnischfeger to Syscon
prior to or at the Closing and Harnischfeger shall hold Logicon harmless
for any such costs resulting from such terminations..
SECTION 5.12 AMOUNTS DUE FROM JORDAN & HOWARD TECHNOLOGIES
("JHT"). Harnischfeger guarantees that all amounts due from JHT and
Messrs. Jordan and Howard to Syscon will be paid in full. Harnischfeger
shall indemnify Syscon against any loss, cost, damage or expense which
Syscon may suffer as a consequence of the failure to pay any amount when
due. Such costs and expenses shall include any reasonable costs incurred
in the collection of amounts owed including but not limited to reasonable
attorneys' fees. Schedule 5.12 shall set forth a copy of all Syscon and
Harnischfeger agreements between JHT and Messrs. Jordan and Howard.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
SECTION 6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
EFFECT THE ACQUISITION. The respective obligations of each party to
effect the Acquisition shall be subject to the fulfillment at or prior to
the Closing Date of each of the following conditions:
(a) The waiting period (and any extensions thereof)
applicable to the consummation of the Acquisition under the Hart-Scott-
Rodino Act shall have expired or been terminated;
(b) There shall not be in effect any preliminary or
permanent injunction or other order or decree of any federal or state
court or administrative agency which prevents the consummation of the
Acquisition (each party agreeing to use its reasonable efforts to have
any such injunction, order or decree lifted);
(c) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Acquisition.
(d) All governmental consents and approvals legally required
for the consummation of the Acquisition and the transactions contemplated
hereby shall have been obtained and be in effect at the Closing Date.
The Parties shall have obtained or fulfilled all conditions necessary to
obtaining all Clearances.
<PAGE>
(e) All consents and approvals (other than those referred to
in (d) above) necessary for consummation of the Acquisition shall have
been obtained, other than those which, if not obtained, would not, in the
aggregate, have a Material Adverse Effect.
SECTION 6.2 CONDITIONS TO OBLIGATION OF HARNISCHFEGER AND
HIHC TO EFFECT THE ACQUISITION. The obligation of Harnischfeger and HIHC
to effect the Acquisition shall be subject to the fulfillment at or prior
to the Closing Date of the following additional conditions:
(a) Logicon shall have performed in all material respects
its agreements required to be performed on or prior to the Closing Date
and the representations and warranties of Logicon contained in this
Agreement shall be true and correct in all material respects on and as of
the date of this Agreement and on and as of the Closing Date as if made
on and as of such date, except as contemplated or permitted by this
Agreement, and Harnischfeger shall have received a certificate of the
President and Chief Executive Officer and Vice President-Chief Financial
Officer of Logicon to that effect;
(b) Harnischfeger shall have received an opinion of the
General Counsel of Logicon, in substantially the form of Exhibit B.
(c) Logicon shall have entered into a non-compete agreement
with Harnischfeger Engineers, Inc. substantially in the form of the
Noncompetition Agreement dated October 28, 1993 among HEI Acquisition,
Inc., Harnischfeger Industries, Inc. and Harnischfeger Engineers, Inc.,
and coterminous thereto a copy of which has been provided to Logicon and
will be set forth as Schedule 6.2(c).
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF LOGICON TO EFFECT
THE ACQUISITION. The obligations of Logicon to effect the Acquisition
shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Each of Harnischfeger and HIHC shall have performed, in
all material respects, its respective agreements required to be performed
on or prior to the Closing Date and shall have caused Syscon to comply
with, in all material respects, its obligations contained in this
Agreement, and the representations and warranties of Harnischfeger and
HIHC contained in this Agreement shall be true and correct in all
material respects on and as of the date of this Agreement and on and as
of the Closing Date as if made on and as of such date, except as
contemplated or permitted by this Agreement, and Logicon shall have
received a Certificate of Harnischfeger and HIHC executed by its
President and Chief Executive Officer and its Chief Financial Officer in
the case of Harnischfeger, and by its President, in the case of HIHC to
that effect.
(b) Since October 31, 1994, there shall have been no
material adverse change, or discovery of a condition or occurrence of an
event which has resulted or reasonably can be expected to result in a
Material Adverse Effect.
(c) Logicon shall have received an opinion of the Counsel of
Harnischfeger, in substantially the form of Exhibit A.
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at
any time prior to the Closing Date, whether before or after approval by
the Board of Directors of Logicon, Harnischfeger and HIHC:
(a) by mutual consent of the Parties, or
(b) unilaterally by either Logicon, on the one hand, or
Harnischfeger and HIHC, on the other hand, if the Acquisition shall not
have been consummated on or before June 30, 1995 (the "Termination
Date"), unless the failure to consummate the Acquisition is the result
of a material breach of this Agreement by the party seeking to terminate
this Agreement (or by one of its subsidiaries); or
(c) unilaterally by either Logicon, on the one hand, or
Harnischfeger and HIHC, on the other hand, (I) if the other fails in any
material respect to perform any covenant in this Agreement, and does not
cure the failure in all material respects within 20 business days after
receipt of written notice of the alleged failure, or (ii) if any
condition to the obligations of that party is not satisfied (other than
by reason of a breach by that party of its obligations hereunder), and it
reasonably appears that the condition cannot be satisfied prior to the
Termination Date.
(d) unilaterally by Logicon as and to the extent provided in
Section 5.9.
(e) unilaterally by Logicon if, after the date hereof, there
is a development in Syscon's AFCAC matter which has or could reasonably
be expected to have a Material Adverse Effect.
SECTION 7.2 EFFECT OF TERMINATION. In the event of
termination of this Agreement, as provided in Section 7.1, there shall be
no further obligation on the part of any party or their respective
officers or directors (except as set forth in this Section 7.2 and in
Sections 3.5, 5.2, 5.3, 7.5 and 9.7 which shall survive the
termination). Nothing in this Section 7.2 shall relieve any party from
liability for any material breach of this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the
Parties hereto and in compliance with applicable law.
SECTION 7.4 WAIVER. At any time prior to the Closing Date,
the Parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other Parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant thereto and (c) waive compliance by the
other party with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION 7.5 EXPENSE REIMBURSEMENT IN THE EVENT OF A DEFAULT.
In the event that either party terminates this Agreement pursuant to
Section 7.1(c), in addition to any other remedy available to such party,
the other party shall reimburse the terminating party for its reasonable
fees, costs and expenses incurred in connection with this Agreement.
<PAGE>
However, in no event shall Logicon be responsible for any of the costs or
expenses related directly or indirectly to the proposed spin-off of
Syscon.
ARTICLE VIII
DISPUTE RESOLUTION
SECTION 8.1 SENIOR OFFICERS. Any claim or dispute between
Harnischfeger or HIHC and Logicon arising out of or in connection with
this Agreement or any alleged breach hereof (a "Claim") shall be
submitted for resolution to a senior officer of both Harnischfeger and
Logicon, as designated by their respective chief executive officers, who
shall meet within 15 days of such submission to seek in good faith an
amicable settlement.
SECTION 8.2 BINDING ARBITRATION.
(a) Governing Principles. Any Claim not settled by the
Parties within 60 days after written notice of the claim is first given
by either Party to the other shall be finally settled by arbitration
under the Commercial Arbitration Rules (the "Rules") and the Guidelines
for Expediting Larger, Complex Commercial Arbitrations of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by
the Arbitrator may be entered in any court having jurisdiction over it.
No claim or claims based on breach or failure of any of the
representations or warranties in Sections 3.1, 3.2, 3.3, 3.6, 3.7, 3.8,
3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.17, 3.19, 3.20, or 3.21 of this
Agreement shall be asserted by Logicon unless the aggregate amount of
such claim or claims together with the aggregate amount of any other
claim or claims asserted by Logicon exceeds One Hundred Thousand Dollars
($100,000).
(b) Selection and Qualification of the Arbitrator. If the
Claim does not exceed One Million Dollars ($1,000,000), there shall be
one arbitrator. If the Claim exceeds One Million Dollars ($1,000,000),
there shall be three arbitrators (all arbitrators are hereafter
collectively referred to as the "Arbitrator"). In the event the panel
consists of one Arbitrator, the Parties shall endeavor to agree on the
selection of such Arbitrator, but if no agreement has been reached within
15 days after expiration of the 60-day period referred to in the
foregoing clause (a), the Arbitrator shall be selected by the American
Arbitration Association. In the event the panel consists of three
Arbitrators, one Arbitrator shall be selected and appointed by each party
(treating Harnischfeger and HIHC as a single party for this purpose) and
a third Arbitrator shall be appointed by the two Arbitrators so selected
by the Parties or, if no agreement has been reached by them within 15
days after expiration of such 60-day period, by the American Arbitration
Association. The Arbitrator shall conduct himself or themselves as a
neutral, and be subject to disqualification pursuant to Section 19 of the
rules. The Arbitrator shall be compensated at his or their normal hourly
or per diem rates for all time spent in connection with the arbitration
proceeding, and pending final award, appropriate compensation and
expenses shall be advanced equally by Logicon, on the one hand, and
Harnischfeger and HIHC, on the other hand.
(c) Preliminary Hearing. Within 15 days after the
Arbitrator has been appointed, a preliminary hearing among the Arbitrator
and counsel for the Parties shall be held for the purpose of evolving a
written plan for the management of the arbitration, that shall promote
the efficient, expeditious and cost-effective conduct of the proceeding.
(d) Powers of the Arbitrator and Arbitration Procedures. The
Arbitrator shall permit and facilitate such discovery as it
determines is appropriate, including prehearing depositions, particularly
of witnesses who will not appear, and orders to protect the
confidentiality of proprietary information, trade secrets, and other
sensitive information disclosed in discovery. Papers, documents and
written communications shall be delivered by the Parties directly to each
other, the Arbitrator, and the AAA tribunal administrator. The
Arbitrator shall actively manage the proceeding to make it fair,
expeditious, economical and less burdensome and adversarial than
litigation. The Arbitrator may limit the issues, limit the time for each
Party to present its case, exclude testimony and other evidence that it
deems irrelevant, cumulative or inadmissible, and order that the direct
testimony of witnesses be furnished by written sworn statement. All
documents that a Party proposes to offer in evidence, except for those
objected to by an opposing party, shall be self-authenticated. Any Claim
submitted to arbitration shall be resolved in accordance with title 9 of
the U.S. Code (U.S. Arbitration Act) which shall govern the
interpretation, enforcement and proceedings pursuant to this arbitration
provision.
(e) Rendering of Award. The award rendered by the
Arbitrator shall itemize the awards, shall allocate the fees and expenses
of the Arbitrator, the AAA and the arbitration proceedings as the
Arbitrator deems appropriate, shall not include punitive damages but may
include all or a part of a Party's reasonable attorneys' fees. Before
rendering the final award, the Arbitrator shall submit to the Parties an
unsigned draft of the proposed award, and each Party may deliver, within
15 days after receipt of such draft, a written statement of alleged
errors of fact, computation, law or otherwise. The Arbitrator may
disregard any Party's statement to the extent that it is in substance an
application for reargument. Within 20 days after receipt of such Party
statements, the Arbitrator shall render the final award.
SECTION 8.3 EXCLUSIVE REMEDY. The provisions of this
Article VIII shall constitute the exclusive remedy with respect to any
Claim.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall survive the
Closing, but no claim based thereon may be asserted more than two years
after the Closing Date except for the representations and warranties
contained in Section 3.15, which shall survive for the appropriate tax
statute of limitations and any extensions granted thereunder, unless
written notice of such claim shall have been given within two years of
the Closing Date.
SECTION 9.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested) or sent via facsimile (receipt of which is confirmed) to the
Parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to Logicon: E. Benjamin Mitchell, Jr., Esq.
Vice President-General Counsel
Logicon, Inc.
<PAGE>
3701 Skypark Drive, #200
Torrance, CA 90505
Phone (310) 373-0220
FAX (310) 373-0844
with a copy to: Barton Beek, Esq.
c/o O'Melveny & Myers
610 Newport Center Drive
Newport Beach, CA 92660
Phone (714) 669-6902
FAX (714) 669-6993
(b) If to Harnischfeger: Francis M. Corby, Jr.
Executive Vice President-Finance
and Administration, and
Chief Financial Officer
Harnischfeger Industries, Inc.
13400 Bishops Lane
P.O. Box 554
Brookfield, WI 53005
Phone (414) 797-6518
FAX (414) 797-6717
with a copy to: K. Thor Lundgren, Esq.
Executive Vice President,
Law and Government Affairs
Harnischfeger Industries, Inc.
13400 Bishops Lane
P.O. Box 554
Brookfield, WI 53005
Phone (414) 797-6860
FAX (414) 797-6717
(c) If to HIHC: John P. Garniewski, Jr.
President
HIHC, Inc.
300 Delaware Ave., Suite 512
Wilmington, DE 19801
Phone (302) 427-5847
with a copy to: K. Thor Lundgren, Esq.
Executive Vice President,
Law and Government Affairs
Harnischfeger Industries, Inc.
13400 Bishops Lane
P.O. Box 554
Brookfield, WI 53005
Phone (414) 797-6860
FAX (414) 797-6717
SECTION 9.3 INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.4 MISCELLANEOUS. This Agreement (including the
documents and instruments referred to herein) and the Confidentiality
Agreement (which shall survive the execution, termination or consummation
of this Agreement) (a) constitute the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
Parties, or any of them, with respect to the subject matter hereof; (b)
are not intended to confer upon any other person any rights or remedies
hereunder, (c) shall not be assigned by operation of law or otherwise;
<PAGE>
and (d) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware (without
giving effect to the provisions thereof relating to conflicts of law).
SECTION 9.5 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.6 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.7 NON-HIRING. Prior to the earlier of the Closing
Date or the termination of this Agreement, and for a period of one year
after any such termination, no Party to this Agreement nor any of its
subsidiaries will knowingly seek to cause anyone who is an employee of
another party to this Agreement or any of its subsidiaries to terminate
such employment.
SECTION 9.8 SCHEDULES. Any matter set forth on a Schedule
to this Agreement shall be deemed to be set forth on each of the other
Schedules hereto as well.
IN WITNESS WHEREOF, Logicon, Harnischfeger and HIHC have
caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
WITNESS LOGICON, INC.
E. BENJAMIN MITCHELL, JR. RALPH L. WEBSTER
E. Benjamin Mitchell, Jr. Ralph L. Webster
Vice President-General Counsel Vice President and Chief
Financial Officer
WITNESS HARNISCHFEGER INDUSTRIES, INC.
JOHN A. SPIES IAN LAMBERT
John A. Spies Ian Lambert
Assistant Treasurer Vice President and Treasurer
WITNESS HIHC, INC.
MARY E. GUILLORY JOHN P. GARNIEWSKI, JR.
Mary E. Guillory John P. Garniewski, Jr.
Assistant to President President
<PAGE>
Exhibit 23. CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Forms S-8 (Nos. 2-82905,
2-82906, 2-82907, 3-45813 and 33-45815) of Logicon, Inc. of our report
dated December 8, 1994, except as to Note 8, which is as of February 24,
1995, relating to the consolidated financial statements of Syscon
Corporation, which appears in the Current Report on Form 8-K of Logicon,
Inc. dated March 2, 1995. We also consent to the incorporation by refer-
ence of our report on the Financial Statement Schedules, which appears in
such Current Report on Form 8-K.
PRICE WATERHOUSE, LLP
Washington, D.C.
March 2, 1995
