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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
Date of Report (Date of earliest event reported): February 16, 1996
LITTON INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
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Delaware 1-3998 95-1775499
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
21240 Burbank Boulevard, Woodland Hills, California 91367
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (818) 598-5000
Page 1 of 3
Exhibit Index appears on Page 2
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Item 2. Acquisition or Disposition of Assets
On February 16, 1996, Litton Industries, Inc. completed the purchase of the
stock of PRC, Inc. from the Black & Decker Corporation for approximately $425
million in cash.
The Registrant anticipates filing the required financial statements and pro
forma financial information as soon as practicable, but not later than 60 days
after this report on Form 8-K.
Item 7. Exhibits
99.1 Press Release issued by the Registrant on February 16, 1996
99.2 Stock Purchase Agreement dated as of December 13, 1995 By and Among
The Black & Decker Corporation, PRC Investments, Inc., PRC Inc. and
Litton Industries, Inc.
Page 2 of 3
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SIGNATURE
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 hereunto duly authorized.
LITTON INDUSTRIES, INC.
(Registrant)
By /s/ John E. Preston
_________________________
John E. Preston
Senior Vice President
February 21, 1996
Page 3 of 3
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EXHIBIT 99.1
[LETTERHEAD FOR LITTON]
FOR IMMEDIATE RELEASE
LITTON COMPLETES PURCHASE OF PRC INC.
WOODLAND HILLS, CA, Feb. 16 -- Litton Industries, Inc. has announced
completion of the purchase of PRC Inc. from The Black & Decker Corporation for
approximately $425 million in cash.
PRC had estimated 1995 sales of approximately $720 million. Based in
McLean, VA, PRC is a diversified information technology company engaged in
systems management and integration. PRC designs, develops, integrates and
supports computer-based information systems and re-engineers business
processes for U.S. government departments, commercial customers and state and
local governments.
Litton Chairman and Chief Executive Officer John M. Leonis said, "PRC is
a major supplier of information technology products and services to growing
government markets. The combination of our businesses will strengthen Litton's
ability to provide more comprehensive service to our command,
- more -
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News
Release
Message JILHW/Page 2
- 2 -
control and communications (C3) systems customers, while expanding the
capabilities of our other defense electronics businesses. PRC will operate as
a unit of our C3 group."
Litton has offered employment to virtually all of PRC's approximately
5,600 employees in Virginia and facilities across the U.S.
Litton is a leader in worldwide technology markets for advanced
electronic and defense systems, and a major designer and builder of surface
combatant ships for the U.S. Navy and allied nations.
###
2/16/96 4387
For information call: Robert Knapp Office: (818) 598-5907
Home: (805) 496-2453
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EXHIBIT 99.2
________________________________________________________________________________
________________________________________________________________________________
STOCK PURCHASE AGREEMENT
Dated as of December 13, 1995
By and Among
THE BLACK & DECKER CORPORATION
("Seller's Parent")
PRC INVESTMENTS INC.
("Seller")
PRC INC.
("PRC")
and
LITTON INDUSTRIES, INC.
("Buyer")
________________________________________________________________________________
________________________________________________________________________________
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TABLE OF CONTENTS
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ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Affiliated Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Benefit Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Bid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7. Bridge Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.8. Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.9. Buyer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.10. Buyer Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.11. Carpal Tunnel Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.12. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.13. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.14. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.15. Competing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.16. Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.17. Consolidated Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.18. Consolidated Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.19. Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.20. Contract Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.21. DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.22. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.23. ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.24. Emhart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.25. Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.26. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.27. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.28. Final Net Asset Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.29. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.30. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.31. Government Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.32. Government Contract Novation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.33. Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.34. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.35. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.36. H-S-R Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.37. IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.38. Incentive Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.39. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.40. Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.41. Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.42. Individual Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Section 1.43. Individual Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.44. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.45. Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.46. Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.47. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.48. Material Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.49. Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.50. Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.51. OCI Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.52. Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.53. PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.54. PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.55. PRC Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.56. PRC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.57. PRC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.58. Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.59. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.60. Post-Closing Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.61. Pre-Closing Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.62. Post-Closing Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.63. Pre-Closing Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.64. Prime Government Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.65. Proposed Final Net Asset Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.66. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.67. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.68. Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.69. Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.70. Seller Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.71. Seller Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.72. Seller's Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.73. Special Severance Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.74. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.75. Tax Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.76. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.77. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.78. U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PURCHASE AND SALE OF PRC SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.1. Sale of PRC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.2. Purchase Price and Payment for PRC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.3. Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.1. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.3. Ownership of PRC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.4. PRC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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Section 3.5. Execution and Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.7. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.8. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.9. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.11. Real and Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.12. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.13. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.14. Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.15. Guarantees by Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.16. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.17. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.19. Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.20. Extraordinary Transactions and Material Adverse Effects . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.21. Licenses; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.22. Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.23. Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.24. Certain Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.25. Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.26. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.27. Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.28. Intercompany Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.29. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.30. Inventories; Receivables; Loss Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.31. Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.32. Customer-Furnished Property or Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.33. Product Warranty; Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.34. Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.35. Clearances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 3.36. Government Contracting Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 3.37. Government Contracting Audits Settlement Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.1. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.2. Investment Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.3. Execution and Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.4. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.5. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.7. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.8. Brokerage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
COVENANTS AND AGREEMENTS OF SELLER AND SELLER'S PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.1. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.2. Conduct and Preservation of Business Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.3. Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.4. H-S-R Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.5. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.6. Certain Indebtedness and Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.7. Delivery of Information After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.8. Use of Certain Words, Trademarks and Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.9. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.10. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 5.11. Nondisclosure of Proprietary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.12. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.13. Novations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
COVENANTS AND AGREEMENTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.1. Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.2. H-S-R Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.3. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.4. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.5. Certain Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.6. Preservation of and Access to Certain Information After Closing . . . . . . . . . . . . . . . . . . . . . 63
Section 6.7. Use of Certain Words, Trademarks and Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.8. Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.9. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
CONDITIONS OF OBLIGATIONS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.1. Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.2. Covenants and Agreements -- No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.3. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.4. H-S-R Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.5. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.6. Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.7. No Orders; Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.8. Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.9. Resignation of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.10 OCI Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
CONDITIONS OF OBLIGATIONS OF SELLER AND SELLER'S PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.1. Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
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<TABLE>
<S> <C>
Section 8.2. Covenants and Agreements -- No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.3. H-S-R Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.4. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.5. Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.6. No Orders; Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 9.2. Documents to be Delivered by Seller and Seller's Parent . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 9.3. Documents to be Delivered by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 10.1. Right to Terminate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 10.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ADDITIONAL COVENANTS AND AGREEMENTS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.1. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.2. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 11.3. Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.4. Indemnification by Seller and Seller's Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 11.5. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 11.6. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 11.7. Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 12.1. Limitation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 12.2. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 12.3. Expenses; Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 12.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.5. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.6. Binding Agreement and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.7. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 12.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 12.9. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 12.10. Article and Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 12.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.14. Reference of Disputes to Senior Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.15. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
Schedule Description
- -------- -----------
<S> <C>
3.1 Organization and Good Standing--PRC Companies
3.4 PRC Subsidiaries
3.6 Restrictions--Seller; Seller's Parent; PRC Companies
3.7 Consents--Seller; Seller's Parent; PRC Companies
3.9 Undisclosed Liabilities--PRC Companies
3.10 Litigation; Investigations--PRC Companies
3.11 Real Property--PRC Companies
3.12 Intellectual Property--PRC Companies
3.13 Material Contracts--PRC Companies
3.14 Employee Benefit Matters--PRC Companies
3.15 Guarantees by Others--Seller's Parent and Affiliates
3.16 Tax Matters--PRC Companies
3.17 Environmental Matters--PRC Companies
3.18 Insurance--PRC Companies
3.19 Banks--PRC Companies
3.20 Extraordinary Transactions--PRC Companies
3.21 Licenses; Permits--PRC Companies
3.23 Government Contracts
3.24 Certain Labor Matters
3.27 Certain Interests
3.28 Intercompany Transactions
3.30 Loss Contracts
3.31 Bids
3.33 Product Warranty; Product Liability
3.34 Backlog
3.35 Clearances
3.36 Government Contracting Audits
3.37 Government Contracting Audits Settlement Agreements
4.4 Restrictions--Buyer
4.5 Consents--Buyer
4.6 Litigation--Buyer
7.5 Consents Required for Closing--Seller;
Seller's Parent; PRC Companies
8.4 Consents Required for Closing--Buyer
12.1(b) Employees of PRC for Purposes of Determining
PRC Companies' Knowledge of Certain Events
</TABLE>
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<PAGE> 8
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
Exhibit A Financial Statement
Exhibit B Special Severance Plans
Exhibit C Allocation of Purchase Price (Section 338(h)(10) of the Code)
</TABLE>
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<PAGE> 9
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (together with the Schedules and Exhibits
hereto, this "Agreement") is made as of this 13th day of December, 1995, by and
among PRC Investments Inc., a Delaware corporation with its principal office at
Drummond Plaza Office Park, 1423 Kirkwood Highway, Newark, Delaware 19711
("Seller"), The Black & Decker Corporation, a Maryland corporation with its
principal office at 701 East Joppa Road, Towson, Maryland 21286 ("Seller's
Parent"), PRC Inc., a Delaware corporation with its principal office at 1500
PRC Drive, McLean, Virginia 22102 ("PRC"), and Litton Industries, Inc., a
Delaware corporation with its principal office at 21240 Burbank Boulevard,
Woodland Hills, California 91367 ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of PRC;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, in accordance with the terms and conditions of this Agreement, all of
the issued and outstanding shares of capital stock of PRC; and
WHEREAS, Seller's Parent and PRC desire to join in this Agreement for the
purpose of making certain representations, warranties, covenants and
agreements;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties contained herein, the parties hereby agree as follows:
<PAGE> 10
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Action. "Action" means any action, complaint, petition,
investigation, suit or other proceeding, whether civil or criminal, in law or
in equity, or before any arbitrator or Governmental Entity.
Section 1.2. Affiliate. "Affiliate" shall mean any Person that directly or
indirectly controls, is controlled by, or is under common control with the
Person in question. For purposes of determining whether a Person is an
Affiliate, the term "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, contract or
otherwise.
Section 1.3. Affiliated Groups. "Affiliated Groups" shall have the meaning
set forth in Section 3.16.
Section 1.4. Allocation. "Allocation" shall have the meaning set forth in
Section 11.2.
Section 1.5. Benefit Arrangements. "Benefit Arrangements" shall mean all
life and health insurance, hospitalization, savings, bonus, deferred
compensation, incentive compensation, severance pay, disability, and fringe
benefit plans, individual employment and severance contracts and other policies
and practices providing employee or executive compensation or benefits to
Employees or
2
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their dependents, maintained or contributed to by any of the PRC Companies,
other than Employee Benefit Plans.
Section 1.6. Bid. "Bid" shall mean any quotation, bid or proposal made by
Seller, Seller's Parent or any PRC Company that, if accepted or awarded, would
lead to a contract with the U.S. Government for the design, manufacture and
sale of products or the provision of services by any PRC Company.
Section 1.7. Bridge Period. "Bridge Period" shall have the meaning set forth
in Section 11.1.
Section 1.8. Buyer. "Buyer" shall have the meaning set forth above.
Section 1.9. Buyer Group. "Buyer Group" shall have the meaning set forth in
Section 11.1.
Section 1.10. Buyer Period. "Buyer Period" shall have the meaning set forth
in Section 11.1.
Section 1.11. Carpal Tunnel Litigation. "Carpal Tunnel Litigation" means
any pending or threatened action against any of the PRC Companies arising out
of or relating to (i) carpal tunnel syndrome, or (ii) cumulative trauma
disorder, tendinitis, nerve entrapment, repetitive motion or stress injury or
any similar illness or ailment causing injury or damage to an individual's
hand, wrist or arm.
Section 1.12. Closing. "Closing" shall mean the consummation of the events
described in ARTICLE IX.
Section 1.13. Closing Date. "Closing Date" shall mean the date on which the
Closing shall occur.
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<PAGE> 12
Section 1.14. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.15 Competing Business. "Competing Business" shall have the meaning
set forth in Section 5.10.
Section 1.16. Confidentiality Agreement. "Confidentiality Agreement" shall
mean the agreement dated October 24, 1995, between PRC and Buyer relating to,
among other things, the confidential nature of certain information in respect
of PRC shared by PRC with Buyer.
Section 1.17. Consolidated Returns. "Consolidated Returns" shall have the
meaning set forth in Section 3.16.
Section 1.18. Consolidated Taxes. "Consolidated Taxes" shall have the
meaning set forth in Section 3.16.
Section 1.19. Contest. "Contest" shall mean any administrative or judicial
Tax or foreign Tax audit, examination, proceeding or litigation involving any
Tax Authority.
Section 1.20. Contract Loss. "Contract Loss" shall exist with respect to a
contract or Bid (i) if in the case of a Government Contract, after
consideration of existing reserves, the sales price therefor is more than
$100,000 less than the sum of the cost incurred to date and the estimated cost
to complete, with all costs determined in accordance with GAAP on a basis
consistent with prior periods, or (ii) if in the case of a contract involving
the business of PRC Public Sector, Inc., the expected gross margin for the
contract for the year ending December 31, 1995 is less than 20%.
4
<PAGE> 13
Section 1.21. DOL. "DOL" shall mean the United States Department of Labor.
Section 1.22. ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.23. ERISA Affiliate. "ERISA Affiliate," as applied to any
Person, shall mean (i) any corporation which is a member of a controlled group
of corporations within the meaning of Section 414(b) of the Code of which that
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control
within the meaning of Section 414(c) of the Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of a Person shall continue to be
considered an ERISA Affiliate within the meaning of this definition with
respect to the period such entity was an ERISA Affiliate of such Person and
with respect to liabilities arising after such period for which such Person
could be liable under the Code or ERISA.
Section 1.24. Emhart. "Emhart" shall mean Emhart Corporation, a Virginia
corporation with its principal office at 701 East Joppa Road, Towson, Maryland
21286.
Section 1.25. Employee Benefit Plan. "Employee Benefit Plan" shall mean
each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained
or contributed to by any of the PRC Companies,
5
<PAGE> 14
which provides or may provide benefits to Employees or their dependents but
excluding Multiemployer Plans.
Section 1.26. Employees. "Employees" shall mean all current employees,
former employees and retired employees of the PRC Companies.
Section 1.27. Environmental Laws. "Environmental Laws" shall mean all Laws
relating to the protection of human health, safety or the environment
including: (i) all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature; and (ii) all requirements pertaining to the
protection of the health and safety of employees or the public.
Section 1.28. Final Net Asset Amount. "Final Net Asset Amount" shall have
the meaning set forth in Section 2.3.
Section 1.29. Financial Statements. "Financial Statements" shall mean the
unaudited Special Purpose Statements of Net Assets of PRC, exclusive of PRC
Environmental Management, Inc. and PRC Realty Systems, Inc., formerly wholly
owned subsidiaries of PRC, as of September 30, 1995 and December 31, 1994, and
the Special
6
<PAGE> 15
Purpose Statements of Operating Income for the years ended December 31, 1994,
1993 and 1992, and for the nine months ended September 30, 1995 and 1994,
together with all notes thereto, copies of which is attached hereto as Exhibit
A.
Section 1.30. GAAP. "GAAP" shall mean generally accepted accounting
principles.
Section 1.31. Government Contract. "Government Contract" means any prime
contract, subcontract, teaming agreement or arrangement, joint venture, basic
ordering agreement, letter contract, purchase order, delivery order, Bid,
change order or other legally binding commitment of any kind relating to any
business between any PRC Company and (i) the U.S. Government, (ii) any prime
contractor of the U.S. Government to the extent it relates to such prime
contract, or (iii) any subcontractor with respect to any contract described in
clauses (i) or (ii).
Section 1.32. Government Contract Novation. "Government Contract Novation"
shall mean, with respect to a Prime Government Contract, an instrument
reasonably satisfactory in form and substance to Buyer and Seller pursuant to
which all of PRC's rights, claims, benefits and liabilities thereunder shall
have been validly conveyed, transferred, assigned, assumed and novated to Buyer
by all parties thereto.
Section 1.33. Governmental Entity. "Governmental Entity" means any
government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
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Section 1.34. Guarantees. "Guarantees" shall mean any obligations,
contingent or otherwise, of a Person in respect of any indebtedness, obligation
or liability (including assumed indebtedness, obligations or liabilities) of
another Person, including but not limited to direct or indirect guarantees,
endorsements (except for collection or deposit in the ordinary course of
business), notes co-made or discounted, recourse agreements, take-or-pay
agreements, keep-well agreements, agreements to purchase or repurchase such
indebtedness, obligation or liability or any security therefor or to provide
funds for the payment or discharge thereof, agreements to maintain solvency,
assets, level of income, or other financial condition, agreements to make
payment other than for value received and any other financial accommodations.
Section 1.35. Hazardous Substances. "Hazardous Substances" shall mean
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials,"
"hazardous wastes" or "toxic substances," or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitibility, corrosivity, reactivity, radioactivity, carcinogenicity,
reproductive toxicity or "EP toxicity," and petroleum and drilling fluids,
produced waters and other wastes associated with the exploration, development,
or production of crude oil, natural gas or geothermal energy.
Section 1.36. H-S-R Act. "H-S-R Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
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Section 1.37. IRS. "IRS" shall mean the Internal Revenue Service.
Section 1.38. Incentive Compensation Plans. "Incentive Compensation Plans"
shall mean any cash bonus or other incentive compensation plan or arrangement
maintained or contributed to by any of the PRC Companies or Seller's Parent,
and any successor plan or arrangement covering Employees for 1995 or
thereafter.
Section 1.39. Income Taxes. "Income Taxes" shall mean any income, gross
receipts, gains, net worth, surplus, franchise or with respect to any interest,
dividends or royalties, withholding taxes (including interest, penalties or
other additions to Tax) imposed by a Tax Authority, payable by any PRC Company
for federal, state, local or foreign income Tax purposes (as the context
requires) with respect to any Pre-Closing Period or any Post-Closing Period.
Section 1.40. Indemnified Party. "Indemnified Party" shall have the meaning
set forth in Section 11.5.
Section 1.41. Indemnifying Party. "Indemnifying Party" shall have the
meaning set forth in Section 11.5
Section 1.42. Individual Returns. "Individual Returns" shall have the
meaning set forth in Section 3.16.
Section 1.43. Individual Taxes. "Individual Taxes" shall have the meaning
set forth in Section 3.16.
Section 1.44. Intellectual Property. "Intellectual Property" shall mean all
brand names, corporate names, copyrights, patents, service marks, trademarks,
trade names, know-how, trade secrets, and all registrations or applications for
registration of any of
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the foregoing, that are (a) owned by or licensed to a PRC Company (other than
generally available software licensed from third parties) and (b) used in the
operation of the business of a PRC Company.
Section 1.45. Law. "Law" or "Laws" means any valid constitutional provision,
statute, ordinance or other law (including common law), rule, regulation or
interpretation of any Governmental Entity and any Order, as any of these may be
in effect from time to time.
Section 1.46. Loss. "Loss" means any action, claim, cost, damage,
disbursement, expense, liability, loss, deficiency, obligation, sanction or
penalty of any kind or nature, whether foreseeable or unforeseeable, including
but not limited to interest, judgments, reasonable legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified Person.
Section 1.47. Material Adverse Effect. "Material Adverse Effect" when used
with reference to a Person or Persons shall mean a material adverse effect on
the business, operations or financial condition of the Person or Persons.
Section 1.48. Material Contract. "Material Contract" shall mean (i) any
contract, agreement, commitment or other arrangement (oral or written) to which
a PRC Company is party and which reasonably could be expected to result in
revenues to the PRC Companies over the expected term of such contract,
agreement,
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commitment or arrangement in excess of $2,000,000 and (ii) those contracts
defined to be material in Section 3.13.
Section 1.49. Multiemployer Plan. "Multiemployer Plan" shall mean a plan
described in Sections 3(37) and 4001(a)(3) of ERISA to which any of the PRC
Companies has an obligation to contribute or had an obligation to contribute
within the past five years.
Section 1.50. Net Assets. "Net Assets" shall mean total assets minus total
liabilities, calculated in accordance with Section 2.3.
Section 1.51. OCI Clause. "OCI Clause" means any clause or provision of any
agreement providing for compliance with the Organizational Conflict of Interest
("OCI") rules of Subpart 9.5 of the Federal Acquisition Regulations, as they
may be amended or modified from time to time, whether or not the agreement
makes explicit reference to Subpart 9.5 of the Federal Acquisition Regulations.
Section 1.52. Order. "Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
Section 1.53. PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
Section 1.54. PRC. "PRC" shall have the meaning set forth above.
Section 1.55. PRC Companies. "PRC Companies" shall mean PRC and the PRC
Subsidiaries.
Section 1.56. PRC Shares. "PRC Shares" shall mean all of the issued and
outstanding shares of common stock, par value $.01 per share, of PRC.
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Section 1.57. PRC Subsidiaries. "PRC Subsidiaries" shall mean the
Subsidiaries of PRC listed in Schedule 3.4 and PRC Aviation LLC, a Virginia
limited liability company.
Section 1.58. Pension Plan. "Pension Plan shall mean any Employee Benefit
Plan that is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA.
Section 1.59. Person. "Person" shall mean any individual, corporation,
unincorporated association, business trust, estate, partnership, limited
liability company, limited liability partnership, trust, state, the United
States or any other entity.
Section 1.60. Post-Closing Claims. "Post-Closing Claims" means any Action
or Order, or any third party claim which would reasonably be expected to lead
to an Action by such third party if not otherwise resolved or settled with such
party, relating to the PRC Companies to the extent arising from facts or
circumstances that occurred after the Closing.
Section 1.61. Pre-Closing Claims. "Pre-Closing Claims" means any pending or
threatened Action or Order, or any third party claim which would reasonably be
expected to lead to an Action by such third party if not otherwise resolved or
settled with such party, relating to the PRC Companies to the extent arising
from facts or circumstances that occurred on or prior to the Closing, whether
pending or threatened at the Closing or thereafter.
Section 1.62. Post-Closing Period. "Post-Closing Period" shall have the
meaning set forth in Section 11.1.
Section 1.63. Pre-Closing Period. "Pre-Closing Period" shall have the
meaning set forth in Section 11.1.
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Section 1.64. Prime Government Contract. "Prime Government Contract" shall
mean any Government Contract the parties to which include (i) any PRC Company
and (ii) the U.S. Government.
Section 1.65. Proposed Final Net Asset Amount. "Proposed Final Net Asset
Amount" shall have the meaning set forth in Section 2.3.
Section 1.66. Purchase Price. "Purchase Price" shall have the meaning set
forth in Section 2.2.
Section 1.67. Section 338(h)(10) Election. "Section 338(h)(10) Election"
shall have the meaning set forth in Section 11.2.
Section 1.68. Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
Section 1.69. Seller. "Seller" shall have the meaning set forth above.
Section 1.70. Seller Group. "Seller Group" shall have the meaning set forth
in Section 11.3.
Section 1.71. Seller Period. "Seller Period" shall have the meaning set
forth in Section 11.1.
Section 1.72. Seller's Parent. "Seller's Parent" shall have the meaning set
forth above.
Section 1.73. Special Severance Plans. "Special Severance Plans" shall mean
the PRC Inc. Special Severance Plan and the PRC Inc. Senior Management
Severance Plan, copies of which are attached hereto as Exhibit B.
Section 1.74. Subsidiary. "Subsidiary," as it relates to any Person, shall
mean any other corporation, unincorporated
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association, business trust, partnership, limited liability company or limited
liability partnership (other than any such entity formed as part of a teaming
arrangement or other venture for the purpose of pursuing or performing a
contract in the ordinary course of business) more than 50% of whose outstanding
securities such Person has the right, other than as affected by events of
default, directly or indirectly, to vote generally.
Section 1.75. Tax Authority. "Tax Authority" shall mean a foreign or United
States federal, state, or local Governmental Entity having jurisdiction over
the assessment, determination, collection or imposition of any Tax, as the
context requires.
Section 1.76. Tax Returns. "Tax Returns" shall mean all returns (including
information returns), declarations, reports, estimates and statements regarding
Taxes, required to be filed with any Tax Authority.
Section 1.77. Taxes. "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Tax Authority.
Section 1.78. U.S. Government. "U.S. Government" shall mean the United
States Government, including any agencies, commissions, branches,
instrumentalities and departments thereof.
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ARTICLE II
PURCHASE AND SALE OF PRC SHARES
Section 2.1. Sale of PRC Shares. On the terms and subject to the conditions
set forth in this Agreement, Seller hereby agrees to sell, transfer, assign and
deliver to Buyer, and Buyer hereby agrees to purchase from Seller, the PRC
Shares on the Closing Date.
Section 2.2. Purchase Price and Payment for PRC Shares. The consideration to
be paid by Buyer to Seller in exchange for the sale, transfer, assignment and
delivery to Buyer of the PRC Shares shall be $425,000,000 (the "Purchase
Price"), which shall be paid by Buyer to Seller at the time of Closing by wire
transfer of immediately available funds into an account designated in writing
by Seller to Buyer at least two days prior to the Closing Date. The Purchase
Price shall be subject to adjustment as provided in Section 2.3.
Section 2.3. Adjustment of Purchase Price.
(a) As promptly as practicable following the Closing Date, but in no event
later than 90 days after the Closing Date, Seller shall prepare and submit to
Buyer an audited schedule setting forth, in reasonable detail, Seller's
calculation of the Net Assets of PRC immediately prior to the Closing (the
"Proposed Final Net Asset Amount") certified by Ernst & Young LLP. Buyer shall
cause personnel of the PRC Companies to be reasonably available to assist Ernst
& Young LLP in its preparation of the Proposed Final Net Asset Amount. In the
event Buyer disputes the correctness of the Proposed Final Net Asset Amount,
Buyer shall notify Seller of its objections within six months of the Closing
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Date and shall set forth, in reasonable detail, the reasons for Buyer's
objections. If Buyer fails to deliver such notice within such time, Buyer
shall be deemed to have accepted Seller's calculation. Buyer and Seller shall
endeavor in good faith to resolve any disputed items within 20 days after
Seller's receipt of Buyer's notice of objections. If they are unable to do so,
Seller's Parent and Buyer shall select a nationally known independent
accounting firm to resolve the dispute, and the determination of such firm in
respect of the correctness of each item remaining in dispute shall be
conclusive and binding on Buyer and Seller. The amount of Net Assets
immediately prior to the Closing, as finally determined pursuant to this
Section 2.3(a) (whether by failure of Buyer to deliver notice of objection, by
agreement of the parties or by determination of the accountants selected as set
forth above), is referred to herein as the "Final Net Asset Amount."
(b) The Proposed Final Net Asset Amount and the Final Net Asset Amount
shall be determined in accordance with GAAP (except as otherwise set forth in
the Financial Statements), in a manner consistent with the Special Purpose
Statement of Net Assets as of September 30, 1995, and as provided in the
Financial Statements. The accounting firm selected to resolve any disputes will
be instructed to determine the Final Net Asset Amount in the same manner.
(c) If the Final Net Asset Amount is greater than $205,333,000, the
difference shall be paid to Seller by Buyer with interest thereon from the
Closing Date to the date of payment at a
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rate per annum equal to the per annum interest rate announced from time to
time by Citibank, N.A. as its prime rate in effect. If the Final Net Asset
Amount is less than $205,333,000, the difference shall be paid to Buyer by
Seller with interest thereon from the Closing Date to the date of payment at a
rate per annum equal to the per annum interest rate announced from time to time
by Citibank, N.A. as its prime rate in effect. Such payment shall be made in
immediately available funds not later than two business days after the
determination of the Final Net Asset Amount by wire transfer to a bank account
designated by the party entitled to receive the payment.
(d) The fees and expenses, if any, of the accounting firm selected to
resolve any disputes between Buyer and Seller in accordance with Section 2.3(a)
shall be paid one-half by Seller and one-half by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally represent and warrant to and
for the benefit of Buyer as follows:
Section 3.1. Organization and Good Standing. Each of Seller and Seller's
Parent, and each of the PRC Companies, is a corporation or other entity duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has full corporate power and authority to
carry on its business as it is now being conducted. Schedule 3.1 sets forth
the jurisdiction in which each PRC Company was organized and each jurisdiction
in which each PRC Company is qualified or licensed to
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do business as a foreign Person. Each of the PRC Companies is qualified as a
foreign corporation or other entity and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except as set forth in Schedule 3.1 and
except where the failure to be so qualified would not have a Material Adverse
Effect on the PRC Companies taken as a whole. Schedule 3.1 correctly lists the
current directors and executive officers of each PRC Company as of the date
hereof. True, correct and complete copies of the respective charter documents
of each of the PRC Companies as in effect on the date hereof have been
delivered or otherwise made available to Buyer.
Section 3.2. Capitalization. The authorized capital stock of PRC consists of
1,000 shares of common stock, par value $.01 per share, all of which are
outstanding. Each of the PRC Shares has been validly issued, is fully paid and
nonassessable and was issued in conformity with applicable Laws. No shares of
capital stock of PRC are held in treasury, and there are no other issued or
outstanding equity securities of PRC and no other issued or outstanding
securities of PRC convertible or exercisable at any time into equity securities
of PRC. PRC is subject to no commitment or obligation that would require the
issuance or sale of additional shares of capital stock of PRC at any time under
options, subscriptions, warrants, rights or any other obligations.
Section 3.3. Ownership of PRC Shares. Seller is the record and beneficial
owner of the PRC Shares, which are free of any lien, security interest, charge,
encumbrance or claim whatsoever. At the
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Closing, Buyer will acquire good and marketable title to and complete ownership
of the PRC Shares, free of any lien, security interest, charge, encumbrance or
claim whatsoever.
Section 3.4. PRC Subsidiaries. Schedule 3.4 sets forth the authorized
capital stock and the record ownership of the outstanding shares of capital
stock of each of the PRC Subsidiaries, and a brief summary of each PRC
Subsidiary's business. PRC's ownership of shares of the capital stock of the
PRC Subsidiaries as shown on Schedule 3.4 is free of any lien, security
interest, charge, encumbrance or claim whatsoever. PRC does not have any
Subsidiaries other than the PRC Subsidiaries. All of the outstanding shares of
capital stock of each of the PRC Subsidiaries have been validly issued and are
fully paid and nonassessable and were issued in conformity with applicable
Laws. Other than as set forth in Schedule 3.4, there are no other issued or
outstanding equity securities of any of the PRC Subsidiaries and there are no
other issued or outstanding securities of any of the PRC Subsidiaries
convertible or exercisable at any time into equity securities of any of the PRC
Subsidiaries. None of the PRC Subsidiaries is subject to any commitment or
obligation that would require the issuance or sale of additional shares of its
capital stock at any time under options, subscriptions, warrants, rights or any
other obligations. Except as described in Schedule 3.4, PRC does not own any
equity securities of any Person that is not a Subsidiary.
Section 3.5. Execution and Effect of Agreement. Each of Seller and Seller's
Parent has all necessary corporate power and
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authority to execute, deliver and perform this Agreement and any related
agreements to which it is a party. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Boards of Directors of Seller and Seller's Parent
and by all other necessary corporate action of Seller and Seller's Parent.
This Agreement has been duly executed and delivered by Seller and Seller's
Parent and constitutes a legal, valid and binding obligation of Seller and
Seller's Parent, enforceable against Seller and Seller's Parent in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other Laws affecting the rights of
creditors generally.
Section 3.6. Restrictions. Except as set forth in Schedule 3.6, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Seller, Seller's Parent or any PRC Company, (b) violate
any Law, (c) result in the imposition of any lien, security interest, charge,
encumbrance or claim whatsoever against any asset or property of any PRC
Company, or (d) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller, Seller's Parent or any PRC Company is a party or
to which it or its property is subject, or constitute a default thereunder
(whether or not any such conflict, breach, right of termination, acceleration
or default will occur only upon lapse
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of time and/or the occurrence of any act or event or otherwise), except where
such conflict, breach, right of termination, acceleration or default (i) arises
out of any OCI Clauses as a result of the consummation of the transactions
contemplated by this Agreement and the business of the Buyer and its Affiliates
on the one hand and the PRC Companies on the other hand or (ii) except with
respect to clause (a) above, would not have a Material Adverse Effect on
Seller's Parent and its Subsidiaries taken as a whole or the PRC Companies
taken as a whole, as the case may be.
Section 3.7. Consents. Except (a) for filings, consents, approvals and
authorizations that the failure to obtain or make would not have a Material
Adverse Effect on the PRC Companies taken as a whole, (b) as set forth in
Schedule 3.6 or Schedule 3.7 or referred to in Section 3.6, or (c) for filings,
consents, waivers, approvals or authorizations pursuant to the H-S-R Act, no
filing, consent, waiver, approval or authorization of any Governmental Entity
or of any third party on the part of Seller, Seller's Parent or any of the PRC
Companies is required in connection with the execution and delivery by Seller,
Seller's Parent and PRC of this Agreement or any instrument contemplated hereby
or the consummation of any of the transactions contemplated hereby.
Section 3.8. Financial Statements. Except as set forth in the Notes to the
Financial Statements, the Financial Statements have been prepared in conformity
with GAAP applied on a consistent basis and present fairly the financial
position of the PRC Companies at the dates and for the periods set forth
therein. The Financial Statements have been certified by the chief financial
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officer of PRC. Seller has made available to Buyer copies of each management
letter or other letter delivered to Seller, Seller's Parent or any PRC Company
by such accountants in connection with the Financial Statements or relating to
any review by such accountants of the internal controls of any PRC Company for
the periods covered by the Financial Statements, and has made available for
inspection, or will make available for inspection upon request, all reports and
working papers produced or developed by Ernst & Young LLP or management in
connection with their review of such Financial Statements, as well as all such
reports and working papers for prior periods for which any tax liability of any
PRC Company has not been finally determined or barred by applicable statutes of
limitation. Since January 1, 1992, there has been no change in any of the
significant accounting policies, practices or procedures of any PRC Company
that would be required by GAAP to be disclosed in the Financial Statements.
Section 3.9. No Undisclosed Liabilities. Except as (a) set forth or reserved
against in the Financial Statements, (b) set forth in Schedule 3.9, (c)
incurred since September 30, 1995 in compliance with Section 5.2 hereof (as if
such Section was in effect since September 30, 1995), or (d) arising under this
Agreement, the PRC Companies do not have as of the date hereof, and will not
have as of the Closing Date, any liabilities whatsoever of a type required to
be accrued for in accordance with GAAP.
Section 3.10. Litigation. Except as set forth in Schedule 3.10, there is no
Order or Action pending, or to the knowledge of Seller, Seller's Parent or any
of the PRC Companies
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threatened, against Seller, Seller's Parent or any of the PRC Companies in
respect of this Agreement or any of the transactions contemplated hereby that
could reasonably be expected to prevent the consummation of any of the
transactions contemplated hereby. Except as set forth in Schedule 3.10, there
is no Order or Action pending, or to the knowledge of Seller, Seller's Parent
or any of the PRC Companies threatened, against or involving any of the
businesses, properties, rights or assets of any of the PRC Companies which (i)
reasonably could be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole or (ii) as of the date of this Agreement, involves a
claim or potential claim that reasonably could be expected to have aggregate
liability to the PRC Companies in excess of $100,000, or that enjoins or
compels or seeks to enjoin or to compel any activity by any PRC Company.
Except as set forth in Schedule 3.10, there is no matter as to which any PRC
Company has received any notice, claim or assertion, or, to the knowledge of
Seller, Seller's Parent and the PRC Companies, which otherwise has been
threatened against or affecting any director, officer, employee, agent or
representative of any PRC Company or any other Person, nor to the knowledge of
Seller, Seller's Parent and the PRC Companies is there any reasonable basis
therefor, in connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by any PRC Company, except as
could not reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole.
Section 3.11. Real and Personal Property.
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(a) None of the PRC Companies owns any real property. Schedule 3.11 sets
forth a complete list of all real property leased by the PRC Companies as of
the date of this Agreement. All leasehold properties listed on Schedule 3.11
are held by PRC Companies under valid, binding and enforceable leases. None of
the PRC Companies is in default, or has received written notice of default,
under any lease of real property, which default reasonably could be expected to
have a Material Adverse Effect on the PRC Companies taken as a whole. There is
no Action pending or, to the knowledge of Seller, Seller's Parent and the PRC
Companies, threatened that could reasonably be expected to materially interfere
with the quiet enjoyment of any of the leasehold properties listed on Schedule
3.11.
(b) Except as could not reasonably be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole, the PRC Companies have good and
marketable title to all owned assets and properties used in their business,
including but not limited to all assets that they respectively purport to own
as of September 30, 1995, as reflected in the Financial Statements. All owned
assets and property as are material to the business of the PRC Companies,
including but not limited to all assets that they respectively purport to own
as of September 30, 1995 as reflected in the Financial Statements, are held
free of any liens, security interests, charges, encumbrances or claims, except
for liens for Taxes not yet due and except for liens, security interests,
charges, encumbrances or claims that could not reasonably be expected to have a
Material Adverse Effect on the PRC Companies
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taken as a whole. All material tangible properties of the PRC Companies are in
a good state of maintenance and repair (except for ordinary wear and tear).
(c) The assets of the PRC Companies are sufficient for the conduct of
their business and operations.
Section 3.12. Intellectual Property. Schedule 3.12 sets forth, as of the
date of this Agreement, a complete list of all Intellectual Property (except
for brand names, know-how, unregistered copyrights, unregistered service marks,
unregistered trademarks, unregistered tradenames and trade secrets and except
for licensed Intellectual Property). Except as otherwise indicated in Schedule
3.12 and except as could not reasonably be expected to have a Material Adverse
Effect on the PRC Companies taken as a whole, (x) the PRC Companies own or
license the Intellectual Property free and clear of any royalty, lien,
encumbrance or charge, subject in the case of licensed Intellectual Property to
the terms of the respective license agreements, and (y) all such Intellectual
Property is valid and enforceable. Except as set forth in Schedule 3.12 and
except as could not reasonably be expected to have a Material Adverse Effect on
the PRC Companies taken as a whole, none of the PRC Companies has received any
notice or claim that any Intellectual Property is not valid or enforceable, or
of any infringement upon or conflict with any patent, trademark, service mark,
copyright, trade name, trade secret or other proprietary right of any third
party by the PRC Companies or of any claim by any third party alleging any such
infringement or conflict. Except as set forth in Schedule 3.12 and
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except as could not reasonably be expected to have a Material Adverse Effect on
the PRC Companies taken as a whole, no PRC Company has any knowledge of any
infringement by any third party upon any of the Intellectual Property listed in
Schedule 3.12. Except as set forth in Schedule 3.12 and except as could not
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole, as of the Closing Date the PRC Companies will not be
infringing any third party's patent, copyright, trademark, service mark, trade
name, know-how, trade secret or other intellectual property rights.
Section 3.13. Material Contracts. Schedule 3.13 sets forth, as of the date
of this Agreement, a list of or brief description of all Material Contracts
(other than Material Contracts that the PRC Companies are limited by applicable
Laws or Orders or by contract from disclosing to Buyer and other than leases of
real property). Each contract, agreement, commitment or other arrangement
(oral or written) to which any of the PRC Companies is a party or by which any
of the PRC Companies is obligated, embodying or evidencing any of the following
transactions shall be deemed to be a Material Contract and is identified on
Schedule 3.13: (a) guarantees by any of the PRC Companies of any obligations
other than guarantees of obligations of other PRC Companies; (b) indentures,
notes, mortgages, installment obligations, capital leases or other instruments
relating to the borrowing of money in excess of $250,000; (c) agreements or
contracts that involved the receipt of monies by any of the PRC Companies and
constituted the (i) 20 largest contracts or agreements by revenue of the PRC
Companies as
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a whole for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (ii) 10 largest contracts or agreements by revenue of the
Information Technologies Group of the PRC Companies for the year ended December
31, 1994, and for the nine months ended September 30, 1995, (iii) 10 largest
contracts or agreements by revenue of the Information Systems Group of the PRC
Companies for the year ended December 31, 1994, and for the nine months ended
September 30, 1995, (iv) 10 largest contracts or agreements by revenue of the
Systems Integration Group of the PRC Companies for the year ended December 31,
1994, and for the nine months ended September 30, 1995 and (v) 10 largest
contracts or agreements by revenue of the Applied Engineering Group of the PRC
Companies for the year ending December 31, 1994 and for the nine months ended
September 30, 1995; (d) contracts or agreements (including subcontracts) that
involved the payment of at least $250,000 by any of the PRC Companies during
the nine months ended September 30, 1995; (e) contracts or agreements limiting
or restricting the ability of any PRC Company to compete or otherwise to
conduct any business in any manner or place other than those relating to OCI
Clauses and provisions of teaming and other similar agreements relating to the
pursuit or performance of a contract; (f) grants of power of attorney, agency
or similar authority to another Person (other than to a PRC Company or any
director, officer or employee of a PRC Company); (g) contracts or agreements
containing a right of first refusal; (h) any contract or agreement to which any
Affiliate, officer or director of Seller, Seller's Parent, or any PRC Company
is party (other than those constituting
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an Employee Benefit Plan or Benefit Arrangement); (i) any sales, marketing or
international consulting or similar contract or agreement and any lobbying
agreement; (j) any material distributor or sales representative contract or
agreement (other than those where the PRC Company is the distributor or sales
representative); and (k) any contract or agreement not made in the ordinary
course of business that was entered into by a PRC Company in 1995 or that
involves an executory obligation on the part of a PRC Company on the date of
this Agreement or hereafter. Except as set forth on Schedule 3.13, to the
knowledge of Seller, Seller's Parent and the PRC Companies, each Material
Contract is valid and subsisting, and none of the PRC Companies is in default
under any Material Contract, has waived any material rights under any Material
Contract (other than releases executed in the ordinary course of business in
connection with closing contracts or task orders) or has knowledge or notice
that any party with whom it has a Material Contract is in default in a material
respect under the Material Contract. Unless otherwise so noted on Schedule
3.13, each Material Contract was entered into in the ordinary course of
business. True copies of the Material Contracts, including all amendments and
supplements, have been delivered or otherwise will be made available to Buyer.
Section 3.14. Employee Benefit Matters.
(a) Schedule 3.14 sets forth, as of the date of this Agreement, a list of
all Employee Benefit Plans, all Multiemployer Plans and all collective
bargaining agreements of the PRC Companies, and all material Benefit
Arrangements. Except as set
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forth in Schedule 3.14, with respect to each of such Employee Benefit Plans,
Multiemployer Plans, collective bargaining agreements and Benefit Arrangements,
Seller has delivered or made available to Buyer, as applicable, copies of (i)
the text of the formal plan document or other agreements, written policies or
guidelines actually maintained by Seller's Parent, Seller, PRC or any of their
Affiliates evidencing the terms of such Employee Benefit Plans and Benefit
Arrangements, including amendments and, if applicable, the summary plan
description, (ii) in the case of a collective bargaining agreement, the text of
the collective bargaining agreement, (iii) in the case of a Pension Plan that
is intended to qualify under Section 401 of the Code, the most recent IRS
determination letter relating to the Pension Plan's qualification under Section
401 of the Code and the related trust's qualification under Section 501 of the
Code, (iv) the trust agreements, insurance contracts or other documents that
constitute all or a part of the funding vehicle, and (v) the most recent annual
reports (IRS Form 5500s), including the schedules thereto.
(b) Except as set forth in Schedule 3.14, all Employee Benefit Plans
comply in all material respects with ERISA, the Code and any other applicable
Law, each Benefit Arrangement has been maintained in material compliance with
its terms and all applicable Laws, and the PRC Companies have performed in all
material respects their obligations under each Employee Benefit Plan and
Benefit Arrangement.
(c) Except as set forth in Schedule 3.14, there are no Actions or Orders
pending, or to the knowledge of Seller, Seller's
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Parent or PRC, threatened, including proceedings before the IRS, the DOL or the
PBGC, against any Employee Benefit Plan, Benefit Arrangement or any
administrator or fiduciary thereof, and, to the best knowledge of Seller and
Seller's Parent, no facts exist which could give rise to any such Actions or
Orders, other than benefit claims arising in the normal course of operation of
such Employee Benefit Plans or Benefit Arrangements.
(d) Except as set forth in Schedule 3.14, no PRC Company has any current
or projected liability for any unfunded post-retirement medical or life
insurance benefits in connection with any Employee of any of the PRC Companies.
(e) Except as set forth in Schedule 3.14, none of the PRC Companies and,
to the knowledge of Seller, Seller's Parent and the PRC Companies, no other
Person has engaged in any non-exempt "Prohibited Transaction," as defined in
Section 406 of ERISA or Section 4975 of the Code, with respect to any Employee
Benefit Plan.
(f) Except as set forth in Schedule 3.14, none of the PRC Companies has
incurred an outstanding "Accumulated Funding Deficiency," as defined in Section
302(a) of ERISA or Section 412(a) of the Code, with respect to any Pension
Plan, nor is any Pension Plan subject to Title IV of ERISA.
(g) Except as set forth in Schedule 3.14, none of the PRC Companies nor
their ERISA Affiliates has incurred a "withdrawal" or "partial withdrawal," as
defined in Section 4203 and 4205 of ERISA, from any Multiemployer Plan, which
has resulted
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in an unpaid liability or could reasonably be expected to result in a liability
of any of the PRC Companies.
Section 3.15. Guarantees by Others. Schedule 3.15 sets forth a complete
list of all Guarantees of Seller's Parent (or any of its Affiliates (other than
a PRC Company)) for the benefit of Persons doing business with any of the PRC
Companies.
Section 3.16. Tax Matters.
(a) Each of the affiliated groups (as that term is defined in Section
1504(a) of the Code) of corporations of which the PRC Companies were members
prior to and subsequent to April 28, 1989 (the "Affiliated Groups"), has filed
consolidated federal Income Tax Returns and state Income Tax Returns filed on a
consolidated or combined basis (the "Consolidated Returns") for all taxable
years (other than years beginning on or after January 1, 1995) during which the
PRC Companies were members of the Affiliated Groups. The Affiliated Groups
have paid or adequately provided for (or will adequately provide for) all
federal Income Taxes, state Income Taxes with respect to Tax Returns filed on a
consolidated or combined basis, additions to tax, penalties and interest
(collectively, the "Consolidated Taxes") applicable to the Affiliated Groups or
to any members thereof, and the affiliated group of corporations of which the
PRC Companies are members as of the date of this Agreement has adequately
provided (or will adequately provide for) for all Consolidated Taxes that would
be due if the current tax period ended at the close of business on the Closing
Date. Other than the PRC Companies' membership in the Affiliated Groups, the
PRC Companies have not been members of any
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affiliated group for any period not barred by the statute of limitations.
(b) Except as set forth in Schedule 3.16, each of the PRC Companies has
filed all federal, state, local and other Tax Returns (other than Consolidated
Returns) (the "Individual Returns") required to be filed by it under applicable
Laws, including estimated tax returns and reports, and each of the PRC
Companies has paid all required federal, state and local income (other than
Consolidated Taxes) and other taxes, additions to taxes, penalties and interest
(the "Individual Taxes") due and payable on or before the date hereof (and will
duly and timely pay all such amounts required to be paid between he date hereof
and the Closing Date), except where such failure to file the Individual Returns
or pay the Individual taxes would not have a Material Adverse Effect on the PRC
Companies taken as a whole. Each of the PRC Companies has paid, withheld or
adequately provided for (or will adequately provide for) any and all Individual
Taxes in respect of the conduct of its business or the ownership of its
property and in respect of any transaction for which such taxes are due or
would be due if the current tax period ended at the close of business on the
Closing Date.
(c) The federal Income Tax Returns of Seller, Seller's Parent and the PRC
Companies have been audited by the IRS (or the time for the IRS to make an
assessment for additional federal Income Taxes has expired) for the taxable
years ended on or before September 30, 1990, but no taxable years ending
thereafter. Except as set forth in Schedule 3.16, all deficiencies asserted as
a
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result of such examinations have been paid or finally settled and no issue has
been raised by the IRS on audit or otherwise that, by application of the same
or similar principles, might result in a proposed deficiency affecting any of
the PRC Companies for any other period not so examined.
(d) Except as set forth in Schedule 3.16, no material proposed Taxes,
addition to tax, interest, or penalties have been asserted against the
Affiliated Groups or any member of the Affiliated Groups including any of the
PRC Companies, except those that have been paid in full and those that would
not have a Material Adverse Effect on the PRC Companies taken as a whole.
Except as set forth in Schedule 3.16, there are no material agreements,
waivers, or other arrangements providing for extensions of time in respect of
the assessment or collection of any material unpaid Tax against the Affiliated
Groups or any member of the Affiliated Groups affecting any of the PRC
Companies, except those that would not have a Material Adverse Effect on the
PRC Companies taken as a whole.
(e) No election or consent under Section 341(f) of the Code has been made
or shall be made on or prior to the Closing Date by or on behalf of any of the
PRC Companies. None of the PRC Companies has made any payments, is obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. None of the PRC Companies has been
a United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable
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period specified in Section 897(c)(1)(A)(ii) of the Code. Each of the PRC
Companies has disclosed on its federal Income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal Income
Tax within the meaning of Section 6662 of the Code. Except as set forth on
Schedule 3.16, none of the PRC Companies is a party to any Tax allocation or
sharing agreement. None of the PRC Companies has any liability for the Taxes
of any Person (other than any of the PRC Companies or the Affiliated Groups)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign Law), as a transferee or successor, by contract, or otherwise.
Section 3.17. Environmental Matters.
(a) Except as set forth in Schedule 3.17 and except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, each of the PRC
Companies is in compliance with all applicable environmental Laws. Except as
set forth in Schedule 3.17, the PRC Companies have obtained all permits,
licenses and other authorizations that are required under applicable Laws
relating to the protection of the environment, except where the failure to
obtain such permits, licenses and other authorizations could not reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole. Except as set forth in Schedule 3.17, the PRC Companies are in
compliance with the terms and conditions under which the permits, licenses and
other authorizations referenced in the preceding sentence were issued or
granted, except where the failure to be in compliance
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could not reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole.
(b) Except as set forth on Schedule 3.17 and except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, (i) none of the
PRC Companies has generated, used, transported, treated, stored, released or
disposed of, or has suffered or permitted anyone else to generate, use,
transport, treat, store, release or dispose of any Hazardous Substance in
violation of any Laws; (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the business of any PRC Company or
in connection with the conduct of the business of any PRC Company or in
connection with the use of any current or former property or facility of any
PRC Company, which has created or might reasonably be expected to create any
condition or liability under any Laws or which would require investigation by,
reporting to or notification of any Governmental Entity; (iii) no asbestos or
polychlorinated biphenyl or underground storage tank is or has been contained
in or located at any facility of any PRC Company; and (iv) any Hazardous
Substance handled or dealt with in any way in connection with the businesses of
the PRC Companies, whether before or during Seller's ownership thereof, has
been and is being handled or dealt with in all respects in compliance with
applicable Laws.
Section 3.18. Insurance. The PRC Companies are, and at all times during the
past five years have been, insured with reputable insurers against all risks
normally insured against by companies in
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similar lines of business of a similar size, except for professional liability
insurance. Schedule 3.18 sets forth a list of the material insurance coverage
in effect as of the date of this Agreement. None of the insurance carriers
listed on Schedule 3.18 are related to or affiliated with Seller, Seller's
Parent or the PRC Companies (other than Shenandoah Insurance, Inc.). None of
the PRC Companies is in default under any of its insurance policies. None of
Seller, Seller's Parent or any PRC Company has received notice or other
indication from any insurer or agent of any intent to cancel or not so renew
any of such insurance policies, except for cancellations deemed to occur as a
result of the Closing of the transactions contemplated by this Agreement. Each
of the PRC Companies has complied with and implemented all outstanding (i)
requirements of and recommendations of any insurance company that has issued a
policy to it and (ii) requirements and recommendations of the Board of Fire
Underwriters or any other body exercising similar functions or any Governmental
Entity with respect to any such insurance policy.
Section 3.19. Banks. Schedule 3.19 sets forth, as of the date of this
Agreement, the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which the PRC Companies
maintain safe deposit boxes or accounts of any nature, and the names of all
Persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
Section 3.20. Extraordinary Transactions and Material Adverse Effects.
Except as set forth in Schedule 3.20, since September 30, 1995, (x) none of the
PRC Companies has taken any action which
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would have required the consent of Buyer under Section 5.2 had such Section
been in effect since September 30, 1995, (y) whether or not in the ordinary
course of business, there has not been, occurred or arisen any change in or
event affecting any of the PRC Companies that has had or could reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole, and (z) none of the PRC Companies has made any management decisions
involving any material change in its policies with regard to the provision of
services, sales, purchasing or other business, financial, accounting (including
reserves and amounts thereof, but excluding those required by GAAP) or Tax
policies or practices.
Section 3.21. Licenses; Permits. Except as set forth in Schedule 3.21, the
PRC Companies have all licenses and permits (except as may be required under
federal or state Tax Laws) of all Governmental Entities necessary to the
conduct of the business of the PRC Companies on the date hereof, except where
the failure to obtain such licenses or permits could not reasonably be expected
to have a Material Adverse Effect on the PRC Companies taken as a whole.
Except as set forth in Schedule 3.21, all such licenses and permits are valid
and in full force and effect and will remain so upon consummation of the
transactions contemplated by this Agreement. To the best knowledge of Seller,
Seller's Parent and the PRC Companies, no suspension, cancellation or
termination of any of such licenses or permits is threatened or imminent that
could reasonably be expected to have a Material Adverse Effect on the PRC
Companies taken as a whole.
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Section 3.22. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Seller or Seller's Parent,
or by or on behalf of any director, officer, employee, agent or Affiliate of
Seller or Seller's Parent.
Section 3.23. Government Contracts.
(a) During the past five (5) years no payment has been made by PRC or by
any Person authorized to act on its behalf, to any Person in connection with
any Government Contracts, in violation of applicable procurement Laws or in
violation of (or requiring disclosure pursuant to) the Foreign Corrupt
Practices Act or other Laws.
(b) Except as set forth in Schedule 3.23, PRC's cost accounting and
procurement systems with respect to Government Contracts are in compliance in
all material respects with all applicable Laws.
(c) Except as set forth on Schedule 3.23 and except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, with respect to
each and every Government Contract or Bid (including any exception taken
therein), of the PRC Companies: (i) the PRC Companies have complied in all
respects with all terms and conditions of each Government Contract and Bid,
including all clauses, provisions and requirements incorporated expressly, by
reference or by operation of Law therein; (ii) the PRC Companies have complied
in all respects with all requirements of all
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applicable Law or agreements pertaining to each Government Contract or Bid;
(iii) all statements representations and certifications executed, acknowledged
or set forth in, or pertaining to each Government Contract or Bid were, when
given, complete and correct in all respects as of their effective date, and the
PRC Companies have complied in all respects with all such statements,
representations and certifications; (iv) neither the U.S. Government nor any
prime contractor, subcontractor or other Person has notified the PRC Companies,
either orally or in writing, that the PRC Companies have breached or violated
any applicable Law, certification, representation or requirement pertaining to
any Government Contract or Bid; (v) no termination for convenience, termination
for default, cure notice or show cause notice is currently in effect pertaining
to any Government Contract; (vi) no Governmental Entity has provided the PRC
Companies with written notice of any cost incurred by the PRC Companies
pertaining to such Government Contract which has been questioned, challenged or
disallowed or has been the subject of any investigation; and (vii) no money due
to the PRC Companies under any Government Contract has been (or has been
attempted to be) withheld or set off, except for amounts withheld under
contracts in the ordinary course of business.
(d) Except as set forth in Schedule 3.23, neither the PRC Companies nor,
to the best knowledge of Seller and Seller's Parent, any of their directors,
officers, employees, consultants or agents engaged in the business of the PRC
Companies is (or during the last three years has been) under administrative,
civil or
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criminal investigation, indictment or information or equivalent official
governmental charge or allegation by any Governmental Entity with respect to
any alleged irregularity, misstatement or omission or other matter arising
under or relating to any Government Contract. Except as previously disclosed
to Buyer in a writing by the PRC Companies specifically referencing this
Section, (i) during the last two years, the PRC Companies have not conducted or
initiated any internal investigation or made a voluntary disclosure to the U.S.
Government, with respect to any alleged irregularity, misstatement, omission or
other matter arising under or relating to any Government Contract or Bid (other
than those relating to employment and other similar Laws), and (ii) there is no
irregularity, misstatement or omission or other matter arising under or
relating to any Government Contract or Bid that has led or could reasonably be
expected to lead, either before or after the Closing Date, to any of the
consequences set forth in clause (i) of this sentence or the immediately
preceding sentence or any other damage, penalty, assessment recoupment of
payment or disallowance of cost that would have a Material Adverse Effect on
the PRC Companies taken as a whole.
(e) Except as set forth on Schedule 3.23 and except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, there exist (i)
no outstanding claims, requests for equitable adjustment or other contractual
action for relief against the PRC Companies, either by the U.S. Government or
by any prime contractor, subcontractor, vendor or other Person, arising under
or relating to any Government Contract or Bid and (ii) no disputes
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between the PRC Companies and the U.S. Government under the Contract Disputes
Act or any other federal statute or between any PRC Company and any prime
contractor, subcontractor, vendor or other Person arising under or relating to
any Government Contract or Bid. To the best knowledge of Seller and Seller's
Parent, except as set forth in Schedule 3.23 and except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, no PRC Company
has any interest in any pending or potential claim under the Contract Disputes
Act against the U.S. Government or any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract or Bid.
(f) Except as set forth on Schedule 3.23, no PRC Company nor, to the best
knowledge of Seller and Seller's Parent, any of their directors, officers,
employees, consultants or agents is (or during the last three years has been)
suspended or debarred from doing business with any Governmental Entity or is
(or during such period was) the subject of a finding of nonresponsibility or
ineligibility for contracting with any Governmental Entity.
(g) The Government Contracts that contain OCI Clauses or other similar
provisions that might restrict or preclude Buyer or any of its Affiliates from
supplying products or services to any Governmental Entity or supplier thereto
are set forth on Schedule 3.23.
Section 3.24. Certain Labor Matters. Except as set forth on Schedule 3.24,
there is no organized labor strike, dispute, slowdown or stoppage, or
collective bargaining or unfair labor practice claim pending or to the best
knowledge of Seller, Seller's
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Parent and the PRC Companies, threatened against or affecting any PRC Company.
Section 3.25. Minute Books. The minute books of the PRC Companies
accurately reflect all actions and proceedings taken to date by the respective
shareholders, boards of directors and committees of the PRC Companies. The
stock record books of the PRC Companies reflect accurately all transactions in
their respective capital stock of all classes.
Section 3.26. Compliance with Law. Except as disclosed in the Schedules to
this Agreement and except as would not have a Material Adverse Effect, the PRC
Companies have conducted their respective businesses in accordance with
applicable Laws in all respects, the forms, procedures and practices of the PRC
Companies are in compliance with applicable Laws in all respects, and the use
and operation of the assets of the PRC Companies are in compliance with
applicable Laws in all respects.
Section 3.27. Certain Interests. Except as set forth on Schedule 3.14 or
3.27 or disclosed in the Financial Statements, no Affiliate of Seller, Seller's
Parent or any PRC Company, nor any officer or director of any thereof, has any
material interest in any property used in or pertaining to the PRC Companies;
no such Person is indebted or otherwise obligated to any PRC Company; and no
PRC Company is indebted or otherwise obligated to any such Person, except for
amounts due under normal arrangements applicable to all employees generally as
to salary or reimbursement of ordinary business expenses not unusual in amount
or significance. Except as set forth on Schedule 3.27, the consummation of the
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transactions contemplated by this Agreement will not (either alone, or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any benefit or payment (severance or other) arising or becoming due from any
PRC Company or the successor or assign of any thereof to any Person.
Section 3.28. Intercompany Transactions. Except as set forth on Schedule
3.28 or disclosed in the Financial Statements, (x) no PRC Company has engaged
in any transaction with Seller or Seller's Parent, (y) no PRC Company has any
liabilities or obligations to Seller or Seller's Parent and (z) neither Seller
or Seller's Parent has any obligations to any PRC Company. Except as set forth
on Schedule 3.27 or as otherwise expressly provided for in this Agreement, the
consummation of the transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or event, or with the lapse of
time, or both) result in any payment arising or becoming due from any PRC
Company or the successor or assign of any thereof to Seller or Seller's Parent.
Section 3.29. Accuracy of Information. None of the information supplied or
to be supplied by or on behalf of Seller, Seller's Parent or any PRC Company to
any Person for inclusion in any document or application filed with any
Governmental Entity having jurisdiction over or in connection with the
transactions contemplated by this Agreement did contain, or at the respective
times such information is or was delivered, will contain any untrue statement
of a material fact, or omitted or will omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under
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which they were made, not misleading. As of the Closing Date, Seller shall
have notified Buyer of any such information that shall have become untrue or
misleading in any material respect subsequent to delivery, and shall have
notified Buyer in writing of the reason for such change. All documents
required to be filed by Seller, Seller's Parent, or any PRC Company with any
Governmental Entity in connection with this Agreement or the transactions
contemplated by this Agreement will comply in all material respects with the
provisions of applicable Law.
Section 3.30. Inventories; Receivables; Loss Contracts.
(a) Except as set forth or reserved against in the Financial Statements,
all inventories of the PRC Companies are of good merchantable quality and
salable or currently usable in the ordinary course of business.
(b) All receivables of the PRC Companies arose from bona fide transactions
in the normal and ordinary course of business consistent with past practice
and, except as set forth or reserved against in the Financial Statements, are
the valid and legally binding obligations of the Persons obligated to pay such
accounts receivable.
(c) Except as set forth on Schedule 3.30 or as set forth or reserved
against in the Financial Statements, no Contract Loss exists with respect to
any Government Contracts or other contracts to which any PRC Company is a party
or with respect to any Bids. Those Government Contracts, contracts or Bids for
which a Contract Loss is not deemed to exist because, after consideration of
existing reserves, the sales price therefor is equal to or less
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than $100,000 less than the sum of the cost incurred to date and the expected
cost to complete, with all costs determined in accordance with GAAP on a basis
consistent with prior periods, could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on the PRC Companies taken as a
whole.
Section 3.31. Bids. Except as disclosed in Schedule 3.31, no PRC Company
has submitted any Bid relating to its business which is currently outstanding
and which, if accepted or awarded, would result in a Government Contract where
the volume of purchases of materials, supplies, goods, services, equipment or
other assets from such PRC Company in connection with its business under any
such resulting Government Contract could be reasonably expected to exceed
$2,000,000. Schedule 3.31 identifies each such Bid. All cost or pricing data
submitted or certified in connection with Bids are current, accurate and
complete in accordance with the Truth in Negotiations Act, as amended, and the
rules and regulations thereunder.
Section 3.32. Customer-Furnished Property or Equipment. Except as would not
have a Material Adverse Effect on the PRC Companies taken as a whole, all
personal property, equipment and fixtures loaned, bailed or otherwise furnished
to a PRC Company by or on behalf of the U.S. Government that are or should be
in the possession of a PRC Company ("Customer-Furnished Items") are in a good
state of maintenance and repair (except for ordinary wear and tear), have been
regularly and appropriately maintained and repaired in accordance with all
contractual, legal and regulatory requirements and, unless returned to the U.S.
Government, shall be
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in the possession of a PRC Company on the Closing Date. Except as would not
have a Material Adverse Effect on the PRC Companies taken as a whole, each PRC
Company has complied in all respects with all of its obligations relating to
the Customer-Furnished Items, and upon the return thereof to the U.S.
Government in the condition thereof on the date hereof, would have no liability
to the U.S. Government with respect thereto. Except as would not have a
Material Adverse Effect on the PRC Companies taken as a whole, Buyer will incur
no liability to the U.S. Government as a result of any PRC Company's failure
to keep records, maintain or possess property furnished to a PRC Company by or
on behalf of the U.S. Government.
Section 3.33. Product Warranty; Product Liability. Except as set forth on
Schedule 3.33 or provided for in the Financial Statements, no PRC Company has
committed any act, and there has been no omission by any PRC Company, which may
reasonably be expected to result in, and there has been no occurrence relating
to any product or service of any PRC Company which may reasonably be expected
to result in product liability or liability for breach of warranty (whether
covered by insurance or not) on the part of any PRC Company, with respect to
products designed, manufactured, assembled, repaired, maintained, delivered or
installed or services rendered prior to or on the Closing Date, except where
such act, omission or occurrence would not have a Material Adverse Effect on
the PRC Companies taken as a whole.
Section 3.34. Backlog. PRC has provided to Buyer a copy of its written
policies and procedures concerning backlog.
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Schedule 3.34 sets forth the backlog of the PRC Companies as of September 30,
1995, together with the dollar amount of the backlog that is characterized as
"funded" in accordance with PRC's policies and procedures.
Section 3.35. Clearances. Each PRC Company and each officer, director,
employee, consultant or agent (to the extent such agent or consultant is
material to the performance by a PRC Company of any contract) has all facility
clearances or personnel clearances, as the case may be, that, if transferred to
Buyer, are sufficient to allow Buyer to conduct each PRC Company's business as
now conducted by such PRC Company. Except as disclosed in Schedule 3.35,
Seller has no knowledge of any proposed or threatened termination of any
material personnel or facility security clearance relating to the business of
any PRC Company (whether or not such clearance is collateral or special
access).
Section 3.36. Government Contracting Audits. Schedule 3.36 sets forth a
list and description of each open audit or investigation report, or in the
absence thereof, a draft thereof, received by any PRC Company by any
Governmental Entity (other than routine audits by resident auditors, none of
which is material to the business or prospects of the business of the PRC
Companies), which pertains to any Government Contract and which has resulted in
an allegation or a notice of violation of any applicable Law or Government
Contract or of any violation of or deficiency in company policies or procedures
by any PRC Company, and which has not been closed or otherwise resolved.
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Section 3.37. Government Contracting Audits Settlement Agreements. Schedule
3.37 sets forth a list and description of each settlement agreement between any
PRC Company and the U.S. Government which will have a binding effect on any PRC
Company after the Closing Date, and under which any PRC Company has material
unperformed obligations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to and for the benefit of Seller and Seller's
Parent as follows:
Section 4.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its state of
incorporation, and has full corporate power and authority to carry on its
businesses as it is now being conducted. Buyer is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which the conduct of its business or the ownership of its properties requires
such qualification, except where the failure to be so qualified would not have
a Material Adverse Effect on Buyer and its Subsidiaries taken as a whole.
Section 4.2. Investment Representation. Buyer is aware that the PRC Shares
are not registered under the Securities Act. Buyer possesses such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investments hereunder. Buyer is
acquiring the PRC shares for its own account, for investment purposes only and
not with a view to the distribution thereof. Buyer agrees that the PRC Shares
will
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not be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of without registration under the Securities Act, except pursuant to a
valid exemption from registration under the Securities Act.
Section 4.3. Execution and Effect of Agreement. Buyer has the corporate
power and authority to enter into this Agreement, and the execution and
delivery of this Agreement and the consummation of the transactions and
contemplated hereby have been duly authorized by all necessary corporate action
of Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other Laws affecting the rights of creditors generally.
Section 4.4. Restrictions. Except as set forth in Schedule 4.4, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any of the provisions of the
charter or by-laws of Buyer, or (b) conflict with or result in a breach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which Buyer is a party or to which it or
its property is subject, or constitute a default thereunder, except where such
conflict, breach, right of termination or default would not have a Material
Adverse Effect on Buyer.
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Section 4.5. Consents. Except (a) for filing, consents, approvals and
authorizations the failure to obtain or make would not have a Material Adverse
Effect on Buyer and its Subsidiaries taken as a whole, (b) as set forth in
Schedule 4.4 or Schedule 4.5, and (c) for filings, consents, approvals and
authorizations pursuant to the H-S-R Act, no filing, consent, approval or
authorization of any Governmental Entity or of any third party on the part of
Buyer is required in connection with the execution and delivery of this
Agreement or any instrument contemplated hereby or the consummation of any of
the transactions contemplated hereby.
Section 4.6. Litigation. Except as set forth in Schedule 4.6, there is no
action at law or in equity, arbitration proceeding or a governmental
investigation pending, or to the knowledge of Buyer threatened, against Buyer
in respect of this Agreement or any of the Transactions contemplated hereby
that would prevent the consummation of any of the transactions contemplated
hereby.
Section 4.7. Financing. Buyer has available to it sufficient financing to
enable it to consummate the transaction contemplated by this Agreement.
Section 4.8. Brokerage Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements, written or oral, made by or on behalf of Buyer or by or on behalf
of any director, officer, employee, agent or Affiliate of Buyer.
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ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER AND SELLER'S PARENT
Seller and Seller's Parent jointly and severally covenant and agree for the
benefit of Buyer as follows:
Section 5.1. Access to Information. Except as prohibited or limited by Law,
Seller and Seller's Parent shall cause the PRC Companies, from and after the
date of this Agreement and until the Closing Date, to give Buyer and its
employees, counsel and advisors, full and complete access upon reasonable
notice during normal business hours, to all properties, agreements, books,
records and all other information (including any routinely prepared reports and
financial information) with respect to the business of the PRC Companies as
Buyer may from time to time request, and to make copies of such books, records
and other documents and to discuss their respective businesses with such other
Persons as Buyer considers necessary or appropriate for the purposes of
familiarizing itself with the business of the PRC Companies, obtaining any
necessary approvals of or permits for the transactions contemplated by this
Agreement and conducting an evaluation of the organization and business of the
PRC Companies.
Section 5.2. Conduct and Preservation of Business Prior to Closing.
(a) Except as contemplated by this Agreement, Seller and Seller's Parent
shall use their best efforts to preserve the business of each of the PRC
Companies and to preserve the goodwill of customers, suppliers and others
having business relations with the PRC Companies. Seller will consult with
Buyer concerning, and
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Seller will cooperate to keep available to Buyer, the services of the officers
and employees of the PRC Companies that Buyer may wish to have the PRC
Companies retain. Nothing in this Section shall obligate Buyer or the PRC
Companies after the Closing to retain or offer employment to any officer or
employee of the PRC Companies. (b) Seller agrees that the business of the
PRC Companies will be conducted in the ordinary course and, except as required
by this Agreement or pursuant to the written consent of Buyer (which consent
shall not be unreasonably withheld), the PRC Companies shall not:
(i) amend their charters or by-laws (or other similar organizational
document);
(ii) except (x) as required by applicable Laws or existing collective
bargaining agreements, Employee Benefit Plans, Multiemployer Plans or Benefit
Arrangements or (y) as otherwise required by this Agreement or the Schedules
hereto, enter into or amend any collective bargaining agreement, Employee
Benefit Plan, Multiemployer Plan or Benefit Arrangements;
(iii) sell, mortgage, pledge, or otherwise dispose of any substantial
portion of their assets or properties;
(iv) merge or consolidate with, or agree to merge or consolidate with, or
purchase or agree to purchase all or substantially all of the assets of, or
otherwise acquire, any other business entity;
(v) authorize for issuance, issue or sell any additional shares of their
capital stock or any securities or obligations convertible into shares of their
capital stock or issue
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or grant any option, warrant or other right to purchase any shares of its
capital stock;
(vi) except for any indebtedness or obligations that will be eliminated
or cancelled in accordance with Section 5.6, incur or agree to incur any
obligation for borrowed money;
(vii) except as required by their terms, amend in any material respect,
terminate, renew/fail to renew or renegotiate in any material respect any
Material Contract, or default (or take or omit to take any action that, with or
without the giving of notice or passage of time, would constitute a default) in
any of its obligations under any Material Contract or enter into any new
Material Contract other than pursuant to a Bid outstanding as the date of this
Agreement, or take any action that would jeopardize the continuance of its
material supplier or customer relationships;
(viii) terminate, amend or fail to renew any existing insurance coverage;
(ix) terminate or fail to renew or preserve any material permits, except
to the extent such permit is no longer required;
(x) except pursuant to an Employee Benefit Plan or Benefit Arrangement in
effect on the date of this Agreement and except for any indebtedness or
obligations that will be eliminated or cancelled in accordance with Section
5.6, make any loan, guaranty or other extension of credit, or enter into any
commitment to make any loan, guaranty or other extension of credit, to or for
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the benefit of any director, officer, employee, stockholder or any of their
respective associates or Affiliates;
(xi) except for cash dividends or distributions, declare, issue, make or
pay any dividend or other distribution of assets to its shareholders, or split,
combine, dividend, distribute or reclassify any shares of its equity
securities;
(xii) make any capital expenditures or commitments with respect thereto
aggregating more than $7,000,000;
(xiii) except in the ordinary course of business in connection with the
performance of a contract, dispose of, license or permit to lapse any rights to
the use of any Intellectual Property or dispose of, license or disclose any
Intellectual Property not a matter of public knowledge;
(xiv) make any Tax election or make any change in any method or period of
accounting or in any accounting policy, practice or significant procedure; or
(xv) agree to or make any commitment to take any actions prohibited by
this Section 5.2.
Section 5.3. Public Statements. Neither Seller nor Seller's Parent, nor any
of their Affiliates, shall release any information concerning this Agreement or
the transactions contemplated hereby that is intended for or may result in
general public dissemination thereof without the prior consent of Buyer, unless
(a) in the opinion of counsel to Seller and Seller's Parent, the release of
such information is required by Law, and (b) prior to the release of such
information Seller's Parent shall provide Buyer with a copy of such counsel's
opinion.
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Section 5.4. H-S-R Act. Seller and Seller's Parent shall promptly make any
and all filings that are or may be required under the H-S-R Act. Seller shall
cooperate and use reasonable efforts to ensure that any pre-acquisition waiting
period required by the H-S-R Act expires or is otherwise terminated, and shall
cause the PRC Companies to comply promptly with any requests made pursuant to
such act or the regulations thereunder.
Section 5.5. Consents. Seller and Seller's Parent each shall use reasonable
efforts to obtain all consents, waivers and authorizations and make all filings
with and give all notices that may be necessary or reasonably required to
consummate the transactions contemplated hereby. If as a condition to
receiving any such consents, waivers or authorizations money must be paid to
any third party, Seller and Seller's Parent shall be responsible for one-half
of all such amounts.
Section 5.6. Certain Indebtedness and Intercompany Accounts. On or before
the Closing Date, Seller's Parent shall cause Seller and each of Seller's
Parent's Subsidiaries to contribute to the equity of PRC all net intercompany
amounts due between Seller's Parent and its Subsidiaries (other than the PRC
Companies) on the one hand, and the PRC Companies on the other hand (including
but not limited to amounts relating to intercompany accounts receivable and
promissory notes but excluding amounts relating to intercompany accounts that
are of a type included in the Financial Statements as Corporate Pass Through
Charges and contemplated by Note 2 to the Financial Statements), and shall
cause such intercompany amounts to be eliminated or cancelled on or prior to
the Closing Date. The
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transactions contemplated by this Section will have no Material Adverse Effect
on any PRC Company.
Section 5.7. Delivery of Information After Closing. Within 30 days of the
Closing Date, Seller and Seller's Parent shall deliver to Buyer all books and
records of PRC in Seller's and Seller's Parent's possession.
Section 5.8. Use of Certain Words, Trademarks and Tradenames. Within 30
calendar days after the Closing Date, Seller and Seller's Parent shall cause
Seller, Seller's Parent and their Affiliates not to use the letters PRC. In
addition, neither Seller nor Seller's Parent, or any of their Affiliates, shall
use any trademark, logo or tradename of PRC or any Affiliate of PRC, or any
trademarks, logos or tradenames that are confusingly similar thereto or that
are a translation or transliteration thereof into any language or alphabet on
any of its signs, products, correspondence, forms, manuals, shipping cartons,
buildings or vehicles, or any other manner whatsoever. Within 60 calendar days
after the Closing, Seller shall take and cause to be taken all action necessary
to change Seller's corporate name to delete "PRC" therefrom.
Section 5.9. Notification of Certain Matters. Seller will promptly notify
Buyer of any event of which Seller obtains knowledge which has had or could
reasonably be expected to have a Material Adverse Effect on the PRC Companies
taken as a whole or which if known as of the date hereof would have been
required to be disclosed to Buyer. Seller will promptly notify Buyer of (i)
the occurrence, or failure to occur, of any event that would be likely
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to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Closing Date and (ii) any failure of Seller to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. No such notification
shall affect the representations or warranties of Seller or the conditions to
Buyer's obligations hereunder.
Section 5.10. Noncompetition.
(a) Restrictions on Competitive Activities. Seller agrees that after the
Closing Buyer and PRC shall be entitled to the goodwill and going concern value
of the business of the PRC Companies and to protect and preserve the same to
the maximum extent permitted by Law. Seller also acknowledges that its
management contributions to the business of the PRC Companies have been
uniquely valuable and involve proprietary information that would be
competitively unfair to make available to any competitor of the PRC Companies.
For these and other reasons and as an inducement to Buyer to enter into this
Agreement, Seller agrees that for a period of three years after the date hereof
neither Seller nor any of Seller's Affiliates will, directly or indirectly, for
its own benefit or as agent for another carry on or participate in the
ownership, management or control of, or the financing of, or allow its name or
reputation to be used in or by any other present or future business enterprise
that competes with Buyer or the PRC Companies in activities in which any of the
PRC Companies is engaged as of the Closing Date (a "Competing Business").
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(b) Exceptions. Nothing contained herein shall limit the right of Seller
as an investor to hold and make investments in securities of any corporation or
limited partnership that is registered on a national securities exchange or
admitted to trading privileges thereon or actively traded in a generally
recognized over-the-counter market, provided Seller's equity interest therein
does not exceed 5% of the outstanding shares or interests in such corporation
or partnership. Notwithstanding any provisions of this Section 5.10 to the
contrary, if Seller's Parent or any of its Affiliates acquires any Person that
is engaged in a Competing Business, Seller's Parent and its Affiliates shall
not be deemed to be in violation of this Section 5.10 provided that (i) the
Competing Business represents less than one-third of the gross revenues of the
acquired Person for the acquired Person's most recent completed fiscal year and
(ii) Seller's Parent or its Affiliates use reasonable and diligent efforts to
divest the operations of such Competing Business subsequent to such
acquisition.
(c) Restrictions on Soliciting Employees. In addition, to protect Buyer
against any efforts by Seller or any of Seller's Affiliates to cause employees
of the PRC Companies as of the date of this Agreement to terminate their
employment, Seller agrees that for a period of three years following the
Closing Date, neither Seller nor any of its Affiliates will, directly or
indirectly (i) induce any employee of the PRC Companies as of the date of this
Agreement with a then current compensation of more than $50,000 annually to
leave any of the PRC Companies or to accept any other
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employment or position, or (ii) assist (other than normal employment
recommendations) any other Person in hiring any such employee.
(d) Special Remedies and Enforcement. Seller recognizes and agrees that a
breach by Seller or any of its Affiliates of any of the covenants set forth in
this Section 5.10 could cause irreparable harm to Buyer, that Buyer's remedies
at law in the event of such breach would be inadequate, and that, accordingly,
in the event of such breach a restraining order or injunction or both may be
issued against Seller and its Affiliates, in addition to any other rights and
remedies which are available to Buyer. If this Section 5.10 is more
restrictive than permitted by the Laws of the jurisdiction in which Buyer seeks
enforcement hereof, this Section 5.10 shall be limited to the extent required
to permit enforcement under such Laws.
Section 5.11. Nondisclosure of Proprietary Data. Neither Seller nor any of
its Affiliates or representatives shall, at any time, make use of, divulge or
otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, record or
financial information) concerning the business or policies of the PRC Companies
that Seller or any Affiliate or representative of Seller may have learned as a
shareholder, employee, officer or director of the PRC Companies. In addition,
except as required by Law or legal process neither Seller nor any of its
Affiliates or representatives shall make use of, divulge or otherwise disclose,
directly or indirectly, to persons other than Buyer, any confidential
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information concerning the business or policies of the PRC Companies which may
have been learned in any such capacity.
Section 5.12. No Solicitation. From the date of this Agreement to the
Closing Date or earlier termination of this Agreement, Seller and its
Affiliates and representatives will not directly or indirectly make, entertain,
solicit or encourage inquiries or proposals, enter into or conduct discussions,
or negotiate or enter into an agreement with any party other than Buyer for the
divestiture of any or all of the PRC Companies or their respective assets,
whether by way of an asset or stock sale, partnership, joint venture, merger,
consolidation or other transaction.
Section 5.13. Novations. In the event any Governmental Entity requires
Government Contract Novations, Seller and Seller's Parent shall cooperate with
the PRC Companies to promptly obtain such Government Contract Novations and
shall execute the novation agreements required by any Governmental Entity.
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees for the benefit of Seller and Seller's Parent as
follows:
Section 6.1. Public Statements. Buyer shall not release any information
concerning this Agreement or the transactions contemplated hereby that is
intended for or may result in general public dissemination thereof without the
prior consent of Seller's Parent, unless (a) in the opinion of counsel to
Buyer, the release of such information is required by Law, and (b) prior to the
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release of such information Buyer shall provide Seller's Parent with a copy of
such counsel's opinion.
Section 6.2. H-S-R Act. Buyer shall promptly make any and all filings that
are or may be required under the H-S-R Act. Buyer shall cooperate and use
reasonable efforts to ensure that any pre-acquisition waiting period required
by the H-S-R Act expires or is otherwise terminated, and shall comply promptly
with any requests made pursuant to the H-S-R Act or the regulations thereunder.
Section 6.3. Consents. Buyer shall use reasonable efforts to obtain all
consents, waivers and authorizations and make all filings with and give all
notices that may be necessary or reasonably required to consummate the
transactions contemplated hereby. If as a condition to receiving any such
consents, waivers or authorizations money must be paid to any third party,
Buyer shall be responsible for one-half of all such amounts.
Section 6.4. Guarantees. Buyer shall take all steps reasonably necessary to
provide Guarantees for or on all contracts, documents, instruments and other
agreements or obligations for which Seller's Parent or any of its Subsidiaries
(other than Subsidiaries that are PRC Companies) has issued Guarantees for the
benefit of Persons doing business with any of the PRC Companies that are listed
in Schedule 3.15 and any such Guarantees executed by Seller's Parent or any of
its Subsidiaries (other than Subsidiaries that are PRC Companies) subsequent to
the date of this Agreement and prior to Closing in compliance with Section 5.2.
Buyer will endeavor to provide all such Guarantees within 60 days of the
Closing Date. Buyer shall use reasonable efforts to assist
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Seller's Parent and its Subsidiaries (other than Subsidiaries that are PRC
Companies) to obtain full and complete releases on each of the Guarantees
referenced in the preceding sentence, which reasonable efforts shall include
but not be limited to providing any financial information about Buyer
reasonably requested by the Persons for whose benefit the respective Guarantees
were made. The provisions of this Section 6.4 shall not apply to any
Guarantees relating to payments under the "PRC Supplemental Executive
Retirement Plan."
Section 6.5. Certain Employee Benefit Matters.
(a) Buyer shall take all action required or appropriate to cause each of
the PRC Companies to fulfill its obligations under all Benefit Arrangements,
Employee Benefit Plans and Multiemployer Plans listed in Schedule 3.14 that are
sponsored or maintained by any of the PRC Companies for so long as any such
Arrangements and Plans are sponsored or maintained by any of the PRC Companies.
(b) Buyer acknowledges that certain Employees of the PRC Companies may be
entitled to benefits under the Incentive Compensation Plans, the Special
Severance Plans or other Benefit Arrangements involving severance or
termination benefits. Buyer assumes the obligations of Seller's Parent and the
PRC Companies under the Incentive Compensation Plans, the Special Severance
Plans and such other Benefit Arrangements in respect of the Employees and agree
to pay any benefits to the Employees that the Employees may be entitled to
receive under the Incentive Compensation Plans, the Special Severance Plans and
such other Benefit Arrangements. Buyer shall not assume or have any
obligations with respect to (x) the
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"Black & Decker -- PRC Inc. Change in Control Agreements" and (y) the "PRC
Supplemental Executive Retirement Plan."
(c) For at least 12 months following the Closing Date, Buyer will ensure
that the PRC Companies continue to provide benefits that are, in the aggregate,
substantially comparable to those provided under the Employee Benefit Plans and
Benefit Arrangements as in effect immediately prior to the Closing Date for the
benefit of all eligible Employees and their dependents. Nothing in this
Section 6.5 shall obligate Buyer or any PRC Company to sponsor or maintain any
specific Employee Benefit Plan or Benefit Arrangement for any period of time
after the Closing Date.
Section 6.6. Preservation of and Access to Certain Information After Closing.
Except as prohibited or limited by Law, Buyer shall cause the PRC Companies,
until three years after the Closing Date or, with respect to Tax matters, until
the expiration of the applicable statute of limitations (including any
extensions thereof), to give Seller and Seller's Parent, and Seller's and
Seller's Parent's employees, counsel and advisors, full and complete access
upon reasonable notice during normal business hours, to all properties,
agreements, records and affairs of the PRC Companies, and will provide copies
of such information concerning the PRC Companies (with respect to periods prior
to the Closing) as Seller and Seller's Parent may reasonably request, including
but not limited to full and complete access in connection with the preparation
and determination of the Proposed Net Asset Amount and the Final Net Asset
Amount (and the resolution of any
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disputes in respect thereof), or the preparation of any Tax Returns for the
Affiliated Groups, or in connection with or in anticipation of any audit by any
federal, state or local Tax Authorities of the Affiliated Groups. From and
after the Closing Date, Buyer shall preserve all books and records of PRC in
Buyer or any of the PRC Companies' possession for a period of eight years,
provided, however, that Buyer shall not destroy or dispose of such books and
records without giving notice to Seller and Seller's Parent of such pending
destruction or disposal and offering Seller and Seller's Parent the right and
opportunity to copy such books and records.
Section 6.7. Use of Certain Words, Trademarks and Tradenames. Whether or not
Buyer or any of the PRC Companies has obtained, directly or indirectly, any
right, title or interest in or to the use of the words "The Black & Decker
Corporation" or "Emhart Corporation," or any derivatives thereof, or the
letters B&D, by virtue of Buyer's purchase of the PRC Shares or otherwise,
neither Buyer nor any of the PRC Companies shall use, and Buyer and each of the
PRC Companies shall cause after the Closing Date the PRC Companies not to use,
the words "The Black & Decker Corporation" or "Emhart Corporation," or any
derivative thereof, or the letters B&D. In addition, neither Buyer nor any of
the PRC Companies shall use, and Buyer and each of the PRC Companies shall
cause within 90 calendar days after the Closing Date the PRC Companies not to
use, any trademark, logo or tradename of Seller's Parent or Emhart, or any
Affiliate of Seller's Parent or Emhart (other than those relating exclusively
to the business of the PRC Companies and transferred to Buyer or the PRC
Companies under the
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terms of this Agreement), or any trademarks, logos or tradenames that are
confusingly similar thereto or that are a translation or transliteration
thereof into any language or alphabet on any of its signs, products,
correspondence, forms, manuals, shipping cartons, buildings or vehicles, or in
any other manner whatsoever.
Section 6.8. Intercompany Accounts. Buyer shall take, and shall cause PRC
and its successors and Subsidiaries to take, all actions and to do, or cause to
be done, all things necessary, proper and appropriate to give effect to the
contribution to the equity of PRC all net intercompany amounts contemplated to
be contributed, eliminated or cancelled on or prior to the Closing Date by
Section 5.6.
Section 6.9. Notification of Certain Matters. Buyer shall give prompt notice
to Seller of (i) the occurrence, or failure to occur, of any event that would
be likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date of
this Agreement to the Closing Date and (ii) any failure of Buyer to comply with
or satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. No such notification
shall affect the representations or warranties of Buyer or the conditions to
Buyer's obligations hereunder.
ARTICLE VII
CONDITIONS OF OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the purchase of the PRC Shares on the
Closing Date and to perform their other covenants and
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agreements in accordance with the terms and conditions of this Agreement are
subject to each of the conditions set forth below:
Section 7.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Seller and Seller's Parent contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made on and as of the Closing Date.
Section 7.2. Covenants and Agreements -- No Default. Neither Seller nor
Seller's Parent shall be in material default in respect of any obligation under
this Agreement and Seller and Seller's Parent shall have performed or complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Seller or Seller's Parent prior
to or as of the Closing Date.
Section 7.3. No Material Adverse Change. Since the date of this Agreement,
none of the PRC Companies shall have suffered a change in its business or
financial condition that has had or could reasonably be expected to have a
Material Adverse Effect on the PRC Companies taken as a whole
Section 7.4. H-S-R Act. All applicable waiting periods in respect of the
transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 7.5. Consents. Seller and Seller's Parent shall have obtained all
third-party and governmental consents required
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for the consummation of the transactions contemplated by this Agreement that
are set forth in Schedule 7.5.
Section 7.6. Closing Documents. Seller and Seller's Parent shall have
provided Buyer with all of the documents required by Section 9.2 to be
delivered at Closing by Seller.
Section 7.7. No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity
which prohibits or restricts the transfer of the PRC Shares. No Action shall
be pending or threatened by any Governmental Entity (i) challenging or seeking
to make illegal or otherwise directly or indirectly restrain or prohibit or
make materially more costly the consummation of the transactions contemplated
hereby, or seeking to obtain material damages in connection with such
transactions or (ii) which has had or would be reasonably likely to have a
Material Adverse Effect on the PRC Companies taken as a whole, and no Order
shall have been issued which would have the effect of or require anything set
forth in clause (i) or clause (ii) above.
Section 7.8. Resignation of Directors. Any directors of the PRC Companies
who are also employees or officers of Seller's Parent or any of its Affiliates
(other than the PRC Companies) shall have submitted their resignations in
writing to such PRC Companies. Such resignations of directors (in such
capacity) shall be effective as of the Closing.
Section 7.9. Resignation of Officers. Any officers or employees of the PRC
Companies who are also employees or officers of Seller's Parent or any of its
Affiliates (other than the PRC
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Companies) shall have submitted their resignations in writing to such PRC
Companies. Such resignations of officers and employees (in such capacity)
shall be effective as of the Closing.
Section 7.10 OCI Clauses. The OCI Clauses contained in contracts or
agreements to which any of the PRC Companies is a party or by which any of the
PRC Companies is obligated could not reasonably be expected in the aggregate to
have a Material Adverse Effect on either the PRC Companies taken as a whole or
any significant business division or line of business of Buyer and its
Subsidiaries.
ARTICLE VIII
CONDITIONS OF OBLIGATIONS OF SELLER AND SELLER'S PARENT
The obligation of Seller and Seller's Parent to consummate the sale of the
PRC Shares on the Closing Date and to perform its other covenants and
agreements in accordance with the terms and conditions of this Agreement are
subject to each of the conditions set forth below.
Section 8.1. Representations and Warranties True. Except as otherwise
permitted or contemplated by this Agreement and except for representations and
warranties that by their terms speak only as of a specified date, each of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though made on and as of the Closing Date.
Section 8.2. Covenants and Agreements -- No Default. Buyer shall not be in
material default in respect of any obligation under this Agreement and Buyer
shall have performed or complied in all
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material respects with all covenants and agreements required by this Agreement
to be performed or complied with by Buyer prior to or as of the Closing Date.
Section 8.3. H-S-R Act. All applicable waiting periods in respect of the
transactions contemplated by this Agreement under the H-S-R Act shall have
expired or otherwise terminated.
Section 8.4. Consents. Buyer shall have obtained all third-party and
governmental consents required for the consummation of the transactions
contemplated by this Agreement that are set forth in Schedule 8.4.
Section 8.5. Closing Documents. Buyer shall have provided Seller with all of
the documents required by Section 9.3 to be delivered at Closing by Buyer.
Section 8.6. No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity
which prohibits or restricts the transfer of the PRC Shares. No Action shall
be pending or threatened by any Governmental Entity challenging or seeking to
make illegal or otherwise directly or indirectly restrain or prohibit or make
materially more costly the consummation of the transactions contemplated
hereby, or seeking to obtain material damages in connection with such
transactions and no Order shall have been issued which would have the effect of
or require anything set forth above.
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ARTICLE IX
CLOSING
Section 9.1. Closing. The Closing shall take place at the offices of
O'Melveny & Myers, 555 13th Street, N.W., Washington, D.C. 20004, at 10:00
a.m., on January 31, 1996, or at such other place and at such other time and
date as may be mutually agreed upon by Buyer and Seller, upon fulfillment of
(a) all the conditions set forth in ARTICLE VII that have not been waived by
Buyer, and (b) all the conditions set forth in ARTICLE VIII that have not been
waived by Seller. If such conditions have not been fulfilled or waived by such
date, the Closing shall take place within five business days after fulfillment
or waiver of all such conditions but in no event later than March 31, 1996,
unless otherwise mutually agreed to in writing by Buyer and Seller. All
proceedings to be taken and all documents to be executed and delivered by
Seller and Seller's Parent in connection with the consummation of the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Buyer and its counsel. All proceedings to be taken and all
documents to be executed and delivered by Buyer in connection with the
consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Seller and its counsel. All proceedings
to be taken and all documents to be executed and delivered at the Closing shall
be deemed to have been taken and executed simultaneously, and no proceedings
shall be deemed taken nor any documents executed or delivered until all have
been taken, executed or delivered.
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Section 9.2. Documents to be Delivered by Seller and Seller's Parent. At the
Closing, Seller and Seller's Parent shall deliver, or shall cause to be
delivered, to Buyer the following:
(a) Certificates representing the PRC Shares, which certificates shall be
duly endorsed in blank or, in lieu thereof, shall have affixed thereto stock
powers executed in blank and in proper form for transfer on the books of PRC;
(b) A certificate of the Secretary or an Assistant Secretary of each of
Seller and Seller's Parent, dated the Closing Date, setting forth the
resolutions of the Boards of Directors of Seller and Seller's Parent,
respectively, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and certifying that such
resolutions have not been amended or rescinded and are in full force and
effect;
(c) A certificate of a senior executive officer of each of Seller and
Seller's Parent certifying that (i) except as otherwise permitted or
contemplated by this Agreement and except for representations and warranties
that by their terms speak as of a specified date other than the Closing Date
each of the representations and warranties of Seller and Seller's Parent
contained in this Agreement are true and correct in all material respects on
and as of the Closing Date as though made on and as of the Closing Date and
(ii) neither Seller nor Seller's Parent is in material default in respect of
any obligation under this Agreement and Seller and Seller's Parent have
performed or complied in all material respects with all covenants and
agreements required by
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this Agreement to be performed or complied with by Seller or Seller's Parent
prior to or as of the Closing Date;
(d) A good standing certificate and certified charter documents, dated as
of a date reasonably close to the Closing Date, in respect of PRC;
(e) Modifications to Schedules 3.10, 3.12 and 3.13 reflecting events
occurring subsequent to the date hereof, provided that (i) no item may be added
to Schedule 3.10 unless (x) Seller confirms in writing that such item is a
Pre-Closing Claim subject to Section 11.4 hereof and (y) Seller acknowledges in
writing that Buyer may assert such item, alone or together with other matters,
as the basis of a material adverse change as contemplated by Section 7.3 (it
being understood that such acknowledgement is not a concession by Seller that
such item constitutes a material adverse change as contemplated by Section
7.3), (ii) no item may be deleted from Schedule 3.12, and (iii) no Material
Contract shall be added to or deleted from Schedule 3.13 unless a PRC Company
entered into or terminated such Material Contract, or permitted such Material
Contract to expire, in compliance with Section 5.2; and
(f) Such other documents, instruments or agreements as may be reasonably
requested by Buyer to effectuate the transactions contemplated by this
Agreement.
Section 9.3. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver, or cause to be delivered, to Seller and Seller's Parent the following:
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(a) A wire transfer of funds to the account designated by Seller in an
amount equal to the Purchase Price, as provided in Section 2.2;
(b) A certificate of the Secretary or an Assistant Secretary of Buyer,
dated the Closing Date, setting forth copies of the resolutions of the Board of
Directors of Buyer authorizing the execution and delivery of this Agreement and
the Consummation of the transactions contemplated hereby, and certifying that
such resolutions have not been amended or rescinded and are in full force and
effect;
(c) A certificate of a senior executive officer of each of Buyer
certifying that (i) except as otherwise permitted or contemplated by this
Agreement and except for representations and warranties that by their terms
speak as of a specified date other than the Closing Date, each of the
representations and warranties of Buyer contained in this Agreement are true
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date and (ii) Buyer is not in material default in
respect of any obligation under this Agreement and Buyer has performed or
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by Buyer prior to or as of the
Closing Date; and
(d) Such other documents, instruments or agreements as may be reasonably
requested by Seller and Seller's Parent to effectuate the transactions
contemplated by this Agreement.
ARTICLE X
TERMINATION
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Section 10.1. Right to Terminate Agreement. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time prior to Closing only as follows:
(a) by mutual written consent of Buyer and Seller and Seller's Parent; and
(b) by any of the parties to this Agreement, upon written notice to the
other parties, at any time after March 31, 1996, except that the right to
terminate this Agreement pursuant to this Section 10.1(b) shall not be
available to (i) Seller and Seller's Parent if the failure to consummate the
Closing on or before such date was caused by or resulted from Seller's or
Seller's Parent's failure to fulfill any of its obligations under this
Agreement or (ii) Buyer if the failure to consummate the Closing on or before
such date was caused by or resulted from Buyer's failure to fulfill any of
their obligations under this Agreement.
Section 10.2. Effect of Termination.
(a) In the event this Agreement is terminated pursuant to Section 10.1(a),
then all further obligations of the parties hereto shall become null and void
and no party shall have any liability to any other party.
(b) In the event this Agreement is terminated by Buyer pursuant to Section
10.1(b) at a time when any of the conditions to its obligations set forth in
ARTICLE VII shall not have been satisfied or waived in writing, then Buyer
shall be entitled to pursue all legal and equitable remedies for breach of
contract and
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damages, including but not limited to any out-of-pocket expenses actually
incurred by Buyer.
(c) In the event this Agreement is terminated by Seller and Seller's
Parent pursuant to Section 10.1(b) at a time when any of the conditions to
their obligations set forth in ARTICLE VIII shall not have been satisfied or
waived in writing, then Seller and Seller's Parent shall be entitled to pursue
all legal and equitable remedies for breach of contract and damages, including
but not limited to any out-of-pocket expenses actually incurred by Seller and
Seller's Parent.
(d) Notwithstanding the provisions of this Section 10.2, the obligations
of the parties hereto under the Confidentiality Agreement shall survive any
termination of this Agreement by either party to this Agreement.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS; INDEMNIFICATION
Section 11.1. Taxes.
(a) Seller's Parent or Seller (on behalf of the PRC Companies) shall
timely and accurately file or cause to be filed all Tax Returns for Income
Taxes and all foreign Taxes (including the filing of any state or local Tax
Returns that include the result of the Section 338(h)(10) Election) of the PRC
Companies due after the date hereof for any taxable year or taxable period
ending on or before the Closing Date, including any taxable period that ends at
the end of the Closing Date as a result of the Section 338(h)(10) Election (a
"Pre-Closing Period").
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(b) Subject to the provisions of Section 11.1(c), Seller's Parent and Seller
shall pay and be responsible for, shall indemnify and hold harmless Buyer and
the PRC Companies (the "Buyer Group") against, and shall be entitled to all
refunds and credits of, (i) Income Taxes and all foreign Taxes (together with
reasonable attorneys' fees and any legal or other expenses for investigating or
defending any actions with respect to such Taxes) with respect to the PRC
Companies for any Pre-Closing Period, including any liability for Income Taxes
and all foreign Taxes arising out of the inclusion of any of the PRC Companies
in any Consolidated Returns, and further including any liability for Income
Taxes arising as a result of the Section 338(h)(10) Election, and (ii) all
Taxes (together with reasonable attorneys' fees and any legal or other expenses
for investigating or defending any actions with respect to Taxes) with respect
to Seller's Parent and any member of the Affiliated Groups (other than the PRC
Companies) for all taxable periods whatsoever. Buyer shall, promptly after the
receipt thereof, remit to Seller's Parent any Income Tax or foreign Tax refund
received by Buyer, Buyer's Parent or any of the PRC Companies to the extent
such refund relates to a Pre-Closing Period. Seller's Parent or Seller shall
promptly, after the receipt thereof, remit to Buyer any Tax refund received by
Seller's Parent or Seller to the extent such refund relates to any Tax paid by
or on behalf of the PRC Companies, other than an Income Tax or foreign Tax
refund related to a Pre-Closing Period. Notwithstanding the provision of this
Section 11.1(b), neither Seller nor Seller's Parent shall be responsible for or
shall be
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required to indemnify or hold harmless Buyer or any of the PRC Companies for
any Taxes that are reimbursed under any contracts of any of the PRC Companies;
provided, however, that Buyer shall cause the appropriate PRC Company to use
its reasonable best efforts to seek reimbursement for such Taxes under the
applicable contract.
(c) No member of the Buyer Group shall be entitled to indemnification
under Section 11.1(b) for any Taxes for which a reserve with respect to such
Taxes is included in or taken into account in the calculation or determination
of the Final Net Asset Amount, except for the Taxes exceeding the amount of
such reserve.
(d) Buyer shall be responsible for, and shall indemnify and hold harmless
Seller and Seller's Parent against, (i) the Taxes described in Section 12.3,
(ii) the timely preparation and filing of all Tax Returns of the PRC Companies
for any taxable year or taxable period beginning after the Closing Date (the
"Post-Closing Period"), and (iii) the preparation and filing of all Tax Returns
required to be filed by any of the PRC Companies after the Closing Date other
than those Tax Returns for Income Taxes and all foreign Taxes described in
Section 11.1(a).
(e) Buyer shall pay and be responsible for, shall indemnify and hold
harmless Seller and Seller's Parent against, and shall be entitled to all
refunds and credits of, all Taxes (together with reasonable attorneys' fees and
any legal or other expenses for investigating or defending any actions with
respect to Taxes) with respect to the PRC Companies for any Post-Closing
Period.
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(f) Subject to the provisions of Section 11.2, if, for any federal, State
or local Income Tax or foreign Tax purpose, a taxable year or taxable period of
any of the PRC Companies which begins before the Closing Date and ends after
the Closing Date (a "Bridge Period") does not terminate on the Closing Date,
and Buyer has the responsibility to pay Taxes for all or a portion of the
Bridge Period, the parties hereto will, to the extent permitted by applicable
Law, elect with the relevant Tax Authority to treat the portion of the Bridge
Period on or before the Closing Date (a "Seller Period") for all purposes as a
short taxable period ending as of the close of the Closing Date and such short
taxable period shall be treated as a Pre-Closing Period for purposes of this
Agreement and the portion of the Bridge Period after the Closing Date (the
"Buyer Period") shall be treated as a Post-Closing Period for purposes of this
Agreement. In any case where applicable Law does not permit such an election
to be made, then, for purposes of this Agreement, Income Taxes and all foreign
Taxes for the Bridge Period shall be allocated between the Seller Period and
the Buyer Period using an interim-closing-of-the-books method assuming that
such taxable period ended at the close of business on the Closing Date, except
that exemptions, allowances or deductions that are calculated on an annual
basis (such as the deduction for depreciation) shall be apportioned on a per
diem basis.
(g) Buyer shall cause the PRC Companies to prepare and file all Tax
Returns and pay all Taxes due, if any, with respect to the PRC Companies for
any Bridge Period that does not terminate on the Closing Date, for which it is
responsible to pay Taxes in whole
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or in part, provided that Seller satisfies its obligations as set forth in this
Section 11.1(g). Seller shall promptly deliver to Buyer work papers relating
to Taxes due for the Seller Period, certified by a duly authorized officer of
Seller, setting forth in detail all information required to complete the
applicable Tax Returns. Upon notice from Buyer, Seller shall pay to Buyer the
Income Taxes and all foreign Taxes for the Seller Period on or before the
second business day prior to the due date for the payment of such Income Taxes
and all foreign Taxes, by wire transfer of immediately available funds to the
account designated by Buyer. In the event that Seller fails to make the
payments required by this Section 11.1(g) to Buyer prior to the date any
payment for Income Taxes and all foreign Taxes as described in this Section
11.1(g) is due, such required payment shall bear interest from such due date
until paid, at the underpayment rate of interest determined under Section 6621
of the Code.
(h) Buyer shall have exclusive control over and responsibility to conduct
any Contest for a Post-Closing Period and for a Bridge Period if the Contest
for a Bridge Period relates solely to the Buyer; provided, however, that Buyer
shall not enter into any agreement in compromise or settlement of such Contest
which could affect a Pre-Closing Period or a Seller Period without the written
consent of Seller.
(i) Unless Buyer agrees in writing to waive any claim for indemnification
under Section 11.1(b) with respect thereto, Seller and Seller's Parent shall
have exclusive control over and responsibility to conduct any Contest for a
Pre-Closing Period and
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for a Bridge Period if the Contest for a Bridge Period relates solely to the
Seller Period; provided, however, that neither Seller not Seller's Parent shall
enter into any agreement in compromise or settlement of such Contest which
could affect a Post-Closing Period or a Buyer Period without the written
consent of Buyer.
(j) Buyer shall notify Seller's Parent in writing promptly upon receipt by
any PRC Company of notice of any Contest or assessment relating thereto for
Pre-Closing Period or a Bridge Period. Failure of Buyer to so notify Seller's
Parent shall not relieve Seller's Parent or Seller from any liability under
this Section 11.1, except to the extent it is proven that Seller's Parent or
Seller suffered actual prejudice in connection with or in defending against a
Contest. Seller or Seller's Parent shall notify Buyer in writing promptly upon
receipt by Seller or Seller's Parent of notice of any Contest or assessment
relating to a Post-Closing Period or a Bridge Period.
(k) Buyer and Seller agree to jointly control and conduct any Contest for
a Bridge Period that relates to both the Seller Period and the Buyer Period.
Seller, Seller's Parent and Buyer agree to cooperate fully with each other with
respect to defending or answering any such Contest and to provide each other
with all materials, information and documents as reasonably requested by the
other. Neither Buyer, Seller, nor Seller's Parent shall be liable for any
portion of any settlement of any Contest for a Bridge Period that relates to
both the Seller Period and the Buyer Period effected without its written
consent, provided such consent was not unreasonably withheld.
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(l) Except as otherwise provided in this Agreement and subject to the
allocation of liabilities for Taxes, Seller, Seller's Parent and Buyer agree to
cooperate fully with each other with respect to the preparation of all Tax
Returns and with respect to all matters relating to Taxes, and to keep each
other advised as to any issue relating to Taxes which could have a bearing on
such other party's responsibilities hereunder.
(m) In any Contest controlled by Seller, Buyer will take, and will cause
each PRC Company to take, such action as Seller may by written notice
reasonably request in connection with such Contest (including the payment of a
Tax preparatory to filing a claim for refund of such Tax; provided that Seller
shall first pay the amount of such Tax to Buyer).
Section 11.2. Section 338(h)(10) Election.
(a) Seller, Seller's Parent, and each of the PRC Companies agree, if so
directed by the Buyer, to join with Buyer in making an election under Section
338(h)(10) of the Code (and any corresponding elections under state, local or
foreign tax law) (collectively, a "Section 338(h)(10) Election") with respect
to the purchase and sale of the stock of the PRC Companies hereunder. Seller
will pay any Income Tax, including any liability of the PRC Companies for
Income Tax resulting from the application to it of Treas. Reg. Section
1.338(h)(10)-1(f)(5), attributable to the making of the Section 338(h)(10)
Election (but only to the extent that application causes an increase in taxable
gain resulting from the deemed purchase of assets pursuant to Section 338 of
the Code) and will indemnify the Buyer and the PRC Companies against any
Material
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Adverse Effect arising out of any failure to pay such Income Tax. If the
Section 338(h)(10) Election is made, Seller and Seller's Parent will also pay
any state, local or foreign Income Tax (and indemnify Buyer and the PRC
Companies against any Material Adverse Effect arising out of any failure to pay
such Income Tax) attributable to an election under state, local, or foreign law
similar to the election available under Section 338(g) of the Code (or which
results from the making of an election under Section 338(g) of the Code) with
respect to the purchase and sale of the stock of the PRC Companies hereunder.
(b) Except as provided below, on or before the date that is 60 days after
the Closing Date, Buyer shall prepare a schedule, in the form of Exhibit C,
which reflects an allocation (the "Allocation") of Buyer's "adjusted grossed-up
basis" and Seller's "deemed sale price" among the Class I, Class II, Class III
and Class IV Assets (as such terms are defined in Section 338 of the Code and
the Department of Treasury regulations thereunder). Provided the Allocation is
reasonable, Seller's Parent agrees to accept the Allocation. Buyer shall be
under no obligation to have the Allocation prepared or approved by an
independent appraiser. Buyer shall be responsible for the preparation of all
forms and filings required to be filed with any Tax Authority to claim the
Section 338(h)(10) Election and Buyer and Seller's Parent shall reflect the
Allocation in all Income Tax returns in which the Section 338(h)(10) Election
is relevant, the effect of which is to treat the purchase of the shares of PRC
by Buyer as the purchase of the assets of PRC by Buyer. If the Final Net Asset
Amount is not
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determined within 60 days of the Closing Date, then Exhibit C shall be prepared
promptly after the Final Net Asset Amount is determined.
Section 11.3. Indemnification by Buyer. Buyer agrees to indemnify, defend
and hold harmless Seller, Seller's Parent and their respective directors,
officers, employees, Affiliates, agents, successors and assigns from and
against any and all Losses suffered or incurred by an Indemnified Party
resulting from, related to or arising out of:
(a) any inaccuracy in any of the representations and warranties made by
Buyer in this Agreement or in any agreement or certificate delivered pursuant
hereto or in connection herewith;
(b) any breach or nonperformance of any of the covenants of Buyer or its
Affiliates contained in this Agreement (including those in Sections 8.1 and
8.2) or in any agreement or document delivered pursuant hereto or in connection
herewith;
(c) any Post-Closing Claim, but only to the extent that the Losses
suffered or incurred result from facts and circumstances that occurred after
the Closing Date (excluding Losses suffered or incurred resulting from facts or
circumstances that occur after the Closing Date but which relate to Hazardous
Substances present at properties or facilities of the PRC Companies on the
Closing Date); and
(d) any Guarantees (other than those relating to payments under the "PRC
Supplemental Executive Retirement Plan") of Seller's Parent (or any of its
Affiliates) to the extent they were
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issued for the benefit of Persons doing business with any of the PRC Companies.
To the extent, but only to the extent, that any Loss for which Buyer has
indemnification obligations under Section 11.3(c) arises as a result of any
fact, circumstance or condition that also causes the inaccuracy of any
representation or warranty of Seller, Seller's Parent or PRC contained in this
Agreement or in any agreement or certificate delivered pursuant hereto or in
connection herewith, or otherwise is the basis for an indemnification claim by
Buyer under Section 11.4, Buyer shall not have liability under Section 11.3(c).
Section 11.4. Indemnification by Seller and Seller's Parent. Seller and
Seller's Parent agree, jointly and severally, to indemnify, defend and hold
harmless Buyer, the PRC Companies and their respective directors, officers,
employees, Affiliates, agents, successors and assigns from and against any and
all Losses suffered or incurred by an Indemnified Party resulting from,
relating to, or arising out of:
(a) any inaccuracy in any of the representations and warranties made by
Seller, Seller's Parent or the PRC Companies in this Agreement or in any
agreement or certificate delivered pursuant hereto or in connection herewith;
(b) any breach or nonperformance of any of the covenants of Seller,
Seller's Parent or the PRC Companies or their Affiliates contained in this
Agreement (including those in Sections 8.1 and 8.2) or in any agreement or
document delivered pursuant hereto or in connection herewith;
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(c) any Pre-Closing Claim (including Pre-Closing Claims listed on, or
arising from matters listed on, Schedules to this Agreement), but only to the
extent that the Losses suffered or incurred result from facts and circumstances
that occurred on or prior to the Closing Date;
(d) any divestitures, sales or other dispositions by any PRC Company of
divisions, product lines, businesses, real property or intellectual property
(other than dispositions of Intellectual Property in the ordinary course of
business in connection with the provision of products or services to customers
of the PRC Companies), Subsidiaries and interests in other Persons effected
prior to the Closing Date, whether as a result of breaches of purchase or sales
agreements, under indemnification provisions, under guarantees by a PRC Company
not yet assumed by the purchaser in such divestitures, sales or dispositions,
or otherwise;
(e) actions taken by Buyer and the PRC Companies after the Closing Date to
bring into compliance with Environmental Laws as in effect at the Closing Date
any violation or noncompliance existing as of the Closing Date, and from Losses
arising from the operations of any PRC Company subsequent to the Closing Date
and prior to the correction of such items of noncompliance as a result of such
violation or noncompliance; provided that, as to Losses arising from the
operations of any PRC Company subsequent to the Closing Date action is taken to
correct such noncompliance reasonably promptly upon discovery of such
noncompliance by Buyer or any of the PRC Companies;
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(f) the following employee benefit matters: (x) the maintenance of or
contribution to a Pension Plan subject to Title IV of ERISA, or obligation to
contribute to a Multiemployer Plan, by an ERISA Affiliate of any of the PRC
Companies (which ERISA Affiliate is not itself one of the PRC Companies), (y)
any post-retirement medical or life insurance benefits and (z) any "change of
control" or similar payments to be made to Employees of PRC Companies as a
result of the transactions contemplated hereby (other than any such payments
made under plans or Benefit Arrangements assumed by Buyer pursuant to Section
6.5);
(g) the "PRC Supplemental Executive Retirement Plan" referred to in
Schedule 3.14 and the Financial Statements; and
(h) the conduct of the business of Seller, Seller's Parent and any of its
Affiliates other than the PRC Companies. For purposes of Section 11.4(a), all
such representations and warranties shall be read as if references therein to
the materiality to the PRC Companies or any of them of any condition, fact,
statement, event or act (including without limitation all references to
"Material Adverse Effects" and "in all material respects") were deleted and
the effect of any such references were eliminated altogether. Thus, for
example: (i) any representation that a statement is true and correct in all
material respects shall be read as a representation that the statement is true
and correct; (ii) any representation that a condition exists except to the
extent that its failure to exist would not have a Material Adverse Effect on
the PRC Companies shall be read as a representation that such condition
exists; and (iii) any representation that no
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incidents of a specific nature have occurred that would have a Material Adverse
Effect on the PRC Companies shall be read as a representation that no incidents
of such nature have occurred.
Section 11.5. Procedure.
(a) Promptly after acquiring knowledge of any claim in respect of which a
party (the "Indemnified Party") may seek indemnification from the other party
(the "Indemnifying Party") hereunder, the Indemnified Party shall give written
notice thereof to the Indemnifying Party describing such claim and demanding
indemnification hereunder. Notwithstanding the foregoing, failure to provide
the aforementioned notice will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party under this Agreement,
except to the extent that (i) such failure to provide notice causes the amounts
paid by the Indemnifying Party to be greater than they would have been had such
notice been given on a reasonably timely basis or (ii) such notice is not
delivered to the Indemnifying Party prior to the expiration of any applicable
survival period under Section 11.6. The Indemnifying Party will be entitled to
assume control of the defense of any claim, and to settle or compromise such
claim in its discretion, subject to the provisions of Sections 11.5(b) and
11.5(c). After written notice by the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of any such action, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder for
any legal expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof. Notwithstanding anything in this Section
11.5
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to the contrary, if the Indemnifying Party does not promptly assume control of
the defense of such action as provided in this Section 11.5, the Indemnified
Party shall have the right to defend such action in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor
(subject, if applicable, to the limitations contained in Section 11.7). An
Indemnifying Party may, at its option and expense, participate in the defense
of any indemnifiable claim.
(b) To the extent that any of the Losses by any of the Persons entitled to
indemnification under Section 11.3 or Section 11.4 relate to facts and
circumstances that occur both prior to and after the Closing, or relate to both
a Pre-Closing Claim and a Post-Closing Claim, then the Indemnifying Party and
the Indemnified Party shall jointly determine at all times thereafter the
actions to be taken with respect to such claims and the control, investigation,
prosecution, defense and settlement thereof.
(c) Neither the Indemnifying Party nor the Indemnified Party shall, without
the written consent of the other party, settle or compromise any indemnifiable
claim or permit a default or consent to entry of any judgment. If a settlement
offer solely for money damages is made by the applicable third party claimant,
and the Indemnifying Party notifies the Indemnified Party in writing of the
Indemnifying Party's willingness to accept the settlement offer and pay the
amount called for by such offer without reservation of any rights or defenses
against the Indemnified Party, the Indemnified Party may withhold its consent
and continue to contest
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such claim, free of any participation by the Indemnifying Party, and the amount
of any ultimate liability with respect to such indemnifiable claim that the
Indemnifying Party shall have an obligation to pay thereunder (regardless of
the ultimate Loss sustained by the Indemnified Party) shall be equal to the
amount of the settlement offer that the Indemnified Party declined to accept
plus the previously unpaid Losses of the Indemnified Party relating to such
indemnifiable claim through the date of its rejection of the settlement offer.
If the Indemnifying Party makes any payment on any indemnifiable claim, the
Indemnifying Party shall be subrogated, to the extent of such payment, to all
rights and remedies of the Indemnified Party to any insurance benefits or other
claims of the Indemnified Party with respect to such claim.
(d) With respect to any claim for which Seller or Seller's Parent is the
Indemnifying Party and for which the Indemnifying Party has assumed control of
the defense, Buyer shall make employees of the PRC Companies reasonably
available to assist the Indemnifying Party in defending such claim, provided
that the costs of providing such assistance are paid by the Indemnifying Party
or, if paid by Buyer or any PRC Company, reimbursed to Buyer or the PRC
Company, as appropriate, by the Indemnifying Party.
(e) Any amounts to which an Indemnified Party is entitled under this
Article shall be paid by the Indemnifying Party promptly upon request.
Section 11.6. Survival.
(a) The representations and warranties contained in or made pursuant to
this Agreement (other than those set forth in
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Section 3.30) shall survive the Closing as provided in this Section 11.6(a).
The representations and warranties contained in or made pursuant to Section
3.30 shall expire on the Closing Date. The representations and warranties
contained (w) in Sections 3.1, 3.2 and 3.3, shall survive indefinitely, (x) in
Sections 3.12 and 3.26 shall expire on the third anniversary of the Closing
Date, (y) in Section 3.16 shall expire at the end of the applicable statute of
limitations period (including extensions) for the Tax matters referenced
therein, and (z) in Section 3.17 shall expire on the fifth anniversary of the
Closing Date. Except as otherwise provided in this Section 11.6, all other
representations and warranties set forth in this Agreement or in any agreement
or certificate delivered pursuant hereto or in connection herewith shall expire
on the second anniversary of the Closing Date. The indemnifications set forth
in Sections 11.1 and 11.2 shall survive until the end of the applicable statute
of limitations period (including extensions) for the Tax matters referenced
therein. The indemnification set forth in Sections 11.3(a) and 11.4(a) shall
survive for as long as the pertinent representation and warranty survives. The
indemnification set forth in Sections 11.3(c), 11.4(c) and 11.4(f) shall
survive until the third anniversary of the Closing Date. The indemnification
set forth in Section 11.4(e) shall survive until the fifth anniversary of the
Closing Date. The indemnification set forth in Sections 11.3(b), 11.3(d),
11.4(b), 11.4(d), 11.4(g) and 11.4(h) shall survive indefinitely.
(b) Except as set forth in this Section 11.6(b), any matter as to which a
claim has been asserted by notice to the other party
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that is pending or unresolved at the end of any applicable limitation or
survival period, including any matter disclosed in this Agreement, shall
continue to be covered by this Article XI notwithstanding any applicable
statute of limitations or the expiration of any survival period until such
matter is finally terminated or resolved. Notwithstanding the previous
sentence, the indemnification obligations of Seller and Seller's Parent under
Section 11.4(c) shall not survive beyond the third anniversary of the Closing
Date unless an Action shall have been commenced as of the third anniversary of
the Closing Date. Notice demanding indemnification for the items set forth on
Schedule 3.10 (as modified under Section 9.2(e)) is acknowledged by the parties
to have been given as of the Closing Date.
Section 11.7. Limitations on Indemnification.
(a) Buyer shall not be required to indemnify Seller, Seller's Parent or any
of their Affiliates under Section 11.3(a) unless the aggregate of all amounts
for which indemnity would otherwise be payable thereunder exceeds $1,500,000,
and, in such event, Buyer shall be responsible for only the amount in excess of
such $1,500,000. The total indemnification that Buyer may be required to pay
under Section 11.3(a) shall not exceed $100,000,000.
(b) Seller and Seller's Parent shall not be required to indemnify Buyer or
any of its Affiliates under Sections 11.4(a) and 11.4(e) unless the aggregate
of all amounts for which indemnity would otherwise be payable thereunder
exceeds $1,500,000 (for both such Sections in the aggregate), and, in such
event, Seller and
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Seller's Parent shall be responsible for only the amount in excess of such
$1,500,000. The total indemnification that Seller and Seller's Parent may be
required to pay under Sections 11.4(a) and 11.4(e) (in the aggregate) shall not
exceed $100,000,000.
(c) Seller and Seller's Parent shall not be required to indemnify Buyer or
any of its Affiliates under Section 11.4(c) (other than those items set forth
on Schedule 3.10 (or which otherwise were pending as of the Closing Date) and
any Carpal Tunnel Litigation) unless the aggregate of all amounts for which
indemnity would otherwise be payable thereunder exceeds $1,500,000, and, in
such event, Seller and Seller's Parent shall be responsible for only the amount
in excess of such $1,500,000. No credit will be given to Seller and Seller's
Parent for any reserves for litigation set forth on the Financial Statements or
included in the calculation of the Final Net Asset Amount. Those items set
forth on Schedule 3.10 and all Carpal Tunnel Litigation are indemnifiable from
the first dollar of Loss by Buyer or any of its Affiliates.
(d) For purposes of Section 11.4(g), no credit will be given to Seller and
Seller's Parent for any reserves for the "PRC Supplemental Executive Retirement
Plan" set forth on the Financial Statements or included in the calculation of
the Final Net Asset Amount.
(e) For purposes of Section 11.3, any claim for indemnification that might
be brought under more than one provision of Section 11.3 may be brought under
any applicable provision at Seller's discretion. For purposes of Section 11.4,
any claim for indemnification that might be brought under more than one
provision
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of Section 11.4 may be brought under any applicable provision at Buyer's
discretion.
(f) Losses for which an Indemnified Party shall be indemnified hereunder
shall be net of any insurance proceeds received by the Indemnified Party from
insurance companies, including affiliated insurance companies.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Limitation of Representations and Warranties.
(a) The parties hereto acknowledge and agree that neither Seller nor
Seller's Parent makes, and neither Seller nor Seller's Parent has made, any
representations or warranties relating to Seller, Seller's Parent or any of the
PRC Companies, or any of the transactions contemplated by this Agreement, other
than the representations and warranties expressly set forth in this Agreement
or in any agreement or certificate delivered pursuant hereto or in connection
herewith. Without limiting the generality of the disclaimer set forth in the
preceding sentence, other than the representations and warranties expressly set
forth in this Agreement or in any agreement or certificate delivered pursuant
hereto or in connection herewith, neither Seller nor Seller's Parent makes, has
made or shall be deemed to have made any representations or warranties, in any
presentation or written information relating to the business of any of the PRC
Companies given or to be given in connection with the transactions contemplated
by this Agreement, in any filing made or to be made by or on behalf of any of
the PRC Companies with any Governmental
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Entity, and no statement, made in any such presentation or written materials,
made in any such filing or contained in any such other information shall be
deemed a representation or warranty hereunder or otherwise. No Person has been
authorized by Seller, Seller's Parent or any of the PRC Companies to make any
representation or warranty in respect of Seller, Seller's Parent or any of the
PRC Companies, or in connection with the transactions contemplated by this
Agreement, unless contained in this Agreement.
(b) Whenever any statement herein or in any schedule, exhibit, certificate
or other document delivered to any party pursuant to this Agreement is made "to
[its] knowledge" or "to [its] best knowledge" or words of similar intent or
effect of any party or its representative, such statement shall be deemed to be
made to the best knowledge of (x) with respect to the PRC Companies, Senior
Vice Presidents or higher ranking officials of PRC, (y) with respect to Seller
and Seller's Parent, the President, Vice President and Chief Financial Officer
and Vice President and General Counsel of Seller's Parent, and shall be deemed
to include a representation that a reasonable investigation of the subject
matter thereof has been conducted, and (z) with respect to Buyer, Senior Vice
Presidents or higher ranking officials of Buyer. With respect to Seller and
Seller's Parent, a reasonable investigation shall mean that senior management
of the pertinent corporation have shown the Employees set forth on Schedule
12.1(b) hereto the relevant statement and have consulted with such individuals
as to whether they have knowledge of any fact or circumstance that would make
such statement untrue.
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Section 12.2. Disclosure. Certain information set forth in the Schedules
has been included and disclosed solely for informational purposes and may not
be required to be disclosed pursuant to the terms and conditions of this
Agreement. The disclosure of any such information shall not be deemed to
constitute an acknowledgement or agreement that the information is required to
be disclosed in connection with the representations and warranties made in this
Agreement or that the information is material, nor shall any information so
included and disclosed be deemed to establish a standard of materiality or
otherwise used to determine whether any other information is material.
Section 12.3. Expenses; Certain Taxes. Except as otherwise contemplated by
Section 10.2, all legal, accounting and other costs and fees incurred by Seller
or Seller's Parent in connection with the transactions contemplated by this
Agreement shall be borne and paid for by Seller or Seller's Parent. Except as
otherwise contemplated by Section 10.2, all legal, accounting and other costs
and fees incurred by Buyer in connection with the transactions contemplated by
this Agreement shall be borne and paid for by Buyer. All Taxes (other than
taxes on, relating to or measured by income or gains), stamp duties, notarial,
registration and recording fees and similar Taxes resulting from or relating to
the transfer of the PRC Shares to Buyer shall be borne one-half by Buyer and
one-half by Seller (including any Taxes (other than Income Taxes) on the deemed
sale of assets under the Section 338(h)(10) Election). Buyer and Seller agree
to treat the
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transactions contemplated by this Agreement as a sale of the PRC Shares for
purposes of such Taxes.
Section 12.4. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in respect of the
matters set forth herein, and all prior negotiations, writings and
understandings relating to the subject matter of this Agreement, other than the
Confidentiality Agreement, are merged herein and are superseded and cancelled
by this Agreement. Other than as set forth in this Agreement, no
representations, warranties, covenants, agreements or conditions, express or
implied, whether by statute or otherwise, have been made by the parties hereto.
Section 12.5. Amendment and Waiver. This Agreement may be amended,
modified, supplemented or changed in whole or in part only by an agreement in
writing making specific reference to this Agreement and executed by each of the
parties hereto. Any of the terms and conditions of this Agreement may be
waived in whole or in part, but only by an agreement in writing making specific
reference to this Agreement and executed by the party that is entitled to the
benefit thereof.
Section 12.6. Binding Agreement and Successors. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that this
Agreement and the rights of the parties hereunder may not be assigned, and the
obligations of the parties hereunder may not be delegated, in whole or in part,
without the prior written consent of the other party hereto, except
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that Buyer may assign its rights hereunder to any wholly-owned Subsidiary of
Buyer so long as Buyer is not released from its obligations hereunder. If
Seller's Parent in one or a series of transactions sells, disposes of or
otherwise transfers all or substantially all of its assets, prior to any such
sales, dispositions or transfers, Seller's Parent shall, without being released
from its obligations hereunder, cause the transferee to assume the obligations
of Seller's Parent under this Agreement.
Section 12.7. No Third Party Beneficiaries. Other than as specifically
provided in Sections 11.3 and 11.4, nothing in this Agreement is intended or
shall be construed to confer upon any Person other than the parties hereto and
their Subsidiaries and Affiliates any rights or remedies.
Section 12.8. Notices. Any notice, request, instruction or other document
or communication required or permitted to be given under this Agreement shall
be in writing and shall be deemed to be given upon delivery in person or by
telecopier, three business days after being deposited in the mail, postage
prepaid, for mailing by certified or registered mail, or one business day after
being deposited with an overnight courier, charges prepaid, as follows:
If to Seller or Seller's Parent, delivered or mailed to:
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Charles E. Fenton, Esquire
Vice President and General Counsel
Telecopier No.: (410) 716-2660
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with a copy delivered or mailed to:
Glenn C. Campbell, Esquire
Miles & Stockbridge,
a Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Telecopier No.: (410) 385-3700
If to Buyer (or, after the Closing, any of the PRC Companies), delivered or
mailed to:
Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California 91367
Attention: John E. Preston, Esquire
Senior Vice President and
General Counsel
Telecopier No.: (818) 598-2025
With a copy delivered or mailed to:
David G. Pommerening, Esquire
O'Melveny & Myers
555 13th Street, N.W.
Washington, D.C 20004
Telecopier No.: (202) 383-5414
or to such other address or addresses as may be specified in writing at any
time or from time to time by either party to the other party hereto.
Section 12.9. Further Assurances. The parties hereto each agree to execute,
make, acknowledge, and deliver such instruments, agreements and other documents
as may be reasonably required to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
Section 12.10. Article and Section Headings. The Article and Section
headings contained in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning or interpretation of this
Agreement or any of its terms and conditions.
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Section 12.11. Governing Law. This Agreement shall be construed and enforced
in accordance with and shall be governed by the Laws of the State of Delaware,
without regard to the conflict of laws and principles thereof.
Section 12.12. Construction. As used in this Agreement, any reference to the
masculine, feminine or neuter gender shall include all genders, the plural
shall include the singular, and the singular shall include the plural. With
regard to each and every term and condition of this Agreement and any and all
agreements and instruments subject to the terms hereof, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement
or instrument subject hereto, no consideration shall be given to the issue of
which party hereto actually prepared, drafted or requested any term or
condition of this Agreement or any agreement or instrument subject hereto.
Section 12.13. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
Section 12.14. Reference of Disputes to Senior Officers. Any dispute between
Seller and Seller's Parent, on the one hand, and Buyer, on the other hand,
arising out of or in connection with this Agreement or any alleged breach
hereof may, at the option of either Seller or Buyer, be submitted for
discussion and possible
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resolution by senior officers of Seller's Parent and Buyer, as designated by
their respective chief executive officers, for a period of 30 days (or such
longer period as the parties may in particular cases so decide) before
initiating any arbitration pursuant to Section 12.15.
Section 12.15. Arbitration. Except as specifically provided for elsewhere in
this Agreement, all claims and controversies arising out of or in connection
with this Agreement shall be subject to binding arbitration in Virginia by a
single arbitrator in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA") or the existing Rules of Practice and
Procedures of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
and judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The party filing the arbitration shall have
the right to select either AAA or JAMS. The parties shall be entitled to
discovery in accordance with the provisions of Virginia law. The prevailing
party in any arbitration proceeding hereunder as determined by the arbitrator
or in any legal proceedings or actions arising from or in connection with this
Agreement shall be entitled to recover reasonable attorneys' fees and costs.
Nothing herein shall prohibit a party from seeking equitable relief in a court
of law to maintain the status quo while an arbitration is pending hereunder.
The parties agree that the arbitrator shall not have the right to award
punitive damages.
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IN WITNESS WHEREOF, Seller, Seller's Parent, PRC and Buyer have executed this
Agreement as of the day and year first above written.
THE BLACK & DECKER CORPORATION
By: /s/ Charles E. Fenton
-------------------------------
Title: Vice President and General
Counsel
PRC INVESTMENTS INC.
By: /s/ Charles E. Fenton
-------------------------------
Title: Vice President
PRC INC.
By: /s/ Charles E. Fenton
-------------------------------
Title: Vice President
LITTON INDUSTRIES, INC.
By: /s/ H. Thomas Hicks
-------------------------------
Title: Vice President
<PAGE> 110
Exhibit C
Allocation of Purchase Price (Section 338(h)(10) of the Code)
Pursuant to Section 11.2(b) of the Stock Purchase Agreement, the Purchase Price
shall be allocated by the parties thereto for income tax and other tax purposes
based upon the fair market value of the properties, rights and assets, as
follows:
Description Allocation
- ----------- ----------
All assets and liabilities reflected Amounts reflected on the "Final
on the "Final Net Asset Amount" schedule, Net Asset Amount" schedule,
determined pursuant to Section 2.3(a), plus premium allocated to the
plus premium determined pursuant to following assets:
Section 2.2 (difference between Purchase
Price of $____________ and $205,333,000
pursuant to Section 2.3(c))
Asset Amount
----- ------
____________ _____________
____________ _____________
____________ _____________
____________ _____________
Total Premium
determined
pursuant to
Sections 2.2
and 2.3(c)
=============
The parties shall report the above allocation for U.S. tax purposes in
accordance with Section 338(h)(10) of the Code, regulations thereunder, and
pertinent IRS rules (to be reported by the parties in a consistent manner).
Purchaser ____________________ _______
Signature Date
Seller ____________________ _______
Signature Date
