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): June 2, 1995
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9294 21-0733751
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 609-896-7600
Not Applicable
(Former name or address if changed since last report)
IMO INDUSTRIES INC.
Form 8-K Current Report
Item 2. Disposition of Assets.
On June 2, 1995, the Registrant completed the sale of its Optical
Systems and Ni-Tec divisions of Varo Inc. and the Optical Systems
division of Baird Corporation to Litton Industries and Litton
Systems Inc. for $50 million in cash, which approximates book
value. The sale price was determined on the basis of arms length
negotiations between the parties. A portion of the proceeds has
been used by the Registrant to repay all borrowings on its domestic
line of credit and the excess has been invested in short term
investments. The Registrant intends to redeem $40 million of its
12.25% senior subordinated debentures, at 100% of their principal
amount, with the remainder of the proceeds.
The Registrant's press release announcing such information is filed
herewith as an exhibit.
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(b) Pro Forma Financial Information:
The consolidated balance sheets as of December 31, 1994 and
March 31, 1995 and the consolidated statements of income for
the twelve month and three month periods then ended, as
presented in the Registrant's Form 10-K and Form 10-Q filed
with the Commission on March 30, 1995 and May 12, 1995,
respectively, reflected the Electro-Optical Business segment
as a discontinued operation along with the Company's
Turbomachinery Business segment, in accordance with
Accounting Principles Board Opinion No. 30, and are
incorporated herein by reference.
(c) Exhibits:
The following exhibits are being filed with this report:
Exhibit No. Description
10.41 Purchase and Sale Agreement among Litton
Industries, Inc. and Litton Systems, Inc., and
Imo Industries Inc., Baird Corporation, Optic-
Electronic International, Inc. and Varo Inc.
dated May 11, 1995 and amended and restated as
of June 2, 1995
99 Press Release dated June 5, 1995
by Imo Industries Inc.
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 hereto duly authorized.
Imo Industries Inc.
(Registrant)
Date: June 19, 1995 By: /s/ DONALD K. FARRAR
Donald K. Farrar
Chairman, Chief Executive Officer,
President and Director
PURCHASE AND SALE AGREEMENT
AMONG
LITTON INDUSTRIES, INC.
AND
LITTON SYSTEMS, INC.
AND
IMO INDUSTRIES INC.
BAIRD CORPORATION
OPTIC-ELECTRONIC INTERNATIONAL, INC.
AND
VARO INC.
May 11, 1995
AMENDED AND RESTATED
AS OF JUNE 2, 1995
TABLE OF CONTENTS
List of Exhibits vi
List of Schedules vii
Appendix I - DEFINITIONS ix
SECTION 1 - Transfer of the Business, Properties, Rights and Assets in
Exchange for Cash and the Assumption of Specified Liabilities 2
1.1 Transfer of Assets. 2
1.2 Excluded Assets. 2
1.3 Consideration. 3
1.4 Purchase Price and Payment. 4
1.5 Liabilities Assumed by LSI. 7
1.6 Unassumed Liabilities. 8
1.7 Right to Contest. 10
1.8 Instruments of Assumption. 10
1.9 Non-Assignable Contracts and Rights. 10
1.10 Bulk Sales Act Waiver. 11
SECTION 2 - Transfer Date 12
2.1 Transfer Date. 12
2.2 Right to Cure. 12
SECTION 3 - Representations and Warranties of Imo and the Sellers 13
3.1 Schedules. 13
3.2 Corporate. 13
3.3 No Breach of Statute or Contract Regarding Agreement. 14
3.4 Financial. 14
3.5 Indebtedness; No Undisclosed Liabilities. 16
3.6 Accounts Receivable. 16
3.7 Inventory. 16
3.8 Liens. 17
3.9 Realty Interests. 17
3.10 Sufficiency of the Purchased Assets. 18
3.11 Condition of Purchased Assets. 18
3.12 Contracts and Commitments. 18
3.13 Customer Furnished Assets. 21
3.14 Government Contracting Audits. 21
3.15 Government Contracting Audits Settlement Agreements. 21
3.16 Government Contracts. 21
3.17 Compliance with Laws; Permits. 23
3.18 Pending or Threatened Legal Proceedings. 24
3.19 Judgments, Orders and Consent Decrees. 24
3.20 Insurance Policies. 24
3.21 Employees; Employee Benefits. 24
3.22 Tax Returns. 25
3.23 Product and Service Warranties; Warranty Experience. 26
3.24 Intellectual Property Rights. 26
3.25 Confidential Information or Trade Secrets. 27
3.26 Infringement and Indemnification. 28
3.27 Computer Programs and Software. 28
3.28 Records. 29
3.29 Broker's or Finder's Fees. 29
3.30 Environmental Matters. 29
3.31 Operation of the Business. 31
3.32 No Imo Liabilities or Assets 31
3.33 Dates of Certain Schedules. 31
SECTION 4 - Representations and Warranties of Litton 32
4.1 Corporate. 32
4.2 No Breach of Statute or Contract. 32
4.3 Broker's or Finder's Fees. 33
4.4 No Litigation Regarding Transaction. 33
4.5 Availability of Funds. 33
SECTION 5 - Conduct of Sellers' Business Pending Transfer Date 34
5.1 Reasonable Access. 34
5.2 No Increase in Compensation or Benefits. 34
5.3 Contracts, Bids, and Government Bids. 35
5.4 Patent and other Proprietary Right Agreements. 35
5.5 Sale of Fixed Assets. 35
5.6 Capital Expenditures. 35
5.7 Indebtedness. 35
5.8 Insurance; Maintenance and Repair. 36
5.9 Preservation of Organization. 36
5.10 No Breach. 36
5.11 Compliance with Laws. 36
5.12 No Waiver or Release; No Prepayment. 36
SECTION 6 - Conditions Precedent to Litton's Obligation to Close 37
6.1 Representations and Warranties True at Transfer Date. 37
6.2 No Material Adverse Change. 37
6.3 Compliance with Agreement. 37
6.4 Certificate of Fulfillment of Conditions. 37
6.5 Secretary's Certificate. 37
6.6 Opinions of Counsel for Seller. 37
6.7 No Litigation. 37
6.8 Proceedings and Instruments Satisfactory. 38
6.9 Approvals. 38
6.10 Release or Removal of Liens. 38
6.11 Instruments of Transfer. 38
6.12 Other Closing Documents. 38
6.13 Miller-Holzwarth Agreement. 39
6.14 Schedules and Exhibits. 39
SECTION 7 - Conditions Precedent to Imo 's and each Seller's Obligation
to
Close 40
7.1 Representations and Warranties True at Closing. 40
7.2 Compliance with Agreement. 40
7.3 Certificate of Fulfillment of Conditions. 40
7.4 Secretary's Certificate. 40
7.5 Opinion of Counsel for LSI. 40
7.6 No Litigation. 40
7.7 Proceedings and Instruments Satisfactory. 41
7.8 Approvals. 41
7.9 Instruments of Assumption. 41
7.10 Other Closing Documents. 41
7.11 Schedules and Exhibits. 41
SECTION 8 - Further Requirements 42
8.1 Access to Books and Records. 42
8.2 Further Instruments and Assurance. 42
8.3 Non-Disclosure by Imo or the Sellers. 42
8.4 Use of Name and Logo. 43
8.5 Notice to Customers. 43
8.6 Collection and Repurchase of Accounts Receivable. 43
8.7 Certain Assistance in Income Tax Preparation and Audits, and
Litigation. 44
8.8 Employee Matters. 45
8.9 Letters of Credit and Performance Bonds. 47
8.10 Remittance of Payments Due Other Party. 47
8.11 Consents. 48
8.12 Conditions Precedent. 48
8.13 Nondisclosure by LSI; Use of Information by Litton. 48
8.14 Transition Agreement. 48
8.15 Real Estate Leases and Subleases. 48
8.16 Sales Representative Agreements. 49
8.17 Transfer of Intellectual Property Rights. 49
8.18 Prorations. 49
8.19 Service Agreement. 50
8.20 Assignment of Computer Associates International, Inc.
License. 50
8.21 Relocation of Purchased Assets. 50
8.22 Environmental Covenants. 50
SECTION 9 - Non-Competition Agreement 53
9.1 Non-Competition Agreement. 53
9.2 Injunctive and Equitable Relief. 54
9.3 Benefit of Non-Competition Agreement. 54
SECTION 10 - Termination and Abandonment 55
10.1 Termination. 55
10.2 Notice of Termination. 55
10.3 Effect of Termination. 55
SECTION 11 - Indemnification and Reimbursement 56
11.1 Indemnification by Imo and each Seller. 56
11.2 Indemnification By Litton. 57
11.3 Claims for Reimbursement. 57
11.4 Defense and Settlement of Third-Party Claims. 58
11.5 Right of Set Off. 59
11.6 Limitation on Indemnity. 59
11.7 No other Warranties. 61
11.8 Exclusive Remedy. 61
SECTION 12 - Miscellaneous Provisions 62
12.1 Public Statements and Press Releases. 62
12.2 Costs and Expenses; Computer Associates Costs. 62
12.3 Amendment and Modification. 62
12.4 No Assignment. 63
12.5 Notices. 63
12.6 Counterparts. 63
12.7 Headings. 63
12.8 Schedules and Exhibits. 63
12.9 Waiver, Cumulative Remedy, Etc. 64
12.10 Governing Law. 64
12.11 Severability. 64
12.12 Survival of Representations, Warranties, Covenants, and
Agreements. 64
12.13 No Third-Party Beneficiaries. 65
12.14 Liability of Parties. 65
12.15 Actions on Behalf of Imo, the Sellers or Litton. 65
12.16 Construction. 65
12.17 Entire Agreement. 66
12.18 Successors and Assigns. 66
List of Exhibits
Exhibit 1.2(a) Certain Excluded Properties, Rights, and
Assets
Exhibit 1.4(a)(iv)-1 Exceptions to GAAP
Exhibit 1.4(a)(iv)-2 The March 31, 1995 EAC's for the
MELIOS, SOFLAM, and Singapore
Programs
Exhibit 1.4(a)(iv)-3 Certain Agreements Regarding
Transfer Date EAC's for SOFLAM
and Singapore Programs
Exhibit 1.4(a)(iv)-4 Cost of Image Intensifier Tubes
Exhibit 1.4(a)(iv)-5 Count of Image Intensifier Tubes
Exhibit 1.4(a)(iv)-6 Other Agreed Upon Issues Regarding
Final
Closing Balance Sheet
Exhibit 1.4(b) Wire Transfer Instructions for Payment of
Estimated Purchase Price
Exhibit 1.4(d) Allocation of Purchase Price
Exhibit 1.5(c)(iv) Advertising Contracts, Etc.
Constituting Executory
Contracts
Exhibit 1.5(c)(v) Consulting Contracts Constituting
Executory Contracts
Exhibit 1.5(e) Assumed Liabilities
Exhibit 1.6(l) Unassumed Liabilities
Exhibit 1.9(b) Agency Agreement
Exhibit 6.6(a) Opinion of General Counsel of Imo
Exhibit 6.6(b) Opinion of Baker & Botts, L.L.P.
Exhibit 6.9 Approvals and Consents
Exhibit 6.11 Bill of Sale
Exhibit 6.13 Miller-Holzwarth Agreement
Exhibit 7.5 Opinion of Counsel of Litton
Exhibit 7.9 Assumption Agreement
Exhibit 8.14 Transition Agreement
Exhibit 8.15-1 Hermann Lease
Exhibit 8.15-2 Walnut Sublease
Exhibit 8.15-3 Shepherd Sublease
Exhibit 8.15-4 Chartwell Operating Sublease
Exhibit 8.15-5 Chartwell Warehouse Sublease
Exhibit 8.15-6 Shepherd Right of-Way Sublease
Exhibit 8.19 Service Agreement
Exhibit 8.20 Assignment of Computer Associates
License
Exhibit 9.1(d) Definition of Defined Business
List of Schedules
Franchises, Permits, Etc. 3.2(e)
1994 Financials 3.4(a)
Events Subsequent to 1994 Financials 3.4(b)
Indebtedness 3.5(a)
Accounts Receivable 3.6
Permitted Liens 3.8
Real Property Leases (As Lessee) 3.9(a)
Right to Lease and Sublease 3.9(b)
Material Contracts 3.12(a)(i)
Material Contracts Not in Ordinary Course
3.12(a)(ii)
Advance or Progress Payments Respecting Material Contracts 3.12(a)(iii)
Contract Losses 3.12(a)(iv)
Contracts with Affiliates
3.12(a)(v)
Purchase Orders 3.12(b)
Sales Representative Agreements 3.12(c)
Personal Property Leases (As Lessee) 3.12(d)
Non-Competition Agreements or Covenants 3.12(e)
Consultant Agreements 3.12(f)
Guarantees 3.12(g)
Letters of Credit, Surety and Performance Bonds 3.12(h)
Letters of Credit in Favor of Seller 3.12(i)
Powers of Attorney, Proxies 3.12(j)
Other Material Contracts 3.12(k)
Contract Breaches 3.12(l)
Required Consents 3.12(m)
Customer Furnished Assets 3.13
Government Contracting Audits 3.14
Settlement Agreements 3.15
Government Contracts 3.16(a)
Government Contracts Concerns 3.16(b)
Outstanding Government Claims 3.16(c)
Suspension or Debarment from Government Contracting 3.16(d)
General Compliance 3.17(a)
Permits 3.17(b)
Facility Security Clearance 3.17(c)
Pending or Threatened Claims Regarding the Business 3.18(a)
Judgments, Orders and Consent Decrees 3.19
Insurance Policies 3.20
Employment Contracts and Consulting Agreements 3.21(a)
Compensation; Recent Layoffs 3.21(b)
Indebtedness to Employees 3.21(c)
Loans or Advances to Employees 3.21(d)
Collective Bargaining Agreements Labor Disputes, Etc. 3.21(e)
Compensation Plans 3.21(f)
Tax Disputes 3.22(c)
Product and Service Warranties; Warranty Experience 3.23
Intellectual Property Rights 3.24(a)
Licenses of Intellectual Property Rights 3.24(b)
No Infringement of Intellectual Property Rights 3.24(c)
Confidential Information or Trade Secrets 3.25
Infringement and Indemnification 3.26
Computer Programs and Software 3.27
Records 3.28
Environmental Matters 3.30
Operation of the Business 3.31
Liabilities and Assets 3.32
Certain Existing Environmental Conditions 8.22
Appendix I
DEFINITIONS
As used in the Purchase and Sale Agreement dated as of May 11,
1995
(amended and restated as of June 2, 1995), by and among Imo Industries
Inc.
("Imo"), a Delaware corporation; Baird Corporation ("Baird"), a
Massachusetts corporation and wholly-owned subsidiary of Imo; Varo Inc.
("Varo"), a Texas corporation and wholly-owned subsidiary of Imo; and
Optic-
Electronics International, Inc. ("OEII"), a Texas corporation and a
wholly-
owned subsidiary of Varo (Baird, Varo and OEII, collectively, the
"Sellers"
and, individually, a "Seller"), on the one hand; and Litton Industries,
Inc.
("LII"), a Delaware corporation; and Litton Systems, Inc. ("LSI"), a
Delaware corporation and wholly-owned subsidiary of LII (LII and LSI,
collectively, "Litton"), on the other hand, each term set forth in Part
I
below shall have the specified meaning, and each term set forth in Part
II
below shall have the meaning ascribed to such term in the Section of the
Purchase and Sale Agreement, set forth opposite such term.
PART I
"Affiliate" means, with respect to any Person, any Person directly
or
indirectly Controlling, Controlled By or Under direct or indirect Common
Control With such other Person.
"Antitrust Law" means all United States federal and state, and any
foreign, statutes, rules, regulations, orders, decrees, administrative
and
judicial doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade, or pricing or trade practices.
"Applicable Law" means, with respect to any Person, any domestic
or
foreign federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction,
directive, judgment, decree or other requirement of any Governmental
Authority applicable to such Person or any of its Affiliates or any of
their
respective properties, assets, officers, directors, employees,
consultants
or agents (in connection with such officer's, director's, employee's,
consultant's or agent's activities on behalf of such Person or any of
its
Affiliates); provided, however, that Applicable Law shall not include
any
Antitrust Law, Environmental Law, Government Contract Law, or ERISA.
"Assumption Agreement" means the Assumption Agreement to be dated
as
of the Transfer Date between the Sellers and Litton substantially in the
form of Exhibit 7.9 to the Purchase and Sale Agreement attached to this
Appendix I.
"Bedford Facility" means the property owned by Baird located at
125 Middlesex Turnpike, Bedford, Massachusetts.
"Bid" means any quotation, bid or proposal made by a Seller that
if
accepted or awarded would lead to a Contract with any Person for the
design,
manufacture, sale or maintenance of products or the provision of
services by
the Business; provided, however, that a Bid shall not include any
Government
Bid.
"Bill of Sale" means the Bill of Sale to be delivered by the
Sellers
to Litton on the Transfer Date substantially in the form of Exhibit 6.11
to
the Purchase and Sale Agreement attached to this Appendix I.
"Business Day" means a day other than a Saturday, Sunday or other
day
on which commercial banks in Los Angeles, California, or Dallas, Texas,
are
authorized or required by law to close.
"CAS" or "Cost Accounting Standards" means those rules and
regulations
promulgated by the Cost Accounting Standards Board from time to time.
"Chartwell Operating Facility" means the property leased by Varo
located at 9839 Chartwell Drive, Dallas, Texas.
"Chartwell Warehouse Facility" means the property leased by Varo
located at 9827 Chartwell Drive, Dallas, Texas.
"Code" means the Internal Revenue Code of 1986, as amended from
time
to time.
"Confidentiality Agreement" means the Confidentiality Agreement
dated
January 26, 1994, between LSI and Imo, as the same may be amended from
time
to time.
"Contract" means any contract, subcontract, purchase order,
mortgage,
deed of trust, conditional sales contract, bond, indenture, lease,
sublease,
franchise, license, sublicense, note, certificate, option, warrant,
right,
or other instrument, document, commitment or other binding arrangement
or
agreement including Government Contracts.
A "Contract Loss" shall exist with respect to a Government
Contract,
other Contract, Bid or Government Bid if the sales price therefor is
less
than the sum of the cost incurred to date and the estimated cost to
complete, with all costs determined in accordance with CAS and GAAP on a
basis consistent with prior periods. In calculating Contract Loss,
costs
shall include material and labor costs, overhead, engineering costs and
manufacturing costs, but shall exclude general and administrative
expenses.
"Control" (including its correlative meanings "Controlled By" and
"Under Common Control With") means possession, directly or indirectly,
of
power to direct or cause the direction of management or policies
(whether
through ownership of securities or partnership or other ownership
interests,
by contract or otherwise).
"Dollars or $" means United States dollars.
"Environmental Law" means any federal, state, regional, county or
local statute, law, rule, regulation, ordinance, order, consent decree,
judgment, permit, license, code, or common law, now in effect, or
enacted in
the future with retroactive effect to before the Transfer Date,
pertaining
to the protection of the environment, health or safety of persons,
natural
resources conservation, waste management, any "Hazardous Material
Activity",
and pollution (including regulation of releases and disposal to air,
land,
water, and groundwater). The term shall include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended
by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
9601 et seq.; Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Solid and Hazardous Waste
Amendments of 1984, 42 U.S.C. 6901 et seq.; Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.
1251 et
seq.; the Clean Air Act of 1966, as amended, 42 U.S.C. 7401 et seq.;
Toxic Substances Control Act of 1976, 15 U.S.C. 2601 et seq.;
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. 651
et
seq.; Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C.
11001 et seq.; National Environmental Policy Act of 1975, 42 U.S.C.
300(f) et seq.; and the Hazardous Materials Transportation Act, 49
U.S.C.
1801 et seq.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended from time to time.
"Fifth Street Facility" means the property leased by Varo located
at
555 North Fifth Street, Garland, Texas.
"GAAP" means generally accepted accounting principles as set forth
in
the opinions and pronouncements of the Accounting Principles Board of
the
American Institute of Certified Public Accountants and the statements
and
pronouncements of the Financial Accounting Standards Board.
"Governmental Authority" means any government, any arbitration or
mediation panel, any court or any governmental department, commission,
board, bureau, agency, or instrumentality of the United States or any
foreign or domestic state, province, commonwealth, nation, territory,
possession, county, parish, town, township, village, or municipality.
"Government Bid" means any quotation, bid or proposal made by a
Seller
that if accepted or awarded would lead to a Government Contract.
"Government Contract" means any Contract with respect to the
Business
between a Seller and (i) any United States Governmental Authority, (ii)
any
prime contractor of any United States Governmental Authority, or (iii)
any
subcontractor with respect to any Contract described in clause (i) or
(ii).
"Government Contract Law" means the Foreign Corrupt Practices Act,
the
Truth in Negotiation Act, U.S. Government contracting and procurement
regulations and procedures, any legal obligation to provide current,
accurate and complete cost or pricing data, or any other domestic
federal,
state, or local statutes, rules or regulations relating to the conduct
of
the Business with any United States Governmental Authority.
"Hazardous Material" is any hazardous or toxic chemical, waste,
byproduct, pollutant, contaminant, compound, product, or substance,
including asbestos, polychlorinated biphenyls, petroleum and its
derivatives, byproducts, or other hydrocarbons, and any other liquid,
solid,
or gaseous material the exposure to, or manufacture, possession,
presence,
use, generation, storage, transportation, treatment, release, disposal,
abatement, cleanup, removal, remediation or handling of, which is
prohibited, controlled or regulated by any Environmental Law.
"Hazardous Material Activity" is any activity involving a
Hazardous
Material, including the manufacture, possession, use, generation,
storage,
transportation, treatment, release, disposal, abatement, cleanup,
removal,
remediation, or handling of any Hazardous Material.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hermann Facility" means the property owned by Imo located at 3414
Hermann, Garland, Texas.
"Imo Trademark Rights" means (i) the names "Imo," "Varo," and
"Baird,"
(ii) the Imo, Varo, and Baird logos, and (iii) any of the following
which is
registered or unregistered: any trade name, trademark, service mark,
corporate symbol, slogan, logo, or like property, the use of which is
likely
to cause confusion with the names "Imo," "Varo," or "Baird" or any of
the
same which includes the name Imo, Varo, or Baird.
"Intellectual Property Rights" means all of the following which
exist
or are protectable in any country of the world including all Trademark
Rights, all related international priority rights, applications,
registrations, common law rights, statutory rights, and rights in
copyrights, technical data and patents as defined in FAR Part 27, and
Department of Defense and other government supplements issued to FAR;
copyrights, data, customer and vendor lists, formulae, inventions
(whether
patent applied for or not) know how, mask works (whether registered or
not),
patents, trade secrets, computer programs and software.
"IRS" means the United States Internal Revenue Service.
"Kingsley Facility" means the property leased by Varo located at
2800 West Kingsley Road, Garland, Texas.
"Legal Proceeding" shall mean any proceeding or investigation by
any
Governmental Authority or any judicial or administrative action, suit,
proceeding (public or private), claim, arbitration, or mediation.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character, or description,
whether
known or unknown, absolute or contingent, accrued or unaccrued,
liquidated
or unliquidated, secured or unsecured, joint or several, due or to
become
due, vested or unvested, executory, determined, determinable, or
otherwise
and whether or not the same is required to be accrued on the financial
statements of such Person.
"Lien" means any mortgage, deed of trust, security interest,
lien,
pledge, charge, equity, trust, hypothecation, easement, right of way,
encroachment, other encumbrance, lease, capital lease, sublease,
license,
occupancy agreement, adverse claim or interest, covenant, possibility of
reversion, option, right of first refusal, mechanics' and materialmen's
liens, inchoate liens, or other ownership or interest in favor of any
third
party, burden, title defect, restriction or limitation of any nature
whatsoever, or the interest of a vendor or lessor under any conditional
sales agreement, or title retention agreement, or deposit for security.
"Loss" means all demands, claims, claims for reimbursement,
actions or
causes of action, assessments, losses, damages, costs, expenses,
liabilities, judgments, awards, fines, sanctions, penalties, charges,
and
amounts paid in settlement (including reasonable attorneys' fees and
costs
incident to any of the foregoing) and including special, consequential,
and
punitive damages; provided, however, that (i) in calculating any amount
payable in respect of any Loss, the Indemnifying Party shall be
subrogated,
to the extent of the payment made by the Indemnifying Party to the
Indemnified Party, to the rights (if any) of Indemnified Party against
(or
with respect to) any other Person (other than the rights of any
Indemnified
Party against the insurance coverage of the Indemnified Party or its
Affiliates), arising out of, or in connection with, the facts or
circumstances giving rise to, or creating, such Loss; and (ii) no amount
shall be payable in respect of any Loss for special, consequential, or
punitive damages resulting from or arising out of the suspension or
debarment of Litton or any division or Subsidiary of Litton in
connection
with either (aa) the investigation currently being conducted by the
Department of Justice with respect to certain Contracts between one or
more
Sellers and the Arab Republic of Egypt and certain alleged Foreign
Corrupt
Practices Act violations and other violations of applicable law by one
or
more Sellers, as initiated by the subpoena dated April 7, 1994, or (bb)
the
grand jury investigation into prior testing and quality control
reporting
procedures of the Ni-Tec Division of Varo currently being conducted by
the
United States Attorneys' Office for the Northern District of Texas, as
initiated by the subpoena dated July 16, 1992. In calculating Loss
consisting of lost profits, only profits with respect to Contracts
constituting Assumed Liabilities shall be considered. An Indemnified
Party
may in any event recover special, consequential, and punitive damages
that
are recovered from such Indemnified Party by any third party.
"Marquis Facility" means the property owned by Varo located at
3609 Marquis Street, Garland, Texas.
"Material Adverse Effect" means any material adverse effect on, or
any
effect that results in a material adverse change in, the Purchased
Assets
taken as a whole or the business, financial condition, or results of
operations of the Business taken as a whole.
"Material Contract" means any Contract relating to the Business
and
included among the Purchased Assets involving a remaining payment to or
from
any Seller of an amount in excess of $1,000,000.
"Multiemployer Plan" means a Multiemployer plan as defined in
Section
4001(a) (3) of ERISA.
"Permitted Lien" means (i) as set forth on Schedule 3.8, (ii) as
reflected on the 1994 Financials, with such changes in the amount
thereof as
may have occurred in the normal and ordinary course of business on or
prior
to the Transfer Date; (iii) Liens for current Taxes not yet due and
delinquent, being contested in good faith by appropriate proceedings or
as
to which adequate reserves have been established by a Seller; (iv)
statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other Liens imposed by
Applicable
Law incurred in the ordinary course of business for sums not yet
delinquent
or being contested in good faith, (v) Liens relating to deposits made in
the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (vi) title to
or
any other interest in work-in-progress or other tangible personal
property
used or held for use in the Business by any United States Governmental
Authority under FAR Sections 52.232-16, 52.245-2(c), 52.245-5(c),
52.245.17,
52.245.18 or any clause of similar import, (vii) the interest of any
United
States Governmental Authority in technical data, computer software, and
patents under the clauses pertaining thereto in any Government Contract
relating to the Business, (viii) the Leases, and (ix) such other
imperfections in title, charges, easements, restrictions, and
encumbrances
that do not, individually or in the aggregate, have a material effect on
LSI's ability to use or dispose of the Purchased Assets; provided,
however,
that, with respect to each of clauses (i) through (ix), to the extent
that
any such Lien relates to, or secures the payment of, a Liability that is
required to be accrued under GAAP, such Lien shall not be a Permitted
Lien
unless accruals for such Liability in accordance with GAAP have been
established therefor by the Sellers on the 1994 Financials (or, in the
case
of any such Liability existing on the Transfer Date, the Final Closing
Balance Sheet). Notwithstanding the foregoing, no Lien arising under
the
Code or ERISA with respect to the operation, termination, restoration,
or
funding of any Compensation Plan sponsored by, maintained by, or
contributed
to by a Seller arising in connection with any excise tax or penalty tax
with
respect to such plan or arrangement shall be a Permitted Lien.
"Person" means an individual, corporation, partnership,
association,
trust, estate, or other entity or organization, including a Governmental
Authority.
"Product Liability" means any Liability for property damage,
personal
injury, or death, whether arising under Applicable Law, tort, contract,
warranty, or otherwise, whether relating to research and development,
design, manufacture, inspection and testing, packaging, warnings or
instructions, sale, supply, repair, service, transportation, or
otherwise,
and whether arising as a result of negligence, strict liability, breach
of
express or implied warranties, failure to warn, design defects,
manufacturing defects, marketing defects, misrepresentation, negligence
per
se, res ipsa loquitor, gross negligence, conspiracy, fraud, intentional
infliction of emotional distress, loss of consortium, wrongful death,
punitive or exemplary damages, survival damages, pre-judgment interest,
or
otherwise.
"Purchased Assets" means all assets (tangible or intangible, real,
personal, or mixed) owned, leased, or otherwise possessed by the Sellers
or
in which the Sellers have any interest that are employed in the business
and
operations of the Business, now in existence or hereafter acquired by
the
Sellers prior to the Transfer Date, including all equipment, Contracts,
Intellectual Property Rights, records, raw materials, supplies, work-in-
progress, inventory, interests in government-furnished equipment,
fixtures,
accounts receivable, permits or licenses used or held for use in the
conduct
of the Business, and any and all derivations and combinations thereof;
provided, however, that the Purchased Assets shall not include the
Excluded
Assets or any assets employed in the Business that are disposed of by
the
Sellers prior to the Transfer Date in the normal and ordinary course of
business and not in violation of this Agreement.
"SEC" means the Securities and Exchange Commission.
"Sellers' Knowledge" means the actual knowledge of the following
officers or employees (or both), and their respective successors, of Imo
or
the Sellers: J. Dwayne Attaway, William M. Brown, Steven A. Lambert,
Jeremy
M. Quick, Pat N. Thurman, Carrie L. Adams, G. Duane Hall, Ann M. Barney,
Ian
B. Hillier, A. Hamilton Evans, Joseph P. Schirard, Thomas E. Milson,
Urban
H. Heitmeyer, Frank L. Thomas, Richard Katz, Ed Peace, Jim Stephens,
Brian
Morgan, Chris Vannatta, and Milton Woodall.
"Shepherd Facility" means the property leased by Varo located at
538
Shepherd, Garland, Texas.
"Shiloh Facility" means the property owned by Varo located at 900-
932
Shiloh Road, Garland, Texas.
"Shepherd Right-of-Way" means the right-of-way leased by Varo in
connection with the Shepherd Facility.
"Subsidiary" of any Person means any other Person:
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or
(ii) which does not have outstanding shares or securities (as may
be
the case in a partnership, joint venture, or unincorporated
association),
but more than 50% of whose ownership interest representing the right to
make
decisions for such other Person is,
now or hereafter owned or Controlled, directly or indirectly, by
such
Person, but such other Person shall be deemed to be a Subsidiary only so
long as such ownership or Control exists.
"Taxes" means all income, profit, franchise, excise, real and
personal
property, sales, use, transfer, import and export, occupation, value-
added,
payroll, withholding, social security, and other taxes, levies, charges,
and
assessments imposed by any Governmental Authority, together with all
interest, penalties, and additions imposed by any Governmental Authority
with respect to such amounts.
"Trademark Rights" means all names, common law trademarks, trade
names, and service marks as they exist in any country of the world,
including all rights based on use or bona fide intent to use, and all
registrations, applications, and related international priority rights,
whether or not any of same is registered or unregistered, but excluding
Imo
Trademark Rights.
"Transaction Agreements" means all certificates and documents
delivered by the parties pursuant to the Purchase and Sale Agreement
attached to this Appendix I, the Agency Agreement, the Hermann Lease,
the
Walnut Sublease, the Shepherd Sublease, the Chartwell Operating
Sublease,
and the Chartwell Warehouse Sublease.
"United States Governmental Authority" means any government, any
arbitration or mediation panel, any court or any governmental
department,
commission, board, bureau, agency or instrumentality of the United
States or
any domestic state, territory, possession, county, parish, town,
township,
village or municipality.
"U.S. Government" means the United States Government including any
agencies, commissions, branches, instrumentalities, and departments
thereof.
"Varo Technology Center Land" means the real property located at
the
corner of Shiloh Road and Buckingham Street in Garland, Texas.
"Walnut Facility" means the property leased by Varo located at
2201
Walnut St., Garland, Texas.
"WARN Act" means the Workers' Adjustment and Retraining
Notification
Act of 1989.
PART II
Each of the following terms is defined in the Section of the
Purchase
and Sale Agreement attached to this Appendix I set forth opposite such
term:
DEFINED TERM SECTION REFERENCE
1994 Financials 3.4(a)
Adjustment 1.4(c)
Affected Real Property 1.6(c)
Agency Agreement 1.9
Arbiter 1.4(a)(vi)
Assumed Liabilities 1.5
Baird Recitals
Bona Fide Offer of Employment 8.8(b)
Business Recitals
Buying Interests 11.1
Cash Purchase Price 1.4(a)(iii)
Chartwell Operating Sublease 8.15-4
Chartwell Warehouse Sublease 8.15-5
Classified Information 5.1
Closing Net Book Value 1.4(a)(ii)
Collection Period 8.6(a)
Company 9.1(b)(i)
Compensation Plan 3.22(a)
Consolidated Books and Records 3.28
Continuing Employee 8.8(b)
Customer 8.6(a)
Customer Furnished Items 3.13
Defined Business 9.1(d)
Direct Litigation Option 11.4
EAC's 1.4(a)(iv)
EAC Schedule 1.4(a)(iv)
EPA 3.31(f)
Environmental Panel 8.22(c)
Environmental Real Property 8.22(a)(i)
Estimated Purchase Price 1.4(b)
Excluded Assets 1.2
Executory Contracts 1.5(c)
Final Closing Balance Sheet 1.4(a)(i)
Hermann Lease 8.15-1
Imo Recitals
Including 12.6
Indemnified Party 11.3
Investigation Period 11.3
Landlords 3.9(a)
Leases 3.9(a)
Letters of Credit 8.9
LII Recitals
Litton's Records 8.1
LSI Recitals
Non-Competition Period 9.1(a)
OEII Recitals
Offerees 8.8(a)
Potential Third-Party Claims 11.3
Preliminary Closing Balance Sheet 1.4(a)(v)
Pre-Existing Environmental Contamination 8.22(a)(i)
Real Property 3.9(a)
Required Consents 3.14(m)
Review Period 1.4(v)
Schedules 3.1
Seller's Records 8.1
Selling Interests 11.2
Separate Books and Records 3.28
Settlement Review Period 11.4
Severance Contracts 3.22(a)
Severance Pay 8.8(b)
Shepherd Sublease 8.15-3
The Melios EAC's 1.4(a)(iv)
Transfer Date 2.1
Transfer Date EAC's 1.4(a)(iv)
Transfer Date Receivables 8.6(a)
Unassumed Liabilities 1.6
Uncollected Receivables 8.6(b)
UST's 3.30(h)
Varo Recitals
Walnut Sublease 8.15-2
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, made and entered into on and as of May 11, 1995
(amended and restated as of June 2, 1995), by and among Imo Industries
Inc.
("Imo"), a Delaware corporation; Baird Corporation ("Baird"), a
Massachusetts corporation and wholly-owned subsidiary of Imo; and Varo
Inc.
("Varo"), a Texas corporation and wholly-owned subsidiary of Imo; and
Optic-
Electronic International, Inc. ("OEII"), a Texas corporation and wholly-
owned subsidiary of Varo (Baird, Varo, and OEII, collectively, the
"Sellers"
and, individually, a "Seller"), on the one hand; and Litton Industries,
Inc.
("LII"), a Delaware corporation; and Litton Systems, Inc. ("LSI"), a
Delaware corporation and wholly-owned subsidiary of LII (LII and LSI,
collectively, "Litton"), on the other hand.
WHEREAS, the Sellers, directly or indirectly, through the Optical
Systems Division of Varo, the Ni-Tec Division of Varo, the Varo
Corporate
Division, the Optical Systems Division of Baird, and OEII, are engaged
in
the business of designing, developing, manufacturing, and selling image
intensifier night vision components and systems, laser products, and
other
optical systems for military applications, commercial customers, the
U.S.
Government, and certain foreign governments (collectively, the
"Business").
WHEREAS, the Sellers desire to sell and LSI desires to purchase
substantially all of the properties and assets owned or operated by the
Sellers and employed in the Business for and in consideration of (a) the
cash payments specified hereinafter, and (b) the assumption by LSI of
certain specified Liabilities of the Sellers relating to the Business,
all
in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
made
and the mutual benefits to be derived from this Agreement and the
transactions provided for herein, the parties hereto agree as follows:
0
Transfer of the Business, Properties, Rights and Assets
in Exchange for Cash and the Assumption
of Specified Liabilities
.0 Transfer of Assets.
Except as otherwise provided in Section 1.2, on the Transfer Date,
the
Sellers shall sell, transfer, assign, grant, convey, and deliver to LSI,
free and clear of all Liens except Permitted Liens, all of the Sellers'
right, title, and interest in and to the Purchased Assets.
.1 Excluded Assets.
Notwithstanding anything in this Agreement to the contrary, LSI
shall
not purchase or acquire hereunder any right, title, or interest in or to
the
following properties, rights, and assets of the Sellers (collectively,
the
"Excluded Assets"):
(a) Listed on Exhibit 1.2.
Those certain properties, rights, and assets of the Sellers
set
forth on Exhibit 1.2;
(b) Cash.
Cash on hand or in banks and cash equivalents;
(c) Compensation Plans.
Any right, title or, interest of the Sellers under any
Compensation Plan or under any trust related to any Compensation Plan;
(d) Insurance Policies and Proceeds Thereof.
Any insurance policies and participation in self-insurance
programs, and coverages thereunder of the Sellers;
(e) Tax Refunds.
Any claims for refund, carryback, or carryforward in
connection
with, and prepaid and deferred, income Taxes for periods commencing on
or
prior to the Transfer Date, any interest thereon, and any and all books,
records, files, and data exclusively pertaining to income Taxes (except
to
the extent any amounts in respect of such rebates or refunds (i) relate
to
Taxes which were charged directly or indirectly to the U.S. Government,
and
(ii) are required to be paid to the U.S. Government pursuant to
Applicable
Law applicable to, or terms contained in, any Executory Contract, which
amounts shall be paid to the U.S. Government promptly upon receipt
thereof
by Litton or any Seller);
(f) Stock and Corporate Franchise.
The capital stock, franchise to be a corporation,
certificate or
articles of incorporation, corporate seal, minute books, stock books,
and
other corporate records pertaining exclusively to the corporate
existence of
each Seller and of each Subsidiary of each Seller;
(g) Certain Trademark Rights.
Except to the extent provided in Section 8.4, the Imo
Trademark
Rights;
(h) Real Estate.
Except as provided in Section 8.15, any interests of any
Seller
with respect to the Bedford Facility, the Chartwell Operating Facility,
the
Chartwell Warehouse Facility, the Fifth Street Facility, the Hermann
Facility, the Kingsley Facility, the Marquis Facility, the Shepherd
Facility, the Shepherd Right-of-Way, the Shiloh Facility, the Varo
Technology Center Land, and the Walnut Facility;
(i) Intercompany Receivable Balances.
The receivable balances in the intercompany accounts due to
the
Business from Imo or any Seller;
(j) Prepaid Items.
Any prepaid insurance premiums and (except as provided in
Section 1.2(e)) prepaid Taxes constituting Unassumed Liabilities; and
(k) Certain Records.
Any books, records, or other data relating to the Sellers'
ownership or operation of the Business not located on the premises of
the
Business and which are either part of the Sellers' general corporate
books
and records or required by Applicable Law, Government Contract Law or
Environmental Law to be retained by the Sellers; provided however, that
copies of such books, records, or other data relating to the Business
shall
be furnished to Litton promptly upon receipt by the Sellers of a
reasonable
written request from Litton.
.2 Consideration.
Upon the terms and subject to the conditions set forth in this
Agreement and in exchange and consideration for the Purchased Assets:
(a) On and as of the dates indicated in Section 1.4, Litton
shall
pay and remit to Imo (on its own behalf and as agent for each Seller)
the
Cash Purchase Price in accordance with and to the extent provided in
Section
1.4; and
(b) LSI shall assume as of the Transfer Date the Assumed
Liabilities
in accordance with and to the extent set forth in Section 1.5 (as
limited by
Section 1.6);
.3 Purchase Price and Payment.
(a) Determination of Purchase Price.
(i) The "Final Closing Balance Sheet" shall mean the
balance
sheet of the Purchased Assets and Assumed Liabilities, as of the
Transfer
Date, prepared in accordance with paragraph (iv).
(ii) The "Closing Net Book Value" shall mean the total net
book
value of the Purchased Assets less the total of the Assumed Liabilities,
as
reflected on the Final Closing Balance Sheet.
(iii) The cash purchase price (the "Cash Purchase Price")
shall
be an amount equal to the Closing Net Book Value less $2,000,000.
(iv) The Final Closing Balance Sheet shall be prepared from
the
books and records of the Sellers in accordance with GAAP (except as set
forth on Exhibit 1.4(a)(iv)-1) applied on a basis consistent with the
basis
used in the preparation of the 1994 Financials. The Final Closing
Balance
Sheet shall include a schedule, as of the Transfer Date, of the costs
incurred to date and the estimated costs to complete, determined in
accordance with GAAP (except as set forth on Exhibit 1.4(a)(iv)-1) (with
costs calculated to include those costs set forth in the definition of
Contract Loss) for all Executory Contracts (the "EAC Schedule"), and the
EAC
Schedule shall be utilized in preparing the Final Closing Balance Sheet.
The EAC Schedule with respect to the MELIOS, SOFLAM, and Singapore
Programs
shall be determined as provided in the following paragraph.
Set forth on Exhibit 1.4(a)(iv)-2 are the incurred costs relating
to,
and the estimated costs at completion for, the MELIOS, SOFLAM, and
Singapore
Programs as of March 31, 1995 as prepared by the Sellers in accordance
with
GAAP (the "EAC's"). The estimated costs at completion as of the
Transfer
Date for the SOFLAM, and Singapore Programs (the "Transfer Date EAC's")
and
the reserves with respect thereto shall be determined by the parties as
of
the Transfer Date in accordance with Exhibit 1.4(a)(iv)-3. Because
additional testing must be performed with respect to the MELIOS program,
and
certain other information must be obtained, the parties are unable to
determine the estimated cost at completion as of the Transfer Date for
the
MELIOS program (the "MELIOS EAC") prior to the Transfer Date.
Therefore,
the MELIOS EAC, like the estimates at completion for all programs other
than
the SOFLAM and Singapore programs, shall be determined in accordance
with
GAAP after the Transfer Date. The Sellers' proposal for the MELIOS EAC
shall be included with the Preliminary Closing Balance Sheet, and
Litton's
objections thereto, if any, shall be included with Litton's objections
to
the Preliminary Closing Balance Sheet, and any disputes shall be
resolved in
accordance with Section 1.4(a)(v). The Transfer Date EAC's shall
include
reasonable estimates of late charges and adjustments to the
consideration
which are reasonably anticipated. The Transfer Date EAC's (including
the
compliance thereof with GAAP, but not including compliance thereof with
GAAP
with respect to costs incurred) shall be deemed to have been agreed upon
by
the parties, shall form part of the EAC Schedule, and shall be utilized
in
preparing the Final Closing Balance Sheet. In the period between the
date
hereof and the Transfer Date, Imo and the Sellers shall promptly notify
Litton of any material adjustment to the estimated costs to complete set
forth in the EAC's.
In addition, for purposes of preparing the Final Closing Balance
Sheet, the parties hereto shall be deemed to have agreed upon the
following:
(aa) the standard costs of image intensifier tubes used by the Sellers
in
the preparation of the 1994 Financials as set forth on Exhibit
1.4(a)(iv)-4;
(bb) the beginning count of image intensifier tubes as set forth on
Exhibit
1.4(a)(iv)-5; and (cc) those matters set forth on Exhibit 1.4(a)(iv)-6.
(v) Within 60 days following the Transfer Date, Imo and the
Sellers with the assistance and cooperation of Litton shall prepare and
deliver to Litton a proposed Final Closing Balance Sheet of the
Purchased
Assets and Assumed Liabilities as of the Transfer Date (the "Preliminary
Closing Balance Sheet"), prepared as provided in paragraph (iv) above.
Litton shall have 60 days following its receipt of the Preliminary
Closing
Balance Sheet (the "Review Period") to review the same for compliance
with
paragraph (iv) above. On or before the expiration of the Review Period,
Litton shall deliver to Imo and the Sellers a written statement
accepting or
objecting to the Preliminary Closing Balance Sheet. In the event that
Litton shall object to the Preliminary Closing Balance Sheet, such
statement
shall include a detailed itemization of Litton's objections and its
reasons
therefor. If no such statement is delivered by Litton to Imo and the
Sellers within the Review Period, Litton shall be conclusively deemed to
have accepted the Preliminary Closing Balance Sheet.
(vi) In the event that Litton shall accept or shall be
conclusively deemed to have accepted the Preliminary Closing Balance
Sheet
as prepared and delivered by Imo and the Sellers, the Preliminary
Closing
Balance Sheet shall constitute the Final Closing Balance Sheet for
purposes
of determining any Adjustment (as hereafter defined) to the Cash
Purchase
Price. In the event, however, that Litton shall object to the
Preliminary
Closing Balance Sheet within the Review Period, Litton, Imo and the
Sellers
shall promptly meet and in good faith attempt to resolve such
objection(s).
If any of such objection(s) cannot be resolved between Litton, Imo and
the
Sellers within 30 days following Imo's and the Sellers' receipt of
Litton's
statement of objection(s), then Imo, the Sellers and Litton shall submit
the
dispute to Price Waterhouse or, if such firm refuses to so act, to
another
nationally recognized independent accounting firm mutually agreeable to
Imo,
the Sellers and Litton, which firm shall not have had a material
relationship with Imo or any Seller or Litton or their respective
Affiliates
within the three years preceding the appointment (the "Arbiter"), for
resolution. If Imo, the Sellers and Litton cannot agree on the
selection of
the independent accounting firm to act as Arbiter, they shall jointly
request the American Arbitration Association to appoint such a firm, and
such appointment shall be conclusive and binding on the parties.
Promptly,
but no later than 60 days after its acceptance of its appointment as
Arbiter, the Arbiter shall determine (based solely on presentations by
Imo
and the Sellers and Litton to the Arbiter and not by independent review)
only those issues in dispute. In resolving any disputed item, the
Arbiter
may not assign a value to any item greater than the greatest value for
such
items claimed by either party, or less than the smallest value for such
item
claimed by either party, in each case, as presented to the Arbiter. The
fees, costs, and expenses of the Arbiter and the American Arbitration
Association, if any, shall be paid one-half by Imo and the Sellers and
one-
half by Litton. The resolution so made shall be final and binding on
the
parties, and the Preliminary Closing Balance Sheet, as adjusted to
reflect
the adjustments agreed upon by or determined by the Arbiter, shall
constitute the Final Closing Balance Sheet for purposes of determining
any
Adjustment (as hereinafter defined) to the Cash Purchase Price.
(b) Payment of Estimated Purchase Price.
On the Transfer Date, Litton shall pay and remit to Imo (on
its
own behalf and as agent for each Seller) by wire transfer of immediately
available federal funds to such bank account as is specified in Exhibit
1.4(b), $50,000,000 (the "Estimated Purchase Price").
(c) Settlement of Purchase Price.
In the event that the Cash Purchase Price (determined as
provided in Section 1.4(a)) is greater or less than the Estimated
Purchase
Price (such excess or deficiency being hereinafter referred to as the
"Adjustment"), on the third Business Day following the date upon which
the
Cash Purchase Price is so determined, Litton shall pay and remit to Imo
(on
its own behalf and as agent for each Seller) if the Cash Purchase Price
(as
so determined) is greater than the Estimated Purchase Price, or Imo (on
its
own behalf and as agent for each Seller) shall pay and remit to Litton
if
the Purchase Price (as so determined) is less than the Estimated
Purchase
Price, the amount of the Adjustment, plus interest on the amount of the
Adjustment from the Transfer Date to the date the Adjustment is paid, at
an
annual rate of 7%. Payment of the Adjustment and the applicable
interest
shall be made by wire transfer of immediately available federal funds to
the
bank account specified by the recipient.
(d) Allocation of Purchase Price.
The consideration given by Litton under this Agreement
(including the payment of the Cash Purchase Price and the assumption of
the
Assumed Liabilities) shall be allocated among the Purchased Assets in
accordance with section 1060 of the Code, and the regulations under the
Code, and Exhibit 1.4(d). Within 60 days following the date upon which
the
Cash Purchase Price is determined as provided in Section 1.4(a), Litton
shall prepare an Asset Acquisition Statement (Form 8594) and shall
furnish a
copy thereof to Imo and the Sellers. In the event that Imo or any
Seller
objects to the Asset Acquisition Statement prepared by Litton within 30
days
after the receipt thereof, the parties shall meet promptly and attempt
in
good faith to resolve any objections of Imo and the Sellers. In the
event
that Imo or any Seller's objections cannot be resolved among the parties
within 30 days following such meeting, such unresolved objections shall
be
submitted to and finally settled under the Commercial Arbitration Rules
of
the American Arbitration Association by an arbitrator appointed in
accordance with such Rules. The place of the arbitration shall be
Dallas,
Texas. The determination of the arbitrator shall be final and binding
upon
the parties and shall be enforceable in any court of competent
jurisdiction.
Imo and the Sellers, on the one hand, and Litton, on the other hand,
shall
each bear one-half of the costs and expenses of the arbitration. If Imo
and
the Sellers do not object to the Asset Acquisition Statement within the
30-
day period after the receipt thereof, such statement shall be final for
purposes of this Agreement. Litton, Imo and the Sellers agree to file
their
respective tax returns or declarations for applicable income tax
purposes in
a manner consistent with the allocation finally determined pursuant to
this
Section.
.4 Liabilities Assumed by LSI.
Except as otherwise provided in Section 1.6 and Section 8.22, on
and
as of the Transfer Date, LSI shall assume and agree to pay, discharge,
and
perform, as the case may be, when due and payable, the following (and
only
the following) specified Liabilities of the Sellers with respect to the
Business (the "Assumed Liabilities"):
(a) Subject to Section 1.5(c), all Liabilities of the Sellers to
the
extent set forth on or reflected in the 1994 Financials and not paid or
discharged by the Sellers on or prior to the Transfer Date;
(b) Subject to Section 1.5(c), all Liabilities of the Sellers
not
constituting Unassumed Liabilities incurred in the normal and ordinary
course of business consistent with past practice from December 31, 1994,
to
the Transfer Date and not paid or discharged by the Sellers on or prior
to
the Transfer Date to the extent that such Liabilities are set forth on
or
reflected in the Final Closing Balance Sheet;
(c) Performance obligations of the Sellers arising after the
Transfer Date under the executory portion of Contracts which are (i)
disclosed in Schedules 3.12(a)(i), 3.12(b), 3.12(d), 3.12(k), 3.24(b) or
3.27; (ii) not disclosed in such Schedules solely because they fall
below
the minimum threshold amount, term, or materiality of the disclosures
required by the terms of this Agreement to be set forth in such
Schedules,
or because they contain classified information; (iii) incurred between
the
date of this Agreement and the Transfer Date in compliance with the
provisions of Section 5 of this Agreement; (iv) distributorship, dealer,
marketing, or advertising Contracts listed on Exhibit 1.5(c)(iv); or (v)
consulting Contracts listed on Exhibit 1.5(c)(v) (Contracts described in
clauses (i), (ii), (iii), (iv) and (v) being herein referred to as
"Executory Contracts"); provided, however, that the term Executory
Contracts
shall not include Contracts as to which all goods and services
thereunder
have been delivered on or prior to the Transfer Date;
(d) Product and service warranty obligations of the Sellers for
products sold and shipped, or services rendered, on or prior to the
Transfer
Date, except any Liabilities resulting from or arising out of the grand
jury
investigation into prior testing and quality control reporting
procedures of
the Ni-Tec Division of Varo currently being conducted by the United
States
Attorneys' Office for the Northern District of Texas, as initiated by
the
subpoena dated July 16, 1992, or any events, acts, or omissions alleged
to
form the basis for such grand jury investigation;
(e) Liabilities set forth on Exhibit 1.5(e); and
(f) Liabilities of the Sellers for actual or alleged Product
Liability resulting from, caused by, or arising out of, any product sold
and
shipped by LSI after the Transfer Date, notwithstanding that such
product
was manufactured by the Sellers on or prior to the Transfer Date.
.5 Unassumed Liabilities.
Except as expressly set forth in Section 1.5 and Section 8.22,
Litton
shall not assume, and the Sellers shall retain, pay, perform, and
discharge,
all Liabilities of any kind whatsoever, whether arising out of or
relating
to the Purchased Assets or the operation of the Business or otherwise on
or
prior to the Transfer Date (collectively, the "Unassumed Liabilities").
Notwithstanding anything to the contrary contained in Section 1.5, the
Unassumed Liabilities shall include the following Liabilities of Imo or
the
Sellers as of the Transfer Date:
(a) Any Liability of the Sellers for Taxes based on income
imposed
by the United States, any foreign country, state, municipality,
subdivision,
agency of the United States or any foreign country, or any other
Governmental Authority charged with levying Taxes or fees, in respect of
periods on or prior to the Transfer Date;
(b) Except as provided in Section 8.8 and except for vacation
pay to
the extent accrued on the Final Closing Balance Sheet, any Liability of
Imo
or any Seller to any present or former director, officer, or employee
under
any Compensation Plan or under any collective bargaining agreement
between
any labor organization and Imo or any Seller, or under any individual
employment contracts, including any Liability for pay-in-lieu-of-notice,
sick pay, severance, or termination pay, arising out of this transaction
or
otherwise, or under any retention or "stick around" bonus agreement or
arrangement;
(c) Any Liability of the Sellers, any predecessors of the
Sellers in
title, or parties for whose acts or omissions the Sellers are
responsible:
(i) arising on or prior to the Transfer Date from the presence of
Hazardous
Material at, under or migrating to or from or transported from (by any
vehicle) the Hermann Facility, the Walnut Facility, the Shepherd
Facility,
the Chartwell Operating Facility, or the Chartwell Warehouse Facility,
or
any other real property which was or is owned, leased, or occupied by
the
Sellers in connection with the Business (the "Affected Real Property");
(ii)
arising from the shipment on or prior to the Transfer Date of Hazardous
Material offsite from the Affected Real Property for treatment, storage,
or
disposal; (iii) arising from the failure on or prior to the Transfer
Date to
comply with Environmental Laws (including the failure to file any
reports
required under Environmental Laws); (iv) arising from the failure on or
prior to the Transfer Date to have obtained all permits, licenses, and
other
authorizations required with respect to the conduct of the Business
under
Environmental Laws in effect prior to the Transfer Date; (v) arising
from
the failure on or prior to the Transfer Date to have complied with all
permits, licenses, and other authorizations issued under Environmental
Laws;
or (vi) arising from the storage, holding, existence, use, release,
emission, discharge, generation, processing, abatement, removal,
disposition, handling, or transportation on or prior to the Transfer
Date of
any Hazardous Material from, under, into or on any of the Affected Real
Property;
(d) Any Liability of the Sellers for actual or alleged Product
Liability resulting from, caused by or arising out of any product sold
and
shipped, repaired, or maintained by the Sellers or any service rendered
by
the Sellers on or prior to the Transfer Date;
(e) Any Liability of the Sellers in respect of, secured by, or
incurred in connection with, the acquisition, ownership, or use by the
Sellers of any of the Excluded Assets;
(f) Any Liability arising from any violation or alleged
violation by
the Sellers of any Applicable Law, Antitrust Law, Government Contract
Law or
ERISA on or prior to the Transfer Date (including the provisions of
Section
1.6(c) with respect to violations of Environmental Laws);
(g) Any Liability arising from performance or breach of any
contractual or other obligations by the Sellers or violations of
Applicable
Law, Antitrust Law, or Government Contracts Law under or in connection
with
any of the Executory Contracts occurring or arising out of acts or
omissions
by the Sellers occurring on or prior to the Transfer Date;
(h) Any Liability of the Sellers for actual or alleged
infringement
of any Intellectual Property Rights of others by any product sold and
shipped, repaired, or maintained by the Sellers or any service rendered
by
the Sellers on or prior to the Transfer Date;
(i) Any Liability of the Sellers for legal, accounting, or other
costs and expenses incurred in connection with the negotiation or
execution
of this Agreement and/or the consummation of the transactions provided
for
herein;
(j) Any Liability of the Sellers for any broker's or finder's
fee
incurred in connection with the transactions provided for herein,
including
any fees payable to CS First Boston Corporation;
(k) The payable balances in the intercompany accounts due from
the
Business to Imo or any Seller;
(l) Those certain Liabilities of the Sellers in respect of the
Business set forth and described in Exhibit 1.6(l);
(m) Except as provided in Section 8.16 and for Liabilities under
Contracts listed on Exhibits 1.5(a)(iv) and 1.5(a)(v), any Liability
under
any sales representative, sales consultant, distributor, dealer,
marketing,
advertising or similar Contracts of the Sellers; provided, however, that
such Liability shall be considered an Assumed Liability to the extent of
any
reserves or accruals established on the Final Closing Balance Sheet with
respect to any sales commissions, consultant's fees or similar
Liabilities
arising under, or related to, any such Contracts; and
(n) Any Liability to make any payment to the U.S. Government or
any
Person with respect to any alleged overfunding of any of Imo's or the
Sellers' pension or other Compensation Plans or based on the prior
merger of
pension plans by Imo or any Seller, whether overfunded or underfunded.
.6 Right to Contest.
The assumption and agreement by LSI to pay, perform, and
discharge, as
the case may be, the Assumed Liabilities shall not prohibit LSI from
contesting, in good faith and at the expense of LSI, the amount,
validity or
enforceability of any thereof; provided, however, that LSI shall
indemnify
the Sellers against any damage to the Sellers resulting from such
contest.
.7 Instruments of Assumption.
On the Transfer Date, LSI shall deliver to the Sellers an
Instrument
of Assumption substantially in the form of Exhibit 7.9.
.8 Non-Assignable Contracts and Rights.
(a) Consent.
Notwithstanding anything to the contrary in this Agreement,
no
properties, rights, or other assets of the Sellers shall be deemed sold,
transferred, or assigned to LSI pursuant to this Agreement if the
attempted
sale, transfer, or assignment of the same to LSI without the consent or
approval of any Person would be ineffective or would constitute a breach
of
Contract or a violation of any Applicable Law, Antitrust Law, or
Government
Contract Law or would in any way adversely affect the rights of the
Sellers
(or LSI, as transferee or assignee), and such consent or approval is not
obtained.
If any such consent or approval is required but not obtained
on
or prior to the Transfer Date, then to the extent possible, (i) the
beneficial interest in or to such properties, rights, or assets shall in
any
event pass as of the Transfer Date to LSI, and (ii) pending such consent
or
approval LSI shall assume or discharge the obligations of the Sellers
under
such properties, rights, or assets (to the extent such obligations are
Assumed Liabilities) as agent for the Sellers pursuant to the Agency
Agreement, and LSI shall act as the Sellers' agent in the receipt of any
benefit, rights, or interests received from such properties, rights, or
assets constituting Purchased Assets.
The parties shall use reasonable efforts (and bear their
respective costs of such efforts) without payment of any material
penalty or
fee to obtain and secure any and all consents and approvals that may be
necessary to effect the sale, transfer, or assignment of such
properties,
rights, or assets to LSI without material change in any of the material
terms or conditions of such properties, rights, or assets, including
their
formal assignment or novation, if advisable. LSI shall cooperate with
and
assist the Sellers in their efforts to obtain any such approval,
novation,
or release, including participating in presentations to contracting
officers
and other appropriate government officials and supplying information
regarding LSI's financial condition, business experience and competence,
technical capabilities, and other relevant matters.
The parties further agree to make or complete such transfers
as
soon as reasonably possible and to cooperate with each other in any
other
reasonable arrangement designed to provide for LSI the benefit of such
properties, rights, and assets.
(b) Agency Agreement.
As of the Transfer Date, the Sellers and LSI shall have
entered
into an agency agreement (the "Agency Agreement") substantially in the
form
of Exhibit 1.9(b) pursuant to which LSI agrees to administer and perform
as
agent for the Sellers all of the Sellers' obligations and
responsibilities
under the Government Contracts and Government Bids constituting
Executory
Contracts and under any Executory Contracts with any Governmental
Authority
which is not a United States Governmental Authority.
.9 Bulk Sales Act Waiver.
LSI hereby waives compliance by the Sellers with the bulk sales
provisions of the Uniform Commercial Code or similar statutory scheme,
if
applicable; provided, however, that such waiver does not as between
Litton
and the Sellers relieve the Sellers of any of the Unassumed Liabilities,
and
the Sellers hereby covenant and agree to pay and discharge promptly the
Unassumed Liabilities and to indemnify, defend, and hold Litton harmless
in
respect of any Loss suffered or incurred by Litton as a result of such
noncompliance.
(Section 2 follows)
1
Transfer Date
.0 Transfer Date.
Consummation of the transactions provided for in this Agreement
shall
take place at the offices of Baker & Botts, L.L.P. located at 700
Trammell
Crow Center, 2001 Ross Avenue, Dallas, Texas, on June 2, 1995,
commencing at
10:00 a.m. local time on such date, or at such other date or time or
other
place as the parties, may mutually agree upon in writing (such date
being
referred to as the "Transfer Date"); and all transactions provided for
herein to occur on and as of the Transfer Date shall be deemed to have
occurred simultaneously and to be effective as of the 11:59 p.m.,
Central
Daylight Savings Time, on the Transfer Date.
.1 Right to Cure.
If any of the conditions set forth in Sections 6 or 7 shall not
have
been satisfied or waived by the date on which the Transfer Date is
otherwise
scheduled to occur, then, subject to the provisions of Section 10.1(d),
and
provided that such party is not in breach of this Agreement, the party
unable to meet such condition shall have a reasonable time (not to
exceed
five business days after the intended Transfer Date) to extend the
Transfer
Date in order to satisfy, at its expense, such condition or conditions.
(Section 3 follows)
2
Representations and Warranties of Imo and the Sellers
Imo and the Sellers hereby represent and warrant to Litton as
follows,
which representations and warranties shall be deemed reaffirmed and
republished on the Transfer Date as if made again on and as of such
date:
.0 Schedules.
Prior to the execution of this Agreement, the Sellers have
delivered
to Litton the several schedules referred to and identified herein (the
"Schedules") setting forth certain disclosures, exceptions and other
information, data, and documents referred to at various places
throughout
this Agreement.
.1 Corporate.
(a) Due Organization and Qualification.
Imo and each Seller is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has qualified to transact business as a foreign
corporation in, and is in good standing under the laws of, all
jurisdictions
where the nature of its business or the ownership, leasing, or operation
of
the Purchased Assets requires qualification, except where failure to so
qualify would not have a Material Adverse Effect.
(b) Power and Authority to Conduct Business.
Imo and each Seller has the corporate power and authority to
own, operate, or lease its properties, rights, and assets and to conduct
its
business in all material respects as now conducted.
(c) Power and Authority to Enter Into Agreement.
Imo and each Seller has the corporate power and authority to
enter into this Agreement and the Transaction Agreements to be executed
by
it hereunder and, subject to the conditions herein and therein provided,
to
consummate the transactions contemplated hereby and thereby.
(d) Due Execution and Enforceability.
The execution, delivery, and performance of this Agreement
and
the Transaction Agreements by and on behalf of Imo and each Seller have
been
duly and validly authorized and approved by all corporate action
necessary
or required to be taken by Imo and such Seller to enter into, execute,
and
deliver this Agreement and the Transaction Agreements and to perform
their
respective obligations hereunder and thereunder. This Agreement has
been,
and each of the Transaction Agreements to be executed by it will be at
or
prior to the Transfer Date, duly executed and delivered by Imo and each
Seller, as applicable, and (assuming the due authorization, execution,
and
delivery by Litton and related parties hereto and thereto) this
Agreement
constitutes, and each of the Transaction Agreement when so executed and
delivered will constitute, the valid and legally binding obligations of
Imo
and such Seller, as applicable, enforceable against Imo and such Seller,
as
applicable, in accordance with its terms and conditions, except to the
extent that the same may limited by bankruptcy, insolvency,
reorganization,
fraudulent conveyance, moratorium, or similar laws affecting creditors'
rights generally or by general equitable principles.
(e) Franchises, Permits, Etc.
Each Seller with respect to the Business possesses all
United
States and, to the best of Sellers' Knowledge, all foreign governmental
and
business franchises, permits, licenses (including export licenses),
approvals, and other authorizations necessary for it to conduct its
present
and planned operations and activities, except for such franchises,
permits,
licenses, approvals, and authorizations which the failure to possess
would
not have a Material Adverse Effect. All material United States and
foreign
governmental and business franchises, permits, licenses, approvals, and
authorizations to operate or conduct specific operations or activities
which
have been issued to the Sellers with respect to the Business or which
were
issued to others on behalf of, or which are used by, the Sellers with
respect to the Business and which are presently in effect are set forth
on
Schedule 3.2(e); and except as specifically identified on Schedule
3.2(e),
shall be transferable to LSI on the Transfer Date.
.2 No Breach of Statute or Contract Regarding Agreement.
The execution, delivery, and performance of this Agreement and the
Transaction Agreements on the part of Imo and the Sellers will not: (i)
breach or violate any Applicable Law or Government Contract Law; or (ii)
conflict with or breach any of the terms, conditions, or provisions of
the
certificate of incorporation or by-laws, or their respective equivalents
as
amended and in effect, of Imo or any Seller; or (iii) conflict with,
violate, breach, or result in the termination of any judgment, order,
injunction, decree, or Material Contract to which Imo or any Seller is a
party or by which Imo or any Seller or any of their respective
properties,
rights, or assets is bound, other than a breach or violation that would
not
materially hinder or impair the transactions contemplated hereby or have
a
Material Adverse Effect, except for any consents to assignment set forth
on
Schedule 3.12(m); or (iv) result in the creation of any Lien (other than
a
Lien in favor of Litton or a Permitted Lien) upon any of the Purchased
Assets.
.3 Financial.
(a) 1994 Financials.
Set forth on Schedule 3.4(a) is the balance sheet of the
Sellers
with respect to the Business at and as of December 31, 1994, and the
related
statement of income for the year then ended (the "1994 Financials").
The
1994 Financials fairly present the financial condition of the Sellers
with
respect to the Business at and as of December 31, 1994, and the results
of
their operations with respect to the Business for the year then ended in
conformity with GAAP applied on a basis consistent with that of
preceding
periods, except as set forth in Exhibit 1.4(a)(iv)-1.
(b) Events Subsequent to 1994 Financials.
Except as set forth on Schedule 3.4(b), since December 31,
1994,
there has not been any of the following:
(i) any change in the financial condition or operating
results
of the Sellers with respect to the Business from that reflected in the
1994
Financials which would have a Material Adverse Effect;
(ii) any destruction or material damage to any material
asset
of the Business, whether covered by insurance or not;
(iii) any sale or other disposition of any capital asset of
the
Sellers with respect to the Business with an original cost in excess of
$100,000 or any write-down or write-off with respect thereto;
(iv) any increase in the wage, salary, commission, or other
compensation (except such increases occurring in the normal and ordinary
course of business in accordance and consistent with past practices or
increases required by contract or legislation affecting wages) payable
or to
become payable by the Sellers with respect to the Business to any
director,
officer, or employee, or any change in any existing, or creation of any
new,
insurance or other plan under which the Sellers with respect to the
Business
provide benefits to their employees;
(v) any Lien (other than Permitted Liens) created on or in
any
of the Purchased Assets or assumed by the Sellers with respect to any of
the
Purchased Assets;
(vi) any release or waiver by the Sellers with respect to
the
Business of any claim or right which would have a Material Adverse
Effect,
except for a claim or right with respect to any Excluded Asset;
(vii) any change in any principles, method, or practice of
accounting or auditing of the Sellers (including any change in
depreciation
or amortization or inventory policies or rates) or in the manner that
the
Sellers keep their books and records pertaining to the Business; or
(viii) any government claims, demands, assertions,
subpoenas,
indictments, or other government actions that would require disclosure
under
the rules of the SEC if the Sellers were an SEC reporting company with
respect to the Business.
.4 Indebtedness; No Undisclosed Liabilities.
(a) Indebtedness.
Set forth on Schedule 3.5(a) is a list and description of
all
Contracts pursuant to which the Sellers are obligated (as promissors,
guarantors, or otherwise) for borrowed monies (other than intercompany
indebtedness or customary trade payables incurred in the normal and
ordinary
course of business), and the outstanding balance of principal and
interest
thereunder as of the date specified thereon.
(b) No Undisclosed Liabilities.
The Sellers with respect to the Business have no Liabilities
of
any nature except to the extent:
(i) Disclosed in this Agreement or any Schedule, or which
are
of the type or kind required to be disclosed in the Schedules but are
not
disclosed solely because they fall below the minimum threshold amount,
term,
or materiality of the disclosures required by the terms of this
Agreement to
be set forth in such Schedules or because they contain classified
information;
(ii) Set forth in the 1994 Financials and not paid or
discharged;
(iii) Incurred on or prior to December 31, 1994, and which,
in
accordance with GAAP (except as set forth on Exhibit 1.4(a)(iv)-1)
applied
on a basis consistent with that of preceding periods, were not required
to
be set forth in the 1994 Financials and which have not been paid or
discharged; or
(iv) Incurred in the normal and ordinary course of business
of
the Sellers since December 31, 1994, which have not been paid or
discharged.
.5 Accounts Receivable.
Set forth on Schedule 3.6 is a list and description, including an
aging, of all outstanding notes, drafts and accounts receivable,
including
unbilled receivables, of the Sellers with respect to the Business. All
such
receivables arose from bona fide transactions in the normal and ordinary
course of business consistent with past practice, and all such
receivables
are good and collectible in the normal and ordinary course of business
except (i) to the extent of the reserve for uncollectible accounts
provided
for in the books and records of the Sellers with respect to the
Business,
and (ii) as otherwise specifically disclosed on Schedule 3.6.
.6 Inventory.
Except as set forth on Exhibit 1.4(a)(iv)-1, all inventory of raw
materials, work in process and finished goods of the Sellers with
respect to
the Business or reflected in the 1994 Financials or acquired by the
Sellers
with respect to the Business since December 31, 1994, are usable and
salable
in the normal and ordinary course of business, except for slow-moving,
damaged, or obsolete items, which have been written down to net
realizable
market value or adequate reserves have been provided for such items, and
all
intercompany profit has been eliminated. The value at which inventories
are
carried in the 1994 Financials and in the books and records of the
Sellers
with respect to the Business reflects the normal inventory valuation
policy
of the Sellers with respect to the Business, applied on a basis
consistent
with that of preceding periods. Except as set forth on Exhibit
1.4(a)(iv)-
1, all inventory received by the Sellers with respect to the Business
has
passed all required testing specifications and receiving inspections
under
applicable Contracts.
.7 Liens.
The Sellers own and have good, valid, and marketable title to, or
in
the case of leased properties, good and valid leasehold interests in,
all of
the Purchased Assets, free and clear of all Liens, except for (a)
Permitted
Liens, or (b) Liens to secure the payment of Assumed Liabilities.
.8 Realty Interests.
(a) Real Property.
Except as set forth on Schedule 3.9(a), the Purchased Assets
are
located within parcels of real property ("Real Property") that are
either
owned by the Sellers or leased by the Sellers for use by the Business.
The
leases of the Real Property, together with any amendments and
modifications
thereto (collectively described hereafter as the "Leases"), are
described in
Schedule 3.9(a). The Sellers have provided Litton with copies of the
Leases
and any correspondence dated since March 1, 1992 between Imo or any of
the
Sellers and the landlords of the Leases ("Landlords"), or any
correspondence
from the Landlords with respect to the Leases discussing any actual or
potential breach, amendment, or waiver.
(b) Right to Lease and Sublease.
Each Seller has fee simple indefeasible title to the Real
Property that it owns, free and clear of any encumbrances (other than
Permitted Liens), and the Sellers have the right and power to lease such
Real Property to LSI. Except as set forth on Schedule 3.9(b), all
Leases
permit subletting without the consent of the Landlords; and, to the best
of
Sellers' Knowledge, except as set forth on Exhibit 3.9(b), no facts
exist
that would cause a Landlord to withhold or delay its consent to a
sublease
between LSI and any Seller for the Real Property. Every Lease is in
full
force and effect; to the best of Sellers' Knowledge, no notice of
default
has been served or delivered pursuant to any Lease except as set forth
on
Schedule 3.9(b); to the best of Sellers' Knowledge, there are no acts or
omissions, which, if known by a Landlord, would give a Landlord cause to
notice the Sellers with a default of any Lease; and, to the best of
Sellers'
Knowledge, no Landlord is in default of any Lease.
(c) Zoning and Building Code Violations.
To the best of Sellers' Knowledge, the present conduct of
the
Business and the ownership, occupancy, use, and operation of the Real
Property owned by the Sellers and the Walnut Facility are in material
compliance with all applicable zoning, city planning, and building
statutes,
laws, ordinances, rules, and regulations; and, to the best of Sellers'
Knowledge, no violations of any deed to such Real Property or Applicable
Law
exist.
.9 Sufficiency of the Purchased Assets.
Except for the Excluded Assets, the Purchased Assets constitute
all of
the assets necessary to enable LSI to operate the Business as a going
concern in substantially the same manner as such operations have
heretofore
been conducted, with all operations of the Business unimpaired in any
material respect immediately after the Transfer Date.
.10 Condition of Purchased Assets.
All tangible Purchased Assets are in all material respects in such
condition and repair as are consistent with the uses in which the
Sellers
presently employ them.
.11 Contracts and Commitments.
(a) Sales Orders and Bids.
(i) Set forth on Schedule 3.12(a)(i) is a list and
description
of each individual Material Contract (including Government Contracts),
each
individual Bid for a Material Contract, and each individual Government
Bid
for a Material Contract that is a Government Contract (other than those
containing classified information which, to the extent permitted by
Applicable Law, Antitrust Law, and Government Contract Law, have been
disclosed to Litton in a written instrument specifically referencing
this
Section).
(ii) Except as specifically identified on Schedule
3.12(a)(ii),
all Material Contracts and Bids and Government Bids for Material
Contracts
required to be set forth on Schedule 3.12(a)(i) have been entered into
in
the normal and ordinary course of business of the Sellers, and, to the
best
of the Sellers' Knowledge, such Material Contracts have been entered
into in
accordance with Applicable Law, Antitrust Law, and Government Contract
Law.
(iii) Except to the extent set forth on Schedule
3.12(a)(iii),
the Sellers have not received any advance payments or deposits in
respect of
any Material Contract required to be set forth on Schedule 3.12(a)(i).
(iv) Except as described on Schedule 3.12(a)(iv), none of
the
Government Contracts, sales Contracts, Bids or Government Bids of the
Sellers with respect to the Business is reasonably anticipated to result
in
a Contract Loss upon completion of performance, and all Contract Losses
required to be described on Schedule 3.12(a)(iv) through completion of
performance are reflected in the books and records of the Sellers and
will
be reflected in the Final Closing Balance Sheet, except as provided in
Section 1.4(a)(iv) with respect to the MELIOS, SOFLAM, and the Singapore
Programs.
(v) Except as specifically identified on Schedule
3.12(a)(v),
none of the Material Contracts or Bids or Government Bids for Material
Contracts is with an operation of a Seller that is not a part of the
Business or with an Affiliate of a Seller.
(vi) The Sellers have no Bids, Contracts (including
Government
Contracts), or Government Bids with respect to the Business, the
existence
of which or the customer for which is classified information (commonly
referred to as "black programs").
(b) Purchase Orders.
Set forth on Schedule 3.12(b) is a list and description of
each
individual purchase order and purchase Contract of the Sellers with
respect
to the Business involving remaining payments by any Seller in excess of
$1,000,000 or $250,000 with respect to items which are charged as
indirect
costs. Except as described on Schedule 3.12(b), all purchase orders and
purchase Contracts required to be set forth on Schedule 3.12(b) have
been
incurred in the normal and ordinary course of business. Except as
specifically identified on Schedule 3.12(b), none of the purchase orders
or
purchase Contracts required to be set forth on Schedule 3.12(b) is with
another operation of any other Seller.
(c) Sales Representative Agreements.
Set forth on Schedule 3.12(c) is a list and description of
all
outstanding sales representative, sales consultant, distributor, dealer,
marketing, advertising, or similar Contracts of the Sellers relating to
the
Business.
(d) Personal Property Leases (As Lessee).
Set forth on Schedule 3.12(d) is a list and description of
all
Contracts relating to the Business that are not terminable without
penalty
or further obligation on the part of the Sellers within 90 days or that
contain a remaining obligation to pay more than $100,000 per year
pursuant
to which the Sellers lease or rent (as lessee) any machinery, equipment,
motor vehicle, or other personal property.
(e) Non-Competition Agreements or Covenants.
Set forth on Schedule 3.12(e) is a list and description of
all
Contracts relating to the Business that impose on any Seller or any of
its
employees any material restriction on the manner in which any of them
may
conduct the Business or use the Purchased Assets in competition with any
third party.
(f) Consultant Agreements.
Set forth on Schedule 3.12(f) is a list and description of
all
outstanding consultant and lobbyist Contracts (other than Contracts
listed
on Schedule 3.12(c)) of the Sellers relating to the Business.
(g) Guarantees.
Set forth on Schedule 3.12(g) is a list and description of
all
Contracts relating to the Business and included among the Purchased
Assets
pursuant to which any Seller guarantees, endorses, or otherwise is,
will, or
may become liable or responsible for the obligations of any other Person
for
money borrowed, advances made, goods or services purchased, or otherwise
(other than the endorsement for collection of negotiable instruments in
the
normal and ordinary course of business).
(h) Letters of Credit, Surety, and Performance Bonds.
Set forth on Schedule 3.12(h) is a list and description of
all
letters of credit, surety, bid, temporary import, performance bonds, and
other similar instruments maintained by Imo or the Sellers which secure
obligations of any Seller with respect to the Business.
(i) Letters of Credit in Favor of the Sellers.
Set forth on Schedule 3.12(i) is a list and description of
all
letters of credit, surety, bid, temporary import and performance bonds,
and
other similar instruments maintained by any Person in favor of the
Sellers
with respect to the Business.
(j) Powers of Attorney, Proxies.
Except as set forth and described on Schedule 3.12(j), there
are
no outstanding powers of attorney or proxies granted by the Sellers with
respect to the Business and included among the Purchased Assets other
than
limited powers of attorney granted solely in connection with tax matters
and
appointments of statutory agents to receive service of process.
(k) Other Material Contracts.
Set forth on Schedule 3.12(k) is a list and description of
all
Material Contracts that are not otherwise listed or disclosed on any
other
Schedule.
(l) Contract Breaches.
Except as stated on Schedule 3.12(l), the Sellers are not in
material breach, and the Sellers have not received notice of any
material
breach by any Seller, under any Material Contract or under any
Government
Contract, sales Contract, Bid, or Government Bid required to be
disclosed on
Schedule 3.12(a)(iv).
(m) Required Consents.
Except (i) as set forth on Schedule 3.12(m), (ii) for
compliance
with the applicable requirements of the HSR Act, (iii) for consents or
approvals with respect to any Contract involving the payment to or from
the
Sellers of amounts not in excess of $1,000,000, and (iv) consents
required
by any Governmental Authority in connection with the assignment of any
Contract (including any Government Contract), no consents or approvals
of
any Person are required in connection with the transfer of the Purchased
Assets to LSI hereunder and the consummation of the transactions
contemplated hereby, including the assignment or novation of any
Executory
Contract ("Required Consents").
.12 Customer Furnished Assets.
Schedule 3.13 identifies by description or inventory number all
personal property, equipment, and fixtures loaned, bailed, or otherwise
furnished to the Sellers by or on behalf of the U.S. Government or any
other
Person that (i) relate to the Business, (ii) are or were used in the
conduct
of the Business, and (iii) are or should be in the possession of the
Sellers
("Customer Furnished Items"). Schedule 3.13 identifies each Government
Contract or other Executory Contract pursuant to which each such
Customer
Furnished Item is furnished. The Sellers have complied in all material
respects with all of their respective obligations relating to the
Customer
Furnished Items, and, upon the return thereof to the U.S. Government or
other customer who provided such Customer Furnished Item in the
condition
thereof on the date hereof, would have no material liability with
respect
thereto.
.13 Government Contracting Audits.
Set forth on Schedule 3.14 is a list and description of each final
audit or investigation report, or in the absence of thereof, a draft
thereof, received by Imo or any Seller since December 31, 1990 by any
prime
or higher-tiered contractor or subcontractor, or Governmental Authority,
including the Defense Contract Audit Agency, the Defense Contract
Management
Command, the Defense Contract Administrative Service Management Area,
any
governmental procurement agencies under the supervision of the Secretary
of
Defense, the General Accounting Office, any of the Inspector Generals
under
the supervision of the Secretary of Defense, the Office of Special
Investigation of the Air Force, the Naval Investigative Service, the
Defense
Investigative Service, or the Defense Criminal Investigative Service
(other
than routine audits by resident auditors, none of which is material to
the
business or prospects of the Business), which pertains to any Executory
Contract or the Business, and which has resulted in an allegation or a
notice of violation of any Applicable Law, any Government Contract Law
or
Contract by the Sellers, and which has not been closed or otherwise
resolved. Schedule 3.14 also describes the current status of activities
related to these audits.
.14 Government Contracting Audits Settlement Agreements.
Set forth on Schedule 3.15 is a list and description of each
settlement agreement between Imo or any Seller, on the one hand, and the
U.S. Government, on the other hand, which will have a binding effect on
the
Business after the Transfer Date, and under which Imo or any Seller has
material unperformed obligations with respect to the Business.
.15 Government Contracts.
(a) Except as set forth in Schedule 3.16(a), with respect to
each
and every Government Contract or Government Bid (including any exception
taken therein) with respect to the Business and included among the
Purchased
Assets, to the best of Sellers' Knowledge: (i) the Sellers have
complied in
all material respects with all material terms and conditions of each
Government Contract; (ii) the Sellers have complied in all material
respects
with all requirements of all Applicable Law, Government Contract Law,
and
each Government Contract or Government Bid; (iii) all representations
and
certifications executed, acknowledged, or set forth in, or pertaining
to,
each Government Contract or Government Bid were, when given, correct in
all
material respects as of their effective date; (iv) neither the U.S.
Government nor any prime contractor, subcontractor or other Person has
notified the Sellers, either orally or in writing, that any Seller has
breached or violated any Applicable Law, Government Contract Law,
certification, representation, or requirement pertaining to any
Government
Contract or Government Bid; (v) no termination for convenience,
termination
for default, cure notice, or show cause notice is currently in effect
pertaining to any Government Contract or Government Bid; (vi) no
Governmental Authority has provided the Sellers with written notice of
any
cost incurred by any Seller pertaining to any Government Contract to
which
such Seller is a party which has been questioned, challenged, or
disallowed
or has been the subject of any investigation; and (vii) no money due to
any
Seller under any Government Contract to which such Seller is a party has
been (or has been attempted to be) withheld or set off.
(b) Except as set forth in Schedule 3.16(b), with respect to the
Business: (i) neither the Sellers nor, to the best of Sellers'
Knowledge,
any of their directors, officers, employees, consultants, or agents is
(or
during the last three years has been) the subject or target of any
administrative, civil, or criminal investigation of which Imo or any
Seller
has received notice, or is (or during the last three years has been)
under
administrative, civil, or criminal indictment or information (or
equivalent
official governmental charge or allegation) by any Governmental
Authority
with respect to any alleged irregularity, misstatement, or omission, or
other matter arising under or relating to any Contract (including any
Government Contract), Bid, or Government Bid; and (ii) during the last
three
years, neither Imo nor the Sellers have submitted a voluntary disclosure
to
the U.S. Government under the U.S. Government's voluntary disclosure
program
with respect to any alleged irregularity, misstatement, omission, or
other
matter arising under or relating to any Government Contract or
Government
Bid. Except as previously disclosed to Litton in a writing by the
Sellers
specifically referencing this Section, neither Imo nor any Seller has
received notice of any investigation by any Governmental Authority of
any
irregularity, misstatement, or omission, or other matter arising under
or
relating to any Contract (including any Government Contract), Bid, or
Government Bid that has led or could reasonably be expected to lead,
either
before or after the Transfer Date, to any of the consequences set forth
in
clause (i) or (ii) of the immediately preceding sentence.
(c) Except as set forth in Schedule 3.16(c), with respect to the
Business, neither Imo nor any Seller has received notice of (i) any
outstanding claims, requests for equitable adjustment, or other
contractual
action for relief against any Seller, 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 Government Bid or any Contract
with, or Bid submitted to, any Governmental Authority which is not a
United
States Governmental Authority and (ii) any disputes between any Seller
with
respect to the Business and the U.S. Government under the Contract
Disputes
Act or other Government Contract Law or between any Seller and any prime
contractor, subcontractor, vendor or other Person arising under or
relating
to any Government Contract or Government Bid, or any Contract with, or
Bid
submitted to, any Governmental Authority which is not a United States
Governmental Authority. To the best of Sellers' Knowledge, except as
set
forth in Schedule 3.16(c), the Sellers have no 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 Government Bid.
(d) Except as set forth in Schedule 3.16(d), with respect to the
Business, neither the Sellers nor, to the best of Sellers' Knowledge,
any of
its directors, officers, employees, consultants, or agents engaged in
the
Business is (or during the last three years has been) suspended or
debarred
from doing business with any Governmental Authority or is (or during
such
period was) the subject of a finding of nonresponsibility or
ineligibility
for contracting with any Governmental Authority. Except as previously
disclosed to Litton in a writing by Imo or the Sellers specifically
referencing in this Section, to the best of Sellers' Knowledge, no facts
or
circumstances exist that would warrant the institution of suspension or
debarment proceedings or the finding of nonresponsibility or
ineligibility
on the part of Imo or any Seller with respect to the Business or any
such
director, officer, employee, consultant, or agent of Imo or any Seller.
.16 Compliance with Laws; Permits.
(a) General.
Except as set forth on Schedule 3.17(a), the Sellers have
conducted the Business in compliance and conformity in all material
respects
with Applicable Law, Antitrust Law, and Government Contract Law. Except
as
set forth on Schedule 3.17(a), there are no pending or, to the best of
Sellers' Knowledge, threatened claims, notices, or allegations of any
material violation by any Seller with respect to the Business of
Applicable
Law, Antitrust Law, or Government Contract Law.
(b) Permits.
Except (i) as set forth on Schedule 3.17(b), and (ii) for
matters arising under Environmental Law (which are addressed in Section
3.30), Imo and the Sellers with respect to the Business have all
domestic,
federal, state, and local and, to the best of Sellers' Knowledge, all
foreign governmental permits, licenses, and authorizations required for
the
conduct of the Business as presently conducted, including all U.S.
Department of State and U.S. Department of Commerce export licenses for
all
products, technical data, or information of Imo and the Sellers with
respect
to the Business that are exported to foreign countries.
(c) Security Clearances.
Except to the extent prohibited by the Industrial Security
Manual For Safeguarding Classified Information, Schedule 3.17(c) sets
forth
all facility security clearances held by Imo or any Seller and all
personnel
security clearances held by an officer, director, or employee of Imo or
any
Seller, in each case, relating to the Business or the Purchased Assets.
.17 Pending or Threatened Legal Proceedings.
(a) Regarding the Business.
Except for matters arising under Environmental Law (which
are
addressed in Section 3.30), set forth on Schedule 3.18(a) is a list and
description of each Legal Proceeding pending or, to the best of Sellers'
Knowledge, threatened in writing against Imo or any Seller with respect
to
the Business or with respect to matters arising out of the Business
which
may individually or in the aggregate have a Material Adverse Effect.
(b) Regarding Transaction.
There is no Legal Proceeding pending against Imo or any
Seller
(i) with respect to which there is a reasonable likelihood of a
determination which would have a material adverse effect on the ability
of
Imo or any Seller to perform its obligations under this Agreement or the
Transaction Agreements, or (ii) which seeks to enjoin, restrain or
prohibit,
or obtain damages in respect of, the consummation of the transactions
provided for in this Agreement.
.18 Judgments, Orders and Consent Decrees.
Except for matters arising under Environmental Law (which are
addressed in Section 3.30), set forth on Schedule 3.19 is a list and
description of any judgment, order, or decree of, or Contract with, any
Governmental Authority to which Imo or any Seller is subject as a party
or
is binding on Imo, or any Seller relating to the Business and which
limits,
restricts, or adversely affects (in any material manner) the conduct,
financial condition or operating results of the Business.
.19 Insurance Policies.
Set forth on Schedule 3.20 is a list and description of all
insurance
policies (including the terms of any self-insurance programs or
retentions)
and fidelity and other bonds of the Sellers with respect to the
Business.
.20 Employees; Employee Benefits.
(a) Employment Contracts and Consulting Agreements.
Set forth on Schedule 3.21(a) is a list and description of
each
individual written employment Contract, consulting Contract or similar
Contract (other than Contracts for employment at will, and Contracts
listed
on Schedules 3.14(c) or 3.14(f)), between the Sellers with respect to
the
Business and any of their respective present or former directors,
officers,
or employees, including any agreements with employees providing for
severance benefits including bonuses based upon continued employment
following the Transfer Date (the "Severance Contracts").
(b) Recent Layoffs.
Set forth on Schedule 3.21(b) is a list by location of the
number of former employees of the Sellers who were engaged in the
Business
and who suffered an employment loss (as defined in the WARN Act) within
the
90-day period preceding the date of the execution of this Agreement,
which
list shall be updated to the Transfer Date for the 90-day period
preceding
the Transfer Date.
(c) Indebtedness to Employees.
Except as set forth and described on Schedule 3.21(c), the
Sellers are not indebted to any present or former director, officer,
employee, or consultant of the Business in any amount whatsoever, other
than
for accrued wages, vacation pay, and other related benefits and
reasonable
reimbursement for business travel and related expenses incurred in the
normal and ordinary course of business.
(d) Loans or Advances to Employees.
Except as set forth and described on Schedule 3.21(d), the
Sellers do not have outstanding and unsatisfied, in whole or in part,
any
loan or advance to any present or former director, officer, or employee
of
the Business, other than reasonable advances for business, travel and
related expenses made in the normal and ordinary course of business.
(e) Collective Bargaining Agreements; Labor Disputes, Etc.
Except as set forth on Schedule 3.21(e), the Sellers have no
collective bargaining or similar agreement with any union, labor
organization, or other bargaining agent for any of its employees, and no
such agreement is under discussion by any Seller with respect to the
Business with any union, labor organization, bargaining agent, or any
group
of its employees. Except as set forth on Schedule 3.21(e), since
January 1,
1990, neither the Sellers with respect to the Business nor any of the
facilities or operations of the Business has been the subject of any
strike,
work stoppage, labor dispute, grievance, boycott, union organizational
effort, or unfair labor practice charge.
(f) Compensation Plans.
Set forth on Schedule 3.21(f) is a list and description of
all
compensation and employee benefit plans, including any employee benefit
plan
as defined in Section 3(3) of ERISA, and any supplemental pension, life
and
dependent life, accidental death and health insurance (including
medical,
dental and vision), hospitalization, savings, bonus, deferred
compensation,
incentive compensation, tax preparation assistance and equalization,
holiday, vacation, severance pay, pay-in-lieu of notice, sick pay, sick
leave, disability, tuition refund, service award, company car,
scholarship,
relocation, patent award, employee assistance, travel accident, break
time,
differential pay for foreign or hazardous assignments, dependent
schooling
and supplements, fringe benefit, and other employee benefit plans,
Contracts
(other than individual employment, consultant Contracts or Severance
Contracts), policies, or practices providing employee or executive
compensation or benefits of Imo or any Seller with respect to the
Business
presently in effect or committed to be implemented (the "Compensation
Plans").
.21 Tax Returns.
(a) Imo and the Sellers have filed on a timely basis (and in the
manner prescribed by Applicable Law) with the IRS and with all other
appropriate Governmental Authorities all material income Tax returns
and, to
the best of Sellers' Knowledge, all other material Tax returns and Tax
reports pertaining to the Business required to be filed by them or with
respect to them, and have paid all Taxes that are shown to be due and
payable on such returns.
(b) There are no Liens for Taxes upon the Purchased Assets or
the
Business (except for Taxes not yet due and payable).
(c) Except as set forth on Schedule 3.22(c), to the best of
Sellers'
Knowledge, there are no pending or threatened disputes with any
Governmental
Authority concerning Taxes of Imo or the Sellers with respect to the
Business or the Purchased Assets.
(d) Neither Imo nor the Sellers are parties to any written
consent
with any Governmental Authority to extend the period for assessment or
collection of any Taxes, or, except as set forth on Schedule 3.22(c), to
any
written Contract with any tax authority concerning liability for Taxes,
in
each case, with respect to the Business or the Purchased Assets.
(e) No Seller is a Foreign Person within the meaning of Section
1445(b)(2) of the Code.
.22 Product and Service Warranties; Warranty Experience.
Adequate reserves have been provided in the 1994 Financials in
respect
of outstanding product and service warranty Liability of the Sellers
arising
out of, or in connection with, the Business, calculated on the same
basis
utilized in the past. Except as set forth on Schedule 3.23, there are
no
individual product or service warranty claims outstanding against the
Sellers with respect to the Business in excess of $50,000. The Optical
Systems Division of Varo has offered no product or service warranty
except
as set forth on Schedule 3.23.
.23 Intellectual Property Rights.
(a) List of all Intellectual Property Rights.
Set forth on Schedule 3.24(a) is a list and description of
Intellectual Property Rights which are owned by the Sellers or are
presently
used or held for use in the Business. Except as otherwise specified in
Schedule 3.24(a), (i) the Sellers are the sole owner of or have the
exclusive right to use and grant sublicenses under, and (ii) neither Imo
nor
the Sellers have granted to any third party any license under, nor have
covenanted not to assert against any third party, any Intellectual
Property
Rights included among the Purchased Assets, all such Intellectual
Property
Rights, being subject as to both clauses (i) and (ii), only to those
licenses indicated on Schedule 3.24(b), and the same are in good
standing.
To the best of Sellers' Knowledge, except as set forth on Schedule
3.24(a),
there are no events, documents, or evidence which are material to the
unenforceability of any patent required to be listed on Schedule
3.24(a), or
any patent based on any patent application required to be listed on
Schedule
3.24(a). Except as set forth on Schedule 3.24(a), none of such
Intellectual
Property Rights is the subject of any claim or challenge asserted by a
third
party in any Legal Proceeding or comprising any opposition or similar
proceeding in any patent office, copyright office, or trademark or
service
mark registration office , nor to the best of Sellers' Knowledge is
there
any basis upon which such a claim or challenge could be made with
respect to
patents included in Purchased Assets.
The Sellers' policy with respect to the Business has been to
have each employee of the Business execute an agreement in favor of the
appropriate Seller under which such employee is obligated to assign to
such
Seller all rights in any inventions made by such employee relating to
the
Business, and, at no cost to such Seller while so employed, to provide
assistance to such Seller regarding the preparation, prosecution, and
enforcement of patents based on such inventions. The rights of such
Seller
in respect thereof are included among the Purchased Assets and shall be
transferable to LSI on the Transfer Date.
Litton acknowledges that the Sellers' rights to certain
patents,
patent applications, inventions for which patent applications have not
been
filed, and other proprietary rights may be subject to rights of the U.S.
Government.
(b) Licenses of Intellectual Property Rights.
Set forth on Schedule 3.24(b) is a list and description of
all
licenses of Intellectual Property Rights (i) used by the Sellers in the
Business and licensed to the Sellers by others, except as set forth in
Schedule 3.27, or (ii) owned by or exclusively licensed to the Sellers
in
connection with the Business and granted to others by the Sellers. None
of
the licenses described above is or will on the Transfer Date be subject
to
termination or cancellation or change in terms or provisions of such
license
as a consequence of this Agreement or consummation of the transactions
provided for in this Agreement, except as otherwise disclosed on
Schedule
3.24(b).
(c) No Infringement.
Except as set forth on Schedule 3.24(c), to the best of
Sellers'
Knowledge, no person or entity is infringing or has misappropriated any
Intellectual Property Rights which are owned by or licensed to the
Sellers
presently used or held for use in or held for use in connection with or
relating primarily to the Business.
(d) Registration and Maintenance Fees.
Except as otherwise specified in Schedules 3.24(a) and
3.24(b),
all maintenance, renewal, or similar fees required by the applicable
Governmental Authority to maintain in effect all Intellectual Property
Rights identified in such Schedules have been paid and no such fee is
currently subject to any material fine or extra payment for late filing.
.24 Confidential Information or Trade Secrets.
Set forth on Schedule 3.25 is a list and description of all claims
or
demands of any Person pertaining to, or any proceedings which are
pending
or, to the best of Sellers' Knowledge, threatened, against any Seller
with
respect to the Business which challenge the rights of such Seller in
respect
of any Intellectual Property Rights. The Sellers' policy with respect
to
the Business has been to have each employee of the Business execute an
agreement under which such employee is obligated to keep confidential
such
information, whether proprietary, confidential, or trade secret, and to
not
use such information except in the conduct of the Business. To the best
of
Sellers' Knowledge, no Seller with respect to the Business has or uses
any
information, whether proprietary, confidential, or trade secret, owned
or
claimed by any third parties, except such information as is listed and
described on Schedule 3.24(b).To the best of Sellers' Knowledge, the
Sellers
with respect to the Business have adequately protected all of their
confidential information and the confidential information of third
parties
in their possession. To the best of Sellers' Knowledge, the Sellers
with
respect to the Business have no confidential information whether
proprietary, confidential, or trade secret, owned or claimed by third
parties not rightfully in their possession, and the Sellers have
complied in
all material respects with all Contracts governing the use of such
confidential information.
.25 Infringement and Indemnification.
There are no claims or demands made by any third party respecting,
and
except for the type and scope of patent indemnification typically
provided
under standard FAR clauses and under sales Contracts, the Sellers with
respect to the Business have not given or granted any indemnification
for,
and there are no pending or, to the best of Seller's Knowledge,
threatened,
claims against the Sellers with respect to the Business for,
Intellectual
Property Rights infringement or misappropriation in connection with the
Business, except as otherwise disclosed on Schedule 3.26 ; and to the
best
of Sellers' Knowledge, the present conduct of the Sellers with respect
to
the Business does not infringe or involve misappropriation and is not
subject to any claim of infringement or misappropriation of any
Intellectual
Property Rights of others, except as otherwise disclosed on Schedule
3.26.
To the best of Sellers' Knowledge, neither Imo nor any Seller with
respect
to the Business has, within the past six years, requested licenses from
others under any patents of others which are not the subject of any of
the
Contracts listed in Schedule 3.25(b).
.26 Computer Programs and Software.
Set forth on Schedule 3.27 is a list and description of computer
programs and software the Intellectual Property Rights to which are not
owned by the Sellers but that are used under license from a third party
in
connection with or as part of any products or services of the Business,
copies of which are included among the Purchased Assets. The Sellers
have,
and on the Transfer Date LSI will have, without payment of any transfer
fee,
the royalty-free right to use and sublicense all such computer programs
and
software, except as otherwise disclosed on Schedule 3.27; and, to the
best
of Sellers' Knowledge, all such computer programs and software are
documented in accordance with standard and customary practice and are
not
subject to any known challenge, except as otherwise disclosed on
Schedule
3.27.
.27 Records.
The books and records of the Business are complete and correct in
all
material respects, and all material transactions involving the Business,
the
Purchased Assets, or the Assumed Liabilities have been in all material
respects accurately set forth in such books and records. The Sellers
have
retained all business records in accordance with Applicable Law and
Government Contract Law. The books and records of the Business,
including
the financial records, have been kept on a basis consistent with the
cost
accounting standards requirements as set forth in FAR 30, except as set
forth in Schedule 3.28. All appropriate filings, notices, and cost
accounting practice changes and determinations of the adequacy of CAS
disclosure statements have been filed, are current, accurate, and
complete,
and accurately represent the current accounting practices of the Sellers
as
disclosed to the U.S. Government, as reflected in the 1994 Financial
Statements, except as set forth in Schedule 3.28.
Prior to December 31, 1994, the books and records of the Business,
the
Purchased Assets, and the Assumed Liabilities were included among the
consolidated books and records of Imo and its consolidated Subsidiaries
("Consolidated Books and Records"). On and after December 31, 1994,
such
books and records of the Business, the Purchased Assets, and the Assumed
Liabilities have been maintained by the Sellers on a separate,
unconsolidated basis so that each Seller's separate books and records
currently reflect its operations with respect to the Business, and its
interest in the Purchased Assets and Assumed Liabilities ("Separate
Books
and Records"). For purposes of this Section 3.28, the term "books and
records of the Business" includes both the Consolidated Books and
Records
and the Separate Books and Records.
.28 Broker's or Finder's Fees.
No Person other than Imo and the Sellers and their respective
Affiliates (and their respective directors, officers, employees, and
outside
accountants and attorneys) and other than CS First Boston Corporation
has
arranged, or participated in arranging, on behalf of Imo or any Seller,
the
transactions provided for in this Agreement. There are no broker's or
finder's fees to be paid by Imo or any Seller other than to CS First
Boston
Corporation in connection with the consummation of the transactions
provided
for in this Agreement.
.29 Environmental Matters.
(a) Assessments.
Seller has delivered or otherwise made available to Litton
all
assessments, studies, and other reports in the possession of Imo or any
Seller concerning any Hazardous Material, or compliance with any
applicable
Environmental Law by Varo or Baird, at the Real Property.
(b) Release/Disposal.
Except as set forth in Schedule 3.30, to the best of
Sellers'
Knowledge, no unlawful release, threat of release, or disposal of
Hazardous
Materials exists or has occurred at the Real Property. Except as set
forth
in Schedule 3.30, to the best of Sellers' Knowledge, no soil or water in
or
under or adjacent to any Real Property has been contaminated by any
Hazardous Material while or before such Real Property was owned or
leased by
the Sellers.
(c) Violations of Environmental Laws.
Except as set forth in Schedule 3.30, to the best of
Sellers'
Knowledge, neither Imo nor any Seller has received any notice, letter,
citation, order, warning, complaint, inquiry, or demand that: (i) Varo
or
Baird has violated an Environmental Law by their Hazardous Material
Activity; (ii) there has been a release or threat of release of
Hazardous
Material at or from the Real Property; or (iii) Varo or Baird may be
liable
for costs of cleaning up, remediating, removing, or responding to a
release
of Hazardous Materials. Except as set forth in Schedule 3.30, to the
best
of Sellers' Knowledge, there are no circumstances which would provide a
basis for any Legal Proceeding against Imo or any Seller arising from
any
Hazardous Material Activity conducted by Varo or Baird at the Real
Property.
(d) Hazardous Materials Liens.
To the best of Sellers' Knowledge, the Real Property is not
subject to any Lien in favor of any Governmental Authority or other
Person
for any Liability, costs or damages incurred by such Governmental
Authority
or other Person in response to a release of Hazardous Materials.
(e) Reporting.
Except as set forth in Schedule 3.30, to the best of
Sellers'
Knowledge, the Sellers have complied with all applicable reporting
requirements under Environmental Laws concerning the use, storage,
treatment, transport, disposal, or release of Hazardous Materials.
(f) Business' Compliance with Environmental Laws.
Except as set forth in Schedule 3.30, to the best of
Sellers'
Knowledge, neither Imo nor any Seller has received any written notice,
letter, citation, order, warning, complaint, inquiry, or demand, or, to
the
best of Sellers' Knowledge, does Imo or any Seller know of any facts,
data,
emissions, or omissions that if known by Governmental Authorities would
cause the issuance of a notice that the Seller with respect to the
Business
(i) has violated or is in violation of an Environmental Law; (ii) has
unlawfully released or threatened the release of Hazardous Material at
or
from the Real Property; (iii) may be liable, for costs of cleaning up,
remediating, or removing Hazardous Materials from disposal sites,
treatment
facilities, and storage facilities which were the recipients of
Hazardous
Materials transported from the Business; or (iv) may have conducted
activities on properties located on the National Priorities List of the
U.S.
Environmental Protection Agency ("EPA") or the Comprehensive
Environmental
Response Compensation and Liability Information System.
(g) Permits.
Except as set forth in Schedule 3.30, the Business or the
Sellers, as the case may be, have obtained all permits required prior to
the
Transfer Date under any Environmental Law that are necessary to conduct
the
Business at the Real Property or to treat or transport Hazardous
Materials
from the Real Property.
(h) Underground Storage Tanks ("USTs").
Except as set forth in Schedule 3.30, there are no USTs
currently at the Real Property; and all USTs formerly located at the
Real
Property and operated by any Seller have been removed and surrounding
soil
remediated as required by Environmental Law.
.30 Operation of the Business.
Except as set forth on Schedule 3.31, Imo and the Sellers
currently
conduct the Business only through Baird, Varo, and OEII, and not through
any
other divisions, or any other direct or indirect Subsidiary or
Affiliate, of
Imo or any Seller.
.31 No Imo Liabilities or Assets
Except as set forth on Schedule 3.32, Imo has no Liabilities with
respect to the Business which constitute Assumed Liabilities and Imo
does
not own or have any interest in any assets, other than Excluded Assets,
which are used or held for use in the Business.
.32 Dates of Certain Schedules.
The following Schedules are dated as of the date set forth below
and
the representations with respect thereto are made as of the applicable
date
set forth below:
Schedule 3.2(e) May 25, 1995
Schedule 3.6 April 28, 1995 as to the Ni-
Tec
Division of Varo and April 30,
1995 as to the Optical Systems
Division of Varo
Schedule 3.12(a)(iii) April 28, 1995 as to the
Ni-Tec
Division of Varo and April 30,
1995 as to the Optical Systems
Division of Varo
Schedule 3.12(a)(iv) April 30, 1995
Schedule 3.12(b) May 25, 1995
Schedule 3.12(h) May 25, 1995
Schedule 3.12(i) May 25, 1995
Schedule 3.17(c) May 26, 1995
Schedule 3.21(d) May 30, 1995
Schedule 3.23 May 25, 1995
(Section 4 follows)
3
Representations and Warranties of Litton
Litton hereby represents and warrants to Imo and each Seller as
follows, which representations and warranties shall be deemed reaffirmed
and
republished on the Transfer Date as if made again on and as of such
date:
.0 Corporate.
(a) Due Organization.
Each of LII and LSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Power and Authority to Conduct Business.
Each of LII and LSI has the complete and unrestricted
corporate
power and authority to own its properties and to conduct its business as
now
conducted.
(c) Power and Authority to Enter Into Agreement.
Each of LII and LSI has the complete and unrestricted
corporate
power and authority to enter into this Agreement and the Transaction
Agreements, and, subject to the conditions herein and therein provided,
to
consummate the transactions contemplated hereby and thereby.
(d) Due Execution and Enforceability.
The execution, delivery, and performance of this Agreement
and
the Transaction Agreements by and on behalf of Litton have been duly and
validly authorized and approved by the Board of Directors of Litton and
Litton has taken all such other corporate action necessary or required
to
enter into, execute, and deliver this Agreement and the Transaction
Agreements and to perform its obligations hereunder and thereunder.
This
Agreement and the Transaction Agreements constitute the valid and
legally
binding obligations of Litton enforceable in accordance with their
respective terms and conditions, except to the extent the same may be
limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance,
moratorium, or similar laws affecting creditors' rights generally or by
general equitable principles.
.1 No Breach of Statute or Contract.
The execution, delivery, and performance of this Agreement or the
Transaction Agreements on the part of Litton will not (i) breach, or
violate
any Applicable Law; (ii) conflict with or breach the terms, conditions,
or
provisions of the Certificate of Incorporation or By-laws of Litton, or
(iii) conflict, violate, breach, or result in the termination of any
judgment, order, injunction, decree, material contract, material
agreement,
or other material instrument to which Litton is a party or by which
Litton
or any of its properties, rights, or assets is bound, other than a
breach or
violation that would not materially hinder or impair the transactions
contemplated hereby or have a material adverse effect on, or any effect
that
results in a material adverse change in, the assets, business, financial
condition, or results of operations of either LSI or LII, in each case,
taken as a whole.
.2 Broker's or Finder's Fees.
No person or firm other than Litton and its Affiliates (and their
respective directors, officers, employees and outside accountants and
attorneys) have arranged, or participated in arranging, on behalf of
Litton
the transactions provided for herein. There are no broker's or finder's
fees to be paid by Litton, and Litton has no knowledge of any claim (or
the
reasonable basis therefor) for a broker's or finder's fee to be paid by
Imo
or any Seller (other than to CS First Boston Corporation), in connection
with the consummation of the transactions provided for herein.
.3 No Litigation Regarding Transaction.
There is no Legal Proceeding pending against Litton (i) with
respect
to which there is a reasonable likelihood of a determination which would
have a material adverse effect on the ability of Litton to perform its
obligations under this Agreement or the Transaction Agreements, or (ii)
which seeks to enjoin or obtain damages in respect of the consummation
of
the transactions provided for in this Agreement.
.4 Availability of Funds.
Litton has available sufficient funds to enable it to consummate
the
transactions contemplated by this Agreement.
(Section 5 follows)
4
Conduct of Sellers' Business
Pending Transfer Date
From and after the date of this Agreement and until the Transfer
Date,
Imo and each Seller covenant and agree that:
.0 Reasonable Access.
Except as may be prohibited by Contract, Applicable Law, Antitrust
Law, or Government Contract Law, authorized representatives of Litton
shall
have reasonable access during normal business hours and upon reasonable
prior notice, but without unreasonably interrupting the Sellers'
Business,
to all the premises and to all books of account, records, and Purchased
Assets owned or used by Sellers in connection with the Business,
including
the right to inspect, examine, audit, and photocopy (in each case, at
Litton's expense) all books of account and records of Imo and each
Seller
relating to the Business, in particular those relating to the 1994
Financials, and Imo and each Seller shall furnish or cause to be
furnished
to such authorized representatives of Litton all information with
respect to
the business and affairs of Imo and each Seller relating to the Business
as
such authorized representatives of Litton may reasonably request,
including
environmental information; provided, however, that Litton is not hereby
authorized to conduct any sampling, monitoring, or other intrusive
environmental assessment activities. If any Contract with a third party
restricts the access of such authorized representatives of Litton to any
such books of account, records, or properties, Imo and each Seller shall
use
all reasonable efforts to obtain the consent of such third party to
permit
access to such authorized representatives of Litton; provided, however
that
neither Imo nor any Seller is under any obligation to disclose to such
authorized representatives of Litton: (i) any information (including any
"Classified Information") to the extent prohibited by Applicable Law,
Antitrust Law, or Government Contract Law, or (ii) any information the
disclosure of which is restricted by Contract, Applicable Law, Antitrust
Law, or Government Contract Law except in strict compliance with such
Contract, Applicable Law, Antitrust Law, or Government Contract Law.
.1 No Increase in Compensation or Benefits.
The Sellers shall not, without the prior written consent of
Litton:
(i) hire any new salaried personnel except for replacement personnel;
(ii)
grant any increase in the rates of pay (other than routine increases
granted
in the ordinary course of business consistent with past practice or as
required by Applicable Law); (iii) extend the duration of employment of
any
employee or consultant of the Business (except as may be required by
Applicable Law or by Contract disclosed in this Agreement or in the
Schedules and except for any such extensions pertaining to temporary
contract employees); or (iv) by means of any new or existing
Compensation
Plan, increase in any amount the compensation or amount or level of
benefits
of any such employee or consultant of the Business.
.2 Contracts, Bids, and Government Bids.
Except as otherwise may be required by Applicable Law, Antitrust
Law,
or Government Contract Law, the Sellers shall not, without the prior
consent
of Litton (which consent shall not be unreasonably withheld or delayed),
make or enter into any Contract, Government Bid, or Bid respecting, (i)
Contracts relating to products or services provided or to be provided to
customers of the Business (aa) involving aggregate payments to the
Sellers
over the life of the applicable Contract of $1,000,000 or more; (bb)
involving a developmental new product; (cc) or otherwise requiring (in
accordance with any Seller's customary business practice) the approval
of J.
Dwayne Attaway or Jeremy M. Quick; (ii) Contracts for which the total
cost
estimate at the time of execution thereof or at the time of the
Government
Bid or Bid, as the case may be, as estimated in good faith by the
Sellers,
would result in a net loss on the applicable Contract (with costs
calculated
based on those costs set forth in the definition of Contract Losses plus
general and administrative costs); (iii) any other Contract having a
term in
excess of one year and involving aggregate payments by the Sellers over
the
life of the Contract of $1,000,000 or more; or (iv) engage in any
transaction not in the normal and ordinary course of business and not
consistent with the past business practices of the Sellers with respect
to
the Business.
.3 Patent and other Proprietary Right Agreements.
The Sellers with respect to the Business shall not, without the
prior
written consent of Litton, negotiate or enter into any license of
Intellectual Property Rights, whether as licensor, licensee, grantor, or
grantee.
.4 Sale of Fixed Assets.
The Sellers with respect to the Business shall not, without the
prior
written consent of LSI, sell or otherwise dispose of any fixed assets
having
an original purchase price in excess of $100,000 except (i) in
connection
with the acquisition of equivalent replacement property, or (ii)
Excluded
Assets.
.5 Capital Expenditures.
The Sellers with respect to the Business shall not, without the
prior
written consent of LSI, make any capital expenditures in excess of
$100,000
for any single item or enter into any lease having a monthly lease
charge in
excess of $35,000 or having a term or duration in excess of three
months,
other than pursuant to purchase orders set forth on Schedule 3.12(b).
.6 Indebtedness.
The Sellers with respect to the Business shall not create any
indebtedness or guarantee or become contingently liable for the
obligations
of another Person other than (i) in the normal and ordinary course of
business, (ii) pursuant to existing Contracts disclosed in the
Schedules, or
(iii) pursuant to commitments permitted by this Agreement.
.7 Insurance; Maintenance and Repair.
Imo with respect to the Business shall continue in full force and
effect its existing insurance and bonding coverages, and all Purchased
Assets shall be used, operated, maintained, and repaired in a normal and
prudent business manner.
.8 Preservation of Organization.
Subject to the provisions of Section 8.8(a), the Sellers with
respect
to the Business shall use all reasonable efforts (without making any
commitments on behalf of Litton) to preserve its business organization
intact, to keep available to Litton the present officers and employees
of
the Business, to maintain in effect all existing material
qualifications,
franchises, licenses, permits, consents, authorizations, and
registrations
of the Sellers pertaining to the Business, and to preserve for Litton
the
present relationships of the Sellers with material suppliers, customers,
and
others having business relations with the Sellers with respect to the
Business.
.9 No Breach.
The Sellers with respect to the Business shall use reasonable
efforts
to refrain from doing any act or omitting to do any act, or permitting
any
act or omission to act, which will cause a material breach or violation
by
any Seller of any Material Contract.
.10 Compliance with Laws.
The Sellers with respect to the Business shall comply in all
material
respects with Applicable Law and Government Contract Law as are required
for
the conduct of the Business or for the valid and effective transfer to
LSI
of the Purchased Assets.
5.12 No Waiver or Release; No Prepayment.
The Sellers with respect to the Business shall not release or
waive
any material claim or right, and shall not, without the prior written
consent of Litton, make any optional payment or prepayment of any
indebtedness.
(Section 6 follows)
5
Conditions Precedent to Litton's Obligation to Close
Each and every obligation of Litton to be performed on the
Transfer
Date shall be subject to the satisfaction on or prior thereto of each of
the
following conditions:
.0 Representations and Warranties True at Transfer Date.
The representations and warranties made by Imo and each Seller in
Section 3 of this Agreement shall be true and correct in all material
respects on and as of the Transfer Date with the same effect as though
such
representations and warranties had been made again and reaffirmed on and
as
of the Transfer Date, except for any representations and warranties made
as
of a specified date, which only must be true and correct in all material
respects as of such date.
.1 No Material Adverse Change.
During the period from the date of this Agreement to the Transfer
Date, there shall not have been any Material Adverse Effect.
.2 Compliance with Agreement.
The Sellers shall have performed and complied in all material
respects
with all of their respective obligations under this Agreement which are
to
be performed or complied with by them on or prior to the Transfer Date.
.3 Certificate of Fulfillment of Conditions.
Imo and each Seller shall have delivered to Litton the certificate
of
its President or a Vice President certifying as of the Transfer Date to
the
fulfillment of the conditions set forth in Sections 6.1, 6.2 and 6.3.
.4 Secretary's Certificate.
Imo and each Seller shall have delivered to Litton the certificate
of
its Secretary or Assistant Secretary certifying as of the Transfer Date
to
the authorization and approval of this Agreement and the transactions
provided for in this Agreement by duly adopted resolutions of the Board
of
Directors of Imo and each Seller.
.5 Opinions of Counsel for Seller.
Litton shall have received from Thomas J. Bird, Executive Vice
President and General Counsel of Imo, and Baker & Botts, L.L.P., counsel
for
Imo and the Sellers, written opinions, dated as of the Transfer Date,
and
addressed to Litton, in form and substance as set forth as Exhibit
6.6(a)
and 6.6(b), respectively.
.6 No Litigation.
No Legal Proceeding shall be pending or threatened against Imo or
any
Seller or Litton which in the reasonable opinion of Litton is likely to
result in the restraint or prohibition of the consummation of the
transactions provided for in this Agreement or the obtaining of
substantial
damages or other substantial relief in connection with this Agreement.
.7 Proceedings and Instruments Satisfactory.
All proceedings, corporate or other, to be taken by Imo and the
Sellers in connection with the transactions provided for in this
Agreement
shall be reasonably satisfactory in form and substance to Litton; and
Imo
and each Seller shall have made available to Litton for examination the
originals or true and correct copies of all documents which Litton may
reasonably request in connection with said transactions.
.8 Approvals.
The Sellers and Litton shall have received all approvals,
consents,
exemptions, or waivers by all Governmental Authorities (other than
novation
requirements with respect to Government Contracts and Contracts with
Governmental Authorities which are not United States Governmental
Authorities) required in connection with the transactions provided for
in
this Agreement; the waiting period (and any statutory extension thereof)
under the HSR Act shall have expired or been terminated; no Legal
Proceeding
shall have been initiated by the Antitrust Division of the United States
Department of Justice or the Federal Trade Commission challenging the
transactions provided for in this Agreement under Antitrust Law; and the
Sellers and Litton shall have received those certain consents of third
parties to the assignment of certain Material Contracts specified on
Exhibit
6.9; and the Sellers and Litton shall have received the consents of the
Landlords to enter into the subleases referred to in Section 8.15, to
the
extent required under the Leases.
.9 Release or Removal of Liens.
The Sellers shall have duly effected the release or removal of all
Liens which encumber the Purchased Assets except Permitted Liens.
.10 Instruments of Transfer.
On the Transfer Date, the Sellers shall deliver to Litton such
instrument or instruments of transfer, assignment, and conveyance as
shall
be reasonably necessary or advisable to vest in LSI good, valid, and
marketable title to, or in the case of leased properties, good and valid
leasehold interests in, all of the Purchased Assets, including the Bill
of
Sale substantially in the form of Exhibit 6.11 and the Assumption
Agreement
substantially in the form of Exhibit 7.9.
.11 Other Closing Documents.
The Sellers shall have executed and delivered to Litton the
following
Transaction Agreements: the Agency Agreement referred to in Section
1.9(b),
the Transition Agreement referred to in Section 8.14, the Hermann Lease,
the
Walnut Sublease, the Shepherd Sublease, the Chartwell Operating
Sublease,
the Chartwell Warehouse Sublease, and the Service Agreement referred to
in
Section 8.19.
.12 Miller-Holzwarth Agreement.
Miller-Holzwarth shall have entered into an agreement with the
Sellers
in substantially the form of Exhibit 6.13, which such agreement shall be
assigned to LSI effective as of the Transfer Date with the consent of
Miller-Holzwarth.
.13 Schedules and Exhibits.
The Sellers and Litton shall have agreed upon the form and
substance
of the Schedules and the Exhibits to this Agreement.
(Section 7 follows)
6
Conditions Precedent to Imo 's and each Seller's Obligation to Close
Each and every obligation of Imo and each Seller to be performed
on
the Transfer Date shall be subject to the satisfaction on or prior
thereto
of each of the following conditions:
.0 Representations and Warranties True at Closing.
The representations and warranties of Litton contained in Section
4 of
this Agreement shall be true and correct in all material respects on and
as
of the Transfer Date as though such representations and warranties were
made
again and reaffirmed on and as of the Transfer Date, except for any
representation or warranty made as of a specified date, which only must
be
true and correct in all material respects as of such date.
.1 Compliance with Agreement.
Litton shall have performed and complied in all material respects
with
all of its obligations under this Agreement which are to be performed or
complied with by it on or prior to the Transfer Date.
.2 Certificate of Fulfillment of Conditions.
Each of LII and LSI shall have delivered to Imo and each Seller
the
certificate of its President or a Vice President certifying as of the
Transfer Date to the fulfillment of the conditions set forth in Sections
7.1
and 7.2.
.3 Secretary's Certificate.
Each of LII and LSI shall have delivered to Imo and each Seller
the
certificate of its Secretary or Assistant Secretary certifying as of the
Transfer Date to the authorization and approval of this Agreement and
the
transactions provided for in this Agreement by duly adopted resolutions
of
the Executive Committee of the Board of Directors of LII and the Board
of
Directors of LSI.
.4 Opinion of Counsel for LSI.
Imo and each Seller shall have received from John E. Preston,
Senior
Vice President and General Counsel of LII, a written opinion, dated as
of
the Transfer Date, and addressed to Imo and each Seller, in form and
substance as set forth as Exhibit 7.5.
.5 No Litigation.
No Legal Proceeding shall be pending or threatened against Litton,
Imo
or any Seller which in the reasonable opinion of Imo or any Seller is
likely
to result in the restraint or prohibition of the consummation of the
transactions provided for in this Agreement or the obtaining of
substantial
damages or other substantial relief in connection with this Agreement.
.6 Proceedings and Instruments Satisfactory.
All proceedings, corporate or other, to be taken by Litton in
connection with the transactions provided for in this Agreement shall be
reasonably satisfactory in form and substance to Imo and the Sellers;
and
Litton shall have made available to Imo and the Sellers for examination
the
originals or true and correct copies of all documents which Imo or any
Seller may reasonably request in connection with said transactions.
.7 Approvals.
Litton, Imo, and each Seller shall have received all approvals,
consents, exemptions, or waivers by all Governmental Authorities (other
than
novation agreements with respect to Government Contracts and Contracts
with
Governmental Authorities which are not United States Governmental
Authorities) required in connection with the transactions provided for
in
this Agreement; the waiting period (and any statutory extension thereof)
under the HSR Act shall have expired or been terminated; no Legal
Proceeding
shall have been initiated by the Antitrust Division of the United States
Department of Justice or the Federal Trade Commission challenging the
transactions provided for in this Agreement under Antitrust Law; and
Litton,
Imo, and each Seller shall have received the consents of the Landlords
to
enter into the subleases referred to in Section 8.15, to the extent
required
under the Leases.
.8 Instruments of Assumption.
LSI shall have delivered to Imo and each Seller an Instrument of
Assumption substantially in the form of Exhibit 7.9.
.9 Other Closing Documents.
Litton shall have executed and delivered to Imo and each Seller
the
following Transaction Documents: the Agency Agreement referred to in
Section 1.9(b), the Transition Agreement referred to in Section 8.14,
the
Hermann Lease, the Walnut Sublease, the Shepherd Sublease, the Chartwell
Operating Sublease, the Chartwell Warehouse Sublease, and the Service
Agreement referred to in Section 8.19.
.10 Schedules and Exhibits.
The Sellers and Litton shall have agreed upon the form and
substance
of the Schedules and the Exhibits to this Agreement.
(Section 8 follows)
7
Further Requirements
.0 Access to Books and Records.
With respect to the books and records of Imo and each Seller that
are
retained by Imo or such Seller ("Seller's Records") and the books and
records of Imo and each Seller that are transferred to Litton under this
Agreement ("Litton's Records"), except as may be restricted by
Applicable
Law and Antitrust Law, for a period of six (6) years from and after the
Transfer Date or for such longer period as may be required by any
Governmental Authority, provided that such requirement is communicated
in
writing by Imo or any Seller to Litton or by Litton to Imo or any
Seller, as
the case may be, and thereafter for so long as such records remain in
existence and available, the authorized representatives of Imo or any
Seller
or the authorized representatives of Litton, as the case may be, shall
have
reasonable access, during normal business hours and upon reasonable
notice,
to inspect and examine and the right to photocopy (at the expense of
Imo,
such Seller, or Litton, as the case may be) Litton's Records or Seller's
Records, as the case may be. The foregoing shall not prohibit the
destruction at any time of documents that are not normally retained in
accordance with customary business practice, subject to Applicable Law,
Government Contract Law, Environmental Law, Antitrust Law, and ERISA.
.1 Further Instruments and Assurance.
From and after the Transfer Date, the parties shall execute and
deliver, or cause to be executed and delivered, at their respective cost
and
expense, to each other such further instruments of transfer, assignment,
conveyance, and assumption, and Imo and each Seller shall take such
other
action as Litton may reasonably require, to more effectively carry out
the
transactions provided for in this Agreement.
.2 Non-Disclosure by Imo or the Sellers.
From and after the Transfer Date, Imo and each Seller shall hold
in
confidence, and shall use all reasonable efforts to cause all of their
respective directors, officers, and employees to hold in confidence, any
and
all proprietary, confidential, or secret information or data of any
Seller
with respect to the Business and not to disclose, publish, or use such
information or data for any purpose other than as provided in this
Agreement
(i) without the prior written consent of Litton, or (ii) until the same
has
been theretofore publicly disclosed by Litton or otherwise ceased to be
secret or confidential as evidenced by general public knowledge (through
no
breach by Imo or any Seller of this Section); provided, however, that
Imo
and each Seller shall have the right to disclose such information,
without
consent, to the extent that (a) in the opinion of Sellers' counsel, Imo
or
any Seller is required to do so by Applicable Law, including those of
public
stock exchanges on which the securities of Imo or such Seller are or may
be
traded, or by order of any court or Government Authority having
competent
jurisdiction, provided, further, however, that prior to such disclosure,
Imo
or such Seller shall provide notice to Litton of such intended
disclosure so
that Litton may seek a protective order; or (b) such disclosure is
necessary
or appropriate in connection with litigation between Litton, on the one
hand, and Imo and/or any Seller, on the other hand, pertinent to such
information.
.3 Use of Name and Logo.
(a) Inventories.
Notwithstanding the provisions of Section 1.2, LSI shall be
permitted to use in the conduct and operation of the business acquired
by it
under this Agreement the existing inventories of raw materials, work-in-
process and finished goods which bear the names "Imo," "Varo," or
"Baird" or
any corporate symbols or logos incorporating such names, for the period
necessary to exhaust such inventories, but in no event longer than one
year
from and after the Transfer Date; provided, however, that LSI shall use
reasonable efforts from and after the Transfer Date to overprint,
overstamp,
apply an appropriate label, or otherwise obliterate such names,
corporate
symbols, or logos on such items.
(b) Supplies.
Notwithstanding the provisions of Section 1.2, LSI shall be
permitted to use in the conduct and operation of the business acquired
by it
under this Agreement the existing stationery, packing, shipping,
invoices,
purchase orders, catalogs, brochures, sales materials, and similar
supplies
which bear the name "Imo" or any corporate symbols or logos
incorporating
such name, for the period necessary to exhaust such supplies, but in no
event longer than one year from and after the Transfer Date; provided,
however, that LSI shall use reasonable efforts from and after the
Transfer
Date to overprint, overstamp, apply an appropriate label, or otherwise
obliterate such name or corporate symbol or logo on such items;
provided,
further, however, that notwithstanding the provisions of this Section,
LSI
shall not represent or hold itself out to the public as representing or
being affiliated in any manner with Imo or any Seller.
.4 Notice to Customers.
Promptly following the Transfer Date, LSI and each Seller shall
jointly notify the other parties to the Executory Contracts of the
consummation of the transactions provided for in this Agreement,
including
the assumption by LSI of the applicable Executory Contract as of the
Transfer Date. Each Seller shall join with LSI in notifying the
customers
of such Seller of the sale and shall assist LSI in introducing Litton's
management and employees to the customers of the Business.
.5 Collection and Repurchase of Accounts Receivable.
(a) Collection of Accounts Receivable.
During the 180-day period following the Transfer Date (the
"Collection Period"), LSI shall use its normal collection procedures
(but in
no event shall LSI be obligated to file any Liens or Legal Proceeding as
part of its collection effort) to collect all accounts, notes, and
drafts
receivable of the Sellers as of the Transfer Date which are set forth on
the
Final Closing Balance Sheet (the "Transfer Date Receivables"), and any
payments received by LSI from any person (a "Customer") who is the
account
debtor on any of the Transfer Date Receivables shall be applied as
specified
by the Customer, unless it is uncertain which invoice is being paid, in
which case payments shall be applied in the order of the oldest invoice
first, unless LSI (or any Seller prior to the Transfer Date) shall have
received notice of a bona fide dispute with respect to such account.
The Sellers shall promptly remit to LSI any payments which
they
may receive in respect of any of the Transfer Date Receivables. The
Sellers
grant to LSI the authority, coupled with an interest, to receive,
endorse,
cash, deposit, and receipt for any checks, drafts, documents, and
instruments evidencing Transfer Date Receivables which are in the name
of
any Seller.
(b) Repurchase of Accounts Receivable.
Promptly following the expiration of the Collection Period,
LSI
shall deliver to the Sellers a statement setting forth (i) a description
of
the Transfer Date Receivables that were not collected (or offset against
amounts owing by LSI to such customer) during the Collection Period (the
"Uncollected Receivables"), and (ii) a calculation of the aggregate
amount
of Uncollected Receivables, less the reserve for uncollectible accounts
on
the Final Closing Balance Sheet. Within 10 Business Days following
Sellers'
receipt of such statement, the Sellers shall pay to LSI the amount of
such
statement, and upon receipt of such payment, LSI shall assign without
recourse the Uncollected Receivables to the Sellers. LSI shall
thereafter
cooperate with Imo and Sellers in connection with all efforts to collect
the
Uncollected Receivables.
.6 Certain Assistance in Income Tax Preparation and Audits, and
Litigation.
(a) Tax Preparation.
Litton shall furnish, at no cost to Imo or any Seller, such
data
and other information relating to any Seller as Imo or such Seller may
reasonably require to prepare tax returns for taxable years or periods
commencing on or prior to the Transfer Date. Such data and other
information shall be furnished within a reasonable time after the date
on
which Litton shall have received from Imo or any Seller all such
information
within the control of such Seller necessary for Litton to prepare such
required data and information.
(b) Cooperation in Litigation and Customer and Tax Audits.
In the event that any party shall participate in any Legal
Proceeding or any customer and tax audits concerning the business or
affairs
of Imo or any Seller conducted on or prior to the Transfer Date, all
other
parties shall, upon the request of such party, cooperate fully with such
party in connection with such Legal Proceeding or audit. Such
cooperation
shall include making available to the requesting party, at such times
and
under such circumstances so as not to unreasonably disrupt business, the
relevant information, documents, records, and employees of the
cooperating
party, allowing the relevant personnel to assist the requesting party in
participating in such proceeding or audit, executing and delivering the
documents or instruments and taking all such action as may be reasonably
requested by the requesting party in connection with such proceeding or
audit; provided, however, that the requesting party shall promptly
reimburse
the cooperating party for all out-of-pocket costs, for a pro rata
portion of
the salary (including fringe benefits), travel, and subsistence expenses
of
any of the cooperating party's employees who assist the requesting
party.
.7 Employee Matters.
(a) Offers of Employment; Definition of Offerees and Continuing
Employees.
Litton has previously offered employment to certain
employees of
the Business (the "Offerees"), contingent upon the occurrence of the
Transfer Date. As of the Transfer Date, the number of Offerees who
shall
have been offered a Bona Fide Offer of Employment (as defined in the
next
paragraph) shall not be less than 80% of the current employees of the
Business as of the Transfer Date. Those Offerees who accept Litton's
offer
of employment are referred to as the "Continuing Employees."
(b) Definition of Bona Fide Offer of Employment.
A "Bona Fide Offer of Employment" shall mean an offer of
employment by LSI, contingent upon the occurrence of the Transfer Date,
on
the following terms and conditions: (a) full-time employment on an "at
will" basis; (b) in the Garland or Dallas, Texas metropolitan area; (c)
at
a salary at least equal to such employee's salary in effect on the
Business
Day next preceding the Transfer Date; and (d) with benefits generally
consistent with those offered by Litton to its employees in comparable
positions in Litton's Laser Systems Division, with respect to Continuing
Employees hired by Litton's Laser Systems Division, or in Litton's
Electron
Devices Division, with respect to Continuing Employees hired by Litton's
Electron Devices Division. Litton shall not be obligated to provide
retiree
health or retiree life insurance benefits to any Continuing Employee.
Litton shall recognize and give each Continuing Employee credit for all
prior service recognized by the Sellers for purposes of eligibility and
vesting under the benefit plans referred to in item (d) of the
definition of
Bona Fide Offer of Employment to the extent permitted by Applicable Law,
other than for purposes of pay-in-lieu of notice, severance or
termination
pay, costs, or Liabilities ("Severance Pay"). As between the parties,
each
of the parties' obligations with respect to Severance Pay is as set
forth
below.
(c) Severance Pay.
(i) Continuing Employees Not Parties to Severance Contracts.
Litton shall provide to Continuing Employees, other
than
Continuing Employees who are signatories to a Severance Contract, who
are
terminated by Litton less than one year following the Transfer Date
Severance Pay benefits which are not inferior to those Severance Pay
benefits provided under the existing Severance Pay policies and
practices of
Imo or the Sellers that would have been applicable to such Continuing
Employee immediately prior to the Transfer Date. Notwithstanding the
foregoing, Imo and the Sellers shall indemnify Litton for any Severance
Pay
Liabilities to Continuing Employees if, during the one-year period
following
the Transfer Date: (a) such Continuing Employee voluntarily terminates
employment with LSI; (b) LSI terminates such Continuing Employee for
cause;
or (c) such Continuing Employee rejects an offer of full-time employment
on
an "at will" basis at any LSI location not situated within the Garland
or
Dallas, Texas Metropolitan area, which offer of employment includes a
relocation package in accordance with the standard policy of the
Electronic
Warfare Group of LSI and includes items (c) and (d) of the definition of
Bona Fide Offer of Employment.
(ii) Continuing Employees Who Are Parties to Severance
Contracts.
Litton shall not be obligated to provide the Severance
Pay or other benefits under the Severance Contracts, except that Litton
shall pay to each Continuing Employee Severance Pay and out-placement
allowances to the extent provided under such Continuing Employee's
Severance
Contract. Imo and the Sellers shall indemnify Litton for all
Liabilities
under Severance Contracts which Litton has not agreed to pay in this
Section
8.8.
(iii) Liabilities Under Severance Contracts for Employees of
the Sellers Who Are Not Continuing Employees.
Imo and the Sellers shall indemnify Litton for all
Liabilities of Imo or any Seller under all Severance Contracts between
Imo
or any Seller and any employee of the Business who is not a Continuing
Employee. The following individuals shall not be deemed to be
Continuing
Employees, notwithstanding that Litton may enter into short-term
employment
or consulting arrangements with any or all of such individuals: Ann
Barney,
Pat Thurman, Tom Millson, and Mel Wall.
(iv) Severance Pay to Employees Who Are Not Continuing
Employees.
Imo and the Sellers shall bear all Severance Pay
Liabilities to employees of the Business who are not Continuing
Employees.
(d) Stick-Around Bonus.
Imo or the Sellers shall pay all bonuses provided in a
Severance
Contracts which are earned by the relevant employee remaining an
employee of
the Sellers through the Transfer Date (sometimes referred to as the
stick
around bonus), regardless of whether such individual is a Continuing
Employee or not.
(e) Other Pre-Closing Employment Related Liabilities.
Except as specifically set forth in this Section 8.8 and
except
for any Liability which otherwise constitutes an Assumed Liability,
Litton
shall have no liability to or with respect to any employee or former
employee of the Sellers or any Continuing Employee with respect to his
or
her employment, or based upon or arising out of any event occurring, on
or
prior to the Transfer Date. Imo and the Sellers shall retain
responsibility
for the funding and distribution of benefits under all employee benefit
plans in which the employees of any Seller participate.
(f) Notices Other Than WARN Act Notices.
The parties have determined that no notices are required to
be
given under the WARN Act with respect to the transactions provided for
in
this Agreement. The Sellers shall give all notices and other
information
required to be given to the employees of the Sellers, any collective
bargaining unit representing any group of employees of the Sellers, and
any
applicable Government Authority under the National Labor Relations Act,
the
Code, the Consolidated Omnibus Budget Reconciliation Act, ERISA, and
other
Applicable Law (other than the WARN Act) in connection with the
transactions
provided for in this Agreement.
.8 Letters of Credit and Performance Bonds.
As promptly as practicable (but in no event later than 60 days)
after
the Transfer Date, Litton will deliver to the Sellers written evidence
of
the establishment (and acceptance by the beneficiary) of corresponding
replacement letters of credit, advance payment guarantees, surety and
performance bonds, and other similar financial support instruments
("Letters
of Credit") in an aggregate principal amount, and from banks or other
appropriate responsible financial institutions, to replace Letters of
Credit
of the Sellers with respect to the Business remaining outstanding after
the
Transfer Date. Litton shall reimburse the Sellers for the cost incurred
by
them or any of their Affiliates for keeping in place any such Letter of
Credit from and after the Transfer Date until the time that Litton
delivers
to the Sellers written evidence of the establishment (and acceptance by
the
beneficiary) of corresponding replacement Letters of Credit as provided
in
the foregoing sentence. Such reimbursement shall be made in each
instance
within five Business Days after the Sellers advise Litton of the amount
thereof.
.9 Remittance of Payments Due Other Party.
Each party hereto shall promptly remit to the other any amounts
received by it after the Transfer Date which, pursuant to the terms and
conditions hereof, are properly payable to such other party.
.10 Consents.
Commencing on the date hereof, the Sellers and Litton, in
cooperation
and after consultation and mutual agreement, shall take all reasonable
action required to obtain all necessary or requisite consents to
assignment,
novations, approvals, and agreements of, and to give all notices and
make
all filings with, any third parties, including Governmental Authorities,
necessary to authorize, approve, or permit the full and complete sale,
assignment, transfer, or novation of all of the Executory Contracts;
provided, however, that neither the Sellers nor Litton or any of their
respective Affiliates shall be required to make any material payments or
enter into or amend any Contract in connection with any obligations of
any
of them contained in this Section in a manner that is materially
disadvantageous to the Business.
.11 Conditions Precedent.
Subject to the terms and conditions hereof, each of the parties
hereto
shall use all reasonable efforts to assure that the conditions precedent
set
forth in Sections 6 and 7 to be satisfied by it are satisfied by it on
or
prior to June 30, 1995, to the extent that satisfaction of such
conditions
precedent is within its reasonable control.
.12 Nondisclosure by LSI; Use of Information by Litton.
LSI shall continue to be bound by the Confidentiality Agreement
until
the Transfer Date, upon which date the Confidentiality Agreement shall
terminate. Notwithstanding the foregoing, it is understood and agreed
by
Litton, Imo, and the Sellers that any information or data with respect
to
the Business, the Purchased Assets, or the Assumed Liabilities obtained
by
or on behalf of Litton pursuant to the provisions of this Agreement
(including the provisions of Section 5.1) or otherwise shall not be used
by
or on behalf of Litton (or any of its directors, officers, employees,
agents, or representatives), until the sooner of (a) four years from
the
date hereof and regardless of any termination of this Agreement pursuant
to
Section 10.1, or (b) the date upon which the transactions provided for
in
this Agreement shall have been consummated, in connection with the
preparation or submission of any Bid or Government Bid by or on behalf
of
Litton, or in connection with the negotiation of the terms of any
Contract,
under circumstances where any Seller is reasonably likely to submit, or
has
submitted, a competing Bid or Government Bid, or is reasonably capable
of
performing the material obligations of such Contract.
.13 Transition Agreement.
Effective as of the Transfer Date, the Sellers and LSI shall have
entered into a Transition Agreement with respect to all computer
services
currently provided to the Business by Martin Marietta and the Sellers
substantially in the form of Exhibit 8.14.
.14 Real Estate Leases and Subleases.
Effective as of the Transfer Date, Varo and LSI shall have entered
into a lease of the Hermann Facility substantially in the form of
Exhibit
8.15-1 (the "Hermann Lease"), and subleases of (i) the Walnut Facility
substantially in the form of Exhibit 8.15-2 (the "Walnut Sublease"),
(ii)
the Shepherd Facility substantially in the form of Exhibit 8.15-3 (the
"Shepherd Sublease"), (iii) the Chartwell Operating Facility
substantially
in the form of Exhibit 8.15-4 (the "Chartwell Operating Sublease"), (iv)
the
Chartwell Warehouse Facility substantially in the form of Exhibit 8.15-5
(the "Chartwell Warehouse Sublease"); and (v) the Shepherd right-of-way
substantially in the form of Exhibit 8.15-6.
.15 Sales Representative Agreements.
Litton shall reimburse the Sellers for any sales commissions due
under
sales representative and distributor agreements of the Sellers with
respect
to the Business for sales of products of the Business after the Transfer
Date. Litton's obligation under the preceding sentence for any sales
representative agreement for the territory of Kuwait shall apply only to
sales made prior to the stated termination date in such agreement. Imo
and
the Sellers shall bear any other termination Liability with respect to
such
agreements.
.16 Transfer of Intellectual Property Rights.
At Litton's expense, the Sellers shall promptly take all action
and
execute and deliver all documents necessary or desirable to transfer to
Litton all Intellectual Property Rights included among the Purchased
Assets,
in the United States and foreign countries, and pay (subject to
reimbursement by Litton) all fees and taxes pertaining thereto. Such
actions shall include filing of Intellectual Property Rights assignments
with the appropriate Governmental Authorities, and notifying all
outside
counsel and agents handling such Intellectual Property Rights matters
that
future correspondence shall be furnished to Litton. Copies of all such
documents shall be furnished to Litton. The Sellers shall pay all
expenses,
including filing fees, maintenance fees, attorney and patent agent fees,
and
other costs incurred by any Seller in the usual and ordinary course of
Business prior to the Transfer Date. The Sellers shall be responsible
for
preserving, to the extent reasonably possible, all Intellectual Property
Rights until such time as they have transferred records and files
pertaining
thereto to Litton. Prior to such transfer, the Sellers shall notify
Litton
on a timely basis in writing of pending deadlines for actions to be
taken
involving such Intellectual Property Rights.
.17 Prorations.
Litton and the Sellers hereby agree as follows with regard to
prorations applicable to the consummation of the transactions
contemplated
hereby:
(a) All of the following expenses of the Sellers with respect to
the
Business (and of LSI with respect to the Business which relate to the
period
prior to the Transfer Date) which are not accrued on the Final Closing
Balance Sheet shall be prorated between the parties as of the Transfer
Date,
and as of such date shall become the obligation and responsibility of
Litton: utility bills, expense of fuel, guard service, facility
maintenance, and real property taxes and similar types of expenses,
other
than expenses for Excluded Assets or items described in Section 1.6(a) -
(n)
as Unassumed Liabilities;
(b) Prorations which are to be effected on the Transfer Date
shall
be made on the Transfer Date or, if such prorations cannot reasonably be
made as of the Transfer Date, as soon thereafter as possible and "as of"
the
Transfer Date;
(c) All prepaid expenses of the Sellers with respect to the
Business
which are not accrued on the Final Closing Balance Sheet, other than
prepaid
expenses for Excluded Assets or items described in Section 1.6(a) - (n)
as
Unassumed Liabilities, shall be prorated between the parties as of the
Transfer Date; and
(d) Litton, as of the Transfer Date, shall pay such amounts as
may
be required to replace all deposits held with the suppliers of utilities
to
the Business, and to assist the Sellers as may be reasonably required in
obtaining a return of such deposits put in place by any Seller as of the
Transfer Date.
.18 Service Agreement.
Effective as of the Transfer Date, Litton shall have entered into,
and
Varo and Baird shall have caused ESD, a division of Varo, to have
entered
into, a Service Agreement substantially in the form of Exhibit 8.19.
.19 Assignment of Computer Associates International, Inc. License.
Effective as of the Transfer Date, the Sellers shall deliver to
LSI an
assignment of the license dated August 16, 1989, between the Sellers and
Computer Associates International, Inc. in substantially the form of
Exhibit
8.20.
.20 Relocation of Purchased Assets.
For a period of 90 days following the Transfer Date, Litton shall
have
access to the real estate owned or leased by Imo or any Seller and used
in
the Business (other than the Hermann Facility, the Walnut Facility, the
Shepherd Facility, the Chartwell Operating Facility, and the Chartwell
Warehouse Facility) and at which any Purchased Assets are located for
the
purpose of removing, at LSI's expense, the Purchased Assets located
thereat.
Imo and the Sellers shall provide reasonable assistance in preparing
such
Purchased Assets for removal. Security and risk of loss for such
Purchased
Assets shall be borne by LSI.
.21 Environmental Covenants.
(a) Obligations of Imo and the Sellers.
(i) Imo and the Sellers will be responsible for performing
any
environmental remediation, clean-up, or closure of "Pre-Existing
Environmental Contamination" (hereafter defined) at the Walnut,
Chartwell
Operating, Chartwell Warehouse, Hermann, and Shepherd Facilities
(hereinafter referred to in this Section 8.22 as the "Environmental Real
Property") that is required by the prime lease or by a Governmental
Authority under an applicable Environmental Law. For purposes of this
Agreement, the term "Pre-Existing Environmental Contamination" means any
environmental contamination or environmental condition or circumstance
in
existence as of the Transfer Date and includes those items identified in
Schedules 3.30 or 8.22.
(ii) In the event that Pre-Existing Environmental
Contamination
is materially exacerbated by the acts or omissions of Litton on or after
the
Transfer Date, including any Hazardous Material Activity of Litton,
Litton
shall be responsible for the costs incurred in responding to such
exacerbated contamination as follows:
(A) If the exacerbated contamination is the result of
a
spill, release, leak, emission, or other occurrence by Litton on or
after
the Transfer Date, and the effects of such spill, release, leak,
emission,
or other occurrence can be reasonably identified or determined as
separate
from the Pre-Existing Environmental Contamination, Litton shall be
solely
responsible for the costs of responding to such exacerbated
contamination.
If the effects of such spill, release, leak, emission, or other
occurrence
cannot be reasonably identified or determined as separate from the Pre-
Existing Environmental Contamination, and if Litton has conducted
substantially the same operations that were conducted by the Sellers
prior
to the Transfer Date, the costs of responding to the Pre-Existing
Environmental Contamination, as exacerbated, shall be allocated based on
the
amount of time the particular unit, equipment, or process responsible
for
the contamination was operated by Litton on or after the Transfer Date
compared with the amount of time the unit, equipment, or process was
operated by Imo or the Sellers or their predecessors prior to the
Transfer
Date. Nothing in this Agreement shall be construed to impose any
obligation
on Litton to conduct any environmental assessment or analysis of the
Environmental Real Property.
(B) Any dispute between the parties under this
Section
8.22(a) shall be resolved through the dispute resolution procedure set
forth
in paragraph (c).
(C) Imo and the Sellers will be responsible for
removing
and disposing of all hazardous wastes and supplies generated or
accumulated
prior to the Transfer Date (including expired virgin material) that are
identified by written notice by Litton within 10 days of the Transfer
Date.
(b) Obligations of Litton.
(i) Litton shall be solely responsible for complying with
Environmental Laws that apply to the conduct of the Business and the
operation of the Environmental Real Property on or after the Transfer
Date,
including, responding to any spill, release, leak, emission, or other
environmental occurrence, including Litton's complying with any new
environmental requirements imposed on or after the Transfer Date. To
the
extent that any spill, release, leak, emission, or other environmental
occurrence exacerbates Pre-Existing Environmental Contamination,
Litton's
costs of responding thereto shall be allocated pursuant to the
provisions of
paragraph (a) of this Section 8.22.
(ii) Prior to the expiration of the Leases and Subleases
identified in Section 8.15, Litton shall be responsible for removing
from
the Environmental Real Property and disposing of any pieces of equipment
or
other furnishings that constitute Purchased Assets (including any
Hazardous
Materials acquired or generated by Litton for use in its operations) and
surrendering the Environmental Real Property in the condition required
by
the Leases and Subleases.
(ii) During its occupancy of the Environmental Real
Property,
Litton shall provide reasonable access to Imo and the Sellers to allow
them
to conduct any environmental remediation, cleanup, or closure activities
they may undertake and shall otherwise cooperate with Imo and the
Sellers in
their performance of those activities.
(c) Dispute Resolution Procedure.
If a dispute arises regarding the obligations of the parties
under this Section 8.22, either party can initiate a dispute resolution
process under this subsection by providing notice to the other party.
Subsequent to such notice, the parties shall meet promptly to resolve
any
dispute. If a dispute is not resolved within 21 days of receipt of a
dispute notice, then the parties shall submit the dispute to a panel of
three environmental consultants ("Environmental Panel"). Each party
shall
choose one consultant, and the two consultants shall select a third
consultant. Each party shall pay all expenses of its one chosen
consultant
and one-half of the expenses of the third consultant. The parties shall
attempt in good faith with the nonbinding assistance of the
Environmental
Panel to resolve their dispute within 60 days of the selection of the
Environmental Panel. If a dispute is not resolved within the sixty-day
period, then such dispute shall be resolved pursuant to applicable law.
(d) Relationship of this Agreement to the Lease and Subleases of the
Real Property.
Notwithstanding anything to the contrary that may exist in
the
Lease or Subleases of the Real Property, the provisions of this Section
8.22
and Section 11 of this Agreement shall govern matters respecting the
environmental responsibilities of the parties.
(Section 9 follows)
8
Non-Competition Agreement
.0 Non-Competition Agreement.
(a) Definition.
For and in consideration of the benefits to be derived,
directly
and indirectly, from this Agreement and the transactions provided for
herein, Imo and each Seller covenant and agree that for a period of
three
years from and after the Transfer Date (the "Non-Competition Period")
they
shall not, directly or indirectly, own, manage, operate, join, control,
or
participate in the ownership, management, operation, or control of any
business or Company (as defined in Section 9.1(b)(i)(B)) engaged in the
Defined Business or any business substantially similar thereto or
competitive therewith anywhere in the world.
(b) Limitations on Non-Competition Agreement.
(i) Notwithstanding Section 9.1(a), neither Imo nor any
Seller
shall be prohibited from (A) the continued conduct and operation of the
business and affairs of those businesses and divisions of Imo or such
Seller
not constituting the Business to the extent heretofore conducted, or (B)
the
acquisition by asset purchase, stock purchase, merger, consolidation, or
otherwise of the business, properties, rights, and assets of any
corporation, company, partnership, or other business entity (a
"Company")
partially engaged in the Defined Business provided that such activity
does
not exceed five percent of the net revenues or net assets, revenues or
equity of such Company, and the gross revenues of the Company from the
Business do not exceed $10 million (if the foregoing provision is not
satisfied, then Imo or such Seller, as the case may be, shall sell or
otherwise dispose of the portion of the Company engaged in the Business
within one year following such acquisition), or in (C) the direct or
indirect ownership of not more than five percent of any class of debt or
equity security of any Company engaged in the Defined Business provided
that
such security is traded on a national securities exchange or regularly
quoted on NASDAQ or the National Quotation Bureau, Incorporated or any
similar or successor organization or automated quotation system.
(ii) In the event that any provision of this Section 9.1
shall
be held invalid or unenforceable by a court of competent jurisdiction by
reason of the geographic or business scope or the duration of such
provision, such invalidity or unenforceability shall attach only to the
scope or duration of such provision and shall not affect or render
invalid
or unenforceable any other provision of this Agreement, and, to the
fullest
extent permitted by Applicable Law and Antitrust Law, this Agreement
shall
be construed as if the geographic or business scope or the duration of
such
provision had been more narrowly drafted so as not to be invalid or
unenforceable.
(c) Non-solicitation.
Imo and each Seller covenant and agree that during the Non-
Competition Period, they shall not solicit, encourage, or induce any
customer, supplier, agent, sales representative, or Continuing Employee
to
discontinue his or its business relationships with the Business acquired
by
Litton under this Agreement or with Litton or its Subsidiaries in
respect of
the Defined Business; provided, however, that the foregoing shall not
restrict Imo or any Seller from soliciting any Continuing Employee
terminated by Litton after the date Litton terminates such Continuing
Employee; and provided, further, however, that the foregoing shall not
apply
to any employment related discussions between Imo or such Seller and any
Continuing Employee that are initiated by such Continuing Employee.
(d) Definition of Defined Business.
The term the "Defined Business" is defined on Exhibit
9.1(d).
.1 Injunctive and Equitable Relief.
Imo and each Seller covenant and agree that Litton's remedy at law
for
any breach of Section 9.1 is inadequate and that, in the event of any
such
breach by Imo or any Seller, Litton shall be entitled to injunctive
relief,
without posting bond or other security, in addition to any other remedy,
at
law, in equity, or under this Agreement to which it may be entitled.
Without limiting the generality of the preceding sentence, the parties
acknowledge and agree that it is impossible to measure in money all of
the
damages that would accrue to Litton by reason of any breach of Section
9.1.
Imo and each Seller waive in advance any claim or defense, in any Legal
Proceeding that may in the future be commenced by Litton to enforce such
provisions, that Litton has an adequate remedy at law, and Imo and each
Seller agree not to urge in any Legal Proceeding that an adequate remedy
at
law exists.
.2 Benefit of Non-Competition Agreement.
Notwithstanding anything in Section 12.13 ("No Third-Party
Beneficiaries") to the contrary, this Section 9 is for the benefit of
Litton
and each of its Subsidiaries and Affiliates as currently existing or as
are
established at any time during the Non-Competition Period, and may be
enforced by any such entity as if it had been a named party to this
Agreement.
(Section 10 follows)
9
Termination and Abandonment
.0 Termination.
This Agreement may be terminated and the purchase and sale and the
other transactions provided for by this Agreement may be abandoned:
(a) By mutual written consent of Imo and the Sellers, on the one
hand, and Litton, on the other hand;
(b) By Litton, if any of the conditions of Section 6 have not
been
satisfied on the intended Transfer Date and have not been waived by
Litton
in writing, subject to the provisions of Section 2.2;
(c) By Imo and the Sellers, if any of the conditions of Section
7
have not been satisfied on the intended Transfer Date and have not been
waived by Imo and the Sellers in writing, subject to the provisions of
Section 2.2; or
(d) By either Litton, on the one hand, or Imo and the Sellers,
on
the other hand, if the purchase and sale provided for by this Agreement
has
not been consummated (for any reason other than a breach of any
representation, warranty, covenant, or agreement contained in this
Agreement
or in any Schedule or Exhibit by the party seeking to so terminate) on
or
before September 30, 1995; or
(e) By either Litton, on the one hand, or Imo and the Sellers,
on
the other hand, if the other party files on or before the Transfer Date
a
petition in bankruptcy, reorganization, liquidation, or receivership or
petition in bankruptcy, reorganization, liquidation, or receivership is
filed on or before the Transfer Date against such other party.
.1 Notice of Termination.
Any party terminating this Agreement in accordance with Section
10.1
shall give the other party prompt written notice of termination, setting
forth in reasonable detail the basis for termination.
.2 Effect of Termination.
Termination of this Agreement shall terminate all rights and
obligations of the parties hereunder except the rights and obligations
of
such parties described in the second sentence of Section 8.13; provided,
however, that termination pursuant to Section 10.1(b), (c), (d), or (e)
shall not relieve the defaulting or breaching party from any liability
to
the other party. In the event of termination, all filings,
applications,
and other submissions made pursuant to this Agreement, to the extent
practicable, shall be withdrawn from the Person to which made.
(Section 11 follows)
10
Indemnification and Reimbursement
.0 Indemnification by Imo and each Seller.
In order to induce Litton to enter into this Agreement and to
consummate the transactions contemplated hereby, Imo and each Seller
covenant and agree to and shall indemnify Litton and its directors,
officers, and employees (collectively, the "Buying Interests") and shall
defend and hold the Buying Interests harmless against and with respect
to
(and shall reimburse the Buying Interests for) any and all Losses
suffered
or incurred by the Buying Interests (whether suffered or incurred with
respect to any Third-Party Claim or otherwise) and resulting from or
arising
out of each of the following:
(a) Misrepresentation or Breach of Warranty.
Any misrepresentation or breach of warranty by Imo or any
Seller
of any of its representations or warranties set forth in Section 3 of
this
Agreement;
(b) Breach of Covenant or Agreement.
Any breach or nonfulfillment by Imo or any Seller of any of
their covenants, agreements, or other obligations set forth in this
Agreement, including the environmental covenants set forth in Section
8.22;
(c) Unassumed Liabilities.
Any Unassumed Liability; including the environmental
liabilities
set forth in Section 1.6(c);
(d) Miller-Holzwarth Agreement.
Any breach or non-fulfillment by Miller-Holzwarth of the
agreement described in Section 6.13; and
(e) Kigre Patents.
(i) Any commercially reasonable action taken by Litton
(after
3 days prior written notice to Imo) to effect the release of a claimed
security interest in, or to establish or re-establish rights in, any
U.S.
Patents to which Optic-Electronic Corp. and/or Varo obtained an interest
by
or through the "Agreement Between Parties" executed on or about May 26,
1988
by Optic-Electronic Corp. and Kigre, Inc. or any other agreement between
Optic-Electronic Corp. and Kigre, Inc. and only to the extent of such
interest or rights, or to otherwise prevent Litton's interest in such
patents acquired or intended to be acquired under this Agreement from
being
materially and adversely affected by any action or omission on the part
of
First Union (or any other Person claiming a security interest in any of
such
patents) that Litton believes is reasonably likely to occur unless such
commercially reasonable action is promptly taken; commercially
reasonable
action shall include the payment in full of any outstanding indebtedness
secured or alleged to be secured by any of such patents; and
(ii) Any infringement by the Buying Interests or any of
their
suppliers of the patents as referenced in the preceding paragraph;
provided,
however, that Loss for this Section 11.1(e)(ii) shall not include
consequential damages or lost profits from an injunction for
infringement of
such patents.
.1 Indemnification By Litton.
In order to induce Imo and each Seller to enter into this
Agreement
and to consummate the transactions contemplated hereby, Litton covenants
and
agrees to and shall indemnify Imo and each Seller and their respective
directors, officers, employees, and agents (collectively, the "Selling
Interests") and shall defend and hold the Selling Interests harmless
against
and with respect to (and shall reimburse the Selling Interests for) any
and
all Losses suffered and incurred by the Selling Interests (whether
suffered
or incurred with respect to a Third Party Claim or otherwise) and
resulting
from or arising out of each of the following:
(a) Misrepresentation or Breach of Warranty.
Any misrepresentation or breach of warranty by Litton of any
of
its representations or warranties set forth in Section 4 of this
Agreement;
(b) Breach of Covenant or Agreement.
Any breach or nonfulfillment by Litton of any of its
covenants,
agreements, or other obligations set forth in this Agreement, including
the
environmental covenants set forth in Section 8.22;
(c) Assumed Liabilities.
Any of the Assumed Liabilities;
(d) Operations After Transfer Date.
The conduct and operations of the Business by Litton from
and
after the Transfer Date, including operations under the Agency
Agreement,
and the use, application, and disposition of the Purchased Assets.
.2 Claims for Reimbursement.
In the event that any of the Buying Interests or the Selling
Interests
shall have (i) suffered any Loss, (ii) received any notice of the
commencement of any Legal Proceeding, or the making of any claim or
demand
by a third party (a "Third-Party Claim"), or (iii) learned of any fact,
event, or condition indicating that any Legal Proceeding concerning the
Business of any party, or the transactions provided for in this
Agreement,
is likely to be commenced or is likely to be pending (a "Potential
Third-
Party Claim") and in respect of which indemnification may be sought by
such
party pursuant to this Section 11, the party who shall have suffered
such
Loss, received such notice of such Third-Party Claim or learned of such
Potential Third-Party Claim and who shall seek indemnification in
respect
thereof (the "Indemnified Party") shall give the other party from whom
indemnification may be sought (the "Indemnifying Party") prompt written
notice of such Loss, Third-Party Claim or Potential Third-Party Claim
setting forth in reasonable detail such information as it shall have
pertaining to such claim and the Indemnified Party's demand for
indemnification in respect to such claim.
Written notice of Third-Party Claims or Potential Third-Party
Claims
shall be given to the Indemnifying Party as promptly as practicable;
provided, however, that the failure of any Indemnified Party to give
timely
notice shall not relieve the Indemnifying Party of any liability which
the
Indemnifying Party might have to the Indemnified Party except to the
extent
(and only to the extent) such failure materially prejudices the
Indemnifying
Party's position.
The Indemnifying Party shall have 30 days from the date of receipt
of
such notice (the "Investigation Period") to investigate and dispute the
nature, validity, or amount of any such claim of Loss, Third-Party Claim
or
Potential Third-Party Claim. During the Investigation Period, the
Indemnifying Party shall have reasonable access, during normal business
hours, to the books and records of the Indemnified Party relating to
such
claim. In the event that the Indemnifying Party shall dispute the
nature,
validity, or amount of a claim under this Section, the Indemnifying
Party
shall give the Indemnified Party written notice of such dispute within
the
Investigation Period, and the parties shall meet promptly after receipt
of
such notice of dispute and in good faith attempt to resolve such
dispute.
To the extent that the Parties cannot resolve any dispute by agreement
within 21 days following receipt of such notice of dispute, such dispute
shall be resolved pursuant to applicable law.
In the absence of a dispute, the Indemnifying Party shall
promptly,
and in any event not later than the expiration of the Investigation
Period,
reimburse the Indemnified Party in full for any Loss set forth in the
notice. In the event that the Indemnifying Party shall dispute only the
amount (and not the validity) of the claim, the Indemnifying Party
shall,
concurrently with the delivery of its notice of dispute, pay to the
Indemnified Party the undisputed portion of the claim of Loss.
.3 Defense and Settlement of Third-Party Claims.
The Indemnifying Party shall have the option to take control of
the
defense and investigation of a Third-Party Claim or Potential Third-
Party
Claim, and to employ and engage attorneys of its own choice to handle
and
defend the same, at the Indemnifying Party's sole cost and expense (the
"Direct Litigation Option"). The Indemnifying Party may elect to
exercise
the Direct Litigation Option by giving prior written notice of its
exercise
to the Indemnified Party. If the Indemnifying Party so elects, the
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and such attorneys in the investigation, trial, and
defense of such Third-Party Claim or Potential Third-Party Claim and any
appeal arising from such claim; provided, however, that the Indemnified
Party may, at its own cost, participate in (but not control) such
investigation, trial and defense of such Third-Party Claim or Potential
Third-Party Claim and any appeal arising from such claim. If the
Indemnifying Party does not elect the Direct Litigation Option, the
Indemnified Party shall defend against the Third-Party Claim or
Potential
Third-Party Claim in the manner it deems appropriate.
The Indemnified Party (or the Indemnifying Party if it has
exercised
the Direct Litigation Option) may settle a Third-Party Claim or
Potential
Third-Party Claim upon 30 days' prior written notice (the "Settlement
Review
Period") to the other party, and such settlement shall be binding upon
all
the parties; provided, however, that if within the Settlement Review
Period
the Indemnifying Party shall have objected to such settlement, the
Indemnified Party shall either, at the election of the Indemnifying
Party:
(i) contest the claim at the expense of the Indemnifying Party (provided
the
Indemnifying Party shall advance to the Indemnified Party such expenses
as
may subsequently be incurred), or (ii) permit the Indemnifying Party to
defend the claim on its behalf and its expense provided that the
Indemnifying Party shall keep the Indemnified Party advised on a timely
basis of all developments with respect to such claim and permit the
Indemnified Party to participate, at its election and expense, in the
defense of such claim. Any payment or settlement resulting from such
contest which is made in accordance with this Section 11.4, together
with
the total expenses of such contest, shall be binding on the parties for
purposes of this Agreement.
In no event shall a party enter into any settlement, adjustment,
or
compromise of any Third-Party Claim or Potential Third-Party Claim
without
the prior written consent of the other party, (which consent shall not
be
unreasonably withheld or delayed), if as a result of such settlement,
adjustment, or compromise an injunction or other non-monetary relief
would
be imposed against the Indemnified Party.
.4 Right of Set Off.
After resolution of the amount of any claim for reimbursement
under
this Agreement by agreement of the parties or as provided for in Section
11.3 or Section 11.4, the Indemnified Party shall have the right, in
addition to any other right which it might have, to set off all or any
part
of the amount of any payment made by any of the Indemnified Parties or
Loss
suffered by any of them with respect to any Liability or claim to which
the
indemnity provided for in Section 11.1 or Section 11.2 relates, against
the
amount of any obligation to the Indemnifying Party.
.5 Limitation on Indemnity.
(a) Time Limitation.
Written notice of all claims for indemnification under
Sections
11.1 or 11.2 must be received by the Indemnifying Party on or before the
termination of the applicable periods set forth in this Section. So
long as
the Indemnified Party provides such written notice of a claim on or
before
the termination of the applicable periods set forth below, such claim
shall
not be barred on the basis that the amount of such claim has not been
ascertained, liquidated, or reduced to final judgment on or before such
termination.
(b) Survival.
(i) Representations and Warranties.
The representations and warranties contained in this
Agreement
shall survive the execution and delivery of this Agreement, any
examination
by or on behalf of the parties hereto, and the completion of the
transactions contemplated herein, but only for a period of 18 months
following the Transfer Date.
(ii) Certain Breaches by Imo and Sellers.
Claims for indemnification under Section 11.1(b) shall
survive
for a period of 18 months following the Transfer Date to the extent made
with respect to obligations performed or to be performed by Imo or any
Seller on or prior to the Transfer Date; provided, however, that claims
for
indemnification made under Section 1.1 (as limited by Section 1.2), and
claims made with respect to obligations of Imo or any Seller performed
or to
be performed after the Transfer Date, including under Sections 1.4, 1.9,
8
(except Section 8.22), 9, 11, 12.1, 12.2, 12.3, 12.4, and 12.5, shall
survive without limitation, except as provided by applicable law.
(iii) Certain Breaches by Litton.
Claims for indemnification under Section 11.2(b) shall
survive
for a period of 18 months following the Transfer Date to the extent made
with respect to obligations performed or to be performed by Litton on or
prior to the Transfer Date; and claims for indemnification under Section
11.2(b) with respect to obligations performed or to be performed by
Litton
after the Transfer Date, including under Sections 1.4, 1.9, 8 (except
Section 8.22), 11, 12.1, 12.2, 12.3, 12.4, and 12.5, shall survive
without
limitation, except as provided by applicable law.
(iv) Other Liabilities.
Claims for indemnification under Sections 11.1(c), (d) and
(e)
and 11.2(c) and (d) shall survive without limitation, except as provided
by
applicable law.
(c) Indemnification Deductible.
Imo, the Sellers, and Litton shall not have any obligation
to
indemnify and hold harmless the Buying Interests or the Selling
Interests,
respectively, in respect of any Loss described in Sections 11.1(a) or
(b) or
11.2(a) or (b), until the aggregate amount of claims hereunder against
Imo
or the Sellers, on the one hand, or Litton, on the other hand, as the
case
may be, in respect thereof (including claims previously made) equals
$1,000,000 and thereafter, subject to Section 11.6(a), (b), and (d), Imo
or
the Sellers, on the one hand, and Litton, on the other hand, as the case
may
be, shall indemnify and hold harmless the Buying Interests or the
Selling
Interests, as the case may be, from and in respect of such further
claims to
the extent such claims exceed in the aggregate $1,000,000; provided,
however, that indemnification in respect of Sections 11.1(c), (d) and
(e)
and 11.2 (c) and (d) shall be on a first-dollar basis.
(d) Indemnification Cap.
No Loss shall be recovered pursuant to Sections 11.1(a) or
(b)
or pursuant to Sections 11.2(a) or (b) after the aggregate of all
Losses
pursuant to Sections 11.1(a) and (b), or 11.2(a) and (b), as the case
may
be, exceeds 50% of the Cash Purchase Price.
.6 No other Warranties.
Except as specifically set forth in this Agreement, any Schedule,
or
Exhibit, any Transaction Agreement, or in any certificate, document, or
instrument delivered by any party pursuant to such agreements, neither
Imo
or the Sellers, on the one hand, nor Litton, on the other hand (or their
respective representatives), have made or shall have liability for any
representation or warranty, express or implied, in connection with the
transactions contemplated by this Agreement, including, in the case of
Imo
and the Sellers (and their respective representatives), any
representation
or warranty, express or implied, as to the accuracy or completeness of
any
information regarding the Business. Litton acknowledges and agrees that
Litton and its representatives have the experience and knowledge to
evaluate
the business, financial condition, assets, and liabilities of the
Business,
that Litton and its representatives have had access to such of the
information, documents, real property, fixtures, and tangible personal
property of the Business as Litton and its representatives shall have
requested to see or review (or both), that Litton and its
representatives
have had a full opportunity to meet with appropriate management and
employees of Imo and the Sellers to discuss the Business and the
Purchased
Assets and that, in determining to acquire the Purchased Assets, Litton
has
made its own investigation into, and based thereon, Litton has formed an
independent judgment concerning, the Purchased Assets and the Business;
provided, however that Litton shall not be deemed to have waived any
right
to indemnification under Section 11.1(a) as a result of Litton's
knowledge
or constructive knowledge of any breach by Imo or the Sellers of any
representation contained in Section 3 of this Agreement. Except as
specifically set forth in the Agreement, any Schedule or Exhibit, any
Transaction Agreement, or in any certificate, document, or instrument
delivered by any party pursuant to such agreements, it is expressly
understood and agreed that Litton accepts the condition of the Purchased
Assets "AS IS, WHERE IS" AND WITHOUT ANY REPRESENTATION, WARRANTY, OR
GUARANTY, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE AS TO THE CONDITION, SIZE, EXTENT,
QUANTITY, TYPE, OR VALUE OF THE PURCHASED ASSETS OR THE BUSINESS.
.7 Exclusive Remedy.
The exclusive remedy available to the parties to this Agreement
with
respect to the matters covered by Sections 11.1 and 11.2 shall be to
proceed
in the manner and subject to the limitations contained in this Section
11.
(Section 12 follows)
11
Miscellaneous Provisions
.0 Public Statements and Press Releases.
No party shall make, issue, or release any public announcement
(including public announcements made to employees and customers), press
release, statement, or acknowledgment of the existence of, or reveal
publicly the terms, conditions, and status of, the transactions provided
for
in this Agreement, without the prior written consent of the other party
as
to the content and time of release to the media in which such statement
or
announcement is to be made; provided, however, that in the case of
announcements, statements, acknowledgments, or revelations which either
party is required by law or regulation, including those of public stock
exchanges on which the securities of such party or its affiliates are
traded, to make, issue, or release, the making, issuing, or releasing of
any
such disclosure by the party so required to do so shall not constitute a
breach of this Agreement if such party shall have given, to the extent
reasonably possible, not less than ten days' prior notice to the other
party, and shall have attempted, to the extent reasonably possible, to
clear
such disclosure with the other party; provided, further, that Litton may
make such statements to employees to whom it is making offers of
employment
(as provided in Section 8.8(a)), as are necessary to explain fully the
terms
of such offer of employment. Each party hereto agrees that it will not
unreasonably withhold any such consent or clearance.
.1 Costs and Expenses; Computer Associates Costs.
Except as provided in Section 1.4(a)(vi), each party covenants and
agrees that it shall be responsible for and bear its respective costs
and
expenses in connection with, or arising out of, the negotiation and
execution of this Agreement and consummation of the transactions
provided
for herein; provided, however, that Litton, on the one hand, Imo and the
Sellers on the other hand, shall each pay one-half of: (a) any and all
sales, use, transfer, stamp, or similar Taxes and any and all filing and
recordation fees applicable to the transactions provided for herein; and
(b)
the fee to be paid to Computer Associates International, Inc. for
transferring the license between the Sellers and Computer Associates
International, Inc. to LSI and the fee for a new license between the
Sellers
(on behalf of the ESD Division of Varo) and Computer Associates
International, Inc. on substantially the same terms as the license
transferred by the Sellers to LSI, up to (but not in excess of) an
aggregate
payment by the parties to Computer Associates International, Inc. of
$750,000. Imo and the Sellers shall prepare and file all required
declarations and forms with respect to the Taxes and fees described in
the
preceding sentence and pay such Taxes and fees and shall be reimbursed
by
Litton for one-half of the amounts so paid. In the event that the fees
described in clause (b) of the first sentence of this Section exceed
$750,000, the parties shall negotiate in good faith regarding the
equitable
sharing of such excess.
.2 Amendment and Modification.
This Agreement may be amended, modified, or supplemented only in
writing executed by each of the parties to this Agreement.
.3 No Assignment.
No party hereto shall assign, in whole or in part, this Agreement
or
its respective rights and obligations hereunder without the express
prior
written consent of the other party hereto, and, absent such consent, any
assignment (including any assignment by merger, dissolution, or
operation of
law) shall be null and void; provided, however, that notwithstanding the
foregoing, the Sellers and Litton shall each have the right to assign
this
Agreement, without consent, to its respective parent corporation or any
of
such parent's Subsidiaries, but notwithstanding any such assignment, the
Sellers or Litton, as the case may be, shall remain liable for any and
all
of its Liabilities and obligations hereunder.
.4 Notices.
All notices, requests, demands, or other communications under this
Agreement must be in writing executed by an authorized representative of
the
party responsible for such communication, and shall be given, either by
hand, telex, telecopy, or other telecommunications (confirmed by
mailing) or
by mailing, certified or registered mail with first-class postage
prepaid,
or overnight courier addressed as follows: (a) if to Seller to: Imo
Industries Inc., 1009 Lenox Drive, Bldg. 4 West, P. O. Box 6550,
Lawrenceville, New Jersey 08648, Attention: Thomas J. Bird, Esq.,
Executive
Vice President and General Counsel, Telecopier number; 609-896-7688,
Telephone number 609-896-7600 with a copy to: Baker & Botts, L.L.P., The
Warner, 1299 Pennsylvania Avenue, N. W., Washington, D. C. 20005-2400,
Attention: Daniel J. Riley, Esq., Telecopier number 202-639-7890,
Telephone
number 202-639-7700, or (b) if to Litton to: Litton Industries, Inc.,
21240
Burbank Blvd., Woodland Hills, CA 91367, Attention: General Counsel,
Telecopier number 818-598-2025; Telephone number 818-598-5983 or to such
other person or place as any party shall furnish to the other party in
writing.
.5 Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which
together shall constitute but one and the same instrument.
.6 Headings.
Section headings and the table of contents contained in this
Agreement
are provided for convenience of reference only and shall not be deemed
to
constitute a part of this Agreement.
.7 Schedules and Exhibits.
One complete set of the Schedules and Exhibits has been marked for
identification and delivered to each of the parties hereto prior to the
execution and delivery of this Agreement. The Schedules and Exhibits
are an
integral part of this Agreement and are incorporated into this Agreement
by
reference.
.8 Waiver, Cumulative Remedy, Etc.
No failure or delay in the enforcement of any provision of this
Agreement shall operate as a waiver of such provision, nor shall any
single
or partial waiver of any breach of any provision of this Agreement be
held
to be a waiver of any other or subsequent breach, and the failure of a
party
to enforce at any time any provision of this Agreement shall not be
deemed a
waiver of any right of any such party to subsequently enforce such
provision. No breach of any covenant, agreement, warranty, or
representation shall be deemed waived unless expressly waived in writing
by
the party who has the right to assert such breach. All remedies
afforded in
this Agreement shall be construed as cumulative, that is, in addition to
every other remedy provided herein or by law or in equity. The rights
and
remedies of any party based upon, arising out of, or otherwise in
respect of
any representation, warranty, covenant, or agreement or failure to
fulfill
any condition shall in no way be limited by the fact that the act,
omission,
occurrence, or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject matter of any
other
representation, warranty, covenant, or agreement as to which there is no
inaccuracy or breach. The representations and warranties of the parties
shall not be affected or deemed waived by reason of any investigation
made
by or on behalf of any other party (including by any of its advisors,
consultants, or representatives) or by reason of the fact that such
other
party (or any of such advisors, consultants, or representatives) knew or
should have known that any such representation or warranty is or might
be
inaccurate.
.9 Governing Law.
This Agreement shall be construed, interpreted, and enforced in
accordance with the law of the State of Texas without regard to its
choice
of law principles and controlling United States federal law.
.10 Severability.
In the event that any provision or any portion of any provision of
this Agreement shall be held invalid, illegal, or unenforceable under
Applicable Law, Antitrust Law, Government Contract Law, Environmental
Law,
or ERISA, the remainder of this Agreement shall remain valid and
enforceable, unless such invalidity, illegality, or unenforceability
substantially diminishes the rights and obligations, taken as a whole,
of
either party hereunder.
.11 Survival of Representations, Warranties, Covenants, and
Agreements.
Subject to the specific limitations of Sections 11.6, all
representations, warranties, covenants, and agreements of the parties
contained herein or in any Schedule or Exhibit and any Transaction
Agreements shall survive the execution and delivery of this Agreement
and
consummation of the transactions provided for in this Agreement and any
Transaction Agreements notwithstanding any investigation made by or on
behalf of the parties. No representation, warranty, or covenant shall
merge
into the deeds, bills of sale, documents, agreements, and instruments to
be
delivered on the Transfer Date.
.12 No Third-Party Beneficiaries.
Except to the extent otherwise provided in Appendix I or in
Sections
9.3, 11.1, 11.2 and 12.3, nothing in this Agreement, whether express or
implied, shall confer any rights or remedies under or by reason of this
Agreement on any Person other than the parties to it and their
respective
successors, and permitted assigns and permitted designees, nor is
anything
in this Agreement intended to relieve or discharge the obligation or
Liability of any third persons to any party to this Agreement, nor shall
any
provision of this Agreement give any third persons any right of
subrogation
or action against any party to this Agreement.
.13 Liability of Parties.
Imo and each Seller are severally liable for their respective
obligations under this Agreement, and, to enforce such obligations,
Litton
shall be required to proceed severally against Imo, Baird, Varo, or OEII
in
the same or separate enforcement action or actions.
LII and LSI are severally liable for their respective obligations
under this Agreement, and, to enforce such obligations, Imo and the
Sellers
shall be required to proceed severally against LII and LSI in the same
or
separate enforcement action or actions.
.14 Actions on Behalf of Imo, the Sellers or Litton.
Any action, consent, authorization, decision, notice, or election
made
or given by Imo or any Seller under this Agreement shall bind Imo or all
other Sellers, as the case may be, and the Selling Interests and be
deemed
to have been made or given to Imo or the other Sellers and the Selling
Interests, as the case may be. Any payment by Litton to Imo or any
Seller
of any amount due and payable to Imo or such Seller or the Selling
Interests
under this Agreement shall be deemed timely payment to Imo and each
Seller,
as the case may be, and each of the Selling Interests of their
respective
share of such amount and Imo and each Seller and each of the Selling
Interests hereby acknowledges that such payment constitutes timely
payment
to such Persons.
Any action, consent, authorization, decision, notice, or election
made
or given by either LII or LSI under this Agreement shall bind all other
Litton entities and the Buying Interests and be deemed to have been made
or
given to the other Litton entities and the Buying Interests. Any
payment by
Imo or any Seller to Litton of any amount due and payable to either LII
or
LSI or the Buying Interests under this Agreement shall be deemed timely
payment to each of LII and LSI and each of the Buying Interests of its
respective share of such amount and each of LII and LSI and each of the
Buying Interests hereby acknowledges that such payment constitutes
timely
payment to such Persons.
.15 Construction.
The parties have participated jointly in the negotiation and
drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of
the
provisions of this Agreement. The term "including" shall indicate
examples
of the foregoing general statement and not a limitation on that general
statement and shall mean including without limitation. Unless otherwise
indicated, all references to Sections, Schedules and Exhibits are to
Sections of this Agreement and to Schedules and Exhibits to this
Agreement.
.16 Entire Agreement.
This Agreement, including the Schedules and Exhibits and the
recitals,
the Confidentiality Agreement and the Transaction Agreements, constitute
the
entire agreement and understanding between the parties with respect to
the
transactions provided for in such agreements, and supersedes and cancels
any
and all prior discussions, correspondence, agreements, or understandings
between the parties with respect to such matters.
.17 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of
the
parties and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound,
have caused this Agreement to be executed by their authorized
representatives on and as of May 11, 1995.
IMO INDUSTRIES INC. LITTON INDUSTRIES, INC.
BY:______________________________ BY:_________________________
Title:_____________________________ Title:________________________
BAIRD CORPORATION LITTON SYSTEMS, INC.
BY:______________________________ BY:_________________________
Title:_____________________________ Title:________________________
OPTIC-ELECTRONIC INTERNATIONAL, INC.
BY:______________________________
Title:_____________________________
VARO INC.
BY:______________________________
Title:_____________________________
xvii
DAL02:71608.3
29
For additional information contact:
Paul B. Lazovick
Director of Investor Relations
609-896-7615
FOR IMMEDIATE RELEASE
IMO COMPLETES SALE OF MAJOR PORTION OF ITS
ELECTRO-OPTICAL SYSTEMS BUSINESS TO LITTON
LAWRENCEVILLE, NJ, June 5, 1995 - Imo Industries Inc. (NYSE-IMD)
today announced that it has completed the sale of most its Electro-
Optical Systems business to Litton Industries (NYSE-LIT) and Litton
Systems Inc. for approximately book value. Imo will use the
proceeds to pay down debt.
The operations sold include all of the assets of Imo's Varo Inc.
and Baird Optical Systems night vision and laser business, other
than real estate. Litton is leasing the operations' facilities in
Dallas, Texas for two years and has an option to extend the leases.
Litton has offered employment to substantially all of the current
employees of the business. Not included in the transaction is the
Varo Electronic Systems Division, which manufactures power supplies
for various government and commercial programs.
"The sale of this defense-oriented business essentially completes
a major, long-term restructuring program for our Company," said
Donald K. Farrar, Imo chairman and chief executive officer. "As a
result of the program we have substantially strengthened Imo's
balance sheet and liquidity. During the first quarter of this year
we reduced the Company's debt by 30%, or more than $120 million,
and restored shareholders' equity to a positive value. Using
proceeds from this sale to pay down debt will have a further
favorable impact on Imo's long-term health.
"Imo is now able to fully focus on its traditionally strong core
businesses. We are making structural and strategic investments to
help ensure improved revenue growth, and view the Company's future
with optimism."
Imo, with 1994 sales of $464 million, supplies mechanical and
electronic controls, engineered power products and their support
services to customers worldwide.
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