<PAGE> 1
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): August 15, 1997
------------------------
ORBITAL SCIENCES CORPORATION
DELAWARE 0-18287 06-1209561
(State of incorporation) (Commission File Number) (I.R.S. Employer I.D. No.)
21700 ATLANTIC BOULEVARD
DULLES, VIRGINIA 20166
(703) 406-5000
(Address and telephone number
of principal executive offices)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On August 15, 1997 (the "Closing Date"), pursuant to the Asset Acquisition
Agreement (the "Agreement") dated as of July 11, 1997 between Orbital Sciences
Corporation ("Orbital") and CTA INCORPORATED ("CTA"), Orbital completed the
acquisition (the "Acquisition") from CTA of substantially all the assets
(including all the outstanding capital stock of CTA's direct and indirect
subsidiaries Engineering Technologies, Inc., CTA Commercial Systems, Inc., CTA
Space Systems, Inc., CTA International Services, Inc., CTA International, Inc.
and CTA International Asia, Ltd.), pertaining to, and assumed certain
liabilities of, CTA's satellite manufacturing and communications services
business (the "Business"). The assets acquired directly or held by the
acquired subsidiaries consist principally of rights under customer contracts
and real estate leases, equipment, patent and trademark applications and other
intellectual property. CTA retained $6,000,000 of accounts receivable related
to the Business. Orbital has hired all CTA's employees who were employed in
connection with the Business. The negotiated consideration provided to CTA by
Orbital included (i) $6,962,500 in cash (subject to certain post-closing
adjustments for which $3,000,000 was held back by Orbital pending calculation
of the net tangible assets and $2,037,500 was held back by Orbital pending
satisfaction by CTA of a closing condition), (ii) the payment of $27,000,000 to
certain of CTA's lenders, (iii) the assumption of certain specified liabilities
of CTA, including obligations under customer contracts and real estate leases,
and accounts payable, and (iv) the right to receive additional, contingent
payments during the five years following the Closing Date in the form of (a)
royalties from $500,000 to $3,000,000 per sale of lightweight geosynchronous
orbit communications satellites after at least five such satellites have been
sold, and (b) 3% of cumulative revenues in excess of $50,000,000 accrued during
such period from the acquired terrestrial wireless data communications service.
Orbital funded the Acquisition with (i) borrowings under the Second Amended
and Restated Credit and Reimbursement Agreement dated as of August 5, 1997
among Orbital, Magellan Corporation and the banks listed therein.
Orbital presently intends to use the assets acquired in the Acquisition to
continue conducting the Business.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
The required financial statements will be filed by amendment within 60
days following the date this report was required to be filed.
(b) Pro Forma Financial Information.
The required pro forma financial information will be filed by
amendment within 60 days following the date this report was required to be
filed.
2
<PAGE> 3
(c) Exhibits.
The following exhibit is filed with this report:
2. Asset Acquisition Agreement dated as of July 11, 1997 between
CTA and Orbital.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORBITAL SCIENCES CORPORATION
Date: August 29, 1997 By: /s/Jeffrey V. Pirone
---------------------------------
Jeffrey V. Pirone
Senior Vice President and
Chief Financial Officer
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
2 Asset Acquisition Agreement dated as of July
11, 1997 between CTA and Orbital (transmitted herewith)
</TABLE>
5
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ACQUISITION AGREEMENT
dated as of July 11, 1997
between
CTA INCORPORATED,
as Seller
and
ORBITAL SCIENCES CORPORATION,
as Buyer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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SECTION 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Cross Reference Table of Certain Defined Terms . . . . . . . . . . . . 2
1.2. Definitions of Certain Additional Terms . . . . . . . . . . . . . . . . 3
1.2.1. "Affiliate" . . . . . . . . . . . . . . . . . . . . . . 3
1.2.2. "Business Assets" . . . . . . . . . . . . . . . . . . . 3
1.2.3. "Business Intellectual Property Rights" . . . . . . . . 3
1.2.4. "CBCA" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2.5. "Code" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2.6. "Contract" . . . . . . . . . . . . . . . . . . . . . . . 3
1.2.7. "Exchange Act" . . . . . . . . . . . . . . . . . . . . . 4
1.2.8. "FAR" . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.9. "GEMtrak Revenues" . . . . . . . . . . . . . . . . . . . 4
1.2.10. "HSR Act" . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.11. "Income Tax" . . . . . . . . . . . . . . . . . . . . . . 4
1.2.12. "Income Tax Return" . . . . . . . . . . . . . . . . . . 4
1.2.13. "Intellectual Property Rights" . . . . . . . . . . . . . 4
1.2.14. "Loss" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.15. "Material Adverse Effect" . . . . . . . . . . . . . . . 5
1.2.16. "Securities Act" . . . . . . . . . . . . . . . . . . . . 5
1.2.17. "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.18. "Seller's knowledge" . . . . . . . . . . . . . . . . . . 5
1.2.19. "STARBus Bus" . . . . . . . . . . . . . . . . . . . . . 5
1.2.20. "STARBus Bus Contract" . . . . . . . . . . . . . . . . . 5
1.2.21. "STARBus Contract" . . . . . . . . . . . . . . . . . . . 6
1.2.22. "STARBus Satellite" . . . . . . . . . . . . . . . . . . 6
1.2.23. "STARBus Satellite Contract" . . . . . . . . . . . . . . 6
1.2.24. "STARBus Threshold Amount" . . . . . . . . . . . . . . . 6
1.2.25. "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . 6
1.2.26. "Tax" . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.2.27. "Tax Return" . . . . . . . . . . . . . . . . . . . . . . 7
1.2.28. "Transaction Agreements" . . . . . . . . . . . . . . . . 7
1.3. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2
PURCHASE AND SALE OF THE PURCHASED ASSETS . . . . . . . . . . . . . . . . . . . . 7
2.1. Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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2.4. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6. Closing Statement and Indostar Adjustment . . . . . . . . . . . . . . . 13
2.7. Deferred Consideration . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . 18
2.9. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . 18
3.1. Due Organization, Authorization and Good Standing of Seller . . . . . . 18
3.2. No Violation or Approval . . . . . . . . . . . . . . . . . . . . . . . 19
3.3. Business Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4. All Assets Necessary to Conduct Business . . . . . . . . . . . . . . . 20
3.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6. Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . 20
3.6.1. General . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6.2. Adequacy . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6.3. Royalties and Licenses . . . . . . . . . . . . . . . . . 21
3.6.4. Ownership . . . . . . . . . . . . . . . . . . . . . . . 21
3.6.5. Absence of Claims . . . . . . . . . . . . . . . . . . . 21
3.6.6. Protection of Intellectual Property . . . . . . . . . . 22
3.7. Indebtedness; Guarantees . . . . . . . . . . . . . . . . . . . . . . . 22
3.8. Financial Statements, etc. . . . . . . . . . . . . . . . . . . . . . . 22
3.9. Absence of Changes; Operations in the Ordinary Course . . . . . . . . . 23
3.10. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 23
3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.12. Title to Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . 25
3.13. Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.14. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.15. Operations in Conformity With Law, etc . . . . . . . . . . . . . . . . 26
3.16. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.17. Employee Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . 27
3.18. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.19. Government Contracts and Subcontracts . . . . . . . . . . . . . . . . . 29
3.20. Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.21. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.22. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.23. Affiliated Transactions . . . . . . . . . . . . . . . . . . . . . . . . 32
3.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.25. Customer Warranty Coverage . . . . . . . . . . . . . . . . . . . . . . 32
3.26. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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<TABLE>
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3.27. Brokers, Finders, etc . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.28. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.29. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.30. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.31. Lender Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ORBITAL . . . . . . . . . . . . . . . . . . . . 33
4.1. Due Organization, Authorization and Good Standing . . . . . . . . . . . 33
4.2. No Violation or Approval . . . . . . . . . . . . . . . . . . . . . . . 34
4.3. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.4. Financial Statements, etc. . . . . . . . . . . . . . . . . . . . . . . 35
4.5. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.7. Brokers, Finders, etc . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.8. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.9. Bank Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5
CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.1. Post Closing Financials . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2. Exclusivity; Acquisition Proposals . . . . . . . . . . . . . . . . . . 36
5.3. HSR Act; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.4. Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.5. Preparation for Closing . . . . . . . . . . . . . . . . . . . . . . . . 37
5.6. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.7. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . 38
5.8. Noncompetition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.9. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . 39
5.10. Other Limitations on Conduct of Business Prior to the Closing Date . . 39
5.11. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.12. Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.13. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.14. Accounting and Financial Records . . . . . . . . . . . . . . . . . . . 43
5.15. Income Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.15.1. Tax Sharing Agreements . . . . . . . . . . . . . . . . 43
5.15.2. Tax Periods Ending On or Before the Closing Date . . . 43
5.15.3. Tax Periods Beginning On or Before and Ending After
the Closing Date . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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<TABLE>
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5.15.4. Tax Periods Beginning After the Closing Date . . . . . 45
5.15.5. Contests . . . . . . . . . . . . . . . . . . . . . . . 45
5.15.6. Interperiod Tax Attribute Adjustments . . . . . . . . 46
5.15.7. Amended Returns and Refunds . . . . . . . . . . . . . 47
5.15.8. Retention of Carryovers . . . . . . . . . . . . . . . 47
5.15.9. Section 338(h)(10) Elections . . . . . . . . . . . . . 47
5.15.10. Indemnification for Post-Closing Transactions . . . . 47
5.15.11. Notices . . . . . . . . . . . . . . . . . . . . . . . 47
5.15.12. Cooperation . . . . . . . . . . . . . . . . . . . . . 48
5.15.13. Valuation and Allocation. . . . . . . . . . . . . . . 48
5.15.14. Purchase Price Adjustment . . . . . . . . . . . . . . 48
5.16. Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.17. Limitation of Certain Types of Transactions by Seller After Closing . 49
5.18. Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.20. Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.21. Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.22. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.1. Conditions Precedent to Obligations of Seller . . . . . . . . . . . . . 51
6.1.1. Purchase Price . . . . . . . . . . . . . . . . . . . . 51
6.1.2. Payment to Lenders . . . . . . . . . . . . . . . . . . 51
6.1.3. Representations; Covenants; Certificate . . . . . . . 51
6.1.4. Opinion of Counsel for Orbital . . . . . . . . . . . . 52
6.1.5. Charter Documents, Etc . . . . . . . . . . . . . . . . 52
6.1.6. General . . . . . . . . . . . . . . . . . . . . . . . 52
6.2. Conditions Precedent to Obligations of Orbital. . . . . . . . . . . . . 52
6.2.1. Representations; Covenants; Certificate . . . . . . . 52
6.2.2. Opinions of Counsel for Seller . . . . . . . . . . . . 53
6.2.3. Assignment of Seller Intellectual Property . . . . . . 53
6.2.4. Charter Documents, Etc . . . . . . . . . . . . . . . . 53
6.2.6. Credit Agreements . . . . . . . . . . . . . . . . . . 53
6.2.7. Required Consents . . . . . . . . . . . . . . . . . . 54
6.2.8. Release of Liens . . . . . . . . . . . . . . . . . . . 54
6.2.9. EarthWatch Modifications. . . . . . . . . . . . . . . 54
6.2.10. General . . . . . . . . . . . . . . . . . . . . . . . 54
6.3. Conditions Precedent to the Obligations of Each Party . . . . . . . . . 54
</TABLE>
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<TABLE>
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6.3.1. Stockholder Approval . . . . . . . . . . . . . . . . . 54
6.3.2. HSR Act . . . . . . . . . . . . . . . . . . . . . . . 55
6.3.3. Bill of Sale and Assignment and Assumption Agreement . 55
6.3.4. Governmental and Court Approvals . . . . . . . . . . . 55
6.3.5. Injunctions . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.1. Orbital's Indemnification. . . . . . . . . . . . . . . . . . . . . . . 55
7.2. Seller's Indemnification . . . . . . . . . . . . . . . . . . . . . . . 56
7.3. Time Limits on Indemnification . . . . . . . . . . . . . . . . . . . . 58
7.4. Monetary Limitations on Indemnification . . . . . . . . . . . . . . . . 59
7.5. Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.6. Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.7. Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.8. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.9. Calculation of Losses . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.2. Amendments and Supplements . . . . . . . . . . . . . . . . . . . . . . 63
8.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.4. No Adequate Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.6. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.7. Entire Agreement, Assignability, Etc . . . . . . . . . . . . . . . . . 65
8.8. Exclusivity of Representations . . . . . . . . . . . . . . . . . . . . 65
8.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.6 Most Recent Statement
Exhibit 6.1.4 Form of Ropes & Gray Opinion
Exhibit 6.2.2 Opinions to be given by Seller's Counsel
Exhibit 6.3.3 Bill of Sale and Assignment and Assumption Agreement
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 1.2.18 Knowledge Persons
Schedule 1.2.20 Existing Orbital Satellite Customers
Schedule 2.2.11 Corporate names, etc.
Schedule 2.7.1 Customers
Schedule 2.8 Allocation of Purchase Price
Schedule 3.1 Due Organization, etc.
Schedule 3.2 No Violation or Approval
Schedule 3.3 Business Assets
Schedule 3.5 Acquired Subsidiaries and Equity Investments
Schedule 3.6.1 Business Intellectual Property Rights
Schedule 3.6.2 Retained Intellectual Property Rights
Schedule 3.7 Acquired Subsidiary Guarantees
Schedule 3.9 Absence of Changes; Operations in the Ordinary Course
Schedule 3.10 Undisclosed Liabilities
Schedule 3.11 Taxes
Schedule 3.12 Liens
Schedule 3.13 Suppliers
Schedule 3.16 Litigation
Schedule 3.17 Employee Matters; Benefit Plans
Schedule 3.19 Government Contracts and Subcontracts
Schedule 3.20 Licenses
Schedule 3.21 Environmental Matters
Schedule 3.22 Contracts
Schedule 3.24 Insurance
Schedule 3.25 Customer Warranty Coverage
Schedule 3.26 Certain Agreements
Schedule 3.29 Bank Accounts
Schedule 4.2 No Violation or Approval
Schedule 5.13 Employee Matters
</TABLE>
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ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT (the "Agreement"), dated as of July 11,
1997, is entered into by and between Orbital Sciences Corporation, a
corporation incorporated under the laws of the State of Delaware ("Orbital"),
and CTA Incorporated, a corporation incorporated under the laws of the State of
Colorado ("Seller").
WHEREAS, Seller is engaged in the business of developing, designing and
manufacturing low Earth orbit and geosynchronous orbit satellite systems and
related support systems, providing aerospace hardware, software and engineering
services for space systems and related ground systems, and marketing and
selling such systems, hardware, software and services to commercial and
government customers (the "Space Business");
WHEREAS, Seller is engaged in the business of developing, designing and
manufacturing automated tracking and cargo status data systems of unpowered
mobile assets such as truck trailers, railcars and containers, including
without limitation Seller's GEMtrak tracking system ("GEMtrak"), and marketing
and selling such systems to commercial customers (the "Mobile Information
Business" and, together with the Space Business, the "Business"); and
WHEREAS, Orbital desires to purchase from Seller substantially all the
assets (including the stock of certain subsidiaries) pertaining to the Business
and to assume certain specified liabilities of Seller related thereto, in each
case on the terms and subject to the conditions set forth in this Agreement (it
being understood that Orbital is not acquiring the business of, or product
lines sold by, business segments of Seller other than the Business except to
the extent specifically provided herein).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, Orbital and Seller hereby agree as
follows:
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SECTION 1
DEFINITIONS
1.1. Cross Reference Table of Certain Defined Terms. The following
terms are defined in the Sections set forth below, and shall have the
respective meanings therein defined:
<TABLE>
<CAPTION>
Term Section
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<S> <C>
"Acquisition Transaction" Section 5.2
"Accounts Receivable" Section 2.1.3
"Acquired Subsidiaries" Section 2.1.11
"Agreement" Preamble
"Business" Recitals
"Cash Consideration" Section 2.5
"Charter Documents" Section 3.1
"Claim" Section 7.5
"Closing" Section 2.9
"Closing Date" Section 2.9
"Computer Software" Section 1.2.13
"Closing Statement" Section 2.6.1
"Deferred Consideration Period" Section 1.2.20
"Employees" Section 3.17(f)
"ERISA" Section 3.17
"Excluded Assets" Section 2.2
"Excluded Liabilities" Section 2.4
"Financial Statements" Section 3.8
"FSAs" Section 5.13
"GAAP" Section 3.8
"GEMtrak" Recitals
"Government Contract" Section 3.19
"Government Subcontract" Section 3.19
"Hazardous Substance" Section 3.21
"Indebtedness" Section 3.7
"Indemnifying Party" Section 7.1
"Indemnitee" Section 7.1
"Inventory" Section 2.1.1
"Liens" Section 3.5
"Mobile Information Business" Recitals
"Most Recent Statement" Section 3.8
"Most Recent Statement Date" Section 3.8
</TABLE>
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<TABLE>
<S> <C>
"Net Tangible Assets" Section 2.6.1
"Orbital" Preamble
"Orbital Financial Statements" Section 4.4
"Overlap Period" Section 5.15.3
"PCBs" Section 3.21
"Plans" Section 3.17
"Post-Closing Periods" Section 5.15.4
"Purchase Price" Section 2.5.1
"Purchased Assets" Section 2.1
"Retained Receivables" Section 2.5.2
"SEC Reports" Section 4.3
"Section 338(h)(10) Election" Section 5.15.9
"Seller" Preamble
"Space Business" Recitals
"Stockholder Meeting" Section 5.20
"Tax Benefits" Section 5.15.6
"Tax Detriments" Section 5.15.6
</TABLE>
1.2. Definitions of Certain Additional Terms. The following terms
shall have the meanings set forth below:
1.2.1. "Affiliate" has the meaning set forth in Rule 12b-2
under the Exchange Act.
1.2.2. "Business Assets" means the Purchased Assets (other than
the capital stock of the Acquired Subsidiaries) and all assets,
properties and rights, tangible or intangible, of any Acquired
Subsidiary.
1.2.3. "Business Intellectual Property Rights" means all
Intellectual Property Rights of Seller used principally in the Business
and all Intellectual Property Rights of each Acquired Subsidiary.
1.2.4. "CBCA" means the Colorado Business Corporation Act, as
amended.
1.2.5. "Code" means the United States Internal Revenue Code of
1986, as amended.
1.2.6. "Contract" means all contracts, agreements, deeds,
mortgages, leases (whether or not capitalized), licenses, instruments,
commitments, sales
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orders, purchase orders, quotations, bids, undertakings, arrangements
or understandings, written or oral, (i) to which or by which any
Acquired Subsidiary is a party or otherwise bound, or (ii) principally
relating to the Business or the Business Assets to which or by which
Seller is a party or otherwise bound.
1.2.7. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.2.8. "FAR" means the Federal Acquisition Regulations, 48
C.F.R. 1, et seq. as in effect from time to time.
1.2.9. "GEMtrak Revenues" means all revenues, determined in
accordance with GAAP applied in a manner consistent with the
preparation of Orbital's financial statements, that would constitute
revenues attributable to the terrestrial-based tracking of unpowered
assets using Seller's asset-monitoring system described in its United
States patent application Serial No. 08/674,577, including without
limitation any such revenues attributable to sales of related hardware.
1.2.10. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.2.11. "Income Tax" means any Tax (including any interest,
addition to Tax or penalty) based upon or computed by reference to
income or profits, and any corporate franchise Tax.
1.2.12. "Income Tax Return" means any Tax Return relating to an
Income Tax.
1.2.13. "Intellectual Property Rights" means, collectively: (a)
all U.S. and foreign registered, unregistered and pending (i) trade
names, trade dress, trademarks, service marks, assumed names, business
names and logos, and all registrations and applications therefor, (ii)
all computer software, data files, source and object codes, user
interfaces, manuals and other specifications and documentation and all
know-how related thereto (collectively, the "Computer Software"),
copyrights (including, without limitation, those in Computer Software,
and all registrations and applications therefor), (iii) technical
information, data, process technology, technical papers, plans,
drawings and blue prints, (iv) all patents, patent applications, and
inventions and discoveries that may be patentable, registered designs
and invention disclosures (including, without limitation, those in
Computer Software), (v) all know-how, trade secrets,
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proprietary inventions, proprietary processes, proprietary formulae,
proprietary know-how, proprietary concepts, proprietary ideas,
proprietary research and development, and proprietary designs, and
(vi) all other intellectual property, and (b) all licenses,
sublicenses, assignments in respect thereto and rights thereunder,
remedies against infringements thereof and rights to protection of
interest therein relating to the items set forth in clause (a) above.
1.2.14. "Loss" means all liabilities, obligations, judgments,
liens, injunctions, charges, orders, decrees, rulings, damages,
demands, claims, losses, dues, assessments, Taxes, losses, fines,
penalties, expenses, fees, costs, and amounts paid in settlement
(including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling
any action or threatened action).
1.2.15. "Material Adverse Effect" means any effect or change
that does have, or would reasonably be expected to have, a material
adverse effect on the business, financial condition, operating results
or prospects of the Business or the Business Assets taken as a whole.
1.2.16. "Securities Act" means the Securities Act of 1933, as
amended.
1.2.17. "SEC" means the Securities and Exchange Commission.
1.2.18. "Seller's knowledge" or "known to Seller" means the
actual knowledge of each person listed on Schedule 1.2.18.
1.2.19. "STARBus Bus" means the "STARBus" satellite bus
currently marketed by Seller or any modifications or derivatives
thereof that do not exceed 4,300 watts in total spacecraft power, do
not exceed 4,000 pounds in launch mass and are SPELDA-compatible.
1.2.20. "STARBus Bus Contract" means a definitive written
agreement entered into subsequent to the Closing and prior to the
fifth anniversary of the Closing (the "Deferred Consideration Period")
providing for the binding purchase by a third party (excluding (i)
Orbital, ORBCOMM Global, L.P., ORBCOMM USA L.P., ORBCOMM
International, L.P. and Orbital Imaging Corporation, (ii) any
satellite customer specified on Schedule 1.2.20, and (iii) any entity
that currently is a Subsidiary of any Person described in the
foregoing clauses (i) and (ii)) of a STARBus Bus (but not the
associated payload) from Orbital or any of its Subsidiaries. A
customer option for a STARBus Bus shall not be considered a
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STARBus Bus Contract until the written exercise of such option by the
customer and at such time shall be deemed to be a separate STARBus Bus
Contract.
1.2.21. "STARBus Contract" means a STARBus Bus Contract or a
STARBus Satellite Contract.
1.2.22. "STARBus Satellite" means a geosynchronous satellite
including payload that uses the STARBUS Bus.
1.2.23. "STARBus Satellite Contract" means a definitive
written agreement entered into during the Deferred Consideration
Period providing for the binding purchase by a third party (excluding
(i) Orbital, ORBCOMM Global, L.P. , ORBCOMM USA L.P., ORBCOMM
International, L.P. and Orbital Imaging Corporation, (ii) any
satellite customer specified on Schedule 1.2.20, and (iii) any entity
that currently is a Subsidiary of any Person described in the
foregoing clauses (i) and (ii)) of a STARBus Satellite from Orbital or
any of its Subsidiaries. A customer option for a STARBus Satellite
shall not be considered a STARBus Satellite Contract until the written
exercise of such option by the customer and at such time shall be
deemed to be a separate STARBus Satellite Contract. A STARBus
Satellite Contract shall, for purposes of Section 2.7.1, be considered
to provide for a STARBus Satellite but not a STARBus Bus.
1.2.24. "STARBus Threshold Amount" means a number of STARBus
Buses subject to STARBus Bus Contracts and STARBus Satellites subject
to STARBus Satellite Contracts for which the sum of (a) the number of
such STARBus Buses plus (b) two times the number of such STARBus
Satellites, exceeds 10.
1.2.25. "Subsidiary" shall mean, with respect to any
corporation, any other corporation, association or other business
entity a majority (by number of votes) of the shares of capital stock
(or other voting interests) of which is owned directly or indirectly
by such corporation.
1.2.26. "Tax" means any federal, state or local tax or any
foreign tax (including, without limitation, any net income, gross
income, profits, premium, estimated, excise, sales, value added,
services, use, occupancy, gross receipts, franchise, license, ad
valorem, severance, capital levy, production, stamp, transfer,
withholding, employment, unemployment, social security (including
FICA), payroll or property tax, customs duty, or any other
governmental charge or assessment), together with any interest,
addition to tax, or penalty.
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1.2.27. "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
1.2.28. "Transaction Agreements" means this Agreement, the
bill of sale and assignment and assumption agreement referred to in
Section 6.3.3 and the general assignment of the Business Intellectual
Property Rights referred to in Section 6.2.3.
1.3. Other Definitional Provisions. The words "hereof" and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provisions of this
Agreement. The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
SECTION 2
PURCHASE AND SALE OF THE PURCHASED ASSETS
2.1. Purchased Assets. Seller agrees to sell, assign and transfer
to Orbital, and Orbital agrees to purchase from Seller at the Closing, all
Seller's right, title and interest as of the Closing Date in and to all assets,
properties and rights of Seller, tangible and intangible, owned or used by
Seller that are principally used in or principally relate to the Business,
including without limitation the specific assets set forth below, as such
assets exist on the Closing Date (the "Purchased Assets"). Notwithstanding the
foregoing, the Purchased Assets shall not include the Excluded Assets.
2.1.1. All inventory held by or for Seller (the "Inventory")
for use in the conduct of the Business (including without limitation
raw material, work in process, finished goods, service parts and
supplies), including without limitation the inventory set forth on
Schedule 3.3 to the extent not sold in the ordinary course of business
prior to the Closing Date.
2.1.2. All furniture, fixtures, equipment, machinery,
computer hardware, parts, tools, dies, jigs, automobiles, trucks,
tractors, trailers, chemicals and other tangible personal property
held by or for Seller and principally used in the conduct of the
Business, including without limitation the items set forth on Schedule
3.3 to the extent not consumed or disposed of in the ordinary course
of business prior to the Closing Date.
2.1.3. Accounts receivable of Seller arising from the
conduct of the Business (other than the Retained Receivables),
including without limitation the
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accounts receivable of Seller set forth on the Closing Statement (the
"Accounts Receivable").
2.1.4. All claims and similar rights (and benefits arising
therefrom) of Seller, including without limitation all warranty rights
against suppliers, principally related to or principally arising out
of the Business or the Purchased Assets.
2.1.5. All governmental permits, authorizations, licenses,
orders, registrations, certificates, variances, approvals, consents,
franchises and directives set forth on Schedule 3.20(a).
2.1.6. All Seller's rights under the Contracts, including
without limitation all Seller's rights under those Contracts listed on
Schedule 3.22.
2.1.7. All Business Intellectual Property Rights of Seller,
including without limitation those set forth on Schedule 3.6.1.
2.1.8. All books and records of Seller that pertain
principally to the Business or the Purchased Assets, including without
limitation customer lists, customer records, Tax Returns and other
information, distributor lists, supplier lists, mailing lists,
business and marketing plans, product brochures and other advertising
and marketing material, studies, reports, payroll, inventory,
maintenance and asset history records, ledgers, books of original
entry and all historical source data and other information
electronically stored or otherwise recorded.
2.1.9. All claims, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off and
rights of recoupment of Seller that relate principally to the Business
or Purchased Assets.
2.1.10. All rights of Seller to or in connection with prepaid
expenses principally relating to the Business or Purchased Assets,
including without limitation the prepaid expenses of Seller set forth
on the Closing Statement.
2.1.11. All the outstanding capital stock of the following
Subsidiaries of Seller: Engineering Technologies, Inc., a Virginia
corporation, and CTA Commercial Systems, a Virginia corporation
(together with their direct and indirect Subsidiaries, the "Acquired
Subsidiaries").
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2.1.12. All equity or other interests held directly by Seller
in each of (i) EarthWatch Incorporated, a Colorado corporation, and
(ii) Constellation Communications Incorporated, a Delaware
corporation.
2.1.13. To the extent not otherwise included in this Section
2.1, all assets set forth on the Closing Statement.
2.2. Excluded Assets. Notwithstanding anything to the contrary
in Section 2.1, the Purchased Assets shall not include any of the following
assets of Seller as the same exist on the Closing Date (collectively, the
"Excluded Assets"):
2.2.1. Claims and litigation against third parties,
including without limitation claims for refunds, to the extent such
claims or litigation are related to Taxes or are not related to the
Purchased Assets or Assumed Liabilities.
2.2.2. Insurance policies of Seller and rights in connection
therewith, including without limitation any rights to claims, premium
adjustments, refunds or other prepaid expenses thereunder or related
thereto.
2.2.3. All Plans of Seller (including without limitation
Plans under which the Acquired Subsidiaries are participating
employers), and all assets of such Plans.
2.2.4. Checkbooks, canceled checks and Tax Returns of
Seller.
2.2.5. The outstanding capital stock of the following
Subsidiaries of Seller: CTA International Ltd., HITEC Telespace,
S.A., CTA Launch Services, Inc. and CTA Simulation Systems, LLC.
2.2.6. The Retained Receivables.
2.2.7. Intercompany accounts receivable except to the extent
set forth on the Closing Statement.
2.2.8. All assets principally related to the information
technology business currently conducted by Seller and its Subsidiaries
(other than the Acquired Subsidiaries).
2.2.9. Except to the extent set forth on the Closing
Statement, cash (including without limitation cash generated by
accounts receivable payments), bank deposits, marketable securities or
other cash equivalents.
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2.2.10. Rights under license agreements with respect to
Deltek software, Microframe Project Management software and Lotus
ccMail software.
2.2.11. All rights to the corporation names, business names,
logos, trade names and trademarks listed in Schedule 3.6.2.
2.3. Assumption of Liabilities. Upon the terms and subject to the
conditions herein, at the Closing, Orbital shall assume and agree to discharge
and perform when due, only the following liabilities and obligations of Seller
(the "Assumed Liabilities"):
2.3.1. All liabilities of Seller to the extent reflected on,
or in respect of liabilities of Acquired Subsidiaries to the extent
reflected on, the Closing Statement.
2.3.2. Liabilities and obligations of Seller under the
Contracts (including without limitation, Government Contracts and
Government Subcontracts) assigned, novated or to be novated pursuant
to this Agreement.
2.3.3. Without limiting Section 2.3.1, liabilities of Seller
to Employees in respect of accrued but unpaid wages, accrued vacation
time and accrued personal time, in each case solely to the extent such
liabilities are reflected on the Closing Statement.
The agreement by Orbital to assume the foregoing liabilities shall not create
any third party beneficiary rights. Orbital acknowledges that after the
Closing each of the Acquired Subsidiaries shall remain obligated for its
liabilities incurred prior to Closing (subject to Sections 5.15 and 7.2).
2.4. Excluded Liabilities. Notwithstanding any other provision of
this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.3, Orbital shall not assume or be responsible for any liability or
obligation, whether fixed or contingent, known or unknown, matured or
unmatured, of Seller (the "Excluded Liabilities"), including without
limitation:
2.4.1. Any intercompany liabilities of Seller.
2.4.2. Any liabilities of Seller for any Tax (including any
such Tax payable in connection with the transfer of the Purchased
Assets from Seller to Orbital), whether or not incurred prior to the
Closing Date, except to the extent
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such liability is reflected on the Closing Statement, and any
obligation of Seller to file any Tax Returns in respect of such Taxes.
2.4.3. Any liability or obligation of Seller with respect to
indebtedness for borrowed money.
2.4.4. Any liability or obligation of Seller arising out of
any Plan established or maintained by Seller or any of its
Subsidiaries or to which Seller or any of its Subsidiaries
contributes, or any liability of Seller relating to the participation
of the Employees in any such Plan.
2.4.5. Except as specifically set forth in Section 2.3.3,
any liability or obligation to or in respect of any employee or former
employee of Seller, including without limitation (i) any obligation or
liability to make payments for accrued sick days, (ii) any obligation
or liability to pay any retention bonus, (iii) any obligation or
liability to make severance or similar payments, (iv) any employment
agreement, whether or not written, between Seller and any employee,
including without limitation any agreement with Ricardo de Bastos or
Bonnie A. Clausen, II or the Consulting Agreement dated September 6,
1996 between Seller and Martin N. Titland and (v) any claim of an
unfair labor practice, or any claim under any state unemployment
compensation or any federal or state workers' compensation law or
regulation or any claim of harassment or discrimination, which shall
have been asserted on or prior to the Closing Date or is based on acts
or omissions which occurred on or prior to the Closing Date.
2.4.6. Any liability or obligation arising from the matters
that are the subject of (i) the lawsuit captioned Thomas van der
Heyden v. CTA Incorporated, et al., Case No. 156956, filed on October
10, 1996 in the Circuit Court of Maryland for Montgomery County, and
the related arbitration proceeding, (ii) the arbitration proceeding
captioned Volunteers in Technical Assistance v. CTA, Incorporated
before party-appointed arbitrators in Washington, D.C., (iii) the
proceeding captioned DBSIndustries, Inc. v. CTA, Inc., Opposition No.
97,765, filed on June 21, 1995 in the United States Patent and
Trademark Office, Trademark Trial and Appeals Board, and (iv) the
administrative proceeding captioned In the Matter of Sylvia Jackson,
filed in February 1997 in the Fairfax County Office of Human Rights.
2.4.7. Any liability or obligation of Seller arising out of
or in connection with storage, release or disposal of any hazardous or
toxic substance, including without limitation a "hazardous substance"
as defined in 42 U.S.C. Section 9601(14) and oil, gasoline and other
petroleum-based substances.
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2.4.8. Any liability or obligation of Seller (except to the
extent reflected on the Closing Statement) arising out of or related
to any Government Contract or Government Subcontract to the extent
such liability or obligation results from (i) any violation or
noncompliance prior to Closing of or with any Cost Accounting
Standard, Disclosure Statement, FAR provision (including without
limitation Cost Principles), or agency FAR supplemental provisions,
(ii) any false claims or defective pricing occurring prior to Closing,
or (iii) any cost disallowance relating to costs incurred prior to
Closing.
2.4.9. Any liability or obligation to indemnify any person
by reason of the fact that such person was a director, officer,
employee or agent of Seller or was serving at the request of Seller as
a partner, trustee, director, officer, employee or agent of another
entity.
2.4.10. Except for liabilities under the Contracts assigned,
novated or to be novated pursuant to this Agreement, any liability or
obligation for products manufactured or sold or services rendered by
Seller prior to the Closing Date, including without limitation any
liability arising from any injury to or death of any person or damage
to or destruction of any property, and regardless of whether based on
negligence, breach of warranty, strict liability, enterprise liability
or any other legal or equitable theory.
2.4.11. Any liability or obligation principally relating to
or arising out of Seller's Information Technology Services business.
2.5. Purchase Price.
2.5.1. Subject to adjustments as provided in Section 2.6,
the purchase price (the "Purchase Price") to be paid by Orbital to
Seller for the Purchased Assets and the covenant not to compete of
Seller and its Affiliates set forth in Section 5.8, in addition to the
assumption of the Assumed Liabilities and the payments to certain of
Seller's lenders to be made pursuant to Section 6.1.2, shall be
(a) $18,000,000 (subject to adjustment pursuant to Section 2.5.3),
minus the face amount of the Retained Receivables, in cash or
immediately available funds (the "Cash Consideration") to be
paid subject to the holdback of $3,000,000 reflected in
Section 2.6.3 and Section 6.1.1, plus
(b) the right to receive the additional payments specified in
Section 2.7.
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2.5.2. Seller shall specifically identify in writing to
Orbital accounts receivable of Seller and the Acquired Subsidiaries of
not less than $6,000,000 as receivables to be retained by Seller at
least two business days prior to Closing (such accounts receivable,
the "Retained Receivables"), the selection of such receivables to be
in Seller's sole discretion.
2.5.3. The amount of $18,000,000 set forth in Section
2.5.1(a) and the amount of $29,555,849 set forth in Section 2.6.3
shall be reduced by the book value of the EarthWatch Incorporated
securities described in Section 2.1.12, in the amount of $2,037,500
(as such amount may be adjusted to reflect receipt of additional
securities), if such securities are not delivered at Closing.
2.6. Closing Statement and Indostar Adjustment.
2.6.1. As promptly as practicable, and in any event within
45 days of Closing, Orbital and Seller shall jointly prepare or cause
to be prepared a consolidated balance sheet for the Business as of the
Closing Date (as initially prepared, and as subsequently determined in
accordance with this Section 2.6, the "Closing Statement"). The
Closing Statement shall be in the form of, and shall be prepared in
accordance with GAAP on a basis consistent with, the Most Recent
Statement (which is attached hereto as Exhibit 2.6), but in any event
shall not include any assets other than Business Assets or any
liabilities other than Assumed Liabilities and liabilities of the
Acquired Subsidiaries. Orbital and Seller shall jointly also prepare
or cause to be prepared a written statement calculating the total
tangible assets of the Business minus the total liabilities of the
Business as of the Closing Date, as reflected on the Closing Statement
(the "Net Tangible Assets"). (By way of example, the total tangible
assets are $37,793,707, the total liabilities are $8,237,857, and the
Net Tangible Assets are $29,555,849, all as reflected on the Most
Recent Statement.)
2.6.2. If Orbital and Seller cannot agree on the final
Closing Statement or the calculation of Net Tangible Assets within 45
days of the Closing either party may submit the dispute to the
Washington, D.C. office of Coopers & Lybrand LLP, or if such firm
declines to serve, then to the Washington, D.C. office of Price
Waterhouse LLP, for resolution within 30 days or as soon thereafter as
reasonably practicable. Such firm of accountants shall determine on
the basis of the standards set forth in Section 2.6.1, and only with
respect to the remaining differences so submitted, whether and to what
extent, if any, the Closing Statement and the calculation of Net
Tangible Assets require adjustment. The decision by such firm of
accountants shall be final and binding on the parties. The costs and
expenses of such accountants shall be paid equally by Orbital and
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Seller. Orbital and Seller shall make available to such firm of
accountants all relevant books and records and work papers (including,
if available, work papers of their respective accountants) relating to
the Most Recent Statement or the Closing Statement, and all other
information reasonably requested by such firm of accountants.
2.6.3. Upon final determination of the Net Tangible Assets,
either by agreement between Seller and Orbital or determination in
accordance with Section 2.6.2, (a) if the Net Tangible Assets exceed
$29,555,849 minus the face amount of the Retained Receivables, the
Purchase Price shall be increased by the amount of such excess up to a
maximum increase of $3,000,000, and (b) if the Net Tangible Assets are
less than $29,555,849 minus the face amount of the Retained
Receivables, the Purchase Price shall be decreased by the amount of
such shortfall up to a maximum decrease of $3,000,000. Orbital shall,
within ten business days after the final determination of the Net
Tangible Assets, pay to Seller in cash or immediately available funds
the remaining Cash Consideration due under Section 2.5.1(a) of
$3,000,000 plus or minus the increase or decrease, as the case may be,
in the Purchase Price. Any payment by Orbital after the applicable
due date shall bear simple interest at the annual rate of 12.0%.
2.6.4. If within 45 days of Closing, Seller shall not (i)
have delivered to Orbital a correct and complete, fully executed copy
of the Pt. Media Citra Indostar contract modification with respect to
the media gateway facility in form and substance reasonably acceptable
to Orbital, and (ii) resolved, in a manner and form reasonably
acceptable to Orbital, credits associated with change orders 3 and 7,
then the Purchase Price shall be automatically reduced by $700,000 or
such lower amount upon which the parties agree within 50 days of
Closing. Within 55 days of Closing, Seller shall pay to Orbital the
amount of the reduction, if any, in Purchase Price determined pursuant
to this Section 2.6.4 in cash or immediately available funds. Any
payment by Seller after the applicable due date shall bear simple
interest at the annual rate of 12.0%. Any reduction to Purchase Price
pursuant to this Section 2.6.4 shall be in addition to, and shall in
no way reduce or be reduced by, any adjustment to Purchase Price that
may be made pursuant to Sections 2.6.1, 2.6.2 and 2.6.3.
2.7. Deferred Consideration.
2.7.1. If Orbital or any of its Subsidiaries enters into one
or more STARBus Contracts providing for an aggregate number of STARBus
Buses and STARBus Satellites in excess of the STARBus Threshold
Amount, then Seller
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shall be entitled in respect of each such STARBus Bus or STARBus
Satellite in excess of the STARBus Threshold Amount (determined
chronologically by the date of the relevant STARBus Contract) up to an
aggregate amount determined as follows (the maximum amount payable in
respect of each such STARBus Bus under a STARBus Bus Contract or
STARBus Satellite under a STARBus Satellite Contract is referred to as
the "Seller Payment" for such STARBus Bus or STARBus Satellite):
(a) $3,000,000 for each STARBus Satellite that is to be built pursuant to
the first STARBus Contract entered into by such customer (other than a
customer listed on Schedule 2.7.1),
(b) $2,000,000 for each STARBus Satellite that is to be built for a
customer (other than a customer listed on Schedule 2.7.1) that has
entered into a prior STARBus Contract,
(c) $2,000,000 for each STARBus Satellite that is to be built pursuant to
the first STARBus Contract entered into by a customer listed on
Schedule 2.7.1,
(d) $1,000,000 for each STARBus Satellite that is to be built for a
customer listed on Schedule 2.7.1 that has entered into a prior
STARBus Contract,
(e) $1,500,000 for each STARBus Bus that is to be built pursuant to the
first STARBus Contract entered into by such customer (other than a
customer listed on Schedule 2.7.1),
(f) $1,000,000 for each STARBus Bus that is to be built for a customer
(other than a customer listed on Schedule 2.7.1) that has entered into
a prior STARBus Contract,
(g) $1,000,000 for each STARBus Bus that is to be built pursuant to the
first STARBus Contract entered into by a customer listed on Schedule
2.7.1, and
(h) $500,000 for each STARBus Bus that is to be built for a customer
listed on Schedule 2.7.1 that has entered into a prior STARBus
Contract.
For each such STARBus Bus or STARBus Satellite for which the customer
is not in breach of its payment obligations under the relevant STARBus
Contract (it being understood that any payments made prior to such
breach shall be retained by Seller and upon the cure of any such
breach Seller shall be entitled to all
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payments to which Seller would have been entitled had the breach not
occurred), Seller shall be entitled to the Seller Payment as follows:
(a) one-third of the total Seller Payment on contract signing, (b)
one-third of the total Seller Payment on Orbital's (or its
Subsidiary's) receipt of cumulative payments for such STARBus BUS or
STARBus Satellite equal to fifty percent of the then total expected
payments due therefor under the relevant STARBus Contract, and (c)
one-third of the total Seller Payment on delivery of the STARBus Bus
or STARBus Satellite under the terms of the relevant STARBus Contract;
provided, however, that in no event shall Seller be entitled to any
portion of a Seller Payment that exceeds the cumulative payments
received by Orbital for such STARBus Satellite under the relevant
STARBus Contract. All such amounts shall be paid within 30 days of
the relevant event, and any payment after the applicable due date
shall bear simple interest at the annual rate of 12%. For purposes of
the foregoing, in the event of any termination of a STARBus Contract
prior to delivery of the relevant STARBus Bus or STARBus Satellite,
such STARBus Bus or STARBus Satellite shall not be considered in
determining whether the STARBus Threshold Amount has been exceeded.
If such change in the number of STARBus Buses or STARBus Satellites
would have resulted in a change in the amount of payments made
pursuant to this Section 2.7.1, all amounts to which Seller had become
or would become entitled to under this Section 2.7.1 shall be
recomputed, and any overpayments resulting from such recomputation
shall be applied as credits against any future amount otherwise owed
by Orbital under this Section 2.7.1. (E.g., if after Seller Payments
have been made for the first STARBus Satellite in excess of the
STARBus Threshold Amount, the STARBus Contract for an earlier STARBus
Satellite were terminated, such subsequent STARBus Satellite would
then not exceed the STARBus Threshold Amount, Seller would not be
entitled to Seller Payments in respect thereof, and any resulting
overpayment would be applied as a credit against any future amount
otherwise owed under this Section 2.7.1. If, however, the STARBus
Contract for a STARBus Satellite in excess of the STARBus Threshold
Amount were terminated prior to delivery, no recomputation would be
necessary and Seller would be entitled in respect of such STARBus
Satellite to the portion of the Seller Payment determined in
accordance with the second sentence of this Section 2.7.1.)
Notwithstanding the foregoing, any Seller Payment otherwise due shall
be reduced by the amount of any payments owed by Orbital or its
Subsidiaries (including the Acquired Subsidiaries) under the van der
Heyden Profit Sharing Agreement (up to a total reduction of $750,000
for the STARBus Contract for which such Seller Payment is due).
2.7.2. Seller shall also be entitled to an amount equal to
3% of all cumulative GEMtrak Revenues in excess of $50,000,000 accrued
during the
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Deferred Consideration Period. Payments shall be calculated as of
June 30 and December 31 of each year and shall be payable in arrears
within 45 days thereafter. Any payments after the applicable due
date shall bear simple interest at an annual rate of 12.0%.
2.7.3. Each payment pursuant to this Section 2.7 shall be
accompanied by a reasonably detailed schedule setting forth the
computation of the payment and any relevant documentation supporting
the payment calculation. If Seller disputes any calculations shown in
the schedule accompanying a payment, Seller shall give written notice
thereof to Orbital no later than 30 days after receipt thereof. Such
notice of dispute shall include a reasonably detailed description of
the disputed items. Any additional payment determined to be owing
upon final resolution of such dispute shall be paid by Orbital within
ten business days after such resolution. Any payment after such date
shall bear simple interest at the annual rate of 12.0%.
2.7.4. During the Deferred Consideration Period, Orbital (i)
shall maintain adequate books of account and records, in which
complete entries will be made accurately and fairly reflecting all
financial transactions relevant to this Section 2.7 relating to the
STARBus Contracts and GEMtrak, and (ii) shall maintain such books of
account and records in a manner that allows determination of the
revenues and payments made in respect thereof to be made separately
from the revenues and payments made in respect of the balance of its
businesses. Orbital shall, upon reasonable notice, provide Seller and
its accountants access during normal business hours to the books and
records referred to above and to any other information reasonably
requested by Seller in order to verify Orbital's calculation of any
payments due under this Section 2.7.
2.7.5. Subject to Section 2.7.7, during the Deferred
Consideration Period, Orbital shall not sell or otherwise transfer all
or substantially all of its STARBus Satellite business or its GEMtrak
business unless Orbital's obligations under this Section 2.7
(including this Section 2.7.5) are expressly assumed by the acquiring
person pursuant to an assumption agreement that expressly states that
Seller is a third party beneficiary thereof.
2.7.6. Each payment pursuant to this Section 2.7 shall be
deemed to include an interest component and a principal component,
each such interest component to be calculated at the lowest rate so as
to avoid the imputation of interest under Sections 483 and 1274 of the
Code.
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2.7.7. Seller acknowledges that following the Closing,
notwithstanding anything herein to the contrary, Orbital will operate
its business, including without limitation its business in respect of
STARBus Satellites and GEMtrak, in its sole discretion and in
accordance with the best interest of Orbital, under the direction and
in accordance with the business judgment of Orbital's board of
directors as constituted subsequent to the Closing, and that Orbital
will have no liability to Seller under this Section 2.7 or otherwise
for any failure to attain or realize any Contract for a STARBus Bus or
Satellite or the payment or other terms thereof or any termination
thereof or any failure to attain or realize any GEMtrak revenues.
2.8. Allocation of Purchase Price. The aggregate purchase price
(including any deferred consideration payable pursuant to Section 2.7) as
determined for federal Income Tax purposes will be allocated to the Purchased
Assets by Orbital and Seller for Tax and financial reporting purposes in
accordance with the allocations set forth on Schedule 2.8. Each of Orbital and
Seller shall execute and timely file Forms 8594 under the Code consistent with
Schedule 2.8 and upon either party's reasonable request the other party shall
execute and file such other documents as may be necessary to document such
allocation.
2.9. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Ropes & Gray, One
Franklin Square, 1301 K Street NW, Suite 800 East, Washington, D.C. at 9:00
a.m. on the second business day following the later to occur of (i) the
Stockholder Meeting and (ii) the expiration or termination of the HSR Act
waiting period, or on such other date as Orbital and Seller may agree upon in
writing (the "Closing Date").
SECTION 3
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Orbital to enter into this Agreement, Seller hereby
represents and warrants as follows:
3.1. Due Organization, Authorization and Good Standing of Seller.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, and each Acquired Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation as listed in Schedule 3.1. Each
of Seller and each Acquired Subsidiary is duly qualified to do business and is
in good standing as a foreign corporation and licensed or qualified to transact
business in the jurisdictions set forth in Schedule 3.1. The jurisdictions
listed on Schedule 3.1 for each Acquired Subsidiary are the only jurisdictions
where such
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Acquired Subsidiary is required to be qualified by reason of the nature of the
business conducted by it or the properties or assets owned, operated or leased
by it, other than such failures to be so licensed or qualified that do not have
a Material Adverse Effect. Seller has the requisite corporate power and
authority to execute, deliver and perform its obligations under each of the
Transaction Agreements and all transactions contemplated thereby. The
execution, delivery and performance by Seller of this Agreement and the other
Transaction Agreements to which Seller will be a party, and the consummation by
Seller of the transactions contemplated hereby and thereby, have been duly and
validly authorized and approved by all necessary corporate action in respect
thereof on the part of Seller, other than approval by the stockholders of
Seller at the Stockholder Meeting. This Agreement has been duly executed and
delivered by Seller and constitutes, and each of the other Transaction
Agreements to which Seller will be a party will be duly executed and delivered
at Closing and will constitute, the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization and similar laws of general
applicability affecting the rights and remedies of creditors and to general
principles of equity, regardless of whether enforcement is sought in
proceedings in equity or at law. Each of the Acquired Subsidiaries has full
corporate power and authority to carry on its business as now conducted and to
own or lease and to operate its properties and assets. True, complete and
correct copies of the charter and by-laws (the "Charter Documents") of Seller
and each of Acquired Subsidiaries as in effect on the date hereof have
heretofore been delivered to Orbital.
3.2. No Violation or Approval. Except as described in clause (x)
below, the execution, delivery and performance by Seller of the Transaction
Agreements to which it is a party and the consummation of the transactions
contemplated under the Transaction Agreements does not and will not result in
(i) a violation of any order, judgment or decree of any court or any
governmental agency or body having jurisdiction over Seller or the Acquired
Subsidiaries or the Business Assets, or (ii) except as set forth on Schedule
3.2, a breach or a default or the acceleration of any payment obligation under
(whether immediately, upon the passage of time or after the giving of notice),
or otherwise require a consent or waiver under, (a) any Contract required to be
listed on Schedule 3.22, or (b) any other material agreement, instrument,
lease, contract, mortgage, deed or license to which Seller or any of its
Acquired Subsidiaries is a party or by which any of them or any of their assets
are bound or (iii) a violation of or a conflict with any of their Charter
Documents. Except as set forth on Schedule 3.2, no consent, approval, order or
authorization of, or declaration or filing with, any governmental authority or
entity or other party is required to be obtained or made by Seller or the
Acquired Subsidiaries in connection with the execution, delivery and
performance of or the consummation by Seller of the transactions contemplated
by the Transaction Agreements other than (x) required consents or approvals of
the United
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States government to the assignment or novation of those Contracts on Schedule
3.22 that are identified therein as Government Contracts or Government
Subcontracts and to which Seller is a party, (y) the expirations of the waiting
period and any extensions thereof as prescribed by the regulations promulgated
under the HSR Act, and (z) such consents, approvals, orders or authorizations
of, or declarations or filings with, any governmental authority or entity or
other party the failure of which to make or obtain do not have a Material
Adverse Effect.
3.3. Business Assets. Schedule 3.3 sets forth a true and complete
list of all tangible Business Assets, in each case indicating the owner of such
Business Assets, a description of such Business Assets, the in-service dates of
such Business Assets, the depreciation methods and periods of such Business
Assets and the net book value of such Business Assets.
3.4. All Assets Necessary to Conduct Business. Except for Deltek
software, Lotus ccMail software and Microframe Project Manager software and
such other assets that can be obtained at a cost in the aggregate of less than
$250,000, the Business Assets constitute all the assets, properties and rights
necessary to conduct the Business as currently conducted.
3.5. Subsidiaries. Schedule 3.5 sets forth the name, jurisdiction
of incorporation, authorized capitalization and record ownership of all issued
and outstanding shares of capital stock of each Acquired Subsidiary. Except
for the equity investments set forth in Schedule 3.5, no Acquired Subsidiary
owns, directly or indirectly, any capital stock, any partnership or equity or
other ownership interest in, or any security issued by, any other corporation,
organization, association, entity or business enterprise. The sole business of
each Acquired Subsidiary is the Business. Except as set forth in Schedule 3.5,
Seller or an Acquired Subsidiary owns, directly or indirectly, all of the
outstanding shares of capital stock of each of the Acquired Subsidiaries free
and clear of all liens, pledges, security interests, mortgages, claims, charges
and encumbrances ("Liens"). There is no warrant, right, option, conversion
privilege, stock purchase plan, puts, call arrangements, understandings or
other agreements or commitments providing for or obligating any of the Acquired
Subsidiaries to offer, issue, purchase or redeem any shares of capital stock or
debt or other securities convertible into or exchangeable for capital stock
(now, in the future or upon the occurrence of any contingency) or which
provides for any stock appreciation or similar right. All issued and
outstanding shares of capital stock of the Acquired Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable.
3.6. Intellectual Property Rights
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3.6.1. General. Schedule 3.6.1 lists all trademarks
(including common law marks), service marks, registrations and
applications, patent applications and trade names, relating to the
Business. Schedule 3.6.1 also sets forth all licenses, sublicenses,
agreements or standard forms thereof which Seller and the Acquired
Subsidiaries have entered into with any third party with respect to
any of the Business Intellectual Property. Neither Seller nor any of
its Subsidiaries owns any patents relating to the Business. True and
correct copies of all patent applications have been provided or made
available to Orbital.
3.6.2. Adequacy. Except as set forth in Schedule 3.6.2,
there are no Intellectual Property Rights of Seller or any Subsidiary
(other than the Acquired Subsidiaries) used or useful in connection
with the Business Assets or the Business as presently conducted or
currently contemplated by Seller to be conducted. Except for the
Intellectual Property Rights set forth on Schedule 3.6.2, the Business
Intellectual Property Rights are all Intellectual Property Rights
currently used by Seller or any Acquired Subsidiary in connection with
the Business or the Business Assets and are all those necessary for
the conduct of the Business as presently conducted, including the
manufacture and sale of all products currently under development or in
production.
3.6.3. Royalties and Licenses. Except as disclosed on
Schedule 3.6.3, neither Seller nor any Acquired Subsidiary has any
obligation to compensate any Person for the use of any Business
Intellectual Property Rights nor has Seller or any Acquired Subsidiary
granted to any Person any license, option or other rights to use in
any manner any of the Business Intellectual Property Rights, whether
requiring the payment of royalties or not.
3.6.4. Ownership. Except as set forth on Schedule 3.6.4,
each of Seller and the Acquired Subsidiaries owns, free and clear of
all Liens, or has all necessary rights to use, its respective Business
Intellectual Property Rights and, in the case of the Seller, to
transfer such Business Intellectual Property Rights to Orbital at the
Closing, and the Business Intellectual Property Rights will not cease
to be rights of either Seller or any Acquired Subsidiary (or upon the
Closing, of Orbital) or be impaired by reason of the performance of
this Agreement or the consummation of the transactions contemplated
hereby or thereby. Upon the Closing, Orbital will succeed to all
Seller's rights, title and interest in the Business Intellectual
Property Rights, including all rights, claims and damages regarding
past infringements of the Business Intellectual Property Rights, and
will be able to enforce all such rights to prevent the infringement or
misappropriation thereof.
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3.6.5. Absence of Claims. Except as set forth in Schedule
3.6.5, no other Person (i) has any ownership of or right to use any
Business Intellectual Property Rights (except such right to use such
Business Intellectual Property as would not have a Material Adverse
Effect) or has notified either Seller or any Acquired Subsidiary in
writing that it is claiming any ownership of or right to use any
Business Intellectual Property Rights or (ii) to the knowledge of
Seller, is infringing upon any such Business Intellectual Property
Rights. Seller and any Acquired Subsidiary's use of the Business
Intellectual Property Rights do not conflict with, infringe upon or
otherwise violate the valid rights of any third party anywhere in the
world where the Business is currently conducted or is currently
proposed to be conducted by Seller, no written notice has been
received and, to the Seller's knowledge, no action has been instituted
against or written notices received by either Seller or any Acquired
Subsidiary that are presently outstanding alleging that either Seller
or any Acquired Subsidiary's use of the Business Intellectual Property
Rights infringe upon or otherwise violate any rights of a third party,
except as set forth on Schedule 3.6.5.
3.6.6. Protection of Intellectual Property. Each of Seller
and the Acquired Subsidiaries has taken all steps necessary or
appropriate to safeguard and maintain the secrecy and confidentiality
of, and the proprietary rights in, all Business Intellectual Property
Rights, except to the extent that the failure to take any such actions
do not in the aggregate have a Material Adverse Effect.
3.7. Indebtedness; Guarantees. Except as set forth in the
Financial Statements, none of the Acquired Subsidiaries has indebtedness for
borrowed money or for the deferred purchase price of property or services
(other than trade payables and other accrued current liabilities incurred in
the ordinary course of business), or capital lease obligations, or conditional
sale or other title retention agreements (collectively, "Indebtedness").
Expect as set forth on Schedule 3.7, no Acquired Subsidiary is a guarantor or
otherwise liable for any liability or obligation of any other person.
3.8. Financial Statements, etc. Seller has previously furnished
Orbital with true and complete copies of the following financial statements
(such financial statements, collectively, the "Financial Statements"): (i)
unaudited statement of income of the Business for the fiscal year ended
December 31, 1996 and the accompanying statement of net tangible assets of the
Business as of December 31, 1996, and (ii) unaudited statement of income of the
Business for the five fiscal months ended May 25, 1997 and the accompanying
statement of net tangible assets (the "Most Recent Statement") as of May 25,
1997 (the "Most Recent Statement Date") each prepared from the books and
records of Seller and its consolidated Subsidiaries, which books and records
are correct and complete in all material respects. The Financial Statements
present fairly, in all material
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respects, the net tangible assets of the Business and the results of its
operations as of the respective dates and for the periods presented therein in
conformity with generally accepted accounting principles in the United States
as in effect on the applicable dates of such financial statements ("GAAP") and
applied on a consistent basis, except as noted therein and except that (i) no
notes are included with the Financial Statements, and (ii) such unaudited
financial statements may be subject to normal, recurring adjustments that would
be made in the course of an audit and that would not be material.
3.9. Absence of Changes; Operations in the Ordinary Course. Except
as set forth in Schedule 3.9, since December 31, 1996 none of the Purchased
Assets (considered as a whole) or the Business has undergone any adverse change
in its business, condition (financial or otherwise) or prospects (whether as a
result of any change as to accounts receivable, inventory or other assets, any
loss of competitive position, any natural disaster, accident, strike, sabotage
or confiscation of property, or any other event or condition directly affecting
or relating to the Business or the Purchased Assets, whether or not related to
any of the foregoing), or suffered any damage, destruction or loss (whether or
not covered by insurance), other than such changes or damage, destruction or
loss as in the aggregate do not have a Material Adverse Effect or changes in
general economic conditions. Since December 31, 1996, with the exception of
actions taken at the request of Orbital or otherwise necessary to the
consummation of the transactions contemplated by the Transaction Agreements,
and except as set forth in Schedule 3.9, Seller and each of the Acquired
Subsidiaries has operated the Business in the ordinary course, consistent in
all material respects with past practice. Without limiting the generality of
the foregoing, since December 31, 1996, except as set forth on Schedule 3.9,
(i) neither Seller nor any Acquired Subsidiary has experienced any actual
termination of any material customer Contract or received any written threat of
termination of any material customer Contract, in each case relating to the
Business, and (ii) there has been no material adverse change in the prospects
of either the Mobile Information Business, taken as a whole, or the Space
Business, taken as a whole.
3.10. Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.10, none of Seller or any Acquired Subsidiary has any liability
(whether absolute or contingent) except for (i) liabilities set forth on the
Most Recent Statement, (ii) liabilities which have arisen after the Most Recent
Statement in the ordinary course of business (none of which liabilities results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement or violation of
law), and (iii) liabilities that do not have a Material Adverse Effect.
3.11. Taxes.
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(a) Each of the Acquired Subsidiaries has filed all material Tax
Returns that it was required to file, and Seller has filed all material Tax
Returns that it was required to file with respect to the Business. All such
Tax Returns were correct and complete in all material respects. All material
Taxes owed by Seller with respect to the Business and all material Taxes owed
by any of the Acquired Subsidiaries (in each case, whether or not shown on any
Tax Return) have been paid. The Acquired Subsidiaries currently are not the
beneficiaries of any extension of time within which to file any Tax Return, and
Seller currently is not the beneficiary of any extension of time within which
to file any Tax Return with respect to the Business. None of the Acquired
Subsidiaries has received notice from an authority in a jurisdiction where it
does not file Tax Returns that it may be subject to taxation by that
jurisdiction, and Seller has not received notice from an authority in a
jurisdiction where it does not file Tax Returns that it may be subject to
taxation by that jurisdiction with respect to the Business. There are no liens
or other encumbrances on any of the assets of the Acquired Subsidiaries or any
other Business Assets that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Each of the Acquired Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party, and Seller has withheld and paid all Taxes with respect to the
Business required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
(c) There is no dispute, audit, investigation, proceeding or claim
concerning any liability with respect to Taxes of the Acquired Subsidiaries
either (i) claimed or raised by any authority in writing or (ii) as to which
Seller has knowledge based upon contact with any agent of such authority, and
there is no dispute, audit, investigation, proceeding or claim concerning any
material liability with respect to Taxes of Seller relating to the Business
either (i) claimed or raised by any authority in writing or (ii) as to which
Seller has knowledge based upon contact with any agent of such authority.
(d) None of the Acquired Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency, and Seller has not waived any statute of
limitations in respect of Taxes relating to the Business or agreed to any
extension of time with respect to a Tax assessment or deficiency relating to
the Business.
(e) None of Seller and the Acquired Subsidiaries has any liability
for the Taxes of any person other than Seller and the Acquired Subsidiaries
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise. Except
as set forth on Schedule 3.11, none of
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Seller and the Acquired Subsidiaries has been a member of an affiliated group
filing a consolidated federal Income Tax Return (or any other consolidated,
combined or unitary Income Tax Return), other than a group the common parent of
which was Seller.
(f) None of the Acquired Subsidiaries has filed a consent under Code
section 341(f) concerning collapsible corporations. None of the Acquired
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will be non-deductible under Code sections 162, 280G or
404. None of the Acquired Subsidiaries has been a United States real property
holding corporation within the meaning of Code section 897(c)(2) during the
applicable period specified in Code section 897(c)(1)(A)(ii).
(g) The unpaid Taxes of Seller relating to the Business and the
unpaid Taxes of the Acquired Subsidiaries (i) did not, as of the date of the
Most Recent Statement, exceed by any material amount the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
Most Recent Statement (rather than in any notes thereto) and (ii) will not
exceed by any material amount that reserve as set forth on the Closing
Statement.
(h) Schedule 3.11 sets forth the states in which Income or corporate
franchise Tax Returns have been filed with respect to each of the Acquired
Subsidiaries as of December 31, 1996.
3.12. Title to Tangible Assets. Each of Seller and the Acquired
Subsidiaries has good and marketable title to all real and tangible personal
Business Assets reflected in the Most Recent Statement or acquired since the
date thereof (except for property disposed of since such date in the ordinary
course of business consistent with past practice), and valid leasehold
interests in all real and tangible personal properties leased by them and used
principally in or principally related to the Business, in each case free and
clear of Liens, easements or title imperfections except (a) Liens for current
Taxes not yet due and payable, (b) encumbrances and easements that do not
materially detract from the value or interfere with the use by Seller or any of
the Acquired Subsidiaries, as the case may be, of the properties affected
thereby, (c) Liens securing Indebtedness reflected in the Financial Statements,
(d) Liens of customers on property purchased by Seller or an Acquired
Subsidiary in connection with its performance of Contracts to provide products
or services to such customers and which in the aggregate do not have a Material
Adverse Effect and (e) Liens set forth in Schedule 3.12. Seller or an Acquired
Subsidiary enjoys peaceful and undisturbed possession of all real and tangible
personal property that is the subject of the leases included within the
Contracts. All tangible personal Business Assets are in satisfactory operating
condition and repair, subject to ordinary wear and tear.
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3.13. Suppliers. Except as set forth on Schedule 3.13, neither
Seller nor any of its Subsidiaries believes, or has received any written threat
that any person or entity (including any subcontractors) with which it has an
existing binding agreement, oral or written, for the procurement of, or from
which it purchases an aggregate amount of at least $50,000 in any year, of
equipment, inventory or other supplies or services used by the Business intends
to reduce significantly delivery of any such supplies or services or default
under or terminate such agreement, whether as a result of the transactions
contemplated hereby or otherwise, other than such reductions or terminations as
in the aggregate do not have a Material Adverse Effect.
3.14. Inventory. Schedule 3.3 includes a true and complete list of
the Inventory as of the date specified therein. The Inventory is carried on a
weighted average cost inventory costing method, and except as set forth on
Schedule 3.3 is in good repair, is not obsolete, is usable and saleable in the
ordinary course of the Business as currently conducted, and to Seller's
knowledge consists of a quantity which is not excessive in kind or amount in
light of the Business. Since the Most Recent Statement Date, no Inventory has
been sold or disposed of except in the ordinary course of business consistent
with past practice.
3.15. Operations in Conformity With Law, etc. Neither Seller nor
any of the Acquired Subsidiaries has been or is in violation of, or in default
under, any law, rule, regulation, order, judgment or decree relating in any
manner or applicable to the Business or the Business Assets or any of the
Employees, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed against any of them alleging
any such violation or default, except for such violations or defaults that do
not in the aggregate have a Material Adverse Effect. Neither Seller nor any of
the Acquired Subsidiaries, nor, to the knowledge of Seller, any of their
respective officers, employees or agents, has directly or indirectly given or
agreed to give any gift, contribution, payment or similar benefit to any
supplier, customer, governmental official or employee or other person who was,
is or may be in a position to help or hinder the Business or any of the
Acquired Subsidiaries (or assist in connection with any actual or proposed
transaction) or made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any candidate for
United States federal, state, local, or foreign public office, which would
subject Orbital or any of the Acquired Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or proceeding other than such
damages or penalties as would not have an Orbital Material Adverse Effect.
3.16. Litigation. Except as set forth in Schedule 3.16 or Schedule
3.19, there are no actions, claims, suits, investigations or proceedings
pending or to Seller's
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knowledge threatened against Seller or any of the Acquired Subsidiaries
pertaining to the Business or the Business Assets or that question the validity
of this Agreement or any of the other Transaction Agreements or any action
taken or to be taken pursuant to or in connection with the provisions of this
Agreement or any other Transaction Agreement, nor to the knowledge of Seller is
there any reasonable basis for any such action, claim, suit, proceeding or
investigation that, if adversely determined, would in the aggregate have a
Material Adverse Effect. There are no judgments, orders, decrees, citations,
fines or penalties heretofore assessed (and not discharged or otherwise
satisfied) against Seller or any of the Acquired Subsidiaries under any United
States federal, state, local or foreign law except for such judgments, orders,
decrees, citations, fines or penalties that in the aggregate do not have a
Material Adverse Effect. There are no unsatisfied judgments against Seller or
the Acquired Subsidiaries with respect to the Business or Business Assets.
3.17. Employee Matters; Benefit Plans.
(a) All plans, agreements, policies and arrangements, whether or not
reduced to writing and whether or not legally binding, to which Seller or any
of the Acquired Subsidiaries contributes or is obligated to contribute, or
under which Seller or any of the Acquired Subsidiaries has or may have any
liability for premiums or benefits, and which benefits any active, former or
retired employee, outside director, consultant or other independent contractor
who provides or provided services to or for the benefit of the Business, are
listed in Schedule 3.17 (the "Plans"). Seller has made available to Orbital, a
true, correct and complete copy of the most recent plan document for the Plans
listed in Items 1, 2, 3 and 4 of Schedule 3.17 (excluding the Agreements
referred to in Section 8 of the Plan listed on Item 3 of Schedule 3.17); the
most recent determination letters issued by the Internal Revenue Service with
respect to the Plans listed in Items 1 and 2 of Schedule 3.17; the 1995 Form
5500s for the Plans listed in Items 1 and 2 of Schedule 3.17; and the CTA
INCORPORATED 1997 Benefits Summary. The CTA INCORPORATED 1997 Benefits Summary
accurately describes the material terms of the plans, agreements, policies and
arrangements described therein, including without limitation those described in
Items 5-13 of Schedule 3.17.
(b) No circumstance exists and no event (including any action or the
failure to do any act) has occurred with respect to any Plan maintained or
formerly maintained or contributed to by Seller or any Subsidiary, or to which
Seller or any Subsidiary is or has been required to contribute, that would
subject Orbital to liability, or the assets of the Business to any Lien, under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
the Code, nor will the transactions contemplated by this Agreement give rise to
any such liability or Lien.
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(c) Each Plan that is required or intended to be qualified under
Section 401(a) of the Code is so qualified.
(d) No Plan currently or previously maintained or contributed to by
Seller is covered by Title IV of ERISA.
(e) Except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, neither Seller nor any Acquired Subsidiary has any
obligations for retiree health or life insurance benefits under any Plan.
(f) Schedule 5.13 lists all employees employed by Seller or any
Acquired Subsidiary in the Business (collectively, the "Employees"), including
for each such Employee: (i) his or her position and title; (ii) his or her
salary; (iii) his or her accrued vacation time; and (iv) any bonuses paid to
him or her with respect to fiscal 1996 or earned by him or her with respect to
fiscal 1997.
(g) Seller shall prior to Closing supply Orbital with the following
information as of June 30, 1997 with respect to each Employee listed on
Schedule 5.13:
(i) the Employee's date of hire by Seller or Acquired
Subsidiary,
(ii) the Employee's account balances in the flexible
spending component of the plan listed on Item 4 of
Schedule 3.17, and
(iii) the Employee's payroll deduction amount per pay
period in 1997 for the flexible spending component of
the Plan listed on Item 4 of Schedule 3.17.
Seller shall as soon as reasonably practicable, but in any event within forty
days after the Closing, provide to Orbital the information listed in paragraph
(iii) of Section 3.17(f) and paragraphs (i) and (ii) of this Section 3.17(g) as
of the date of the Closing.
3.18. Labor Relations. There is no existing dispute or controversy
between Seller or any of the Acquired Subsidiaries and any of the Employees
that has a Material Adverse Effect. Neither Seller nor any of the Acquired
Subsidiaries is a party to any collective bargaining agreement with respect to
any of the Employees, none of such Employees is represented by a labor union
and, to Seller's knowledge, there is no labor union organizing activity by or
among such Employees.
3.19. Government Contracts and Subcontracts. Except as set forth on
Schedule 3.19, Seller has received no written claims, penalties, or causes of
action against Seller
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or any of the Acquired Subsidiaries the basis of which is an actual or alleged
violation of, or noncompliance with, any applicable law, regulation or order
(a) related to a Contract between Seller or any of the Acquired Subsidiaries
and the United States federal government or any other state, local or foreign
government or any division or agency of any of the foregoing (a "Government
Contract"), which contract relates or related to the Business, or (b) related
to a Contract between Seller or any of its Subsidiaries and any other party,
which Contract relates or related to the Business and renders or rendered
Seller or any of the Acquired Subsidiaries a subcontractor at any tier to a
prime Contract with the United States federal government or any other state,
local or foreign government or any division or agency of any of the foregoing
(a "Government Subcontract"). Except as set forth on Schedule 3.19, to
Seller's knowledge, there is no reasonable basis for any claim, penalty or
cause of action against Seller or any of its Subsidiaries alleging a violation
of, or noncompliance with, any applicable law, regulation or order related to
any Government Contract or Government Subcontract to which Seller or any of the
Acquired Subsidiaries is a party and that relates or related to the Business,
except for such claims, penalties or causes of action as do not, in the
aggregate, have a Material Adverse Effect. For purposes of this Section 3.19,
claims, penalties and causes of action alleging a violation of, or
noncompliance with, any applicable law, regulation or order include, but are
not limited to, those purporting to be based on failure to comply with cost
accounting standards, allowable costs, allocation of costs, omissions or errors
in disclosure statements, or defective pricing.
3.20. Licenses, etc. Seller and each of the Acquired Subsidiaries
has all governmental and regulatory licenses and permits necessary for the
conduct of the Business as presently conducted, except where the failure to
maintain such licenses and permits do not, in the aggregate, have a Material
Adverse Effect. All such licenses and permits used principally in the Business
or with respect to the Business Assets are set forth on Schedule 3.20(a), are
in full force and effect, and except as set forth on Schedule 3.20(b), no
written notice of any violations has been received by Seller or any Acquired
Subsidiary relating to such licenses or permits. Neither Seller nor any of the
Acquired Subsidiaries is in violation of any such license or permit other than
such violations as in the aggregate do not have a Material Adverse Effect, and
no proceeding or investigation is pending or, to Seller's knowledge, threatened
that would have the effect, directly or indirectly, of revoking or limiting in
any way any such licenses or permits.
3.21. Environmental Matters. Seller and each of the Acquired
Subsidiaries is and has at all times been in compliance with all applicable
United States, federal, state, local, and foreign laws and regulations relating
to environmental, natural resources, health and safety matters relating to the
Business or the Business Assets, other than such noncompliance as does not have
a Material Adverse Effect. There is no suit, claim,
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action or proceeding pending or threatened against Seller or any of the
Acquired Subsidiaries or, to Seller's knowledge, any reasonable basis therefor,
in respect of (i) noncompliance by Seller or any of the Acquired Subsidiaries
with any such laws or regulations, (ii) personal injury, wrongful death or
other tortious conduct arising out of or resulting from materials, commodities
or products held, used, sold, transferred, manufactured or disposed of by or on
behalf of Seller or any of the Acquired Subsidiaries in the course of the
Business, containing or incorporating any hazardous or toxic materials,
commodities or substances, or (iii) the presence or release or threatened
release into the environment of any pollutant, contaminant or toxic or
hazardous material, substance or waste, whether solid, liquid or gas (each a
"Hazardous Substance"), arising out of or related to the Business or the
Business Assets, whether generated by Seller or any of the Acquired
Subsidiaries or located at or about (x) a site currently owned, leased or
otherwise used by Seller or any of the Acquired Subsidiaries in connection with
the Business or (y) heretofore owned, leased or otherwise used by Seller or any
of the Acquired Subsidiaries or any predecessor entity in connection with the
Business and for which Seller or an Acquired Subsidiary would have liability.
To Seller's knowledge, there have been no Hazardous Substances generated by
Seller in connection with the Business or by any Acquired Subsidiary that have
been disposed of or come to rest at any site that has been included in any
published United States federal, state or local "superfund" site list or any
other list of hazardous or toxic waste sites published by any governmental
authority in the United States. Except as set forth on Schedule 3.21, to
Seller's knowledge, there are and have been no underground storage tanks
located on, no polychlorinated biphenyls ("PCBs") or PCB-containing equipment
used or stored on, and no hazardous waste, as defined by the Resource
Conservation and Recovery Act, as amended, stored on, any site owned or
operated by Seller in connection with the Business or by any Acquired
Subsidiary. To Seller's knowledge, there has been no release or threatened
release of Hazardous Substances on, upon, into or from (x) any site currently
owned, leased or otherwise used by Seller in connection with the Business or by
any Acquired Subsidiary or (y) any site heretofore owned, leased or otherwise
used by Seller in connection with the Business or by any Acquired Subsidiary or
any predecessor entity, other than such releases or threatened releases for
which Seller or any Acquired Subsidiary would not have liability or that do not
have a Material Adverse Effect.
3.22. Contracts. Schedule 3.22 contains a true and complete list
of all Contracts of the types described below and in effect on the date hereof.
(a) Contracts relating to confidentiality or noncompetition;
(b) Contracts concerning a partnership or joint venture;
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(c) Contracts to which any director, officer or employee of the
Business is a party, other than (i) option agreements relating to options to
purchase shares of common stock of Seller, (ii) standard form confidentiality
or assignment of inventions or similar agreements or (iii) employment offer
letters that are terminable by Seller at will (subject only to reasonable
notice);
(d) Contracts relating to the provision of consulting services that
involve liabilities or obligations of Seller or any of its Subsidiaries in
excess of $100,000 or that have a term extending more than one year after the
Closing Date;
(e) Contracts (including without limitation options) to sell (other
than sales of products) or lease (as lessor) any property or asset owned or
leased by Seller or any Acquired Subsidiary, other than property or assets
having individual values less than $50,000 and an aggregate value less than
$300,000;
(f) Contracts pursuant to which Seller or any Acquired Subsidiary
possesses or uses (including as lessee) any properties or assets in the
Business;
(g) Contracts for the sale of products or provision of services by
Seller or any Acquired Subsidiary that (i) individually involve products or
services having a value of at least $100,000, (ii) have a term extending more
than one year after the Closing Date, (iii) to which the United States federal
government or any state, local or foreign government or any agency or
department of any of the foregoing is a party, or (iv) that renders Seller or
any Acquired Subsidiary a subcontractor at any tier to any prime Contract to
which the United States federal government or any state, local or foreign
government or any agency or department of any of the foregoing is a party;
(h) Contracts with suppliers or providers of goods or services (other
than cleaning, trash removal, facilities maintenance or repair, or similar
services and other than agent or representation agreements terminable upon no
more than one year's notice) to Seller or any Acquired Subsidiary, including
without limitation purchase orders, that individually involve liabilities in
excess of $100,000;
(i) Contracts under which the consequences of a default or
termination would have a Material Adverse Effect; and
(j) Each other Contract (other than Contracts of the type described
in (a) through (i) of this Section 3.22) that involves liabilities or
obligations of Seller or any Acquired Subsidiary in excess of $150,000 or that
has a term extending more than one year after the Closing Date.
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Seller has made available to Orbital upon request a true and complete copy of
each such Contract. Except as set forth on Schedule 3.22, neither Seller nor
any Acquired Subsidiary nor, to the knowledge of Seller, any other party is in
default under or in breach or violation of, nor has an event occurred that
(with or without notice, lapse of time or both) would constitute a default by
Seller or any Acquired Subsidiary, or to Seller's knowledge by any other party,
under any such Contract, other than such defaults, breaches and violations as
in the aggregate do not have a Material Adverse Effect. Each such Contract is
legal, valid, binding, enforceable and in full force and effect, and, except as
the result of failing to obtain required novations of Government Contracts,
will continue to be legal, valid, binding, enforceable and in full force and
effect following the consummation of the transactions contemplated hereby and
except for such failures to be legal, valid, binding and enforceable as do not
have a Material Adverse Effect.
3.23. Affiliated Transactions. Except for Contracts described in
Schedule 3.22(c), none of the directors, officers, stockholders or employees of
Seller or any of its Subsidiaries, or any relative by blood or marriage or any
"affiliate" or "associate" (as such terms are defined in Rule 405 promulgated
under the Securities Act) of any of the foregoing, is currently a party to any
Contract.
3.24. Insurance. Schedule 3.24 contains a list of all insurance
policies (including self-insurance arrangements) maintained by Seller or any
Acquired Subsidiary principally related to the Business, the Employees or the
Business Assets (including coverage limits, deductibles, named insureds and
policy periods, all of which policies are in full force and effect. True and
complete copies of all such insurance policies have been provided to Orbital.
3.25. Customer Warranty Coverage. Schedule 3.25 contains a complete
list and description of all express warranty coverages (including terms of such
coverages, expiration dates, and estimated amounts of liability) extended by
Seller or any Acquired Subsidiary for repair or replacement of defective
products or service related to the Business, as of the date indicated thereon,
other than those contained in Contracts listed on Schedule 3.22. Neither
Seller nor any Acquired Subsidiary has received written notice of any
outstanding, pending or threatened claims based on such warranty coverage,
except as set forth in Schedule 3.25.
3.26. Certain Agreements. Except as set forth in Schedule 3.26 and
except for benefits given generally to employees of the Seller and the Acquired
Subsidiaries pursuant to any written Plan as in effect at December 31, 1996 as
disclosed in Schedule 3.17, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without
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limitation, severance, unemployment compensation, parachute payment, bonus or
otherwise) becoming due to any Employee from Seller or any of its Subsidiaries
under any Plan, agreement or otherwise, (ii) increase any benefits otherwise
payable to any Employee under any Plan or agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
3.27. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Seller in such manner as to
give rise to any valid claim against Seller or Orbital for any brokerage or
finder's commission, fee or similar compensation, except for fees payable to
Legg Mason Wood Walker, Incorporated, which fees will be paid by Seller.
3.28. Books and Records. Seller has made available to Orbital true
and correct copies of the books and all corporate (including minute books and
stock record books) and financial records of Seller that relate to the Business
or the Purchased Assets or of any Acquired Subsidiary.
3.29. Bank Accounts. Schedule 3.29 sets forth a list of all bank
accounts maintained by any Acquired Subsidiary, together with list of all
authorized signatories for such bank accounts.
3.30. Accountants. None of Seller or its Subsidiaries has retained
either Coopers & Lybrand LLC or Price Waterhouse LLC to examine or review its
financial statements after June 30, 1995.
3.31. Lender Consents. Seller has no reasonable basis for believing
that the Liens and guarantees described in Section 6.2.8 will not be released
on a timely basis.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ORBITAL
In order to induce Seller to enter into this Agreement, Orbital
represents and warrants as follows:
4.1. Due Organization, Authorization and Good Standing. Orbital is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with the corporate power and authority to own its
properties and assets, to carry on its business as now being conducted, and to
execute and deliver each of the Transaction Agreements to which it is a party
and to perform its obligations thereunder and to consummate all transactions
contemplated thereby. Orbital is duly
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qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the conduct of its business or the ownership or
property requires such qualification, except for such failures to be so
qualified and in good standing as in the aggregate do not have an Orbital
Material Adverse Effect. The execution, delivery and performance by Orbital of
this Agreement and the other Transaction Agreements to which Orbital will be a
party, and the consummation by Orbital of the transactions contemplated hereby
and thereby, has been duly and validly authorized and approved by all necessary
corporate action in respect thereof on the part of Orbital. This Agreement has
been duly executed and delivered by Orbital and constitutes, and each of the
other Transaction Agreements to which Orbital will be a party will be duly
executed and delivered at Closing and will constitute, the legal, valid and
binding obligation of Orbital, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, moratorium, reorganization and similar laws
of general applicability affecting the rights and remedies of creditors and to
general principles of equity, regardless of whether enforcement is sought in
proceedings in equity or at law. True, complete and correct copies of the
Charter Documents of Orbital as in effect on the date hereof have heretofore
been delivered to Seller.
4.2. No Violation or Approval. The execution, delivery and
performance by Orbital of each of the Transaction Agreements to which it is a
party and the consummation of the transactions contemplated thereby does not
and will not result in (i) a violation of any law, rule or regulation, order,
judgment or decree applicable to Orbital or any order, judgment or decree of
any court or any governmental agency or body having jurisdiction over Orbital
or its properties or assets, (ii) except as disclosed on Schedule 4.2, a breach
or a default under (whether immediately, upon the passage of time or after
giving notice), or the acceleration of any payment under any material
agreement, instrument, lease, contract, mortgage, or license to which Orbital
is a party or by which it or any of its properties or assets is bound, or (iii)
a violation of or a conflict with its Charter Documents. No consent, approval,
order or authorization of, or declaration or filing with, any governmental
authority or, except as disclosed in Schedule 4.2, entity or other party is
required to be, and has not been, obtained or made by Orbital in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby other than required
filings under the HSR Act.
4.3. SEC Reports. Orbital has filed all proxy statements, reports
and other documents required to be filed by it under the Exchange Act after
January 1, 1996, and Orbital has made available to Seller copies of Orbital's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and all
final proxy statements, reports and other documents filed by Orbital with the
SEC under the Exchange Act after such date (collectively, the "SEC Reports").
Each SEC Report was, as of the date of filing of such
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report, in compliance in all material respects with the applicable requirements
of the Exchange Act and none of the SEC Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
4.4. Financial Statements, etc. Orbital has previously furnished
Seller with true, correct and complete copies of the following financial
statements (collectively, the "Orbital Financial Statements"): (i)
consolidated financial statements for the fiscal years ended December 31, 1994,
1995 and 1996 audited by KPMG Peat Marwick LLP, and (ii) unaudited consolidated
statements of income and cash flows for the fiscal quarter ended March 31, 1997
and the accompanying consolidated balance sheets as of such dates. The Orbital
Financial Statements present fairly, in all material respects, the consolidated
financial position of Orbital and the results of its operations and its cash
flows as of the respective dates and periods thereof in conformity with GAAP
and applied on a consistent basis, except as noted therein and except that in
the case of the unaudited financial statements, no notes are included and such
unaudited financial statements may be subject to normal, recurring adjustments
that would be made in the course of an audit and that would not be material.
4.5. Absence of Changes. Except as set forth in the SEC Reports
(copies of which have all been provided by Orbital to Seller), since March 31,
1997 none or Orbital or its Subsidiaries (considered as a whole) has undergone
any adverse change in its business, condition (financial or otherwise) or
prospects (whether as a result of any change as to accounts receivable,
inventory or other assets, any loss of competitive position, any natural
disaster, accident, strike, sabotage or confiscation of property, or any other
event or condition directly affecting or relating to Orbital or any of its
Subsidiaries, whether or not related to any of the foregoing), or suffered any
damage, destruction or loss (whether or not covered by insurance), other than
such changes or damage, destruction or loss as do not have an Orbital Material
Adverse Effect or that are the result of changes in general economic
conditions.
4.6. Litigation. Except as described in the SEC Reports, there are
no actions, claims, suits, investigations or proceedings pending or to
Orbital's knowledge threatened against Orbital or any of its Subsidiaries the
resolution of which is reasonably likely to have an Orbital Material Adverse
Effect or that question the validity of this Agreement or any of the other
Transaction Agreements or any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement or any other Transaction
Agreement, nor to the knowledge of Orbital is there any basis for any such
action, claim, suit, proceeding or investigation. There are no judgments,
orders, decrees, citations, fines or penalties heretofore assessed (and not
discharged or otherwise satisfied) against
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Orbital or any of its Subsidiaries under any United States federal, state,
local or foreign law except for such judgments, orders, decrees, citations,
fines or penalties that in the aggregate do not have an Orbital Material
Adverse Effect.
4.7. Brokers, Finders, etc. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the intervention of any person acting on behalf of Orbital in such manner as to
give rise to any valid claim against Seller or Orbital for any brokerage or
finder's commission, fee or similar compensation.
4.8. Accountants. None of Orbital or its Subsidiaries has retained
either Coopers & Lybrand LLC or Price Waterhouse LLC to examine or review its
financial statements after June 30, 1995.
4.9. Bank Approvals. Orbital has no reasonable basis for believing
that the approvals described in Section 6.2.6 will not be obtained on a timely
basis.
SECTION 5
CERTAIN COVENANTS
5.1. Post Closing Financials. As soon as reasonably practicable
but in any event within 40 days after the Closing, Seller shall provide to
Orbital unaudited financial statements of the Business consisting of statements
of income and cash flows for the six months ended June 30, 1997 and June 30,
1996, and a balance sheet as of June 30, 1997. Within 40 days after the
Closing, Seller shall provide Orbital with audited financial statements of the
Business for the fiscal years ended December 31, 1994, 1995 and 1996 consisting
of statements of income and statements of cash flows for the year ended
December 31, 1994, 1995 and 1996 and balance sheets as of December 31, 1995 and
December 31, 1996.
5.2. Exclusivity; Acquisition Proposals. Unless and until this
Agreement shall have been terminated by either party pursuant to Section 8.1
hereof, except as required by law, Seller shall not (and it shall instruct its
officers, directors, agents, representatives or Affiliates not to) take or
cause or permit any Subsidiary to take, directly or indirectly, any of the
following actions with any party other than Orbital and its designees or
agents: (i) solicit, encourage, initiate or participate in any negotiations,
inquiries or discussions with respect to any offer or proposal to acquire all
or any substantial part of the Business or the Business Assets or the capital
stock of Seller or any Acquired Subsidiary whether by merger, consolidation,
other business combination, purchase of assets, tender or exchange offer or
otherwise (each of the foregoing an "Acquisition Transaction"); (ii) disclose
any information not customarily disclosed to any person concerning the Business
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or Business Assets except in the ordinary course of business consistent with
past practice and as required pursuant to a governmental request for
information; (iii) enter into or execute any agreement relating to an
Acquisition Transaction, or other agreement calling for the sale of all or any
significant part of the Business or the Business Assets; or (iv) make or
authorize any public statement, recommendation or solicitation with respect to
any Acquisition Transaction or any offer or proposal relating to an Acquisition
Transaction other than with respect to the transactions contemplated hereby;
provided, however, that notwithstanding anything to the contrary in this
Section 5.2, if the board of directors of Seller determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to comply with its fiduciary duties to its stockholders under applicable law,
Seller may, in response to the presentation subsequent to the date hereof of a
proposed Acquisition Transaction concerning the Business that was not solicited
or encouraged by Seller, furnish information to any person presenting such
Acquisition Transaction pursuant to a customary confidentiality agreement and
participate in discussions or negotiations regarding such Acquisition
Transaction. Seller shall notify Orbital promptly in writing of the receipt of
any proposal in respect of an Acquisition Transaction.
5.3. HSR Act; Etc. As promptly as practicable after the date of
the execution of this Agreement, Orbital and Seller shall file notifications
under and in accordance with the HSR Act. Orbital and Seller shall respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and shall respond as promptly as
practicable to all inquiries and requests received from any state attorney
general or other governmental authority in connection with antitrust matters.
5.4. Notices and Consents. Seller has given or will timely give
any notices to third parties, and Seller will use commercially reasonable
efforts to obtain any third party consents, that are required to transfer the
Purchased Assets to Orbital, including without limitation any novation
agreements in connection with any Government Contract for which novation is
required.
5.5. Preparation for Closing. Each of the parties hereto agrees to
use all commercially reasonable efforts to bring about the fulfillment of the
conditions precedent contained in this Agreement.
5.6. Public Announcements. Neither Orbital nor Seller shall, nor
shall either permit any of its Subsidiaries to (and each such party shall use
all commercially reasonable efforts to cause its Affiliates, directors,
officers, employees, agents and representatives not to) issue any press
release, make any public announcement or public filing or furnish any written
statement to its employees or stockholders generally
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concerning the transactions contemplated by this Agreement without the consent
of the other party (which consent shall not be unreasonably withheld), except
to the extent required by applicable law, rule or regulation or the applicable
requirements of the National Association of Securities Dealers, Inc. with
respect to issuers whose securities are quoted on the NASDAQ National Market
System (and in any such case such party shall, to the extent consistent with
timely compliance with such requirement, consult with the other party prior to
making the required release, announcement, filing or statement).
5.7. Confidential Information. Each of Orbital and Seller
covenants and agrees that it will continue to abide by the terms and conditions
of the letter agreements dated February 27, 1997 and May 1, 1997; provided,
however that effective as of Closing, Orbital's obligations under Sections 1, 3
and 4 of the letter agreement dated February 27, 1997 shall terminate with
respect to Confidential Information (as defined therein) principally related to
the Business or the Purchased Assets. Seller also hereby covenants and agrees
that on and after the Closing it shall maintain the confidentiality of any
confidential or proprietary information relating to the Business or the
Business Assets on the same basis as it treats its own confidential and
proprietary information.
5.8. Noncompetition, Etc. Seller agrees that, in consideration of
the payments made by Orbital hereunder, during the period from the Closing Date
through the third anniversary of the Closing Date it shall not, directly or
indirectly, own, manage, operate, control, participate in, invest in or be
connected in any manner with the management, financing, ownership, operation or
control of any business, venture or activity engaged anywhere in the world in
the business of developing, designing, manufacturing or marketing (i)
satellites, satellite systems, related support systems or related hardware,
software or services, (ii) aerospace hardware, software and engineering
services for space systems and related ground systems (other than continuing
its business with United Space Command, Air Force Space Command and Air Force
Material Command), or (iii) automated tracking and cargo status data systems of
mobile assets, or related hardware, software or services, provided, however,
that Seller shall not be prohibited by this Section 5.8 from owning
beneficially or of record up to 5% of the equity interests in a public company.
Seller further agrees that, in consideration of the payments by Orbital
hereunder, without the prior written consent of Orbital neither Seller nor any
of its Affiliates shall during the period from the Closing Date through the
third anniversary of the Closing Date, directly or indirectly, recruit, offer
employment, employ (including employment as a consultant), lure or entice away
any Employee who then is, or within the then prior three months has been, an
employee of Orbital or any Subsidiary, group or division of Orbital or any
Affiliate thereof, unless such person has been terminated by Orbital or an
Affiliate of Orbital. Orbital agrees, in consideration of Seller's sale of the
Purchased Assets and other obligations hereunder, that without the prior
written consent of Seller Orbital shall, during the period from the Closing
Date through the third
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anniversary of the Closing Date, not knowingly initiate any contact or
discussions with any current employee of Seller who is then an employee of
Seller in an effort to recruit, offer employment, or employ (including
employment as a consultant), lure or entice away any such employee; provided,
however, the foregoing shall not prohibit (i) any employee of Orbital (other
than an Employee (acting directly or indirectly) whose position with Seller or
any Acquired Subsidiary was that of a program manager or higher) from
initiating any such contact of his or her own volition and without any
direction or suggestion by any executive officer of Orbital or by any Employee
whose position with Seller or any Acquired Subsidiary was that of a program
manager or higher that such contact be made, (ii) any general solicitation or
advertising, or (iii) the hiring by Orbital of any employee of Seller with whom
contact or discussions were initiated not in violation of this Section 5.8.
5.9. Notification of Certain Matters. Between the date hereof and
the Closing Date, each party shall give prompt notice in writing to the other
party of: (i) any information that indicates that any of its representations
or warranties contained herein was not true and correct in all material
respects as of the date hereof or will not be true and correct in all material
respects at and as of the Closing Date with the same force and effect as if
made at and as of the Closing Date (except for changes permitted or
contemplated by this Agreement), (ii) the occurrence of any event that will
result, or has a reasonable prospect of resulting, in the failure of any
condition specified in Section 6 hereof to be satisfied, and (iii) any notice
or other written communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement or that such transactions otherwise may violate
the rights of or confer remedies upon such third party.
5.10. Other Limitations on Conduct of Business Prior to the Closing
Date. Seller hereby covenants and agrees with Orbital that, prior to the
Closing Date, unless the prior written consent of Orbital shall have been
obtained and except as otherwise contemplated herein, it shall operate the
Business, and it shall cause each of the Acquired Subsidiaries to operate the
Business, only in the usual, regular and ordinary course of business consistent
with past practice, incurring only ordinary and necessary business expenses
consistent with past practice; provided, however, that the Acquired
Subsidiaries may pay cash dividends to other Acquired Subsidiaries. Without
limiting the foregoing, unless the prior written consent of Orbital shall have
been obtained (which such consent shall not be unreasonably withheld in the
case of (iii), (iv), (v) or (x) below, it being understood that in the case of
a Contract with a customer it shall not be unreasonable to withhold consent if
the expected profit margin is less than 10%) and except as otherwise
contemplated herein, prior to the Closing Date Seller shall: (i) use
commercially reasonable efforts to preserve intact the Business and the
Business Assets and maintain their rights and franchises; (ii) not materially
alter its methods, practices or terms with
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respect to the billing or collection of accounts receivable that relate to the
Business or the payment of accounts payable that relate to the Business; (iii)
not declare, set aside or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock; (iv) not submit any material bids or proposals to any third
party with respect to the Business; (v) not enter into any material contracts,
commitments or agreements (including without limitation any material
modification or amendment to any such contract, commitment or agreement
(including without limitation Seller's Contract with EarthWatch Incorporated
dated May 17, 1994 and Seller's Contract with Pt. Media Citra Indostar dated
December 7, 1994)) with respect to the Business; (vi) use commercially
reasonable efforts to keep the Business and the Business Assets substantially
intact, including its present operations, physical facilities, working
conditions and relationships with lessors, licensors, suppliers, customers and
employees; (vii) not sell, dispose of or otherwise transfer or encumber any of
the Business Assets, except in the usual, regular and ordinary course of
business consistent with past practices; (viii) use commercially reasonable
efforts to conduct the Business in compliance with all applicable laws, rules
and regulations; (ix) not increase the compensation, benefits or any other form
of remuneration to officers or employees of the Business; (x) not modify, alter
or amend the terms or provisions of any Plan (excluding stock based Plans) for
officers or employees of the Business, other than to decrease benefits under
the severance Plan; (xi) use commercially reasonable efforts (other than
providing additional financial incentives) to keep available to Orbital the
services of Seller's present officers, employees, agents and independent
contractors presently engaged in the Business; (xii) not sell or permit the
sale of products or services or enter into other transactions related to the
Business at rates or prices lower than the rates and prices in effect for such
transactions on the date hereof other than in the usual, regular and ordinary
course of business consistent with past practice; (xiii) maintain in full force
and effect all insurance policies listed on Schedule 3.24; (xiv) not authorize
for issuance, issue or obligate itself to issue any shares of its capital stock
or any options, warrants or rights, or enter into any other agreements or
commitments obligating it to issue or sell shares of its capital stock or any
securities or obligations convertible into, or exchangeable for, any shares of
its capital stock, other than (a) the issuance of Seller Common Stock pursuant
to options outstanding on June 1, 1997 or granted in the ordinary course of
business to recruit or retain employees other than the Employees, or (b) the
issuance of such securities of Seller if the purchaser has agreed to vote such
securities having the right to vote for this Agreement and the transactions
contemplated hereby (as applicable); and (xv) take no action that would (a)
materially adversely affect the ability of Orbital or Seller to obtain any
necessary approvals of any third parties or any governmental authorities
required for the transactions contemplated hereby or materially increase the
period of time necessary to obtain such approvals, or (b) materially adversely
affect its ability to perform its covenants and agreements under this
Agreement.
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5.11. Access to Information. Seller shall, subject to applicable
law, afford Orbital and its accountants, counsel and other representatives
reasonable access during reasonable business hours prior to the Closing Date to
(a) all of Seller's and the Acquired Subsidiaries' financial statements,
properties, books, contracts, commitments and records to the extent they relate
to the Business or the Business Assets, and (b) all other information
concerning the Business or the Business Assets as Orbital may reasonably
request. No information or knowledge obtained after the date hereof in any
investigation pursuant to this Section 5.11 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the transactions contemplated hereby.
5.12. Transfer Taxes. Seller agrees to pay all applicable sales and
use Taxes on the transfer of the Purchased Assets hereunder, including any such
Taxes that may be imposed in the event Seller does not obtain a clearance
certificate from any applicable taxing authority. Seller shall apply prior to
Closing for a clearance certificate and shall use commercially reasonable
efforts to obtain such certificate.
5.13. Employee Matters.
(a) Orbital shall make offers to and use good faith efforts to
continue the employment in the Business immediately after the Closing (or in
the case of Employees receiving short or long term disability payments under
the plans listed in Items 7 and 8 of Schedule 3.17 as of the Closing, such
later date as the Employee is able to work full time) each Employee listed on
Schedule 5.13 as employed by Seller, and shall cause each Acquired Subsidiary
to use good faith efforts to continue immediately following the Closing to
employ each Employee employed by it, in each case at a salary or annualized
hourly wage equal to the annual salary or annualized hourly wage set forth with
respect to each Employee on Schedule 3.17 and fringe benefits comparable to
those generally available to Orbital's employees. In furtherance of the
foregoing, Seller will (i) terminate the employment by it of all Employees
employed by it concurrently with the Closing and will pay (or will use
commercially reasonable efforts to cause the applicable Plan to pay) any and
all liabilities (other than accrued liabilities for accrued vacation and
personal time to the extent such liabilities are reflected on the Closing
Statement) relating to such termination or the termination of participation by
the Employees in or under any Plan or policy of Seller or the Acquired
Subsidiary applicable prior to the Closing, including without limitation cash
payments in respect of all accumulated sick leave in excess of 240 hours per
Employee and any payments and benefits due such Employees pursuant to accrued
pension, retirement, savings, health, welfare and other benefits and severance
payments or similar payments of the Employees to the extent any such payments
are required to be made by Seller or the applicable Plan and (ii) provide to
all
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Employees any notice (which notice shall be reasonably acceptable to Orbital)
required under any law or regulations in respect of such termination, including
without limitation COBRA. Each Employee shall commence employment with Orbital
or continue employment with an Acquired Subsidiary, as the case may be, having
accrued but unused leave time in an amount equal to the aggregate of such
Employee's accrued but unused vacation time and personal time as an employee of
Seller as of the Closing Date. Orbital shall for purposes of its severance
policy and the participation and vesting provisions of its Deferred Salary and
Profit Sharing Plan and its 1995 Deferred Compensation Plan and the allocation
provisions of such Plans for the plan year ending in 1997 treat the term of
employment of each Employee with Orbital after the Closing as including any
period of employment with Seller or an Acquired Subsidiary prior to Closing.
For a period of at least three months after the Closing Date, Orbital shall
maintain its severance policy that provides a benefit of one week of severance
pay per one year of service, up to a maximum of ten weeks, in the event of a
layoff or reduction in work force. Seller shall pay in a manner consistent
with its normal payroll cycles all amounts due Employees in respect of
employment by Seller or the Acquired Subsidiaries through the Closing Date, and
shall pay in accordance with law to the appropriate authorities all
withholding, FICA, FUTA and similar amounts due in respect of such employment.
Orbital will reimburse Seller promptly upon notification thereof (accompanied
by reasonable support thereof) for all amounts paid or to be paid by Seller
pursuant to the preceding sentence to the extent such amounts are reflected on
the Closing Statement. Each Acquired Subsidiary shall terminate its
participation in Seller's Defined Contribution 401(k) Retirement Plan, Seller's
Employee Stock Ownership Plan and all other plans, agreements, policies and
arrangements listed in Schedule 3.17 (except for the flexible spending account
component of the plan listed on Item 4 of Schedule 3.17), effective as of or
prior to the Closing. Orbital's Deferred Salary and Profit Sharing Plan (or
another comparable qualified plan established by Orbital) shall accept direct
and indirect rollovers of eligible rollover distributions that consist of cash
or outstanding loan balances from Seller's Defined Contribution 401(k)
Retirement Plan and Seller's Employee Stock Ownership Plan. Nothing in this
Section 5.13 shall be construed as creating any right of Seller or any Employee
to the continued employment of any Employee or to any particular terms of
employment, and nothing in this Section 5.13 shall limit in any way Orbital's
or any Acquired Subsidiary's right at any time to terminate or modify the terms
of employment of any Employee or any of Orbital's or any Acquired Subsidiary's
employment or severance benefits or policies.
(b) Except as set forth below, Employees employed by Orbital or
the Acquired Subsidiaries pursuant to this Section 5.13 shall, immediately upon
commencement of their employment by Orbital, commence participation in and
coverage under any and all employee benefit plans maintained by Orbital that
provide medical, dental, vision, or other similar benefits and, provided that
Seller delivers to Orbital prior
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to Closing a medical claims history of such Employees for the period January 1,
1996 through June 30, 1997, shall not be subject to any preexisting condition
limitation included in any such plan. For purposes of this Section 5.13(b), a
preexisting condition limitation means a limitation or exclusion of benefits
relating to a condition based on the fact that the condition was present before
the date the Employee was employed by Orbital, whether or not any medical
advice, diagnosis, care or treatment was recommended or received before such
date. The first sentence of this Section 5.13(b) shall not apply to: (i)
Employees who as of the Closing are receiving short- or long-term disability
payments under the Plans listed in Items 7 and 8 of Schedule 3.17; or (ii)
Employees who have reached $100,000 in claims with respect to 1997 as of the
Closing, or are reasonably expected by Seller in its good faith judgment to
reach $100,000 in claims with respect to 1997 by December 31, 1997.
(c) Seller shall separate into a different plan the portion of its
Cafeteria-Style Section 125 Plan that provides flexible spending accounts for
health care and dependent care to Employees of the Seller or of an Acquired
Subsidiary who become employees of Orbital ("FSAs"), and such portion shall be
adopted by Orbital and maintained through December 31, 1997. Within 40 days
after Closing (or such earlier time as payment may occur under Section 2.6.3)
(i) Seller shall pay to Orbital in cash the amount, if any, by which aggregate
contributions made by such Employees to their FSAs for 1997 exceed the
aggregate benefits paid to such Employees from their FSAs as of the Closing; or
(ii) Orbital shall pay to the Seller in cash the amount, if any, by which the
aggregate benefits paid to such Employees from their FSAs exceed the aggregate
contributions made by such Employees to their FSAs as of the Closing.
5.14. Accounting and Financial Records. Seller shall provide to
Orbital such assistance in the transfer of the financial and accounting records
related to the Business as is reasonably requested by Orbital to facilitate the
transfer of the accounting function of the Business to Orbital.
5.15. Income Tax Matters.
5.15.1. Tax Sharing Agreements. Any Tax sharing agreement
between Seller and any of the Acquired Subsidiaries shall be
terminated as of the Closing Date and shall have no further effect for
any taxable year (whether the current year, a future year, or a past
year).
5.15.2. Tax Periods Ending On or Before the Closing Date.
Seller shall include the income of the Acquired Subsidiaries on
Seller's consolidated federal Income Tax Returns and any other
consolidated, combined or unitary Income Tax Returns including Seller
and any of the Acquired Subsidiaries ("Seller
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Consolidated Returns") for all Tax periods ending on or prior to the
Closing Date (the "Pre-Closing Periods"), and shall file or cause to
be filed all other Income Tax Returns that are required to be filed by
or with respect to the income, assets or operations of the Acquired
Subsidiaries for Pre-Closing Periods ("Pre-Closing Separate Returns"),
except that Seller shall not be required to file or cause to be filed
information Tax Returns prepared on Internal Revenue Forms 1098 and
1099 (and any variants of each), and summary Tax Returns related
thereto ("Information Tax Returns") for the Acquired Subsidiaries.
All other Tax Returns shall be filed by the entity to which the Taxes
are attributable. Seller shall pay any Income Taxes required to be
paid by or with respect to the income, assets or operations of Seller
and its Subsidiaries, including the Acquired Subsidiaries, for
Pre-Closing Periods except to the extent set forth on the Closing
Statement. Orbital shall, or shall cause the Acquired Subsidiaries
to, furnish Income Tax information to Seller for inclusion in Seller
Consolidated Returns and Pre-Closing Separate Returns (collectively,
"Pre-Closing Returns") in accordance with Seller's past custom and
practice. Seller shall allow Orbital an opportunity to review and
comment upon such Pre-Closing Returns to the extent that (i) they
relate to an Acquired Subsidiary for which a Section 338(h)(10)
Election will not be made, or (ii) they relate to an Acquired
Subsidiary and are filed with a taxing authority in a jurisdiction in
which no Section 338(h)(10) Election is available. Seller shall take
no position inconsistent with past custom and practice on such returns
that would adversely affect the Acquired Subsidiaries after the
Closing Date without the prior written consent of Orbital, which shall
not be unreasonably withheld.
5.15.3. Tax Periods Beginning On or Before and Ending After
the Closing Date. Orbital shall file or cause to be filed all Income
Tax Returns that are required to be filed by or with respect to the
income, assets or operations of the Acquired Subsidiaries for Tax
periods which begin on or before the Closing Date and end after the
Closing Date (the "Overlap Period"). Seller shall reimburse Orbital
for any Income Taxes (that have not previously been paid by Seller as
estimated Income Tax payments) required to be paid by or with respect
to the income, assets or operations of the Acquired Subsidiaries with
respect to an Overlap Period within fifteen days after Seller's
receipt of notice from Orbital of the amount of such Income Taxes, to
the extent such Income Taxes relate to Taxes for the portion of the
Overlap Period that includes Pre-Closing Periods. Orbital shall pay
or cause to be paid all other Income Taxes required to be paid by or
with respect to the income, assets or operations of the Acquired
Subsidiaries for Overlap Periods. For purposes of this Section 5.15.3,
in the case of any Income Taxes that are imposed on a period basis and
are payable for an Overlap Period, the portion of
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such Income Taxes that relates to the portion of such period ending on
the Closing Date shall be based upon a closing of the books as of the
end of the Closing Date. Any credits relating to an Overlap Period
shall be apportioned based on the apportionment of Income Taxes set
forth in the preceding sentence. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner
consistent with prior practice of Seller.
5.15.4. Tax Periods Beginning After the Closing Date.
Orbital shall file or cause to be filed all Income Tax Returns that
are required to be filed, and pay or cause to be paid, all Income
Taxes that are required to be paid by or with respect to the income,
assets or operations of the Acquired Subsidiaries for any Tax period
beginning after the Closing Date (the "Post-Closing Periods").
5.15.5. Contests. Seller and its duly appointed
representatives shall have the exclusive authority to control any
audit or examination by any taxing authority, initiate any claim for
refund, amend any Income Tax Return and contest, resolve and defend
against any assessment for Income Taxes, notice of Income Tax
deficiency or other adjustment of Income Taxes of or relating to any
liability of the Acquired Subsidiaries for Income Taxes for any
Pre-Closing Period. Subject to the foregoing, Seller shall allow
Orbital and its counsel to participate at Orbital's expense in (i) any
audits or examinations of any Seller Consolidated Return to the extent
that such returns relate to any Acquired Subsidiary for which a
Section 338(h)(10) Election will not be made or a Seller Consolidated
Return filed with a taxing authority in a jurisdiction in which no
Section 338(h)(10) Election is available, and (ii) any audits or
examinations of Pre-Closing Separate Returns that relate to an
Acquired Subsidiary for which a Section 338(h)(10) Election will not
be made or Pre-Closing Returns that are filed with a taxing authority
in a jurisdiction in which no Section 338(h)(10) Election is
available. Seller shall not settle any such audit or examination in a
manner which would materially adversely affect the Acquired
Subsidiaries after the Closing Date without the prior written consent
of Orbital, which shall not unreasonably be withheld. Orbital and its
duly appointed representatives shall have the exclusive authority to
control any audit or examination by any taxing authority, initiate any
claim for refund, amend any Income Tax Return and contest, resolve and
defend against any assessment for Income Taxes, notice of Income Tax
deficiency or other adjustment of Income Taxes of or relating to any
liability of the Acquired Subsidiaries or any successor thereto for
Income Taxes for any Tax period ending after the Closing Date.
Subject to the foregoing, Orbital shall allow Seller and its counsel
to participate at Seller's expense in any audits or examinations of
Income Tax Returns including any of the Acquired Subsidiaries to the
extent that such audits or examinations could require Seller to make a
payment hereunder. Orbital
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shall not settle any such audit or examination in a manner which would
adversely affect Seller without the prior written consent of Seller,
which shall not unreasonably be withheld.
5.15.6. Interperiod Tax Attribute Adjustments.
(a) If, as a result of the examination of a Seller Consolidated
Return, there shall result any adjustment which increases deductions, decreases
income or increases credits against Income Tax ("Tax Benefits") or which
increases income, decreases deductions or credits, or results in a recapture of
credits against Income Tax ("Tax Detriments") for any Tax period and which will
permit Orbital or the Acquired Subsidiaries (or any corporation in an
affiliated group of which Orbital or any of the Acquired Subsidiaries is a
member) to increase the Income Tax Benefits or decrease the Income Tax
Detriments to which they would otherwise have been entitled for any Tax period
beginning on or after the Closing Date, Seller shall notify Orbital of such
adjustment and provide Orbital with such information as may be necessary for
Orbital to take account of such increases or decreases through filing of a
claim for refund or otherwise. Orbital shall use commercially reasonable
efforts to secure the benefit of such increases or decreases and shall pay
Seller the amount of any refund (together with interest, if any, received) or
reduction of Income Tax liability resulting from such adjustment, such amount
to be paid when, as and if such refund or reduction in Income Tax liability is
actually realized.
(b) If, with respect to an Overlap Period or a Post-Closing Period,
Seller (or its Affiliates excluding the Acquired Subsidiaries) reports a net
operating loss or otherwise has available Tax benefits (e.g. Tax credits) that
may be carried back to a Pre-Closing Period, Seller shall be permitted to
carry back such losses or benefits into the Seller Consolidated Returns or
other Income Tax Returns filed by Seller or its Affiliates. Seller shall be
entitled to keep all such refunds obtained as a result of any such carryback.
Subject to the first sentence of this paragraph (b), Seller shall permit
Orbital to carry back post-acquisition net operating losses or Tax benefits of
any of the Acquired Subsidiaries into the Pre-Closing Returns to the extent
permitted by law. Seller shall use commercially reasonable efforts to obtain
such refunds, and shall promptly pay to Orbital the amount of any refund
(together with interest, if any, received), such amount to be paid when, as and
if such refund is actually realized. Orbital (i) shall indemnify Seller for
any Income Taxes resulting from the disallowance of any such carryback of
post-acquisition net operating losses or Tax benefits on audit or otherwise,
and (ii) shall return any amount paid by Seller (together with interest to the
extent interest would have been available on a refund claim that could have
been filed by Seller) pursuant to this Section 5.15.6 to the extent that net
operating losses or Tax benefits of Seller subsequently arise that would have
enabled Seller to obtain such refund in the absence of a carryback of Tax
attributes from the Acquired Subsidiaries hereunder.
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5.15.7. Amended Returns and Refunds. Seller shall have the
authority to file amended returns and claims for refund relating to
Pre-Closing Returns, provided that Seller shall allow Orbital an
opportunity to review and comment upon such amended returns or claims
for refund to the extent that they relate to any Acquired Subsidiary.
Except as otherwise provided in Section 5.15.6, Seller shall be
entitled to any refund received by Orbital or the Acquired
Subsidiaries relating to Pre-Closing Returns. Orbital shall pay over
(and cause the Acquired Subsidiaries to pay over) to Seller in
immediately available funds such refund (including refunds of interest
or penalties paid by Seller) together with any interest thereon within
fifteen days after the receipt of such refund.
5.15.8. Retention of Carryovers. Seller shall not elect to
retain any net operating loss carryovers or capital loss carryovers of
the Acquired Subsidiaries.
5.15.9. Section 338(h)(10) Elections. Seller shall join with
Orbital in making an election under section 338(h)(10) of the Code
(and any corresponding elections under state, local, or foreign tax
law) (collectively a "Section 338(h)(10) Election") with respect to
the purchase and sale of the stock of each Acquired Subsidiaries other
than Engineering Technologies, Inc. and CTA Space Systems, Inc.
Seller shall pay any Tax attributable to the making of the Section
338(h)(10) Election. The deemed sales price paid in connection with
the Section 338(h)(10) Election shall be allocated as set forth in
Section 2.8.
5.15.10. Indemnification for Post-Closing Transactions.
Orbital agrees to indemnify Seller for any additional Tax owed by
Seller and agrees to hold Seller harmless from any additional Tax of
the Acquired Subsidiaries for a Pre-Closing Period (including Income
Tax owed by Seller due to this indemnification payment) resulting from
any transaction undertaken by Orbital without the consent of Seller
and not in the ordinary course of business occurring on the Closing
Date after Orbital's purchase of the Acquired Subsidiaries' stock.
5.15.11. Notices. If any party to this Agreement receives
any written notice or other communication from any governmental
authority relating to any Tax audit or other proceeding relating to
any Tax for which any other party thereto may be obligated to
indemnify or pay under this Agreement, such party shall promptly
forward such notice or communication to the other party. The failure
to forward such written notice or other communication promptly
pursuant to this Section 5.15.11 shall excuse the indemnity or payment
obligations of such other party except to the extent (and only to the
extent) that the party that so failed to forward can show that such
failure did not materially prejudice the rights of the other party to
contest such Tax.
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5.15.12. Cooperation. Orbital and Seller shall cooperate
(and Orbital shall cause the Acquired Subsidiaries to cooperate)
fully, as and to the extent reasonably requested by the other party,
in connection with the calculation of any Taxes and with the
preparation and filing of Tax Returns pursuant to this Agreement, and
in connection with any proceeding with respect to Taxes affecting or
relating to the Acquired Subsidiaries. Such cooperation shall include
the retention and (upon the other party's written request) the
provision of records and information that are reasonably relevant to
such preparation and filing and to any Tax proceeding relating thereto
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material so
provided. Orbital and Seller agree to retain (and Orbital agrees to
cause the Acquired Subsidiaries to retain) all books and records with
respect to Tax matters pertinent to the Acquired Subsidiaries
relating to any Tax period beginning prior to the Closing Date until
the expiration of the statute of limitations for assessment of the
applicable Taxes (and, to the extent notified by Orbital or Seller,
any extensions thereof), and shall not destroy or otherwise dispose of
any such books and records until such expiration without first
providing the other party or parties with a reasonable opportunity to
review and copy the same. Orbital and Seller acknowledge that any and
all information obtained in connection with the preparation of any Tax
Return, audit or judicial or administrative proceeding or
determination pursuant to this Section 5.15.12 is of a confidential
nature and that all such information shall be used only for the
purposes set forth in this Section 5.15.12.
5.15.13. Valuation and Allocation. Seller and Orbital agree
to act reasonably and in good faith in preparing all valuations,
allocations, Income Tax Returns, and calculations of indemnity amounts
under this Section 5.15.13. If Seller and Orbital are unable to reach
mutual agreement on any such item within thirty (30) days from the
arising of the need for agreement on any such item, such disagreement
shall be resolved in the manner provided in Section 2.6 and such
resolution shall be final and binding on the parties. The fees and
expenses of such resolution shall be borne equally by Seller and
Orbital. The valuations and allocations determined pursuant to this
Section 5.15.13 shall be used for purposes of all relevant Income Tax
Returns.
5.15.14. Purchase Price Adjustment. Seller and Orbital
agree to treat all payments made by either of them to or for the
benefit of the other (including any payments to or from the Acquired
Subsidiaries under this Section 5.15, under other indemnity provisions
of this Agreement and for any misrepresentations or breaches of
warranties or covenants) as adjustments to the
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Purchase Price for Tax purposes and that such treatment shall
govern for purposes hereof.
5.16. Government Contracts. After the Closing Date, as
applicable, the parties will use commercially reasonable efforts to
obtain novation agreements in connection with any Government Contract
for which novation is required and any consents to assignments or name
changes for any other Government Contracts required and not obtained
prior to the Closing. Upon request by Orbital, Seller shall direct
the parties to such Government Contracts to make payments to a lockbox
account to which Orbital has access and the right to withdraw monies
from, or to make payments otherwise in accordance with instructions to
be provided by Orbital.
5.17. Limitation of Certain Types of Transactions by
Seller After Closing. Following the Closing, Seller shall not in any
one transaction or any series of related transactions sell all or a
majority of Seller's assets unless each Person acquiring any of such
assets shall execute an agreement by which such Person shall agree to
be bound by, and perform the obligations of Seller under, this
Agreement (including this Section 5.17) and in which agreement Orbital
shall be expressly stated to be a third party beneficiary.
5.18. Intercompany Accounts. The Seller shall cause to be
discharged prior to Closing all intercompany accounts (i) between the
Acquired Subsidiaries and Seller, (ii) between the Acquired
Subsidiaries and any of Seller's other Subsidiaries and (iii) between
Seller and any Subsidiary of Seller other than an Acquired Subsidiary
to the extent such account relates to or arises from the Business or
the Business Assets.
5.19. Change of Names. Orbital shall not use any name
listed on Schedule 2.2.11 or any name incorporating or confusingly
similar to "CTA"; provided that for a period of 30 days following the
Closing, Orbital shall be permitted to continue to use any preprinted
forms and other similar existing materials that are part of the
Purchased Assets. Simultaneously with the Closing, the Acquired
Subsidiaries' Articles of Incorporation shall be amended to change
their corporate names to comply with Orbital's obligations under this
Section 5.19.
5.20. Stockholders' Meeting. Seller shall, in accordance
with the CBCA, duly call, give notice of, convene and hold a meeting
of its stockholders as promptly as practicable for the purpose of
voting upon this Agreement and any other related matters requiring
approval of Seller's stockholders (the "Stockholder Meeting"). Seller
shall, through its board of directors, recommend to its stockholders
approval of the transactions contemplated hereby and shall use all
commercially reasonable efforts to hold such meeting as soon as
practicable after the date hereof, and shall use all commercially
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reasonable efforts to secure the approval by its stockholders of the
transactions contemplated hereby.
5.21. Liquidated Damages. If Seller terminates this
Agreement pursuant to Section 8.1(b)(ii) or Section 8.1(f) or if
Orbital terminates this Agreement pursuant to Section 8.1(b) or
Section 8.1(c) and within 180 days of such termination Seller executes
a definitive agreement with respect to an Acquisition Transaction or
files a registration statement registering the shares of Seller for an
initial public offering, then in either such case Seller shall within
five business days pay to Orbital, as liquidated damages and not as a
penalty, $2,500,000.
5.22. Further Assurances. Each of the parties hereto,
before, at and after the Closing Date, upon the reasonable request
from time to time of the other party hereto and without further
consideration (other than the reimbursement of reasonable
out-of-pocket expenses), shall do each and every act and thing as may
be necessary or reasonably desirable to consummate the transactions
contemplated hereby and to effect an orderly transfer to Orbital of
the Purchased Assets and the Business, including without limitation:
(i) executing, acknowledging and delivering assurances, assignments,
powers of attorney and other documents and instruments (including
without limitation (a) the execution by Orbital of the Stockholders
Agreement dated as of March 29, 1995 by and among EarthWatch
Incorporated and the other parties thereto to the extent required to
transfer the shares of EarthWatch Incorporated common stock included
in the Purchased Assets and (b) the execution by Orbital of the
Investors' Rights Agreement dated August 28, 1995 by and among
Constellation Communications, Inc. and the other parties thereto to
the extent required to transfer the Constellation Communications, Inc.
securities included in the Purchased Assets); (ii) furnishing
information and copies of documents, books and records (including
without limitation Forms W-9, Forms I-9 and other personnel records);
(iii) filing reports, returns, applications, filings and other
documents and instruments with governmental authorities; (iv)
assisting in responding to any inquiry of any customer, including any
governmental agency, of the Business Assets with respect to the sale
of products or provision of services prior to the Closing, including,
without limitation, DCAA, Department of Labor and other government
audits and inquiries, (v) assisting in good faith in any litigation,
threatened litigation or claim and cooperate therein with other party
hereto and its advisors and representatives, including without
limitation providing relevant documents and evidence and maintaining
confidentiality, other than litigation or threatened litigation or
claims against the party from whom such cooperation is requested, (vi)
assisting in the efforts to secure the facility security clearances,
personal security clearances and non-discloseable clearances from the
Defense Investigative Service of the U.S. Department of Defense or any
other agency of the U.S. government and any export licenses or
technology assistance agreements required for Orbital to conduct the
Business subsequent to Closing, and (vii) cooperating
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with the other party hereto (at such other party's expense) in
exercising any right or pursuing any claim, whether by litigation or
otherwise, other than rights and claims running against the party from
which such cooperation is requested. Without limiting the foregoing
and except as provided for in Section 5.16 with respect to the
novation of Government Contracts and except in the case of Retained
Receivables, Seller shall promptly after the Closing notify each other
party to each Contract assumed by Orbital hereunder that such Contract
has been assumed and will be performed by Orbital and that all
payments thereunder are to be made to Orbital in accordance with wire
instructions to be provided by Orbital. Upon receipt by Seller of any
payments to which Orbital is entitled as a result of the assignment of
such Contracts or for which novation may be pending, Seller shall
immediately pay such amounts to Orbital in accordance with the
foregoing instructions. Further, and without limiting the foregoing,
to the extent Contracts intended to be assigned hereunder cannot be
assigned to Orbital, Seller shall endeavor to provide Orbital the
benefits of Seller's rights under such Contracts and to the extent all
such rights are provided to Orbital, Orbital shall assume the
obligations of Seller thereunder.
SECTION 6
CONDITIONS PRECEDENT
6.1. Conditions Precedent to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, prior to or contemporaneously
with the Closing, of the following conditions, compliance with which, or the
occurrence of which, may be waived in whole or in part by Seller in writing:
6.1.1. Purchase Price. Orbital shall have paid to Seller
the Cash Consideration minus $3,000,000 by wire transfer in accordance
with written instructions given by Seller to Orbital at least two
business days prior to the Closing Date.
6.1.2. Payment to Lenders. Orbital shall have paid to
lenders designated by Seller an aggregate of $27,000,000 in partial or
full satisfaction of Seller's obligations to such lenders, pursuant to
written instructions provided to Orbital by Seller no fewer than two
business days prior to the Closing Date.
6.1.3. Representations; Covenants; Certificate. The
representations and warranties of Orbital contained in Section 4
hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date with the same effect
as though made as of the Closing Date (except that representations and
warranties that are made as of a specific date shall be true in all
material
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respects only as of such date); Orbital shall in all material respects
have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it
prior to the Closing Date; and Orbital shall have delivered to Seller
a certificate, dated the Closing Date and signed by its President or a
Vice President, to each such effect.
6.1.4. Opinion of Counsel for Orbital. Seller shall have
received from Ropes & Gray, counsel for Orbital, a legal opinion,
dated the Closing Date in substantially the form attached as Exhibit
6.1.4.
6.1.5. Charter Documents, Etc. Orbital shall have delivered
such certificates or other documents as may be reasonably requested by
Seller or its counsel, including without limitation certificates of
legal existence, good standing and certified charter documents on file
with the Secretary of State of the State of Delaware, and certificates
of the Secretary or Assistant Secretary of Orbital with respect to
directors' resolutions, bylaws and any other relevant matters.
6.1.6. General. All instruments and legal and corporate
proceedings in connection with the transactions contemplated by this
Agreement and the other Transaction Agreements shall be reasonably
satisfactory in form and substance to Seller, and Seller shall have
received counterpart original, or certified or other copies, of all
documents that it may reasonably request in connection therewith.
6.2. Conditions Precedent to Obligations of Orbital. The
obligations of Orbital to purchase the Purchased Assets and to consummate the
other transactions contemplated by this Agreement shall be subject to the
satisfaction, prior to or substantially contemporaneously with the Closing
Date, of the following conditions, compliance with which, or the occurrence of
which, may be waived in whole or in part by Orbital in writing:
6.2.1. Representations; Covenants; Certificate. The
representations and warranties of Seller contained in Section 3 hereof
shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date with the same effect as
though made as of the Closing Date (except that representations and
warranties that are made as of a specific date shall be true in all
material respects only as of such date); Seller shall in all material
respects have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with
by it prior to the Closing Date; and Seller shall have delivered to
Orbital a certificate, dated the Closing Date and signed by its
President or a Vice President, to each such effect.
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6.2.2. Opinions of Counsel for Seller. Orbital shall have
received from (i) Fried, Frank, Harris, Shriver & Jacobson, counsel
for Seller, a legal opinion, dated the Closing Date, in both form and
substance reasonably acceptable to Orbital as to the matters addressed
in Item 3, clauses (ii), (iii) and (iv) (other than as applied to
Colorado law) of Item 5, and Item 6 (as it applies to federal and New
York law) of Exhibit 6.2.2, (ii) Sherman & Howard L.L.C., counsel for
Seller, a legal opinion, dated the Closing Date, in both form and
substance reasonably acceptable to Orbital as to the matters addressed
in Item 1, Item 2, clauses (i) and (iv) (as to Colorado law) of Item 5
and Item 6 (as it applies to Colorado law) of Exhibit 6.2.2, and (iii)
Michael J. Ladino, General Counsel of Seller, a legal opinion, dated
the Closing Date, in both form and substance reasonably acceptable to
Orbital as to the matters addressed in Items 1, 4, 7 and 8 of Exhibit
6.2.2
6.2.3. Assignment of Seller Intellectual Property. Seller
shall have executed and delivered to Orbital a general assignment to
Orbital of the Seller Intellectual Property in both form and substance
reasonably acceptable to Orbital, and where applicable, specific
assignments in the form required by any applicable government agency
for recordation of such assignment.
6.2.4. Charter Documents, Etc. Seller shall have delivered
such certificates or other documents as may be reasonably requested by
Orbital or its counsel, including without limitation (i) certificates
of legal existence, good standing and certified charter documents of
Seller on file with the Secretary of State of the State of Colorado,
(ii) certificates of legal existence, good standing and certified
charter documents of the Acquired Subsidiaries on file with the
Secretary of State of each such entity's jurisdiction of
incorporation, and (iii) certificates of the Secretary or Assistant
Secretary of Seller with respect to directors' resolutions, bylaws and
any other relevant matters.
6.2.5. Resignation of Directors and Officers of Acquired
Subsidiaries. Each director and officer of each Acquired Subsidiary
shall have tendered his or her resignation effective as of the
Closing.
6.2.6. Credit Agreements. Orbital shall have received the
written consent to this Agreement and the transactions contemplated
hereby of the necessary banks under the Amended and Restated Credit
Agreement and Reimbursement Agreement dated as of September 27, 1994
(as amended from time to time) among Orbital, the banks listed therein
and the bank acting as agent thereunder, to the extent required under
the terms of such agreement.
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6.2.7. Required Consents. Seller shall have received all
necessary consents, waivers or amendments listed by Seller on Schedule
3.2 as being required (other than the facility security clearances,
personal security clearances and non-discloseable clearances from the
Defense Investigative Service of the U.S. Department of Defense or any
other agency of the U.S. government), and the representation made by
Seller in the first sentence of Section 3.2 hereof construed without
reference to any exceptions noted on Schedule 3.2 shall be true and
correct.
6.2.8. Release of Liens, Guarantees, etc. All lenders of
Seller and the Acquired Subsidiaries shall have released all Liens on
the Business Assets (including but not limited to Liens of lenders set
forth on Schedule 3.12) and the Acquired Subsidiaries shall be
released from the guarantees reflected on Schedule 3.7.
6.2.9. EarthWatch Modifications. EarthWatch Incorporated
shall have executed Modification 8 (a draft copy of which has
previously been delivered to Orbital) to Contract dated May 17, 1994
between EarthWatch Incorporated and Seller in form and substance
acceptable to Orbital.
6.2.10. General. All instruments and legal and corporate
proceedings in connection with the transactions contemplated by this
Agreement and the other Transaction Agreements shall be reasonably
satisfactory in form and substance to Orbital, and Orbital shall have
received counterpart original, or certified or other copies, of all
documents that it may reasonably request in connection therewith.
6.3. Conditions Precedent to the Obligations of Each Party. The
obligations of each of the parties to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction prior to or
substantially contemporaneously with the Closing Date of the following
additional conditions, compliance with which, or the occurrence of which, may
be waived in whole or in part by a writing executed by each of Seller and
Orbital:
6.3.1. Stockholder Approval. The holders of the requisite
number of outstanding shares of Seller's capital stock shall have duly
approved this Agreement and the transactions contemplated hereby, all
in accordance with the requirements of the CBCA.
6.3.2. HSR Act. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated.
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6.3.3. Bill of Sale and Assignment and Assumption Agreement.
Each of Orbital and Seller shall have executed and delivered to
Orbital a bill of sale and assignment and assumption agreement in the
form attached hereto as Exhibit 6.3.3.
6.3.4. Governmental and Court Approvals. Consents legally
required for the consummation of the transactions contemplated by this
Agreement (other than novations, consents and approvals of Government
Contracts or Government Subcontracts or the transfer of facility
security clearances, personal security clearances and non-discloseable
clearances from the Defense Investigative Service of the U.S.
Department of Defense or any other agency of the U.S. government)
shall have been filed, occurred or been obtained, other than such
consents with respect to which the failure to obtain such consents
does not have a Material Adverse Effect or a Orbital Material Adverse
Effect or any material adverse effect on the consummation of the
transactions contemplated hereby.
6.3.5. Injunctions. No temporary restraining order,
preliminary or permanent injunction or other order by any United
States federal or state court or governmental body prohibiting,
preventing or materially restraining the consummation of the
transactions contemplated by this Agreement shall have been issued and
shall not have expired or been withdrawn or reversed and there shall
be no pendent or threatened litigation or other proceeding seeking to
prohibit, prevent or materially restrict or impose any material
limitations on the consummation of such transactions; it being
understood that the parties hereto hereby agree to use their
commercially reasonable efforts to cause any such temporary
restraining order, preliminary or permanent injunction or other order
to be vacated or lifted as promptly as possible.
SECTION 7
INDEMNIFICATION
7.1. Orbital's Indemnification. Subject to the limitations set
forth in this Section 7, Orbital hereby agrees to indemnify and hold harmless
(in such capacity, an "Indemnifying Party"), to the fullest extent permitted by
law, Seller and each of its officers, directors, employees and Affiliates
(each, in its capacity as an indemnified party, an "Indemnitee") from, against
and in respect of any Losses arising from, or otherwise related to, directly or
indirectly, any of the following:
7.1.1. Any breach of any representation or warranty made by
or on behalf of Orbital in Section 4 of this Agreement (as each such
representation or
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warranty would be read if all qualifications as to materiality
(including without limitation in the definition of Orbital Material
Adverse Effect) were deleted therefrom).
7.1.2. Any breach or default in performance by Orbital of
any covenant or other agreement in this Agreement.
7.1.3. Any Assumed Liability, including without limitation
any failure to fully pay or satisfy or cause to be paid or satisfied
any Assumed Liability when due and payable.
7.1.4. Any liability or obligation to or in respect of any
Employee hired by Orbital relating to periods after the Closing,
including without limitation any obligation or liability to make
severance or similar payments to any such Employee as a result of the
termination of the employment of such Employee by Orbital after the
Closing.
7.1.5. Subject to Section 7.2, any liability or obligation
in respect of Seller's guarantee of the obligations of any Acquired
Subsidiary under the Indostar-1 Direct Broadcast Satellite Program
Contract between PT. Media Citra Indostar and International
Technologies, Inc. dated as of December 8, 1993.
7.1.6. Except for Losses that are referred to in clause (i)
of Section 7.2.6, any liability to Thomas van der Heyden arising under
the Profit Sharing Agreement dated July 12, 1990, as amended from time
to time, to the extent such liability arises from or relates to a
customer Contract and exceeds $750,000 in respect of such Contract.
7.2. Seller's Indemnification. Subject to the limitations set forth
in this Section 7, Seller hereby agrees to indemnify and hold harmless (in such
capacity, an "Indemnifying Party"), to the fullest extent permitted by law,
Orbital, its subsidiaries, Orbital's Deferred Salary and Profit Sharing Plan
(or any other qualified plan established by Orbital to accept direct and
indirect rollovers of eligible rollover distributions from Seller's Plans), and
each of their respective officers, directors, employees and Affiliates (each,
in its capacity as an indemnified party, an "Indemnitee") from, against and in
respect of any Losses arising from, or otherwise related to, directly or
indirectly, any of the following:
7.2.1. Any breach of any representation or warranty made by
or on behalf of Seller in Section 3 of this Agreement (as each such
representation or
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warranty would be read if all qualifications as to materiality
(including without limitation in the definition of Material Adverse
Effect) were deleted therefrom).
7.2.2. Any breach or default in performance by Seller of any
covenant or other agreement in this Agreement.
7.2.3. All Excluded Liabilities, including without
limitation, any failure to fully pay or satisfy or cause to be paid or
satisfied any Excluded Liability when due and payable.
7.2.4. Any Plan established or maintained by Seller or any
of its Subsidiaries or to which Seller or any of its Subsidiaries
contributes, any act or omission prior to Closing of any such Plan or
of Seller or any of its Subsidiaries with respect to any such Plan, or
any failure of any such Plan required or intended to be qualified
under applicable laws to be so qualified.
7.2.5. Except to the extent reflected on the Closing
Statement, any liability or obligation to or in respect of any
Employee, or any other current or former employee of Seller or its
Subsidiaries, relating to periods prior to the Closing or the
termination of the employment of such Employee by Seller, including
without limitation any obligation or liability to make severance or
similar payments as a result of, or in connection with, such
termination, any claim of an unfair labor practice, any claim under
any state unemployment compensation or any federal or state workers'
compensation law or regulation, or any claim of harassment or
discrimination.
7.2.6. Any matters that are the subject of (i) the lawsuit
captioned Thomas van der Heyden v. CTA Incorporated, et al., Case No.
156956, filed on October 10, 1996 in the Circuit Court of Maryland for
Montgomery County, and the related arbitration proceeding, (ii) the
arbitration proceeding captioned Volunteers in Technical Assistance v.
CTA, Incorporated before party-appointed arbitrators in Washington,
D.C., (iii) the proceeding captioned DBSIndustries, Inc. v. CTA, Inc.,
Opposition No. 97,765, filed on June 21, 1995 in the United States
Patent and Trademark Office, Trademark Trial and Appeals Board, and
(iv) the administrative proceeding captioned In the Matter of Sylvia
Jackson, filed in February 1997 in the Fairfax County Office of Human
Rights.
7.2.7. Except for matters for which indemnification is
provided in Section 7.2.6, any agreement (written or oral) entered
into prior to Closing between Seller, any Acquired Subsidiaries and
Thomas van der Heyden, including but not
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limited to, that certain Profit Sharing Agreement dated July 12, 1990,
as amended from time to time.
7.2.8. Any violation prior to the Closing by Seller or any
Acquired Subsidiary of any federal, state or local governmental
statute or rule, regulation or directive.
7.2.9. Any storage, release or disposal prior to the Closing
by Seller or any Acquired Subsidiary or from or on any real property
currently or formerly owned or operated by Seller or any Acquired
Subsidiary of any hazardous or toxic substance, including without
limitation a "hazardous substance" as defined in 42 U.S.C. Section
9601(14) and oil, gasoline and other petroleum-based substances.
7.2.10. Except to the extent of specific liabilities or
reserves reflected on the Closing Statement, any Government Contract
or Government Subcontract to the extent such Loss results from (i) any
violation or noncompliance by Seller or any Acquired Subsidiary prior
to Closing of or with any Cost Accounting Standard, Disclosure
Statement, FAR provision (including without limitation Cost
Principles), or agency FAR supplemental provision, (ii) any false
claims or defective pricing occurring prior to Closing, or (iii) any
cost disallowance relating to costs incurred prior to Closing.
7.2.11. Any liability or obligation for products manufactured
or sold or services rendered by Seller or any Acquired Subsidiary
prior to the Closing Date, including without limitation any liability
arising from any injury to or death of any person or damage to or
destruction of any property, and regardless of whether based on
negligence, breach of warranty, strict liability, enterprise liability
or any other legal or equitable theory.
7.2.12. Any liability of Seller or any Acquired Subsidiary
for legal, accounting, brokerage or finder's fees, audit and other
professional fees, or any other costs or expenses, incurred with
respect to the preparation of this Agreement, the transactions
contemplated hereby and the sale of the Purchased Assets to Orbital.
7.3. Time Limits on Indemnification. No claim may be made or suit
instituted by an Indemnitee under Section 7.1.1 or 7.2.1 hereof (other than for
breach of the fourth, fifth, sixth, and seventh sentences of Section 3.1, the
first, fourth, fifth and sixth sentences of Section 3.5, Section 3.11, Section
3.12 or Section 3.15), unless notice of such claim or suit is given to the
Indemnifying Party against whom such claim is made or suit instituted on or
prior to the earlier of March 31, 1999 or 30 days after the delivery to
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Orbital of the audit report on its financial statements for the fiscal year
ended December 31, 1998. No claim may be made or suit instituted by an
Indemnitee for breach of representations and warranties made in the fourth,
fifth, sixth, and seventh sentences of Section 3.1, the first, fourth, fifth
and sixth sentences of Section 3.5, Section 3.11, Section 3.12 or Section 3.15
after the thirtieth day after the expiration of the applicable statute of
limitations (if any).
7.4. Monetary Limitations on Indemnification. No Indemnifying
Party shall have any obligation under Section 7.1.1, 7.2.1 (other than for a
breach of Section 3.3, 3.5, 3.11, 3.12 or 3.15), 7.2.3 (other than in respect
of Excluded Liabilities referred to in Section 2.4.1, 2.4.2, 2.4.3, 2.4.4,
clause (iv) of Section 2.4.5, Section 2.4.6, 2.4.9 or 2.4.11), 7.2.5, 7.2.8,
7.2.9, 7.2.10 or 7.2.11 in respect of any Loss incurred by an Indemnitee until
the aggregate cumulative total of all such Losses (excluding any portion of
such Losses for which Seller has indemnified Orbital under another subsection
of Section 7.2) incurred by the Indemnitee exceeds $500,000, whereupon the
Indemnitee shall be entitled to indemnification under such Sections for the
entire aggregate cumulative amount of such Losses in excess of $500,000. No
Indemnifying Party shall have any obligation under Section 7.1.1 or 7.2.1
hereof, other than for a breach of Section 3.5, 3.11, 3.12 or 3.15, in excess
of an aggregate of $10,000,000. Seller's obligations under Section 7.2.7 (i)
shall not exceed $750,000 per customer Contract in respect of amounts paid to
Thomas van der Heyden, (ii) shall not apply to any Contract for which Seller
would have been entitled to a Seller Payment, and (iii) shall not exceed
$250,000 in respect of aggregate attorney's fees and other defense costs
incurred by Orbital in the investigation or defense of any and all claims
threatened, asserted or brought by Thomas van der Heyden at any time after the
Closing (other than attorney's fees and other defense costs incurred by Seller
in connection with the proceeding referred to in clause (i) of Section 7.2.6.).
7.5. Notice of Claims. Within 30 days after the receipt by an
Indemnitee of notice of any claim against such Indemnitee or the commencement
of any action or proceeding against such Indemnitee (any such claim, action or
proceeding, a "Claim"), such Indemnitee shall, if a claim with respect thereto
is or may be made against an Indemnifying Party pursuant to this Section 7,
give such Indemnifying Party written notice thereof. In addition, promptly
upon the discovery by an Indemnitee of any other event, occurrence, fact,
circumstance or other matter that, in its reasonable judgment, gives rise, or
may give rise, to a Claim for indemnity pursuant to this Section 7, the
Indemnitee will give notice thereof in writing to the Indemnifying Party
together with a statement setting forth the basis of the Claim. The failure to
give any notice required by this Section 7 shall not relieve any Indemnifying
Party of any obligations contained in
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this Section 7 except to the extent that the failure to give such notice
actually and materially prejudices the rights of such Indemnifying Party.
7.6. Defense of Claims. Except to the extent otherwise provided in
Section 5.15.5, the procedures to be followed with respect to indemnification
regarding a Claim shall be as follows:
7.6.1. Subject to the provisions of Section 7.6.5, unless in
the reasonable judgment of Indemnitee (i) there is a conflict between
the positions of the Indemnifying Party and the Indemnitee in
conducting the defense of such claim or (ii) legitimate business
considerations would require the Indemnitee to defend or respond in a
manner different from that recommended by the Indemnifying Party, the
Indemnifying Party shall, by giving notice thereof to the Indemnitee
confirming the Indemnifying Party's obligation under this Section 7 to
indemnify the Indemnitee in respect of such Claim, be entitled to
assume and control such defense with counsel chosen by it. The
Indemnitee shall be entitled to participate therein after such
assumption and the costs of such participation following such
assumption shall be at the expense of the Indemnitee. Upon assuming
such defense as aforesaid, the Indemnifying Party shall have full
right to enter into any compromise or settlement which is dispositive
of the matter involved; provided, however, that except for the
settlement of a Claim that involves no obligation of the Indemnitee
other than the payment of money for which indemnification is provided
hereunder (in which case the Indemnifying Party shall give the
Indemnitee the opportunity to discuss with it such payment, which
opportunity shall not affect the right of the Indemnifying Party to
effect such settlement in its discretion), the Indemnifying Party
shall not settle or compromise any Claim without the prior written
consent of the Indemnitee, which consent will not be unreasonably
withheld; and provided, further, the Indemnifying Party may not
consent to entry of any judgment or enter into any settlement in
respect of a Claim which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnitee of a
release from all liability in respect of such Claim.
7.6.2. With respect to a Claim as to which (i) the
Indemnifying Party does not have the right to assume the defense under
Section 7.6.1 or (ii) shall not have exercised its right to assume the
defense, the Indemnitee shall assume and control the defense of and
contest such Claim with counsel chosen by it (which defense shall be
reasonably calculated to minimize the liability of the Indemnifying
Party under this Section 7 to the extent consistent with the
legitimate business interests of the Indemnitee) and the Indemnifying
Party shall be obligated to pay all reasonable attorneys' fees and
expenses of the Indemnitee. The Indemnifying Party shall be
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entitled to participate in the defense of such Claim, the cost of such
participation to be at its own expense.
7.6.3. The Indemnitee may compromise or settle any Claim
against it at any time; provided, however, that the Indemnitee shall
not settle or compromise any Claim without the prior written consent
of the Indemnifying Party, which consent will not be unreasonably
withheld; provided, further, that if in the reasonable judgment of the
Indemnitee it would be materially harmed or otherwise prejudiced by
not entering into a proposed settlement or compromise and the
Indemnifying Party withholds consent to such settlement or compromise,
the Indemnitee may enter into such settlement or compromise and such
settlement or compromise shall not be conclusive as to, or otherwise
be used to establish, the liability of the Indemnifying Party to the
Indemnitee or any third party. The Indemnitee may not consent to entry
of any judgment or enter into any settlement or compromise with
respect to a Claim which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnifying
Party of a release from all liability in respect of such Claim.
7.6.4. Both the Indemnifying Party and the Indemnitee shall
cooperate fully with one another in connection with the defense,
compromise or settlement of any Claim, including without limitation
making available to the other all pertinent information and witnesses
within its control at reasonable intervals during normal business
hours.
7.6.5. Each of the matters described in Section 7.2.6 shall
be treated for all purposes as Claims for which notice has been given
pursuant to Section 7.6.1 to Orbital as Indemnitee that Seller as
Indemnifying Party has assumed and shall control the defense of such
Claims and the remaining subsections of this Section 7.6 shall be
applicable to such Claims. Any other Claim brought by or on behalf of
Thomas van der Heyden shall be defended by Orbital unless Orbital
waives its right to do so.
7.7. Exclusive Remedy. Absent fraud, the remedies provided in this
Section 7 shall be the sole and exclusive remedy for the matters that are the
subject of Section 7.1.1 and 7.2.1, and each of Orbital and Seller agrees not
to seek any remedy for any such matter other than in accordance with this
Section 7.
7.8. Setoff. Any amount owing under this Section 7 may be set off
against any other amount owing under the Agreement, including without
limitation Section 2.7.
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7.9. Calculation of Losses. For purposes of this Section 7, (a)
the amount of any Loss shall be calculated net of insurance proceeds received
by the Indemnitee in connection with such Loss, (b) the amount of Loss shall be
calculated taking into account any Tax benefit or detriment actually realized
by the Indemnitee as a result of or in connection with the matter, event or
condition giving rise to such Loss and as a result of or in connection with the
receipt of the indemnification payment in respect of such Loss and (c) the
amount of Loss shall be reduced to the extent such Loss was specifically
identified and reserved against (as to type of Loss and amount) on the Closing
Statement. For purposes of the foregoing, a Tax benefit or detriment will be
considered actually realized in a taxable year if and to the extent that the
Indemnitee's Tax liability for such year, taking into account such Tax benefit
or detriment, is less than or exceeds such liability calculated without regard
to such Tax benefit or detriment.
SECTION 8
MISCELLANEOUS
8.1. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
before the Closing, whether before or after approval of the Agreement by the
stockholders of Seller as herein provided:
(a) By the mutual consent of Orbital and Seller.
(b) By either Seller or Orbital, if (i) there has been a material
breach on the part of the other party of any representation, warranty or
agreement contained herein that cannot be or has not been cured within ten days
after written notice of such breach to the breaching party or (ii) Seller's
stockholders fail to approve the transactions contemplated hereby; provided,
however such failure is not due to Seller's breach of its covenants contained
in Section 5;
(c) By Orbital, if the board of directors of Seller shall have
withdrawn or modified in a manner adverse to Orbital its support of the
transactions contemplated hereby or shall fail to affirm such support upon the
request of Orbital;
(d) By Seller, if the Closing shall not have occurred by August 29,
1997 (which date shall be extended to October 31, 1997 if all conditions
precedent to the obligations of the parties hereto, other than expiration of
the waiting period under the HSR Act, have been satisfied by August 29, 1997)
other than as a result of the failure of Seller to satisfy its obligations
hereunder.
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(e) By Orbital, if the Closing shall not have occurred by August 29,
1997 (which date shall be extended to October 31, 1997 if all conditions
precedent to the obligations of the parties hereto, other than expiration of
the waiting period under the HSR Act, have been satisfied by August 29, 1997)
other than as a result of the failure of Orbital to satisfy its obligations
hereunder.
(f) By Seller if in the good faith reasonable judgment of its board
of directors, after consultation with outside counsel as to its fiduciary
duties to its stockholders, such termination is required by reason of any
Acquisition Transaction.
In the event of termination and abandonment under this Section 8.1, this
Agreement shall forthwith become null and void and there shall be no liability
on the part of any of Seller or Orbital or any of their respective officers and
directors; provided, however, that Sections 5.21 and 8.3 hereof shall survive
any termination of this Agreement and in the event of a termination pursuant to
Section 8.1(b)(i) the breaching party shall be liable for such breach.
8.2. Amendments and Supplements. At any time before or after
approval of this Agreement by the stockholders of Seller and prior to the
Closing Date, this Agreement may be amended or supplemented by a written
instrument signed by the parties hereto and approved by their respective Boards
of Directors, except that, after the stockholders of Seller shall have approved
the transactions contemplated hereby, there shall be no amendment that would
require the approval of the stockholders of Seller in accordance with the CBCA
without such approval.
8.3. Expenses. Subject to the proviso at the end of the last
sentence of Section 8.1, whether or not the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
8.4. No Adequate Remedy. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of
the provisions of Sections 5.2, 5.7 and 5.8 of this Agreement are not performed
in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of
Sections 5.2, 5.7 and 5.8 of this Agreement and to enforce specifically
Sections 5.2, 5.7 and 5.8 of this Agreement and the terms and provisions hereof
in any action instituted in any court having jurisdiction over the parties and
the matter, in addition to any other remedy to which it may be entitled, at law
or in equity.
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8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to any choice or conflict of laws rule or provision that would cause the
application of the domestic substantive laws of any other jurisdiction.
8.6. Notice. All notices and other communications required or
permitted hereunder shall be in writing (including any facsimile transmission
or similar writing), and shall be sent either by telecopy, hand delivery, or
reputable overnight courier, addressed as follows or to such other address or
addresses of which the respective party shall have notified the other party.
Each such notice or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted and the appropriate answerback is
received, (ii) if given by reputable overnight courier, one business day after
being delivered to such courier or (iii) if given by any other means, when
received at the address specified in this Section.
To Orbital:
21700 Atlantic Boulevard
Dulles, Virginia 20166
Telecopier: (703) 406-5572
Attention: General Counsel
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: (617) 951-7050
Attention: Daniel S. Evans, Esq.
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To Seller:
6116 Executive Boulevard
Suite 800
Rockville, MD 20852
Telecopier: (301) 816-1460
Attention: General Counsel
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, DC 20004
Telecopier: (202) 859-7008
Attention: Richard A. Steinwurtzel
8.7. Entire Agreement, Assignability, Etc. This Agreement
(including the Schedules and Exhibits attached hereto) and together with the
letter agreements dated February 27, 1997 and May 1, 1997 of Orbital and
Seller, (i) constitutes the entire agreement, and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the transactions and matters contemplated hereby, (ii)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder and (iii) shall not be assignable other than by
(A) operation of law or (B) a party that sells or otherwise transfers all or
substantially all of its assets to a third party and such third party expressly
agrees to assume the assigning party's obligations hereunder and to make the
non-assigning party hereto a third party beneficiary to such assumption.
8.8. Exclusivity of Representations. Seller shall not be deemed to
have made to Orbital any representation or warranty other than as expressly
made by Seller in Section 3 of this Agreement. Orbital shall not be deemed to
have made to Seller any representation or warranty other than as expressly made
by Orbital in Section 4 of this Agreement.
8.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
ORBITAL SCIENCES CORPORATION
By /s/ DAVID W. THOMPSON
---------------------------------------------
Title: President and Chief Executive Officer
CTA INCORPORATED
By /s/ C.E. VELEZ
---------------------------------------------
Title: Chairman and Chief Executive Officer
