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): January 4, 1997
RAYTHEON COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-2833 04-1760395
(State of Incorporation) (Commission File (IRS Employer
Number) Identification
Number)
141 Spring Street
Lexington, Massachusetts 02173
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 862-6600<PAGE>
Item 5. Other Events.
On January 4, 1997, the Registrant entered into an
Asset Purchase Agreement (the "Asset Purchase Agreement") with
Texas Instruments Incorporated ("Texas Instruments") pursuant
to which the Registrant agreed to purchase substantially all of
the assets of, and to assume substantially all of the li-
abilities related to, the Defense Systems and Electronics busi-
ness (the "Defense Business") of Texas Instruments. The con-
sideration to be paid by the Registrant in connection with the
purchase of the Defense Business is $2.875 billion in cash,
subject to adjustment for certain changes in the net assets of
the Defense Business between September 30, 1996 and the closing
date of the purchase (and not including an additional payment
of $75 million in respect of a related assignment and license
of certain related intellectual property).
A copy of the Asset Purchase Agreement is attached
hereto as Exhibit 2.1 and is specifically incorporated herein
by reference, and the description herein of such Agreement and
the transactions contemplated thereby is qualified in its en-
tirety by reference to such Agreement.
In connection with entering into the Asset Purchase
Agreement, the Registrant and Texas Instruments issued a press
release, a copy of which is attached hereto as Exhibit 99.1 and
is specifically incorporated herein by reference.<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits. The following exhibits are filed as
part of this report:
2.1 Asset Purchase Agreement, dated as of Jan-
uary 4, 1997, by and between Texas Instru-
ments Incorporated and Raytheon Company.
99.1 Press release, dated January 6, 1997.<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned here-
unto duly authorized.
Dated: January 6, 1997
RAYTHEON COMPANY
By /s/ Christoph L. Hoffmann
Executive Vice President
Law and Corporate Administration,
and Secretary<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Asset Purchase Agreement, dated as of
January 4, 1997, by and between Texas
Instruments Incorporated and Raytheon
Company.
99.1 Press release, dated January 6, 1997.
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of
January 4, 1997
between
Texas Instruments Incorporated
and
Raytheon Company<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.01. Definitions.............................. 1
ARTICLE 2
Purchase And Sale
Section 2.01. Purchase and Sale........................ 14
Section 2.02. Retained Assets.......................... 14
Section 2.03. Assumed Liabilities...................... 14
Section 2.04. Retained Liabilities..................... 14
Section 2.05. Nonassignable Contracts.................. 14
Section 2.06. Purchase Price........................... 15
Section 2.07. Closing Balance Sheet.................... 15
Section 2.08. Allocation of Purchase Price............. 16
Section 2.09. Closing.................................. 17
ARTICLE 3
Representations and Warranties Of Seller
Section 3.01. Corporate Organization................... 18
Section 3.02. Corporate Authority...................... 19
Section 3.03. No Violations; Consents and Approvals.... 19
Section 3.04. Subsidiaries............................. 20
Section 3.05. Acquired Business Financial Statements... 20
Section 3.06. No Undisclosed Material Liabilities...... 21
Section 3.07. Absence of Certain Events and Changes.... 21
Section 3.08. Compliance with Applicable Laws.......... 22
Section 3.09. Title to and Sufficiency of Assets....... 22
Section 3.10. Litigation............................... 23
Section 3.11. Taxes.................................... 24
Section 3.12. Employee Benefit Plans................... 24
Section 3.13. Environmental Matters.................... 27
Section 3.14. Brokers and Finders...................... 28
Section 3.15. Intellectual Property.................... 28
Section 3.16. Employees................................ 30
i<PAGE>
Page
Section 3.17. Contracts................................ 30
Section 3.18. Permits.................................. 30
Section 3.19. Restrictive Agreements................... 31
Section 3.20. No Representations or Warranties......... 31
ARTICLE 4
Representations and Warranties of Buyer
Section 4.01. Corporate Organization and Qualification. 31
Section 4.02. Corporate Authority...................... 31
Section 4.03. No Violations; Consents and Approvals.... 32
Section 4.04. Brokers and Finders...................... 32
Section 4.05. No Representations or Warranties......... 33
ARTICLE 5
Covenants of Seller
Section 5.01. Conduct of Seller........................ 33
Section 5.02. Other Offers............................. 35
Section 5.03. Notices of Certain Events................ 35
Section 5.04. Confidentiality and Standstill
Agreements............................. 35
Section 5.05. No Agreement to Prohibited Actions....... 35
Section 5.06. Confidentiality.......................... 35
Section 5.07. Insurance................................ 36
Section 5.08. Non-Solicitation of Employees............ 37
ARTICLE 6
Covenants of Both Parties
Section 6.01. Access to Information.................... 38
Section 6.02. Reasonable Efforts....................... 38
Section 6.03. Novation of Government Contracts......... 38
Section 6.04. Public Announcements..................... 39
Section 6.05. Further Assurances....................... 39
Section 6.06. Notices.................................. 39
ARTICLE 7
Tax Matters
Section 7.01. Tax Covenants............................ 40
ii<PAGE>
Page
Section 7.02. Allocation of Transfer and Property
Taxes.................................. 42
Section 7.03. Cooperation.............................. 42
Section 7.04. Allowable Taxes.......................... 43
Section 7.05. Long-Term Contracts...................... 43
Section 7.06. Refunds.................................. 44
ARTICLE 8
Employee Benefits
Section 8.01. Employees; Allocation of Liabilities..... 45
Section 8.02. Defined Benefit Retirement Plans......... 45
Section 8.03. Defined Contribution Plans............... 47
Section 8.04. Retiree Health and Other Retiree Benefit
Plans.................................. 47
Section 8.05. Stock Options and Restricted Stock Units. 48
Section 8.06. Other Welfare Benefits................... 48
Section 8.07. Employment Agreements.................... 50
Section 8.08. Cooperation.............................. 50
Section 8.09. Amendment, Modification or Termination
of Benefit Plans....................... 50
Section 8.10. Compensation and Benefits................ 50
Section 8.11. Deferred Compensation.................... 52
Section 8.12. Forms W-2................................ 52
Section 8.13. Foreign Plans............................ 52
Section 8.14. Acquired Subsidiary...................... 53
Section 8.15. Labor Relations.......................... 54
ARTICLE 9
Conditions to the Closing
Section 9.01. Conditions to the Obligations of Buyer
and Seller............................. 54
Section 9.02. Conditions to the Obligations of Seller.. 55
Section 9.03. Conditions to the Obligations of Buyer... 56
ARTICLE 10
Survival; Indemnification
Section 10.01. Survival................................. 57
Section 10.02. Indemnification.......................... 57
Section 10.03. Indemnification Procedures............... 59
iii<PAGE>
Page
ARTICLE 11
Termination
Section 11.01. Termination.............................. 61
Section 11.02. Effect of Termination.................... 61
ARTICLE 12
Miscellaneous
Section 12.01. Entire Agreement......................... 61
Section 12.02. Notices.................................. 62
Section 12.03. Amendments; No Waivers................... 63
Section 12.04. Successors and Assigns................... 63
Section 12.05. Governing Law............................ 63
Section 12.06. Counterparts; Effectiveness.............. 63
SCHEDULES, EXHIBITS AND ANNEXES
Exhibit A Intellectual Property Assignment and License
Agreement
Exhibit B Real Estate Agreements
Exhibit C Systems and Services Transition Agreement
Exhibit D Master Services Agreement
Schedule 1 Acquired Facilities
Schedule 2 Certain Agreements
Schedule 3 Certain Environmental Liabilities
Schedule 4 Certain Other Assumed Liabilities
Schedule 2.07 Net Worth Adjustment
Schedule 4.03 Certain Consents
iv<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of January 4, 1997
between Texas Instruments Incorporated, a Delaware corporation
("SELLER"), and Raytheon Company, a Delaware corporation
("BUYER").
W I T N E S S E T H:
WHEREAS, Seller designs, manufactures, sells, and
distributes certain products constituting the Defense Business
(as hereinafter defined);
WHEREAS, Buyer desires to purchase substantially all of
the assets of the Defense Business from Seller, and Seller
desires to sell substantially all of the assets of the Defense
Business to Buyer, upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, and of
the representations, warranties, covenants and agreements set
forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
Section 1.01 Definitions. (a) The following terms used
herein shall have the following meanings:
"ACQUIRED ASSETS" means (i) all Seller's and its
Subsidiaries' right, title and interest (including minority
interests) in and to all Assets of Seller or any of its
Subsidiaries that are used primarily in or held primarily for
use in the operation, as currently conducted, or as proposed to
be conducted in the Confidential Memorandum provided by Seller
to Buyer in connection with proposing the transactions
contemplated hereby (including new developments) of the Defense
Business, including without limitation the Acquired Facilities,
(ii) whether or not included within the Assets set forth in
clause (i) above, all Assets reflected on the Acquired Business
Interim Balance Sheet, as such Assets may have been added to,
sold in the ordinary course of business or otherwise changed
since such date, (iii) all assets treated as Acquired Assets in
Article 8 hereof, and (iv) all issued and outstanding shares of
capital stock of the Acquired Subsidiary; provided that
"Acquired Assets" shall exclude (i) all patents, patent
applications and patent disclosures not listed on the Seller
Disclosure Schedule (but shall include those listed on the
Seller Disclosure Schedule) and third party patent licenses,
(ii) all insurance policies, contracts, arrangements and
agreements relating to medical, dental and other services
entered into by<PAGE>
Seller for the benefit of Seller or its employees and all
rights of Seller thereunder and (iii) except as provided in
Article 8, cash and cash equivalents.
"ACQUIRED BUSINESS" means the Acquired Assets and the
Assumed Liabilities.
"ACQUIRED BUSINESS BALANCE SHEET" means the unaudited
combined statement of assets and liabilities as of December 31,
1995 for the Acquired Business.
"ACQUIRED BUSINESS FINANCIAL STATEMENTS" means the
Acquired Business Balance Sheet and the unaudited statements of
combined income and combined cash flows for the year ended
December 31, 1995 for the Acquired Business.
"ACQUIRED BUSINESS INTERIM BALANCE SHEET" means the
unaudited combined statement of assets and liabilities as of
September 30, 1996 for the Acquired Business.
"ACQUIRED BUSINESS INTERIM FINANCIAL STATEMENTS" means the
Acquired Business Interim Balance Sheet and the unaudited
statements of combined income and combined cash flows for the
nine months ended September 30, 1996 for the Acquired Business.
"ACQUIRED FACILITIES" means the real property and
facilities described on Schedule 1 hereto.
"ACQUIRED SUBSIDIARY" means SAVI Technology, Inc., a
California corporation and a wholly owned subsidiary of Seller.
"ADJUSTED PURCHASE PRICE" means the Purchase Price (i) (a)
minus the amount of any payment made pursuant to Section
2.07(a), or (b) plus the amount of any payment made pursuant to
Section 2.07(b), as the case may be, and (ii) as adjusted to
reflect any payments required by Section 2.07(d).
"ADVANCED PROGRAMS DIVISION" means the organization within
Seller that (a) is engaged in the development of next
generation products for the Electronics Systems Division and
the Missile Systems Division, and includes, without limitation,
(i) the Advanced Weapons Department, which is engaged in the
development of systems level technologies for future missile
systems programs, (ii) the Advanced Land Combat Systems
department, which pursues next generation ground-based U.S.
Army and U.S. Navy/U.S. Marine Corps programs and supporting
technologies for future ESD programs, and (iii) the Airborne
Systems Department, which is focused on future U.S. Air Force
and U.S. Navy/U.S. Marine Corps aviation programs with system
technologies such as advanced airborne FLIR, IR search and
track, airborne data processing system
2<PAGE>
technologies and advanced RF systems using active
electronically scanned antenna technology and products for
broad band-width space based communications with GaAs MMIC
solid-state-based transmitters and other technologies; and (b)
oversees the development and management of new strategic
businesses through (i) the New Business department, which
explores developing defense and related commercial
opportunities and (ii) the management of acquired companies.
"ADVANCED TECHNOLOGY AND COMPONENTS DIVISION" means the
organization within Seller that provides the Advanced Programs,
Electronic Systems and Missile Systems Divisions access to
technology in the fields of RF/Microwave, Electro-Optics,
advanced microelectronics, image/signal processing and weapon
guidance algorithms by supplying advanced component technology
and products for infrared systems, electronically steered
arrays, active RF decoys, missile seeker front-ends, power
supply subsystems, digital signal processors and target
recognition tracking algorithms.
"AFFILIATE" means, with respect to any specified Person, a
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
"ALLOWABLE TAX" means the allocable share of any Tax of
Seller or any of its Affiliates which is an allowable cost
under the Federal Acquisition Regulation, 48 C.F.R. Chapter 1,
and associated regulations and agreements between Seller and
any U.S. governmental entity, which agreements are listed on
Schedule 2, allocated based on Seller's existing finance policy
(as it is in effect as of the date hereof).
"ANCILLARY AGREEMENTS" means the following: with respect
to Intellectual Property, the Intellectual Property Assignment
and License Agreement (the "IP AGREEMENT") substantially in the
form of Exhibit A hereto, with respect to real estate, the
agreements substantially in the form of Exhibit B hereto, with
respect to information systems, the Systems and Services
Transition Agreement substantially in the form of Exhibit C
hereto and, with respect to administrative services, the Master
Services Agreement substantially in the form of Exhibit D
hereto.
"APPLICABLE INTEREST RATE" means interest at the rate per
annum determined, from time to time, under the provisions of
Section 6621(a)(2) of the Code.
"ASSETS" means any and all assets, properties and rights,
whether tangible or intangible, whether real, personal or
mixed, whether fixed, contingent or otherwise, and wherever
located, including, without limitation, the following:
3<PAGE>
(i) real property interests (including leases),
land, plants, buildings and improvements;
(ii) machinery, equipment, vehicles, furniture and
fixtures, leasehold improvements, supplies, repair parts,
tools, plant, laboratory and office equipment and other
tangible personal property, together with any rights or
claims arising out of the breach of any express or implied
warranty by the manufacturers or sellers of any of such
assets or any component part thereof;
(iii) inventories, including raw materials,
work-in-process, finished goods, parts, accessories;
(iv) cash, bank accounts, notes, loans and accounts
receivable (whether current or not current), interests as
beneficiary under letters of credit, advances and
performance and surety bonds;
(v) certificates of deposit, banker's acceptances,
shares of stock, securities, bonds, debentures, evidences
of indebtedness, certificates of interest or participation
in profit-sharing agreements, collateral-trust
certificates, shares, investment contracts, voting trust
certificates, puts, calls, straddles, interests in joint
ventures, partnerships and other entities, options, swaps,
collars, caps and other securities or hedging arrangements
of any kind;
(vi) financial, accounting and operating data and
records including, without limitation, books, records,
electronic data, notes, sales and sales promotional data,
advertising materials, credit information, cost and
pricing information, customer and supplier lists,
reference catalogs, payroll and personnel records, minute
books, stock ledgers, stock transfer records and other
similar property, rights and information;
(vii) Intellectual Property;
(viii) agreements, leases, Contracts, sale orders,
purchase orders, open bids and other commitments and all
rights therein;
(ix) prepaid expenses, deposits and retentions held
by third parties;
(x) claims, causes of action, choses in action,
rights under insurance policies, rights under express or
implied warranties, rights of recovery, rights of set-off,
and rights of subrogation;
(xi) Permits; and
4<PAGE>
(xii) goodwill and going concern value.
"ASSUMED LIABILITIES" means (i) all Liabilities relating
primarily to the Defense Business as presently conducted,
including without limitation all Liabilities relating to the
Acquired Facilities (excluding Liabilities (A) arising under
Environmental Laws relating to the facilities listed on
Schedule 3, (B) for Taxes incurred in or attributable to a Pre-
Closing Tax Period, and (C) for "Performance Payments" up to
$11,000,000 payable as provided in Section 2.1(e) of the
Agreement and Plan of Merger between Seller and the Acquired
Subsidiary dated October 2, 1995 (as defined therein)), (ii)
the Liabilities described on Schedule 4, and (iii) all
Liabilities treated as Assumed Liabilities under Article 8
hereof. Notwithstanding the foregoing, Assumed Liabilities
shall not include any Retained Liabilities.
"BRIDGE EMPLOYEES" means those individuals who are
employed in the Defense Business as of the Closing Date
pursuant to "bridge" agreements which grant a leave of absence
from Seller of up to five years until the employee qualifies
for early retirement under a pension plan maintained by Seller
or for benefits under a retiree medical plan maintained by
Seller.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"BUYER COMMON STOCK" means common stock, par value $1.00
per share, of Buyer.
"CLOSING DATE" means the date of the Closing.
"COMMERCIAL UNCOOLED IR BUSINESS" means the organization
within Seller that provides low cost uncooled night vision
systems for markets other than military, such as security, law
enforcement and automotive industry markets.
"CONTRACT" means any written note, bond, mortgage,
indenture, lease, contract, license, agreement or other
obligation or commitment.
"CONTROLLED GROUP LIABILITY" means any and all Liabilities
relating to Employee Plans under (i) Title IV of ERISA, (ii)
Section 302 of ERISA, and (iii) Sections 412 and 4971 of the
Code, other than such Liabilities that are Assumed Liabilities
hereunder.
"DGCL" means the General Corporation Law of the State of
Delaware.
"DAMAGES" means any damage, loss, claim, assessment,
judgment, liability and expense (including without limitation
reasonable expenses of investigation and reasonable
5<PAGE>
attorneys' fees and expenses in connection with any pending or
threatened claim, action, suit, investigation, proceeding or
government directive).
"DEFENSE BUSINESS" means (a) Seller's Missile Systems
Division, Electronics Systems Division, Advanced Programs
Division, and Advanced Technology and Components Division,
together with the Finance, Engineering, Business Development,
Supply Process, Human Resources, Quality Assurance, Product
Production Process and SG Strategy support activities
associated with said divisions, (b) Seller's Commercial
Uncooled IR Business, (c) Seller's Smart Antenna Business, (d)
the business of the Acquired Subsidiary, (e) the following
laboratories of Seller's Corporate and Research Development
Laboratories ("CRDL"): the Systems Components Laboratory, the
Sensors and Infrared Laboratory and the portion of the
Materials Science Laboratory that is engaged in work on gallium
arsenide, together with the CRDL management and administration,
marketing and contract, and quality, capital and computer
activities that support said two laboratories, and (f) certain
activities currently performed by corporate staff in support
thereof (the cost of which activities has been fully reflected
in the Acquired Business Financial Statements and the Acquired
Business Interim Financial Statements).
"ELECTRONIC SYSTEMS DIVISION" means the organization
within Seller that provides system solutions in the areas of
(a) electro-optical systems, including the Improved TOW/
Acquisition System, the Horizontal Technology Integration FLIR
program (with Hughes Aircraft Company), the Improved Bradley
Acquisition System, the Abrams Commander's Independent Thermal
Viewer, the Combat Vehicle Thermal Targeting System, the F-117
Infrared Acquisition and Designation System, the F-18 NITE Hawk
FLIR, the Surveillance FLIR Systems family of surveillance
FLIRs and low-cost uncooled night vision systems; (b) ocean
surveillance and terrain following/terrain avoidance radar
systems, including the ASW/ASUW/Ocean Surveillance Radars, the
LANTIRN/Multi-mode radar, the F-22 radar development program
(with Northrop Grumman), certain proprietary radar programs and
microwave components; and (c) specialized computing components
and systems for defense applications, including the F-16
Modular Mission Computer and ruggedized Memory Loader/Verifier
portable computerized test equipment.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA AFFILIATE" means, with respect to any entity, trade
or business, any other entity, trade or business that is a
member of a group described in Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b)(1) of ERISA that includes the
first entity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.
6<PAGE>
"EMPLOYEE PLANS" means each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, and each
employment, severance or other similar contract, arrangement or
policy and each plan or arrangement providing for insurance
coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits or for
deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which is
maintained, administered or contributed to by Seller or any of
its ERISA Affiliates and which covers any Transferred
Individual, other than any such plan, contract, arrangement or
policy which is a Foreign Plan.
"ENVIRONMENTAL LAWS" means any applicable Federal, state,
local or foreign law, treaty, judicial decision, regulation,
rule, judgment, order, decree, injunction, permit, agreement or
governmental restriction, each as in effect on or prior to the
Closing Date, relating to the environment or to any Hazardous
Substance.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"FINAL DETERMINATION" shall mean (i) with respect to
federal income Taxes, a "determination" as defined in Section
1313(a) of the Code or execution of an Internal Revenue Service
Form 870AD and, with respect to Taxes other than federal income
Taxes, any final determination of liability in respect of a Tax
that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a
period for the filing of claims for refunds, amended returns or
appeals from adverse determinations) or (ii) the payment of Tax
by Seller, Buyer or any of their Affiliates, whichever is
responsible for payment of such Tax liability under applicable
law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party
determines that no action should be taken to recoup such
payment and the indemnifying party, if any, agrees.
"FOREIGN PLANS" means each "employee benefit plan," within
the meaning of Section 3(3) of ERISA, and each employment,
severance or other similar contract, arrangement or policy and
each plan or arrangement providing for insurance coverage
(including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits or for
deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which is
maintained, administered or contributed to by Seller or any of
its ERISA Affiliates primarily for non-U.S. citizens or non-
U.S. residents and which covers any Transferred Individual.
7<PAGE>
"FORMER DEFENSE EMPLOYEES" means (i) those individuals who
at their termination were employed by Seller and engaged in the
Defense Business, a preliminary list of whom will be delivered
to Buyer as promptly as practicable, and a definitive list of
whom as of the close of business on the date prior to the
Closing Date will be delivered to Buyer at Closing, and (ii)
Bridge Employees.
"GAAP" means United States generally accepted accounting
principles.
"GOVERNMENT CONTRACT" means (i) any Contract relating to
the Acquired Business between Seller or the Acquired Subsidiary
and any Governmental Entity and (ii) any Contract relating to
the Acquired Business entered into by Seller or the Acquired
Subsidiary as subcontractor (at any tier) in connection with a
Contract between another Person and any Governmental Entity.
"GOVERNMENTAL ENTITY" means any government or any court,
arbitral tribunal, administrative agency, or commission or
other governmental or other regulatory authority or agency,
Federal, state, local, transnational or foreign.
"HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HAZARDOUS SUBSTANCE" means any substance, pollutant,
contaminant, chemical, waste or material, including petroleum,
its derivatives, by-products and other hydrocarbons, that is
listed, identified in, or regulated under any applicable
Federal, state, local or foreign law, treaty, judicial
decision, regulation, rule, judgment, order, decree,
injunction, permit, agreement or governmental restriction.
"INCOME TAX" (and, with correlative meaning, "INCOME
TAXES") means any Tax imposed on or measured by net income, net
worth or capital, or any alternative minimum Tax or similar
Tax, together with any interest or any penalty, addition to tax
or additional amount imposed by any Taxing Authority.
"INTELLECTUAL PROPERTY" has the meaning set forth in the
IP Agreement.
"INTERIM BALANCE SHEET NET WORTH" means $611,666,000.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means, with respect to Seller, the actual
knowledge of corporate officers of Seller, the members of the
Strategy Leadership Team of the Defense Business and Messrs. R.
Grossman and R. Donaldson.
8<PAGE>
"LEASED FACILITIES" means Acquired Facilities which are
leased by Seller. The material Leased Facilities are
identified on Schedule 1.
"LIABILITIES" means any and all debts, liabilities,
commitments, claims, allegations, demands and obligations,
whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or
unknown, whenever or however arising (including, without
limitation, whether arising out of any contract or tort based
on negligence or strict liability) and whether or not the same
would be required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
"LIEN" means any adverse claim, restriction on voting or
transfer or pledge, lien, mortgage, hypothecation, collateral
assignment, charge, encumbrance, easement, covenant,
restriction, title defect, encroachment or security interest of
any kind.
"MATERIAL ADVERSE EFFECT" means, with respect to the
Acquired Business or any entity (or group of entities taken as
a whole), such state of facts, events, change or effect as has
had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations or
financial condition of the Acquired Business, taken as a whole,
or, such entity (or group of entities, taken as a whole), or
with respect to the Acquired Business, on the ability of Buyer
to own and operate the Acquired Business following the Closing
Date substantially as currently conducted.
"MISSILE SYSTEMS DIVISION" means the organization within
Seller that develops, produces and assembles Seller's precision
guided weapons systems, including, without limitation, the
Paveway laser guided bomb family, the Joint Standoff Weapon
series, the Wind Corrected Munitions Dispenser guidance kit
development program (with Alliant Techsystems), the High-speed
Anti-Radar Missile, the Javelin anti-tank weapon (with Lockheed
Martin), the active radar seeker for the McDonnell Douglas
Harpoon anti-ship missile, the Extended Range Guided Munition
development program and two proprietary missile programs
referred to as PXX1 and PXX2.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any license, franchise, permit, concession,
order, authorization, approval or registration from, of or with
a Governmental Entity.
"PERMITTED LIENS" means any Liens (i) for Taxes
attributable to a Pre-Closing Tax Period not yet due or payable
or being contested in good faith, (ii) that are not material
and constitute mechanics', carriers', workers' or like liens
incurred in the ordinary course of business or (iii) that,
individually or in the aggregate, do not materially impair
9<PAGE>
the use, utility or value of the property to which they apply
or otherwise have a Material Adverse Effect on the Acquired
Business.
"PERSON" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or
any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
"PRE-CLOSING TAX PERIOD" means any Tax period, or portion
thereof, ending on or before the close of business on the
Closing Date.
"PROPRIETARY INFORMATION" means all information with
respect to the Acquired Business that in accordance with
Seller's usual practices would be treated by Seller as "TI
PROPRIETARY INFORMATION - STRICTLY PRIVATE", "TI PROPRIETARY
INFORMATION - INTERNAL DATA" or equivalent.
"RETAINED ASSETS" means all Assets of Seller other than
the Acquired Assets.
"RETAINED LIABILITIES" means all Liabilities of Seller
other than the Assumed Liabilities including, without
limitation, (i) any obligation or liability for Taxes; provided
that Transfer Taxes incurred in connection with the
transactions contemplated by this Agreement shall be paid in
the manner set forth in Section 7.02 hereof; (ii) any Liability
or obligation relating to the Retained Assets; (iii) the
Liabilities described in the parenthetical in clause (i) of the
definition of "Assumed Liabilities"; (iv) any Liability to
Transferred Employees for severance arising solely as a result
of the consummation of the transactions contemplated by the
Transaction Agreements (except to the extent any such Liability
is a result of the failure by Buyer to fulfill any of its
obligations under this Agreement); (v) any Taxes with respect
to the Acquired Subsidiary incurred in or attributable to a
Pre-Closing Tax Period; (vi) all Liabilities treated as
Retained Liabilities under Article 8 hereof; and (vii) any
Liability of the Acquired Subsidiary that would otherwise be a
Retained Liability if the Buyer were buying the Assets of the
Acquired Subsidiary used primarily in or held primarily for use
in the operation, as currently conducted, of the Defense
Business and not buying the stock of the Acquired Subsidiary.
"SEC" means the Securities Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SELLER BY-LAWS" means the by-laws of Seller, as amended.
"SELLER CHARTER" means the articles of incorporation of
Seller, as amended.
10<PAGE>
"SELLER COMMON STOCK" means common stock, par value $1.00
per share, of Seller.
"SELLER DB PLAN" means the TI Employees Pension Plan.
"SELLER DC PLAN" means the TI Employees Universal Profit
Sharing Plan, including the Profit Sharing, CODA, VEC and Tax
Credit Employees Stock Ownership Accounts.
"SELLER DISCLOSURE SCHEDULE" means the Disclosure Schedule
delivered by Seller to Buyer simultaneously with the execution
and delivery of this Agreement.
"SELLER OPTION" means an option to purchase a share of
Seller Common Stock granted under the Seller Stock Plans.
"SELLER RESTRICTED STOCK UNIT" means a restricted stock
unit granted under the Seller Stock Plans.
"SELLER STOCK PLANS" means the TI 1984 Stock Option Plan,
the TI 1988 Stock Option Plan, the TI Long-Term Incentive Plan,
and the TI 1996 Long-Term Incentive Plan.
"SELLER VEBA" means the TI Employees Health Benefit Trust.
"SMART ANTENNA BUSINESS" means the organization within
Seller that is developing an antenna for applications on
cellular and PCS transmissions equipment to improve the
quality, capacity and coverage of new and existing cell sites.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation of which such Person owns, either directly or
through its Subsidiaries, more than 50% of the total combined
voting power of all classes of voting securities of such
corporation or (ii) any partnership, association, joint venture
or other form of business organization, whether or not it
constitutes a legal entity, in which such Person, directly or
indirectly, owns more than 50% of the total equity interests.
"TAX" (including with correlative meaning, the terms
"TAXES" and "TAXABLE") means (A) all forms of taxation,
whenever created or imposed, whether imposed by a local,
municipal, state, foreign, Federal or other governmental body
or authority, and, without limiting the generality of the
foregoing, shall include income, gross receipts, ad valorem,
excise, value-added, sales, use, transfer, franchise, license,
stamp, occupation, withholding, employment, payroll, property
or environmental tax or premium, together
11<PAGE>
with any interest, penalty, addition to tax or additional
amount imposed by any governmental body or authority
responsible for the imposition of any such tax (a "TAXING
AUTHORITY"), (B) any liability of the Acquired Subsidiary for
the payment of any amounts of the type described in (A) as a
result of being a member of an affiliated, consolidated,
combined or unitary group, or being a party to any agreement or
arrangement whereby the liability of the Acquired Subsidiary
for payments of such amounts is determined or taken into
account with reference to the liability of any other Person;
and (C) any liability for the payment of any amounts as a
result of being party or subject to any agreement or with
respect to the payment of any amounts of the type described in
(A) or (B) as a result of any express or implied obligations to
indemnify any other Person.
"TAX ASSET" means any net operating loss, net capital
loss, investment tax credit, foreign tax credit, charitable
deduction or any other credit or tax attribute which could
reduce Taxes (including, without limitation, deductions and
credits related to alternative minimum Taxes).
"TAX RETURN" means any return, report, statement,
information statement and the like required to be filed with
any Taxing Authority.
"TERMINATION DATE" means December 31, 1997.
"TRANSACTION AGREEMENTS" means this Agreement and the
Ancillary Agreements.
"TRANSFERRED EMPLOYEES" means those individuals who are
employed by Seller (or any of its Subsidiaries operating
primarily outside the United States) in the Defense Business as
of the Closing Date (other than Bridge Employees), a
preliminary list of whom will be delivered to Buyer as promptly
as practicable and a definitive list of whom as of the close of
business on the date prior to the Closing Date will be
delivered to Buyer at Closing. Transferred Employees shall
include all individuals who are described in the first sentence
hereof and who are, as of the Closing Date, on an approved
leave of absence with a right to return to active employment.
"TRANSFERRED INDIVIDUALS" means Transferred Employees and
Former Defense Employees.
(b) The following terms shall have the meanings assigned
to such terms in the following sections:
Term Section
Accounting Referee 2.08
12<PAGE>
Allocation 2.08
Apportioned Obligations 7.02(b)
Assumption Agreement 2.09(c)
Buyer Recitals
Buyer DB Plan 8.02(b)
Buyer DC Plan 8.03(a)
Buyer FSAs 8.06(c)
Buyer Retiree Plan 8.04(a)
Buyer VEBA 8.06(d)
Claim 5.07(a)
Closing 2.09
Closing Net Worth Schedule 2.07
Compensation Maintenance Period 8.10(a)
Confidentiality Agreement 6.01
Consideration 2.08
Environmental Permits 3.13(a)(ii)
General Assignment 2.09(b)
indemnified party 10.03(a)
indemnifying party 10.03(a)
IP Agreement 1.01(a)
Long-Term Contract 7.05(a)
Novation Agreement 6.03(a)
Qualified Plans 3.12(b)(i)
Post-Closing Tax Period 7.02(b)
Purchase Price 2.06
Seller Recitals
Seller FSAs 8.06(c)
Seller Insurance Policies 5.07(a)
Seller Representatives 5.06
Tax Benefit 10.02(d)
Technology 3.15(b)
Third Party Claim 10.03(b)
Transfer Taxes 7.02(a)
13<PAGE>
ARTICLE 2
Purchase And Sale
Section 2.01. Purchase and Sale. Except as otherwise
expressly provided below, upon the terms and subject to the
conditions of this Agreement, Buyer agrees to purchase from
Seller and Seller agrees to sell, convey, transfer, assign
and deliver, or cause to be sold, conveyed, transferred,
assigned and delivered, to Buyer at the Closing, free and
clear of all Liens, other than Permitted Liens, the Acquired
Assets. Buyer and Seller agree that Buyer shall have the
right to use the name "Raytheon - TI Systems" in the manner
set forth in Section 2.12 of the IP Agreement.
Section 2.02. Retained Assets. Buyer expressly
understands and agrees that the Retained Assets shall be
excluded from the Acquired Assets.
Section 2.03 Assumed Liabilities. Upon the terms and
subject to the conditions of this Agreement and effective at
the time of the Closing:
(a) Buyer shall unconditionally assume and agree to pay,
satisfy and discharge when due in accordance with their terms,
and Buyer shall fully and forever hold Seller and its
Affiliates harmless against, any and all Assumed Liabilities.
(b) Seller shall retain, and Buyer will have no liability
with respect to, and Seller shall fully and forever hold Buyer
and its Affiliates harmless from and against, the Retained
Liabilities.
Section 2.04. Retained Liabilities. Notwithstanding any
provision in this Agreement or any other writing to the
contrary, Buyer is assuming only the Assumed Liabilities and is
not assuming any of the Retained Liabilities, which shall be
retained by and remain obligations and liabilities of Seller.
Section 2.05 Nonassignable Contracts. Anything contained
herein to the contrary notwithstanding, this Agreement shall
not constitute an agreement to assign any lease, license
agreement, Contract, agreement, sales order, purchase order,
open bid or other commitment or Acquired Assets if an
assignment or attempted assignment of the same without the
consent of another Person would constitute a breach thereof or
in any way impair the rights of Buyer or Seller thereunder. If
any such consent is not obtained or if an attempted assignment
would be ineffective or would impair either Seller's or Buyer's
rights under any such lease, license agreement, Contract,
agreement, sales order, purchase order, open bid or other
commitment or Acquired Assets so that Buyer would not receive
all such rights, then (x) Seller shall use reasonable efforts
(it being understood that such efforts shall not include any
requirement of Seller or any of its Subsidiaries to expend
14<PAGE>
material sums of money or grant any material financial
accommodation) to provide or cause to be provided to Buyer, to
the extent permitted by law, the benefits of any such lease,
license agreement, Contract, agreement, sales order, purchase
order, open bid or other commitment or Acquired Assets and
Seller shall promptly pay or cause to be paid to Buyer when
received all moneys received by Seller with respect to any such
lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or Acquired Assets
and (y) in consideration thereof Buyer shall pay, perform and
discharge on behalf of Seller all of Seller's debts,
liabilities, obligations and commitments thereunder in a timely
manner and in accordance with the terms thereof. In addition,
Seller shall take such other actions as may reasonably be
requested by Buyer in order to place Buyer, insofar as
reasonably possible, in the same position as if such lease,
license agreement, Contract, agreement, sales order, purchase
order, open bid or other commitment or Acquired Assets had been
transferred as contemplated hereby and so all the benefits and
burdens relating thereto, including possession, use, risk of
loss, potential for gain and dominion, control and command,
shall inure to Buyer. If and when such consents and approvals
are obtained, the transfer of the applicable lease, license
agreement, contract, agreement, sales order, purchase order,
open bid or other commitment or Acquired Assets shall be
effected in accordance with the terms of this Agreement.
Notwithstanding the foregoing, the provisions of this Section
2.05 shall not relieve Seller of any of its obligations under
this Agreement with respect to any breach of any
representations, warranties, covenants or agreements contained
herein or in any of the Ancillary Agreements, or with respect
to any of its indemnification obligations contained herein or
therein.
Section 2.06. Purchase Price. The purchase price for the
Acquired Assets (the "PURCHASE PRICE") is $2,875,000,000 in
cash. The Purchase Price shall be paid as provided in Section
2.09, subject to adjustment as provided in Section 2.07.
Section 2.07. Closing Balance Sheet. (a) If the Closing
Net Worth of the Acquired Business, as calculated in the manner
set forth, and as defined, on Schedule 2.07, is less than the
Interim Balance Sheet Net Worth, then Seller shall pay to the
Buyer an amount equal to such shortfall in the manner set forth
in Schedule 2.07.
(b) If the Closing Net Worth is greater than the Interim
Balance Sheet Net Worth, then Buyer shall pay to Seller an
amount equal to such excess in the manner set forth in Schedule
2.07.
(c) Schedule 2.07 sets forth (i) the manner in which the
Closing Net Worth shall be calculated and (ii) the manner in
which any payment required by Sections 2.07(a), 2.07(b) or
2.07(d) shall be made.
15<PAGE>
(d) There will be a further adjustment to the Purchase
Price (A) for the present value of the future annual after-tax
cost or benefit to Buyer of the Seller's Voluntary Early
Retirement Program, giving effect to (i) increased pension and
retiree medical costs, (ii) reduced payroll and benefit costs
in excess of $20 million annually, and (iii) reasonably
expected government cost reimbursements, arising in each case
from Seller's Voluntary Early Retirement Program and (B) to
reflect any transfer of Assets or Liabilities required by
Section 8.13. The parties will cooperate in good faith to
jointly make the calculations required by the preceding
sentence. Any disputes between the parties with respect to the
adjustment provided for in this Section 2.07(d) shall be
resolved in the manner provided in Schedule 2.07.
Section 2.08. Allocation of Purchase Price. (a) The
Purchase Price and the Assumed Liabilities (hereinafter, the
"CONSIDERATION"), to the extent properly taken into account
under Section 1060 of the Code, shall be allocated among the
Acquired Assets, including the stock of the Acquired
Subsidiary, as set forth in this Section 2.08. No later than
30 days prior to the Closing, Buyer shall deliver to Seller a
statement allocating the Consideration among the Acquired
Assets, including the stock of the Acquired Subsidiary, in
accordance with Code Section 1060 and the regulations
promulgated thereunder (the "ALLOCATION"). Seller shall have a
period of 10 days after the delivery of the Allocation to
present in writing to Buyer notice of any objections Seller may
have to the Allocation. Unless Seller timely objects, the
Allocation shall be binding on the parties without further
adjustment. If Seller shall raise any objections within the 10
day period, Seller and Buyer shall negotiate in good faith and
use their best efforts to resolve such dispute. If the parties
fail to agree within 20 days after delivery of the notice, then
the disputed items shall be resolved by a mutually agreed upon
"Big Six" accounting firm (the "ACCOUNTING REFEREE") (which
firm shall not be Ernst & Young or Coopers & Lybrand). The
Accounting Referee shall resolve the dispute within 30 days
after having the dispute referred to it. The costs, fees and
expenses of the Accounting Referee shall be borne equally by
Buyer and Seller.
(b) Except as required by a Final Determination, Seller
and Buyer agree to (i) be bound by the Allocation, (ii) act in
accordance with the Allocation in the preparation of financial
statements and filing of all Tax returns (including, without
limitation, filing Form 8594 with its federal income Tax return
for the taxable year that includes the date of the Closing) and
in the course of any Tax audit, Tax review or Tax litigation
relating thereto and (iii) take no position and cause their
Affiliates to take no position inconsistent with the Allocation
for federal and state income Tax purposes.
(c) If an adjustment is made with respect to the Purchase
Price pursuant to Section 2.07, the Allocation shall be
adjusted in accordance with Code Section 1060 and the
regulations promulgated thereunder, and as mutually agreed by
Seller and Buyer. In the
16<PAGE>
event that an agreement is not reached within 20 days after the
determination of Closing Net Worth pursuant to Schedule 2.07
hereto, any disputed items shall be resolved pursuant to
Section 2.08(a) hereof. Seller and Buyer agree to file any
additional information return required pursuant to the
regulations under Code Section 1060 and to treat the Allocation
as adjusted in the manner described in Section 2.08(c).
(d) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to this transaction, each party
shall deliver to the other party a copy of its Form 8594.
Section 2.09. Closing. The closing (the "CLOSING") of
the purchase and sale of the Acquired Assets and the assumption
of the Assumed Liabilities hereunder shall take place at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New
York, New York, as soon as possible, but in no event later than
10 business days, after satisfaction of the conditions set
forth in Article 9, or at such other time or place as Buyer and
Seller may agree. At the Closing:
(a) Buyer shall deliver to Seller the Purchase Price in
immediately available funds by wire transfer to an account of
Seller with a bank designated by Seller, by notice to Buyer,
not later than two business days prior to the Closing Date (or
if not so designated, then by certified or official bank check
payable in immediately available funds to the order of Seller
in such amount).
(b) Seller shall assign and transfer (or, where
appropriate, cause its Subsidiaries to assign and transfer) to
Buyer the Acquired Assets by delivery of (i) a General
Assignment and Bill of Sale in form and substance reasonably
satisfactory to Buyer and Seller (the "GENERAL ASSIGNMENT"),
duly executed by Seller or any appropriate subsidiary of
Seller, (ii) an assignment of the Intellectual Property as
evidenced by the IP Agreement, (iii) special warranty deeds in
proper statutory form for recording and otherwise in form and
substance reasonably satisfactory to Buyer conveying good and
indefeasible title to the Acquired Facilities listed in Part
(I) of Schedule 1 subject only to Permitted Liens, (iv) certain
of the Ancillary Agreements and assignments of or subleases of
Seller's or any of its Subsidiaries' rights in other Leased
Facilities in form and substance reasonably satisfactory to
Buyer and Seller, and (v) all such other good and sufficient
instruments of conveyance, assignment and transfer, and such
affidavits (including, without limitation, affidavits of title
and any FIRPTA affidavits which may be required under Section
1445 of the Code) and other instruments in form and substance
reasonably acceptable to Buyer's counsel, as shall be effective
to transfer to Buyer the Acquired Assets and to enable Buyer to
obtain from a national title insurance company at standard
rates extended coverage Texas-form title insurance policies
with respect to the Acquired Facilities listed in Part (I) of
Schedule 1, subject only to exceptions for the applicable
Permitted Liens and in all respects in form and substance
reasonably acceptable to Buyer.
17<PAGE>
(c) Buyer shall assume from Seller the due payment,
performance and discharge of the Assumed Liabilities by
delivery of (i) an Assumption Agreement in form and substance
reasonably satisfactory to Buyer and Seller (the "ASSUMPTION
AGREEMENT"), duly executed by Buyer, and (ii) such other good
and sufficient instruments of assumption, in form and substance
reasonably acceptable to Seller's counsel, as shall be
effective to cause Buyer to assume the Assumed Liabilities as
and to the extent provided in Section 2.03;
(d) Seller and Buyer shall also deliver the certificates
and other contracts, documents and instruments required to be
delivered under Article 9, including, without limitation, the
Ancillary Agreements;
(e) Seller shall deliver to Buyer true, accurate and
complete copies of the stock record and minute books of the
Acquired Subsidiary, and such minute books shall contain
minutes of all meetings of the Board of Directors (including
any committees thereof) and of stockholders of the Acquired
Subsidiary; and
(f) Seller and Buyer shall each pay half of all costs and
premiums incurred by Buyer in obtaining title insurance and
surveys with respect to the Acquired Facilities.
ARTICLE 3
Representations and Warranties Of Seller
Seller hereby represents and warrants to Buyer that,
except as set forth in the section of the Seller Disclosure
Schedule corresponding to the Section of this Agreement to
which such representation or warranty pertains:
Section 3.01. Corporate Organization. Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. The Acquired
Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation. The Acquired Subsidiary is duly qualified and
in good standing as a foreign corporation in each jurisdiction
in which the properties owned, leased or operated, or the
businesses conducted, by it require such qualification, except
for any such failure so to qualify or be in good standing
which, individually or in the aggregate, would not have a
Material Adverse Effect on the Acquired Business, materially
impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement. The
Acquired Subsidiary has the requisite corporate power and
authority to
18<PAGE>
carry on its businesses as they are now being or will be
conducted. Seller has heretofore provided to Buyer complete
and correct copies of Seller Charter and Seller By-laws and of
the certificate of incorporation and by-laws of the Acquired
Subsidiary each, as amended to date and currently in full force
and effect.
Section 3.02. Corporate Authority. Seller has, or, in
the case of any Ancillary Agreement executed after the date
hereof, will have, the requisite corporate power and authority
to execute, deliver and perform each Transaction Agreement to
which it is or will be a party and to consummate the
transactions contemplated thereby. The execution, delivery and
performance of each Transaction Agreement by Seller and the
transactions contemplated thereby have been duly authorized by
Seller's Board of Directors, and no other corporate proceedings
on the part of Seller are necessary to authorize any
Transaction Agreement or for Seller to consummate the
transactions contemplated thereby. Each Transaction Agreement
to which Seller is, or will be, a party is, or when executed
and delivered will be (assuming such agreement constitutes a
valid and binding obligation of Buyer), a valid and binding
agreement of Seller, enforceable against Seller in accordance
with the terms thereof except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or
other laws relating to or affecting creditors' rights
generally, and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
Section 3.03. No Violations; Consents and Approvals. (a)
None of the execution, delivery or performance by Seller of
each Transaction Agreement to which it is or will be a party or
the consummation by Seller of the transactions contemplated
thereby (i) will conflict with, or result in a violation or
breach of, Seller's or the Acquired Subsidiary's Charter or
Seller's or the Acquired Subsidiary's By-laws or (ii) subject
to the matters referred to in clause 3.03(b)(A) and (B) below,
will conflict with, or result in a violation or breach of, or
constitute a default (with or without notice or lapse of time
or both) under, or give rise to any right of termination,
amendment, cancellation or acceleration of any obligation
under, or result in the creation of a Lien upon any of the
properties or assets of, Seller or any Subsidiary of Seller
under, (A) any of the terms, conditions or provisions of any
Contract or of any Permit to which Seller or any of its
Subsidiaries is a party or by which any of their properties or
assets may be bound or (B) any judgment, order, decree,
statute, law, regulation or rule applicable to Seller or any of
its Subsidiaries, except, in the case of this clause (ii), for
conflicts, violations, breaches, defaults, rights or Liens that
would not, individually or in the aggregate, (x) have a
Material Adverse Effect on the Acquired Business, (y)
materially impair the ability of Seller to perform its material
obligations under the Transaction Agreements or (z) prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement.
19<PAGE>
(b) No consent, approval, order, authorization of or
registration, declaration or filing with any Governmental
Entity or any other Person is required with respect to Seller
or any of its Subsidiaries in connection with the execution,
delivery or performance by Seller of each Transaction Agreement
to which it is or will be a party or the consummation by Seller
of the transactions contemplated thereby, except for (A)
compliance with any applicable requirements of the HSR Act, (B)
the matters described in Section 3.03 of the Seller Disclosure
Schedule, (C) assignment and novation of Government Contracts
and (D) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, the failure to obtain
or to make which would not, individually or in the aggregate,
(x) have a Material Adverse Effect on the Acquired Business,
(y) materially impair the ability of Seller to perform its
material obligations under the Transaction Agreements or (z)
prevent or materially delay the consummation of the purchase
and sale of the Acquired Assets contemplated by this Agreement.
Section 3.04. Subsidiaries. (a) Each of the outstanding
shares of capital stock of the Acquired Subsidiary has been
duly authorized and validly issued, is fully paid and
nonassessable and is owned directly by Seller free and clear
of all Liens. There are no Contracts obligating Seller, or
restricting Seller's rights, to transfer, sell or vote, the
capital stock of the Acquired Subsidiary owned by it, directly
or indirectly. There are no outstanding options, warrants or
other rights of any kind to acquire, obligations to issue, or
securities convertible into, shares of capital stock of any
class of, or other equity interests in the Acquired Subsidiary.
No person has any preemptive right, right of first refusal or
similar right in connection with such shares or interests owned
by Seller.
(b) Section 3.04 of the Seller Disclosure Schedule lists
all teaming arrangements relating to the Acquired Business to
which Seller or any Subsidiary of Seller is a party. Seller
does not, directly or indirectly, own any capital stock or
other ownership interest in any corporation, partnership, joint
venture or other entity that is engaged in the Acquired
Business, other than the capital stock of the Acquired
Subsidiary and as listed on Section 3.04 of the Seller
Disclosure Schedule. Neither Seller nor the Acquired
Subsidiary is a party to any Contract, other than this
Agreement, relating to the purchase of any interest in, or the
obligation to invest in or provide funds to, any such entity.
Section 3.05. Acquired Business Financial Statements.
Included in Section 3.05 of the Seller Disclosure Schedule are
(i) the Acquired Business Financial Statements, and (ii)
Acquired Business Interim Financial Statements. Each of the
Acquired Business Balance Sheet and the Acquired Business
Interim Balance Sheet (including any related notes and
schedules) fairly presents in all material respects the
combined financial position of the Acquired Business as of its
date, and each of the statements of combined income and
combined cash flows included in the Acquired Business Financial
Statements and the Acquired Business Interim Financial
Statements (including any related notes and
20<PAGE>
schedules) fairly presents, in all material respects the
combined results of operations and combined cash flows, as the
case may be, of the Acquired Business for the periods set forth
therein, in each case in accordance with GAAP consistently
applied, subject, in the case of the Retained Business Interim
Financial Statements, to normal year-end adjustments which are
not material in the aggregate.
Section 3.06. No Undisclosed Material Liabilities. There
are no liabilities of the Seller or any Subsidiary of any kind
whatsoever relating to the Acquired Business, whether accrued,
contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in
such a liability, other than:
(a) liabilities provided for in the Acquired Business
Interim Balance Sheet or disclosed in the notes thereto; and
(b) other undisclosed liabilities which, individually or
in the aggregate, are not material to the Acquired Business;
provided that Seller shall have no liability under this Section
3.06 with respect to any matter as to which there are specific
representations herein.
Section 3.07. Absence of Certain Events and Changes.
Since January 1, 1996 Seller and its Subsidiaries have
conducted the Acquired Business in the ordinary course,
consistent with past practices, and there have not been (i) any
events, changes or developments which, individually or in the
aggregate, have had or would reasonably be expected to have a
Material Adverse Effect on the Acquired Business (as currently
conducted and as conducted since January 1, 1996), or would
materially impair the ability of Seller to perform its material
obligations under the Transaction Agreements, or that would
prevent or materially delay the consummation of the purchase
and sale of the Acquired Assets contemplated by this Agreement,
other than events, changes or developments relating to the
economy in general or resulting from industry-wide developments
affecting companies in similar businesses; (ii) (x) any
granting by Seller or any of its Subsidiaries to any officer or
management employee who is to be a Transferred Employee of any
increase in compensation, except in the ordinary course of
business (including, but not limited to, in connection with
promotions) consistent with past practice or as was required
under employment agreements in effect as of January 1, 1996,
(y) any granting by Seller or any of its Subsidiaries to any
such officer or management employee of any increase in
severance or termination pay, except as part of a standard
employment package to any person promoted or hired (but not, in
any case, to any of the five most senior officers), or as was
required under employment, severance or termination agreements
in effect as of January 1, 1996, or (z) except in the ordinary
course of business consistent with past practice, any entry by
Seller or any of its Subsidiaries into any
21<PAGE>
employment, consulting, severance, termination or
indemnification agreement with any executive officer or
management employee who is to be a Transferred Employee; (iii)
any acquisition or any sale, lease or disposition of any
material assets or properties of the Defense Business by
Seller, except in the ordinary course of business, consistent
with past practice; (iv) any change in accounting methods,
principles or practices by Seller or any of its Subsidiaries,
except insofar as such change may have been required by a
change in GAAP; or (v) any entry into any agreement,
arrangement or commitment to take any of the actions set forth
in this Section 3.07.
Section 3.08. Compliance with Applicable Laws. Seller
and its Subsidiaries and their respective properties and assets
are in compliance with all statutes, laws, regulations, rules,
judgments, orders and decrees of all Governmental Entities
applicable to them that relate to the Acquired Business
(including any statutes, laws, regulations, rules, judgments,
orders and decrees incorporated expressly, by reference or by
operation of law into, or otherwise applicable to, any
Government Contract) except where the failure to be in
compliance would not, individually or in the aggregate, have a
Material Adverse Effect on the Acquired Business, materially
impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement. Neither
Seller nor any Acquired Subsidiary has received any written
notice of any administrative, civil or criminal investigation
or audit (other than Tax audits) by any Governmental Entity
relating to the Acquired Business which have not been resolved
that, individually or in the aggregate, would have a Material
Adverse Effect on the Acquired Business. This Section 3.08
does not relate to employee benefits matters (for which Section
3.12 is applicable) or Tax matters (for which Section 3.11 is
applicable) or environmental matters (for which Section 3.13 is
applicable).
Section 3.09. Title to and Sufficiency of Assets. (a)
Seller has good title to the personal properties and assets
reflected on the Acquired Business Interim Balance Sheet or
acquired since the date of the Acquired Business Interim
Balance Sheet, in each case free and clear of any Liens other
than Permitted Liens, except for properties and assets not
material in the aggregate to the Acquired Business disposed of
in the ordinary course of business consistent with past
practice and except for such defects in title which,
individually or in the aggregate, would not have a Material
Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(b) Seller has (i) good and indefeasible title to its
owned Acquired Facilities (which are accurately listed on
Schedule 1) and (ii) valid and subsisting leasehold interests
22<PAGE>
in its Leased Facilities (the material Leased Facilities are
accurately listed on Schedule 1), in each case, free and clear
of any Liens, subject only to Permitted Liens. Each Acquired
Facility (including, without limitation, all buildings,
structures, improvements and fixtures located thereon,
thereunder, thereover or therein, and all appurtenances thereto
and other aspects thereof): (1) is in good operating condition
and repair and is structurally sound and free of defects, with
no material alterations or repairs being required thereto under
applicable law or insurance company requirements; (2) consists
of sufficient land, parking areas, driveways and other
improvements and lawful means of access to permit the use
thereof in the manner and for the purposes to which it is
presently devoted; and (3) is otherwise suitable, sufficient,
adequate and appropriate in all respects (whether physical,
structural, legal, practical or otherwise) for its current use,
operation and occupancy, except, in each such case, to the
extent that failure to meet such standards does not impair or
adversely affect in any material respect the manner or extent
of the current use, operation or occupancy of such Acquired
Facility. The Permitted Liens would not reasonably be expected
to have a Material Adverse Effect on the Acquired Business or
to adversely affect in any material respect the manner or
extent of the current use, operation or occupancy of any
material Acquired Facility. No owned Acquired Facility is
subject to any sales contract, option, right of first refusal
or similar agreement or arrangement with any third party and no
material Leased Facility is subject to any sales contact,
option, right of first refusal or similar agreement or
arrangement with any third party the exercise of which would,
individually or in the aggregate, reasonably be expected to (i)
adversely affect in any material respect the manner or extent
of the current use, operation or occupancy of any such Leased
Facility, (ii) have a Material Adverse Effect on the Acquired
Business, (iii) materially impair the ability of Seller to
perform its material obligations under the Transaction
Agreements or (iv) prevent or materially delay the purchase and
sale of the Acquired Assets contemplated by this Agreement.
(c) The Acquired Business will, at the Closing Date,
include all right, title and interest in and to all Assets
(other than Intellectual Property) that are used primarily in
or that are being held primarily for use or are otherwise
necessary in the operation, as currently conducted, of the
Defense Business of Seller, and will have the rights to
Intellectual Property set forth in the IP Agreement.
Section 3.10. Litigation. There are no civil, criminal
or administrative actions, suits, claims, hearings,
investigations or proceedings pending, or to the knowledge of
Seller threatened, against Seller that, individually or in the
aggregate, would (i) have a Material Adverse Effect on the
Acquired Business, (ii) materially impair the ability of Seller
to perform its material obligations under the Transaction
Agreements or (iii) prevent or materially delay the purchase
and sale of the Acquired Assets contemplated by this Agreement.
There are no outstanding judgments, orders, decrees,
stipulations or awards against Seller or its properties or
businesses that, individually or in the aggregate, would
23<PAGE>
have a Material Adverse Effect on the Acquired Business,
materially impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement. Section
3.10 of the Seller Disclosure Schedule sets forth, as of the
date hereof, (i) each suit, action or proceeding which seeks
damages or other monetary relief of more than $1.0 million and
(ii) each criminal investigation, in each case pending (or, to
the knowledge of Seller, threatened) with respect to any of the
Acquired Business.
Section 3.11. Taxes. (a) All Tax Returns required to be
filed by the Seller and the Acquired Subsidiary before the date
hereof have been filed, and all Taxes due with respect to the
periods covered by such Returns have been timely paid or
adequately reserved for on the books of Seller, except to the
extent that the failure to so file or to pay would not have a
Material Adverse Effect on the Acquired Business, materially
impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement.
(b) There are no material claims or investigations
pending or threatened in writing with respect to any Tax of the
Acquired Subsidiary or any Taxes (other than Income Taxes)
relating to the Acquired Assets.
(c) There is no Tax sharing or allocation agreement under
which the Acquired Subsidiary will have any obligations after
the Closing Date.
(d) Seller and the Acquired Subsidiary have timely paid,
and will timely pay, all Tax liabilities which relate to the
Acquired Assets and which are incurred in or attributable to
the Pre-Closing Tax Period, other than Transfer Taxes as
defined in Section 7.02(a), the non-payment of which would
result in a Lien on any Acquired Asset, would otherwise
adversely affect the Acquired Business or would result in the
Buyer becoming liable therefor.
(e) The Acquired Subsidiary does not report any income in
accordance with the provisions of Section 460 of the Code.
Section 3.12. Employee Benefit Plans. (a) The Seller
Disclosure Schedule lists each Employee Plan and Foreign Plan.
Except as set forth in the next sentence, with respect to each
Employee Plan, Seller has delivered or made available to Buyer,
a true, correct and complete copy of: (i) each writing
constituting a part of such Employee Plan and Foreign Plan,
including without limitation all plan documents, benefit
schedules, trust agreements, and insurance contracts and other
funding vehicles; (ii) the most recent
24<PAGE>
Annual Report (Form 5500 Series) and accompanying schedule, if
any; (iii) the current summary plan description, if any; (iv)
the most recent annual financial report, if any; and (v) the
most recent determination letter from the IRS, if any. Foreign
plans, insurance contracts, preferred provider contracts and
similar contracts, trust agreements relating to Employee Plans
and executed copies of the Seller incentive pay and employment
agreements described on Section 8.07 of the Seller Disclosure
Schedule (a form of which, in relevant part, has been provided
to Buyer) shall be made available prior to the Closing Date.
Except as specifically provided in the foregoing documents
delivered or made available to Buyer, there are no amendments
to any Employee Plan or Foreign Plan that have been adopted or
approved nor has Seller undertaken to make any such amendments.
(b) Except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Acquired
Business, materially impair the ability of Seller to perform
its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase
and sale of the Acquired Assets contemplated by this Agreement:
(i) The Seller Disclosure Schedule identifies each
Employee Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code
("QUALIFIED PLANS"). The Internal Revenue Service has
issued a favorable determination letter with respect to
each Qualified Plan that has not been revoked, and there
are no existing circumstances nor any events that have
occurred that could reasonably be expected to adversely
affect the qualified status of any Qualified Plan or the
related trust.
(ii) Each Employee Plan and Foreign Plan has been
maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA
and the Code, which are applicable to such Plan.
(iii) All contributions required to be made to any
Employee Plan or Foreign Plan by applicable law or
regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect
to insurance policies funding any Employee Plan, for any
period through the date hereof have been timely made or
paid in full, or, to the extent not required to be made or
paid on or before the date hereof, either (A) have been
fully reflected on the Acquired Business Interim Financial
Statements; or (B) will not constitute Assumed
Liabilities.
(iv) With respect to each Employee Plan that is
subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code: (A) there does not
25<PAGE>
exist any accumulated funding deficiency within the
meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived; (B) except in the case of
the Seller DB Plan, the fair market value of the assets of
such Employee Plan equals or exceeds the actuarial present
value of all accrued benefits under such Employee Plan
(whether or not vested), on a termination basis; (C) no
reportable event within the meaning of Section 4043(c) of
ERISA has occurred (except for any such reportable event
for which the requirement of filing notice with the PBGC
has been waived); and (D) all premiums to the PBGC have
been timely paid in full.
(v) There does not now exist, nor do any
circumstances exist that could result in, any Controlled
Group Liability that would be a liability of Buyer or any
of its ERISA Affiliates as a result of transactions
contemplated by this Agreement. Without limiting the
generality of the foregoing, neither Seller nor any of its
ERISA Affiliates has engaged in any transaction described
in Section 4069 or Section 4204 or 4212 of ERISA.
(vi) No Employee Plan is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA or a
plan that has two or more contributing sponsors at least
two of whom are not under common control, within the
meaning of Section 4063 of ERISA.
(vii) No Transferred Individual will become entitled
to any retirement, severance or similar benefit or
enhanced or accelerated benefit solely as a result of the
transactions contemplated hereby, to the extent Buyer
complies with its obligations hereunder. Without limiting
the generality of the foregoing, no amount required to be
paid or payable to or with respect to any Transferred
Individual in connection with the transactions
contemplated hereby (either solely as a result thereof or
as a result of such transactions in conjunction with any
other event) will be an "excess parachute payment" within
the meaning of Section 280G of the Code.
(viii) Neither Seller nor any of its ERISA Affiliates
has any liability for post-retirement life, health,
medical or other welfare benefits to Transferred
Individuals, except as set forth in the Seller Disclosure
Schedule, and except for health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I
of ERISA.
(ix) At the Closing Date, Buyer will employ no more
than 800 Bridge Employees. As soon as practicable after
the date hereof, Buyer will provide Seller with a list of
all Bridge Employees as of the date hereof and (to be
provided before
26<PAGE>
the Closing) as of the Closing Date, together with a
schedule of the expirations of such Bridge Employees'
leaves of absence. Each "bridge agreement," within the
meaning of the definition of Bridge Employees, permits
Seller to modify or reduce benefits under any welfare
benefit plan under which the relevant Bridge Employee is
covered during such Bridge Employee's leave of absence
prior to retirement.
Section 3.13. Environmental Matters. (a)(i) The
Acquired Business is in compliance with all applicable
Environmental Laws except where the failure to be in compliance
would not, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(ii) The Acquired Business has all Permits required
under Environmental Laws for the operation of the Acquired
Business as presently conducted (the "ENVIRONMENTAL
PERMITS") and there are no violations, investigations or
proceedings or, to the knowledge of Seller, pending or
threatened with respect to such Environmental Permits
except where the failure to have such Environmental
Permits or where the violation, investigation or
proceeding relating thereto would not, individually or in
the aggregate, have a Material Adverse Effect on the
Acquired Business, materially impair the ability of Seller
to perform its material obligations under the Transaction
Agreements or prevent or materially delay the consummation
of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(iii) Since December 31, 1994, no notice,
notification, demand, request for information, citation,
summons, complaint or order has been received by or, to
the knowledge of Seller, is pending or threatened by any
Person against, any part of the Acquired Business or in
respect of any of the Acquired Facilities nor has any
material penalty been assessed against any of the Acquired
Business with respect to any alleged violation of any
Environmental Law or liability thereunder, other than
where such notice, notification, demand, request for
information, citation, summons, complaint or order has
been fully resolved, or where resolution would not,
individually or in the aggregate, have a Material Adverse
Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations
under the Transaction Agreements or prevent or materially
delay the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement.
27<PAGE>
(iv) No Hazardous Substance has been discharged,
generated, treated, manufactured, handled, stored,
transported, emitted, released or is present at any
property now or previously owned, leased or operated by
any part of the Acquired Business in violation of any
Environmental Law, which circumstance, individually or in
the aggregate, would have in a Material Adverse Effect on
the Acquired Business, materially impair the ability of
Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired
Assets contemplated by this Agreement.
(b) Since January 1, 1994, there has been no
environmental investigation conducted of which Seller has
knowledge in relation to the Acquired Business or any property
or facility now or previously owned or leased with respect to
the Acquired Business with respect to any matter which has had
or would, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
Section 3.14. Brokers and Finders. None of Seller or any
of its directors, officers or employees has employed any broker
or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the transactions
contemplated hereby, other than Morgan Stanley & Co.
Incorporated, the fees and expenses of which shall be paid by
Seller.
Section 3.15. Intellectual Property. (a) Section
3.15(a) of the Seller Disclosure Schedule sets forth a list of
the patents, patent applications, patent disclosures and
trademarks that will be transferred to the Buyer at the
Closing. All of the other Intellectual Property owned by
Seller or any of its Subsidiaries and used primarily, or held
primarily for use, in connection with the Defense Business as
conducted on the date hereof and on the Closing Date will be
transferred to the Buyer at the Closing. Pursuant to the IP
Agreement, and subject to the terms therein, the Buyer shall,
as of the Closing Date, have the right to use, hold for use or
otherwise exploit (to the extent set forth in the IP Agreement)
all the Intellectual Property referred to therein, whether or
not set forth in Section 3.15(a) of the Seller Disclosure
Schedule, in a manner not materially different than that in
which such Intellectual Property is or may be used, held for
use or otherwise exploited by Seller and its Subsidiaries in
the Defense Business as of the date hereof and as of the
Closing Date.
(b) Seller and its Subsidiaries own or have the right to
use all material Intellectual Property (other than third party
patents and licenses) and research records,
28<PAGE>
records of inventions, test information, market surveys and
marketing know-how and unregistered copyrights ("TECHNOLOGY")
used in connection with the Defense Business as conducted on
the date hereof and as of the Closing Date. Seller and its
Subsidiaries have used commercially reasonable measures to
protect the secrecy, confidentiality and value of the material
Technology used in connection with the Defense Business. To
the knowledge of Seller, no material Technology (other than
unregistered copyrights) used in connection with the Defense
Business has been used, divulged or appropriated for the
benefit of any Person other than Seller and its Subsidiaries,
except where such use, divulgence or appropriation would not,
individually or in the aggregate, have a Material Adverse
Effect on the Acquired Business, materially impair the ability
of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(c) As of the date hereof, neither Seller nor any of its
Subsidiaries has made any claim in writing of a violation,
infringement, misuse or misappropriation by others of rights of
Seller and its Subsidiaries to or in connection with any
material Intellectual Property or material Technology used in
connection with the Defense Business.
(d) To the knowledge of Seller, as of the date hereof,
there is no pending or threatened claim by any third Person of
a violation, infringement, misuse or misappropriation by any of
Seller or any of its Subsidiaries in connection with the
Defense Business of any Intellectual Property or Technology
owned by any third Person, or of the invalidity of any patent
used in connection with the Defense Business, that would,
individually or in the aggregate, have a Material Adverse
Effect on the Defense Business. To the knowledge of Seller,
the conduct of the Acquired Business by Buyer following the
Closing in the manner currently conducted by Seller and its
Subsidiaries will not result in the infringement of any
Intellectual Property or Technology owned by any third Person
that would, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business. There are no
interferences or other contested inter partes proceedings,
either pending or, to the knowledge of Seller, threatened, in
any domestic or foreign copyright office, patent and trademark
office or any other Governmental Entity relating to any pending
application with respect to any material Intellectual Property
used in connection with the Defense Business.
(e) Seller is not a party to any exclusive licensing
agreement with respect to any Intellectual Property included in
the Acquired Assets.
29<PAGE>
Section 3.16. Employees. There is no labor strike or
work stoppage pending or, to the knowledge of Seller,
threatened against the Acquired Business that, individually or
in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Acquired Business.
Neither the Seller nor the Acquired Subsidiary is a party to
any collective bargaining agreement relating to the Transferred
Employees in the United States. To the knowledge of Seller,
there is no material union representation or organizing effort
pending or threatened against any part of the Acquired
Business.
Section 3.17. Contracts. Neither Seller nor any of its
Subsidiaries is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material
respect under any Contract that is material to the operation of
the Acquired Business. To Seller's knowledge, as of the date
of this Agreement, none of the other parties to any Contract
that is material to the operation of the Acquired Business is
(with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder.
To Seller's knowledge, as of the date hereof, there is no
pending written claim or request for equitable adjustment under
any Government Contract by any Governmental Entity that would
reasonably be expected to have a Material Adverse Effect on the
Acquired Business. As of the date of this Agreement, except
where the same would not, individually or in the aggregate,
have a Material Adverse Effect on the Acquired Business,
neither Seller nor any Subsidiary (i) has received any written
notice of the intention of any party to terminate any Contract,
whether as a termination for convenience or for default of
Seller or any Subsidiary thereunder, or (ii) has, since January
1, 1995, received any written cure notice or show cause notice
(as defined in the Federal Acquisition Regulations Part 49,
Paragraph 49.607(a) and (b), respectively) in respect of any
such Contract which is a Government Contract. The Acquired
Business is in compliance with all obligations relating to any
equipment or fixtures owned by any Governmental Entity and
loaned, bailed or otherwise furnished to or held by any part of
the Acquired Business, except where the failure to so comply
would not, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business.
Section 3.18. Permits. Seller has all Permits relating
to the Acquired Business that are required in order to permit
it to carry on its business as it is presently conducted,
except where the failure to have such Permits would not,
individually or in the aggregate, have a Material Adverse
Effect on the Acquired Business, materially impair the ability
of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement, and all such Permits are in
full force and effect, and Seller is in compliance with the
terms of such Permits, except where the failure of such Permits
to be in full force and effect, or of Seller to be in
compliance with such Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Acquired
Business, materially impair the ability of Seller to perform
its material
30<PAGE>
obligations under the Transaction Agreements or prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement.
Section 3.19. Restrictive Agreements. Seller and its
Subsidiaries are not parties to or bound by any agreement,
contract, policy, license, Permit, document, instrument,
arrangement or commitment relating to the Acquired Business
that, by its terms, would materially limit the freedom of Buyer
or any of its Subsidiaries to compete in any line of business
or with any Person or in any geographic area after the Closing
Date.
Section 3.20. No Representations or Warranties. Buyer
acknowledges that none of Seller or any of its Subsidiaries,
any of their respective Affiliates or any other Person has made
any representation or warranty, expressed or implied, as to the
accuracy or completeness of any information regarding any of
the Acquired Business not included in the Transaction
Agreements. Buyer further acknowledges that, except as
expressly set forth in the Transaction Agreements and including
any schedules, exhibits, annexes or other attachments thereto,
there are no representations or warranties of any kind,
expressed or implied, with respect to Acquired Business.
ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
Section 4.01. Corporate Organization and Qualification.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation.
Section 4.02. Corporate Authority. Buyer has, or in the
case of any Ancillary Agreement executed after the date hereof,
will have, the requisite corporate power and authority to
execute, deliver and perform each Transaction Agreement and to
consummate the transactions contemplated thereby. The
execution, delivery and performance by Buyer of each
Transaction Agreement and the consummation by it of the
transactions contemplated thereby have been duly authorized by
its Board of Directors, and no other corporate proceedings on
its part are or will be necessary to authorize any Transaction
Agreement or for it to consummate the transactions contemplated
thereby. Each Transaction Agreement is, or when executed and
delivered will be (assuming such agreement constitutes a valid
and binding obligation of Seller), a valid and binding
agreement of Buyer, enforceable against Buyer in accordance
with the terms thereof
31<PAGE>
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
Section 4.03. No Violations; Consents and Approvals. (a)
None of the execution, delivery or performance by Buyer of each
Transaction Agreement to which it is or will be a party or the
consummation by Buyer of the transactions contemplated hereby
(i) will conflict with, or result in a violation or breach of,
the certificate of incorporation or by-laws of Buyer or (ii)
subject to the matters referred to in Section 4.03(b) below,
will conflict with, or result in a violation or breach of, or
constitute a default (with or without due notice or lapse of
time or both) under, or give rise to any right of termination,
amendment, cancellation or acceleration of any obligation
under, or result in the creation of any Lien upon any of the
properties or assets of Buyer either under (A) any of the
terms, conditions or provisions of any Contract or of any
Permit to which Buyer is a party or by which any of its
properties or assets may be bound, or (B) any judgment, order,
decree, statute, law, regulation or rule applicable to Buyer,
except, in the case of clause (ii), for conflicts, violations,
breaches, defaults, rights, losses or Liens that would not,
individually or in the aggregate, (x) materially impair the
ability of Buyer to perform its material obligations under the
Transaction Agreements or (y) prevent or materially delay the
consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(b) No consent, approval, order or authorization of or
registration with any Governmental Entity or any other Person
is required with respect to Buyer in connection with the
execution, delivery or performance by Buyer of each Transaction
Agreement to which it is or will be a party or the consummation
by it of the transactions contemplated thereby except for (A)
compliance with any applicable requirements of the HSR Act, (B)
the matters described in Schedule 4.03 hereto, (C) assignment
and novation of Government Contracts, and (D) such other
consents, approvals, orders, authorizations, registrations,
declarations, filings and agreements, the failure to obtain or
to make which would not, individually or in the aggregate, (x)
materially impair the ability of Buyer to perform its material
obligations under the Transaction Agreements or (y) prevent or
materially delay the consummation of the purchase and sale of
the Acquired Assets contemplated by this Agreement.
Section 4.04. Brokers and Finders. None of Buyer or any
of its directors, officers or employees has employed any broker
or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the
transactions contemplated thereby, except Bear, Stearns & Co.,
the fees and expenses of which shall be paid by Buyer.
32<PAGE>
Section 4.05. No Representations or Warranties. Seller
acknowledges that none of Buyer, any of its Affiliates or any
other Person has made any representation or warranty, expressed
or implied, as to the accuracy or completeness of any
information regarding Buyer not included in the Transaction
Agreements. Seller further acknowledges that, except as
expressly set forth in the Transaction Agreements, there are no
representations or warranties of any kind, expressed or
implied, with respect to Buyer.
ARTICLE 5
Covenants of Seller
Section 5.01. Conduct of Seller. From the date of this
Agreement until the Closing Date, Seller agrees as to itself
and its Subsidiaries that, except as otherwise contemplated by
the Transaction Agreements or the Seller Disclosure Schedule,
or as Buyer shall otherwise consent in writing:
(a) Ordinary Course. Seller shall conduct the Acquired
Business in the ordinary course consistent with past practice
and shall use reasonable efforts to keep available the services
of key employees engaged primarily in the Acquired Business and
to preserve the relationships with key customers, suppliers and
others having business dealings with the Acquired Business.
(b) Governing Documents. Seller will not amend in any
material respect Seller Charter or Seller By-laws, nor will it
permit the Acquired Subsidiary to amend its certificate of
incorporation or by-laws or comparable organizational
documents.
(c) No Acquisitions. Seller will not, nor will it permit
the Acquired Subsidiary to, (i) acquire or agree to acquire, by
merging or consolidating with, or by purchasing a substantial
equity interest in or substantial portion of the assets of, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire
or agree to acquire any material assets, in any such case, that
would be part of and material to the Acquired Business, or (ii)
make or agree to make any material investment in any Person
(whether by means of loan, capital contribution, purchase of
capital stock or other securities or otherwise) that would be
part of the Acquired Business, except for acquisitions or
investments by Seller pursuant to contractual obligations
existing on the date hereof and disclosed in Section 5.01(c) of
the Seller Disclosure Schedule.
(d) No Dispositions. Seller will not, nor will it permit
the Acquired Subsidiary to, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license,
33<PAGE>
encumber or otherwise dispose of (including by termination of
leases), any of the Acquired Assets other than non-material
Assets in the ordinary course of business consistent with past
practice or pursuant to contractual obligations existing on the
date hereof and disclosed in Section 5.01(d) of the Seller
Disclosure Schedule.
(e) Liens. Seller will not, and will not permit any of
its Subsidiaries to, create, assume or suffer to exist any Lien
on the Acquired Assets, except for Permitted Liens.
(f) Maintenance of Properties. Seller will, and will
cause the Acquired Subsidiary to, use reasonable efforts to
continue to maintain and repair all property material to the
operation of the Acquired Business in a manner consistent in
all material respects with past practice.
(g) Benefit Plans. Except as described in Section
5.01(g) of the Seller Disclosure Schedule or otherwise
expressly contemplated in this Agreement, or except as required
by law, or in the ordinary course of business consistent with
past practice, Seller will not, nor will it permit the Acquired
Subsidiary to, (i) adopt any plan, arrangement or policy which
would become an Employee Plan applicable to the Transferred
Employees or Bridge Employees (or, to the extent it affects
Liabilities assumed by Buyer hereunder, with respect to Former
Defense Employees) or amend any Employee Plan applicable to the
Transferred Employees or Bridge Employees (or, to the extent it
affects Liabilities assumed by Buyer hereunder, with respect to
Former Defense Employees), (ii) except for normal increases in
the ordinary course of business consistent with past practice
(including, but not limited to, in connection with promotions),
increase the base salary of any Transferred Employee or
(iii) enter into or modify in any material respect any
collective bargaining agreement governing Transferred Employees
or Bridge Employees (or, the extent it affects Liabilities
assumed by Buyer hereunder, with respect to Former Defense
Employees).
(h) Project Bids. Seller will not, and will not permit
any of its Subsidiaries to, submit a bid to any Person with
respect to any project which (i) would be material to the
Acquired Business and (ii) Seller expects would have an
operating profit margin of less than 6%; provided, however,
that this provision shall not apply in connection with any
bidding process in which Seller has good reason to believe
Buyer is participating.
(i) Representation and Warranties. Seller will not take,
and will not permit any Subsidiary to take, or agree or commit
to take any action that would make any representation and
warranty of Seller hereunder inaccurate in any material respect
at, or as of any time prior to, the Closing Date or that would,
or would reasonably be expected to, result in any of the
conditions set forth in Article 9 not being satisfied on the
Closing Date.
34<PAGE>
Section 5.02. Other Offers. Seller has, upon execution
of this Agreement, immediately ceased or caused to be
terminated any existing discussions or negotiations with any
parties (other than Buyer) conducted on or prior to the date
hereof with respect to any sale or other transaction involving
the Acquired Assets.
Section 5.03. Notices of Certain Events. Seller shall
promptly notify Buyer of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this
Agreement, other than consents the failure of which to obtain
would not have a Material Adverse Effect on the Acquired
Business, materially impair the ability of Seller to perform
its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase
and sale of the Acquired Assets contemplated by this Agreement;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by the Transaction
Agreements; and
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened, against
Seller or any Subsidiary which, if pending on the date of this
Agreement, would have been required to have been disclosed
pursuant to Section 3.10 or which seek to prevent or delay the
consummation of the transactions contemplated by the
Transaction Agreements.
Section 5.04. Confidentiality and Standstill Agreements.
Seller will not amend, waive or modify any provision of any
confidentiality or standstill agreement entered into with any
other party in connection with such party's interest in
acquiring the Acquired Business or the Defense Business or any
substantial portion of the Defense Business.
Section 5.05. No Agreement to Prohibited Actions. Seller
will not, and will not permit any of its Subsidiaries to, agree
or commit to take any action that is prohibited under this
Article 5.
Section 5.06. Confidentiality. (a) For five years
following the Closing Date, Seller shall, and shall use
reasonable efforts to cause its Affiliates, Subsidiaries and
their respective directors, officers, employees, agents and
representatives ("SELLER REPRESENTATIVES") to, hold in strict
confidence and use only for audit, accounting, and Tax
purposes, as well as, to the extent, in the opinion of Seller's
counsel required by law, for purposes of fulfilling disclosure
and reporting obligations, all Proprietary Information in its
possession or control. Seller shall not, and shall use
reasonable efforts to cause the
35<PAGE>
Seller Representatives not to, release or otherwise disclose
such Proprietary Information to any other Person except Seller
Representatives who need to know such information and who shall
be bound by the provisions of this Section 5.06. Seller shall,
and shall use reasonable efforts to cause the Seller
Representatives to, protect any such Proprietary Information by
using, at least the same degree of care, but no less than
reasonable care, to prevent the unauthorized use, disclosure,
or publication of such Proprietary Information as each uses
with respect to its own information of like importance.
(b) Notwithstanding the foregoing, Seller may disclose
such Proprietary Information to the extent that (a) disclosure
is compelled by judicial or administrative process or, in the
opinion of Seller's counsel, by other requirements of law, or
(b) Seller can show that such Proprietary Information was (i)
publicly available prior to the Closing Date or thereafter
becomes publicly available without any violation of this
Agreement on the part of Seller or the Seller Representatives
or (ii) became available to Seller from a Person other than
Buyer, as applicable, that is not subject to any legally
binding obligation to keep such Proprietary Information
confidential.
(c) The obligations of Seller and the Seller
Representatives under this Section 5.06 shall be in addition
to, and not in lieu of, any obligations Seller may otherwise
have arising under law, contract or otherwise with respect to
any obligation to protect the confidential or privileged nature
of any Proprietary Information.
Section 5.07. Insurance. (a) From and after the Closing
Date, Seller and its Subsidiaries shall use all reasonable
efforts to retain the right to make claims and receive
recoveries, for the benefit of Buyer, under any insurance
policies maintained at any time prior to the Closing by Seller
or its Subsidiaries (the "SELLER INSURANCE POLICIES"), covering
any Damages relating to the Acquired Business and relating to
or arising out of occurrences prior to or at the Closing (a
"CLAIM"). Seller agrees to use reasonable efforts so that
Buyer shall have the right, power and authority, subject to any
required consent of the carriers under the Seller Insurance
Policies, in the name of Seller, to make directly any Claims
under the Seller Insurance Policies and to receive directly
recoveries thereunder. Buyer agrees to notify Seller, promptly
upon making any such Claim, of the basis and amount of such
Claim.
(b) Buyer will bear costs relating to any self-retention
or deductible and any gaps in or limits on coverage applicable
to a Claim asserted at any time with respect to the applicable
Seller Insurance Policy, after taking into account the effect
of any prior claim payments under the terms of such Seller
Insurance Policy, whether or not the applicable Seller
Insurance Policy solely covers claims of Buyer or covers claims
of Buyer, on the one hand, and Seller, on the other hand. In
the event that any legal action, arbitration, negotiation or
other proceedings are required for coverage to be asserted
against any
36<PAGE>
insurer or a Claim to be perfected, (i) Buyer shall, to the
extent possible, do so at its own expense or (ii) if Buyer is
not permitted to assert coverage or perfect a Claim, Seller
shall do so, and, in either event, Buyer shall reimburse Seller
for any reasonable costs and expenses that Seller may incur
because of such action.
(c) Each of Buyer and Seller shall use all reasonable
efforts (i) to cooperate fully and to cause its Affiliates to
cooperate fully with the other in submitting good faith Claims
on behalf of Seller and its Subsidiaries and under the Seller
Insurance Policies and (ii) to pay promptly over to Buyer any
and all amounts received by Seller or its Subsidiaries under
the Seller Insurance Policies with respect to Claims.
(d) Seller shall retain custody of the Seller Insurance
Policies and any and all service contracts, claim settlements
and all other insurance records relating thereto; and Buyer
shall have access to and the right to make copies of all such
documents and records upon reasonable request.
(e) Notwithstanding any provision of this Agreement,
Seller shall not be required to comply with this Section 5.07
or any portion thereof if so doing would (i) be materially
adverse to Seller or its Subsidiaries or (ii) require Seller or
its Subsidiaries to incur any significant costs not
reimbursable by Buyer.
Section 5.08. Non-Solicitation of Employees. Seller, its
Subsidiaries and Affiliates will not, from and after the
Closing Date, directly or indirectly, solicit, encourage,
entice or induce any officer, management employee or key
technical employee that is a Transferred Employee to terminate
his or her employment with the Acquired Business; provided,
that nothing herein shall prevent Seller from engaging in
discussions regarding employment, or employing, any Transferred
Employee (i) if such Transferred Employee shall voluntarily
initiate such discussions without any such solicitation,
encouragement, enticement or inducement prior thereto on the
part of Seller, its Subsidiaries or Affiliates or (ii) if such
discussions shall be held as a result of or employment be the
result of the response by any such Transferred Employee to a
written employment advertisement placed in a publication of
general circulation, general solicitation conducted by
executive search firms, employment agencies or other general
employment services, not directed specifically at officers,
management employees, and key technical employees who are
Transferred Employees. Seller agrees that any remedy at law
for any breach by it of this Section 5.08 would be inadequate,
and Buyer would be entitled to injunctive relief in such a
case. If it is ever held that the restriction placed on
Seller, its Subsidiaries and Affiliates by this Section 5.08 is
too onerous and is not necessary for the protection of Buyer,
Seller agrees that any court of competent jurisdiction may
impose lesser restrictions which such court may consider to be
necessary or appropriate to properly protect Buyer.
37<PAGE>
ARTICLE 6
Covenants of Both Parties
The parties hereto agree that:
Section 6.01. Access to Information. From the date
hereof until the Closing Date, Seller will give Buyer, its
counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours
to the offices, properties, books and records, of and relating
to the Acquired Business, will furnish to Buyer, its counsel,
financial advisors, auditors and other authorized
representatives such financial and operating data and other
information with respect to the Acquired Business as such
Persons may reasonably request and will instruct its employees,
counsel and financial advisors to cooperate with Buyer in its
investigation of the Acquired Business. Any information
provided, or caused to be provided, by Seller pursuant to this
Section 6.01 shall be subject to the terms of the
Confidentiality Agreement dated as of October 22, 1996 between
Seller and Buyer (the "CONFIDENTIALITY AGREEMENT").
Section 6.02. Reasonable Efforts. Each party will use
reasonable efforts to take, or cause to be taken, all actions
necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by the
Transaction Agreements. Without limiting the generality of the
foregoing:
(i) Seller will use reasonable efforts to make or
obtain all consents, approvals, orders, authorizations,
registrations, declarations and filings described in
clauses (A) and (B) of Section 3.03(b) and estoppel
certificates reasonably acceptable to Buyer from the
landlords for the material Leased Facilities; and
(ii) Buyer will use reasonable efforts to make or
obtain all consents, approvals, orders, authorizations,
registrations, declarations and filings described in
clauses (A) and (B) of Section 4.03(b).
Section 6.03. Novation of Government Contracts. (a) As
soon as practicable following the Closing, Buyer shall prepare
(with Seller's assistance), in accordance with Federal
Acquisition Regulations part 42, (P) 42.12 and any applicable
agency regulations or policies, a written request meeting the
requirements of the Federal Acquisition Regulations part 42, as
reasonably interpreted by the Responsible Contracting Officer
(as such term is defined in Federal Acquisition Regulations
Part 42, (P) 42.1202(a)), which shall be submitted by Seller to
each Responsible Contracting officer, for the United States
Government (i) to recognize Buyer as Seller's successor in
interest to all the Acquired Assets constituting Government
Contracts); and (ii) to enter into a novation agreement (a
"NOVATION AGREEMENT") in form and substance reasonably
satisfactory to Buyer and
38<PAGE>
Seller and their respective counsel, pursuant to which, subject
to the requirements of the Federal Acquisition Regulations Part
42, all of Seller's right, title and interest in and to, and
all of Seller's obligations and liabilities under, each such
Government Contract shall be validly conveyed, transferred and
assigned and novated to Buyer by all parties thereto. Seller
shall provide to Buyer promptly any information regarding
Seller required in connection with such request. Seller and
Buyer shall each use all reasonable efforts to obtain all
consents, approvals and waivers required for the purpose of
processing, entering into and completing the Novation
Agreements with regard to any of the Government Contracts,
including responding to any requests for information by the
United States Government with regard to such Novation
Agreements.
(b) In connection with obtaining the consents
contemplated in Section 6.03(a) hereof, Seller shall not
consent to any modification of any Government Contract included
in the Acquired Assets which would adversely affect the rights
of Buyer under such Government Contract without the prior
written consent of Buyer.
Section 6.04. Public Announcements. (a) The initial
press release relating to the Transaction Agreements and the
transactions contemplated thereby will be a joint release.
Buyer and Seller will consult with each other before issuing
any further press release or making any other public statement
with respect to the Transaction Agreements and the transactions
contemplated thereby which differs substantially from
previously approved statements and, except as may be required
by applicable law or any listing agreement with any securities
exchange, will not issue any such press release or make any
such public statement unless the text of such statement shall
first have been agreed by the parties.
(b) Seller and Buyer shall cooperate in making
communications with Transferred Employees with respect to
employee benefit plans maintained by Seller or Buyer and with
respect to other matters arising in connection with the sale of
the Acquired Assets.
Section 6.05. Further Assurances. At and after the
Closing Date, Seller will execute and deliver any deeds, bills
of sale, assignments or assurances and take and do, any other
actions and things reasonably necessary to vest, perfect or
confirm of record or otherwise in Buyer any and all right,
title and interest in, to and under any of the rights,
properties or assets of the Acquired Business acquired or to be
acquired by Buyer as a result of, or in connection with, the
purchase and sale of the Acquired Assets.
Section 6.06. Notices. Seller and Buyer will promptly
advise from the date hereof through the Closing Date the other
party orally and in writing of (i) any representation or
warranty made by it and contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in
any respect, or any such representation that is not so
qualified become untrue or inaccurate in any material respect,
(ii) the failure
39<PAGE>
by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or (iii) any event or
change, or the impending occurrence of any event or change, or
which it has knowledge and which has resulted or which, insofar
as can reasonably be foreseen, would result in any of the
conditions to the Closing set forth in Article 9 not being
satisfied; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements
of the parties or the conditions to the obligations of the
parties under this Agreement.
ARTICLE 7
Tax Matters
Section 7.01. Tax Covenants. (a) All Returns required
to be filed with any Taxing Authority on or before the Closing
Date with respect to any Pre-Closing Tax Period by, or with
respect to, the Acquired Subsidiary will be filed when due in
accordance with all applicable laws (taking into account any
extension of a required filing date) and Seller shall pay or
cause to be paid all Taxes as shown on such Returns and all
other Returns required to be filed with respect to the Acquired
Subsidiary (excluding any separate Returns required to be filed
by the Acquired Subsidiary) with respect to any Pre-Closing Tax
Period will be filed by Seller when due (taking into account
any extension of a required filing date) and Seller shall pay
or cause to be paid all Taxes as shown on such Returns. Buyer
shall file or cause to be filed all separate Returns required
to be filed by an Acquired Subsidiary after the Closing Date.
Such Returns shall be prepared in a manner consistent with past
practices and without a change of any election or any
accounting method, except as required by a change in applicable
law or by a Final Determination. Each such Return shall be
submitted by Buyer to Seller (together with schedules,
statements and, to the extent requested by Seller, supporting
documentation) at least 45 days prior to the due date
(including extensions) of such Return, together with a
statement from Buyer setting forth the amount of reimbursement
to which Buyer is entitled under this Section 7.01(a). Seller
shall have the right to review all work papers and procedures
used to prepare any such Return. If Seller, within 15 business
days after delivery of any such Return, notifies Buyer in
writing that it objects to any items in such Return, the
parties shall proceed in good faith to resolve the disputed
items and, if they are unable to do so within 10 business days,
the disputed items shall be resolved (within a reasonable time,
taking into account the deadline for filing such Return) in the
manner set forth in Section 2.08(a). Upon resolution of all
disputed items, the relevant Return shall be adjusted to
reflect such resolution and shall be binding upon the parties
without further adjustment. Seller shall reimburse the
Acquired Subsidiary for the Taxes shown as payable on any such
return which are allocable to the Pre-Closing Tax Period 10
days
40<PAGE>
after the resolution of all disputed items; provided that if
such Return shall be due prior to the resolution of all
disputed items, Seller shall reimburse the Acquired Subsidiary
the amount agreed by the parties as due, with any additional
amounts payable upon resolution of all the disputed items.
(b) Buyer covenants that it will not, nor will it cause
or permit the Acquired Subsidiary or any Affiliate of Buyer to
(i) take any action on the Closing Date, other than in the
ordinary course of business or as contemplated by this
Agreement, that could rise to any Tax liability of Seller or
any indemnification obligation of Seller under this Agreement
or (ii) without the consent of Seller, except as a result of a
Final Determination or as otherwise required by law, or unless
Seller is fully indemnified and held harmless (to Seller's
satisfaction) from any resulting liability, make or change any
Tax election, amend any Return or take any position on any
Return, take any action, omit to take any action or enter into
any transaction that results in any increased Tax liability or
reduction of any Tax Asset of Seller in respect of any Pre-
Closing Tax Period (including any election under Section 338 of
the Code).
(c) If any claim or demand for Taxes with respect to any
Pre-Closing Tax Period of the Acquired Subsidiary is asserted
in writing against Buyer, any of its Affiliates, or effective
upon the Closing, the Acquired Subsidiary, Buyer shall notify
Seller as promptly as practicable (taking into account the time
in which a response is required), but in no event later than 10
days of such claim or demand, and shall give Seller such
information with respect thereto as Seller may reasonably
request. Seller may discharge, at any time, its
indemnification obligation with respect to such Taxes under
this Agreement by paying to Buyer the amount of the
indemnifiable loss (inclusive to any amount payable under
Section 10.02(d)), calculated on the date of such payment.
Seller may, at its own expense, participate in and assume the
defense of any such claim, suit, action or proceeding
(including any Tax audit). If Seller assumes such defense,
Buyer shall have the right (but not the duty) to participate in
the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by Seller. Whether or not
Seller chooses to defend or prosecute any claim, all of the
parties hereto shall cooperate in the defense or prosecution
thereof. Seller shall not be liable under Section 10.03 with
respect to any Tax referred to in this Section 7.01(c)
resulting from a claim or demand the defense of which Seller
was not offered the opportunity to assume as provided under
this Section 7.01(c) to the extent Seller's liability under
this Agreement is adversely affected as a result thereof.
(d) For all purposes of the Agreement, all Income Taxes
for a taxable period which includes (but does not end on) the
Closing Date shall be allocated based upon a closing-of-the-
books method.
41<PAGE>
Section 7.02. Allocation of Transfer and Property Taxes.
(a) All excise, sales, use, value added, registration stamp,
recording, documentary, conveyancing, franchise, property,
transfer, gains and similar Taxes, levies, charges and fees
including any deficiencies, interest, penalties, additions to
tax or additional amounts excluding any Income Taxes
(collectively, "TRANSFER TAXES") incurred in connection with
the transactions contemplated by this Agreement and the other
Transaction Agreements shall be borne equally by Buyer and
Seller. Buyer and Seller shall use reasonable efforts to
minimize the amount of all Transfer Taxes and shall cooperate
in providing each other with any appropriate resale exemption
certifications and other similar documentation. The party that
is required by applicable law to make the filings, reports, or
returns and to handle any audits or controversies with respect
to any applicable Transfer Taxes shall do so, and the other
party shall cooperate with respect thereto as necessary.
(b) All real property taxes, personal property taxes and
similar ad valorem obligations levied with respect to the
Acquired Assets or the Assets of the Acquired Subsidiary for a
taxable period which includes (but does not end on) the Closing
Date (collectively, the "APPORTIONED OBLIGATIONS") shall be
apportioned between Seller and Buyer based on the number of
days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period after the
Closing Date (with respect to any such taxable period, the
"POST-CLOSING TAX PERIOD"). Seller shall be liable for the
proportionate amount of such taxes that is attributable to the
Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of such taxes that is attributable to the
Post-Closing Tax Period. Upon receipt of any bill for real or
personal property taxes relating to the Acquired Assets or the
Assets of the Acquired Subsidiary, each of Seller and Buyer
shall present a statement to the other setting forth the amount
of reimbursement to which each is entitled under this Section
7.02(b) together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration
amount shall be paid by the party owing it to the other within
30 days after delivery of such statement. In the event that
either Seller or Buyer shall make any payment for which it is
entitled to reimbursement under this Section 7.02(b), the other
party shall make such reimbursement promptly but in no event
later than 10 days after the presentation of a statement
setting forth the amount of reimbursement to which the
presenting party is entitled along with such supporting
evidence as is reasonably necessary to calculate the amount of
reimbursement.
Section 7.03. Cooperation. Buyer and Seller agree to
furnish or cause to be furnished to each other, upon request,
as promptly as practicable, such information and assistance
relating to the Acquired Subsidiary, Acquired Business and the
Acquired Assets (including, without limitation, access to books
and records) as is reasonably necessary for the filing of all
Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the
prosecution or defense of any claim, suit or
42<PAGE>
proceeding relating to any Tax. Buyer and Seller shall retain
all books and records with respect to Taxes pertaining to the
Acquired Assets for a period of at least six years following
the Closing Date. At the end of such period, each party shall
provide the other with at least thirty days prior written
notice before destroying any such books and records, during
which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records.
Seller and Buyer shall cooperate with each other in the conduct
of any audit or other proceeding relating to Taxes involving
the Acquired Assets or the Acquired Business.
Section 7.04. Allowable Taxes. (a) Payments. If Seller
has paid any Allowable Tax which is attributable to a Pre-
Closing Tax Period, or if pursuant to Section 10.02(a) Seller
reimburses the Acquired Subsidiary for any Allowable Tax, Buyer
agrees to repay promptly to Seller any portion of such
Allowable Tax that Buyer, any of its Affiliates, or the
Acquired Subsidiary is ultimately able to recover from the
United States government.
(b) Refunds. (i) If Buyer, any of its Affiliates or the
Acquired Subsidiary receives a refund with respect to an
Allowable Tax that is attributable to a Pre-Closing Tax Period,
Buyer shall pay to Seller the amount of such refund reduced by
the amount, if any, that Buyer will be required to pay to the
United States government or suffer by reason of offset in
accordance with the Federal Acquisition Regulation, 48 C.F.R.
Chapter 1, and associated regulations and agreements between
Seller and any U.S. governmental entity.
(ii) If Seller receives a refund after the Closing
Date with respect to an Allowable Tax that is attributable
to a Pre-Closing Tax Period, Seller will pay to Buyer the
amount, if any, which Buyer will be required to pay to the
U.S. government, or suffers by reason of an offset, in
accordance with the regulations described in Section
7.04(b)(i) hereof.
(c) Seller and Buyer agree to cooperate with respect to
the calculation of any amounts payable pursuant to this Section
7.04 and to give each other written notice of events reasonably
likely to result in the increase or decrease in the amount of
any Allowable Tax attributable to a Pre-Closing Tax Period.
Section 7.05. Long-Term Contracts.
(a) In the case of any acquired Contract that is a long-
term contract within the meaning of Code Section 460
(hereinafter a "LONG-TERM CONTRACT") the Buyer and the Seller
shall for all federal and state Income Tax purposes (including
without limitation the application of the lookback method
described in Code Section 460(b)(2)) take into account all
amounts treated as paid by the customer pursuant to Section
7.05(c)(i) and all
43<PAGE>
contract costs incurred attributable thereto on the basis of a
constructive completion of such Long-Term Contract on the
Closing Date.
(b) The Seller shall be responsible for reporting all
taxable income properly accruing under each Long-Term Contract
through the Closing Date and paying all Taxes (including, when
due, any lookback interest when payable) payable with respect
to that period (taking into account all amounts paid by the
customer as defined in Section 7.05(c)(i) and all contract
costs incurred through the Closing Date) while the Buyer shall
be responsible for reporting all taxable income properly
accruing under each Long-Term Contract after the Closing Date
and paying all Taxes (including lookback interest) payable with
respect to that period (taking into account all amounts paid by
the customer (other than collection of unpaid accounts
receivable and other amounts assigned to the Buyer hereunder),
and all contract costs incurred after the Closing Date). Any
lookback interest refunds for periods through the Closing Date
shall accrue to the Seller, while any lookback interest refunds
for periods after the Closing Date shall accrue to the Buyer.
(c) For purposes of this Section 7.05:
(i) there shall be treated as amounts paid by the
customer to the Seller prior to the Closing Date and
attributable to a Long-Term Contract (A) all amounts
received with respect thereto on or prior to the Closing
Date, other than cost underruns, and (B) any then unpaid
accounts receivable, unbilled work in progress at its fair
market value (after taking into account any net progress
payments) as determined under Section 2.08, and claims,
disputes and retentions, without regard to whether any
interest in such items is assigned or sold to the Buyer
hereunder or whether any such items that are uncollected
as of the Closing Date are ultimately collected; and
(ii) there shall be treated as contract costs
incurred prior to the Closing Date attributable to a Long-
Term Contract all costs properly accrued as of the Closing
Date.
(d) Seller and the Buyer agree to provide the other party
any assistance reasonably necessary or appropriate to carry out
the computations required by, and to file Tax Returns
(including refund claims) necessary or appropriate to give
effect to, this Section 7.05
Section 7.06. Refunds. Except as provided in Section
7.04, Seller shall be entitled to any credits or refunds of
Taxes of the Acquired Subsidiary with respect to any Pre-
Closing Tax Period, including interest thereon, and Buyer shall
pay or cause prompt payment to be made to Seller of any credits
or refunds of such Taxes and interest thereon
44<PAGE>
received by Buyer or any of its Affiliates, reduced by any
Income Taxes payable on account of interest on such credits or
refunds.
ARTICLE 8
Employee Benefits
Section 8.01. Employees; Allocation of Liabilities.
Buyer or one of its Subsidiaries shall offer employment at the
Closing Date to all Transferred Employees on the terms
described in Section 8.10; provided, however, that nothing
contained herein is intended to confer upon any Transferred
Employee any right to continued employment after the Closing
Date. Seller hereby consents to Buyer or one of its
Subsidiaries making such offers. Except as expressly stated to
the contrary in this Agreement, all Liabilities with respect to
employee benefit plans, arrangements or policies maintained by
Seller or its Subsidiaries shall be Retained Liabilities.
Section 8.02. Defined Benefit Retirement Plans.
(a) Effective as of the Closing Date, Seller shall take
all necessary actions to cause the Seller DB Plan to be amended
(i) to freeze, effective immediately prior to the Closing Date,
future benefit accruals with respect to Transferred Employees
and Bridge Employees, and (ii) to provide for the direct
trust-to-trust transfer of assets and the assumption of
liabilities as contemplated herein.
(b) Prior to the Closing Date, Buyer or one of its
Subsidiaries shall establish or designate a defined benefit
pension plan which shall be qualified under Section 401(a) of
the Code (the "BUYER DB PLAN") effective as of the Closing Date
covering Transferred Individuals. As soon as practicable
following the establishment of the Buyer DB Plan, Seller and
Buyer shall file with the IRS proper notice on IRS Form 5310
regarding the transfer of assets and liabilities from the
Seller DB Plan to the Buyer DB Plan.
(c) As soon as practicable after the Closing Date,
following receipt by Buyer and Seller of favorable
determination letters or Buyer's certification to Seller, and
Seller's certification to Buyer, in a manner reasonably
acceptable to both Seller and Buyer, that the Buyer DB Plan and
Seller DB Plan are qualified under the applicable provisions of
the Code, the assets and liabilities associated with all
Transferred Individuals shall be transferred from the Seller DB
Plan to the Buyer DB Plan. The amount of assets accumulated to
provide pension benefits in the Seller DB Plan that will be
transferred shall be the amount which would be allocated to
Transferred Individuals if the Seller DB Plan were terminated
as of the Closing Date and assets were allocated to
participants in
45<PAGE>
accordance with Section 4044 of ERISA (i) using the methodology
of the PBGC for plan terminations, (ii) using the interest rate
and mortality tables used by the PBGC and effective at the
Closing Date for valuing annuities, (iii) assuming participants
not in pay status will retire and elect a lump sum under the
Plan commencing at expected retirement age, as determined in
accordance with Appendix D of PBGC Regulation 2619, (iv) using
for purposes of determining the lump sum value the interest
rate and mortality table specified in the Seller DB Plan for
valuing lump sums and effective for lump sums made as of the
Closing Date, and (v) without regard to any assets or
liabilities associated with any account under the Seller DB
Plan maintained pursuant to Section 401(h) of the Code. In no
event will the assets that remain in the Seller DB Plan to
provide pension benefits be less than the total liabilities
computed pursuant to the above methodology for all participants
in the Seller DB Plan other than the Transferred Individuals.
In addition, all assets associated with an account under the
Seller DB Plan maintained under Section 401(h) of the Code will
be transferred to a similar account or accounts under the Buyer
DB Plan. The assets to be transferred shall be credited with
earnings on the balance outstanding from time to time from the
Closing Date to the actual date of transfer, at the rate of
earnings on assets of the Seller DB Plan during the period from
the Closing Date to the last day of the month ending prior to
the actual date of transfer, and shall be reduced by any
necessary benefit payments made in respect of Transferred
Individuals prior to the actual date of transfer.
Notwithstanding the above, the transfer of assets and
liabilities from the Seller DB Plan to the Buyer DB Plan shall
satisfy the requirements of Code Section 414(l). Buyer and
Seller shall each use reasonable efforts to effect the asset
and liability transfers contemplated in this Section 8.02 as
soon as practicable after the Closing Date.
(d) If the Internal Revenue Service determines that the
transfer described in Section 8.02(c) of assets associated with
any account maintained under Section 401(h) of the Code would
result in the disqualification of either the Seller DB Plan or
the Buyer DB Plan or the imposition of excise tax liability on
Seller or Buyer, or if the PBGC notifies Seller or Buyer of its
objection to such transfer, such assets shall not be
transferred. Instead, notwithstanding Section 8.04, Seller
will retain liability for retiree welfare benefits which
otherwise would have become Buyer's liability hereunder with an
actuarial net present value equal to the (i) the value of such
assets, determined as of the Closing Date plus (ii) imputed
earnings on such value for the period from the Closing Date to
the actual date of transfer of the pension assets pursuant to
Section 8.02(c), computed in the same manner as the earnings
credited on the assets transferred from the Seller DB Plan to
the Buyer DB Plan pursuant to the fifth sentence of Section
8.02(c).
(e) Following the transfers of assets and liabilities as
provided in Section 8.02(c) above, the liabilities transferred
to or assumed by the Buyer DB Plan under this Section
46<PAGE>
8.02 shall be Assumed Liabilities. All other Liabilities
relating to or arising out of the Seller DB Plan shall be
Retained Liabilities.
Section 8.03. Defined Contribution Plans.
(a) Effective as of the Closing Date, Seller shall amend
the Seller DC Plan (i) to cause the active participation of the
Transferred Employees and Bridge Employees therein to cease as
of the Closing Date, and (ii) to permit Transferred Employees
and Bridge Employees to elect to take distributions (subject to
applicable law) of their accounts thereunder (including to the
extent practicable, in Buyer's reasonable judgment, any plan
loans) and, if such Employees so elect, to roll them over,
directly or otherwise, in accordance with applicable law and
regulations, to an individual retirement account or to one or
more defined contribution retirement plans qualified under
Section 401(a) of the Code (the "BUYER DC PLANS") and
maintained by Buyer or one of its Subsidiaries, and the Buyer
DC Plans shall accept such rollovers.
Section 8.04. Retiree Health and Other Retiree Benefit
Plans.
(a) Prior to the Closing Date, Buyer or one of its
Subsidiaries shall establish or designate a retiree welfare
benefit plan or plans (the "BUYER RETIREE PLAN") effective as
of the Closing Date covering Transferred Individuals. The
Buyer Retiree Plan shall contain provisions under which
Transferred Individuals are provided with retiree health and
other retiree welfare benefits as determined by Buyer,
consistent with this Section 8.04 and Section 8.10.
(b) After the Closing Date, Buyer or, where appropriate,
the Buyer Retiree Plan, shall assume liability for all retiree
health benefits and other retiree welfare benefits of
Transferred Individuals and their beneficiaries under the
retiree welfare benefit plans maintained by Seller (except that
Seller shall retain liability for any benefits relating to
claims incurred prior to the Closing Date). Buyer shall credit
the dollar amount of all expenses incurred by Transferred
Individuals and their respective eligible dependents during the
applicable plan year in which occurs the Closing Date for
purposes of satisfying such plan year's deductible and
co-payment limitations and shall credit service with Seller
earned prior to the Closing Date under the Buyer Retiree Plan.
All liabilities assumed by Buyer or the Buyer Retiree Plan
under this Section 8.04 shall be Assumed Liabilities.
(c) All insurance policies, contracts, arrangements and
agreements relating to medical, dental and other services
entered into by Seller and existing for the benefit of Seller
or employees under or pursuant to retiree health or other
retiree welfare benefit plans and all rights of Seller
thereunder shall be Retained Assets and not Acquired Assets.
To the extent such insurance policies, contracts, arrangements
and agreements can be split
47<PAGE>
between Buyer and Seller, or to the extent Buyer can enter into
similar agreements without additional expense or administration
responsibilities for Seller, then, at Buyer's election, Buyer
and Seller shall cooperate in arranging such agreements for
Buyer.
Section 8.05. Stock Options and Restricted Stock Units.
(a) Prior to the Closing Date, Seller shall, if
appropriate, amend the Seller Stock Plans, make adjustments and
take actions (and Buyer shall take such actions as are
reasonably required to implement the same) with respect to
Seller Options which are outstanding immediately prior to the
Closing Date and which are held by Transferred Employees or
Bridge Employees and are not vested as of the Closing Date to
provide that, pursuant to the equitable adjustment provisions
of the applicable Seller Stock Plan, effective as of the
Closing Date such Seller Options will, at the election of such
Employees, be converted into and represent (pursuant to a
methodology consistent with Section 424 of the Code, with
respect to the values of Seller Common Stock and Buyer Common
Stock which is reasonably agreed to by Buyer) the right to
acquire shares of Buyer Common Stock with such other amendments
and adjustments proposed by Buyer as are reasonable and
appropriate, which may include modifying or amending any
performance-based vesting acceleration provisions. Any
Liabilities with respect to such converted Seller Options shall
be Assumed Liabilities.
(b) All Assets and Liabilities associated with any Seller
Restricted Stock Units which are held by Transferred Employees
or Bridge Employees will be Retained Assets and Retained
Liabilities respectively.
Section 8.06. Other Welfare Benefits.
(a) Effective as of the Closing Date, Buyer shall
establish or maintain "employee welfare benefit plans," as
defined in Section 3(1) of ERISA, and other employee welfare
benefit or fringe benefit arrangements as Buyer shall
determine, consistent with Section 8.10, for the benefit of
Transferred Employees and Bridge Employees. Buyer shall credit
the dollar amount of all expenses incurred by Transferred
Employees and Bridge Employees and their respective eligible
dependents during the applicable plan year in which occurs the
Closing Date for purposes of satisfying such plan year's
deductible and co-payment limitations and shall credit service
with Seller earned prior to the Closing Date under the relevant
welfare benefit plans of Buyer. Buyer shall credit each
Transferred Employee with the unused time bank days accrued in
accordance with the time bank policy of Seller applicable to
such employees in effect as of the Closing Date.
(b) Seller shall be liable for payments to Transferred
Employees and Bridge Employees (and, if applicable, their
dependents) arising from claims incurred under
48<PAGE>
Seller's employee welfare benefit plans and other employee
welfare benefit or fringe benefit arrangements prior to the
Closing Date. Buyer shall recognize service with Seller as
service for those health and welfare arrangements of Buyer
which are based in whole or in part on length of service. With
respect to any Transferred Employee or Bridge Employee, as the
case may be, who is subject to pre-existing limitation
provisions under Seller's medical or dental benefit plans as of
the Closing Date, pre-existing limitation provisions under the
Buyer medical or dental plans shall lapse on the date such
limitations would have lapsed under the applicable plans of
Seller, had the Transferred Employee or Bridge Employee, as the
case may be, remained in the employ of Seller.
(c) Effective as of the Closing Date, Buyer or one of its
Subsidiaries shall establish or designate "flexible spending
arrangements," within the meaning of Proposed Treasury
Regulation Section 1.125-2, Q/A-7(c), (the "BUYER FSAS")
covering Transferred Employees and Bridge Employees on
substantially the same terms as such Transferred Employees and
Bridge Employees were covered under flexible spending
arrangements maintained by Seller (the "SELLER FSAS") prior to
the Closing Date. All Liabilities with respect to Transferred
Employees and Bridge Employees under the Seller FSAs shall be
Assumed Liabilities, and all other Liabilities under the Seller
FSAs shall be Retained Liabilities. Until the end of the
calendar year in which occurs the Closing Date, Buyer shall
effectuate all payroll deductions with respect to Transferred
Employees and Bridge Employees under the Buyer FSAs in
accordance with such Employees' elections as in effect at the
Closing Date (or in accordance with any valid amendment to such
elections after the Closing Date).
(d) Prior to the Closing Date, Buyer or one of its
Subsidiaries shall establish or designate a trust that
qualifies as a voluntary employee beneficiary association under
Section 501(c)(9) of the Code (the "BUYER VEBA") covering
Transferred Individuals. As soon as practicable after the
Closing Date, Seller shall cause the trustee of Seller VEBA to
transfer to the trustee of the Buyer VEBA assets, in kind,
representing (i) the balance (as of the date of transfer) of
the account or accounts maintained by the Seller VEBA in
respect of retiree welfare benefits, (ii) amounts associated
with any Liabilities with respect to Transferred Employees or
Bridge Employees under the Seller FSAs, (iii) any compensation
deferrals made by Transferred Employees or Bridge Employees
under the Seller FSAs prior to the Closing Date and not
included in clause (ii), and (iv) any amounts attributable to
insurance premiums paid or deferred by Transferred Individuals
or Seller or the Seller VEBA relating to Transferred
Individuals prior to the Closing Date and relating to periods
after the Closing Date; provided, that all insurance policies,
contracts and agreements and all contracts, arrangements and
agreements with providers of medical, dental and other services
entered into by the Seller VEBA and existing for the benefit of
Seller or employees under or pursuant to the Seller VEBA and
all rights of the Seller
49<PAGE>
VEBA or the trustee thereof thereunder shall be retained by the
Seller VEBA and shall not be transferred to the Buyer VEBA.
(e) All insurance policies, Contracts, arrangements and
agreements relating to medical, dental and other services
entered into by Seller and existing for the benefit of Seller
or employees under or pursuant to the plans and arrangements
described in this Section 8.06 and all rights of Seller
thereunder shall be Retained Assets and not Acquired Assets.
To the extent such insurance policies, Contracts, arrangements
and agreements can be split between Buyer and Seller, or to the
extent Buyer can enter into similar agreements without
additional expense or administration responsibilities for
Seller, then, if Buyer so requests, Buyer and Seller shall
cooperate in arranging such agreements for Buyer.
Section 8.07. Employment Agreements. Seller's
obligations under any employment, severance or similar
agreement between Seller and any Transferred Individual which
is disclosed on the Seller Disclosure Schedule shall be Assumed
Liabilities, except as otherwise provided in such Schedule, and
Seller's rights under any such agreement shall be Acquired
Assets. Buyer or one of its Subsidiaries will assume each such
agreement.
Section 8.08. Cooperation. Without limiting the
generality of Article 6 hereof, Seller and Buyer agree to
furnish each other promptly with such information concerning
employees and employee benefit plans, arrangements or policies
as is necessary and appropriate to effect the transactions
contemplated by this Article 8.
Section 8.09. Amendment, Modification or Termination of
Benefit Plans. Except as provided in Section 8.10, from and
after the Closing Date, (i) Seller expressly reserves the
right, in accordance with applicable law, to amend, modify or
terminate any benefit plan it sponsors or maintains for its
employees and former employees and (ii) Buyer expressly
reserves the right, in accordance with applicable law, to
amend, modify or terminate any benefit plan it sponsors or
maintains for Transferred Individuals.
Section 8.10. Compensation and Benefits. (a) Buyer or
one of its Subsidiaries shall offer employment at or as soon
after the Closing Date as practicable to all Transferred
Employees, on terms determined by Buyer. Following the Closing
Date and through December 31, 1998 (the "COMPENSATION
MAINTENANCE PERIOD"), Buyer shall provide the Transferred
Employees and Bridge Employees with compensation and employee
benefits reasonably comparable in the aggregate to those
provided by Seller to such Transferred Employees and Bridge
Employees immediately prior to the Closing Date, valuing any
stock-based compensation, for this purpose, under any
reasonable method; provided, that nothing herein shall be
construed to require Buyer to provide Transferred
50<PAGE>
Employees with any stock-based compensation, provided the
requirements of this sentence are otherwise met. Without
limiting the preceding sentence, during the Compensation
Maintenance Period Buyer shall maintain severance, reduction-
in-force and pay-in-lieu-of-notice benefits for the Transferred
Employees no less favorable than the severance, reduction-in
force and pay-in-lieu-of-notice benefits provided to such
Transferred Employees by Seller immediately prior to the
Closing Date and disclosed on the Seller Disclosure Schedule.
Buyer shall recognize service with Seller, Tiburon, Inc., and
PhotoTelesis Corporation as service for all purposes except
benefit accrual under any pension plan maintained by Buyer.
The provisions of this Section 8.10 shall not create any rights
in any employee or former employee of the Acquired Subsidiary
or of any part of the Acquired Business or any other person who
is not a party to this Agreement, and no such person shall have
any rights as a third party beneficiary hereof
(b) Buyer shall provide each Transferred Employee and
Bridge Employee with an accrued benefit under its defined
benefit pension plans that is no less generous than the total
such benefit such Transferred Employee or Bridge Employee, as
the case may be, would have accrued, under those of Buyer's
defined benefit pension plans under which such Transferred
Employee or Bridge Employee, as the case may be, is otherwise
entitled to a retirement benefit, assuming that all such
Transferred Employee's or Bridge Employee's, as the case may
be, years of service with Seller were treated as service with
Buyer for purposes of benefit accrual.
(c) Without limiting Sections 8.10(a) and 8.10(b), Buyer
shall, until the expiration of the relevant bridge agreements
(as defined in the definition of "Bridge Employees") preserve
without reduction under the Buyer DB Plan the early retirement
benefits (including all payment options) to which Bridge
Employees may earn entitlement under the Seller DB Plan (as the
Seller DB Plan is in effect on the date hereof).
(d) All Assets and Liabilities of Seller associated with
any TEXINS Association substantially all the participants in
which are Transferred Employees or Former Defense Employees at
any location or plant primarily related to the Defense Business
shall be Acquired Assets and Assumed Liabilities, respectively.
Without limiting Section 8.10(a), Seller will take all
reasonable steps to permit the continued participation of
Transferred Employees and Bridge Employees in the Dallas,
Spring Creek, Austin and Sherman Associations during the
Compensation Maintenance Period, provided that Buyer fulfills
its obligations under the next sentence. Buyer shall during
the Compensation Maintenance Period subsidize the continued
participation of such Transferred Employees and Bridge
Employees at the same per employee amount of subsidy as in
effect at the date hereof, to the extent that Seller meets its
obligations under the preceding sentence. Nothing herein shall
prevent Seller from discontinuing any TEXINS Association at any
location at any
51<PAGE>
time, in which case participation of the Transferred Employees
and Bridge Employees described in this paragraph shall cease.
(e) All Liabilities assumed by Buyer under this Section
8.10 shall be Assumed Liabilities.
Section 8.11. Deferred Compensation. As soon as
practicable after the date hereof Seller will offer any
Transferred Employee or Bridge Employee who has previously
elected to defer compensation payable by Seller the right to
elect to continue to defer receipt of such compensation after
the Closing Date. All Liabilities of Seller with respect to
deferred compensation as to which any such election is made, or
which is owed in respect of Former Defense Employees, shall, to
the extent reflected on the Acquired Business Interim Financial
Statements or accrued in the ordinary course after the date of
such Statements, be Assumed Liabilities and not Retained
Liabilities. Buyer shall not modify or alter the payment
options applicable to any such deferred compensation without
the written consent of the affected Transferred Individual or,
where applicable, his or her beneficiary. All accrued
nonqualified defined benefit pension obligations with respect
to Transferred Individuals shall, to the extent reflected on
the Acquired Business Interim Financial Statements or accrued
in the ordinary course after the date of such Statements, be
Assumed Liabilities. Buyer and Seller will cooperate as
necessary to effectuate this Section 8.11.
Section 8.12. Forms W-2. Buyer and Seller agree to
cooperate and to take all actions reasonably necessary to
permit reliance by Seller, with respect to Transferred
Individuals, on the "alternate procedure" provided under
Internal Revenue Service Revenue Procedure 96-60, and to
relieve Seller from the requirement of furnishing Forms W-2 to
any such Transferred Individuals for the calendar year within
which occurs the Closing Date. Without limiting the foregoing,
Seller agrees timely to provide Buyer with all information
necessary for Buyer to include on the Forms W-2 it furnishes to
Transferred Individuals for such calendar year the wages paid
and taxes withheld by Seller with respect to such Individuals
during such calendar year.
Section 8.13. Foreign Plans. Buyer and Seller agree to
cooperate and to take all actions reasonably necessary to
effectuate the transfer, where agreed or required by law, from
Seller or one of its Subsidiaries to Buyer or one of its
Subsidiaries (or from a plan or trust maintained by Seller or
one of its Subsidiaries to a plan or trust maintained by Buyer
or one of its Subsidiaries) of Assets and/or Liabilities
attributable to Transferred Individuals under any Employee Plan
maintained primarily for the benefit of employees stationed
outside the United States. Any Assets and Liabilities
transferred pursuant to the preceding sentence shall be
Acquired Assets and Assumed Liabilities, respectively. Buyer
or one of its Subsidiaries will offer continued employment to
Transferred Employees
52<PAGE>
whose principal place of employment is outside the United
States on terms sufficient to avoid incurrence by Seller of any
severance or similar liability under any statute, ordinance or
regulation (where such avoidance is legally possible and not
unduly burdensome, for which purpose the terms of employment
applicable to such Employees as of the Closing Date will not be
considered unduly burdensome). Buyer and Seller further agree
to cooperate and to take all other actions reasonably necessary
to avoid incurrence by Seller of any severance or similar
liability under any statute, ordinance or regulation with
respect to any Transferred Employee or Bridge Employee whose
principal place of employment is outside the United States.
The first sentence of each of Section 8.01 and Section 8.10(a)
shall not apply to Transferred Employees or Bridge Employees
whose principal place of employment is outside the United
States. It is agreed and understood that the remainder of
Section 8.10(a) will apply, substituting references to such
Transferred Employees' or Bridge Employees' employer for
references to Seller. Sections 8.04, 8.06 and 8.11 shall not
apply to Foreign Plans. Buyer and Seller agree that it is
their mutual intent that Transferred Individuals whose
principal place of employment is outside the United States
(other than any such Transferred Individuals covered by
Employee Plans) and Foreign Plans be treated in a manner
consistent with other Transferred Individuals and Employee
Plans. However, adjustments may be appropriate or required in
order to reflect foreign law, applicable tax law and funding
vehicles. If, in connection with Foreign Plans or Transferred
Individuals whose principal place of employment is outside the
United States (other than any such Transferred Individuals
covered by Employee Plans), (i) Assets or Liabilities would be
transferred from Seller or one of its employee benefit plans to
Buyer or one of its employee benefit plans pursuant to the
statement of intent in the second preceding sentence, and (ii)
Buyer and Seller have not agreed in writing prior to the
Closing Date to treat such Assets or Liabilities as Acquired
Assets or Assumed Liabilities, as the case may be, then such
Assets or Liabilities shall be Retained Assets or Retained
Liabilities, as the case may be, and the parties will negotiate
in good faith an appropriate adjustment in the Purchase Price
(to the extent such adjustment is not otherwise accomplished
under Section 2.07(a)-(c)).
Section 8.14. Acquired Subsidiary. Notwithstanding any
other provision of this Article 8, all Assets and Liabilities
associated with any Employee Plan maintained solely for
employees or former employees (or the beneficiaries or
dependents thereof) of the Acquired Subsidiary shall be
Acquired Assets and Assumed Liabilities, respectively.
Sections 8.02 and 8.04(a) and (b) shall apply with respect to
any employee of the Acquired Subsidiary who is a Transferred
Individual to the extent any such employee is entitled to any
benefits described therein. Section 8.05 and the second,
third and fourth sentences of Section 8.10(a) shall apply to
employees of the Acquired Subsidiary as if such employees were
Transferred Employees, substituting references in such
sentences of Section 8.10 to the Acquired Subsidiary for
references to Seller. No other provision of this Article 8
shall apply to the Acquired Subsidiary, or to any insurance
policies,
53<PAGE>
contracts, arrangements or agreements maintained solely for
employees or former employees (or the beneficiaries or
dependents thereof) of the Acquired Subsidiary.
Section 8.15. Labor Relations. Buyer and Seller
acknowledge that, following completion of the transaction
contemplated by this Agreement, employees of Buyer or its
Subsidiaries will be working in close proximity to employees of
Seller or its Subsidiaries in several locations. Buyer and
Seller understand and agree that the employees of Buyer or its
Subsidiaries and the employees of Seller or its Subsidiaries
will not be integrated or commingled, but shall be kept
separate for purposes of workplace policies and practices,
employee communications and all other labor and human resource
matters. Buyer and Seller agree to take and cause their
respective Subsidiaries to take all steps reasonably necessary
or appropriate to comply with the requests of the other party
to accomplish and maintain the complete separation, to the
extent commercially practicable, of the workforces of Buyer or
its Subsidiaries and Seller or its Subsidiaries. Buyer and
Seller agree that, in the event any of the employees of Buyer
or its Subsidiaries or Seller or its Subsidiaries or any labor
union or organization representing or seeking to represent such
employees, engages or threatens to engage in any strikes, work
slowdowns, work stoppages or other interferences with the work,
or any picketing, demonstration, distribution, solicitation or
organizing activities of any nature at any locations where
Buyer or its Subsidiaries and Seller or its Subsidiaries share
common facilities or are located in close proximity with each
other, Buyer or its Subsidiaries or Seller or its Subsidiaries,
as the case may be, shall take any and all actions reasonably
requested by the other party to separate, to the extent
commercially practicable, the employees or individuals engaging
in such activities, or the employees or individuals to which
such activities are directed by any labor union or
organization, from access to the employees of the other party
and its Subsidiaries and to facilities shared with or occupied
by employees of the other party and its Subsidiaries. Such
actions shall, without limitation, include designating or
constructing entrances and exits, parking facilities and other
facilities which are separate and apart from facilities used by
the employees of the other party and its Subsidiaries and
preventing the use by employees of such party or its
Subsidiaries of facilities used by employees of the other party
and its Subsidiaries.
ARTICLE 9
Conditions to the Closing
Section 9.01. Conditions to the Obligations of Buyer and
Seller. The obligations of each of Seller and Buyer to
consummate the sale of the Acquired Assets and the assumption
of the Assumed Liabilities are subject to the satisfaction of
the following conditions:
54<PAGE>
(a) any applicable waiting period under the HSR Act
relating to the sale of the Acquired Assets shall have expired
or been terminated and no action shall have been instituted by
the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of such sale,
or the other transactions contemplated by the Transaction
Agreements, other than an action which shall have been
withdrawn or terminated;
(b) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the
consummation of the transactions contemplated by the
Transaction Agreements;
(c) the Ancillary Agreements, in form and substance
reasonably satisfactory to Seller and Buyer, shall have been
executed and delivered by the parties thereto and shall be in
full force and effect; and
(d) each of Seller and Buyer shall have received
reasonably satisfactory assurance that the actions to be taken
pursuant to Section 6.03 shall have been taken.
Section 9.02. Conditions to the Obligations of Seller.
The obligation of Seller to consummate the sale of the Acquired
Assets is subject to the satisfaction of each of the following
further conditions:
(a) Buyer shall have performed in all material respects
all obligations required to be performed by it under the
Transaction Agreements at or prior to the Closing Date, and
Seller shall have received a certificate signed by an executive
officer of Buyer to the foregoing effect;
(b) the representations and warranties of Buyer contained
in this Agreement and in any certificate or other writing
delivered by Buyer pursuant hereto qualified as to materiality
shall be true and those not so qualified shall be true in all
material respects at and as of the Closing Date as if made at
and as of such time and Seller shall have received a
certificate signed by an executive officer of Buyer to the
foregoing effect;
(c) all consents, approvals, orders, authorizations,
registrations, declarations, and filings required to be
obtained or made prior to the Closing Date (other than those
referred to in Section 9.01(a)) shall have been made or
obtained, except where the failure to make or obtain the same
would not, individually or in the aggregate, (i) have a
Material Adverse Effect on the Acquired Assets, or (ii) be
reasonably be expected to subject Seller or any of its
Subsidiaries, or any of their Affiliates or any directors or
officers of any of the foregoing, to the risk of criminal
liability;
55<PAGE>
(d) Buyer shall have delivered to Seller $75,000,000 in
immediately available funds as provided in Section 2.4 of the
IP Agreement; and
(e) Seller shall have received all customary closing
documents it may reasonably request relating to the existence
of Buyer and the authority of Buyer for this Agreement and the
transactions contemplated hereby, all in form and substance
reasonably satisfactory to Seller.
Section 9.03. Conditions to the Obligations of Buyer.
The obligations of Buyer to consummate the sale of the Acquired
Assets and the assumption of the Assumed Liabilities are
subject to the satisfaction of the following further
conditions:
(a) Seller shall have performed in all material respects
all obligations required to be performed by it under the
Transaction Agreements at or prior to the Closing Date, and
Buyer shall have received a certificate signed by an executive
officer of Seller to the foregoing effect;
(b) the representations and warranties of Seller
contained in this Agreement and in any certificate or other
writing delivered by Seller pursuant hereto qualified as to
materiality shall be true and those not so qualified shall be
true in all material respects at and as of the Closing Date, as
if made at and as of such time and Buyer shall have received a
certificate signed by an executive officer of Seller to the
foregoing effect;
(c) all consents, approvals, orders, authorizations,
registrations, declarations and filings required to be made or
obtained prior to the Closing Date (other than those referred
to in Section 9.01(a)) shall have been made or obtained, except
where the failure to make or obtain the same would not,
individually or in the aggregate, (i) have a Material Adverse
Effect on the Acquired Business, or (ii) be reasonably be
expected to subject Buyer or any of its Subsidiaries, the
Acquired Subsidiary or any of their respective Affiliates or
any directors or officers of any of the foregoing, to the risk
of criminal liability or (iii) prohibit Buyer from operating or
owning the Acquired Business following the Closing
substantially as currently conducted and as conducted
immediately prior to the Closing; and
(d) Buyer shall have received all customary closing
documents it may reasonably request relating to the existence
of Seller and the authority of Seller for this Agreement and
the transactions contemplated hereby, all in form and substance
reasonably satisfactory to Buyer.
56<PAGE>
ARTICLE 10
Survival; Indemnification
Section 10.01. Survival. The representations and
warranties of the parties hereto contained in this Agreement or
in any certificate or other writing delivered pursuant hereto
or in connection herewith shall survive the Closing for a
period of one year after the Closing Date; provided, however,
that (i) the representations and warranties set forth in
Section 3.13 shall survive the Closing for a period of two
years after the Closing Date and (ii) the representations and
warranties in Sections 3.11 and 3.12(b)(iv), (v) and (vi) shall
survive until the expiration of the statute of limitations
applicable to the matters covered thereby, giving effect to any
mitigation, waiver or extension thereof. Notwithstanding the
preceding sentence, any representation or warranty in respect
of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant
to the preceding sentence, if notice of the inaccuracy or
breach thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be
sought prior to such time.
Section 10.02. Indemnification. (a) Seller hereby
indemnifies Buyer and each of its Subsidiaries and their
respective officers, directors, employees and agents, and each
of the heirs, executors, successors and assigns of the
foregoing, against and agrees to defend and hold them harmless
from any and all Damages incurred or suffered by any of them
arising or due out of (i) any misrepresentation or breach of
warranty made by Seller contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in
connection herewith (provided that, for purposes of determining
Seller's obligations pursuant to this Section 10.02(a), such
representations and warranties shall be read not to include any
qualification or limitation with respect to materiality,
including, without limitation, Material Adverse Effect) or (ii)
breaches of covenants or obligations of Seller contained herein
(including with respect to the adjustment of the Purchase Price
pursuant to Section 2.07 hereof) or any Retained Liability;
provided, that (a) Seller shall not be liable under clause (i)
of this Section 10.02(a) unless the aggregate amount of loss
with respect to all matters referred to in clause (i) of this
Section 10.02(a) exceeds $50,000,000 and then only to the
extent of such excess, (b) Seller's maximum liability under
clause (i) of this Section 10.02(a) shall not exceed the sum of
$37,500,000 plus 50% of the Adjusted Purchase Price and (c)
Seller shall only be liable for 90% of the amount of such
excess (as calculated after giving effect to the provisions of
Section 10.02(c) and (d)) with respect to any matter referred
to in clause (i) of this Section 10.02(a).
(b) Buyer hereby indemnifies each of Seller and each of
its Subsidiaries and their respective officers, directors,
employees and agents, and each of the heirs, executors,
successors and assigns of the foregoing, against and agrees to
defend and hold it harmless from any and all Damages incurred
or suffered by any of them arising or due out of (i) any
57<PAGE>
misrepresentation or breach of warranty made by Buyer contained
in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith (provided
that, for purposes of determining Buyer's obligations pursuant
to this Section 10.02(b), such representations and warranties
shall be read not to include any qualification or limitation
with respect to materiality, including, without limitation,
Material Adverse Effect) or (ii) any breaches of covenants or
obligations of Buyer contained herein (including with respect
to the adjustment of the Purchase Price pursuant to Section
2.07 hereof) or any Assumed Liability; provided, that (a) Buyer
shall not be liable under clause (i) of this Section 10.02(b)
unless the aggregate amount of loss with respect to all matters
referred to in clause (i) of this Section 10.02(b) exceeds
$50,000,000 and then only to the extent of such excess, (b)
Buyer's maximum liability under clause (i) of this Section
10.02(b) shall not exceed the sum of $37,500,000 plus 50% of
the Adjusted Purchase Price and (c) Buyer shall only be liable
for 90% of the amount of such excess (as calculated after
giving effect to the provisions of Section 10.02(c) and (d))
with respect to any matter referred to in clause (i) of this
Section 10.02(b).
(c) The amount of any indemnifiable losses or other
liability for which indemnification is provided under this
Agreement shall be net of any amounts actually recovered by the
indemnified party from third parties (including, without
limitation, amounts actually recovered under insurance
policies) with respect to such indemnifiable losses or other
liability. Any indemnifying party hereunder shall be
subrogated to the rights of the indemnified party upon payment
in full of the amount of the relevant indemnifiable loss. An
insurer who would otherwise be obligated to pay any claim shall
not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provision hereof, have
any subrogation rights with respect thereto. If any
indemnified party recovers an amount from a third party in
respect of an indemnifiable loss for which indemnification is
provided in this Agreement after the full amount of such
indemnifiable loss has been paid by an indemnifying party or
after an indemnifying party has made a partial payment of such
indemnifiable loss and the amount received from the third party
exceeds the remaining unpaid balance of such indemnifiable
loss, then the indemnified party shall promptly remit to the
indemnifying party the excess (if any) of (A) the sum of the
amount theretofore paid by the indemnifying party in respect of
such indemnifiable loss plus the amount received from the third
party in respect thereof, less (B) the full amount of such
indemnifiable loss or other liability.
(d) The amount of any indemnifiable losses or other
liability for which indemnification is provided under this
Article 10 shall be increased by any Tax imposed on the receipt
of any indemnity payment with respect thereto and decreased to
take account of any credit, deduction, amortization, exclusion
from income or other allowance associated with the Damages
giving rise to the payment received by the Indemnitee ("TAX
BENEFIT"). The amount of such decrease shall be the present
value as of the date of any
58<PAGE>
indemnification payment under this Article 10 of each Tax
Benefit multiplied by (i) the combined effective Federal and
state corporate tax rates in effect at the time of the
indemnity payment or (ii) in the case of a credit, 100 percent.
The present value of any Tax Benefit shall be determined using
the Applicable Interest Rate and assuming the party being
indemnified has sufficient Taxable income or other Tax
attributes to permit the utilization of such Tax Benefit at the
earliest possible time. Any payment pursuant to this Article
10 will be treated as non-Taxable to the indemnified party
except to the extent that a Final Determination causes such
payment to be Taxable. In the event any Final Determination
renders any payment made pursuant to this Article Taxable to
the recipient, the indemnifying party shall pay an amount that
reflects the Tax consequences to the indemnified party of
receiving such payment.
Section 10.03. Indemnification Procedures. (a) Subject
to Section 7.01(c), upon receipt by any Person who may seek
indemnity pursuant to Section 10.02 (the "INDEMNIFIED PARTY")
of actual notice of a loss, claim, Damage, liability or action
in respect of which indemnity may be sought, such indemnified
party shall promptly notify the Person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing
(provided, however, that the failure to so notify the
indemnifying party shall only relieve the indemnifying party of
its obligations hereunder to the extent such failure actually
prejudices such indemnifying party in its defense of the loss,
claim, Damage, liability or action) and the indemnifying party,
upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent
the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the
same counsel would be inappropriate, in such indemnified
party's reasonable judgment, due to actual or potential
differing interests between them, in which case such fees and
expenses shall be paid by the indemnifying party. It is
understood that the indemnifying party shall not, in respect of
the legal expenses of any indemnified party in connection with
any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all indemnified
parties and that all such fees and expenses shall be reimbursed
as they are incurred. Subject to the terms of Section
10.03(c), the indemnifying party shall not be liable for any
settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or
59<PAGE>
judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(b) Upon receipt of the notice described in the first
sentence of Section 10.03(a), an indemnifying party shall
promptly notify the indemnified party of its election to defend
or to seek to settle or compromise, at such indemnifying
party's own expense and by such indemnifying party's own
counsel, any claim, action, inquiry or investigation commenced
by any person (a "THIRD PARTY CLAIM") and of its acknowledgment
of its indemnification obligation hereunder. If the
indemnifying party elects to assume responsibility for
defending such Third Party Claim, the indemnifying party shall
so notify the claimant or plaintiff of such election and
request that all communications relating to such Third Party
Claim be made, delivered or addressed to the indemnifying party
and the indemnified party. After notice by the indemnifying
party to the indemnified party of its election to assume the
defense of a Third Party Claim, subject to the indemnified
party's rights to separate counsel paid for by the indemnifying
party pursuant to Section 10.03(a), so long as such
indemnifying party continues such defense in good faith, the
indemnifying party shall have no further obligation to the
indemnified party in respect of legal or other expenses not yet
incurred by the indemnified party in connection with such Third
Party Claim and shall promptly reimburse any such expenses
already incurred.
(c) If an indemnifying party does not elect to assume
responsibility for a Third Party Claim (which decision not to
assume may only be made in the case of a good faith dispute
that a claim is not properly the subject of an indemnification
obligation pursuant to this Article 10), an indemnified party
may not settle or compromise any claim without prior written
notice to the indemnifying party, which shall have the option
within 10 days following such notice (i) to disapprove the
settlement and assume all past and future responsibility for
the claim, including reimbursing the indemnified party for
prior expenditures relating thereto, (ii) to disapprove the
settlement and continue to refrain from participation in the
defense of the claim, in which event the indemnifying party
shall have no further right to contest the amount or
reasonableness of the settlement if the indemnified party
elects to proceed therewith, (iii) to approve the amount of the
settlement, reserving the indemnifying party's right to contest
the indemnified party's indemnity right, or (iv) to approve and
agree to pay the settlement (and all expenditures of the
indemnified party relating thereto). If no response is
received by the indemnified party, the indemnifying party shall
be deemed to have elected option (ii).
60<PAGE>
ARTICLE 11
Termination
Section 11.01. Termination. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer at any time after the
Termination Date if the Closing shall not have been consummated
on or before such date, so long as the terminating party is not
then in material breach of its obligations hereunder;
(c) by Seller, provided it is not then in breach of any
of its obligations hereunder, if Buyer fails to perform any
covenant in this Agreement when performance thereof is due or
Buyer shall have breached in any material respect any of the
representations or warranties contained in this Agreement and
does not cure the failure or breach within 30 business days
after Seller delivers written notice thereof; or
(d) by Buyer, provided it is not then in breach of any of
its obligations hereunder, if Seller fails to perform any
covenant in this Agreement when performance thereof is due or
Seller shall have breached in any material respect any of the
representations and warranties contained therein and does not
cure the failure or breach within 30 business days after Buyer
delivers written notice thereof.
Section 11.02. Effect of Termination. In the event of
the termination of this Agreement pursuant to Section 11.01
hereof, this Agreement shall, except for the provisions of
Sections 3.14 and 4.04 and the confidentiality provisions of
Section 6.01, forthwith become null and void and have no
effect, without any liability on the part of any party or its
directors, officers or stockholders. Nothing in this Section
11.02 shall relieve any party to this Agreement of liability
for breach of this Agreement.
ARTICLE 12
Miscellaneous
Section 12.01. Entire Agreement. This Agreement,
together with the Confidentiality Agreement and the Ancillary
Agreements, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all
prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
61<PAGE>
Section 12.02. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given,
if to Seller, to:
Texas Instruments Incorporated
13500 North Central Expressway
P.O. Box 655474
Dallas, TX 75265
Attention: General Counsel MS241
Telecopy: (972) 995-2632
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: E. Deane Leonard, Esq.
Paul R. Kingsley, Esq.
Telecopy: (212) 450-4800
if to Buyer, to:
Raytheon Company
141 Spring Street
Lexington, Massachusetts 02173
Attention: Christoph L. Hoffmann, Esq.
Telecopy: (617) 860-2822
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy: (212) 403-2000
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other
parties hereto. Each such notice, request or other
communication shall be effective (a) if given by telecopy, when
such telecopy is
62<PAGE>
transmitted to the telecopy number specified in this section
and the appropriate telecopy confirmation is received, or (b)
if given by any other means, when delivered at the address
specified in this Section.
Section 12.03. Amendments; No Waivers. (a) Any
provision of this Agreement may be amended or waived prior to
the Closing Date if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Seller
and Buyer or in the case of a waiver, by the party against whom
the waiver is to be effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by law.
Section 12.04. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit
of parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that
Buyer may assign its rights and obligations to any one or more
wholly owned Subsidiary or Subsidiaries of Buyer (but no such
assignment shall relieve Buyer of its obligations hereunder).
Section 12.05. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the
State of New York regardless of the laws that might otherwise
govern under principles of conflicts of laws applicable
thereto.
Section 12.06. Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto
shall have received counterparts hereof signed by all of the
other parties hereto.
63<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ William A. Aylesworth
Name: William A. Aylesworth
Title: Senior Vice President
RAYTHEON COMPANY
By: /s/ Christoph L. Hoffmann
Name: Christoph L. Hoffmann
Title: Executive Vice President
RAYTHEON
_____________
News Release
FOR IMMEDIATE RELEASE
RAYTHEON PURCHASES DEFENSE SYSTEMS & ELECTRONICS
BUSINESS OF TEXAS INSTRUMENTS
ACQUISITION SUBSTANTIALLY STRENGTHENS RAYTHEON'S
LEADERSHIP IN DEFENSE ELECTRONICS
LEXINGTON, MASSACHUSETTS/DALLAS, TEXAS, JANUARY 6, 1997 --
Raytheon Company (NYSE:RTN) and Texas Instruments Incorporated
(NYSE:TXN) announced today that their boards of directors have
approved a definitive agreement for Raytheon to purchase the
assets of Texas Instruments' defense operations for $2.95 bil-
lion in cash.
This strategic acquisition will increase Raytheon's total
annualized revenues to approximately $15 billion, and strength-
ens Raytheon's leadership in defense electronics while enhanc-
ing its position for continued growth in a consolidating indus-
try. The transaction is expected to be non-dilutive to
Raytheon's earnings per share in 1997 and to provide increas-
ingly positive contributions to earnings per share thereafter.
The transaction is subject to Hart-Scott-Rodino antitrust
review and is expected to close in the second quarter of this
year.
Dennis J. Picard, Raytheon chairman and chief executive
officer, commented, "We have consistently said that we will
remain a top-tier player in the defense industry. We are buy-
ing a growing, world-class business that competes successfully
in several key defense electronics markets where Raytheon is
not a significant participant. Our combined operations are
highly complementary, making for a powerful extension of our
defense electronics business. We have long admired the Texas
Instruments Defense Systems & Electronics team, and we welcome
them to the Raytheon family."
"The acquisition of Texas Instruments' defense business
opens new defense markets worldwide and brings our annualized
defense electronics sales to $8 billion and our current defense
electronics backlog to $9.3 billion," Picard said.
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Page Two
"This is a great move for everyone," said Thomas J.
Engibous, president and chief executive officer of Texas
Instruments. "Raytheon gets tremendous technology and
employees who are among the finest in the defense industry.
Employees gain the career opportunities associated with a
larger defense company. And Texas Instruments strengthens its
focus on digital solutions for the networked society."
David W. Welp, who will serve as president of what will
become Raytheon TI Systems, a Raytheon Company subsidiary, will
report directly to Mr. Picard. Welp commented, "We are pleased
to be joining the Raytheon family. The natural synergies
between our businesses will enable both of us to offer cus-
tomers a far broader array of technologies and products than
either of us could offer alone. The outlook and the possibili-
ties are exciting, and we "re eager to start work together."
Texas Instruments Defense Systems & Electronics Group,
headquartered in Lewisville, Texas, is expected to have 1996
revenues of approximately $1.8 billion. Texas Instruments is a
premier supplier of advanced defense systems, including
precision-guided weapons, anti-radiation and strike missiles,
airborne radar, night vision systems and electronic warfare
systems. The Defense Systems & Electronics Group has approx-
imately 12,000 employees, based largely in Texas.
Texas Instruments Defense Systems & Electronics Group
brings to Raytheon leadership positions in a number of major
programs. In precision-guided munitions, Texas Instruments is
a leader in the Paveway laser-guided weapon program. Texas
Instruments' Joint Stand-Off Weapon (JSOW) is a U.S. Navy/U.S.
Air Force system for attacking high-value ground targets. The
Javelin program is an anti-tank system for the U.S. Army.
Texas Instruments is a leader in Long Range Precision Strike
programs, such as the High-Speed Anti-Radiation Missile (HARM).
HARM and Paveway constituted 65 percent of air-delivered
weapons used by Coalition Forces in Operation Desert Storm.
-more-<PAGE>
Page Three
Texas Instruments' outstanding credentials in airborne
radar are evident by its strong positions in P-3 and S-3 ocean
surveillance, F-22 airborne radars, and the LANTIRN terrain-
following radar. Texas Instruments is also among the world
leaders in electro-optics, particularly with its Forward-
Looking InfraRed (FLIR) sensors, deployed on platforms such as
the M-1 Tank, Bradley Fighting Vehicle, F-117 "Stealth" fighter
and the F-18 Hornet. Despite the steep decline in U.S. defense
procurement over recent years, the armed services continue to
prioritize airborne and ground systems that extend capabilities
at night and in adverse weather.
Raytheon Electronics Systems (RES) has long been a leader
in air-to-air and ship-defense missiles, with AMRAAM, Side-
winder, Standard Missile and Sparrow, as well as missile
defense systems, such as Patriot and Hawk. RES has a major
presence in ground-based and shipboard radars, military com-
munications systems, and naval combat control, sonar and mine-
hunting systems. At the forefront of systems integration for
defense customers, Raytheon E-Systems businesses include recon-
naissance and surveillance, command, control and communica-
tions, specialized aircraft modification, and countermeasures.
Additionally, Raytheon Aircraft Company (RAC) provides
aircraft training systems to the military. RAC won the 1995
competition for the multi-billion dollar, next-generation Joint
Primary Aircraft Training System (JPATS) trainer for the U.S.
Air Force and U.S. Navy. Raytheon Engineers & Constructors
(RE&C), through its Raytheon Service Company, is one of the
nation's leading government technical contractors, providing
operations and maintenance services for many U.S. defense sys-
tems.
Raytheon competes in a variety of commercial businesses,
as well. RE&C is one of the largest engineering, construction,
and operations and maintenance organizations in the world. Its
markets include: fossil-fuel and nuclear power; petroleum and
gas; polymers and chemicals; pharmaceuticals and biotechnology;
metals, mining and light
-more-<PAGE>
Page Four
industry; food and consumer products, and pulp and paper, among
others. Raytheon Aircraft is the world leader in general
aviation, offering the most extensive product line in the
industry. Raytheon Appliances markets some of the finest brand
names in appliances, including Amana refrigerators, microwave
ovens, cooking surfaces and washers and dryers as well as Speed
Queen, Huebsch and UniMac commercial laundry equipment.
Raytheon Company, headquartered in Lexington, Massachu-
setts, is a $12 billion international, high-technology company
with approximately 75,000 employees worldwide operating in four
businesses: commercial and defense electronics, engineering
and construction, aircraft, and major appliances.
Texas Instruments Incorporated, headquartered in Dallas,
Texas, is one the world's foremost high-technology companies,
with sales or manufacturing operations in more than 30 coun-
tries. TI products and services include semiconductors;
defense electronics systems; software productivity tools;
mobile computing products and consumer electronics products;
electrical controls; and metallurgical materials.
More information about Raytheon and TI is located on the
World Wide Web at http://www.raytheon.com and http://
www.ti.com.
Statements which are not historical facts contained in
this release are forward-looking statements that involve risks
and uncertainties. These risks include the ability to realize
anticipated cost efficiencies, the effect of market conditions,
the impact of competitive products and pricing, and new product
development. Further information regarding the factors that
could cause actual results to differ from projected results can
be found in Raytheon's reports filed with the SEC, including
our Form 10-Q for the quarter ended September 29, 1996.
-00-
Contacts: Robert S. McWade Neil McGlone
Raytheon Company Texas Instruments
(617) 860-2846 Incorporated
(972) 995-4961
Joele Frank/Mike Pascale
The Abernathy MacGregor Group
(212) 371-5999
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Page Five
SATELLITE UPLINK FOR RAYTHEON/TEXAS INSTRUMENTS B-ROLL
January 6, 1997
7:30-8:00 a.m. EST 1:30-2:00 p.m. EST
C-Band Galaxy 6; transponder 11 C-Band Galaxy 6; transponder 11
Downlink Frequency: 3920 Downlink Frequency: 3920
If you have any technical questions or problems with the satellite
feed for Raytheon/Texas Instruments B-Roll, please call Emy Nakase at
(212) 627-5622.
