<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 1997
ALLIANT TECHSYSTEMS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10582 41-16726904
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
600 SECOND STREET N.E.
HOPKINS, MINNESOTA 55343-8384
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (612) 931-6000
NOT APPLICABLE
(Former name, former address and former fiscal year if changed from last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 28, 1997, the registrant closed its previously announced
agreement to sell its Marine Systems Group to Hughes Aircraft Company, as
described in a news release, the text of which is attached hereto as Exhibit
99.1. The net assets sold consist primarily of net working capital and
property, plant and equipment.
Item 7. Financial Statements and Exhibits.
(a) None.
(b) Pro forma financial information. Pro forma financial statements of the
registrant, which present the pro forma effects of the transaction
described in Item 2 hereof, assuming such transaction had occurred as
of the date set forth in the notes accompanying the pro forma
financial statements, are attached hereto as Exhibit 99.2.
(c) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Asset Purchase Agreement dated as of December 22, 1996
by and between the registrant and Hughes Aircraft
Company (excluding schedules and exhibits)
2.2 Amendment to Asset Purchase Agreement dated February 28,
1997 by and between registrant and Hughes Aircraft
Company (excluding schedules and exhibits)
10 Arrangements with Executive
99.1 Text of news release dated March 3, 1997
99.2 Pro forma financial information
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANT TECHSYSTEMS INC.
Date: March 13, 1997
By: /s/ Charles H. Gauck
Name: Charles H. Gauck
Title: Secretary
<PAGE>
ALLIANT TECHSYSTEMS INC.
FORM 8-K
EXHIBIT INDEX
The following exhibits are filed herewith electronically or incorporated herein
by reference. The applicable Securities and Exchange Commission File Number is
1-10582.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Method of Filing
- ------ ------------------------ ----------------
<S> <C> <C>
2.1 Asset Purchase Agreement dated as of Filed herewith electronically
December 22, 1996 by and between the
registrant and Hughes Aircraft Company
(excluding schedules and exhibits)
2.2 Amendment to Asset Purchase Agreement Filed herewith electronically
dated February 28, 1997 by and
between registrant and Hughes Aircraft
Company (excluding schedules and
exhibits)
10 Arrangements with Executive Filed herewith electronically
99.1 Text of news release dated March 3, Filed herewith electronically
1997
99.2 Pro forma financial information Filed herewith electronically
</TABLE>
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
DATED AS OF DECEMBER 22, 1996
BY AND BETWEEN
HUGHES AIRCRAFT COMPANY
AND
ALLIANT TECHSYSTEMS INC.
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 22, 1996, by and
between HUGHES AIRCRAFT COMPANY, a Delaware corporation ("Purchaser"), and
ALLIANT TECHSYSTEMS INC., a Delaware corporation ("Seller").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller is engaged in the business and related activities of
its Marine Systems Group, including the design, research, development,
manufacture and sale of torpedo systems, underseas acoustic surveillance
systems, naval sonar and mine countermeasure systems and naval contract
engineering services (the "Business"); and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires
to sell to Purchaser substantially all of the assets and business of the
Business on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Each reference contained in this Agreement to:
"Adverse Environmental Condition" shall mean any of the matters
referred to in clauses (i), (ii) or (iii) of the definition of Environmental
Claim.
"Affiliate" shall mean, with respect to any given Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
The term "control" (including, with correlative meaning, the terms "controlled
by" and "under common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall refer to this Asset Purchase Agreement, as the same
may be amended from time to time.
1
<PAGE>
"Ancillary Agreements" shall refer to the Bill of Sale, the Transition
Agreement and the Assumption Agreement.
"Arbiter" shall have the meaning ascribed to such term in Section
4.1(c) hereof.
"Asset Acquisition Statement" shall have the meaning ascribed to such
term in Section 12.4(f) hereof.
"Assets" shall refer collectively to the Purchased Assets and the
Leased Assets.
"Assumed Liabilities" shall have the meaning ascribed to such term in
Section 2.3 hereof.
"Assumption Agreement" shall refer to the Assumption Agreement to be
executed at Closing by Purchaser.
"Audited Closing Date Balance Sheet" shall refer to the Adjusted
Closing Date Balance Sheet as certified by Seller's Auditors.
"Auditors' Report" shall have the meaning ascribed to such term in
Section 4.1(b) hereof.
"Authorization" shall refer to any federal, state, local or other
governmental consent, license, permit, grant or authorization.
"Backlog Contract" shall have the meaning ascribed to such term in
Section 5.7(a)(xiv).
"Best Efforts" shall mean the taking of all reasonable efforts to
effect a result, but shall not require the incurrence of unreasonable expenses.
"Bill of Sale" shall refer to the Bill of Sale to be executed at
Closing by Seller.
"Business" shall have the meaning ascribed to such term in the first
recital hereof.
"Business Day" shall refer to a day, other than a Saturday or a
Sunday, on which commercial banks are not required or authorized to close in the
City of New York.
"Closing" shall refer to the consummation of the several transactions
provided for in Article II, all upon the terms and subject to the conditions set
forth in this Agreement, which closing shall commence at 9:00 A.M., local time
at the location specified in Section 9.1 below.
2
<PAGE>
"Closing Date" and "day of the Closing" shall refer to the day upon
which the consummation of the several transactions provided for in Article II
occurs.
"Closing Date Balance Sheet" shall refer to the balance sheet of the
Business, prepared by Seller in accordance with the provisions of Section
4.1(a)(1) hereof.
"Closing Date Financial Information" shall have the meaning ascribed
to such term in Section 4.1(a)(1) hereof.
"Closing Date Net Assets" shall have the meaning ascribed thereto in
Section 4.1(a)(1) hereof.
"Closing Date Schedule of Net Assets" shall have the meaning ascribed
thereto in Section 4.1(a)(1) hereof.
"COBRA" shall refer to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"Code" shall refer to the Internal Revenue Code of 1986, as amended.
"Contaminant" shall mean, collectively, any (a) petroleum or petroleum
products, or derivative or fraction thereof, flammable material, explosives,
radioactive materials (including radon gas), asbestos in any form that is or
could become friable, urea formaldehyde foam insulation ("UFI"), and
polychlorinated biphenyls ("PCBs"), and (b) any chemical, material, substance or
waste, (i) which is defined on the date hereof as or included in the definition
of "hazardous substances", "hazardous wastes", "hazardous materials", "toxic
substances", "restricted hazardous wastes", "contaminants", "pollutants" or
words of similar import under any applicable Environmental Laws or (ii) the
emission, discharge, release, storage, transport, disposal, management, handling
or use of which is regulated under or subject to any applicable Environmental
Laws.
"Contracts" shall mean all written or oral bids, quotations,
proposals, contracts (including, without limitation, Government Contracts and
any Lease Contracts), agreements, commitments, understandings, licenses, teaming
arrangements, associate contractor agreements, advance agreements, Memoranda of
Understanding, Memoranda of Agreements and sales and purchase orders, of Seller
relating to the Business.
"Copyrights" shall mean all copyrights, whether or not registered, and
registrations and applications for registration thereof, and all rights therein
provided by law, multinational treaties or conventions.
"Damages" shall refer, in respect of any obligation to indemnify any
Person pursuant to the terms of this Agreement, to any losses, claims, damages,
liabilities (liquidated or unliquidated, accrued, contingent or otherwise),
obligations, judgments, settlements,
3
<PAGE>
reasonable out-of-pocket costs, expenses and attorneys' fees (including such
costs, expenses and attorneys' fees incurred in connection with any
investigation (if such investigation results in an enforcement action) or in
enforcing such right of indemnification against any Indemnitor), fines and
penalties, if any.
"Definitive Closing Date Net Assets" shall refer to the Closing Date
Net Assets as reflected in the Auditor's Report, unless Purchaser shall have
objected thereto, in which event "Definitive Closing Date Net Assets" shall
refer to the Closing Date Net Assets as reflected in the report of the Arbiter.
"Deloitte & Touche" shall refer to the public accounting firm of
Deloitte & Touche L.L.P. or any successor organization.
"Documents" shall refer to any books, records, files, papers, tapes,
microfilms and any other documents.
"Employee Benefit Plan" shall have the meaning ascribed to such term
by Section 3(3) of ERISA.
"Employee Pension Benefit Plan" shall have the meaning ascribed to
such term by Section 3(2) of ERISA.
"Employees" shall have the meaning ascribed to such term by Section
5.8 hereof.
"Environmental Claim" shall mean any accusation, allegation, notice of
violation, action, claim, demand, abatement or other order or directive
(conditional or otherwise), judgment, lien or other assessment by any Person
for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or
restrictions, resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden, accidental or non-accidental leaks or spills), of, or
exposure to, or Release of any Contaminant in, into or onto the environment,
including, without limitation, the air, groundwater, surface water or any
surface or subsurface strata, at, in, by, from, or related to the Facilities,
(ii) the transportation, storage, treatment or disposal of any Contaminant in
connection with the operation of the Facilities or (iii) the violation, or
alleged violation, of any applicable Environmental Laws or any Environmental
Permits.
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and Remedial
4
<PAGE>
Action) arising from or under any Environmental Law or order or Contract with
any governmental authority or other Person.
"Environmental Laws" shall mean all applicable Laws, in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any applicable judicial
or administrative order, consent decree or judgment relating to the regulation
and protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater, wet
lands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. (S) 9601 et seq.) ("CERCLA"); the Hazardous Material
-- ---
Transportation Act, as amended (49 U.S.C. (S) 1801 et seq.); the Federal
-- ---
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S) 136 et
--
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. (S)
- ---
6901 et seq.) ("RCRA"); the Toxic Substances Control Act, as amended (15 U.S.C.
-- ---
(S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S) 740 et seq.);
-- --- -- ---
the Federal Water Pollution Control Act, as amended (33 U.S.C. (S) 1251 et
--
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. (S) 651 et
- --- --
seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f
- ---
et seq.), the Atomic Energy Act of 1954, as amended (42 U.S.C. (S)(S) 2014, 2021
- -- ---
to 2021d, 2022, 2111, 2113 and 2114), and any and all regulations promulgated
thereunder, and all applicable analogous state and local counterparts,
equivalents, or similar statutes or ordinances, rules or regulations.
"Environmental Investigation" shall mean environmental testing,
assessment and investigation.
"Environmental Lien" means any lien in favor of any governmental
authority pursuant to Environmental Laws.
"Environmental Permit" shall mean any permit, approval, authorization,
license, variance, or permission required under any applicable Environmental
Laws.
"ERISA" shall refer to the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" shall have the meaning ascribed to such term in
Section 2.2 hereof.
"Excluded Liabilities" shall have the meaning ascribed to such term in
Section 2.4 hereof.
"Export Control Laws" shall mean all Laws, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any judicial
or administrative
5
<PAGE>
interpretations thereof, relating to the export or reexport of commodities and
technologies. Export Control Laws include, but are not limited to, the Export
Administration Act of 1979, 24 U.S.C. (S)(S) 2401-2420; the International
Emergency Economic Powers Act, 50 U.S.C. (S)(S) 1701-1706; the Trading with the
Enemy Act, 50 U.S.C. (S)(S) 1 et seq.; the Arms Export Control Act, 22 U.S.C.
-- ---
(S)(S) 2778, 2779; and the International Boycott Provisions of Section 999 of
the Code.
"Exhibit" shall refer to the written Exhibit to this Agreement which
is hereby incorporated into and made a part of this Agreement for all purposes.
"Facilities" shall mean real property owned, leased or used by Seller
and related to the Business, other than any such property which is an Excluded
Asset.
"Financial Statements" shall have the meaning ascribed to such term in
Section 5.5(a) hereof.
"GAAP" shall refer to generally accepted accounting principles in the
United States as of the date of the Interim Date Balance Sheet, without
reference to changes therein as might otherwise be applicable to subsequent
periods, consistently applied.
"Government Contract" shall refer to any bid, quotation, proposal,
contract, agreement, commitment or sale or purchase order that is with the
United States Government, a foreign government or a department or agency of the
United States Government or a foreign government, including, among other things,
all contracts to supply goods and services, and subcontracts issued by or
awarded to the Business.
"HSR Act" shall refer to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnification Event" shall refer to any action, proceeding or claim
for which a Person is entitled to indemnification under this Agreement.
"Indemnitor" shall refer to the indemnifying Person in the case of any
obligation to indemnify established pursuant to the terms of this Agreement.
"Intellectual Property" shall refer to all Patents, Trademarks,
Copyrights, mask work registrations, Software and (a) trade secrets and
proprietary technical information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice); (b) technology (including know-how and
show-how), manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data and copyrightable works, whether secret or proprietary or not;
(c) copies and all tangible embodiments of all of the foregoing, in whatever
form or medium; (d) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights; and (e) all rights to sue
6
<PAGE>
for and recover and retain damages, costs or attorneys' fees for present and
past infringement of any of the intellectual property rights hereinabove set
out.
"Intellectual Property Licenses" shall have the meaning ascribed to
such term in Section 5.20(c)(2).
"Interests" shall have the meaning ascribed to such term in Section
3.1(a) hereof.
"Interim Date Balance Sheet" shall have the meaning ascribed to such
term in Section 5.5(a)(1) hereof.
"Interim Date Net Assets" shall have the meaning ascribed thereto in
Section 5.5(a)(2) hereof.
"Interim Financial Statements" shall have the meaning ascribed to such
term in Section 5.5(a)(1)(B) hereof.
"Law" shall mean any federal, state, local, or foreign law (including
common law), constitution, statute, code, ordinance, rule, regulation, executive
order, or other requirement.
"Lease Contract" shall refer to any Contract which is a lease of or
rental agreement with respect to Property (other than the facility Leases and
other Leases) or an installment sale contract arising out of the sale of
Property.
"Leased Assets" shall refer to those assets leased to Seller which, if
owned by Seller, would be Purchased Assets (excluding any Leased Property), all
of which are listed on Schedule 1(b).
"Leased Property" shall have the meaning ascribed to such term in
Section 5.19(a) hereof.
"Leases" shall have the meaning ascribed to such term in Section
5.19(a) hereof.
"Licensed Intellectual Property" shall have the meaning ascribed to
such term in Section 5.20(c)(2).
"Liens" shall have the meaning ascribed to such term in Section 5.16
hereof.
"Loss" shall mean any loss, cost, damage, liability, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorney's and
other professional fees),
7
<PAGE>
investigation, removal, cleanup and remedial costs (voluntarily or involuntarily
incurred) and modification costs incurred to permit continued or resumed normal
operation of the Facilities.
"Material Adverse Effect" shall mean any material and adverse effect
on the business, condition (financial or otherwise), revenues, earnings, assets,
prospects or results of operations of the specified Person.
"Mukilteo Facility" shall mean the facility located at 6500 Harbour
Heights Parkway, Mukilteo, Washington 98275.
"Multiemployer Plan" shall have the meaning ascribed to such term by
Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" shall have the meaning ascribed thereto in
Section 5.8(a) hereof.
"Occupants" shall have the meaning ascribed to such term in Section
5.19(a) hereof.
"Owned Property" shall have the meaning ascribed to such term in
Section 5.19(a) hereof.
"PBGC" shall refer to the Pension Benefit Guaranty Corporation.
"Patents" shall refer to all (a) inventions, whether or not
patentable, whether or not reduced to practice, or whether or not yet made the
subject of a pending patent application or applications; (b) ideas and
conceptions of potentially patentable subject matter, including without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications; (c) all national (including the U.S.) and multinational statutory
invention registrations, patents, patent registrations and patent applications
(in the U.S. or any foreign country, and including all reissues, divisions,
continuations, continuations-in-part, extension and reexaminations) and all
rights therein provided by law, multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application.
"Permitted Encumbrances" shall have the meaning ascribed to such term
in Section 5.19(a) hereof.
"Person" shall include an individual, a partnership, a corporation, or
a division or business unit thereof, a trust, an unincorporated organization, a
federal, state, local or foreign government or any department or agency thereof
and any other entity.
8
<PAGE>
"Program Performance Reserve Ratio" shall be the percentage ratio
derived by dividing the program performance reserve amount at any date by the
related remaining program revenue at such date.
"Property" shall include all property and all other assets of
whatsoever nature including, without limitation, real and personal property,
whether tangible or intangible, and claims, rights and choses in action, other
than Intellectual Property.
"Prospective Employees" shall have the meaning ascribed to such term
in Section 11.1(c) hereof.
"Purchased Assets" shall have the meaning ascribed to such term in
Section 2.1 hereof.
"Purchased Intellectual Property" shall refer to the Intellectual
Property which is owned by or licensed by Seller, and which is used in, related
to or necessary to the operation of, the Business as it is currently operated or
reasonably contemplated to be operated in the future, provided that this
definition shall not imply that Seller is obligated to acquire or convey
Intellectual Property which it does not currently own or have rights to use.
"Purchaser" shall refer to Hughes Aircraft Company, a Delaware
corporation, having its principal executive office at 7200 Hughes Terrace, Los
Angeles, California 90045.
"Registered Intellectual Property" shall have the meaning ascribed to
such term in Section 5.20(c)(2).
"Release" shall mean any release, spill, emission, abandonment of any
container or receptacle containing any Contaminant, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or migration of any
Contaminant into the environment, or into or out of any property, including the
movement or migration, gradual or otherwise, of any Contaminant through or in
the air, soil, surface water, groundwater, or land surface or subsurface strata
or formation.
"Remedial Action" shall mean all actions required under Environmental
Laws to (a) clean up, remove, treat, monitor or in any other way address the
Release of any Contaminant in the environment; (b) prevent the further Release
or threat of further Release, or minimize the further Release of any Contaminant
so it does not migrate or endanger or threaten to endanger public health or
welfare of the environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care with respect to any Release
or any threatened Release; or (d) bring the Facilities and the operations
conducted thereon into compliance with all applicable Environmental Laws and
Environmental Permits.
"Revised Statements" shall have the meaning ascribed to such term in
Section 12.4(f)(1) hereof.
9
<PAGE>
"Schedule" shall refer to one of several written Schedules to this
Agreement, each of which is hereby incorporated into and made a part of this
Agreement for all purposes.
"Seller's Auditors" shall mean Deloitte & Touche.
"Seller" shall refer to Alliant Techsystems Inc., a Delaware
corporation, having its principal executive office at 600 Second Street, N.E.,
Hopkins, Minnesota 55343-8384.
"Seller Employee Benefit Plans" and "Seller Employee Pension Plans"
shall have the meaning ascribed thereto in Section 5.8(a) hereof.
"Seller Property" shall have the meaning ascribed to such term in
Section 5.19(a) hereof.
"Software" shall mean all computer software, (including, without
limitation, source code, object code, flow charts, operating systems and
specifications, data, data bases, files, documentation, and other materials
related thereto), and all Patent, Copyright, mask work registrations trade
secret or other proprietary rights associated therewith.
"SQQ-89 REA" shall have the meaning ascribed to such term in Section
2.1(m) hereof.
"Subsidiary" shall refer to a corporation (or equivalent legal entity
under foreign law) of which another Person owns directly or indirectly more than
50% of the stock, the holders of which are ordinarily and generally, in the
absence of contingencies or understandings, entitled to vote for the election of
directors and any partnership (or equivalent legal entity under foreign law) in
which such other Person owns directly or indirectly more than a 50% interest.
"substantially-performed" shall mean, with respect to a Government
Contract, that all contract deliverables under all options which have previously
been exercised have been provided to the customer.
"Taxes" shall mean (A) all federal, state, local and foreign taxes,
charges, fees, levies, imposts, duties or other assessments, including, without
limitation, income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental (including taxes under Code section 59A), premium, federal highway
use, commercial rent, customs duties, capital stock, paid up capital, profits,
withholding, Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added, alternative
or add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, foreign government or subdivision or agency thereof, including any
interest, fines, assessments, penalties or additions thereto, whether disputed
or not, and (B) any Taxes for which Seller is liable as a transferee,
10
<PAGE>
indemnitor, guarantor, surety or in a similar capacity under any contract,
arrangement, understanding or commitment, whether oral or written.
"Tax Return" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in connection
with Taxes.
"Third Party Assets" shall mean all government, customer or other
third party-owned Property, equipment and information.
"Trademarks" shall mean all trademarks, service marks, trade dress,
logos, trade names and corporate names, whether or not registered, including all
common law rights, and registrations and applications for registration thereof,
including all of the goodwill associated with or represented by any of the
foregoing, and including, but not limited to, all marks registered in the United
States Patent and Trademark Office, the Trademark Offices of the States and
Territories of the United States of America, and the trademark offices of other
nations throughout the world, and all rights therein provided by multinational
treaties or conventions.
"Transferred Employees" shall have the meaning ascribed to such term
in Section 11.1(c) hereof.
"Transition Agreement" shall refer to the Transition Services
Agreement to be executed at Closing by Purchaser, Seller and Parent,
substantially on the terms set forth in Schedule 12.5.
"Year-End Financial Statements" shall have the meaning ascribed to
such term in Section 5.5(a)(1)(a) hereof.
ARTICLE II
BASIC TRANSACTION
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing the following transactions shall occur:
2.1 Purchase and Sale of Assets. On the terms and subject to the
---------------------------
conditions set forth in this Agreement, at the Closing, Purchaser shall purchase
from Seller, and Seller shall sell, transfer, assign, convey and deliver to
Purchaser, all of Seller's right, title and interest in and to the Business,
including, without limitation, in and to all of the assets, properties, rights,
goodwill, contracts and claims of the Business (except as otherwise set forth in
Section 2.2 hereof), wherever located, whether tangible or intangible, real or
personal, known or unknown, actual or contingent, as the same shall exist as of
the Closing, subject to subsection (o) below (such rights, title and interest in
and to all such assets, properties, rights,
11
<PAGE>
contracts and claims, being collectively referred to herein as, the "Purchased
Assets"). The Purchased Assets shall include, without limitation, the following
assets:
(a) all fee owned real property, leasehold and other interests in
real property listed on Schedule 2.1(a), together with all improvements,
fixtures and all other appurtenances thereto and rights in respect thereof;
(b) all inventory (including work in process, raw materials and
finished goods), goods in transit, unbilled revenues and other properties
and rights associated with the performance of Contracts and the operation
of the Business, supplies, machinery, equipment, test equipment,
demonstration equipment, computers, tools, dies, spare parts, vehicles,
furniture, office materials and other tangible personal property, whether
or not such assets are located at the properties referred to in clause (a)
above;
(c) all accounts receivable and notes receivable and other claims for
money or other obligations due (or which hereafter will become due) to
Seller arising out of the Business together with any unpaid interest
accrued thereon from the respective obligors and any security or collateral
therefor, but excluding any sums owed by any Affiliate of Seller as
intercompany advances or accounts, other than any thereof arising from the
purchase and sale of goods or services in the ordinary performance of the
Contracts of the Business;
(d) all of Seller's interest in the Purchased Intellectual Property,
including, without limitation, all results of the Business' research and
development activities and other Intellectual Property developed or
acquired for the Business, or related to, or of use or potential use in
connection with any current or contemplated potential future products of
the Business or parts, components or subassemblies used or purchased by the
Business;
(e) all proceeds under any insurance contract or arrangement relating
to the Business in respect of Assumed Liabilities or damage to Assets;
(f) all right, title and interest in, to and under all Contracts,
subject in each case to the terms of such Contracts;
(g) all books and records (including such books and records as are
contained in computerized storage media) of the Business, including all
inventory, purchasing, accounting, sales, export, import, research,
engineering, manufacturing, maintenance, repairs, marketing, banking,
documents and records constituting Purchased Intellectual Property,
shipping records, personnel files for Transferred Employees and all files,
customer and supplier lists, records, literature and correspondence,
whether or not physically located on any of the premises referred to in
clause (a) above, but excluding personnel files for employees of Seller who
are not Transferred Employees, provided
12
<PAGE>
Seller may retain copies of all books and records related to Excluded
Liabilities, Excluded Assets and Employees;
(h) any other tangible assets of Seller which are used in the
Business and which are of a nature not customarily reflected in the books
and records of a business, such as assets which have been written off for
accounting purposes but which are still used by or of value to the
Business;
(i) all Authorizations which are transferable and which are used in
the Business, as presently conducted;
(j) all goodwill associated with the Business;
(k) all rights under non-disclosure agreements with employees and
agents of Seller and under confidentiality agreements with prospective
purchasers of the Business or with other third parties to the extent
relating to the Business;
(l) all deposits, prepaid charges, insurance, sums and fees, offset
credit balances in any country, refunds, and causes of action;
(m) the SQQ-89 Request for Equitable Adjustment ("SQQ-89 REA"), the
Hydroscience Receivable described in Section 7.20, the NT37 Inventory
described in Section 7.21, and the Ocean Bottom Cable Royalty described in
Section 7.22;
(n) any other asset of Seller, other than Excluded Assets, in respect
of which there is an Assumed Liability; and
(o) other than to the extent related to a liability asserted against
Seller, all rights of recovery, rights of set-off and rights of recoupment
of Seller in connection with the Business.
2.2 Excluded Assets. Notwithstanding anything herein to the
---------------
contrary, the Purchased Assets shall not include any of the following assets
related to the Business (collectively, the "Excluded Assets"):
(a) Cash and cash equivalents, including petty cash accounts or cash
on hand or in bank accounts, certificates of deposit, commercial paper and other
similar securities related to the Business;
(b) Any books or records relating to the Business which Seller is
required by law to retain in its possession;
(c) Federal income tax refund entitlements or other tax attributes
related to the Business with respect to any period prior to the Closing Date;
13
<PAGE>
(d) The account receivable payable by Armada de Chile, Contract
Number MK46-ILS119 in the amount of $2.93 million.
2.3 Assumption of Liabilities. On the terms and subject to the
-------------------------
conditions set forth in this Agreement, at the Closing, Purchaser will assume
and become responsible for the following liabilities and obligations of Seller
(the "Assumed Liabilities"):
(a) the Contracts being transferred to Purchaser hereunder (to the
extent that such liabilities and obligations remain unsatisfied or are required
to be performed on or after the Closing Date);
(b) Employees and employee benefits solely to the extent specifically
set forth in Article XI hereof, and those certain employment contracts between
Seller and the individuals set forth on Schedule 2.3(b) with respect to any
potential severance and severance related liabilities;
(c) once the Remedial Action set forth in the Remedial Plan
contemplated by Section 7.7 hereof is complete, on-site Environmental Claims and
Environmental Costs and Liabilities of Seller, irrespective of when they arise,
at the Mukilteo Facility; and
(d) Except to the extent otherwise specifically provided herein, any
liability or obligation reflected on Column Four of the Closing Date Schedule of
Net Assets irrespective of the amount reserved.
2.4 Excluded Liabilities. Seller and Purchaser expressly understand
--------------------
and agree that Purchaser shall not assume, pay, perform or discharge or become
liable for any and all obligations, commitments or liabilities of any and every
nature whatsoever of Seller including (without limitation) all obligations,
commitments or liabilities (whether recourse or non-recourse to Seller) which
relate to, are secured by or otherwise encumber any of the Assets, including,
without limitation, (a) liabilities arising out of, or relating to, the
operation of the Business prior to the Closing, (b) liabilities resulting from
Environmental Claims or Remedial Action relating to the operation of the
Business prior to the Closing, (c) claims that the operation of the Business
infringes the Intellectual Property rights of any Person, (d) except as
otherwise provided in Section 12.4(c), or Section 12.4(g), all liabilities of
Seller or any Affiliate of Seller for Taxes, and, in each case, which are not
Assumed Liabilities and (e) liabilities arising out of any performance incentive
payment obligations under the contracts described on Schedule 2.3(b)
(collectively, the "Excluded Liabilities").
2.5 Purchase Price. On the terms and subject to the conditions set
--------------
forth in this Agreement, and subject to adjustment as provided in Article IV
hereof, at the Closing, Purchaser will pay to Seller $141,000,000, allocated as
provided in Section 12.4(f) hereof by wire transfer of immediately available
funds to an account designated by Seller not later than three Business Days
prior to the Closing Date.
14
<PAGE>
ARTICLE III
CERTAIN AGREEMENTS OF THE PARTIES
3.1 Certain Provisions Relating to Assets. (a) To the extent that a
-------------------------------------
Contract, Authorization or other asset which would otherwise be included within
the definition of "Assets", or any claim, right or benefit arising thereunder or
resulting therefrom (each an "Interest" and collectively the "Interests"), is
not capable of being sold, assigned, transferred or conveyed without the
approval, consent or waiver of the issuer thereof or the other party thereto, or
any third person (including a government or governmental unit or agency), and
such approval, consent or waiver has not been obtained prior to the Closing, or
if such sale, assignment, transfer or conveyance or attempted sale, assignment,
transfer or conveyance would constitute a breach thereof or a violation of any
law, decree, order, regulation or other governmental edict, this Agreement shall
not constitute a sale, assignment, transfer or conveyance thereof, or an
attempted sale, assignment, transfer or conveyance thereof.
(b) Seller and Purchaser shall use their best efforts and shall
cooperate to obtain all approvals, consents or waivers necessary to convey to
Purchaser each Interest as of the Closing. The failure to obtain any approval,
consent or waiver necessary to convey any Interest to Purchaser shall not affect
the obligations of the parties to close hereunder.
(c) To the extent any of the approvals, consents or waivers necessary
to convey any Interest (other than Government Contracts with respect to which
Section 7.6 shall govern) to Purchaser have not been obtained by Seller as of
the Closing, Seller shall, during the remaining term of such Interest, use its
best efforts, to (1) at the request of Purchaser, cooperate with Purchaser to
obtain the consent of any such third party (provided that Purchaser shall not be
obligated to pay any consideration therefor), (2) at the request of Purchaser,
cooperate with Purchaser in any reasonable and lawful arrangements designed to
provide the benefits of such Interest to Purchaser (including, with respect to
any Property leased by Seller which would otherwise be an Asset and as to which
Seller has been unable to obtain the lessor's consent to the assignment thereof
to Purchaser, to sublease such Property (to the extent permitted under the
pertinent lease) to Purchaser, upon substantially the same terms and conditions
as are set forth in such lease with respect to Seller), so long as Purchaser
cooperates with Seller in such arrangements and promptly reimburses Seller for
any and all payments required to be made by Seller after the Closing Date by the
terms of the document governing such Interest (as the same shall be in effect on
the date hereof), and (3) enforce, at the request of Purchaser and at the
expense and for the account of Purchaser, any rights of Seller arising from such
Interest against the issuer thereof or the other party or parties thereto
(including the rights to elect to terminate any such Interest in accordance with
the terms thereof upon the advice of Purchaser).
15
<PAGE>
ARTICLE IV
POST-CLOSING ADJUSTMENT
4.1 Closing Date Balance Sheet. (a)(1) Within 45 days after the
--------------------------
Closing Date, Seller shall deliver to Seller's Auditors a balance sheet of the
Business as it existed immediately prior to the Closing (the "Closing Date
Balance Sheet"), prepared in accordance with GAAP applied on a basis consistent
with that employed by Seller in the preparation of the Interim Date Balance
Sheet and using the same accounting methods, policies, practices and procedures
with consistent classifications, judgments, and valuation and estimation
methodologies as used in the preparation of the Interim Date Balance Sheet,
including those adjustments required by Section 4.1(b). The Closing Date
Balance Sheet shall be accompanied by an additional schedule of information (the
"Closing Date Schedule of Net Assets") (i) the first column of which shall be a
copy of the Closing Date Balance Sheet, (ii) the second column of which
accurately details all adjustments necessary to reflect the elimination of all
assets and liabilities which are reflected on the Closing Date Balance Sheet but
not sold to or assumed by Purchaser in accordance with the terms of this
Agreement (it being understood by the parties that the profit accrual rates on
Contracts will not be affected by the elimination of any such assets or
liabilities not sold or assumed, the costs of which are normally included in
estimated costs at completion), (iii) the third column of which accurately
details the adjustments required by Section 4.1(a)(2) below, and (iv) the fourth
column of which accurately presents the assets and liabilities of the Business
as at the Closing Date after giving effect to the adjustments reflected in the
second and third columns thereof and indicates the Net Assets as at the Closing
Date (the "Closing Date Net Assets"). The Closing Date Balance Sheet and the
Closing Date Schedule of Net Assets are referred to collectively as the "Closing
Date Financial Information."
(2) The third column of the Closing Date Schedule of Net Assets
indicates all adjustments to the Closing Date Balance Sheet which are necessary
to remove the effects, if any, resulting from any change in the assets or
liabilities of the Business during the period from the date of the Interim Date
Balance Sheet through the Closing Date, caused by any of the following: (A) any
change resulting from a change in GAAP, including those promulgated after the
Interim Date Balance Sheet is prepared, regardless of whether or not otherwise
required to be made, except as agreed to between Seller and Purchaser; (B) any
change resulting from a change of an accounting policy, practice, procedure,
allocation method or estimation technique from that followed in preparing the
Interim Date Balance Sheet; (C) any extraordinary or non-recurring gains or any
transactions not in the ordinary course of business consistent with past
practices of Seller and not otherwise required by this Section 4.1; (D) the
inclusion in the Closing Date Balance Sheet of any Asset or any Liability which
was not, but could have been, reflected in the Interim Date Balance Sheet; (E)
any corrections relating to mathematical mistakes, mistakes in the application
of accounting principles, or oversight or misuse of facts that existed at the
date of the Interim Date Balance Sheet and affected the determination of any
amounts in the Interim Date Balance Sheet; and (F) any change in the amount
requests for equitable adjustment or claims made or to be made
16
<PAGE>
by Seller under any contract relating to the Business which has not been
approved by the Purchaser pursuant to the approach described in Schedule
4.1(a)(2)(F); (G) any change in the amount of Seller's reserves for the Business
from the amounts of the reserves reflected on Schedules 5.5(c) and 5.5(d) as of
the Interim Date Balance Sheet, except as noted on Schedules 4.1(a)(2)(G)(A) and
4.1(a)(2)(G)(B). For purposes of Sections 4.1(a)(2)(A), (B), (D) and (E), any
potential adjustment having an individual value of less than $50,000 (the "Small
Adjustment") shall not be considered as a column three adjustment until the
total cumulative value of all such Small Adjustments when measured on a net
basis exceeds $100,000, in which case only the excess value above $100,000 shall
be reflected in column three of the Closing Date Schedule of Net Assets. In
preparing the Closing Date Financial Information, Seller shall use the same
techniques and methodologies in determining its estimates and judgments for
evaluating the status of its Contracts and Government Contract rate reserves as
were used in preparing the Interim Financial Statements, except that the third
column of the Closing Date Schedule of Net Assets shall (A) reverse all
reductions and increases in reserves from the amounts contained in the Interim
Date Balance Sheet and reflected on Schedule 5.5(d), except as noted on Schedule
4.1(a)(2)(G)(A) and (B) make such adjustments as are necessary to cause each
program estimate at completion profit margin percentage on the remaining revenue
to equal the related estimate at completion profit percentage reflected on
Schedule 5.5(c) as of the date of the Interim Date Balance Sheet, except as
noted on Schedule 4.1(a)(2)(G)(B) and (C) make such adjustments as are necessary
to cause each Program Performance Reserve Ratio at Closing to equal the related
Program Performance Reserve Ratio reflected on Schedule 5.5(c) as of the date of
the Interim Date Balance Sheet. For all purposes of this Agreement, reserves
shall be deemed to include (without limitation) balance sheet reserves and/or
contract level reserves whether related to accounts receivable, billed or
unbilled, contracts in process, inventories, fixed assets or any other Purchased
Asset, regardless of whether any such reserve is recorded as an offset to such
Assets' carrying value or is included as an accrued liability in the Closing
Date Balance Sheet. Notwithstanding the above, no adjustments shall be made to
this third column of the Closing Date Schedule of Net Assets under any of the
provisions of Section 4.1(a)(2) if the adjustment pertains to assets or
liabilities which are reflected on the Closing Date Balance Sheet but are not
sold to or assumed by Purchaser under the terms of this Agreement.
(3) The third column of the Closing Date Schedule of Net Assets shall
make any adjustments necessary to remove any values remaining on the accounts
listed on Schedule 4.1(a)(3) after considering previous amounts assigned to
these accounts under the provisions of Section 4.1(a)(1)(i), Section
4.1(a)(1)(ii) and Section 4.1(a)(1)(iii), such that the value assigned to column
four for these accounts in the Closing Date Schedule of Net Assets shall be
zero.
(4) The third column of the Closing Date Schedule of Net Assets shall
make any adjustments necessary to eliminate the effect of any accounting or
audit adjustments posted between the Interim Date Balance Sheet and the Closing
Date Balance Sheet to write down or write up the carrying value of the MK46 New
Brighton H1602 Account. It is the expectation of Purchaser and Seller that a
potential write down of approximately $500,000
17
<PAGE>
may be reflected in this account in the Closing Date Balance Sheet, and it is
the intention of this provision to eliminate the effect of this or any other
such accounting or audit adjustment to the value of the MK46 New Brighton H1602
Account from the price adjustment provisions of Section 4.1.
(5) In the event that sales of the NT37 inventory have occurred or
that cash collections have occurred on the SQQ-89 REA or the Hydroscience
Receivable between the Interim Date and the Closing Date, the following details
the calculation of the Purchase Price adjustment necessary to reflect these
occurrences: (i) sale of NT37 inventory and cash is collected by Seller;
Purchase Price is reduced by Purchaser's share of proceeds per Section 7.21 of
this Agreement; (ii) sale of NT37 inventory and a collectible account receivable
exists on the Closing Date Balance Sheet; Purchase Price is increased by
Seller's share of this receivable per Section 7.21 of this Agreement; (iii) cash
collection on the SQQ-89 REA; Purchase Price is reduced by Purchaser's share of
the proceeds per Section 7.19 of this Agreement; (iv) cash collection on the
Hydroscience Receivable; Purchase Price is reduced by Purchaser's share of the
proceeds per Section 7.20 of this Agreement.
(b) Seller shall engage Seller's Auditors (at Seller's and
Purchaser's expense shared equally) to, within 60 days after Seller's delivery
of the Closing Date Financial Information under Section 4.1(a) above: (i) read
this Agreement and all other documents and instruments deemed necessary by
Seller's Auditors to discharge their obligations required under this Agreement;
(ii) audit the Closing Date Balance Sheet in accordance with generally accepted
auditing standards; and (iii) deliver to Seller, Purchaser and Deloitte &
Touche, a draft certificate in the form set forth in Exhibit A hereto (the final
version of which is referred to as the "Auditors' Report") together with the
Closing Date Balance Sheet to which such draft Auditors' Report relates. The
Auditors' Report shall report, without qualification or other limitation arising
out of the scope of the audit, that, the Closing Date Balance Sheet presents
fairly the financial condition of the Business at the Closing Date in conformity
with GAAP, and that:
(1) the Closing Date Balance Sheet does not give effect to any
purchase accounting (or similar related) adjustments, or any other accounting
effects, arising from the transactions provided for in this Agreement;
(2) the Closing Date Balance Sheet does take into account all
liabilities, accruals and other adjustments on or prior to the Closing Date
which would be appropriate to a balance sheet being prepared at a financial
year-end including (without limitation) all liabilities and accruals necessary
to present the Business as a stand-alone entity and any liabilities and accruals
relating to the Business which may have previously been recorded at the
corporate office or other organizational level, including (without limitation)
all liabilities (A) for such charges as rentals, maintenance services, property
taxes, general and product liability insurance (including self-insurance
accruals), (B) arising from the employment of the employees of the Business
(including obligations for accrued bonuses, workers' compensation obligations
(including claims filed and obligations incurred but not reported), medical,
dental,
18
<PAGE>
severance, profit sharing, vacation time, paid time off, other insurance
and business expenses) and (C) arising from interorganizational transactions
(i.e., transactions between the Business and any other business, division, unit
- -----
or Subsidiary of Seller) and intraorganizational transactions and expense
allocations, accrued in accordance with the past customs and practices of the
Business but only to the extent arising from the purchase and sale of goods or
services in the ordinary performance of the Contracts of the Business;
(3) Reserves are provided on a Contract by Contract basis, as
appropriate, for all Contracts with total estimated costs at completion
(including all other overhead costs allocated to such Contracts in a manner
consistent with the methodology used in preparing the Interim Date Balance
Sheet) in excess of the firm negotiated ceiling price based on the most recently
completed Contract cost estimates. Adjustments have been made to reflect all
other Contracts on the individual contract percentage of completion method
(using Seller's historical methodology for determining the percentage of
completion), based upon effort performed through the Closing Date, and utilizing
the most recently completed contract cost estimates. When calculating the
earnings associated with the most recently completed contract cost estimates,
adjustments have been provided for the difference between booked Government
Contract overhead rates and the rates that are expected to be negotiated with
the government for all years open for audit by the government;
(4) Property, plant and equipment amounts contained in the Closing
Date Balance Sheet represent the respective book values of the specific Assets
as at such date; and
(5) In addition to the foregoing adjustments, the Closing Date
Balance Sheet takes into account all proposed audit adjustments which are
individually in excess of $50,000 on a pre-tax basis. It is understood by
Purchaser and Seller that Seller's Auditors will establish the scope of its
audits based upon its professional judgment of materiality as applied to the
Closing Date Balance Sheet.
Seller covenants to make all such changes to the Closing Date Balance
Sheet as shall be necessary to enable Seller's Auditors to deliver the draft
certificate in substantially the form set forth in Exhibit A and to deliver the
Auditor's Report. Notwithstanding the above, Seller shall not be required to
make any changes where its existing accounting policies, practices, procedures,
allocation methods or estimation techniques are in compliance with GAAP and
consistent with past practices, including those used in preparing the Interim
Date Balance Sheet.
(c) Within 30 Business Days after the receipt of the Closing Date
Financial Information, the Closing Date Balance Sheet and the draft Auditors'
Report on the Closing Date Balance Sheet, Purchaser shall notify Seller of any
objections thereto and shall attempt in good faith to reach an agreement with
Seller as to the matter or matters in dispute. If Purchaser and Seller,
notwithstanding such good faith effort, shall have failed to resolve the matter
or matters in dispute within 20 Business Days after Purchaser advises Seller of
its objections, then Seller immediately will cause Seller's Auditors to issue
the Auditors' Report
19
<PAGE>
and the related financial statements and schedule and deliver copies thereof to
Seller, Purchaser and Purchaser's representative. Any remaining disputed matters
shall be finally and conclusively determined by an independent auditing firm of
recognized national standing (the "Arbiter") selected by Purchaser and Seller,
which shall not be the regular auditing firm of Purchaser or Seller. Promptly,
but not later than 30 Business Days after its acceptance of its appointment, the
Arbiter shall determine (based solely on presentations by Seller and Purchaser
to the Arbiter and not by independent review) only those issues in dispute and
shall render a report as to the disputes and containing a revised Closing Date
Schedule of Net Assets, which report shall be conclusive and binding upon the
parties hereto. In resolving any disputed item, the Arbiter may not assign a
value to any particular item greater than the greatest value for such item
claimed by either party or less than the smallest value for such item claimed by
either party, in each case, as presented to the Arbiter. For purposes of the
Arbiter's determination of Definitive Closing Date Net Assets, the amounts to be
included shall be the appropriate amounts from the Closing Date Schedule of Net
Assets for assets and liabilities that are being sold or assumed as to items
that are not in dispute, and the amounts determined by the Arbiter as to items
that were submitted for resolution by the Arbiter.
(d) For purposes of complying with the terms set forth herein, each
party shall cooperate with and make available to the other party and its
auditors and representatives, all information, records, data, auditors' working
papers, and access to its personnel, shall permit access to its facilities and
shall permit the other party and its auditors and representatives to make copies
of all information, records, data and auditors' working papers, in each case as
may be reasonably required in connection with the analysis of the Interim Date
Balance Sheet, the draft Auditors' Report, the Auditors' Report, the Closing
Date Financial Information, the Audited Closing Date Balance Sheet and the
resolution of any dispute(s) thereunder. Without limiting the generality of the
foregoing, Seller shall cause Seller's Auditors to make available at its office
to Purchaser and Purchaser's representative immediately after delivery of the
draft Auditors' Report pursuant to Section 4.1(b) above the workpapers therefor
pertaining only to the Business and not to other operations and businesses of
Seller (which may be copied by Purchaser if Purchaser so elects), subject to
approval by Deloitte & Touche. Purchaser's auditors shall also have access to
Seller's Auditors' workpapers pertaining only to the Business and not to other
operations and businesses of Seller (including those relating to prior audits)
as necessary for the purpose of providing regular auditing services to the
Business.
4.2 Post-Closing Adjustment. As soon as the Auditor's Report has
-----------------------
been delivered pursuant to the provisions set forth in Section 4.1 hereof and
either all disagreements with respect to the Closing Date Net Assets have been
resolved directly by Purchaser and Seller or the report of the Arbiter has been
issued: (a) in the event that the Definitive Closing Date Net Assets shall be
less than the Interim Date Net Assets, then Seller shall pay to Purchaser the
amount of such difference in cash plus interest thereon from the Closing Date to
the date of such payment thereof at the per annum rate equal to the rate
announced by Citibank, N.A. in the City of New York as its base rate as in
effect on the Closing Date; or (b) in the event that the Definitive Closing Date
Net Assets shall be greater than the Interim Date Net Assets, then Purchaser
shall pay to Seller the amount of such
20
<PAGE>
difference in cash plus interest thereon from the Closing Date to the date of
such payment thereof at the per annum rate equal to the rate announced by
Citibank, N.A. in the City of New York as its base rate as in effect on the
Closing Date. Any such cash payment pursuant to this Section 4.2 shall be made
within 10 Business Days following the later of (i) the receipt by the parties of
the Audited Closing Date Balance Sheet and (ii) if there shall exist a dispute
between the parties as to the amount of Closing Date Net Assets, the date of
receipt of the Arbiter's report, by bank wire transfer of immediately available
funds to an account designated by Purchaser or Seller, as the case may be. The
cash payment pursuant to this Section 4.2 (other than the portion of any such
payment made by Purchaser specifically denominated as interest hereunder) shall
be treated by the parties as an adjustment to the purchase price of the Assets.
The provisions of this Section 4.2 Post Closing Adjustment section, as well as
provisions contained in Section 4.1 and Section 5.5, are intended to measure the
differences between the Interim Date Balance Sheet and the Closing Date Balance
Sheet on a comparable basis. Differences in accounting treatment as identified
in Section 4.1(a)(2) between the Interim Date Balance Sheet and the Closing Date
Balance Sheet are to be addressed under the Indemnification provisions of
Section 12 of this Agreement, and no attempt will be made by either Purchaser or
Seller to seek an economic adjustment under both the price adjustment terms of
Article IV and the indemnity provisions of Article XII of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as of the date hereof, and
shall be deemed to have represented and warranted on the Closing Date, as
follows:
5.1 Organization and Authority of Seller. Seller is a corporation
------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full power and authority, corporate and otherwise, to own
and operate its properties and to carry on its business as and where presently
conducted, to enter into and to perform its obligations under this Agreement and
each of the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. Seller is duly qualified or
otherwise authorized to do business as a foreign corporation and is in good
standing in each jurisdiction set forth in Schedule 5.1, except where the
failure to so qualify would not have Material Adverse Effect.
5.2 Authorization of Agreements. The execution, delivery and
---------------------------
performance of this Agreement and each of the Ancillary Agreements to which it
is a party by Seller have been duly authorized by all necessary action,
corporate or otherwise, of Seller, and this Agreement has been, and each of the
Ancillary Agreements to which it is a party will be, duly executed and delivered
by Seller and this Agreement constitutes, and each of the Ancillary Agreements
to which it is a party when executed will constitute, the valid and binding
obligation of Seller, enforceable in accordance with its terms.
21
<PAGE>
5.3 No Conflicts. Except as described in Section 5.4, the execution,
------------
delivery and performance by Seller of this Agreement and each of the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (with or without the giving
of notice or the passage of time or both) (a) conflict with the certificate of
incorporation or by-laws of Seller or, except as set forth in Schedule 5.3,
conflict with, violate, or result in the breach or termination of, or constitute
a default under, (1) any Authorization, lease, agreement, contract, commitment,
letter of intent, memorandum of understanding or other document or instrument,
or (2) any order, judgment, injunction or decree of any court or governmental
authority, foreign or domestic, to which Seller is a party or by which it or any
of its assets or properties are bound; (b) constitute a violation of any law,
statute or regulation of any governmental authority, domestic or foreign,
applicable to Seller; (c) result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Seller or (d) give to any
other Person any rights whatsoever, including rights of termination,
cancellation or acceleration, in or with respect to any of the properties or
assets of Seller except to the extent that the occurrence of any of the
foregoing would not have a material adverse effect on (i) the ability of Seller
to enter into and perform its obligation under this Agreement or (ii) the
business, operations, prospects or financial condition of Seller.
5.4 Consents. No consent, approval or authorization of, or
--------
designation, declaration or filing with, any governmental authority or other
third party is required on the part of Seller in connection with Seller's
execution, delivery and performance of this Agreement (including, without
limitation, the sale, assignment, transfer and conveyance to Purchaser of all
Interests) and the Ancillary Agreements to which it is a party, except for (a)
any required filings with the Federal Trade Commission and the Department of
Justice pursuant to the HSR Act and due expiration of the waiting period
(including any extensions) thereunder, (b) any novations required in connection
with Government Contracts, (c) any filings required under the Department of
Defense Industrial Security Manual for Safeguarding Classified Information (the
"DoD Manual"), (d) any filings required under United States Export Control Laws
and (e) those consents or approvals which are listed in Schedule 5.4.
5.5 Financial Statements. (a)(1) Set forth in Schedule 5.5(a)(1) are
--------------------
complete and correct copies of the following financial statements:
(A) the unaudited balance sheet for the Business for the fiscal year
ended March 31, 1996 and the related statement of operating income and
statement of operating cash flows for the year then ended (the "Year-End
Financial Statements"). The unaudited balance sheet of the Business as at
March 31, 1996 and the notes thereto are sometimes referred to in this
Agreement as the "March 31, 1996 Balance Sheet";
(B) the unaudited balance sheet of the Business as at July 31, 1996,
and the related statement of operating income and statement of operating
cash flows for the four-month period then ended (together with Schedule
5.5(a)(2) referred to below, the
22
<PAGE>
"Interim Financial Statements"). The unaudited balance sheet of the
Business as at July 31, 1996 and the notes thereto are sometimes referred
to in this Agreement as the "Interim Date Balance Sheet".
(2) Attached hereto as Schedule 5.5(a)(2) is a schedule (i) the first
column of which is a copy of the Interim Date Balance Sheet, (ii) the second
column of which accurately details all adjustments necessary to reflect the
elimination of all assets and liabilities which are reflected on the Interim
Date Balance Sheet but not sold to or assumed by Purchaser in accordance with
the terms of this Agreement, except that no amount shall appear in this second
column for any vacation accrual that is not to be assumed by Purchaser at
Closing, (it being understood by the parties that the profit accrual rates on
Contracts will not be affected by the elimination of any such assets or
liabilities not sold or assumed, the costs of which are normally included in
estimated costs at completion), (iii) the third column of which shall make any
adjustments necessary to remove any values remaining on the accounts listed on
Schedule 4.1(a)(3) after considering previous amounts assigned to these accounts
under the provisions of Section 5.5(a)(2)(i) and Section 5.5(a)(2)(ii), such
that the value assigned to column four for these accounts in this Interim Date
Schedule of Net Assets shall be zero; and (iv) the fourth column of which
accurately presents the assets and liabilities of the Business as at the date of
the Interim Date Balance Sheet after giving effect to the adjustments reflected
in the second and third columns thereof and indicates the Net Assets as at the
date of the Interim Date Balance Sheet (the "Interim Date Net Assets").
The Year-End Financial Statements and the Interim Financial Statements
(including the schedules thereto) are sometimes referred to herein collectively
as the "Financial Statements".
(3) The Interim Date Balance Sheet takes into account all
liabilities, accruals and other adjustments on or prior to the date thereof
which would be appropriate to a balance sheet being prepared at a financial
year-end and gives effect to the following adjustments:
(A) Reserves have been provided on a Contract by Contract basis, as
appropriate, for all Contracts with total estimated costs at completion
(including all other overhead costs allocated to such Contracts) in excess
of the firm negotiated ceiling price based on the most recently completed
Contract cost estimates. Adjustments have been made to reflect all other
Contracts on the individual contract percentage of completion method (using
Seller's historical methodology for determining the percentage of
completion), based upon effort performed through the date of such balance
sheet, and utilizing the most recently completed contract cost estimates.
When calculating the earnings associated with the most recently completed
contract cost estimates, adjustments have been provided for the difference
between booked Government Contract overhead rates and the rates that are
expected to be negotiated with the government for all years open for audit
by the government. Reserves shall be deemed to include (without
limitation) balance sheet reserves related to accounts receivable, whether
billed or unbilled, contracts in process, inventories,
23
<PAGE>
fixed assets or any other assumed asset, regardless of whether any such
reserve is recorded as an offset to such assets' carrying value or is
included as an accrued liability in the Interim Date Balance Sheet; and
(B) Property, plant and equipment amounts contained therein represent
the respective book values of the specific Assets as at the date of the
Interim Date Balance Sheet and provision has been made for the disposition
of any idle or excess property, plant and equipment in accordance with
Federal Acquisition Regulation 31.205-16.
The Interim Date Balance Sheet does not give effect to any purchase
accounting adjustments arising from the transactions provided for in this
Agreement.
(b) The Financial Statements are in agreement with the books and
records regularly maintained by Seller and its Subsidiaries and were prepared in
accordance with GAAP (except as otherwise required by Section 5.5(a)(3)(B), or
as disclosed in the notes to the Financial Statements) and using the same
accounting methods, policies, practices and procedures with consistent
classifications, judgments, and valuation and estimation methodologies as those
used by Seller with respect to the Business in preparing its historical
financial statements, except as otherwise expressly noted on Schedule 5.5(a)(1).
Subject to normal year-end adjustments with respect to the Interim Financial
Statements (which adjustments, individually and in the aggregate, are not
material) the Financial Statements present fairly the financial position of the
Business as of the dates specified therein and the results of operations for the
fiscal periods then ended, taking into account all liabilities and accruals
necessary to present the Business as a stand-alone entity and any liabilities
and accruals which may have previously been recorded at the corporate office or
other organizational level, including (without limitation) all liabilities (A)
for such charges as rentals, maintenance services, property taxes, general and
product liability insurance (including self-insurance accruals), (B) arising
from the employment of the employees of the Business (including obligations for
accrued bonuses, workers' compensation obligations (including claims filed and
obligations incurred but not reported), medical, dental, severance, profit
sharing, vacation time, paid time off, other insurance and business expenses)
and (C) arising from interorganizational transactions (i.e., transactions
----
between the Business and any other business, division, unit or Subsidiary of
Seller) and intraorganizational transactions and expense allocations, accrued in
accordance with the past customs and practices of the Business.
(c) Set forth in Schedule 5.5(c) is a complete and correct list on a
Contract by Contract basis, for all Contracts having a total contract value in
excess of $500,000, of the EAC profit rates reflected in the Interim Date
Balance Sheet with respect to all Contracts relating to the Business, as well as
Performance Reserves, Rate Reserves and Warranty Reserves included in Program
Reserves.
(d) Set forth in Schedule 5.5(d) is a complete and correct list on a
Contract by Contract basis of all reserves for warranties, reserves for bad
debts, rate reserves and gross
24
<PAGE>
margin reserves maintained by Seller with respect to the Business as of the date
of the Interim Date Balance Sheet.
5.6 Absence of Certain Developments. Except as set forth on Schedule
-------------------------------
4.1(a)(3) and the reduction in projected sales to $125 million for the fiscal
year ending March 31, 1997, since July 31, 1996, there has not been any Material
Adverse Change in the business, condition, revenues, earnings, assets or results
of operations of the Business.
5.7 Material Contracts and Leases. (a) To the extent permitted by
-----------------------------
government regulations applicable to classified documents, Schedule 5.7 contains
a listing of all Contracts described in clauses (i) through (xv) below to which
Seller is a party and which relate to or involve the Business as currently
operated by Seller or which are material to the continued operation of the
Business by the Purchaser. True, correct and complete copies of the Contracts
referred to in clauses (i)-(xv) below and listed on Schedule 5.7 have been
delivered to or made available to Purchaser and its agents and representatives.
(i) Each Government Contract which involves performance of
services or delivery of goods and/or materials by Seller;
(ii) Each note, debenture, letter of credit, bond or surety,
other evidence of indebtedness, guarantee, loan, credit or financing
agreement or instrument or other contract for money borrowed, including any
agreement or commitment for future loans, credit or financing in excess of
$75,000;
(iii) Each Contract not in the ordinary course of business
involving expenditures or receipts of Seller in excess of $250,000;
(iv) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property and involving aggregate payments
in excess of $250,000;
(v) Each license agreement or other material Contract with
respect to any Intellectual Property of Seller or any other Person,
including any agreements with current or former employees, consultants, or
contractors of Seller regarding the ownership, appropriation or the
nondisclosure of Intellectual Property;
(vi) Each collective bargaining agreement or other Contract
to or with any labor union or other employee representative of a group of
employees relating to wages, hours, and other conditions of employment;
(vii) Each joint venture Contract, co-production or partnership
agreement, or limited liability company agreement;
25
<PAGE>
(viii) Each Contract requiring capital expenditures after the
date hereof in an amount in excess of $250,000 or otherwise material to
Seller;
(ix) Each distributorship, agency or manufacturer's
representative agreement;
(x) Each management, consulting or employment Contract or
severance agreement, including, without limitation, any Contract (A) to
employ or terminate executive officers or other personnel and other
Contracts with present or former officers, directors or shareholders of
Seller or (B) that will result in the payment by, or the creation of any
commitment or obligation (absolute or contingent) to pay on behalf of
Seller any severance, termination, "golden parachute," or other similar
payments to any present or former personnel following termination of
employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement;
(xi) Each distribution, franchise, license, sales representative,
commission, consulting, agency or advertising Contract which is not
cancelable on thirty (30) calendar days notice without liability to Seller;
(xii) Each material option to buy any property, real or personal,
or material option to sell any real property or personal property;
(xiii) Each Contract containing covenants limiting the freedom of
Seller to engage in any line of business or compete with any Person
anywhere in the world;
(xiv) Each open sales order, contract or firm written quotation
for more than $250,000 ("Backlog Contracts"); and
(xv) Each Contract pursuant to which Seller is required to
indemnify a third party (other than with respect to product warranties in
the ordinary course of business).
(b) Except as set forth on Schedule 5.7, all the Contracts listed
pursuant to paragraph (a) hereof are (i) in full force and effect and (ii)
represent the legal, valid and binding obligations of Seller and, to the
knowledge of Seller, represent the legal, valid and binding obligations of the
other parties thereto. Except as set forth on Schedule 5.7(b), no condition
exists or event has occurred which, with notice or lapse of time or both, would
constitute a default under such Contracts by Seller or any other party thereto,
except where the occurrence of such event or existence of any such condition
would not have a Material Adverse Effect on the Business.
26
<PAGE>
(c) Except as set forth in Schedule 5.7(c), there is no outstanding
bid for the sale of goods or services by Seller for which the total costs
estimated at the time of the bid, including allocable overhead and general and
administrative expenses, as estimated in good faith by Seller would exceed 93%
of the proposed price set forth in such bid on the applicable Contract.
(d) Except as set forth in Schedule 5.7(d), there is no unexercised
option for the sale of goods or services by Seller for which the most recent
estimated total costs of completing the unexercised option, including allocable
overhead and general and administrative expenses, as estimated in good faith by
Seller exceeds 93% of the price for such goods and services in respect of the
applicable Contract.
(e) Except as set forth on Schedule 5.7(e), there are no Contracts
for the sale of goods or services by Seller as to which at the time of the most
recent scheduled contract milestone for any such Contract the work scheduled was
more than sixty (60) days late.
(f) Except as set forth on Schedule 5.7(f), there are no Contracts,
options or bids for the sale of goods or services by Seller which include a
liquidated damages clause for late delivery.
(g) Except as set forth on Schedule 5.7(g), there are no Contracts
for the sale of goods or services by Seller which require Seller to be an
account party to a letter of credit or bank guarantee which allows the
beneficiary to draw funds without the specific consent of the account party, in
the absence of an arbitration or judicial ruling in favor of the beneficiary.
(h) Except as set forth on Schedule 5.7(h), (i) there is no
outstanding bid for the sale of goods or services where performance of
contractual effort will begin prior to contract award, and (ii) there are no
existing Contracts where performance will continue while awaiting additional
contractual funding.
5.8 Employee Benefit Plans. In regard to the Business: (a)
----------------------
Schedule 5.8(a) sets forth all Employee Benefit Plans and any other material
employee benefit arrangements, policies or payroll practices, including, without
limitation, with respect to sick leave, vacation pay, severance pay, salary
continuation for disability, consulting or other compensation agreements or
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance and
scholarship programs maintained by Seller to which Seller has contributed or is
or was obligated to contribute to or otherwise make payments to (hereinafter the
"Seller Employee Benefit Plans"), in each case with respect to any employees of
Seller who are employed in the Business as of fourteen (14) days prior to the
Closing Date (hereinafter "Employees"). All Employee Pension Plans maintained
by Seller, or to which Seller has contributed or is obligated to contribute, in
each case with respect to any Employees (hereinafter, the "Seller Employee
Pension Plans") are separately listed on Schedule 5.8(a). Schedule 5.8(a) also
27
<PAGE>
clearly sets forth which of such plans are Multiemployer Plans, multiple
employer plans subject to Sections 4063 and 4064 of ERISA ("Multiple Employer
Plans"), plans other than Multiemployer Plans and Multiple Employer Plans that
are subject to Section 412 of the Code and "welfare benefit plans" within the
meaning of Section 3(1) of ERISA which provide for continuing benefits or
coverage for any participant or any beneficiary or dependent of a participant
after such participant's termination of employment except as required by Section
4980B of the Code and which is required to be paid 100% by the participant.
(b) True, correct and complete copies of the following documents,
with respect to each of the Seller Employee Benefit Plans and Seller Employee
Pension Plans, have been made available or delivered by Seller to Purchaser:
(A) any plans, insurance policies and service agreements and amendments thereto,
(B) the most recent Forms 5500 and any financial statements attached thereto,
(C) the last Internal Revenue Service determination letter, (D) summary plan
descriptions, and (E) the last actuarial reports, if any.
(c) Except as set forth on Schedule 5.8(c), there are no pending or,
to Seller's knowledge, threatened claims or lawsuits which have been asserted or
instituted against the Seller Employee Benefit Plans and/or the Seller Employee
Pension Plans, the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator, or against any fiduciary of the Seller
Employee Benefit Plans and/or Seller Employee Pension Plans (other than routine
benefit claims) nor does Seller have knowledge of facts which could form the
basis for any such claim or lawsuit.
(d) [Intentionally Omitted]
(e) [Intentionally Omitted]
(f) [Intentionally Omitted]
(g) [Intentionally Omitted]
(h) Except as set forth in Schedule 5.8(h), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment becoming due to any employee
(current, former or retired) of the Seller, (ii) increase any benefits otherwise
payable under any Seller Employee Benefit Plan or Seller Employee Pension Plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
(i) Neither Seller nor any Subsidiary of Seller has any contract or
commitment, to create any additional Seller Employee Benefit Plans or Seller
Employee Pension Plans or to modify any existing Seller Employee Benefit Plan or
Seller Employee Pension Plans to the detriment of any employee.
(j) [Intentionally Omitted]
28
<PAGE>
5.9 Litigation; Violation of Law. (a) There are no judicial,
----------------------------
arbitral or administrative actions, proceedings, investigations or audits
(including, but not limited to, any audits or investigations referred to in
Section 5.9(b) hereof) pending or, to Seller's knowledge, threatened that
question the validity of this Agreement or any action taken or to be taken by
Seller in connection with this Agreement or any of the Ancillary Agreements, or
which, if adversely determined, would have a Material Adverse Effect upon
Seller's ability to enter into or perform its obligations under this Agreement.
(b) Except as set forth on Schedule 5.9 or 5.13: (1) there are no
suits, actions, or legal, administrative, arbitration or other proceedings or
governmental investigations or audits with respect to the Business, including,
without limitation, any thereof related to any Government Contract or other
Contract to which Seller is a party or by which it is bound and which relates to
or involves the Business, pending or, to Seller's knowledge, threatened, (2)
there are no orders, injunctions or decrees outstanding against Seller related
to any Government Contract or other Contract involving the Business or pursuant
to which Seller is performing services or supplying goods, (3) there are no
internal, or to Seller's knowledge, outside investigations (other than routine
audits under Governmental Contracts) of Seller which relate to the Business
concerning any actual or potential liabilities which relate to Government
Contracts or other Contracts or with respect to which voluntary disclosure may
be necessary under the Defense Industry Initiatives, and (4) Seller has no
knowledge of any claim or claims, whether asserted or unasserted, or other
assertion of liability against Seller which relates to the Business and in each
case, (A) in which relief other than, or in addition to, money damages from
Seller is sought, or (B) in which recovery of money damages from Seller in an
amount (individually or in the aggregate for all such claims and assertions of
liability) in excess of $100,000 is sought.
(c) Except as set forth in Schedule 5.9 or 5.13, Seller has not
received any notice of violation of, and Seller is not in violation of, any
applicable federal, state, local or foreign law, statute, ordinance, order, rule
or regulation, or judgment entered by any federal, state, local or foreign court
or governmental authority, relating in each case to the operation, conduct or
ownership of the properties or businesses of the Business, including but not
limited to, the federal antitrust laws, federal procurement laws, the state
antitrust laws, the federal securities laws, the state securities laws (so
called "Blue Sky" and similar laws), and all other federal, state or local laws,
regulations or ordinances pertaining to the Business, except for any such
violations, which, individually or in the aggregate, would not have a Material
Adverse Effect on the Business.
(d) All Authorizations material to the current operations of the
Business are in full force and effect without any default thereunder by Seller
or, to the knowledge of Seller, by any other party thereto, and Seller has not
received any notice, written or oral, of any claim or charge that Seller is
currently in violation of or in default under any Authorization or
Authorizations necessary to any of the current operations of the Business.
29
<PAGE>
5.10 Taxes. (a) Except as set forth in Schedule 5.10, Seller has
-----
timely filed all Tax Returns required to be filed and all such Tax Returns were
correct and complete in all material respects. Seller has timely paid all Taxes
that are due, or claimed by any taxing authority to be due, or has provided for
all such Taxes on its financial statements in accordance with GAAP.
(b) Except as set forth in Schedule 5.10, no assessment, audit or
other proceeding by any taxing authority, court, or other governmental or
regulatory authority has occurred or is pending, or to the knowledge of Seller,
threatened with respect to the Taxes or Tax Returns of Seller.
(c) Except as set forth in Schedule 5.10, none of the Assets is: (1)
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(2) used predominantly outside the United States within the meaning of Proposed
Treasury Regulation Section 1.168-2(g)(5), (3) "Tax-exempt bond financed
property" within the meaning of Section 168(g)(5) of the Code, or (4) "limited
use property" as that term is used in Rev. Proc. 76-30. Following the Closing,
none of the Assets will be property that Purchaser or any of its Affiliates will
be required to treat as being owned by any other Person pursuant to the
provisions of Section 168(f)(8) of the 1954 Code.
(d) Seller is not a foreign person within the meaning of Section 1445
of the Code.
(e) With respect to Leased Assets placed in service on or before the
date hereof, each Lease Contract (excluding property sold on installment sales
contracts) will be treated as a lease for federal income tax purposes.
(f) Seller has complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has duly and
timely withheld from employee salaries, wages and other compensation and has
paid over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods under all applicable laws.
5.11 Material Changes. Except as set forth in Schedule 5.11 or the
----------------
Interim Date Balance Sheet, whether or not in the ordinary course of business,
since July 31, 1996, there has not been, occurred or arisen: (1) any material
damage or destruction to properties or assets of Seller, whether covered by
insurance or not; (2) any increase in the compensation payable, or to become
payable, by Seller to any officer or employee employed in the Business whose
remuneration during 1996 exceeded the rate of $75,000 per year, or any material
increase in benefits or benefit plan costs or any material change in any bonus,
insurance, pension, compensation or other benefit plan made for or with or
covering any officer or employee of Seller employed in the Business; (3) any
material extraordinary or non-recurring loss (as defined in Opinion Number 30 of
the Accounting Principles Board of the American Institute of Certified Public
Accountants) suffered by Seller; or (4) any waiver by Seller of any material
rights of substantial value.
30
<PAGE>
5.12 Affiliate Agreements. Schedule 5.12(a) sets forth a list of all
--------------------
Contracts and invoices outstanding as of the date of this Agreement which relate
to (i) the provision of products or services to the Business by any other
division, unit, Subsidiary or Affiliate of Seller or (ii) the provision of
products or services by the Business to any other division, unit, Subsidiary or
Affiliate of Seller. Except as set forth on Schedule 5.12(b) and in Section
12.6, all such Contracts are terminable at will by Seller without penalty, are
assignable by Seller to Purchaser and, following the assignment thereof by
Seller to Purchaser pursuant hereto, will be terminable at will by Purchaser
without penalty.
5.13 Contracts with the United States Government. (a) Schedule
-------------------------------------------
5.13(a) contains a complete list of all open Government Contracts with respect
to the Business to which Seller is a party.
(b) Seller has complied in all material respects with all applicable
federal procurement laws and regulations including, without limitation, the
Truth in Negotiations Act, the Cost Principles and Cost Accounting Standards,
and the Federal Acquisition Regulation and all supplements thereto, in
connection with such Government Contracts, and Seller is not aware of any
allegation by any Person that Seller has not so complied.
(c) All of the Government Contracts relating to or involving the
Business have been legally awarded and are binding on the parties thereto and
Seller is in compliance in all material respects with all terms and conditions
in such Government Contracts, including all terms and conditions incorporated
expressly by reference or by operation of law therein.
(d) To Seller's knowledge, except as set forth on Schedule 5.13(d),
Seller has not received any notice, written or oral, of performance or
administrative deficiencies relating to or involving any of such Government
Contracts.
(e) The pricing, cost accounting, estimating, material management and
accounting, property and resource planning and procurement systems relating to
the Business have been properly disclosed to and, to the extent required by
applicable regulations, approved by the United States government and such
disclosures are in material compliance with applicable federal procurement laws
and regulations, including the Cost Principles and Cost Accounting Standards.
(f) To the Seller's knowledge, no officer, director, employee, agent,
or representative of Seller has made with respect to the Business (1) any
illegal political contributions, (2) material payments from corporate funds not
recorded on the books and records of Seller, (3) payments from corporate funds
that were falsely recorded on the books and records of Seller, (4) any payments
from corporate funds, promises to pay, or authorization of payment, or offer,
gift or promise to give, to any government officials or any foreign political
party, official thereof or candidate for foreign political office, or to any
person while knowing that all or a portion of such funds will be offered
directly or indirectly to any foreign official or any foreign political party,
party official, or candidate for foreign political office for the purpose of
influencing the action of such official, party official, or candidate for
foreign
31
<PAGE>
political office or the action of the government, or foreign political party, in
order to obtain, retain or direct business to or obtain, retain or direct
licenses or other special treatment for the Business.
(g) Except as set forth in Schedule 5.13(g), neither Seller, any of
Seller's Affiliates nor, to Seller's knowledge, any of their respective
directors, officers or employees has been debarred or suspended from
participation in the award of Government Contracts or subcontracts or from
otherwise conducting business with the United States government or any agency
thereof, nor are there any facts or circumstances which may form the basis of a
debarment or suspension proceeding, in any such case, relating to or involving
the Business.
(h) Except as set forth in Schedule 5.13(h), Seller has not received
any notice of any "stop orders", "cure notice", "show cause notice" or any
"terminations for convenience or default" of any of the Government Contracts
relating to or involving the Business.
(i) Seller holds such security clearances as are required to perform
its respective Government Contracts or subcontracts. To Seller's knowledge,
there are no facts or circumstances that could result in the suspension or
termination of such clearances, or that could render Seller ineligible for such
security clearances in the future. All security measures required by the
Department of Defense Industrial Security Manual have been implemented.
(j) [Intentionally Omitted]
(k) Except as set forth on Schedule 5.13(k), there is no cost type
Government Contract relating to or involving the Business with a ceiling, cap or
share ratio, which is or is likely to be exceeded.
5.14 Export Control and Related Matters. (a) In connection with the
----------------------------------
Business, Seller is in substantial compliance with all United States and foreign
Export Control Laws.
(b) Except as set forth on Schedule 5.14(b), Seller has all necessary
authority under the Export Control Laws to conduct operations relating to the
Business including, but not limited to, (1) all necessary licenses for any
pending export transactions, (2) all necessary licenses and clearances for the
disclosure of information to foreign persons and (3) all necessary registrations
with government agencies with authority to implement the Export Control Laws.
(c) Seller has not participated directly or indirectly in any
boycotts or other similar practices in violation of the regulations of the
United States Department of Commerce or Section 999 of the Code.
32
<PAGE>
5.15 Subsidiaries; Cooperative Business Agreements. (a) There are
---------------------------------------------
no Subsidiaries of Seller that are engaged, in whole or in part, in the Business
or that own or lease any of the Assets.
(b) Schedule 5.15(b) contains a complete and correct list of all of
the teaming arrangements, advance agreements, associate contractor agreements,
MOUs and MOAs to which Seller is a party and which relate to or involve the
Business.
5.16 Personal Property. Except for property furnished by the
-----------------
government or prime contractors, Seller owns or leases, and the Assets
constitute, sufficient tangible personal Property to conduct the business and
operations of the Business in all material respects as presently conducted.
Schedule 5.16(a) contains a complete and correct list of all tangible personal
Property that constitute Assets used by the Seller in the operation of the
Business in the ordinary course. Schedule 5.16(b) separately identifies all
Third Party Assets, including, without limitation, tooling and test equipment,
necessary to perform the obligations under or for which Purchaser could be held
accountable under the Government Contracts transferred to Purchaser pursuant to
this Agreement, and such Third Party Assets are maintained by Seller in
accordance with a government approved property management system. Schedule
5.16(c) separately identifies all Third Party Assets, including, without
limitation, tooling and test equipment, necessary to carry on the Business, not
accountable under the Government Contracts and included in the Assets. Except
as set forth on Schedule 5.16(d), Seller now has, and on the Closing Date will
have, good and valid title to all such tangible personal Property owned by it as
of the date of this Agreement, free and clear of all liens, security interests,
mortgages, claims, levies, charges, pledges, hypothecations, conditional sale or
retention contracts and encumbrances of any nature whatsoever (collectively,
"Liens"), except for Liens of the type referred to in Section 5.19(a) hereof.
Except as set forth on Schedule 5.16(e), upon consummation of the transactions
contemplated by this Agreement, Purchaser will be entitled to continue to use
all tangible personal Property owned or used by Seller in the Business on the
date hereof.
5.17 Environmental Matters. (a) Except as disclosed in Schedule
---------------------
5.17:
(1) the Facilities and the operations of the Business are in
compliance in all material respects with all Environmental Laws;
(2) (a) Seller has obtained all Environmental Permits necessary for
the operations of the Business, all such Environmental Permits are in good
standing, and Seller is in material compliance with all terms and conditions of
such Environmental Permits; (b) there are no judicial or administrative
proceedings pending nor, to the knowledge of Seller, threatened to revoke,
cancel, suspend or adversely modify any such Environmental Permits; and (c) no
notice to or approval by a governmental authority is required under or pursuant
to any such Environmental Permits as a result of the transaction contemplated
hereunder;
33
<PAGE>
(3) none of the Facilities or the operations of the Business is
subject to any Environmental Claim nor, to the knowledge of Seller, has any such
Environmental Claim been threatened;
(4) to the knowledge of Seller, none of the Facilities or the
operations of the Business is the subject of any federal, state or local
investigation evaluating whether any of the Facilities or the Business is not in
compliance with Environmental Laws or whether any Remedial Action is needed to
respond to a Release of any Contaminant nor, to the knowledge of the Seller, is
any such investigation threatened;
(5) [Intentionally Omitted]
(6) to the knowledge of Seller, Seller is not subject to any
Environmental Costs and Liability with respect to any Contaminant and no facts
or circumstances exist which could give rise to Environmental Costs and
Liabilities in each case related to the Business in excess of $500,000;
(7) to the knowledge of Seller, there is not currently, nor has there
been in the past, on, under, in or about any of the Facilities (a) any above
ground storage tanks which are owned or operated by Seller; (b) underground
storage tanks; (c) surface impoundments or dikes; (d) any asbestos-containing
materials or presumed asbestos-containing materials; (e) and polychlorinated
biphynels; or (f) radioactive substances;
(8) To the knowledge of Seller, Seller has not received any notices
of any violation or alleged violation of, or any liability under or pursuant to
any Environmental Law relating to the operations of the Business or the
Facilities and there are no outstanding or, to the knowledge of Seller,
threatened writs, injunctions, Environmental Liens, judgments, decrees,
administrative orders or settlement agreements arising under or pursuant to
Environmental Laws against Seller or the Facilities and there are no outstanding
compliance schedules or requirements under any of the Environmental Permits;
(9) To the knowledge of Seller, neither the Facilities nor any real
property formerly owned, operated or leased by or for the Business is listed or
has been proposed for listing on the National Priorities List ("NPL"), the
Comprehensive Environmental Response Compensation and Liability and Information
System ("CERCLIS") or any analogous list identifying possibly contaminated sites
and neither Seller nor any predecessor of Seller has been named as a
"potentially responsible party" with respect to or received any request for
information or demand from any party concerning, its potential involvement in or
at any site listed or proposed for listing on the NPL, the CERCLIS or analogous
state list or for which a condition exists which may give rise to Remedial
Action under any applicable Environmental Laws, in each such case, which relates
to or involves the Business;
(b) [Intentionally Omitted]
34
<PAGE>
(c) Except as disclosed in Schedule 5.17, to the knowledge of Seller,
Seller has provided Purchaser with copies of or made available all environmental
reports, investigations, studies, audits, assessments, tests, reviews or other
environmental analyses relating to the Business, the Facilities or any real
property owned, operated or leased by or for the Business that are in the
possession, custody or control of Seller or its subsidiaries relating to a
potential liability in excess of $500,000.
5.18 [Intentionally Omitted]
5.19 Real Property. (a) Schedule 2.1(a) sets forth a complete list
-------------
of all real property and interests in real property owned in fee by Seller and
used in, held for use by or related to the Business (individually, an "Owned
Property"), including the address and description of the improvements thereon,
and sets forth a complete list of all real property and interests in real
property leased by Seller, as lessee and used in, held for use by or related to
the Business (individually, a "Leased Property"), including the names of the
lessee and lessor and a description of the premises and the lease (collectively,
the "Leases"); and Schedule 5.19 sets forth a complete list of all Persons (the
"Occupants") that occupy any portion of the Owned Property or Leased Property
pursuant to an agreement with Seller, including the names of the parties thereto
and a description of the premises and the agreement. True, complete and correct
copies of the Leases (together with any recorded memoranda or short-form leases)
as the same have been amended, modified, supplemented or assigned have been
delivered or made available to Seller. Seller has provided to the extent
available all title insurance policies, title reports, surveys and instruments
or documents affecting title with respect to the Owned Property and Leased
Property in the possession of Seller or an Affiliate of Seller. Except as set
forth on Schedule 5.19, Seller or an Affiliate of Seller owns and has (1)
marketable and insurable fee simple title to all Owned Properties and (2) valid
leasehold estates in all Leased Properties (Owned Property and Leased Property
are sometimes referred to individually as a "Seller Property" and collectively
as "Seller Properties"), in each case free and clear of all Liens and
encumbrances of any nature except (A) as set forth on Schedule 5.19, such minor
covenants, restrictions, easements and encroachments, if any, not listed on
Schedule 5.19, as do not materially interfere with such property's present, or
to the extent known to Seller, proposed use or the business operations thereon
(the Liens and encumbrances described in the foregoing clauses (A) and (B) are
collectively hereinafter referred to as "Permitted Encumbrances"). Seller is in
peaceful, exclusive and undisturbed possession of the Seller Properties, with
the exception only of the Occupants.
(b) Neither Seller nor, to Seller's knowledge, any other party is in
default under any of the Leases, and to Seller's knowledge no event has occurred
which, with notice, lapse of time or both, would constitute a default
thereunder. No previous or current party to any such Lease has furnished notice
to Seller of or made a claim against Seller with respect to any breach or
default thereunder.
(c) With respect to those Leases that were transferred to Seller or
any of Seller's Affiliates by a third party, to Seller's knowledge all necessary
consents to such
35
<PAGE>
transfers have been obtained and are in full force and effect and neither Seller
nor any Affiliate of Seller has received any notice that any such third party's
acts or omissions has given rise to any breach of the underlying lease or
sublease to which it is a party.
(d) Except to the extent otherwise disclosed by Seller elsewhere in
this Agreement, to the knowledge of Seller, each Owned Property and each Leased
Property complies in all material respects with all applicable Laws, including
without limitation, zoning and subdivision, and no notice of violation of Law
has been received by Seller or any Affiliate of Seller or, to the knowledge of
Seller, has been issued by any public or governmental authority with respect to
any Seller Property, which noncompliance or violation, if not remedied, would
prevent, hinder or impair the ability of Purchaser to use such Seller Property
consistent with its present use.
(e) [Intentionally Omitted]
(f) To the knowledge of Seller, all utility systems required in
connection with use, occupancy and operation of each Seller Property are
sufficient for their present purposes and are fully operational and in working
order.
(g) Except as set forth on Schedule 5.19(g), other than options,
rights of first refusal or other similar arrangements in favor of the Seller or
any Affiliate of Seller under the Leases which have not been exercised as of the
date hereof, neither Seller nor any Affiliate of Seller has entered into any
contract, arrangement or understanding with respect to the future ownership,
development, use, occupancy or operation of any of the Facilities.
(h) To the knowledge of Seller, no termination rights have been
exercised or threatened by any party with respect to the Leases.
(i) To Seller's knowledge, there is no material default or violation
of an Authorization necessary for the current and continued operation or use of
Seller's Property. Seller has not received any notice from any governmental
entity to the effect that there is lacking any Authorization required in
connection with the current or continued use or operation of any Owned Property.
(j) There does not exist any actual or, to the knowledge of Seller,
threatened condemnation or eminent domain proceedings that affect any Owned
Property or any part thereof, and none of Seller or its Affiliates has received
any written notice of the intention of any governmental entity or other Person
to take or use all or any part thereof.
(k) Except as set forth in Schedule 5.19(k), to the knowledge of
Seller there is no actual or pending imposition of any assessments for public
improvements with respect to any Seller Property, except for customary annual
assessments under state and local law.
36
<PAGE>
(l) Except as set forth on Schedule 5.19(l), no labor has been
performed or material furnished for any portion of any Owned Property for which
any Lien, having a value in excess of $50,000 in the aggregate can be claimed,
except as covered by insurance.
(m) [Intentionally Omitted]
(n) Seller has not received any written notice from any insurance
company that has issued a policy to Seller with respect to any Seller Property
requiring performance of any structural or other repairs or alterations to such
Seller Property.
(o) The transactions contemplated hereby will not constitute a
default under, or result in any change in the material terms of any Lease,
provided that consent to the assignment thereof to Purchaser, if required by
such Lease, is obtained prior to the Closing. For purposes of this Section
5.19(o), rent, other monetary obligations or term shall constitute "material
terms of any Lease."
5.20 Intellectual Property. (a) Unless otherwise indicated in
---------------------
Schedule 5.20, the Purchased Intellectual Property constitutes all of the
Intellectual Property owned by or licensed to Seller relating to, used in, or
necessary to the operation of the Business.
(b) Unless otherwise indicated in Schedule 5.20, Seller owns the
entire right, title and interest in and to the Purchased Intellectual Property
(including, without limitation, the right to use and license the same) free and
clear of all liens and encumbrances.
(c) Schedule 5.20 sets forth complete and correct lists of:
(1) all patents, trademark registrations, copyright registrations,
mask work registrations and applications for any of them which are part of
the Purchased Intellectual Property (the "Registered Intellectual
Property");
(2) all Contracts ("Intellectual Property Licenses") between Seller
and any other Person (other than licenses for off-the-shelf Software
purchased by Seller in the ordinary course) granting Seller a license in,
or rights with respect to, the Intellectual Property of any Person
("Licensed Intellectual Property") relating to the Business;
(3) all Intellectual Property, including without limitation, Software
(other than off-the-shelf Software purchased by Seller in the ordinary
course), owned by any Person (other than Seller) that is used in, or is
necessary to the operation of, the Business.
(4) all Contracts between Seller and any other Person pursuant to
which Seller grants a license to, or rights with respect to, the Purchased
Intellectual Property to any Person; and
37
<PAGE>
(5) all Intellectual Property which is the subject of the obligations
of Seller described in Section 3.1(c) hereof.
(d) Neither this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) result in the termination, suspension, breach, or
violation of any Contract between Seller and any Person relating to Intellectual
Property; or (ii) will result in the termination, suspension, breach, or
violation of Intellectual Property Licenses. Except as set forth on Schedule
5.20, all of Seller's rights under the Intellectual Property Licenses are
transferable to Purchaser in connection with the transactions contemplated by
this Agreement and Purchaser will be entitled to continue to use all of the
Licensed Intellectual Property to the same extent and under the same conditions
that it has heretofore been used in the Business, without financial obligations
to any other Person.
(e) The Purchased Intellectual Property together with the Licensed
Intellectual Property constitutes all of the Intellectual Property used in, or
necessary to, the operation of the Business.
(f) To Seller's knowledge, the operation of the Business by Seller
does not infringe or violate the Intellectual Property rights of any Person.
(g) Schedule 5.20 sets forth a list of all notices or claims received
by and suits or proceedings pending against Seller or, to Seller's knowledge,
received by or pending against any customer of Seller, which notices, claims,
suits or proceedings assert infringement of any Intellectual Property of any
Person as a result of the operation of the Business or activities of any such
customer with regard to any product or service supplied by the Business and
Seller has no knowledge of any basis for any additional claims, suits or
proceedings against it or any customer for any such infringement.
(h) To Seller's knowledge, (i) no person is infringing,
misappropriating or otherwise violating any right of Seller in the Purchased
Intellectual Property and (ii) there are no interferences, pending or
threatened, involving any of the Patents that constitute "Assets," and Seller
knows of no basis for any such interference.
(i) All of the material Registered Intellectual Property is valid and
subsisting and all actions (including, without limitation, the payment of
renewal and maintenance fees) necessary to maintain or renew, as the case may
be, the registrations and applications to register such Registered Intellectual
Property have been taken.
(j) To Seller's knowledge, there exist no notices, claims, suits or
proceedings made or brought by Seller pending against any third party asserting
infringement or misappropriation of any of the Purchased Intellectual Property.
(k) No Purchased Intellectual Property is owned or controlled by any
officer, director or employee of Seller or any of its Affiliates.
38
<PAGE>
5.21 Employees and Employee Relations. (a) Seller has provided
--------------------------------
Purchaser with access to a list of all Employees and the salary for each.
(b) Except as set forth on Section 5.21(b), there is no strike, work
stoppage, slowdown, picketing or lockout pending or, to Seller's knowledge,
threatened against or involving Employees or Seller with respect to the
Business. Except as set forth on Schedule 5.21(b), there has been no such
strike, work stoppage, slowdown, picketing or lockout at any time in respect of
the Business in the past five years.
(c) There is no pending or, to Seller's knowledge, threatened strike,
work stoppage, slowdown, picketing or lockout with respect to the employees of
any of the suppliers or customers of the Business that could reasonably be
expected to have a Material Adverse Effect on the Business.
(d) Seller is not a party to, nor has any obligations under, any
collective bargaining agreement involving any Employees, except as set forth on
Schedule 5.21(d).
(e) To Seller's knowledge, there is no organizing activity involving
any Employees pending or threatened by any labor union or group of employees.
There are no representation proceedings pending or threatened with the National
Labor Relations Board, and no labor organization or group of Employees has made
a pending demand for recognition.
(f) Except as set forth on Schedule 5.21(f), there are no unfair
labor practice charges, or complaints pending or, to Seller's knowledge,
threatened by or on behalf of any employee or group of Employees.
(g) Except as set forth on Schedule 5.21(g), there are no complaints
or charges pending or, to Seller's knowledge, threatened to be filed with any
federal, state or local court, governmental agency or arbitrator based on,
arising out of, in connection with, or otherwise relating to employment,
termination of employment or retirement from employment with Seller in respect
of the Business.
(h) Except as set forth on Schedule 5.21(h), to Seller's knowledge,
Seller is in compliance with all Laws, and all orders of any court, governmental
agency or arbitrator, relating to employment, including all such Laws relating
to wages, hours, collective bargaining, discrimination, civil rights,
affirmative action and the payment of withholding and/or Social Security and
similar taxes, except where such non-compliance could not reasonably be expected
to have a Material Adverse Effect.
5.22 Product Warranty. Except as set forth on Schedule 5.22, no
----------------
products heretofore sold by Seller are now subject to any guarantee or warranty
other than Seller's standard terms and conditions of sale, a copy of which has
been furnished to Purchaser. To Seller's knowledge, Seller has committed no
act, and there has been no omission, which would result in, and there has been
no occurrence which would give rise to, any material
39
<PAGE>
product liability or liability for breach of warranty (whether covered by
insurance or not) on the part of Seller, with respect to products sold or
services rendered prior to the Closing in the operation of the Business.
5.23 Backlog. Schedule 5.23 sets forth, with respect to each Backlog
-------
Contract, the backlog of Seller. With respect to each such Contract, Seller has
disclosed in writing or otherwise made available to Purchaser the name of each
customer (where permitted) and the dollar amount of backlog.
5.24 Insurance. Schedule 5.24 contains an accurate and complete list
---------
of all policies of insurance owned by Seller under which Seller, in respect of
the Business, or any properties or assets of Seller which are used in the
Business, is insured. To Seller's knowledge, all such policies (i) are in full
force and effect and (ii) are sufficient for compliance by Seller with all
applicable requirements of Law and all agreements to which Seller is a party or
subject, in each case with respect to the Business.
5.25 Brokers' and Finders' Fees. Except for Merrill Lynch & Co. and
--------------------------
Lehman Bros., whose fees will be paid by Seller, no Person acting on behalf of
Seller or any of its Affiliates or under the authority of any of the foregoing
is or will be entitled to any brokers' or finders' fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with any of the transactions contemplated hereby.
5.26 [Intentionally Omitted]
5.27 Knowledge. Whenever the representations and warranties set
---------
forth in this Article V are qualified by or use the phrase "to the knowledge of
Seller" or words of like import, it indicates that those executive officers of
Seller listed on Schedule 5.27 have received no written notice of or have no
actual knowledge of the existence or nonexistence of relevant facts contrary to
the provisions of such representations and warranties.
5.28 No Other Representations and Warranties. EXCEPT AS SET FORTH
---------------------------------------
HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE,
WHETHER EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY,
WITH RESPECT TO THE PURCHASED ASSETS, OR ANY PART THEREOF, OR AS TO THE
CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY
PROVIDED IN THIS ARTICLE V, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY
KIND OR NATURE, WHETHER EXPRESS OR IMPLIED, THAT THE BUSINESS OR BUYER'S
OWNERSHIP, POSSESSION, OPERATION OR USE OF THE PURCHASED ASSETS WILL YIELD ANY
GIVEN OR STATED ECONOMIC, FINANCIAL, PROFIT OR BUSINESS RESULT TO BUYER OR WILL
RESULT IN BUYER HAVING ANY GIVEN STANDING OR
40
<PAGE>
POSITION IN ANY BUSINESS (INCLUDING THE BUSINESSES), MARKET OR PRODUCT.
IRRESPECTIVE OF ANY INFORMATION SUPPLIED BY SELLER TO PURCHASER IN CONNECTION
WITH THE SALE OF THE PURCHASED ASSETS, WHICH WERE FOR DISCUSSION PURPOSES ONLY,
EXCEPT AS SET FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY
KIND OR NATURE, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROJECTIONS,
BUDGETS OR FORECASTS RELATED TO ANY FUTURE EARNINGS, NET WORTH, OPERATIONS,
PHYSICAL CONDITION, OR BUSINESS PROSPECTS OF THE BUSINESS OR THE PURCHASED
ASSETS.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date hereof, and
shall be deemed to have represented as of the Closing Date, as follows:
6.1 Organization and Authority of Purchaser. Purchaser is a
---------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full power and authority, corporate and otherwise,
to enter into and to perform its obligations under this Agreement and each of
the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby.
6.2 Authorization of Agreements. The execution, delivery and
---------------------------
performance of this Agreement and each of the Ancillary Agreements to which it
is a party by Purchaser has been duly authorized by all necessary action,
corporate or otherwise, of Purchaser, and this Agreement has been, and each of
the Ancillary Agreements to which it is a party will be, duly executed and
delivered by Purchaser and this Agreement constitutes, and each of the Ancillary
Agreements to which it is a party when executed will constitute, the valid and
binding obligation of Purchaser, enforceable in accordance with its terms.
6.3 No Conflicts. The execution, delivery and performance of this
------------
Agreement and each of the Ancillary Agreements to which it is a party by
Purchaser and the consummation of the transactions contemplated hereby and
thereby do not and will not (with or without the giving of notice) (a) conflict
with the certificate of incorporation or by-laws of Purchaser or conflict with,
or result in the breach or termination of, or constitute a default under any
order, judgment, injunction or decree of any court or governmental entity,
foreign or domestic, to which Purchaser is a party or by which it or any of its
assets and properties are bound or (b) constitute a violation of any law,
statute or regulation of any governmental authority, domestic or foreign,
applicable to Purchaser, except to the extent that the occurrence of any of the
foregoing would not have a material adverse effect on the ability of Purchaser
to enter into and perform its obligations under this Agreement.
41
<PAGE>
6.4 Consents. No consent, approval or authorization of, or
--------
designation, declaration or filing with, any governmental authority or other
third party is required on the part of Purchaser in connection with Purchaser's
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party, except for (a) any required filings with the
Federal Trade Commission and the Department of Justice pursuant to the HSR Act
and due expiration of the waiting period (including any extensions) thereunder,
(b) any novations required in connection with the Government Contracts, (c) any
filings required under the DoD Manual and (d) any required filings under United
States Export Control Laws.
6.5 Litigation. There are no judicial or administrative actions,
----------
proceedings or investigations pending or, to Purchaser's knowledge, threatened
that question the validity of this Agreement or any action taken or to be taken
by Purchaser in connection with this Agreement or that, if adversely determined,
would have a material adverse effect upon Purchaser's ability to enter into or
perform its obligations under this Agreement or any of the Ancillary Agreements
to which it is a party.
6.6 Brokers' and Finders' Fees. Except for Dillon, Read & Co. Inc.,
--------------------------
whose fees will be paid by Purchaser, no Person acting on behalf of Purchaser or
any of its Affiliates or under the authority of any of the foregoing is or will
be entitled to any brokers' or finders' fee or any other commission or similar
fee, directly or indirectly, from any of the parties hereto in connection with
any of the transactions contemplated hereby.
6.7 Purchaser's Financial Capacity. Purchaser possesses the
------------------------------
immediately available financial resources and capacity to pay the Purchase
Price, discharge the Assumed Liabilities and otherwise perform each and all of
its obligations under this Agreement.
6.8 Insurance. Purchaser acknowledges and agrees that all insurance
---------
policies and programs maintained by Seller and related to the Business and/or
the Purchased Assets shall be terminated as of the Closing Date, and Purchaser
shall be responsible for all insurance related to the Business and/or the
Purchased Assets from and after the Closing Date.
6.9 Knowledge. Whenever the representations and warranties set forth
---------
in this Article VI are qualified by or use the phrase "to the knowledge of
Purchaser" or words of like import, it indicates that those executive officers
of Purchaser listed on Schedule 6.9 have received no written notice of or have
no actual knowledge of the existence or nonexistence of relevant facts contrary
to the provisions of such representations and warranties.
6.10 No Additional Representations and Warranties. Except for the
--------------------------------------------
representations and warranties expressly provided in this Article VI or
otherwise expressly provided in this Agreement, Purchaser makes no
representation or warranty of any kind or nature, whether express or implied.
42
<PAGE>
ARTICLE VII
COVENANTS
7.1 Investigation by Purchaser. (a) Through the Closing Date,
--------------------------
Seller will give or cause to be given to Purchaser and its representatives and
agents access to all the premises, books, records and key employees of Seller
and will cause its officers and employees to furnish to Purchaser financial and
operating data and other information with respect to the Assets and the conduct
of the Business as Purchaser shall from time to time reasonably request and
Purchaser shall have the right, but not the obligation, to retain one or more
environmental professionals to conduct an Environmental Investigation of the
Mukilteo Facility, which Environmental Investigation shall include the right to
conduct such tests of soil, groundwater, surface water or air that Purchaser may
require to determine whether any material violations of Environmental Laws,
including the presence of Contaminants requiring Remedial Action, exist at such
real property as of or prior to the Closing; provided, however, that any such
-------- -------
investigations shall be conducted during normal business hours and in such
manner as not to unreasonably interfere with the operation of the Business.
Notwithstanding any provision to the contrary contained in this Section 7.1 or
elsewhere in this Agreement, Seller will not be obligated to make any disclosure
pursuant to this Agreement in violation of applicable laws or regulations
pertaining to classified information with respect to Government Contracts, nor
will Seller have any liability to Purchaser for any breach of a representation
or warranty or otherwise with respect to any non-disclosure of information by
Seller by reason of Seller's compliance with such laws and regulations; provided
that, in any such case, Seller has described to Purchaser in writing prior to
the execution hereof the general nature of the information not disclosed and the
particular law or regulation which prohibits such disclosure.
(b) Purchaser will treat, and will cause its employees,
representatives, consultants and advisors to treat, such documents and
information concerning Seller or the Business furnished to Purchaser and its
representatives and agents in connection with this Agreement confidentially in
accordance with the terms and provisions of that certain Confidentiality
Agreement, dated April 9, 1993, between Purchaser and Seller.
7.2 Satisfaction of Conditions. (a) Prior to the Closing, at
--------------------------
Seller's sole expense, Seller will obtain from Honeywell Inc. written permission
to assign to Purchaser a royalty-free right and license for the use of Honeywell
Patents as set forth on Schedule 5.20, which Seller currently owns or licenses
under the Intellectual Property Agreement dated September 24, 1990 between
Seller and Honeywell. Purchaser's sole remedy for breach of this Section 7.2
shall be money damages for the failure to deliver the Honeywell patents under
such agreement, it being understood that the Damages from such failure will
constitute Damages under Section 8.1(a).
(b) Each of the parties hereto shall use its Best Efforts to cause
the conditions to the Closing to be satisfied as promptly as practicable, except
as otherwise provided with respect to assignments and novations in Section 7.6
hereof.
43
<PAGE>
7.3 Conduct of Seller. Seller hereby covenants with Purchaser that,
-----------------
during the period from the date hereof to the Closing Date:
(a) Operations in the Ordinary Course of Business; Notice of Any
------------------------------------------------------------
Inconsistency. Subject to the terms of this Agreement, Seller will conduct the
- -------------
Business only in the ordinary and usual course and will use its Best Efforts
(consistent with the terms of this Agreement) to preserve intact Seller's
business organization (to the extent relating to or involving the Business),
keep available the services of its officers and employees who are employed in
the Business, and use its best efforts to maintain satisfactory relationships
with other parties to its contracts and with all suppliers, clients, customers
and others having business relationships with it (to the extent relating to or
involving the Business).
(b) Forbearances. Seller agrees, except as provided by or as
------------
contemplated in this Agreement, that it will not without the prior written
consent of Purchaser:
(1) incur any debt, liability or obligation, direct or indirect,
whether accrued, absolute, contingent or otherwise (in each case on behalf of or
with respect to the Business), other than liabilities incurred in the ordinary
course of business;
(2) assume, guarantee, endorse or otherwise become responsible for
the obligations of, or make any advances to (in each case on behalf of or with
respect to the Business), any other Person, except in the ordinary course of
business;
(3) mortgage, pledge or otherwise encumber any of its properties or
assets which are used in or related to the Business or would otherwise comprise
Assets;
(4) sell, license, lease, transfer or dispose of any of its
properties or assets which are used in or related to the Business or would
otherwise comprise Assets, or waive or release any rights which relate to or
involve the Business, or compromise, release or assign any indebtedness owed to
it or any claims held by it which relate to or involve the Business, in each
case other than in the ordinary and usual course of business;
(5) make any investment of a capital nature on behalf of or which
relates to the Business whether by contributions to capital, property transfers
or otherwise, or by the purchase of any property or assets of any other Person,
other than in the ordinary course of business consistent with past practices;
(6) enter into, terminate or substantially amend or supplement any
Contract or Lease which relates to the Business unless the same is done in the
ordinary and usual course of business and except as expressly contemplated by
this Agreement;
(7) enter into, terminate, modify or supplement any collective
bargaining agreement which may involve Employees;
44
<PAGE>
(8) increase, except for currently scheduled base salary increases,
in any manner the compensation or fringe benefits of any of its Employees or
commit itself to any employment agreement with or for the benefit of such
Employees which calls for annual payments in excess of $50,000 or, except as
provided in Schedule 7.3, establish or create any, or materially modify as to
benefits any existing, Seller Employee Benefit Plan or other compensation plan,
program or arrangement which relates to any Employee, unless such increase or
enhancement is mutually agreed upon by the parties;
(9) take any action which is inconsistent with any of Seller's
representations, warranties or covenants contained in this Agreement;
(10) waive or commit to waive any rights of significant value to the
properties, assets, business, operations or financial condition of the Business;
(11) enter into any Contract on behalf of or which relates to the
Business with any Affiliate of Seller; or
(12) enter into a Contract (other than this Agreement) to do any of
the things described in clauses (1) through (11) above.
(c) Insurance. Seller will cause all insurance policies currently in
---------
effect with respect to Seller's properties, assets, or operations (to the extent
relating to the Business) to be maintained in force, or replaced with
substantially comparable coverages to be maintained in force until the Closing
Date.
7.4 HSR Act Compliance. Each party hereto hereby agrees hereto that,
------------------
with respect to each reportable transaction to which it is a party, each will,
as soon as reasonably practicable, take all action (to the extent not previously
taken) necessary in order to file with the Federal Trade Commission and the
Department of Justice all filings, reports and other information required under
the HSR Act in order to commence the running of the waiting period thereunder,
to continue the running of said waiting period (including any extensions) and
prevent or minimize any tolling thereof, to cause such waiting period to expire
without enforcement action, and to provide to each other such cooperation as may
be reasonably necessary in order to cause such filings and reports to be
prepared and duly filed and all waiting periods to expire, all to the extent
involving the transactions contemplated hereby.
7.5 Pending or Threatened Litigation. Between the date hereof and
--------------------------------
the Closing Date, each party hereto shall inform the other party hereto promptly
upon obtaining knowledge of any pending or threatened litigation or other fact
or event which may reasonably be anticipated to (a) prevent, delay or adversely
affect the consummation of the transactions contemplated hereby or (b) cause any
of its representations and warranties contained herein to be inaccurate.
45
<PAGE>
7.6 Assignments; Novations. (a) Seller and Purchaser will use Best
----------------------
Efforts in effecting, if necessary, the transfer or assignment of all licenses,
registrations or other documents pertaining to the Business which were issued by
government agencies under the authority of the Export Control Laws.
(b) Government Contracts. The parties acknowledge that, in
--------------------
accordance with FAR (S) 42.1204 and other applicable U.S. Government policy and
guidance, Seller and Purchaser are required to enter into a novation agreement
or agreements with the U.S. Government. Seller and Purchaser will cooperate
fully with each other and will use all reasonable efforts to obtain consents to
the assignment, or the novation, of all Government Contracts, and Seller hereby
agrees expeditiously to take all steps necessary to file and to use all
reasonable efforts to obtain approvals of all required novations or assignments,
including the execution and delivery of agency agreements appointing Purchaser
as an agent of Seller with respect to each Government Contract relating to or
involving the Business until such Government Contract is novated, and the
provision of the guarantee of performance required for novation of contracts
pursuant to FAR (S)(S) 42.1201, 42.1204(e). Nothing in this Agreement, however,
shall require (1) Seller or Purchaser to pay any consideration for any such
consent or novation, or (2) Purchaser to accept any conditions, requirements,
amendments or limitations (other than those contained in the underlying
contract) which Purchaser determines, in its sole discretion, to be
unacceptable.
(c) Performance Under Non-Assigned Contracts. With respect to any
----------------------------------------
Government Contracts that cannot be assigned to Purchaser or novated on the
Closing Date, Seller and Purchaser shall cooperate so that the performance
obligations of Seller thereunder shall, unless not permitted by such Government
Contract, be deemed to be subcontracted or delegated to Purchaser until such
Government Contract has been assigned or novated. Purchaser or any of its
Subsidiaries, as a subcontractor or delegate, shall perform such Government
Contracts and Seller shall, as soon as practicable, pay over to Purchaser in
full any amounts received by Seller as a result of performance by Purchaser of
such Government Contracts. Prior to the assignment or novation of such
Government Contracts to Purchaser, Seller, as the contracting party, shall take
such timely action as is reasonably necessary to allow Purchaser or any of its
Subsidiaries to perform such Government Contracts and to protect any rights that
may exist or accrue under such Government Contracts until they are assigned or
novated.
(d) Assignment After Closing. If, after the Closing Date, Seller and
------------------------
Purchaser obtain the necessary consent for the assignment or novation of a
Government Contract for which an assignment or novation is required, then such
Government Contract shall be deemed to be assigned and transferred to Purchaser
promptly after Seller and Purchaser obtain such consent or novation. Effective
upon the assignment of a Government Contract to Purchaser, the Government
Contract shall be deemed to be assumed by Purchaser provided that Seller shall
reimburse Purchaser for any monetary benefit received by Seller (net of actual
costs paid or incurred by Seller in connection with such Government Contract
prior to consent or novation) that would have accrued to Purchaser had the
Government Contract been assigned
46
<PAGE>
or novated as of the Closing Date. Any subcontract or other Government Contract
which Seller and Purchaser have theretofore entered into or agreed upon in
respect of such contract shall be terminated effective as of the date of such
assignment.
(e) Bids. Seller and Purchaser shall cooperate with each other and
----
use their Best Efforts to preserve all bids, quotations and proposals made in
the ordinary course of business of the Business and to facilitate the award
thereof consistent with applicable legal requirements. Any contracts awarded to
Seller pursuant to such bids, quotations and proposals shall be deemed to be
assumed and, in the case of Contracts with the U.S. Government, shall be deemed
to be "Government Contracts" for purposes of this Agreement and shall be
governed by this Section 7.6.
7.7 Assessment and Remedial Work. (a) Purchaser shall conduct and
----------------------------
complete, or retain consultants to conduct, complete and deliver to Seller, at
Purchaser's expense, within 180 days of the date hereof, a final report of an
Environmental Investigation of environmental conditions, including test results
and an evaluation of compliance with Environmental Laws at the Mukilteo
Facility. Upon failure of Purchaser to deliver to Seller within 180 days of the
date hereof a final report of an Environmental Investigation of environmental
conditions, Seller may, at Purchaser's expense, conduct and complete or retain
consultants to conduct or complete and deliver to Purchaser a final report of an
Environmental Investigation of environmental conditions, including test results
and an evaluation of compliance with Environmental Laws at the Mukilteo
Facility.
(b) Within 90 days of receiving a such a final report prepared by
Purchaser or its consultants which indicates a Release or Adverse Environmental
Condition at the Mukilteo Facility, Seller and Purchaser shall jointly prepare a
proposed remediation plan containing Remedial Actions ("Remedial Plan") based
upon the Environmental Investigation, which, among other things, shall
reasonably itemize Releases, Adverse Environmental Conditions and estimated
remediation costs. The Remedial Plan shall provide for Remedial Actions to be
taken at a cost reasonably responsive to the condition and as required by
Environmental Laws at the date of delivery of the Remedial Plan, provided,
however, that without the prior consent of Purchaser, the Remedial Actions shall
not, when complete, adversely affect in a material manner the appearance or
operations of the Mukilteo Facility. If Seller and Purchaser are unable in good
faith to agree upon the Remedial Plan within such 90 day period, Seller and
Purchaser shall agree upon a mutually acceptable environmental consulting firm
to prepare the Remedial Plan, consistent with the terms of this subsection (b),
which shall be final, binding and conclusive with respect to the parties hereto.
The cost of such consulting firm shall be borne equally by Purchaser and Seller.
(c) If required by law, rule or regulation, Purchaser and Seller
shall jointly approach the governmental authority having jurisdiction under the
Environmental Laws for approval of the Remedial Action and/or recommendation as
to what other Remedial Action is required, if any.
47
<PAGE>
(d) Within 60 days after completion and acceptance of the final
Remedial Plan and upon receiving the approvals or recommendations, if required
by law, rule or regulation from the appropriate governmental authority, Seller
and Purchaser shall jointly prepare a bid package and solicit bids on behalf of
Purchaser from not less than three (3) reputable contractors with experience in
environmental remediation to implement the Remedial Plan, as approved by the
appropriate governmental authority, if any. All work shall be performed in a
workmanlike manner, shall be staged in such a manner as to minimize disruption
at the Mukilteo Facility and shall provide for replacing or repairing damaged or
altered portions of the Mukilteo Facility in a manner comparable to their
original construction. The contract shall promptly be awarded to one (1) of
such three (3) contractors after receiving the bids and shall cause the
contractor to commence and complete work expeditiously and with reasonably
minimal disruption to the Mukilteo Facility or its operations.
(e) Subject to Section 12.2(d) and (e), Seller shall indemnify and
hold Purchaser harmless for all costs of Remedial Action taken under the
Remedial Plan at the Mukilteo Facility, including without limitation costs
incurred to comply with legal requirements, removal and cleanup costs as if such
costs were Damages under Section 12.2(b).
7.8 Environmental Permit Identification and Transfer. (a) Schedule
------------------------------------------------
7.8 sets forth the Environmental Permits necessary, to Seller's knowledge, to
operate the Business from and after the Closing Date. Seller either shall
transfer existing Environmental Permits of Seller to Purchaser where permissible
or assist Purchaser to obtain new Environmental Permits for Purchaser. Seller
and Purchaser shall cooperate to identify all Environmental Permits requiring
pre-approval from a Governmental Authority prior to transferring such
Environmental Permits to Purchaser.
(b) In the event that any Environmental Permits, including waivers,
required under any applicable Environmental Laws in connection with Purchaser's
operation of the Business following the Closing Date have not been assigned or
transferred by Seller to Purchaser on or prior to the date which is five years
after the Closing Date, or otherwise obtained by Purchaser, prior to the Closing
Date, Seller will, at the request of Purchaser, cooperate with Purchaser at
Purchaser's cost in any reasonable and lawful arrangement designed to provide to
Purchaser the benefits of any such Environmental Permits, including waivers,
held by Seller in connection with the Business. Seller's obligations shall
include, but not be limited to, to the extent reasonably possible and lawful,
maintaining existing Environmental Permits and allowing Purchaser to operate
under these existing Permits until either existing Environmental Permits are
transferred or new Environmental Permits are obtained by Purchaser. Purchaser
shall indemnify Seller for any Loss or Damages incurred by Seller after Closing
arising directly or indirectly from use of Seller's permits or waivers by the
Purchaser.
7.9 Non-Compete. (a) For a period of three (3) years after the
-----------
Closing Date, Seller shall not and shall cause its Affiliates not to: (1) offer
employment to Transferred Employees while employed by Purchaser; (2) cause,
induce or encourage any customer,
48
<PAGE>
supplier, manufacturer or licensor of the Business, or any other Person who has
a business relationship with the Business, to terminate or change any such
relationship in a manner which would be materially adverse to the Business; (3)
conduct, participate or engage, directly or indirectly, in any activities
related to the design, development, manufacture and sale of torpedo systems,
underseas acoustic surveillance systems, naval sonar and mine countermeasure
systems and naval contract engineering services; provided, however, that the
-------- -------
restrictions contained in this Section 7.9 shall not restrict the acquisition by
Seller, directly or indirectly, of less than 5% of the capital stock of any
Person engaged in a business directly or indirectly in competition with the
Business, and further provided that no restrictions imposed on the Seller by
this Section 7.9 shall cause Seller's remaining businesses to limit or cease
conducting business in the manner in which they are currently being conducted.
(b) The covenants and undertakings contained in this Section 7.9
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 7.9 will cause irreparable
injury to Purchaser, the amount of which will be impossible to estimate or
determine and which cannot be adequately compensated. Therefore, Purchaser will
be entitled to an injunction, restraining order or other equitable relief from
any court of competent jurisdiction in the event of any breach of this Section
7.9. The rights and remedies provided by this Section 7.9 are cumulative and in
addition to any other rights and remedies which Purchaser may have hereunder or
at law or in equity. In the event that Purchaser were to seek damages for any
breach of this Section 7.9, the portion of the consideration delivered to Seller
hereunder which is attributed by the parties to the foregoing covenant shall not
be considered a measure of or limit on such damages.
(c) Section 7.9 shall not prohibit Seller from producing, selling
components, or subcomponents of the systems described above, so long as the
components are not integrated in a manner that materially competes with the
systems sold by the Business and further provided that notwithstanding Section
13.5, Section 7.9 shall not bind any third party which purchases the business or
assets of Seller or any entity into which Seller consolidates or merges.
(d) The parties hereto agree that, if any court of competent
jurisdiction in a final nonappealable judgment determines that a specified time
period, a specified geographical area, specified business limitation or any
other relevant feature of this Section 7.9 is unreasonable, arbitrary or against
public policy, then a lesser time period, geographical area, business limitation
or other relevant feature which is determined to be reasonable, not arbitrary
and not against public policy may be enforced against the applicable party.
7.10 Certain Payments to Employees. Seller shall make whatever
-----------------------------
payments may become due, and satisfy any and all claims or liabilities that may
exist, now or in the future, in connection with or arising out of any agreements
of Seller or its Affiliates with any of their employees concerning or relating
to any payment or bonus in respect of a change-of-control of the Business
contemplated herein or the acquisition of all or a substantial portion of the
Business.
49
<PAGE>
7.11 Bureau of Alcohol, Tobacco and Firearms. At least 45 days prior
---------------------------------------
to the proposed Closing, Seller shall provide Purchaser with a list of all
licenses or permits issued by the Bureau of Alcohol, Tobacco and Firearms
("BATF") to Seller and/or its Subsidiaries that, to Seller's knowledge, are
necessary for the ownership and/or operation of the Purchased Assets. In
addition, Seller shall cooperate with Purchaser and assist Purchaser in either
transferring existing BATF licenses or permits of Seller or obtaining new BATF
licenses and permits for Purchaser.
7.12 Books and Records; Personnel. For a period of six years after
----------------------------
the Closing Date (or such longer period as may be required by any governmental
body or ongoing legal proceeding):
(a) Purchaser shall not dispose of or destroy any of the business
records and files of the Business. If Purchaser wishes to dispose of or destroy
such records and files after that time, it shall first give 30 days' prior
written notice to Seller and Seller shall have the right, at its option and
expense, upon prior written notice to Purchaser, within such 30 day period, to
take possession of the records and files within 60 days after the date of the
Seller's notice.
(b) Purchaser shall allow Seller and any of its directors, officers,
employees, counsel, representatives, accountants and auditors (collectively, the
"Seller Representatives") access to all business records and files of the
Business which are transferred to it in connection herewith, which are
reasonably required by such party in anticipation of, or preparation for, any
existing or future litigation, arbitration, administrative proceeding or tax
return preparation during regular business hours and upon reasonable notice at
Purchaser's principal place of business or at any location where such records
are stored, and Seller shall have the right, at its own expense, to make copies
of any such records and files; provided, however, that any such access or
-------- -------
copying shall be had or done in such a manner so as not to unreasonably
interfere with the normal conduct of Purchaser's business or operations.
(c) Purchaser shall make available to Seller or the Seller
Representatives, upon written request and at Seller's expense (i) personnel to
assist Seller in locating and obtaining records and files maintained by
Purchaser and (ii) any of the personnel previously in Seller's employ whose
assistance or participation is reasonably required by Seller in anticipation of,
or preparation for, existing or future litigation, arbitration or administrative
proceeding, tax return preparation or other matters in which Seller or any of
its Affiliates is involved and which is related to any of the Business;
provided, however, that any such access to personnel shall be had in such a
- -------- -------
manner so as not to unreasonably interfere with the normal conduct of
Purchaser's business or operations.
(d) Seller shall allow Purchaser or any of its directors, officers,
employees, counsel, representatives, accountants and auditors (the "Purchaser
Representatives") access to all business records and files of the Business
retained by Seller, which are reasonably required by such party in anticipation
of, or preparation for, any existing or future litigation,
50
<PAGE>
arbitration, administrative proceeding or tax return preparation during regular
business hours and upon reasonable notice at Seller's principal place of
business or at any location where such records are stored, and Purchaser shall
have the right, at its own expense, to make copies of any such records and
files; provided, however, that any such access or copying shall be had or done
-------- -------
in such a manner so as not to unreasonably interfere with the normal conduct of
the Seller's business or operations.
(e) Seller shall make available to Purchaser or the Purchaser
Representatives, upon written request and at Purchaser's expense (i) personnel
to assist Purchaser in locating and obtaining records and files maintained by
Seller and (ii) any other personnel whose assistance or participation is
reasonably required by Purchaser in anticipation of, or preparation for,
existing or future litigation, arbitration or administrative proceeding, tax
return preparation or other matters in which Purchaser or any of its respective
Affiliates is involved and which is related to any of the Business; provided,
--------
however, that any such access to personnel shall be had or done in such a manner
- -------
so as not to unreasonably interfere with the normal conduct of the Seller's
business or operations.
7.13 Use of Name, etc. Purchaser shall be entitled for a period of
----------------
not more than 90 days following the Closing Date to use any signs, purchase
orders, invoices, sales orders, labels, letterheads or shipping documents
existing on the Closing Date that bear any "Alliant Techsystems Inc." name, mark
or logo, in each case where the removal of such name, mark or logo would be
impractical; provided, however, that to the extent practicable, Purchaser shall
-------- -------
place a stamp, mark or other notation on any such item that identifies any
Business as its busi ness (and not that of Seller), such language may include
use of "Alliant Techsystems Inc." name, mark or logo as used in conjunction with
any mark of Purchaser; provided, however, that Purchaser will use such mark,
-------- -------
name or logo only to the extent necessary to make an orderly transition with
respect to the goodwill of the Business and may not use such mark, name or logo
in any advertising without Seller's prior written consent.
7.14 [Intentionally Omitted]
7.15 Bulk Sales Laws. Purchaser and Seller hereby agree to waive the
---------------
compliance by either party with the so called "bulk sales" provisions of Article
6 of the Uniform Commercial Code as it is in effect in the states where
Purchased Assets may be located and any other "bulk sales" or "bulk transfer"
laws of any jurisdiction that may be applicable to the transactions contemplated
herein. Seller unconditionally agrees to indemnify and hold harmless Purchaser
from any Damages relating to the failure of Seller or Purchaser to so comply
with such provisions or laws, except with respect to Damages arising out of
Assumed Liabilities.
7.16 Mail; Payments. Except as otherwise agreed by the parties, each
--------------
party authorizes and empowers the other party on and after the Closing Date to
receive and open all mail and other communications received by such party and,
if such mail or communication relates to the other party, to forward it
immediately to such other party. Each party agrees
51
<PAGE>
promptly (but, in any event, not more than five (5) business days after receipt
thereof) to pay when received and cleared or deliver to the other party any
monies or checks which have been mistakenly sent by customers to it and which
should properly have been sent to such other party (including any payments in
respect of accounts receivable transferred to Purchaser pursuant to this
Agreement).
7.17 Intentionally Omitted.
---------------------
7.18 Purchaser's Assistance Relating to Excluded Liabilities. During
-------------------------------------------------------
normal business hours, Purchaser shall provide Seller with employees to assist
Seller in pursuing any litigation or other actions relating to or involving the
Excluded Liabilities. Upon notice from Purchaser, Seller shall promptly
reimburse Purchaser for all costs incurred by Purchaser in providing such
employees.
7.19 REA. Purchaser shall reasonably pursue collection of the SQQ-89
---
REA claim and all recoveries therefrom will go first to reimburse Purchaser for
all costs incurred by Purchaser in connection therewith and the balance thereof
shall be split thirty-three and one-third percent (33-1/3%) to Purchaser and
sixty-six and two-thirds percent (66-2/3%) to Seller, provided, however, that
-------- -------
Purchaser shall not be required to incur attorney fees and expenses in excess of
$240,000 in connection with the pursuit of the SQQ-89 REA and, upon incurring
such amount of fees and expenses, Purchaser shall have no further obligation to
pursue the SQQ-89 REA. If Purchaser discontinues its collection of the SQQ-89
REA, after the expenditure of $240,000 of third party attorneys fees and
expenses, Seller may acquire from Purchaser that claim by payment to Purchaser
of $240,000 plus reasonably allocated salaries, benefits and out-of-pocket costs
of Buyers' personnel incurred in processing the claim. If Purchaser fails to
pursue the SQQ-89 REA prior to expending $240,000 in attorneys' fees and
expenses, then Seller may pursue the claim at its own expense and shall receive
all proceeds of such claim.
7.20 Hydroscience Receivable. Purchaser shall reasonably pursue
-----------------------
collection of the receivables from sale of AESOP Systems to Hydroscience
Corporation (the "Hydroscience Receivable") and shall pay sixty-six and two-
thirds (66-2/3%) percent of the proceeds, less costs of collection, to Seller.
7.21 NT37 Inventory. For a period of three (3) years after the
--------------
Closing, Purchaser shall reasonably pursue the sale of inventory located at the
Mukilteo Facility for sale in connection with NT37 Torpedo Systems or upgrade
kits (the "NT37 Inventory") and shall pay fifty (50%) percent of the proceeds,
less the costs of sale, to Seller after the Purchaser receives $2.4 million from
the sale of such inventory.
7.22 Ocean Bottom Cable Systems. Purchaser and Seller shall enter
--------------------------
into an agreement for payment to Seller for a period of three (3) years after
the Closing of a royalty on the sale by Purchaser of Ocean Bottom Cable Systems
and components (provided that it is
52
<PAGE>
substantially similar technology to that in existence as of the Closing Date)
equal to five (5%) percent of gross sales proceeds (the "Ocean Bottom Cable
Royalty").
7.23 Non-Infringement. Purchaser agrees not to assert any claim of
----------------
infringement or for royalty or other payment by Seller after the Closing with
respect to the Purchased Intellectual Property to the extent that Seller has
used within a two-year period prior to the date hereof such Purchased
Intellectual Property as of the Closing Date in its other businesses other than
the Business.
ARTICLE VII
CONDITIONS TO THE CLOSING
8.1 Conditions to Purchaser's Obligation to Effect the Closing. The
----------------------------------------------------------
obligation of Purchaser to consummate the transactions contemplated by this
Agreement to occur at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Purchaser):
(a) Representations and Warranties of Seller. The reasonably
----------------------------------------
anticipated Losses and Damages resulting from breaches of representations,
warranties and covenants by Seller would not exceed $10 million in the
aggregate.
(b) No Injunctions. No injunction restraining consummation of any of
--------------
the material transactions contemplated by this Agreement shall be in effect. No
action shall be pending or threatened by the United States Department of Justice
or the Federal Trade Commission to enjoin or materially adversely affect the
transactions contemplated herein.
(c) HSR Act. All applicable waiting periods in respect of the
-------
transactions contemplated by this Agreement under the HSR Act shall have
expired.
(d) Delivery by Seller of Documents. Seller shall have delivered to
-------------------------------
Purchaser documents executed by Seller reasonably sufficient to transfer the
Business to Purchaser as contemplated herein, provided that Purchaser has
reasonably cooperated in their preparation.
8.2 Conditions to Seller's Obligations to Effect the Closing. The
--------------------------------------------------------
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing are subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Seller):
(a) Representations and Warranties of Purchaser. The reasonably
-------------------------------------------
anticipated Losses and Damages from breaches of representations, warranties and
covenants by Purchaser would not exceed $10 million in the aggregate.
53
<PAGE>
(b) No Injunctions. No injunction restraining consummation of any of
--------------
the material transactions contemplated by this Agreement shall be in effect. No
action shall be pending or threatened by the United States Department of Justice
or the Federal Trade Commission to enjoin or materially adversely affect the
transactions contemplated herein.
(c) HSR Act. All applicable waiting periods in respect of the
-------
transactions contemplated by this Agreement under the HSR Act shall have
expired.
(d) Delivery by Purchaser of Documents. Purchaser shall have
----------------------------------
delivered to Seller documents executed by Purchaser reasonably sufficient to
complete the transaction as contemplated herein, provided that Seller has
reasonably cooperated in their preparation.
ARTICLE IX
THE CLOSING; TERMINATION OF AGREEMENT
9.1 The Closing. The Closing shall be held within five Business Days
-----------
after each of the conditions precedent set forth in Sections 8.1 and 8.2 have
been satisfied or waived. The Closing shall be held at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. At the
Closing, all of the transactions provided for in Article II hereof shall be
consummated on a substantially concurrent basis.
9.2 Termination. Anything in this Agreement to the contrary
-----------
notwithstanding, this Agreement and the transactions contemplated hereby may be
terminated in any of the following ways at any time before the Closing and in no
other manner:
(1) By mutual written consent of Purchaser and Seller;
(2) By Purchaser or Seller (if such terminating party is not then in
default of any obligation hereunder), if the Closing has not occurred on or
before June 30, 1997).
(3) By either Purchaser or Seller if there shall be in effect a non-
appealable order of a court of competent jurisdiction permanently prohibiting
the consummation of the transactions contemplated hereby.
In the event this Agreement is terminated pursuant to this Section
9.2, all further obligations of the parties hereunder shall terminate, except
for the obligations set forth in Sections 7.1(b), 12.3 and 13.8, and except that
nothing in this Section 9.2 shall relieve any party hereto of any liability for
breach of this Agreement.
54
<PAGE>
ARTICLE X
DELIVERIES AT THE CLOSING
10.1 Deliveries by Seller at the Closing. At the Closing, Seller
-----------------------------------
shall deliver, or cause to be delivered, to Purchaser, the following items:
(a) The duly executed Bill of Sale and such other executed
assignments, bills of sale or certificates of title, each dated the Closing Date
and in form and substance reasonably satisfactory to counsel to Purchaser, as
are reasonably necessary to transfer to Purchaser all of Seller's right, title
and interest in, to and under the Assets.
(b) A certificate executed by Seller stating that Seller is not a
foreign person within the meaning of Section 1445 of the Code, which certificate
shall set forth all information required by, and otherwise be executed in
accordance with, Treasury Regulation Section 1.1445-2(b).
(c) A counterpart of the Transition Agreement, duly executed by a
duly authorized officer of Seller.
(d) Duly executed assignments, sufficient to transfer all of Seller's
right, title and interest in and to the Registered Intellectual Property to
Purchaser, in a form suitable for recording in the various appropriate national
or regional patent, trademark, copyright offices or other governmental offices.
(e) Duly executed assignments, to the extent required, to permit
Purchaser to exercise or otherwise enjoy any of Seller's rights under any
Intellectual Property Licenses.
(f) Certificates of the Secretary or an Attesting Secretary of
Seller, dated the Closing Date, (A) as to the incumbency and signatures of the
officers or representatives of Seller executing this Agreement and each of the
Ancillary Agreements and any other certificate or other document to be delivered
pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary, and (B) certifying attached resolutions of the
Board of Directors of Seller, which authorize and approve the execution and
delivery of this Agreement and each of the Ancillary Agreements to which Seller
is a party and the consummation of the transactions contemplated hereby and
thereby.
(g) Duly executed and acknowledged general quit claim deed, in form
acceptable to Purchaser, conveying good and marketable title to the Owned
Property in fee simple, free and clear of all Liens and encumbrances except
Permitted Encumbrances.
(h) Duly executed and acknowledged assignments, in form and substance
reasonably acceptable to Purchaser, transferring to Purchaser all of Seller's
right, title and interest in and to the Leases.
55
<PAGE>
(i) Fully executed originals (to the extent available) of each Lease
together with all amendments, extensions, assignments and memoranda thereof.
(j) Landlord estoppel certificates, to the extent available, from
each landlord under the real estate leases as set forth on Schedule 5.19
indicating that such leases are in full force and effect, that there are no
defaults or events, which, with the passage of time or the giving of notice or
both, would become defaults under such leases, and as to such other matters as
Purchaser may reasonably request all to the extent the same may be obtained
through the best efforts of Seller.
10.2 Deliveries by Purchaser at the Closing. At the Closing,
--------------------------------------
Purchaser shall deliver, or cause to be delivered, to Seller, the following
items:
(a) The duly executed Assumption Agreement referred to in Section
2.2.
(b) A counterpart of each Lease of any facility, duly executed by a
duly authorized officer of Purchaser.
(c) A counterpart of the Transition Agreement, duly executed by a
duly authorized officer of Purchaser.
(d) Certificates of the Secretary or an Assistant Secretary of
Purchaser, dated the Closing Date, (A) as to the incumbency and signatures of
the officers or representatives of Purchaser executing this Agreement and each
of the Ancillary Agreements and any other certificate or other document to be
delivered pursuant hereto or thereto, together with evidence of the incumbency
of such Secretary or Assistant Secretary, and (B) certifying attached
resolutions of the Board of Directors of Purchaser, which authorize and approve
the execution and delivery of this Agreement and each of the Ancillary
Agreements to which Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby.
ARTICLE XI
EMPLOYEES AND EMPLOYEE BENEFITS
11.1 Employment. (a) Purchaser shall, at least fourteen (14) days
----------
prior to the Closing Date, make offers of employment, effective as of the
Closing Date, to (i) all Employees in active status on such date (excluding
however, those Employees employed at Seller's Minnesota facilities) and (ii) all
Employees who, on such date are on a leave of absence for purposes of jury duty,
funeral leave, military leave, or scheduled vacation.
(b) Purchaser shall, at the same time as set forth in paragraph (a)
above, make offers of employment to Employees who are on a personal or temporary
medical leave of
56
<PAGE>
absence, effective as of the date such person actually returns to work, provided
such Employee has been cleared to return to work through Purchaser's disability
program manager, and such return is within 180 days of the Closing Date.
(c) Employees who are given offers of employment shall hereinafter be
referred to as "Prospective Employees". All Prospective Employees who accept
Purchaser's offer of employment in writing on or before the Closing Date and
who report for their assigned duty by the Closing Date, or upon their scheduled
return date shall be hereinafter referred to as "Transferred Employees".
(d) Seller shall deliver to Purchaser, at least thirty (30) days
prior to the Closing Date, Schedule 11.1(d) listing all Employees including
salaries for each. Such list shall identify any Employee who is on a personal
or medical leave of absence.
(e) Seller shall continue to be responsible for all employment,
benefit and pension obligations, costs and expenses in respect of (i) retirees
of the Business ("Retirees"), (ii) vested terminated employees in respect of
the Business, and (iii) any Prospective Employees prior to such Prospective
Employee becoming a Transferred Employee or who does not become a Transferred
Employee, e.g. those Prospective Employees who do not accept Purchaser's offered
---
employment on or before the Closing Date or who do not report to work on the
Closing Date or upon their scheduled return date (including any medical, Retiree
medical or other benefits being paid to such individuals).
(f) Except as expressly provided otherwise in this Article XI,
Purchaser shall offer Transferred Employees employment with Purchaser at a
salary similar to that in effect immediately prior to the Closing Date;
provided, however, that such other terms, benefits and pensions from the Closing
Date shall be provided as set forth in Section 11.3 hereof.
(g) Beginning on the date of execution of this Agreement and for up
to six (6) months following the Closing Date, upon request of Purchaser, Seller
shall, within a reasonable period of time, provide Purchaser reasonable access
to data (including computer data) regarding the dates of hire, credited service
dates, compensation and job descriptions of Employees.
(h) Seller hereby authorizes Purchaser to enter into discussions with
and to advise any Employee concerning the terms of any future employment of such
individuals by Purchaser and will permit Purchaser reasonable access to
Employees for such purposes, provided, however, that a representative of Seller
is present at all such discussions. Seller shall not discourage any Employee
from accepting an offer of employment made by Purchaser to such Employee.
Except with the prior knowledge and cooperation of Purchaser or as expressly
provided in this Article XI, Seller will not authorize any of its officers,
employees or agents to have any written or oral communications with any
Employees concerning the transaction contemplated by this Agreement or the
effect of the transaction upon such
57
<PAGE>
Employees' employment or the terms or conditions of the Employees' employment or
the benefits payable to or in respect of them.
11.2 Certain Notice to Employees and Continuation of Benefits. Seller
--------------------------------------------------------
and Purchaser shall cooperate to provide complete and adequate notice to
Employees regarding the effect of their becoming Transferred Employees. Such
notice shall include a description of the effect such transfer shall have on the
benefits provided or available to them under any Seller Employee Benefit Plans
or Seller Employee Pension Plans and the benefits to be provided to Transferred
Employees by Purchaser following the Closing. Seller and Purchaser shall
cooperate in coordinating any and all other communications to the Employees
about the transaction.
11.3 Employee Benefits. (a) Effective on the Closing Date, Purchaser
-----------------
shall provide the Transferred Employees with such pensions and other employee
benefits as set forth in Schedule 11.3. Purchaser reserves the right to modify
or terminate any such pension and other employee benefits, at any time or from
time to time. Purchaser shall be under no obligation to assume or replicate any
of the Seller Employee Benefit Plans or Seller Employee Pension Plans. Purchaser
shall amend its Employee Benefit Plans (as such term is defined in ERISA section
3(3)) and Employee Pension Benefit Plans (as such term is defined in ERISA
section 3(2)) and all other employee benefit arrangements, plans, policies or
practices, such that, effective as of the Closing Date, such plans recognize
Transferred Employees' Credited Service (as such term is defined in the Alliant
Techsystems Inc. Retirement Plan) with Seller for purposes of eligibility,
vesting, early retirement incentives, pre-existing condition exclusions and
waiting periods; provided, however, that such plans may contain, in the
-------- -------
discretion of Purchaser, exclusions for pre-existing conditions as were
applicable under the health and welfare benefits provided to such Transferred
Employees by Seller before the Closing Date and as allowed by law. In no event
will Purchaser provide or be under any obligation to provide post-retirement
medical or life insurance benefits or medicare supplemental benefits to
Transferred Employees.
(b) From and after the Closing Date, Seller shall remain solely
responsible for all obligations, costs and expenses under all Seller Employee
Benefit Plans or Seller Employee Pension Plans in respect of Employees' claims
incurred or conditions existing prior to the Closing Date, whether such claims
are made or reported before or after the Closing Date, provided, however, that
in no event shall Seller be obligated to pay claims made after nine (9) months
following the Closing Date.
(c) Health Care Plan Deductibles. Any health care plan expenses
(excluding office visit copays) incurred by Transferred Employees on or after
January 1, 1997 and prior to the Closing Date will be recognized by Purchaser's
health care plan for purposes of plan year 1997 deductibles, copays, and out of
pocket maximums. Seller agrees to cooperate in the transmission of data to
Purchaser's claims administrator.
58
<PAGE>
(d) Worker's Compensation. Responsibility for workers' compensation
claims in respect of the Business arising out of conditions having a date of
injury (or, in the case of a claim relating to occupational disease, the last
significant exposure) prior to the Closing Date shall remain with Seller.
Purchaser shall have responsibility for workers' compensation claims in respect
of the Business arising out of conditions having a date of injury (or, in the
case of a claim relating to occupational disease, the last significant exposure)
on or after the Closing Date. Provided, however, that in no event shall Seller
pay claims made after nine (9) months following the Closing Date.
(e) Vacation. Purchaser shall, effective as of the Closing, (i)
recognize Transferred Employees' service with Seller for purposes of future
Personal Time Off ("PTO") accruals, and (ii) recognize Transferred Employees
accrued and unused vacation with Seller as of the Closing; provided, however,
that such recognition shall not exceed one week less than the Purchaser's PTO
accrual maximums as applied to each Transferred Employee. Seller shall, within
two weeks following the Closing Date, pay to each Transferred Employee, the
amount of vacation accrual in excess of the amount to be recognized under the
Purchaser's PTO plan each such Transferred Employee has, if any, as of the
Closing Date. Such amounts shall be treated as income for tax and benefits
purposes.
(f) Relocation Agreements. With respect to costs associated with any
relocation agreements between Seller and an Employee, Seller shall remain liable
for all costs incurred prior to the Closing Date and Purchaser shall be liable
for any and all costs incurred on or after the Closing Date, subject to Section
2.3(b) hereof and Schedule 2.3(b).
11.4 Retirement and 401(k) Plan.
--------------------------
(a) 401(k) Plan. Seller shall amend the Alliant Techsystems Inc.
-----------
401(k) Plan (hereinafter "Alliant 401(k) Plan") to fully vest all Transferred
Employees effective as of the Closing Date. Seller shall further amend the
Alliant 401(k) Plan to permit lump sum distributions as of the Closing Date in
respect of all Transferred Employees who are participants in the Alliant 401(k)
Plan. Such Transferred Employees shall be entitled to transfer their accrued
entitlements under such Alliant 401(k) Plan to Purchaser's 401(k) Plan at any
time after the Closing Date (subject to any applicable time limits imposed by
ERISA), and Purchaser and Seller shall cooperate fully in that regard.
(b) Retirement Plan. Seller shall amend the Alliant Techsystems Inc.
---------------
Retirement Plan to fully vest all Transferred Employees effective as of the
Closing Date. The Alliant Techsystems Inc. Retirement Plan shall further be
amended to provide that any Transferred Employee who meets the eligibility
requirements to retire may do so at the earliest of (a) their date of retirement
from Purchaser or (b) their date of termination from Purchaser.
(i) Seller shall amend the Alliant Techsystems Inc. Retirement Plan
so that any Transferred Employee who is at least age 52 with at least 15 years
of Credited Service (as
59
<PAGE>
defined in the Alliant Techsystems Inc. Retirement Plan) as of the Closing Date
shall have their age and service with Purchaser counted (to a maximum of 3
additional years of age and 3 additional years of service) for purposes of
determining early retirement eligibility and the applicable early retirement
reduction factors under the Alliant Techsystems Inc. Retirement Plan. Further,
any Transferred Employee who is at least age 52 and is within 3 years of having
85 points (age plus years of Credited Service) as of the Closing Date, shall
have their age and service with Purchaser counted (for a maximum of 3 additional
years of age and 3 additional years of service) for purposes of reaching the 85
point early retirement reduction eligibility under the Alliant Retirement Inc.
Retirement Plan. Such service with Purchaser shall not be counted beyond such
target dates. Seller shall administer the Alliant Techsystems Inc. Retirement
Medical Plan, and Purchaser shall compensate Seller for those services as set
forth on Schedule 12.5.
(ii) Unless set forth in this Agreement, Seller retains the right to
change, amend or terminate any Seller Employee Pension Plans, Seller Employee
Benefit Plans, or any employee benefit arrangement, plan, practice or policy at
any time prior to or following the Closing, provided, however, that any such
change, amendment or termination will not result in any benefits for Transferred
Employees who were eligible for retirement at the Closing Date less than those
they would have received had they retired immediately prior to Closing.
(iii) Seller shall retain all liabilities associated with the
Sellers' Supplemental Employee Retirement Plan for any Transferred Employees.
(iv) A Transferred Employee who meets the eligibility requirements to
retire at the Closing Date (other than those Employees described under Section
11.4(b)(i) who have not attained age 55 as of the Closing Date) shall be
entitled to participate in the Seller's Retiree Medical Benefit Program
commencing as of the date of his retirement or termination from Purchaser if and
to the extent such Transferred Employee had retired immediately prior to the
Closing. Seller shall not be obligated to provide any Transferred Employee who
becomes eligible for early retirement solely pursuant to Section 11.4(b)(i)
after the Closing Date with Retiree Medical Benefits.
11.5 No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement or the schedules hereto, express or implied, shall confer upon any
labor organization, Employee, Potential Employee, Transferred Employee, employee
of Purchaser, or employee of Seller any rights or remedies including, without
limitation, any right to employment or continued employment for any specified
period, any nature or kind whatsoever under or by reason of this Agreement.
11.6 Indemnification (a) Seller shall indemnify and hold Purchaser
---------------
harmless from any Loss, Damage or expense it may incur (including reasonable
attorneys' fees) with respect to any claims of Employees, Potential Employees,
Transferred Employees or other employees, former employees or retirees of Seller
arising out of or in connection with their
60
<PAGE>
employment or non-employment with Seller, or termination by Seller, including,
but not limited to, claims arising out of or in connection with any of the
Seller Employee Benefit Plans and Seller Employee Pension Plans and claims
arising out of post-retirement medical and/or life insurance benefits promised,
provided or subsidized (whether or not terminated by Seller) whether before or
after the Closing Date. This indemnity, except for any claim arising out of or
in connection with any of the Seller Employee Benefit Plans and Seller Employee
Pension Plans and claims arising out of post-retirement medical and/or life
insurance benefits, shall be subject to the Threshold Amounts and Second
Threshold Amounts under Section 12(d) hereof.
(b) Purchaser shall indemnify and hold Seller harmless from any Loss,
Damage or expense it may incur (including reasonable attorneys' fees) with
respect to any claims of Employees, Potential Employee, Transferred Employees or
other employees, former employees or retirees of Seller arising out of or in
connection with their employment or non-employment with Purchaser, or
termination by Purchaser, including, but not limited to, claims arising out of
or in connection with any Employee Benefit Plan (as such term is defined in
Section 3(3) of ERISA, maintained by Purchaser.
11.7 Employment Matters. Except as may be required by law or as set
------------------
forth in this Agreement and Schedule 11.7, Seller will, prior to the Closing
Date, refrain from directly or indirectly, in respect of the Business:
(a) making any representation or promise, oral or written, to any
Employee concerning any Seller Employee Benefit Plan or Seller Employee Pension
Plan, which representation or promise is materially inconsistent with the terms
of such Plan then in effect, other than representations or promises made
pursuant to materials or other communications prepared in cooperation with the
Purchaser;
(b) making any change to, or amending in any way, the employment
contracts, salaries, wages, or other compensation of any Employee other than
changes or amendments that (i) are made in the ordinary course of business and
consistent with past practice, (ii) do not and will not result in increases of
more than 5% in the salary, wages or other compensation of any such person, and
(iii) do not and will not exceed, in the aggregate, 5% of the total salaries,
wages, and other compensation of all employees of such entity unless mutually
agreed upon by the parties;
(c) except as provided herein, adopting, entering into, materially
amending or altering, or terminating, partially or completely, any Seller
Employee Benefit Plan or Seller Employee Pension Plan relating to or affecting
any Employee unless mutually agreed upon by the parties;
(d) except as provided herein, adopting, entering into, materially
amending or altering, or terminating, partially or completely, any employment,
agency or representation
61
<PAGE>
contract or agreement that is, or had it been in existence on the effective date
of this Agreement would have been, required to be disclosed in Schedule 5.8(a);
(e) entering into any contract with an Employee that is not
terminable, without penalty or other liability, upon not more than 60 calendar
days' notice;
(f) assuming, entering into, materially amending or altering, or
terminating any labor or collective bargaining agreement to which the Business
is affected thereby; and
(g) hiring any additional Employee, agent, or other similar
representative of the Seller whose annual salary or wage (excluding bonus and
commission) exceeds $50,000 unless mutually agreed to by the parties.
11.8 Intellectual Property. Purchaser shall provide complete and
---------------------
adequate notice to Employees that they will be required, upon becoming
Transferred Employees, to sign a new employment agreement containing provisions
concerning Intellectual Property.
11.9 Spending Accounts. Purchaser and Seller shall cooperate to
-----------------
address the transition treatment of healthcare and dependent care reimbursement
accounts.
ARTICLE XII
CLOSING AND POST-CLOSING COVENANTS;
INDEMNIFICATION
12.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of the parties contained in Articles V and VI of this Agreement
shall survive the Closing through and including the second anniversary of the
Closing Date; provided, however, that the representations and warranties of (i)
-------- -------
Seller set forth in Sections 5.1, 5.2, 5.10 and 5.25 and (ii) Purchaser set
forth in Sections 6.1, 6.2 and 6.6 hereof, shall survive this Agreement in
perpetuity.
12.2 Indemnification. (a) Purchaser shall fully and promptly pay,
---------------
perform, discharge, defend, indemnify and hold harmless Seller and its
Affiliates and Subsidiaries, and their respective directors, officers, employees
and agents, from and against any and all Damages arising out of, based upon or
with respect to: (1) the failure of any representation or warranty made by
Purchaser herein to have been true and correct in all respects when made or
deemed to have been made (including, without limitation, all statements made on
any Schedule hereto or in any Exhibit hereto), (2) the breach by Purchaser of
any of the covenants and agreements on its part to be performed under this
Agreement, (3) the Assumed Liabilities, (4) the ownership of the Purchased
Assets or the operation of the Business (including, without limitation, the
manufacture and sale of products sold after the Closing Date, the leasing of
Property (real and personal), the incurrence of commitments and obligations, the
provision of
62
<PAGE>
services, the giving of warranties, indemnities or warnings, and the receipt by
Purchaser, after the Closing Date, of any rebate, recoupment, recovery or refund
that results in an obligation on the part of Purchaser to make a payment to, or
credit in favor of the customer under any Government Contract) by Purchaser
after the Closing Date, except for the Excluded Liabilities, (5) any and all
Environmental Costs and Liabilities or Damages arising out of, based upon or
attributable to any Environmental Claim or Remedial Action which is attributable
to (but only to the extent attributable to) the operation or ownership of the
Business or the Facilities by Purchaser from and after the Closing.
(b) Seller shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Purchaser and its Affiliates and Subsidiaries and
their respective directors, officers, employees, agents and customers, past,
present or future, from and against any and all Damages arising out of, based
upon or with respect to: (1) the failure of any representation or warranty made
by Seller herein to have been true and correct in all respects when made or
deemed to have been made (including, without limitation, all statements made on
any Schedule hereto or in any Exhibit hereto), (2) the breach by Seller of any
of the covenants and agreements on its part to be performed under this
Agreement, (3) the ownership of the Assets or the operation of the Business
(including, without limitation, the sale of products before the Closing Date,
the leasing of property (real and personal), the incurrence of commitments and
obligations, the provision of services, the giving of warranties, indemnities or
warnings, and the receipt by the Seller, whether before or after the Closing
Date, of any rebate, recoupment, recovery or refund that results in an
obligation on the part of Purchaser to make a payment to, or credit in favor of
the customer under any Government Contract) by Seller on or before the Closing
Date, whether asserted before or after the Closing Date, except for the Assumed
Liabilities, (4) without duplication, any and all Excluded Liabilities, and (5)
subject to the obligations under Section 2.3(c) and Section 7.7, any and all
Damages or Environmental Costs and Liabilities arising out of, based upon, or
attributable to (but only to the extent attributable to) any Environmental Claim
or Remedial Action arising out of or based upon anything relating to the
Business prior to the Closing, and the operation or ownership of the Business or
the Facilities by the Seller prior to the Closing.
(c) For the purposes of administering the indemnification provisions
of this Section 12.2, the following procedures shall apply from and after the
Closing Date:
(1) Each indemnified party shall notify the Indemnitor of any
Indemnification Event in writing within 30 days following the receipt of notice
of the commencement of any action or proceeding or within 60 days of (A) the
assertion of any claim against such indemnified party or (B) the discovery by
such indemnified party of any loss, giving rise to indemnity pursuant to this
Section 12.2 (any 30 or 60 day notification requirement shall begin to run, in
the case of a claim which is amended so as to give rise to an Indemnification
Event, from the first day such claim is amended to include any claim which is an
Indemnification Event hereunder) and shall indicate in such notification whether
such indemnified party is requesting indemnification with respect to such
Indemnification Event and the amount of indemnification initially anticipated
(if the same is capable of estimation).
63
<PAGE>
The failure to give notice as required by this Section 12.2(c)(1) in a timely
fashion shall not result in a waiver of any right to indemnification hereunder
except to the extent that the Indemnitor's ability to defend against the event
with respect to which indemnification is sought is materially adversely affected
by the failure of the indemnified party to give notice in a timely fashion as
required by this Section.
(2) After notification is given as aforesaid, the Indemnitor shall be
entitled (but not obligated) to assume the defense or settlement of any such
action or proceeding, or to participate in any negotiations or proceedings to
settle or otherwise eliminate any claim; provided, however, that in the event
-------- -------
the Indemnitor assumes any such defense or settlement or any such negotiations,
it shall actively pursue such defense, settlement or negotiations in good faith.
If the Indemnitor fails to elect in writing within 10 Business Days after the
notification referred to above to assume the defense, the indemnified party may
engage counsel to defend, settle or otherwise dispose of such action or
proceeding.
(3) In cases where the Indemnitor has assumed the defense or
settlement with respect to an Indemnification Event, the Indemnitor shall be
entitled to assume the defense or settlement thereof with counsel of its own
choosing, which counsel shall be reasonably satisfactory to the indemnified
party, provided that the Indemnitor shall not be entitled to settle, compromise,
decline to appeal, or otherwise dispose of any such action, proceeding or claim
without the consent or agreement of the indemnified party (which consent will
not be unreasonably withheld or delayed) provided, that if the terms of the
settlement provide only for payment of monies and do not provide for any
agreement to act or refrain from acting in any manner and such consent is
withheld, then the Indemnitor's liability shall be limited to the amount for
which the Indemnitor agreed with the claimant to settle together with
Indemnitor's cost and attorneys' fees to the date such settlement was rejected
by the indemnified party.
(4) In any case in which the Indemnitor assumes the defense or
settlement thereof, the indemnified party shall be entitled to continue to
participate at its own cost in any such action or proceeding or in any
negotiations or proceedings to settle or otherwise eliminate any claim for which
indemnification is being sought and shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (A) the employment of such counsel
shall have been authorized in writing by the Indemnitor in connection with the
defense of such suit, action, claim or proceeding, (B) the Indemnitor shall not
have employed counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding within 10
Business Days after notice of commencement of the action, suit, claim or
proceeding, or (C) such indemnified party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Indemnitor which, if the Indemnitor and the indemnified
party were to be represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of the
defenses available to such indemnified party. If any of the events specified in
clauses (B) or (C) of the preceding sentence shall have occurred or shall
otherwise be applicable, then the reasonable fees and expenses of one counsel or
firm of counsel selected
64
<PAGE>
by the indemnified party shall be borne by the Indemnitor. In no event shall an
Indemnitor be liable to any indemnified party for the cost of employing or using
in-house legal counsel regardless of whether such Indemnitor has, or has not,
assumed the defense or settlement of such action, proceeding or claim.
(5) In the event indemnification is requested, the relevant
Indemnitor, its representatives and agents shall have access to the premises,
books and records of the indemnified party or parties seeking such
indemnification to the extent reasonably necessary to assist it in defending or
settling any action, proceeding or claim; provided, however, that such access
-------- -------
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of the indemnified party or parties and shall only
take place in the presence of a representative of the indemnified party or
parties unless otherwise so agreed and the indemnified party shall not be
required to disclose any information with respect to itself or any of its
Affiliates or former Affiliates (other than any such Affiliate or former
Affiliate which is a party to this Agreement), and shall not be required to
participate in the defense of any claim to be indemnified hereunder (except as
otherwise expressly set forth herein), unless such disclosure or participation
is otherwise required or reasonably necessary in the defense of any claim to be
indemnified hereunder.
(6) Any amount which is required to be paid by an Indemnitor to any
party, including any reimbursement to which the indemnified party is entitled,
shall be paid by such Indemnitor promptly.
(d) Except with respect to Damages resulting from a violation by
Seller of federal procurement laws or other criminal statutes, which shall not
be limited by this Section 12.2(d), Seller shall not be liable to any Person
under Sections 12.2(b) unless and until the aggregate amount determined to be
owing to such Person by Seller under Section 12.2(b) exceeds $1 million (the
"Threshold Amount"), and, at such time as such Threshold Amount is exceeded,
Seller shall be liable for seventy-five (75%) and Purchaser shall be liable for
twenty-five percent (25%) of the next $4 million (the "Second Threshold Amount")
of Losses, Damages and Environmental Costs and Liabilities claimed by Purchaser
under Sections 12.2(b) hereof. In addition to the limitation set forth in the
immediately preceding sentence, indemnification under Section 12.2(b) by Seller
of Purchaser shall be only for Losses, Damages and Environmental Costs and
Liabilities in an amount equal to or greater than $50,000 individually or where
a series of related Losses exceeds $50,000. Seller shall not in any event be
liable under Sections 12.2(b) to make payments, in the aggregate, exceeding the
amount received by Seller pursuant to Section 2.5 hereof. The foregoing
limitations shall not be applicable in respect of (A) the failure of any
representation or warranty made by Seller to have been true and correct under
Sections 5.10 or 5.25 or (B) the breach by Seller of any of the covenants and
agreements on its part to be performed under Sections 12.3 and 12.4 hereof.
In measuring the economic consequences of any claim being asserted
under the representations and warranties of Section 5.5 for Financial
Statements, the economic impact of
65
<PAGE>
all such issues (both positive and negative) must be taken into consideration
- ---
and the resulting claim must be measured on a net basis, taking into account the
---
post-closing adjustment provided in Article IV. The economic impact will be
determined based only on issues associated with the Purchased Assets and Assumed
Liabilities, and it will not take into consideration any issues associated with
Excluded Assets, Excluded Liabilities, or any other assets or liabilities
reflected on any financial statements that are not sold to or assumed by
Purchaser in accordance with the terms of this Agreement.
(e) Except with respect to Damages resulting from a violation of
federal procurement laws or other criminal statutes and subject to the
limitations set forth below, Purchaser shall reimburse Seller quarterly, upon
receiving an invoice from Seller, for amounts paid by Seller (i) within five (5)
years from the Closing Date with respect to Damages paid by Seller to third
parties in respect of defending claims relating to the ownership or operation of
the Business prior to the Closing which claims were neither pending nor, to
Seller's knowledge, threatened, as of the Closing Date, and (ii) amounts paid by
Seller pursuant to Section 7.7(e). Such reimbursements shall be up to an
aggregate amount equal to the then remaining Threshold Amount and/or Second
Threshold Amount, as applicable, as described in Section 12.2(d). For purposes
of this Section 12.2(e), the amount paid by Purchaser to Seller shall be paid at
a rate equal to the rate at which the Threshold Amount and/or Second Threshold
Amount would be reduced if the amount sought to be reimbursed by Seller were an
amount which Purchaser were seeking an indemnity under Section 12.2(b). For
example, if the reimbursement sought by Seller under this subsection 12.2(e)
were $1,200,000, and assuming no prior reduction of the Threshold or Second
Threshold Amounts had occurred under this subsection 12.2(e) or subsection
12.2(d) above, Purchaser would pay Seller 100% of the first $1,000,000 and 25%
of the next $200,000, or $1,050,000. The Threshold Amount and Second Threshold
Amount shall be reduced by any amount reimbursed by Purchaser to Seller under
this Section 12.2(e).
(f) Indemnification by Purchaser of Seller shall be only for Losses,
Damages and Environmental Costs and Liabilities in an amount equal to or greater
than $25,000 individually or where a series of related Losses exceeds $25,000.
The foregoing limitations shall not be applicable in respect of (X) the failure
of any representation or warranty made by Purchaser to have been true and
correct under Section 6.6 or (Y) the indemnity by Purchaser contained in Section
11.6(b) or the breach by Purchaser of the covenants and agreements on its part
to be performed under Sections 12.3 and 12.4 hereof.
12.3 Payment of Brokers' or Finders' Fees. Seller shall pay any and
------------------------------------
all brokers' or finders' fees, or any other commission or similar fee, payable
to any person acting on behalf of Seller or any of its Affiliates or under the
authority of any of them, in connection with any of the transactions
contemplated herein, and Purchaser shall pay any and all brokers' or finders'
fees, or any other commission or similar fee, payable to any person acting on
behalf of Purchaser or any of its Affiliates or under the authority of any of
them, in connection with any of the transactions contemplated herein, in each
case regardless of
66
<PAGE>
whether any claim for payment is asserted before or after the closing of the
transactions contemplated hereby, or before or after any termination of this
Agreement.
12.4 Tax Matters. (a) Seller and Purchaser shall cooperate fully
-----------
with each other and make available or cause to be made available to each other
in a timely fashion such Tax data, prior Tax Returns and filings and other
information as may be reasonably required for the preparation by Purchaser or
Seller of any Tax Returns, elections, consents or certificates required to be
prepared and filed by Purchaser or Seller and any audit or other examination by
any taxing authority, or judicial or administrative proceeding relating to
liability for Taxes. Purchaser and Seller will each retain and provide to the
other party all records and other information which may be relevant to any such
Tax Return, audit or examination, proceeding or determination, and will each
provide the other party with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other party for any period. Each of Purchaser
and Seller will retain copies of all Tax Returns, supporting work schedules and
other records relating to tax periods or portions thereof ending prior to or on
the Closing Date.
(b) Seller shall be responsible for the preparation and filing of all
federal and state income and franchise Tax returns, and all other Tax returns
required to be filed by Seller, relating to the Business or the Assets for all
periods ending on or before Closing Date. Seller shall make all payments
required with respect to any such Tax return as shown thereon.
(c) Purchaser and Seller shall share equally in the cost of (A) all
transfer and documentary Taxes and fees imposed with respect to instruments of
conveyance in the transaction contemplated hereby and (B) all sales, use, gains,
excise and other transfer or similar Taxes incurred in connection with the
transactions contemplated by this Agreement (including any Tax liability arising
from an adjustment to or the filing of an amended Tax Return in respect of Taxes
shared by Purchaser and Seller pursuant to this Section 12.4(c)). The Purchaser
shall bear its share and the Seller shall remit the Purchaser's share of all
applicable sales taxes which the Purchaser incurs as a result of the
acquisition. The Seller will not render any sales taxes on those assets for
which Purchaser supplies the appropriate exemption certificates. Purchaser and
Seller agree to cooperate in the filing of all necessary documentation and all
Tax Returns, reports and forms filed in connection with Taxes relating to the
operations, activities or Assets of the Business with respect to all such Taxes,
including any available pre-sale filing procedure.
(d) Seller shall be responsible for, and shall indemnify and hold
harmless, Purchaser and its Subsidiaries and Affiliates in respect of any
Damages attributable to all Taxes with respect to the ownership, use or leasing
of the Assets on or prior to the Closing Date.
(e) Seller and Purchaser agree that the transaction contemplated by
this Agreement constitutes a sale of a trade or business within the meaning of
Section 41(f)(3) of
67
<PAGE>
the Code. Seller agrees to provide Purchaser upon request with all information
necessary to permit Purchaser to timely apply the provisions of Section
41(f)(3)(A) of the Code with respect to the assets. Seller agrees to furnish
Purchaser by not later than the Closing Date clearance certificates or similar
documents that may be required by any state, local or other taxing authority to
relieve Purchaser of any obligations to withhold any portion of the purchase
consideration to be transferred pursuant to Article II hereof.
(f) (1) Not later than 180 days following the Closing, Purchaser
shall provide to Seller copies of Form 8594 and any required exhibits thereto
(the "Asset Acquisition Statement") with Purchaser's proposed allocation of the
purchase price paid by Purchaser with respect to the Assets. Within 30 days
after the receipt of such Asset Acquisition Statement, Seller shall propose to
Purchaser any changes to such Asset Acquisition Statement or shall indicate its
concurrence therewith, which concurrence shall not be unreasonably withheld.
Thereafter, Purchaser shall provide to Seller from time to time revised copies
of the Asset Acquisition Statement (the "Revised Statements") so as to report
any matters on the Asset Acquisition Statement that need updating (including
purchase price adjustments, if any). Within 30 days after the receipt of any
Revised Statement, Seller shall propose to Purchaser any changes to such Revised
Statement or shall indicate its concurrence therewith, which concurrence shall
not be unreasonably withheld. Subject to and in accordance with Section
12.4(f)(2) hereof, Purchaser and Seller shall endeavor in good faith to resolve
any differences with respect to the Asset Acquisition Statement or any Revised
Statements within 30 days after Purchaser's receipt of notice of objections or
suggested changes from Seller. The costs of preparing the Asset Acquisition
Statement and any supporting materials (including any appraisals) shall be borne
solely by Purchaser. Nothing in this Section 12.4(f)(1) or (2) shall be
construed to require that an appraisal of the assets be performed.
(2) Subject to the provisions of the following sentence of this
Section 12.4(f)(2), the purchase price for the Assets shall be allocated in
accordance with the Asset Acquisition Statement or, if applicable, the last
Revised Statements, provided by Purchaser to Seller pursuant to Section
12.4(f)(1) hereof, and all Tax Returns and reports filed by Purchaser and Seller
shall be prepared consistently with such allocation. If Seller shall have
withheld its consent to such allocation (which consent shall not be unreasonably
withheld) and Purchaser and Seller have acted in good faith to resolve the
differences with respect to the items on the Asset Acquisition Statement or any
Revised Statement and, thereafter, Purchaser and Seller are unable to resolve
such differences which, in the aggregate, are material in relation to the
aggregate purchase price for the Assets, Purchaser and Seller shall file all Tax
Returns and reports consistent with the allocation provided in such statements
except with respect to the items that are the subject of such material
difference.
(g) All federal and state income and franchise Taxes for any taxable
period that includes the Closing Date, real and personal property Taxes, state
and local ad valorem Taxes and assessments applicable to the Business or the
Assets shall be prorated by the parties as of the Closing Date, and all such
Taxes applicable to periods of time on or prior to the Closing Date shall be the
sole obligation, responsibility and expense of Seller and shall be
68
<PAGE>
Excluded Liabilities. All such assessments and Taxes applicable to periods after
the Closing Date shall be the sole obligation, responsibility and expense of
Purchaser. All real property, personal property and similar taxes and
installments of general and special assessments, if any, with respect to the
Purchased Assets shall be prorated on the basis of actual days elapsed between
the commencement of the relevant fiscal tax year and the Closing Date, based on
a 365-day year and the tax payable within the current tax year. Following the
Closing Date, each Party shall, upon request of the other Party, immediately
reimburse the other Party for any such taxes for which said Party is responsible
but have been paid by or are owed by the other Party and for collections made by
one Party on behalf of the other Party.
12.5 Transition Services. As soon as practicable following the date
-------------------
hereof and prior to Closing, the parties will enter into the Transition Services
Agreement to provide certain services to be provided by Seller to Purchaser for
the transition of certain support services for the Business which are currently
performed by Seller and which will in the future be performed by Purchaser. The
terms of that agreement are set forth on Schedule 12.5. These services shall be
priced at cost through general overhead plus a nominal administrative fee not to
exceed 2%. The duration of the services provided will vary depending on the
service, but both parties will use their best efforts to minimize duration, not
to exceed 12 months. All costs will be invoiced monthly from Seller to
Purchaser, such invoices to show actual cost breakdown on a format agreed by the
parties. Invoices shall be payable within 30 days.
12.6 Supply Contracts. As soon as practicable after the signing
----------------
hereof and prior to the Closing Date, Seller and its Affiliates and Purchaser
and its Affiliates will negotiate in good faith with each other to convert
existing interdivisional supply agreements into supply contracts between
Purchaser and Seller. In each case the provider of goods, services, parts,
components or materials agrees to continue or to cause its appropriate Affiliate
to continue to provide, at the same quality as now provided, such goods,
services, parts, components or materials for the period of the existing
agreement but in no event less than one year from the Closing Date. For
existing active purchase orders and priced options awarded within 90 days
following Closing Date, the price to be charged by the providing business to the
buying business shall be cost through general overhead plus 5%. For follow-on
business and unpriced options or options awarded later than 90 days following
Closing Date, the price shall be negotiated between the providing business and
the buying business.
ARTICLE XII
GENERAL
13.1 Amendments. This Agreement may be amended, modified, superseded
----------
or canceled and any of the terms, covenants, representations, warranties or
conditions hereof may be waived only by an instrument in writing signed by each
of the parties hereto or, in the case of a waiver, by or on behalf of the party
waiving compliance.
69
<PAGE>
13.2 Integrated Contract. This Agreement, including the Schedules and
-------------------
Exhibits hereto, any written amendments to the foregoing satisfying the
requirements of Section 13.1 hereof, the Ancillary Agreements and the
Confidentiality Agreement referred to in Section 7.1(b) hereof, constitute the
entire agreement among the parties with respect to the subject matter hereof and
thereof, and supersede any previous agreements and understandings between the
parties with respect to such matters.
13.3 Governing Law. This Agreement and the legal relations between
-------------
the parties shall be governed by and construed in accordance with the laws of
the State of New York without regard to the principles regarding the choice of
law.
13.4 Notices. Any notice or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally or transmitted by telex or telecopier, receipt
acknowledged, or in the case of documented overnight delivery service or
registered or certified mail, return receipt requested, postage prepaid, on the
date shown on the receipt therefor,
(a) if to Purchaser, to:
Hughes Aircraft Company
7200 Hughes Terrace
Los Angeles, California 90080-0028
Attention: Secretary
Telecopy: (310) 649-1983
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Jeffrey J. Weinberg, Esq.
Telecopy: (212) 310-8007
(b) if to Seller, to:
Alliant Techsystems Inc.
600 Second Street Northeast
Hopkins, Minnesota 55343-8343
Attention: Daryl L. Zimmer, Esq.
Vice President and General Counsel
Telecopy: (612) 931-5920
with a copy to:
70
<PAGE>
Malkerson Gilliland Martin LLP
901 Marquette Avenue, Suite 1500
Minneapolis, Minnesota 55402
Attention: Michael S. Gilliland, Esq.
Telecopy: (612) 334-1414
or to such other address(es) as shall be furnished in writing by any such party
to each of the other parties hereto in accordance with the provisions of this
Section 13.4.
13.5 Assignment. Neither this Agreement nor any of the rights and
----------
obligations of the parties hereunder may be assigned by any of the parties
hereto without the prior consent of each other party hereto, except that either
party may assign any or all of its rights and/or obligations hereunder to any
entity controlling, controlled by or under common control with such party, and,
with respect to Purchaser, any such entity may assign such rights and/or
obligations to a direct or indirect Subsidiary of Purchaser or to Purchaser,
provided that in all events the Assignee shall assume all obligations of the
Assignor under this Agreement. Notwithstanding the foregoing, Purchaser shall
remain liable for all of its obligations under this Agreement. Subject to the
first sentence of this Section 13.5, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and no other person shall have any right, obligation or benefit
hereunder.
13.6 Headings. The descriptive headings of the several Articles and
--------
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
13.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered, in person or by telecopier, receipt
acknowledged, to the other party hereto.
13.8 Expenses. Whether or not the transactions contemplated by this
--------
Agreement are consummated, except as otherwise expressly provided herein each of
the parties hereto shall be responsible for the payment of its own respective
costs and expenses incurred in connection with the negotiations leading up to
and the performance of its respective obligations pursuant to this Agreement,
including the fees of any brokers or advisors employed or retained by or on
behalf of such party.
13.9 Further Assurances. From time to time after the Closing Date,
------------------
each party to this Agreement shall, at its expense except as otherwise expressly
provided herein, do, execute, acknowledge and deliver any and all such other and
further acts, assignments, transfers and any instruments of further assurance,
approvals and consents as are reasonably necessary or proper to complete, ensure
and perfect the consummation of the transactions contemplated hereby.
71
<PAGE>
13.10 Public Announcements. No party to this Agreement shall issue
--------------------
any press release or public announcement of any kind concerning the transactions
contemplated by this Agreement without prior consultation with the other party
hereto.
13.11 Exhibits/Schedules. The exhibits and schedules to this
------------------
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement.
[No more text on this page.]
72
<PAGE>
13.12 Conflicting Provisions. In the event of any conflict between
----------------------
the provisions of this Agreement and the provisions of any Ancillary Agreement,
the provisions of this Agreement shall control.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officers or representatives
thereunto duly authorized, all as of the date first written above.
HUGHES AIRCRAFT COMPANY
By: /s/ Michael T. Smith
-------------------------------------
Name: Michael T. Smith
Title: Chairman of the Board
ALLIANT TECHSYSTEMS INC.
By: /s/ Richard Schwartz
-------------------------------------
Name: Richard Schwartz
Title: President and Chief Executive Officer
73
<PAGE>
Exhibit 2.2
AMENDMENT TO ASSET PURCHASE AGREEMENT
AMENDMENT dated February 28, 1997 (this "Amendment") to ASSET PURCHASE
AGREEMENT dated December 22, 1996 by and between HUGHES AIRCRAFT COMPANY, a
Delaware corporation ("Purchaser"), and ALLIANT TECHSYSTEMS INC., a Delaware
corporation ("Seller") (the "Agreement").
WITNESSETH:
WHEREAS, Seller and Purchaser wish to amend the Agreement and certain
Affiliate Agreements as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
1. Defined terms in this Amendment shall have the same meaning as
in the Agreement.
2. Section 7.24 shall be added to the Agreement as follows:
7.24. Armada de Chile Receivable. Purchaser shall provide reasonable
assistance to Seller in seeking collection of the $2.93 million account
receivable payable by Armada de Chile, Contract Number MK46-ILS 119 and shall
immediately pay any sums received in respect of that account receivable to
Seller.
3. Sections 11.3, 11.4, 11.5, 11.6 and 11.7 of the Agreement shall
be amended and restated as follows:
11.3 Employee Benefits. (a) Effective on the Closing Date, Purchaser
-----------------
shall provide the Transferred Employees with such pensions and other employee
benefits as set forth in Schedule 11.3. Purchaser reserves the right to modify
or terminate any such pension and other employee benefits, at any time or from
time to time. Except as set forth in Sections 11.5 and 11.7, Purchaser shall be
under no obligation to assume or replicate any of the Seller Employee Benefit
Plans or Seller Employee Pension Plans. Purchaser shall amend its Employee
Benefit Plans (as such term is defined in ERISA section 3(3)) and Employee
Pension Benefit Plans (as such term is defined in ERISA section 3(2)) and all
other employee benefit arrangements, plans, policies or practices, such that,
effective as of
<PAGE>
the Closing Date, such plans recognize Transferred Employees' Credited Service
(as such term is defined in the Alliant Techsystems Inc. Retirement Plan) with
Seller for purposes of eligibility, vesting, early retirement incentives, pre
existing condition exclusions and waiting periods; provided, however, that such
-------- -------
plans may contain, in the discretion of Purchaser, exclusions for pre existing
conditions as were applicable under the health and welfare benefits provided to
such Transferred Employees by Seller before the Closing Date and as allowed by
law. In no event will Purchaser provide or be under any obligation to provide
post retirement medical or life insurance benefits or medicare supplemental
benefits to Transferred Employees.
(b) Except as set forth in Section 11.5, from and after the Closing
Date, Seller shall remain solely responsible for all obligations, costs and
expenses under all Seller Employee Benefit Plans or Seller Employee Pension
Plans in respect of Employees" claims incurred or conditions existing prior to
the Closing Date, whether such claims are made or reported before or after the
Closing Date, provided, however, that in no event shall Seller be obligated to
pay claims made after nine (9) months following the Closing Date.
(c) Health Care Plan Deductibles. Any health care plan expenses
(excluding office visit copays) incurred by Transferred Employees on or after
January 1, 1997 and prior to the Closing Date will be recognized by Purchaser's
health care plan for purposes of plan year 1997 deductibles, copays, and out of
pocket maximums. Seller agrees to cooperate in the transmission of data to
Purchaser's claims administrator.
(d) Worker's Compensation. Responsibility for workers' compensation
claims in respect of the Business arising out of conditions having a date of
injury (or, in the case of a claim relating to occupational disease, the last,
significant exposure) prior to the Closing Date shall remain with Seller.
Purchaser shall have responsibility for workers' compensation claims in respect
of the Business arising out of conditions having a date of injury (or, in the
case of a claim relating to occupational disease, the last significant exposure)
on or after the Closing Date. Provided, however, that in no event shall Seller
pay claims made after nine (9) months following the Closing Date.
(e) Vacation. Purchaser shall, effective as of the Closing, (i)
recognize Transferred Employees' service with Seller for purposes of future
Personal Time Off ("PTO") accruals; and (ii) recognize Transferred Employees
accrued and unused vacation with Seller as of the Closing; provided, however,
that such recognition shall not exceed one week less than the Purchaser's PTO
accrual maximums as applied to each Transferred
<PAGE>
Employee who, as of the Closing Date, has less than 20 years of service and
shall not exceed two weeks less than the Purchaser's PTO accrual maximums as
applied to each Transferred Employee who, as of the Closing Date, has 20 or more
years of service. Seller shall, within two weeks following the Closing Date, pay
to each Transferred Employee, the amount of vacation accrual in excess of the
amount to be recognized under the Purchaser's PTO plan each such Transferred
Employee has, if any, as of the Closing Date. Such amounts shall be treated as
income for tax and benefits purposes.
(f) Relocation Agreements. With respect to costs associated with
any relocation agreements between Seller and an Employee, Seller shall remain
liable for all costs incurred prior to the Closing Date and Purchaser shall be
liable for any and all costs incurred on or after the Closing Date, subject to
Section 2.3(b) hereof and Schedule 2.3(b).
(g) Retiree Medical and Life Insurance. Solely for purposes of
participation in the retiree medical portion (including medicare supplement) of
the Alliant Techsystems Inc. Health Plan for Non Union Employees ('Alliant
Retiree Medical Plan") and the retiree life portion of the Alliant Techsystems
Inc. Death Benefit Plan for Non Union Employees ("Alliant Retiree Life Plan"),
Transferred Employees who are eligible to retire under the provisions of the
Alliant Techsystems Inc. Retirement Plan as of the Closing Date, shall be
considered as having retired as of the Closing Date and shall be eligible to
elect to begin coverage under such Alliant Retiree Medical Plan and such Alliant
Retiree Life Plan at any time on or after the Closing Date on the same terms and
conditions as any other participant in the Alliant Retiree Medical Plan or
Alliant Retiree Life Plan who retired on the Closing Date and elected to begin
coverage on the same date as such Transferred Employee.
11.4 401(k) Plan. Transferred Employees shall be entitled to
-----------
rollover their accrued entitlements under the Alliant Techsystems Inc. 401(k)
Plan to Purchaser's 401(k) Plan at any time after the Closing Date (subject to
any applicable time limits imposed by the Code or ERISA), and Purchaser and
Seller shall cooperate fully in that regard.
11.5 Retirement Plan.
---------------
(a) On or before the Closing Date, Purchaser shall, or shall cause
a Subsidiary to, effective as of the Closing Date, establish a defined benefit
plan ("Purchaser
<PAGE>
New Retirement Plan") and trust ("Purchaser Qualified Trust") intended to
qualify under Sections 401(a) and 501(a) of the Code and the Treasury
Regulations issued pursuant thereto. Such Purchaser New Retirement Plan shall be
substantially identical in all material respects to the Alliant Techsystems Inc.
Retirement Plan ("Alliant Retirement Plan"), including, without limitation, the
preservation of all protected rights, benefits and features within the meaning
of Code Section 411(d)(6).
Seller and Purchaser or Purchaser's Subsidiary shall each provide to
the other on the Closing Date a certified copy of a resolution of its Board of
Directors or its authorized delegates (with a certified copy of the delegation
of authority) evidencing the transfer from the Alliant Retirement Plan and the
assumption by the Purchaser New Retirement Plan of the assets and accrued
benefit liabilities as of (and including) the Closing Date under the Alliant
Retirement Plan for all Transferred Employees, and, in Purchaser's case, further
evidencing adoption of the Purchaser New Retirement Plan and the Purchaser
Qualified Trust. Seller shall direct the trustee of the Alliant Retirement Plan
to transfer to the Purchaser Qualified Tnist, assets of the Alliant Retirement
Plan in the amounts and in the manner described in Section 11.5(b) hereof.
(b) The amount of assets to be transferred from the Alliant
Techsystems Inc. Defined Benefit Master Trust ("Alliant Master Trust") under the
Alliant Retirement Plan to the Purchaser Qualified Trust shall be in the form of
cash. The amount of assets allocable to Transferred Employees under the Alliant
Retirement Plan that will be transferred to the Purchaser New Retirement Plan
shall be the amount which would be allocated to Transferred Employees if the
Alliant Retirement Plan were terminated as of the Closing Date and assets were
allocated to participants in accordance with Section 4044 of ERISA using the
assumptions and methodology of the PBGC for plan terminations as of Closing Date
and such other assumptions not specified by the PBGC and agreed to by Seller's
actuary and Purchaser's actuary ("Appropriate Transfer Amount"). Schedule
11.5(b) sets forth the actuarial assumptions agreed to by Seller's actuary and
Purchaser's actuary. The calculation of the Appropriate Transfer Amount shall be
made by the Seller's Actuary and shall be subject to approval by the Purchaser's
actuary, which shall not be unreasonably withheld. Notwithstanding the above,
the transfer of assets and liabilities from the Alliant Retirement Plan to the
Purchaser New Retirement Plan shall satisfy the requirements of Code Section
414(l). Purchaser and Seller shall cooperate and each use reasonable efforts to
effect the asset and accrued benefit liability transfers contemplated in this
Section as soon as practicable after the Closing Date and in a cost-efficient
manner. This includes the provision by Seller's actuary to Purchaser's actuary
of detailed workpapers and other pertinent information to enable Purchaser's
actuary to
<PAGE>
adequately review the asset allocation procedures.
Seller shall cause the Alliant Master Trust to transfer, and Purchaser
shall cause the Purchaser Qualified Trust to accept, an amount of cash equal to
$24 million ("Initial Transfer Amount") (which represents the good faith
estimate by the Seller's Actuary of the Appropriate Transfer Amount on Monday,
March 1, 1997, plus interest thereon from the Closing Date at the applicable
short term investment fund rate. Purchaser shall reimburse Seller for up to $750
of late filing penalties associated with Form 5310A, if any.
In the event that the Initial Transfer Amount exceeds the Appropriate
Transfer Amount, as defined below, Purchaser New Retirement Plan shall promptly
reimburse (and in any event within 30 days) the Alliant Retirement Plan any
excess assets plus interest thereon at 8.5% per year from the date of transfer
of the Initial Transfer Amount. In the event the Initial Transfer Amount is less
than the Appropriate Transfer Amount, then the Alliant Retirement Plan shall
promptly (and in any event within 30 days) transfer to the Purchaser New
Retirement Plan an amount equal to such difference, plus interest thereon at
8.5% per year from the Closing Date to the date of transfer of such amount.
In the event any Prospective Employee becomes a Transferred Employee
after and within six months following the Closing Date, the Alliant Actuary
shall determine the amount equal to the amount of assets required to be
transferred under Code Section 414(l), as of the end of the month in which each
Prospective Employee becomes a Transferred Employee based on the provisions of
the Alliant Retirement Plan in effect on the Closing Date, and such
determination shall be subject to approval of the Purchaser's actuary, which
shall not be unreasonably withheld. As soon as administratively feasible after
appropriate governmental notices have been filed, the Seller shall cause the
trustee of the Alliant Master Trust to transfer such present value, in cash, to
the Purchaser Qualified Trust and the Purchaser New Retirement Plan shall accept
liability therefor.
(c) Seller shall amend the Alliant Retirement Plan, such that
effective as of the Closing Date, Transferred Employees shall receive no further
accruals under the Alliant Retirement Plan.
(d) As soon as administratively feasible after the Closing Date,
Purchaser or a Subsidiary of the Purchaser shall submit such Purchaser New
Retirement Plan and Purchaser Qualified Tnist to the Internal Revenue Service
for determination of
<PAGE>
their qualified status under Sections 401(a) and 501(a) of the Code. Purchaser
shall use Best Efforts to obtain a favorable determination on such qualified
status.
11.6 Unless set forth in this Agreement, Seller retains the right to
change, amend or terminate any Seller Employee Pension Plans, Seller Employee
Benefit Plans, or any employee benefit arrangement, plan, practice or policy at
any time prior to or following the Closing, provided, however, that any such
change, amendment or termination will not result in any benefits for Transferred
Employees who were eligible for retirement at the Closing Date less than those
they would have received had they retired immediately prior to Closing.
11.7 Non-Qualified Supplemental Employee Retirement Benefits.
-------------------------------------------------------
Effective as of the Closing Date, Purchaser shall assume all accrued benefit
liabilities associated with non-qualified supplemental employee retirement
benefits for those Transferred Employees set forth in Schedule 11.10(ii).
4(a). A new Section 11.10(A) is added to the Agreement to read as
follows:
11.10(A) Within 30 days following the completion of the Section 4044
allocation of assets and liabilities of the Alliant Retirement Plan,
(i) if the Total Pension Costs (as defined below) exceeds $3.6
million, then Seller shall pay in cash to Purchaser such excess amount, plus
interest thereon from the Closing Date to the date of payment at the annual rate
of 8.5 %; or
(ii) if the Total Pension Costs (as defined below) is less than $3.6
million, then Purchaser shall pay to Seller such deficit, plus interest thereon
from the Closing Date to the date of payment at the annual rate of 8.5 %.
For purposes of this Section 11.10, "Total Pension Costs" means the
amount by which the actuarial accrued liabilities of Transferred Employees on a
termination basis as of the Closing Date (as determined using cost accounting
standards and other actuarial methods and assumptions set forth in
Schedule 11.10(i)) ("Actuarial Accrued Liabilities") exceeds the Appropriate
Transfer Amount.
The actuarial valuation of the Alliant Retirement Plan shall be subject to
approval of Purchaser's actuary, which shall not be unreasonably withheld.
<PAGE>
An illustration of the intended operation of this Section 11.10(A) is
set forth in several examples described in Schedule 11.10(iii).
4(b). A new Section 11.10(B) is added to the Agreement to read as
follows:
11.10(B) Within 30 days following the completion of the Section 4044
allocation of assets and liabilities of the Alliant Retirement Plan,
(i) if one-half of the Incremental Pension Costs (as defined below)
exceed $200,000, then Seller shall pay in cash to Purchaser such excess amount,
plus interest thereon from the Closing Date to the date of payment at the annual
rate of 8.5 %; or
(ii) if one-half of the Incremental Pension Costs (as defined below)
is less than $200,000, then Purchaser shall pay to Seller such deficit, plus
interest thereon from the Closing Date to the date of payment at the annual rate
of 8.5 %.
For purposes of this Section 11.10, "Incremental Pension Costs" means
the sum of: (i) the reasonable costs of the Seller's actuary for preparing an
actuarial valuation of the Actuarial Accrued Liabilities performing an ERISA
-----------------------------
Section 4044 allocation of the assets of the Alliant Retirement Plan as of the
Closing Date and determining the amount of assets allocable to Transferred
Employees as of the Closing Date, and (ii) the total Projected Benefit
Obligation as of the Closing Date of Transferred Employees under Seller's non
qualified supplemental employee retirement benefits (as determined using the
actuarial methods and assumptions set forth in Schedule 11.10(ii)).
Purchaser shall pay the invoiced. cost of Seller's acturary fees for preparing
- -------------------------------- --------------------------------------------
the calculations described in this section 11.10.
- ------------------------------------------------
The actuarial valuation of the Seller's non-qualified supplemental employee
retirement benefits shall be subject to approval of Purchaser's actuary, which
shall not be unreasonably withheld.
5. The definition of "Closing" in Article I shall be amended in its
entirety as follows:
"Closing" shall refer to the consummation of the several transactions
provided for in Article 11, all upon the terms and subject to the conditions set
forth in this Agreement, which closing shall commence at 9:00 A.M., at the
location specified in Section 9.1 below, provided, however, that for purposes of
preparing the Closing Date
<PAGE>
Balance Sheet and for all related calculations under the provisions of Article
IV, Closing shall be deemed to occur as of 11:59 PM Pacific Standard Time on the
day of closing.
6. A new section 2.1(p) shall be added as follows:
(p) all petty cash and cash in assumed bank accounts of the Business
wherever contained as described on Schedule 2.1(p).
7. Section 2.2(a) shall be restated and amended as follows:
(a) cash and cash equivalents, or cash on hand or in bank accounts,
certificates of deposit, commercial paper and other similar securities
related to the Business, except for cash and petty cash as set forth on
Schedule 2.1 (p).
8. A new Section 4.1(a)(6) shall be added as follows:
(6) The third column of the Closing Date Schedule of Net Assets shall
make any adjustments necessary to ensure that all petty cash and cash in bank
accounts of the Business wherever contained as described on Schedule 2.1(p) and
assumed by Purchaser at Closing be reflected at full value in the fourth column
of the Closing Date Schedule of Net Assets.
9. A new section 4.1(a)(7) shall be added as follows:
(7) The second column of the Closing Date Schedule of Net Assets
shall reflect the elimination of certain corporate accounts for employee
benefits (item labeled Corporate Accruals on Schedule 5.5(a)(2)) by an
amount such that the numerical result of adding the amounts in Column 1,
Column 2 and Column 3 equals $1.5 million (i.e., the amount to be reflected
in Column 4 of the Closing Date Net Assets will equal $1.5 million) for the
benefit plan accrual, representing an agreed upon adjustment between the
Purchaser and Seller for certain employee benefit matters.
10. Governing Law. This Amendment and the legal relations between
-------------
the parties shall be governed by and construed in accordance with the laws of
the State of New York without regard to the principles regarding the choice of
law.
11. Notices. Any notice or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered
<PAGE>
personally or transmitted by telex or telecopier, receipt acknowledged, or in
the case of documented overnight delivery service or registered or certified
mail, return receipt requested, postage prepaid, on the date shown on the
receipt therefor,
if to Purchaser, to:
Hughes Aircraft Company
7200 Hughes Terrace
Los Angeles, California 90080-0028
Attention: Secretary
Telecopy: (310) 649-1983
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Jeffrey J. Weinberg, Esq.
Telecopy: (212) 310-8007
if to Seller, to:
Alliant Techsystems Inc.
600 Second Street Northeast
Hopkins, Minnesota 55343-8343
Attention: Daryl L. Zimmer, Esq.
Vice President and General Counsel
Telecopy: (612) 931-5920
with a copy to:
Malkerson Gilliland Martin LLP
901 Marquette Avenue, Suite 1500
Minneapolis, Minnesota 55402
Attention: Michael S. Gilliland, Esq.
Telecopy: (612) 334-1414
<PAGE>
or to such other address(es) as shall be furnished in writing by any such party
to each of the other parties hereto in accordance with the provisions of this
Section 13.4.
12. Headings. The descriptive headings of the several Articles and
--------
Sections of this Amendment are inserted for convenience only and do not
constitute a part of this Amendment.
13. Counterparts. This Amendment may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered, in person or by telecopier, receipt
acknowledged, to the other party hereto.
14. Exhibits/Schedules. The exhibits and schedules to this Amendment
------------------
are hereby incorporated and made a part hereof and are an integral part of this
Amendment.
15. Amended Schedules. Seller and Purchaser acknowledge and agree
-----------------
that the schedules attached as Exhibit 1 shall augment, modify, amend and
replace, as applicable those schedules originally attached to the Agreement, and
the Agreement shall be deemed amended thereby.
16. Conflicting Provisions. In the event of any conflict between the
----------------------
provisions of this Amendment and the provisions of the Agreement or any
Ancillary Agreement, the provisions of this Amendment shall control.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officers or representatives
thereunto duly authorized, all as of the date first written above.
HUGHES AIRCRAFT COMPANY
By: /s/ Charles S. Ream
--------------------------
Name: C. Ream
Title: V.P., CFO
ALLIANT TECHSYSTEMS INC.
By: /s/ Daryl L. Zimmer
--------------------------
Name: Daryl L. Zimmer
Title: Vice President and
General Counsel
<PAGE>
Exhibit 10
Arrangement with Executive
In December 1996, the registrant entered into an incentive arrangement with
Lawrence H. Tveten ("Executive") in connection with pending negotiations to sell
registrant's Marine Systems Group (the "Sale Transaction"), of which Executive
was the Group Vice President. In consideration for Executive's agreement to,
among other things, maximize the value to registrant of the Sale Transaction,
the registrant agreed to pay Executive an amount equal to one percent of the
amount by which the purchase price paid by the buyer in the Sale Transaction
exceeds $140,000,000. In February 1997, the registrant entered into a revised
incentive arrangement with Executive providing that, although the Asset Purchase
Agreement with Hughes Aircraft Company provides for a purchase price of
$141,000,000, inasmuch as the Agreement also provides for a post-closing
adjustment to the purchase price, and certain assets of the Marine Systems Group
were not included in those to be conveyed to the purchaser, the registrant will
also pay the Executive one percent of (a) any amount by which the purchase price
exceeds $141,000,000, after applying the post-closing adjustment, and (b) the
amount received by registrant in respect of certain accounts receivable not
included in the assets conveyed to the purchaser, which accounts receivable were
recorded on the registrant's books at approximately $10,800,000 at the time of
the sale.
<PAGE>
Exhibit 99.1
FOR IMMEDIATE RELEASE
ALLIANT TECHSYSTEMS CONTACTS: HUGHES CONTACT:
ROD BITZ (MEDIA) RICHARD DORE
PHONE: 612-931-5413 310-568-6324
RICHARD N. JOWETT (INVESTORS)
PHONE: 612-931-6080
ALLIANT TECHSYSTEMS COMPLETES SALE OF MARINE SYSTEMS GROUP
TO HUGHES ELECTRONICS CORPORATION FOR $141 MILLION
___________________________________________________________
SALE EXPECTED TO RESULT IN AFTER-TAX GAIN OF
APPROXIMATELY $20 MILLION IN FOURTH QUARTER
MINNEAPOLIS, MARCH 3, 1997 -- Alliant Techsystems (NYSE: ATK) said it
completed the sale of its Marine Systems Group to Hughes Electronics Corporation
for $141 million in cash on Feb. 28. The sale is expected to result in an
after-tax gain of approximately $20 million in the fourth quarter, which ends
March 31. Alliant announced on Dec. 23, 1996, that it had agreed to sell the
group to Hughes.
Richard Schwartz, chairman, president, and chief executive officer, said
the majority of the proceeds from the sale will be used to reduce debt.
"Approximately $90 million of the cash generated from the sale will go
toward debt repayment, which will lower our debt-to-total-capitalization ratio
significantly and reduce our interest expense accordingly," said Schwartz. "As
a result, our balance sheet will be stronger, giving us the financial
flexibility to continue to participate in the consolidation of the defense
industry. We fully intend to be an active buyer and seller in situations where
it makes good business sense."
-more-
<PAGE>
ALLIANT TECHSYSTEMS - PAGE 2
Schwartz said the balance of the $141 million from the sale will be used
for the company's share repurchase program or other strategic initiatives.
The Marine Systems Group employs approximately 650 people at facilities in
California, Maryland, Minnesota, Rhode Island, Texas, and Washington. The sale
to Hughes includes the group's headquarters facility in Mukilteo, Wash.
Hughes Electronics is a world leader in the design, manufacture and
marketing of advanced electronic systems. With more than 84,000 employees
worldwide and 1996 revenues of $15.9 billion, Hughes is comprised of Delco
Electronics Corporation, Hughes Aircraft Company, Hughes Telecommunications
Company, Hughes Network Systems, Inc., and DIRECTV, Inc.
After the sale of the Marine Systems Group, Hopkins, Minn.-based Alliant
Techsystems has annual revenues of approximately $1.1 billion, with the
company's Aerospace Systems Group accounting for just over half of the total.
Employees number approximately 6,700.
Alliant's three business groups - Aerospace Systems, Defense Systems, and
Emerging Business - conduct operations in 23 states. Company news and
information can be found on the Internet at www.ATK.com.
# # #
<PAGE>
Exhibit 99.2
ALLIANT TECHSYSTEMS INC.
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Condensed Consolidated Balance Sheet -
December 29, 1996 -1-
Notes to Pro Forma Condensed Consolidated Balance Sheet -2-
Pro Forma Condensed Consolidated Statement of Income - Year
ended March 31, 1996 -3-
Notes to Pro Forma Condensed Consolidated Statement of Income -4-
</TABLE>
The following unaudited pro forma consolidated financial statements should be
read in conjunction with the unaudited consolidated financial statements and
notes thereto included in Alliant Techsystems Inc.'s (the Company) Quarterly
Report on Form 10-Q for the quarterly period ended December 29, 1996 and the
audited consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1996. The pro
forma information may not be indicative of what the financial condition or
results of operations of the Company would have been, had the sale been
completed on the dates assumed, nor is such information necessarily indicative
of the financial condition or results of operations of the Company that may
exist in the future.
No pro forma condensed consolidated statement of income for the nine months
ended December 29, 1996 is presented herein. Such pro forma amounts would be the
same amounts as reflected in the Company's unaudited consolidated statement of
income for the nine months ended December 29, 1996 included in its Quarterly
Report on Form 10-Q for the quarter ended December 29, 1996, as previously filed
with the Commission.
<PAGE>
ALLIANT TECHSYSTEMS INC. (ATK)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
(In millions) ATK ---------------------
Historical I II Pro Forma
---------- -------- -------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 38.4 $ 138.0 $ (88.6) $ 87.8
Receivables 188.7 188.7
Net inventory 76.4 76.4
Other current assets 37.5 (10.6) 26.9
---------- -------- -------- ---------
Total current assets 341.0 127.4 (88.6) 379.8
Net property, plant, and equipment 364.2 (3.5) 360.7
Goodwill 124.2 124.2
Other assets 117.7 (70.0) 47.7
---------- -------- -------- ---------
Total assets $ 947.1 $ 53.9 $ (88.6) $ 912.4
========== ======== ======== =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current long-term debt $ 61.1 $ $ (20.5) $ 40.6
Accounts payable 71.5 71.5
Contract advances and allowances 41.6 41.6
Other current liabilities 127.6 36.3 163.9
---------- -------- -------- ---------
Total current liabilities 301.8 36.3 (20.5) 317.6
Long-term debt 312.5 (68.1) 244.4
Other long-term liabilities 132.5 (1.9) 130.6
---------- -------- -------- ---------
Total liabilities 746.8 34.4 (88.6) 692.6
Stockholders' Equity:
Common stock and additional paid-in-capital 249.7 249.7
Retained earnings (deficit) (14.8) 19.5 4.7
Common stock in treasury and other (34.6) (34.6)
---------- -------- -------- ---------
Total stockholders' equity 200.3 19.5 219.8
---------- -------- -------- ---------
Total liabilities and stockholders' equity $ 947.1 $ 53.9 $ (88.6) $ 912.4
========== ======== ======== =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet
-1-
<PAGE>
ALLIANT TECHSYSTEMS INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
1. Basis of Presentation - The Pro Forma Condensed Consolidated Balance Sheet
assumes that the sale of the Company's Marine Systems Group to Hughes
Aircraft Company (the transaction), as described in Item 2 of this Report on
Form 8-K dated March 13, 1997, occurred on December 29, 1996. It also
assumes that, as a result of the transaction, the Company would prepay a
portion of its Bank Term Loan.
2. Pro Forma Adjustments:
I. Reflects the sale of substantially all of the assets of the Marine
Systems Group to Hughes Aircraft Company and all costs/liabilities
resulting from the sale. Cash consideration received in the sale is
shown net of related transaction costs. The effective tax rate related
to the pre-tax gain on disposal is 35 percent.
II. Reflects the required prepayment of $88.6 million of the Company's
Bank Term Loan. Under the terms of the Bank Term Loan agreement, the
Company's prepayment will reduce each future minimum required payment by
approximately 42 percent.
-2-
<PAGE>
ALLIANT TECHSYSTEMS INC. (ATK)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
(In millions except ATK Pro Forma
per share data) Historical Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Sales $1,193.8 $(173.2) $1,020.6
Cost of sales 971.6 (137.3) 834.3
-------- ------- --------
Gross Margin 222.2 (35.9) 186.3
Operating expenses
Research and development 16.6 (2.5) 14.1
Selling 41.4 (8.3) 33.1
General and administrative 49.9 (6.5) 43.4
Restructuring charges (recovery) (3.2) (3.2)
-------- ------- --------
Total operating expenses 104.7 (17.3) 87.4
-------- ------- --------
Income from operations 117.5 (18.6) 98.9
Other income (expense)
Interest expense (45.1) 5.8 (39.3)
Other income (net) 4.0 (1.5) 2.5
-------- ------- --------
Total other expense (41.1) 4.3 (36.8)
Income from continuing operations
before income taxes 76.4 (14.3) 62.1
Income tax provision 16.8 (3.1) 13.7
-------- ------- --------
Income from continuing operations $ 59.6 $ (11.2) $ 48.4
-------- ------- --------
Earnings from continuing operations
per common and common equivalent
share: $ 4.43 $ (0.83) $ 3.61
-------- ------- --------
Average number of common and
common equivalent shares (millions) 13.4 13.4 13.4
-------- ------- --------
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statement on Income
-3-
<PAGE>
ALLIANT TECHSYSTEMS INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
1. Basis of Presentation - The Pro Forma Condensed Consolidated Statement of
Income assumes that the sale of substantially all of the assets of the
Company's Marine Systems Group, as described in Item 2 of this Report on Form
8-K dated March 13, 1997, occurred as of April 1, 1995.
2. Pro Forma Adjustments - Reflect the elimination of the Marine Systems Group's
historical results of operations, as previously included in the Company's
consolidated statement of income. In future filings, the Company will report
Marine Systems Group's results of operations as discontinued operations.
-4-
