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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 1, 1994
.................
MARTIN MARIETTA CORPORATION
.................................................................
(Exact name of registrant as specified in its charter)
Maryland 1-11810 52-1801551
.................................................................
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6801 Rockledge Drive, Bethesda, Maryland 20817
.................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 897-6000
.................................................................
Not Applicable
...............................................................
(Former name or former address, if changed since last report)
Page 1 of 109
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Item 2. Acquisition or Disposition of Assets
Pursuant to an Asset Purchase Agreement dated as of
December 22, 1993 by and between Martin Marietta Corporation
("Martin Marietta"), General Dynamics Corporation ("General
Dynamics"), General Dynamics Space Services Company and General
Dynamics Commercial Launch Services, Inc. ("Asset Purchase
Agreement"), effective at 11:59 p.m. Pacific Daylight Savings
Time on May 1, 1994, Martin Marietta, acting through a direct
wholly-owned subsidiary, Martin Marietta Technologies, Inc., and
an indirect wholly-owned subsidiary, Martin Marietta Commercial
Launch Services, Inc., acquired substantially all of the assets
and business (together with certain associated liabilities), all
as more particularly described in the Asset Purchase Agreement,
of General Dynamics's Space Systems Division ("Division"). The
primary asset of the Division is business relating to the Atlas
series of space launch vehicles and the Centaur upper stages used
with Atlas and Titan IV launch vehicles.
The purchase consideration of $208.5M was established
by negotiation. Martin Marietta paid such amount from its working
capital. The Asset Purchase Agreement provides that the purchase
consideration is subject to post-closing adjustment based generally
upon changes in the economic value of the Division as reflected in
the Division's financial statements (subject to certain adjustments)
between that existing on August 29, 1993 and that existing on the
date of closing as defined in the Asset Purchase Agreement.
The assets acquired include, among other things,
machinery, equipment and other physical property the primary use
of which relates to the design, development, production,
processing, sale and launching of expendable launch vehicles and
upper stage boosters as well as to other advanced space programs.
It is the present intent of Martin Marietta to continue to devote
the assets to such purposes.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
General Dynamics Space Systems Group
Combined Financial Statements
For the Years Ended December 31, 1993, 1992 and 1991
Together With Auditors' Report
(b) Pro Forma Financial Statements
Unaudited Pro Forma Combined Condensed Financial
Statements
Notes to Unaudited Pro Forma Combined Condensed
Financial Statements
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(c) Exhibits
Exhibit 10 - Asset Purchase Agreement dated as of
December 22, 1993 by and between Martin Marietta Corporation,
General Dynamics Corporation, General Dynamics Space Services
Company and General Dynamics Commercial Launch Services, Inc.
Note: The Registrant has not filed the Exhibits and Schedules to
the Asset Purchase Agreement on the basis that these are not
material for the purposes of this filing, however, the Registrant
agrees to furnish such documents to the Securities and Exchange
Commission upon request.
Exhibit 23 - Consent of Arthur Andersen & Co, SC
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 hereunto duly authorized.
MARTIN MARIETTA CORPORATION
(Registrant)
Date: May 13, 1994 By: /s/ Stephen M. Piper
Stephen M. Piper
Assistant General Counsel
Page 3
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Item 7 (a)
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
TOGETHER WITH AUDITORS' REPORT
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To General Dynamics Corporation:
We have audited the accompanying combined balance sheets of the GENERAL
DYNAMICS SPACE SYSTEMS GROUP as of December 31, 1993 and 1992, and the related
combined statements of operations and net investment and cash flows for each
of the three years in the period ended December 31, 1993. These combined
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the General
Dynamics Space Systems Group as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. As discussed in Note 1, the
Group has suffered pretax losses from operations in each year since inception,
aggregating approximately $577 million as of December 31, 1993. These losses
have been funded by General Dynamics Corporation. These factors raise
substantial doubt about the Group's ability to operate on a standalone basis
without continued financial support. The accompanying combined financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
As discussed in Note 9 to the combined financial statements, effective January
1, 1993, the Group changed its method of accounting for postretirement
benefits other than pensions.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
San Diego, California
January 20, 1994
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GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
1993 1992
(Amounts in thousands)
ASSETS
CURRENT ASSETS:
Cash $ 419 $ 170
Accounts receivable 31,427 4,896
Contracts in process 1,449,901 1,352,536
Other current assets 6,126 1,921
---------- ----------
Total current assets 1,487,873 1,359,523
NONCURRENT ASSETS:
Property, plant and equipment, net 80,769 87,455
---------- ----------
$1,568,642 $1,446,978
========== ==========
LIABILITIES AND NET INVESTMENT
CURRENT LIABILITIES:
Customer deposits $1,018,252 $ 862,839
Accounts payable and other current liabilities 94,668 93,103
Contract loss reserves 178,948 240,227
---------- ----------
Total current liabilities 1,291,868 1,196,169
DEFERRED TAXES 38,233 41,490
COMMITMENTS AND CONTINGENCIES
NET INVESTMENT BY GENERAL DYNAMICS CORPORATION 238,541 209,319
---------- ----------
$1,568,642 $1,446,978
========== ==========
The accompanying notes are an integral part of
these combined balance sheets.
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GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF OPERATIONS AND NET INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
(Amounts in thousands)
NET SALES $529,006 $504,650 $367,099
OPERATING COSTS AND EXPENSES 556,943 556,254 382,237
-------- -------- --------
OPERATING LOSS (27,937) (51,604) (15,138)
OTHER INCOME (EXPENSES), net 3,359 (384) 1,062
-------- -------- --------
Loss before income taxes (24,578) (51,988) (14,076)
BENEFIT FOR INCOME TAXES 9,000 16,912 4,946
-------- -------- --------
Net loss (15,578) (35,076) (9,130)
NET INTERDIVISIONAL ACTIVITY 44,800 (73,904) 29,584
NET INVESTMENT BY GENERAL DYNAMICS
CORPORATION:
Beginning of period 209,319 318,299 297,845
-------- -------- --------
End of period $238,541 $209,319 $318,299
======== ======== ========
The accompanying notes are an integral part of
these combined financial statements.
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GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,578) $(35,076) $ (9,130)
Adjustments to reconcile net
loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,389 13,459 18,838
Deferred income taxes (3,257) 39,250 41,839
Investment write-off - 10,000 -
Decrease (increase) in:
Accounts receivable (26,531) 6,434 9,050
Contracts in process (97,365) (167,150) (237,868)
Other current assets (4,205) 2,696 1,005
Increase (decrease) in:
Customer deposits 155,413 180,704 196,445
Accounts payable and other
current liabilities 1,565 27,110 17,740
Contract loss reserves (61,279) 2,061 (44,834)
--------- -------- --------
Net cash provided by (used in)
operating activities (37,848) 79,488 (6,915)
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (6,703) (5,431) (22,654)
--------- -------- --------
Net cash used in investing
activities (6,703) (5,431) (22,654)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net interdivisional activity 44,800 (73,904) 29,584
--------- -------- --------
Net cash provided by (used in)
financing activities 44,800 (73,904) 29,584
--------- -------- --------
NET INCREASE IN CASH $ 249 $ 153 $ 15
CASH AT BEGINNING OF YEAR 170 17 2
--------- --------- ---------
CASH AT END OF YEAR $ 419 $ 170 $ 17
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Notes received as customer deposits $ 67,616 $ 39,774 $ -
========= ========= =========
The accompanying notes are an integral part of
these combined financial statements.
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GENERAL DYNAMICS SPACE SYSTEMS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Amounts in thousands)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The General Dynamics Space System Group (the Group) specializes in the
design, engineering, manufacturing and support of space launch vehicles and
related launch services. The major programs of the Group include the
Commercial Atlas Expendable Launch Vehicle (Atlas) program and the
Titan/Centaur program (Titan). Atlas includes the production and launch of
Atlas/Centaur vehicles for various U.S. and foreign Government, Civil, and
commercial customers. Titan includes the production of fifteen Centaur upper
stages for launch on the Titan IV launch vehicle. The Group is a
subcontractor to Martin Marietta on Titan.
Reporting Entity, Principles of Consolidation
The accompanying combined financial statements of the Group include the
accounts of General Dynamics Space Systems Division (GDSS), which is the
primary operating entity providing launch vehicles and services. GDSS is a
division of General Dynamics Corporation (GD). Also included are the accounts
of Commercial Launch Services, Inc., which is a wholly owned subsidiary of GD
that provides sales and marketing services to GDSS, and General Dynamics
Space Services Corporation, also a wholly owned subsidiary of GD which
provides engineering services to GDSS and other corporations in the aerospace
industry.
All intercompany transactions within the Group have been eliminated.
Assumption Regarding Going Concern
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. The Group has suffered
pretax losses from operations in each year since inception, aggregating
approximately $577 million as of December 31, 1993. These losses have been
funded by GD. These factors raise substantial doubt about the Group's ability
to operate on a standalone basis without continued financial support. The
accompanying combined financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
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Asset Purchase Agreement
On December 22, 1993, GD and Martin Marietta Corporation entered into an Asset
Purchase Agreement (the Agreement) to sell certain assets and liabilities of
the Group (excluding primarily certain property, plant and equipment) to
Martin Marietta Corporation for approximately $208,500, subject to certain
post-closing adjustments. GD management expects the transaction to be
completed during the second quarter of 1994.
Sales and Earnings Under Long-Term Contracts and Programs
The Atlas program is accounted for using the completed contract method of
accounting. Sales are recognized upon launch at the contract price. Atlas
revenues approximated $273,000, $245,000 and $130,000 for the years ended
December 31, 1993, 1992 and 1991, respectively. Cost of sales is based upon
the estimated unit cost. General and administrative expenses and product
development costs are treated as contract costs to the extent allocable to a
firm contract, otherwise these costs are expensed as incurred.
All other programs and contracts are accounted for using the
percentage-of-completion method of accounting. Sales and earnings on fixed
price type and cost reimbursement contracts are recognized as costs are
incurred on each individual contract. The sales and earnings on these
contracts are based, in part, on estimates. These estimates are revised
periodically and adjustments to sales and earnings resulting from such
revisions are recorded on a cumulative basis in the period of revision.
Any anticipated losses on contracts or programs are charged to earnings when
identified. Such losses encompass all costs, including general and
administrative expenses, allocable to the contracts. Revenue arising from the
claims process is not recognized either as income or as an offset against a
potential loss until it can be reliably estimated and its realization is
probable.
General and Administrative Expenses
General and administrative expenses are allocated to contracts in process and
included in operating costs and expenses at the time of sales recognition with
the exception of certain Atlas contracts as discussed above. Total general
and administrative expenses incurred amounted to approximately $65,000 in
1993, $62,000 in 1992, and $60,000 in 1991.
Certain GD corporate general and administrative costs attributed to the
Group's operations are charged to the Group by GD. Total allocated corporate
expenses were approximately $12,000, $8,000 and $5,000 in 1993, 1992 and 1991,
respectively. No assurances can be given that such expenses would not vary
significantly if the Group had operated as an unaffiliated entity.
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Research and Development Costs
Customer-sponsored research and development costs are accounted for as direct
costs.
Company-sponsored research and development costs, including bid and proposal
costs, amounted to approximately $9,000 in 1993, $12,000 in 1992 and $10,000
in 1991. Specifically reimbursable costs are allocated to contracts in
process and included in operating costs and expenses at time of sales
recognition.
Contracts in Process
Contracts in process for the Atlas program are stated at cost incurred less
cost allocated to delivered units. All other contracts in process are stated
at cost incurred, plus estimated earnings, less progress payments. Incurred
costs consist of, among other things, production costs and related overhead,
which includes general and administrative expenses allocated to contracts.
Revenue which has not yet been billed is included in contracts in process.
Property, Plant and Equipment
The Group uses straight-line and accelerated methods of depreciation for its
depreciable assets.
Customer Deposits
Customer deposits represent primarily advance payments from Atlas program
customers. In the event of contract termination, a certain portion of the
deposit would be refunded to the customer in accordance with contract terms.
At December 31, 1993, customer deposits are net of $67,616 of notes receivable
from a related party received in connection with one specific contract in the
Atlas program. These notes are due 60 days prior to launch, which is
currently scheduled for the fourth quarter of 1994, and bear interest at rates
ranging from 6.5% to 7%.
Classification
Consistent with industry practice, contracts in process, customer deposits and
other assets and liabilities relating to long-term contracts and programs are
classified as current although a portion of these amounts is not expected to
be realized within one year.
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2. ATLAS PROGRAM
During 1993, 1992 and 1991, the Group recognized $29,000, $53,000 and
$8,000, respectively, of losses on certain contracts in the Atlas program
representing primarily the costs to investigate launch failures, related
corrective actions, the estimated impact of launch delays on existing
contracts, and certain other increases in expected costs.
All of the aforementioned losses, as well as losses identified in
earlier periods, have been reflected in contract loss reserves in the
accompanying balance sheets.
The Group's investment in the Atlas program includes recorded amounts
of inventoried costs, customer deposits and liabilities relating to the
previously discussed losses. The Group's ability to recover its significant
investment in the Atlas program is dependent upon, among other things, the
vehicle demonstrating the level of reliability required by its customers. In
addition, the Group has a remaining firm commitment for the purchase of rocket
engines of approximately $300,000 and other firm commitments of approximately
$165,000 as of December 31, 1993.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of December 31:
1993 1992
Government: long-term contracts
or programs $13,172 $2,212
Commercial and other 18,255 2,684
------- ------
$31,427 $4,896
======= ======
Direct sales to the U.S. Government were approximately $387,000, $359,000, and
$243,000 in 1993, 1992 and 1991, respectively.
4. CONTRACTS IN PROCESS
Contracts in process consist of the following as of December 31:
1993 1992
Government contracts in process $ 194,969 $ 298,453
Commercial programs in process 1,385,138 1,289,883
---------- ----------
1,580,107 1,588,336
Less--Advances and progress payments (130,206) (235,800)
---------- ----------
$1,449,901 $1,352,536
========== ==========
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Substantially all government contracts in process represent unbilled costs
incurred plus estimated earnings that will be billed to the customer upon the
completion of certain milestones.
Under the contractual arrangements by which progress payments are received,
the U.S. Government asserts that it has a security interest in the contracts
in process identified by the related contracts.
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is stated at cost. The major classes of
property, plant and equipment are as follows:
1993 1992
Land and improvements $ 1,750 $ 1,750
Buildings and improvements 75,564 72,660
Machinery and equipment 80,299 76,500
-------- --------
157,613 150,910
Less--Accumulated depreciation
and amortization (76,844) (63,455)
-------- --------
$ 80,769 $ 87,455
======== ========
Certain plant facilities aggregating approximately 815 square feet are
provided by the U.S. Government at an annual lease cost of approximately $873.
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consist of the following at
December 31:
1993 1992
Accounts payable $57,358 $73,178
Accrued salaries and wages 17,654 12,982
Other current liabilities 19,656 6,943
------- -------
$94,668 $93,103
======= =======
7. INCOME TAXES
The Group is included in GD's consolidated federal income tax return. Under
the provisions of an informal tax sharing agreement with GD, the Group
computes federal income taxes to approximate a separate company basis. Taxes
currently payable or refundable based on this computation are reflected in the
Group's intercompany account balance with GD. Such intercompany balance is
reflected in Net Investment by General Dynamics Corporation in the
accompanying combined financial statements. Deferred taxes are shown
separately in the accompanying combined financial statements.
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The benefit for federal income taxes is summarized as follows:
1993 1992 1991
Current $ (5,743) $(56,162) $(46,785)
Deferred (3,257) 39,250 41,839
---------- ---------- ----------
$ (9,000) $ (16,912) $ (4,946)
========== ========== ==========
Deferred federal income taxes result primarily from differences in accounting
for long-term contracts, certain accrued costs, contract loss reserves, and
depreciation for financial reporting and income tax reporting purposes.
Earnings under long-term contracts (other than Atlas, see Note 1) are recorded
either under the percentage-of-completion or completed contract methods of
accounting for income tax reporting purposes.
The provision for state and local income taxes, which is primarily allocable
to U.S. Government contracts, is included in operating costs and expenses.
8. COMMITMENTS AND CONTINGENCIES
Outsourcing of Information Technology Operations
In November 1991, GD signed an agreement with Computer Sciences
Corporation (CSC) for the sale of the information technology operations of
GD's Data Systems Division. Under a related agreement, CSC has the exclusive
right to provide information technology services to the Group for the next ten
years. The agreement provides for minimum aggregate payments to CSC during
the first three years of the service agreement and payments equal to 90
percent of the Company's estimated annual usage thereafter.
Atlas Program Commitments
The Group has offered different types of launch insurance coverage to
its customers under certain Atlas contracts. This insurance coverage is
generally designed to protect the customer from incurring losses relating to
any one or a combination of the following:
- Launch failure
- Damage or other loss to the satellite during launch and flight
- Satellite performance for specified period subsequent to launch
Generally, the Group has sold this insurance to its customers at fixed
premium rates. However, the Group generally does not purchase the related
insurance until sometime thereafter. The future availability and cost of this
insurance is subject to market conditions which can vary greatly and
significantly impact the profitability of launch contracts. The Group has
committed to providing, in certain circumstances, significant amounts of
launch insurance coverage falling outside of the insurance contract currently
in place.
The Company has entered into debt and lease guarantees in connection
with certain contracts in the Atlas program. As of December 31, 1993, the
Company was contingently liable on guarantees and other arrangements
aggregating up to a maximum of approximately $104,000.
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Rental Expense and Lease Commitments
Rent expense, substantially all of which is minimum rental expense, was
approximately $7,000, $7,000 and $10,000 in 1993, 1992 and 1991, respectively.
Rental commitments under existing operating leases at December 31, 1993, are
approximately $5,000 in 1994, $4,000 in 1995, $4,000 in 1996, $4,000 in 1997,
$4,000 in 1998 and $3,000 thereafter.
Legal
The Group is involved in various legal matters in the ordinary course
of its business activities. Management does not expect these matters to have
a significant impact on the Group's financial condition or results of its
operations.
9. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
The Group participates in five GD sponsored trustee noncontributory retirement
plans covering substantially all of its employees. Under certain of the
plans, retirement benefits are primarily a function of both the employee's
years of service and level of compensation. Under other plans, benefits are a
function only of years of service.
It is GD's policy to fund retirement plans to the maximum extent deductible
under existing federal income tax regulations. Such contributions are
intended to provide not only for benefits attributed to service to date but
also for those expected to be earned in the future.
Assumptions used in accounting for the plans are as follows as of December 31:
1993 1992 1991
Discount rates 7% 8% 8%
Varying rates of increase in
compensation levels based on age 4.5-10% 4.5-10% 4.5-10%
Expected long-term rate on assets 8% 8% 8%
The Group's net periodic pension cost calculated pursuant to Statement of
Financial Accounting Standards NO. 87, "Employers' Accounting for Pensions,"
included the following:
1993 1992 1991
Year ended December 31:
Service costs - benefits earned
during period $ 9,404 $ 9,096 $ 8,935
Interest cost on projected
benefit obligation 15,325 12,651 11,004
Actual return on plan assets (26,289) (11,863) (33,501)
Net amortization and deferral 11,309 (1,275) 23,243
------- ------- --------
$ 9,749 $ 8,609 $ 9,681
======== ======= ========
Increases in prior service cost resulting from plan amendments are amortized
on a straight-line basis over the average remaining service period of
employees expected to receive benefits under the plan. If the unrecognized
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gain or loss at the beginning of the year exceeds 10 percent of the greater of
the projected benefit obligation or the market related value of plan assets,
the excess is amortized on a straight-line basis over the average remaining
service period of employees expected to receive benefits under the plan.
GD's stock is not included in the assets of any of the plans. At December 31,
1993, approximately 54 percent of the assets are invested in U.S. Government
securities, 34 percent in common stock and equivalents and 12 percent in
diversified corporate fixed income securities. In the event GD terminates
certain plans with assets that exceed accumulated benefits, the U.S.
Government may receive an equitable interest in those assets.
The following table sets forth the Group's share of the plans' funded status:
1993 1992
Actuarial present value of
benefit obligations:
Vested benefit obligation $(207,191) $(143,870)
========= =========
Accumulated benefit obligation (210,639) (146,899)
========= =========
Projected benefit obligation (246,417) (172,103)
Plans' assets at fair value 223,214 195,992
--------- ---------
Plans' assets (less than) in excess
of projected benefit obligation (23,203) 23,889
Unrecognized net gain (7,752) (35,542)
Prior service cost not yet recognized
in net periodic pension cost 33,191 15,219
Unrecognized net asset at January 1, 1986 (5,274) (5,910)
--------- ---------
Accrued pension cost recognized
in the combined balance sheets $ (3,038) $ (2,344)
========= =========
The Group provides certain health care and life insurance benefits for retired
employees. The cost of these benefits totaled $1,756, $1,450 and $750 in
1993, 1992 and 1991, respectively, based on the claims paid.
Effective January 1, 1993, the Group adopted FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", which requires
the recognition of postretirement benefits over the period in which active
employees become eligible for such benefits. Previously, the Group recognized
these costs on the cash basis. The Group has elected to implement this new
standard by recognizing the transition obligation prospectively over the
average estimated remaining service life of active employees. The remaining
transition obligation at January 1, 1994, is approximately $9,000.
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Item 7 (b)
UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements have been prepared by Martin Marietta Corporation's
(the "Corporation's") management from its historical consolidated
financial statements and from the historical financial statements
of General Dynamics Space Systems Group which are included in this
Current Report on Form 8-K. The unaudited pro forma combined condensed
statement of earnings reflect adjustments as if the transaction had
occurred on January 1, 1993. The unaudited pro forma combined condensed
balance sheet reflects adjustments as if the transaction had occurred on
December 31, 1993. See "Note 1 -- Basis of Presentation." The pro forma
adjustments described in the accompanying notes are based upon preliminary
estimates and certain assumptions that management of the Corporation
believes are reasonable in the circumstances.
The unaudited pro forma combined condensed financial statements are
not necessarily indicative of what the financial position or results of
operations actually would have been if the transaction had occurred on the
applicable dates indicated. Moreover, they are not intended to be indica-
tive of future results of operations or financial position. The unaudited
pro forma combined condensed financial statements should be read in con-
junction with the historical consolidated financial statements of the
Corporation and the related notes thereto which were included in the Corp-
oration's Annual Report on Form 10-K for the year ended December 31, 1993,
which was filed with the Securities and Exchange Commission on February
28, 1994. The unaudited pro forma combined condensed financial statements
should also be read in conjunction with the historical financial state-
ments of General Dynamics Space Systems Group which are included in this
Current Report on Form 8-K.
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<TABLE>
Unaudited Pro Forma Combined
Condensed Statement of Earnings
($ in millions, except per share data)
<CAPTION>
For the Year Ended December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
<S> <C> <C> <C> <C> <C>
Net sales $9,435.7 $529.0 2(d) ($149.0) $9,815.7
Cost of sales, other costs and expense 8,647.2 556.9 2(d) (149.0) 9,041.2
2(e) (13.9)
-------- ------- ------- --------
Earnings from operations 788.5 (27.9) 13.9 774.5
Other income and expenses, net 47.0 3.3 - 50.3
-------- ------- -------- --------
835.5 (24.6) 13.9 824.8
Interest expense on debt 110.2 - - 110.2
-------- ------- -------- --------
Earnings before taxes on income and
cumulative effect of accounting chan 725.3 (24.6) 13.9 714.6
Taxes on income 275.0 (9.0) 2(f) 5.3 271.3
-------- ------- -------- --------
Earnings before cumulative effect of
accounting changes 450.3 (15.6) 8.6 443.3
Cumulative effect of changes in accounting for
postretirement benefits other than pensions
and for post-employment benefits (429.4) - - (429.4)
-------- ------- -------- --------
Net Earnings (Loss) $20.9 ($15.6) $8.6 $13.9
======== ======= ======== ========
Net Earnings (Loss) Per Common Share
Assuming no dilution:
Before cumulative effect of accounting changes $4.25 N/A $4.18
Cumulative effect of accounting changes (4.51) N/A (4.51)
-------- ------- -------
($0.26) N/A ($0.33)
======== ======= =======
Assuming full dilution:
Before cumulative effect of accounting changes $3.80 N/A $3.75
Cumulative effect of accounting changes * N/A *
-------- ------- -------
* N/A *
======== ======= =======
<FN>
*Anti-dilutive
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Unaudited Pro Forma Combined
Condensed Balance Sheet
($ in millions)
<CAPTION>
As of December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $373.1 $0.4 2(a) ($208.5) $164.6
2(b) (0.4)
Receivables 1,435.5 31.4 1,466.9
Inventories 358.8 1,449.9 2(c) (140.0) 1,668.7
Current deferred income taxes 238.6 - - 238.6
Other current assets 42.2 6.1 - 48.3
-------- -------- --------- --------
Total Current Assets 2,448.2 1,487.8 (348.9) 3,587.1
Other Noncurrent Assets 707.8 - - 707.8
Noncurrent Deferred Income Tax Benefit 206.1 - 2(c) 22.9 229.0
Property, Plant & Equipment, net 1,692.8 80.8 2(b) (42.8) 1,739.8
2(c) 9.0
Cost in Excess of Net Assets Acquired 1,914.9 - 2(c) 144.7 2,059.6
Other Intangibles 775.1 - - 775.1
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $536.8 $94.7 $ - $631.5
Customer deposits - 1,018.3 - 1,018.3
Other current liabilities 572.3 178.9 - 751.2
Salaries, benefits and payroll taxes 333.6 - - 333.6
Income taxes 48.9 - - 48.9
Current maturities of long-term debt 318.5 - - 318.5
-------- -------- --------- --------
Total Current Liabilities 1,810.1 1,291.9 - 3,102.0
Noncurrent Deferred Income Tax Liability - 38.2 2(b) (38.2) -
Long-term Debt 1,479.6 - - 1,479.6
Postretirement Benefits 740.6 - 2(c) 6.6 747.2
Other Noncurrent Liabilities 838.2 - 2(c) 55.0 893.2
Shareowners' Equity 2,876.4 238.5 2(c) (238.5) 2,876.4
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
</TABLE>
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed statement of
earnings presents the historical results of operations of the Corporation
and the General Dynamics Space Systems Group for the year ended December
31, 1993, with pro forma adjustments as if the transaction had taken place
on January 1, 1993. The unaudited pro forma combined condensed balance
sheet presents the historical balance sheets of the Corporation and the
General Dynamics Space Systems Group as of December 31, 1993, as if the
transaction had been consummated as of December 31, 1993, in a transaction
accounted for as a purchase in accordance with generally accepted account-
ing principles.
No reclassifications have been made to the historical financial
statements of the General Dynamics Space Systems Group in preparing
the pro forma combined condensed financial statements.
2. PRO FORMA ADJUSTMENTS
The following adjustments give pro forma effect to the transaction:
(a) To record the cash purchase consideration at closing in the
amount of $208.5 million.
(b) To reflect the excluded assets and liabilities at closing.
(c) To adjust the acquired assets and assumed liabilities to their
estimated fair values, including the recording of the cost in
excess of net assets acquired of $144.7 million.
(d) Adjustments for the elimination of the Titan/Centaur program
intercompany sales and cost of sales which would not have been
recognized if the transaction had occurred on January 1, 1993.
(e) Adjustments for: (i) items charged to General Dynamics Space
Systems Group which would or would not have been incurred if the
transaction had occurred on January 1, 1993; (ii) additional
depreciation expense on the step-up of certain fixed assets
to fair value over an estimated life of ten years; and (iii) the
amortization of excess costs over acquired net assets over an
estimated life of 20 years. Such depreciation and amortization
expenses are subject to possible adjustment resulting from
completion of the valuation analyses.
(f) The tax effect, using a 38% statutory rate, on the pro forma
adjustments.
The pro forma combined condensed statements of earnings do not reflect
the total cost savings or economies of scale that the Corporation's
management believes would have been achieved had the transaction occurred
on January 1, 1993.
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(Dollars in Millions, except share and per share data)
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
ASSUMING NO DILUTION:
Average number of common shares
outstanding (1) 95,346,614 95,346,614
========== ==========
Earnings before cumulative effect
of accounting changes $ 450.3 $ 443.3
Less: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes applicable
to common stock 405.0 398.0
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net loss applicable to common stock $( 24.4) $( 31.4)
====== ======
Net earnings (loss) per common share:
Before cumulative effect
of accounting changes $ 4.25 $ 4.18
Cumulative effect of
accounting changes (4.51) (4.51)
------ ------
$( .26) $( .33)
==== ====
(1) Excludes common stock equivalents since the
dilutive effect on earnings per share assuming
no dilution is less than 3%.
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE (Continued)
(Dollars in Millions, except share and per share data)
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
ASSUMING FULL DILUTION:
Average number of common shares
outstanding 95,346,614 95,346,614
Dilutive stock options -- based
on the treasury stock method
using the December 31 market
prices, if higher than average
market price 1,294,357 1,294,357
Assumed conversion of the Convertible
Preferred Stock from the date of
issuance 21,706,100 21,706,100
----------- -----------
118,347,071 118,347,071
=========== ===========
Earnings before cumulative effect
of accounting changes applicable
to common stock $ 405.0 $ 398.0
Add: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes 450.3 443.3
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net earnings $ 20.9 $ 13.9
====== ======
Net earnings per common share:
Before cumulative effect of
accounting changes $ 3.80 $ 3.75
Cumulative effect of accounting
changes * *
----- -----
$ * $ *
===== =====
* Anti-dilutive
<PAGE>
<PAGE>
Exhibit 10
ASSET PURCHASE AGREEMENT
BY AND AMONG
MARTIN MARIETTA CORPORATION,
AS PURCHASER,
AND
GENERAL DYNAMICS CORPORATION,
GENERAL DYNAMICS SPACE SYSTEMS COMPANY
AND
GENERAL DYNAMICS COMMERCIAL LAUNCH SERVICES, INC.,
AS SELLERS
DATED AS OF DECEMBER 22, 1993
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . 1
ARTICLE II BASIC TRANSACTION. . . . . . . . . . . . . . . 14
2.1 Purchase and Sale of Assets. . . . . . . . . 14
2.2 Assumption of Liabilities. . . . . . . . . . 14
2.3 Purchase Consideration . . . . . . . . . . . 14
2.4 Purchase from GDC, SSC and CLS . . . . . . . 15
ARTICLE III CERTAIN AGREEMENTS OF THE PARTIES . . . . . . 15
3.1 Certain Provisions Relating to Assets. . . . 15
ARTICLE IV POST-CLOSING ADJUSTMENT. . . . . . . . . . . . 16
4.1 Preparation of August Balance Sheet. . . . . 16
4.2 Preparation of Initial Statement of
Net Assets to be Sold and Initial
Reconciling Statement. . . . . . . . . . . 17
4.3 Preparation of Closing Date
Balance Sheet. . . . . . . . . . . . . . . 18
4.4. Preparation of Closing Statement of
Net Assets to be Sold and Closing
Reconciling Statement. . . . . . . . . . . 18
4.5 Audit. . . . . . . . . . . . . . . . . . . . 19
4.6 Review of Closing Statement of
Net Assets to be Sold. . . . . . . . . . . 20
4.7 Adjustment of Purchase Price . . . . . . . . 21
<PAGE>
<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER. . . . 22
5.1 Organization and Authority of Seller . . . . 22
5.2 Authorization of Agreements. . . . . . . . . 22
5.3 No Conflicts . . . . . . . . . . . . . . . . 22
5.4 Consents . . . . . . . . . . . . . . . . . . 23
5.5 Financial Statements . . . . . . . . . . . . 23
5.6 Forecasts. . . . . . . . . . . . . . . . . . 24
5.7 Absence of Certain Developments. . . . . . . 24
5.8 Material Contracts . . . . . . . . . . . . . 24
5.9 Employee Benefit Plans . . . . . . . . . . . 25
5.10 Litigation; Violation of Law . . . . . . . . 27
5.11 Tax and Other Returns and Reports. . . . . . 29
5.12 Absence of Undisclosed Liabilities . . . . . 29
5.13 Affiliate Agreements . . . . . . . . . . . . 30
5.14 Contracts for the Sale of Products
or Services. . . . . . . . . . . . . . . . 30
5.15 Export Control and Related Matters . . . . . 32
5.16 Cooperative Business Agreements. . . . . . . 33
5.17 Personal Property. . . . . . . . . . . . . . 33
5.18 Environmental Matters. . . . . . . . . . . . 34
5.19 Inventory and Receivables. . . . . . . . . . 35
5.20 Real Property. . . . . . . . . . . . . . . . 36
5.21 Intellectual Property. . . . . . . . . . . . 39
5.22 Employees and Employee Relations . . . . . . 40
5.23 Insurance. . . . . . . . . . . . . . . . . . 41
5.24 Backlog. . . . . . . . . . . . . . . . . . . 42
5.25 Brokers' and Finders' Fees . . . . . . . . . 42
5.26 Full Disclosure. . . . . . . . . . . . . . . 42
5.27 Unimpaired Operation . . . . . . . . . . . . 43
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER. . 42
6.1 Organization and Authority of Purchaser. . . 43
6.2 Authorization of Agreements. . . . . . . . . 43
6.3 No Conflicts . . . . . . . . . . . . . . . . 44
6.4 Consents . . . . . . . . . . . . . . . . . . 44
6.5 Litigation . . . . . . . . . . . . . . . . . 44
6.6 Brokers' and Finders' Fees . . . . . . . . . 44
ARTICLE VII COVENANTS . . . . . . . . . . . . . . . . . . 44
7.1 Investigations by Purchaser. . . . . . . . . 44
7.2 Satisfaction of Conditions . . . . . . . . . 45
7.3 Conduct of Seller. . . . . . . . . . . . . . 46
7.4 HSR Act Compliance . . . . . . . . . . . . . 48
7.5 Pending or Threatened Litigation . . . . . . 48
7.6 Assignments; Novations . . . . . . . . . . . 48
7.7 [Intentionally Ommitted] . . . . . . . . . . 50
7.8 Noncompete . . . . . . . . . . . . . . . . . 50
7.9 Non-Solicitation . . . . . . . . . . . . . . 51
7.10 Certain Payments to Employees. . . . . . . . 51
7.11 Use of Stationery, etc.. . . . . . . . . . . 51
7.12 Administration of Accounts . . . . . . . . . 51
7.13 1993 Financial Statements. . . . . . . . . . 52
7.14 Audited Financial Statements . . . . . . . . 52
<PAGE>
<PAGE>
ARTICLE VIII CONDITIONS TO THE CLOSING. . . . . . . . . . 52
8.1 Conditions to Purchaser's Obligation to
Effect the Closing . . . . . . . . . . . . 52
8.2 Conditions to Seller's Obligations to
Effect the Closing . . . . . . . . . . . . 55
ARTICLE IX THE CLOSING: TERMINATION OF AGREEMENT. . . . . 57
9.1 The Closing. . . . . . . . . . . . . . . . . 57
9.2 Termination. . . . . . . . . . . . . . . . . 57
ARTICLE X DELIVERIES AT THE CLOSING . . . . . . . . . . . 57
10.1 Deliveries by Seller at the Closing. . . . . 58
10.2 Deliveries by Purchaser at the Closing . . . 59
ARTICLE XI EMPLOYEES AND EMPLOYEE BENEFITS. . . . . . . . 60
11.1 Employment . . . . . . . . . . . . . . . . . 60
11.2 Collective Bargaining Agreements . . . . . . 61
11.3 Retiree Medical and Life Insurance
Benefits . . . . . . . . . . . . . . . . . 62
11.4 Health and Welfare Benefits for
Active Employees . . . . . . . . . . . . . 63
11.5 Pension Benefits . . . . . . . . . . . . . . 64
11.6 Savings Plans. . . . . . . . . . . . . . . . 65
11.7 Procedural Matters . . . . . . . . . . . . . 65
11.8 Incentive Closing Agreements . . . . . . . . 65
11.9 Indemnification. . . . . . . . . . . . . . . 65
11.11 Intellectual Property. . . . . . . . . . . . 66
ARTICLE XII CLOSING AND POST-CLOSING COVENANTS;
INDEMNIFICATION. . . . . . . . . . . . . . . . . . 66
12.1 Survival of Representations and Warranties . 66
12.2 Indemnification. . . . . . . . . . . . . . . 67
12.3 Payment of Brokers' or Finders' Fees . . . . 72
12.4 Tax Matters. . . . . . . . . . . . . . . . . 72
12.5 [Intentionally Omitted]. . . . . . . . . . . 75
12.6 Liquidating Events . . . . . . . . . . . . . 75
ARTICLE XIII GENERAL. . . . . . . . . . . . . . . . . . . 76
13.1 Amendments . . . . . . . . . . . . . . . . . 76
13.2 Integrated Contract. . . . . . . . . . . . . 76
13.3 Governing Law. . . . . . . . . . . . . . . . 77
13.4 Notices. . . . . . . . . . . . . . . . . . . 77
13.5 Assignment . . . . . . . . . . . . . . . . . 78
13.6 Headings . . . . . . . . . . . . . . . . . . 78
13.7 Counterparts . . . . . . . . . . . . . . . . 78
13.8 Expenses . . . . . . . . . . . . . . . . . . 78
13.9 Further Assurances . . . . . . . . . . . . . 78
13.10 Public Announcements . . . . . . . . . . . . 79
13.11 Bulk Sales Compliance. . . . . . . . . . . . 79
13.12 No Third Party Beneficiaries . . . . . . . . 79
13.13 Agreement Regarding EAC's. . . . . . . . . . 79
<PAGE>
<PAGE>
EXHIBITS, NONDISCLOSURE SCHEDULES AND ADDITIONAL DOCUMENTS
EXHIBITS
EXHIBIT A - Form of Assumption Agreement
EXHIBIT B - Form of Bill of Sale
EXHIBIT C - Form of Kearny Mesa Lease Agreement
EXHIBIT D - Form of License Agreement
EXHIBIT E - Form of Service Agreement
EXHIBIT F - Form of Sycamore Canyon Lease
NONDISCLOSURE SCHEDULES
Schedule 1(A) - Assumed Liabilities
Schedule 1(B) - Excluded Assets
Schedule 1(C) - Leased Assets
Schedule 1(D) - Real Property Interests
Schedule 2.2 - Non-Exclusive List of Excluded Liabilities
Schedule 3.1(b) - Certain Required Consents
Schedule 4.2 - EAC Assumptions
ADDITIONAL DOCUMENTS
August Balance Sheet, Initial Statment of Net Assets to Be Sold
and Initial Reconciling Statement
Agreement Regarding Schedules and Other Matters
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement dated as of December 22, 1993, by and between
MARTIN MARIETTA CORPORATION, a Maryland corporation ("Purchaser"), GENERAL
DYNAMICS CORPORATION, a Delaware corporation ("GDC"), GENERAL DYNAMICS SPACE
SERVICES COMPANY, a Delaware corporation ("SSC") and a wholly-owned subsidiary
of GDC, and GENERAL DYNAMICS COMMERCIAL LAUNCH SERVICES, INC., a Delaware
corporation ("CLS") and a wholly-owned subsidiary of GDC. GDC, SSC and CLS are
collectively referred to herein as the "Seller."
W I T N E S S E T H :
WHEREAS, GDC, directly and through SSC and CLS, is engaged, through
the Space Systems Division (as hereinafter defined), in the business of design,
development, production, processing, sale and launching of expendable launch
vehicles and upper stage rockets, and also is engaged in other advanced space
programs and energy and magnetics programs for commercial customers and the
United States Government and certain foreign governments; and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires
to sell to Purchaser substantially all of the assets and business of the Space
Systems Division (collectively, the "Business").
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
-1-
<PAGE>
<PAGE>
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.
"Allocation Arbiter" shall have the meaning ascribed thereto in
Section 12.4(e) hereof.
"AMSC Letter Agreement" shall refer to the letter agreement to be
executed between Purchaser and GDC at the Closing.
"Ancillary Agreements" shall refer to the Assumption Agreement, the
Bill of Sale, the License Agreement, the Services Agreement and the Facility
Leases.
"Arthur Andersen" shall refer to the public accounting firm of Arthur
Andersen & Co. or any successor organization.
"Arbiter" shall have the meaning ascribed to such term in Section
4.6(a) hereof.
"Assets" shall refer, collectively, to the Purchased Assets and the
Leased Assets.
"Assumed Liabilities" shall refer to those liabilities and obligations
of Seller which are identified on Schedule 1(A) hereto.
"Assumption Agreement" shall refer to the Assumption Agreement to be
executed at Closing by Purchaser, substantially in the form of Exhibit A
hereto.
"Atlas Program" shall mean the program of the Space Systems Division
consisting of the planned and actual design, development, production and launch
of 62 Atlas launch vehicles currently estimated to be completed in the year
2000.
"Attestation Report" shall have the meaning ascribed to such term in
Section 4.5 hereof.
"Audited Financial Statements" shall have the meaning ascribed to such
term in Section 7.14 hereof.
"August Balance Sheet" shall have the meaning ascribed to such term in
Section 4.1(a) hereof.
-2-
<PAGE>
<PAGE>
"Authorization" shall refer to any federal, state, local or other
governmental consent, license, permit, grant or authorization.
"Basket Limited Liabilities" shall have the meaning ascribed to such
term on Schedule 1(A) hereto.
"Bill of Sale" shall refer to the Bill of Sale to be executed at
Closing by Seller, substantially in the form of Exhibit B hereto.
"Business" shall have the meaning set forth in the second recital to
this Agreement.
"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.
"CERCLA" shall have the meaning ascribed to such term in the
definition of Environmental Laws.
"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., E.S.T.,
at the location specified in Section 9.1 hereof.
"Closing Date Balance Sheet" shall have the meaning ascribed to such
term in Section 4.3 hereof.
"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 Reconciling Statement" shall have the meaning ascribed to
such term in Section 4.4 hereof.
"Closing Statement of Net Assets To Be Sold" shall have the meaning
ascribed to such term in Section 4.4 hereof.
"Code" shall refer to the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall have the meaning ascribed to such
term in Section 7.1(b) hereof.
"Contaminant" shall mean, collectively, any (a) petroleum or petroleum
products, or derivative or fraction thereof, flammable material, explosives,
radioactive materials (including radon gas, other than that which is naturally
occurring), asbestos in any form that is or could become friable, urea
formaldehyde foam insulation ("UFI"), and polychlorinated biphenyls ("PCBs"),
and (b) any chemical, material or substance (i) which is now or hereafter
becomes defined as or included in the definition of "hazardous substances",
-3-
<PAGE>
<PAGE>
"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
now or hereafter regulated under or subject to any applicable Environmental
Laws.
"Contracts" shall mean, whether written or oral, all bids, quotations,
proposals, options, guarantees, offset agreements, subcontracts, contracts
(including subcontracts thereunder), including (without limitation) the
Contracts listed on Schedules 5.8 and 5.14, agreements, leases, understandings,
commitments, teaming arrangements, Memoranda of Understanding ("MOUs"), and
Memoranda of Agreements ("MOAs") and sales and purchase orders of Seller or the
Space Systems Division relating to the Business.
"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, reasonable out-of-pocket costs, expenses
and attorneys' fees (including such costs, expenses and attorneys' fees
incurred in connection with any investigation or in enforcing such right of
indemnification against any Indemnitor), fines and penalties, if any.
"Documents" shall refer to any books, records, files, papers, tapes,
microfilms, computer records (including, without limitation, books and records
stored in computerized storage media) and any other documents.
"DoD Manual" shall have the meaning ascribed to such term in Section
5.4 hereof.
"Employee Benefit Plan" shall have the meaning ascribed to such term
by Section 3(3) of ERISA.
"Employee Pension Plan" shall have the meaning ascribed to such term
by Section 3(2) of ERISA.
"Employees" shall have the meaning ascribed to such term in Section
11.1(a) hereof.
"Environmental Claim" shall mean any accusation, allegation, notice of
violation, claim, demand, abatement or other order or directive (conditional or
otherwise), judgment, lien or other assessment by any governmental authority or
any Person for personal injury (including sickness, disease or death), tangible
or intangible property damage, damage to the environment, nuisance, 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, odor or audible noise in, into or
-4-
<PAGE>
<PAGE>
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
Permits.
"Environmental Laws" shall mean all applicable federal, state and
local laws, statutes, ordinances and regulations, now or hereafter in effect,
and in such 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, wetlands, 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. Section 9601 et seq.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49 U.S.C. Section 1801
et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended
(7 U.S.C. Section 136 et seq.); the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic Substances Control
Act, as amended (15 U.S.C. Section 2601 et seq.); the Clean Air Act, as amended
(42 U.S.C. Section 7401 et seq.); the Federal Water Pollution Control Act, as
amended (33 U.S.C. Section 1251 et seq.); the Occupational Safety and Health
Act, as amended (29 U.S.C. Section 651 et seq.) ("OSHA"); and the Safe Drinking
Water Act, as amended (41 U.S.C. Section 300f et seq.), and any and all
regulations promulgated thereunder, and all applicable analogous state and
local counterparts, equivalents, or similar statutes or ordinances, rules or
regulations, including, without limitation, the California Health & Safety Code
Section 1 et seq., as amended, and any transfer of ownership notification or
approval statutes such as the New Jersey Industrial Site Recovery Act (N.J.
Stat. Ann. Section 13:1K-6 et seq.) ("ISRA").
"ERISA" shall refer to the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall refer to any trade or business, whether or not
incorporated, under common control of Seller within the meaning of Section
414(b), (c), (m) or (o) of the Code.
"Excluded Assets" shall refer to those assets owned or leased by
Seller which would otherwise be Assets and which are listed on Schedule 1(B).
"Excluded Liabilities" shall refer to any and all obligations,
commitments or liabilities of any and every nature whatsoever of Seller or the
Space Systems Division, whether due or to become due, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, contingent, executory or
otherwise, howsoever or whenever arising, which are not Assumed Liabilities,
including (without limitation) all obligations, commitments or liabilities
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(whether recourse or non-recourse to Seller or the Space Systems Division)
which are secured by or otherwise encumber any of the Assets or for which a
claim otherwise could be made against the Purchaser or any of the Assets as a
result of the transactions contemplated by this Agreement and, in each case,
which are not Assumed Liabilities.
"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 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. Sections 2401-
2420); the International Emergency Economic Powers Act (50 U.S.C. Sections
1701-1706); the Trading with the Enemy Act (50 U.S.C. Sections 1 et seq); the
Arms Export Control Act (22 U.S.C. Sections 2778, 2779); and the International
Boycott Provisions of Section 999 of the Code.
"Exhibit" shall refer to one of several written Exhibits to this
Agreement each of 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 the
Space Systems Division.
"Facility Leases" shall mean collectively, the Kearny Mesa Lease and
the Sycamore Canyon Lease.
"Final Closing Net Assets to be Sold" shall mean the assets and
liabilities of the Space Systems Division as shown on the Final Closing
Statement of Net Assets to be Sold.
"Final Closing Statement of Net Assets to be Sold" shall have the
meaning ascribed to such term in Section 4.6(a).
"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 this Agreement, without references to changes
therein as might otherwise be applicable to subsequent periods, consistently
applied.
"GD Employee Benefit Plans" shall have the meaning ascribed thereto in
Section 5.9(a) hereof.
"GD Employee Pension Plans" shall have the meaning ascribed thereto in
Section 5.9(a) hereof.
"GD Savings Plans" shall have the meaning ascribed thereto in Section
5.9(b) hereof.
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"GD Savings and Welfare Plans" shall have the meaning ascribed thereto
in Section 5.9(b) hereof.
"General Industry Developments" shall mean any change, or any
development involving a prospective change, which relates to the defense and
space launch vehicle industries generally as opposed to a change or prospective
change, the effects of which will impact primarily the Space Systems Division.
"Government Contract" shall refer to any bid, quotation, proposal,
contract, option, agreement, commitment or sale or purchase order that is with
the United States Government or a department or agency thereof or any foreign
government or a department or agency thereof, including, among other things,
all contracts to supply goods and services, and subcontracts thereunder.
"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.
"Initial Net Assets to be Sold" shall mean the assets and liabilities
of the Space Systems Division as shown on the Initial Statement of Net Assets
to be Sold.
"Initial Reconciling Statement" shall have the meaning ascribed to
such term in Section 4.2 hereof.
"Initial Statement of Net Assets to be Sold" shall have the meaning
ascribed thereto in Section 4.2 hereof.
"Interests" shall have the meaning ascribed to such term in Section
3.1(a) hereof.
"Intellectual Property" shall refer to all inventions, improvements,
domestic and foreign patents and applications therefor, trade secrets, know
how, customer lists, trade names, common law trademarks and service marks,
trademark and service mark registrations and applications therefor, copyrights,
copyright registrations and applications therefor, mask works, mask work
registrations and applications therefor, rights in computer software, all
rights granted or retained in licenses under any of the foregoing and all
rights to use data retained by the Space Systems Division under any Contract.
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"Kearny Mesa Facility" shall mean the Kearny Mesa facility located in
San Diego, California, which is owned by GDC and used in the Space Systems
Division.
"Kearny Mesa Lease" shall mean the lease agreement to be executed by
Purchaser and GDC at Closing relating to the Kearny Mesa Facility substantially
in the form of Exhibit C hereto.
"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 the Leased Properties)
and which are listed on Schedule 1(C).
"Leased Property" shall have the meaning ascribed to such term in
Section 5.20(a) hereof.
"Leases" shall have the meaning ascribed to such term in Section
5.20(a) hereof.
"License Agreement" shall refer to the Cross License Agreement between
Seller and Purchaser, substantially in the form of Exhibit D hereto.
"Liens" shall have the meaning ascribed to such term in Section 5.17
hereof.
"Loss" shall mean any loss, cost, damage, liability, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorney's and
other professional fees), investigation, removal, cleanup and remedial costs
(voluntarily or involuntarily incurred) and those 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.
"Multiemployer Plans" shall have the meaning ascribed to such term by
Section 4001(a)(3) of ERISA.
"Multiple Employer Plans" shall have the meaning ascribed thereto in
Section 5.9(a) hereof.
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"1954 Code" shall refer to the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986.
"Owned Property" shall have the meaning ascribed to such term in
Section 5.20(a) hereof.
"PBGC" shall refer to the Pension Benefit Guaranty Corporation.
"Permit" shall mean any permit, approval, authorization, license,
variance, or permission required by a governmental authority under any
applicable Environmental Laws.
"Person" shall include an individual, a partnership, a corporation, or a
division or business unit thereof, a trust, an unincorporated organization, a
government or any department or agency thereof and any other entity.
"Plant 19" shall mean the facility designated as Plant 19 located in
San Diego, California, which is owned by the United States Air Force and used
in the Space Systems Division pursuant to the Plant 19 Facilities Agreement.
"Plant 19 Facilities Agreement" shall mean the Facilities Agreement by
and between the Seller and the United States Air Force relating to Plant 19.
"Pre-Medicare Plan" shall have the meaning ascribed thereto in Section
11.3 hereof.
"Product Warranty Insurance" shall have the meaning ascribed thereto
in Section 5.23 hereof.
"Property" or "Properties" 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.
"Purchase Order" shall have the meaning ascribed thereto in Section
12.5(b) hereof.
"Purchase Price" shall have the meaning ascribed thereto in Section
2.3 hereof.
"Purchased Assets" shall refer to all the business, properties,
assets, goodwill, rights and claims of whatever kind and nature, real or
personal, tangible or intangible, known or unknown, actual or contingent and
wherever situated, which are owned by Seller or any Affiliate of Seller and
used in, held for use by, or related to the business of, the Space Systems
Division (other than any Excluded Assets or any fee interest in the Leased
Assets), including, without limitation, the following assets:
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(a) all leasehold interests (including, without
limitation, the Facility Leases (other than the landlord's
interest therein), the Leases, the Plant 19 Facilities Agreement
and leasehold interests in the Leased Assets) and other interests
in real property listed on Schedule 1(D), in each case together
with all improvements, fixtures and all other appurtenances
thereto and rights in respect thereof;
(b) all work in process, raw materials, finished
goods, goods in transit and other properties and rights
associated with the performance of Contracts or the business or
operations of the Space Systems Division, supplies, machinery,
equipment, interests in government furnished equipment, test
equipment, computers, tools, dies, spare parts, components,
subassemblies, vehicles, furniture, office materials and other
tangible personal property and leasehold interests therein,
whether or not such assets are located at the properties referred
to in clause (a) above;
(c) all accounts receivable, notes receivable,
unbilled revenues and other claims for money or other obligations
due (or which hereafter will become due) to Seller arising out of
the business or operations of the Space Systems Division;
(d) all of Seller's interest in Intellectual
Property, including, without limitation, all results of research
and development activities and other Intellectual Property
developed or acquired by or on behalf of the Space Systems
Division, whether related to, or of use or potential use in
connection with any current or contemplated potential future
products of the Space Systems Division or parts, components or
subassemblies thereof used or purchased by the Space Systems
Division;
(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 Documents of the Space Systems Division
(including such books and records as are contained in
computerized storage media), including (without limitation) all
inventory, purchasing, accounting, sales, export, import,
research, engineering, manufacturing, maintenance, repairs,
marketing, banking, legal, Intellectual Property, shipping
records, records relating to GD Employee Benefit Plans to the
extent they relate to Assumed Liabilities, 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;
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provided, however, that Seller shall have the right to (A) keep
and use for itself and its Affiliates a copy of any such list,
file, book, record or Document and (B) transfer to a third party,
a copy of any such list, file, book, record or Document
transferred hereunder to Purchaser that is not exclusive to the
Space Systems Division and that does not contain any confidential
or proprietary information concerning the Space Systems Division;
(h) any other tangible assets of Seller which are
used primarily in the Space Systems Division 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 Space Systems Division;
(i) all Authorizations which are or, with the consent
of a third party, may be transferable and which are used in the
business and operations of the Space Systems Division, as
presently conducted;
(j) all goodwill associated with the Business, other
than the goodwill associated with the name "General Dynamics";
(k) all rights under non-disclosure agreements with
employees and agents of Seller and under confidentiality
agreements with prospective purchasers of the Space Systems
Division;
(l) all deposits and advance payments, prepaid
charges, sums and fees, refunds, causes of action, rights of
recovery, rights of set-off and rights of recoupment of Seller in
connection with the Business(other than intercompany accounts
between the Space Systems Division and Seller, or any other
divisions, units, Affiliates or Subsidiaries of Seller);
(m) to the extent assets have been accumulated in
connection with any GD Employee Benefit Plan as of the Closing
Date, the allocable portion of the balance existing as of the
Closing Date in any trust, voluntary employee beneficiary
association, reserve, premium stabilization account or other
similar account or arrangement established by Seller or any other
Person which is attributable to the Assumed Liabilities; and
(n) any other asset of Seller in respect of which
there is an Assumed Liability.
"Purchased Intellectual Property" shall refer to the Intellectual
Property included in Assets.
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"Purchaser" shall refer to Martin Marietta Corporation, a Maryland
corporation having its principal executive office at 6801 Rockledge Drive,
Bethesda, Maryland 20817.
"Purchaser's Plans" shall have the meaning ascribed thereto in Section
11.5(b) hereof.
"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 into
the environment, or into or out of any property owned, leased or used by the
Space Systems Division, 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 and all reasonable voluntary efforts to (1) clean up, remove, treat,
monitor or in any other way address the Release of any Contaminant in the
environment; (2) 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 (3) perform pre-remedial studies and investigations and post-remedial
monitoring and care with respect to any Release or any threatened Release.
"Restricted Business" shall have the meaning ascribed to such term in
Section 7.8(a) hereof.
"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" shall refer to General Dynamics Corporation, a Delaware
corporation, having its principal executive office at 3190 Fairview Park Drive,
Falls Church, Virginia 22042-4523, General Dynamics Space Services Company, a
Delaware corporation, having its principal office at 710 Mulcet Road, Cape
Canaveral, Florida 32920, and General Dynamics Commercial Launch Services,
Inc., a Delaware corporation, having its principal office at 5001 Kearny Villa
Road, San Diego, California 92123.
"Seller's Knowledge" shall mean the actual or constructive knowledge
obtainable after due investigation by those officers, directors, employees or
agents of the Seller named on or meeting the criteria set forth on Schedule
1(E) hereto.
"Seller Property" shall have the meaning ascribed to such term in
Section 5.20(a) hereof.
"Services Agreement" shall refer to the Services Agreement to be
executed at Closing between Purchaser and Seller, substantially in the form of
Exhibit E hereto.
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"Software" shall have the meaning ascribed to such term in Section
5.21(a)(4) hereof.
"Space Systems Division" shall refer to the Space Systems Division of
Seller (including each of GDC, SSC and CLS) and all of the businesses thereof
involving the design, development, production, processing, launching, sale and
servicing of (i) expendable launch vehicles, including Atlas launch vehicles,
(ii) upper stage rockets, including all Centaur programs, and (iii) advanced
space systems, including space exploration, advanced upper stages, and next
generation launch systems programs and supporting research and development,
(iv) any other launch vehicles, rockets, rocket motors and related products and
services, (v) programs conducted with respect to energy and magnetics, and (vi)
special access required programs related to any of the foregoing, including,
without limitation, in each such case all IR&D/R&D, B&P/PD, Market Assist and
MP&E of Seller in connection with the Space Systems Division (in each case as
defined in Seller's Corporate Policy and Procedures as in effect as of the date
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
a 50% interest.
"Sycamore Canyon Facility" shall mean the Sycamore Canyon facility
located in San Diego, California, which is owned by GDC and used in the Space
Systems Division.
"Sycamore Canyon Lease" shall mean the lease agreement to be executed
by Purchaser and GDC at Closing relating to the Sycamore Canyon Facility
substantially in the form of Exhibit F hereto.
"Taxes" shall mean 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, penalties or additions thereto, whether
disputed or not.
"Tax Return" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in connection
with Taxes.
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"Termination Date" shall have the meaning ascribed to such term in
Section 9.2(c) hereof.
"Transferred Employees" shall have the meaning ascribed to such term
in Section 11.1(b) hereof.
"Transferred Non-Union Employees" shall have the meaning ascribed to
such term in Section 11.1(b) hereof.
"Transferred Union Employees" shall have the meaning ascribed to such
term in Section 11.1(b) hereof.
"Unresolved Changes" shall have the meaning ascribed to such term in
Section 4.6(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 will
purchase from Seller, and Seller will sell, transfer, assign, convey and
deliver to Purchaser, all of Seller's right, title and interest in and to the
Assets.
2.2 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 all of the Assumed Liabilities. The parties to this
Agreement expressly understand and agree that the Purchaser shall not and does
not hereby assume or become liable for any obligations, commitments,
liabilities or indebtedness of GDC, SSC, CLS or of any of their respective
Subsidiaries or the Space Systems Division, which are Excluded Liabilities or
otherwise are not expressly assumed by the Purchaser pursuant to this Section
2.2. Schedule 2.2 hereof sets forth a non-exclusive listing of some of the
liabilities and obligations of Seller which Purchaser has not assumed or agreed
to pay, perform or discharge, it being understood that such listing is not
intended to limit in any manner whatsoever the foregoing sentence or the
definition of Excluded Liabilities.
2.3 Purchase Consideration. On the terms and subject to the
conditions set forth in this Agreement, Purchaser agrees to pay to Seller,
by bank wire transfer of immediately available Federal funds to an account
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designated in writing by Seller not later than three (3) Business Days prior
to the Closing Date, an amount equal to $208,500,000 (the "Purchase Price").
The Purchase Price shall be subject to post-Closing adjustments as provided
in Article IV hereof.
2.4 Purchase from GDC, SSC and CLS. It is acknowledged that (i)
Purchaser will acquire the Assets constituting the Business from each of GDC,
SSC and CLS (as well as from any other Affiliate of GDC holding such assets),
(ii) Purchaser will not acquire the stock of SSC and CLS, (iii) Purchaser may
elect to purchase all or part of the Purchased Assets through one or more of
its direct or indirect Subsidiaries, as provided in Section 13.5 hereof and
(iv) each Seller will execute such documents as may be reasonably necessary
to facilitate the foregoing.
ARTICLE III
CERTAIN AGREEMENTS OF THE PARTIES
3.1 Certain Provisions Relating to Assets. (a) Except for
Government Contracts, 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) Anything in this Agreement to the contrary
notwithstanding, Seller is not obligated to sell, assign, transfer or convey
to Purchaser any of its rights and obligations in and to any of the Interests
without first obtaining all necessary approvals, consents or waivers. Seller
shall cooperate with Purchaser to obtain all approvals, consents or waivers
necessary to convey to Purchaser each such Interest as soon as practicable;
provided, however, that neither Seller nor Purchaser shall be obligated to pay
any consideration therefor to the third party from whom such approval, consent
or waiver is requested except as set forth in Section 7.2 hereof. The failure
by Seller to obtain any approval, consent or waiver necessary to convey any
Interest to Purchaser, except with respect to those approvals and consents
listed on Schedule 3.1(b) (which is to be prepared by Purchaser after its
review of the Contracts), 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 to Purchaser (other than the approvals and
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consents referred to in Section 3.1(b)) have not been obtained by Seller as of
the Closing or to the extent any Interest cannot be transferred to Purchaser by
the Closing, Seller shall, during the remaining term of such Interest, use all
reasonable efforts, to (1) at the request of Purchaser, cooperate with
Purchaser to obtain the consent of any such third party; provided that neither
Seller nor Purchaser shall be obligated to pay any consideration therefor
except as set forth in Section 7.2 hereof, (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 any fees, costs and expenses of any nature
incurred by Seller in connection with any such arrangements, 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). To the extent that Seller enters into lawful
arrangements reasonably satisfactory to Purchaser designed to provide the
benefits of any Interest to Purchaser as set forth in clauses (1) and (2)
above, such Interest shall be deemed to have been conveyed to Purchaser for the
purposes of this Agreement; provided, however, that the approvals and consents
listed on Schedule 3.1(b) shall be obtained as a condition to Closing, unless
waived by Purchaser.
ARTICLE IV
POST-CLOSING ADJUSTMENT
Purchaser and Seller acknowledge that they may have differences of
opinion regarding the underlying assumptions used for the earnings accrual
rates and estimates at completion in the Atlas Program. The purpose of the
preparation of the Closing Statement of Net Assets to be Sold is to determine
the net change in the economic value of the Space Systems Division between that
existing on August 29, 1993 and that existing on the Closing Date, by comparing
financial statements as of those dates prepared by Seller on a consistent
basis; the purpose is not to resolve any differences of opinion that may exist
with respect to the underlying assumptions used for the earnings accrual rates
and estimates at completion in the Atlas Program.
4.1 Preparation of August Balance Sheet. Seller has provided to
Purchaser prior to the execution of this Agreement a balance sheet, including
related footnotes thereto, of the Space Systems Division as of August 29, 1993
(the "August Balance Sheet"), which August Balance Sheet (i) except as provided
in clause (ii) hereof, has been prepared in accordance with GAAP consistently
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applied and (ii) takes into account all accruals and other adjustments (a)
required to present the Space Systems Division as a stand alone entity,
including certain liabilities or reserves which may previously have been
recorded at the headquarters level, and (b) appropriate for a balance sheet
being prepared at a financial year end.
4.2 Preparation of Initial Statement of Net
Assets to be Sold and Initial Reconciling Statement. Seller has provided to
Purchaser prior to the execution of this Agreement the Initial Statement of Net
Assets to be Sold which is based upon the August Balance Sheet and which (i)
except as otherwise provided in the remainder of this Section 4.2, has been
prepared in accordance with GAAP on a basis consistent with the August Balance
Sheet and the basis of accounting described in the footnotes to the Initial
Statement of Net Assets to be Sold, which footnotes are attached to the Initial
Statement of Net Assets to be Sold, (ii) has been based upon estimate-at-
complete assumptions set forth on Schedule 4.2, and (iii) includes the
following adjustments to the August Balance Sheet:
(a) Excluded Assets and Excluded Liabilities (except
for the Space Systems Division's investment and related customer deposits with
respect to AMSC) have been excluded;
(b) All intercompany accounts between
the Space Systems Division and Seller, or any other divisions, units,
Affiliates or Subsidiaries of Seller, have been eliminated;
(c) To the extent that any such fee or expense would
not otherwise have been incurred by the Space Systems Division in the ordinary
course of business, liabilities or reserves with respect to any accounting,
legal, investment or other professional or advisory fees or expenses relating
to the negotiation of this Agreement or the transactions contemplated herein
have been excluded;
(d) An adjustment has been made to include any
employee or employee benefit matters that have been designated as Assumed
Liabilities in Article XI and which are not otherwise included on the August
Balance Sheet; and
(e) eliminate all accrued liabilities or benefits
for current or deferred federal income taxes and all accrued liabilities or
benefits for deferred state income taxes (including deferred state franchise
taxes).
The resulting document shall hereinafter be referred to as the "Initial
Statement of Net Assets to be Sold." Seller has provided to Purchaser in
conjunction with the Initial Statement of Net Assets to be Sold an Initial
Reconciling Statement which traces, reconciles and explains in reasonable
detail all adjustments made to the August Balance Sheet in order to comply with
this Section 4.2. The resulting document shall hereinafter be referred to as
the "Initial Reconciling Statement."
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4.3 Preparation of Closing Date Balance Sheet. As promptly as
practicable, but no later than sixty (60) days after the Closing Date, Seller
shall prepare or cause to be prepared a balance sheet of the Space Systems
Division as of the close of business on the day preceding the Closing Date (the
"Closing Date Balance Sheet") which balance sheet shall (i) except as provided
in clause (ii) hereof, be prepared in accordance with GAAP consistently applied
and (ii) shall take into account all accruals and other adjustments (a)
required to present the Space Systems Division as a stand alone entity,
including certain liabilities or reserves which may previously have been
recorded at the headquarters level and were included in the August Balance
Sheet, and (b) appropriate to a balance sheet being prepared at a financial
year end. Purchaser shall, at the request of Seller, cooperate with Seller in
the preparation of the Closing Date Balance Sheet.
4.4 Preparation of Closing Statement of Net
Assets to be Sold and Closing Reconciling Statement. As promptly as
practicable, but no later than sixty (60) days following the Closing Date,
Seller shall prepare, or cause to be prepared, the Closing Statement of Net
Assets to be Sold, which shall be based upon the Closing Date Balance Sheet and
which shall:
(i) except as otherwise provided in the remainder of
this Section 4.4, be prepared in accordance with GAAP on a basis consistent
with the Closing Date Balance Sheet;
(ii) make the same adjustments as were made to the
Initial Statement of Net Assets to be Sold as provided for by Section 4.2;
(iii) be adjusted to remove the effects, if any,
resulting from any change in the assets or liabilities of the Space Systems
Division during the period after the Initial Statement of Net Assets to be Sold
through the Closing Date, caused by any write-ups or similar re-evaluations in
the book value of any of the Assets that are not realizable within 12 months
after the Closing Date Balance Sheet;
(iv) include an adjustment for any differences noted
between a physical count of all fixed assets, equipment and inventories which
are noted as a result of any physical inventory observation procedures
conducted by Arthur Andersen;
(v) except as otherwise provided in clause (vi), for
those Contracts accounted for under the percentage of completion method
(Titan/Centaur program), the earnings accrual rates applied to Contracts in
process, and for those Contracts accounted for under the completed contract
method (Atlas Program), the estimates at completion applied to Contracts in
process, shall, in each case, be identical to those used in the preparation of
the Initial Statement of Net Assets to be Sold (the significant estimate-at-
complete assumptions underlying the Initial Statement of Net Assets to be sold
are reflected in Schedule 4.2);
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(vi) except with respect to the Atlas Program, make
those adjustments to the earnings accrual rates and estimates at completion
underlying the Closing Statement of Net Assets to be Sold which are of such a
nature as would under GAAP consistently applied require a change in the cost
estimates at completion;
(vii) eliminate any amount that has been recorded in
any asset account to the extent that the benefits associated with the related
asset cannot be transferred to or realized by Purchaser, including, without
limitation, any amounts (i) intended to reflect potential prospective benefits
of the carryover of losses or of tax benefits or attributes of the Space
Systems Division from periods prior to or ending on or as of the Closing Date
Balance Sheet, and (ii) in respect of any insurance policy covering any of the
Assets if such insurance policy and the benefits thereof will not be assigned
or otherwise transferred to the Purchaser at the Closing; provided, however,
that, for the purposes of the foregoing, Purchaser and Seller agree that this
subsection shall not be construed to prevent an amount from being recorded in
an asset account if Purchaser's sole basis for excluding it is that the benefit
will not be realized because the estimates at completion on the Atlas Program
are not sufficiently conservative; and
(viii) eliminate all cash balances, including all
negative cash balances.
The resulting document shall hereinafter be referred to as the "Closing
Statement of Net Assets to be Sold." Seller shall provide to Purchaser in
conjunction with the Closing Statement of Net Assets to be Sold, the Closing
Reconciling Statement which shall trace, reconcile and explain in reasonable
detail all adjustments made to the Closing Date Balance Sheet in order to
comply with this Section 4.4. The resulting document shall hereinafter be
referred to as the "Closing Reconciling Statement."
4.5 Audit. Seller has engaged, or immediately upon execution of
this Agreement shall engage, at Seller's expense, Arthur Andersen to conduct an
examination of the Closing Date Balance Sheet in accordance with generally
accepted auditing standards and to issue an unqualified report thereon. Arthur
Andersen's judgment as to the audit scope and materiality threshold for
proposed adjusting entries shall not be restricted by any limitations imposed
by Seller or Purchaser. In addition, Arthur Andersen shall report on the
Closing Statement of Net Assets to be Sold and attest that the Closing
Statement of Net Assets to be Sold was prepared in accordance with Section 4.4.
Seller shall agree to and shall make any adjustments necessary to (i) the
Closing Date Balance Sheet in order to obtain and deliver to Purchaser as soon
as is practicable, but no later than sixty (60) days after the Closing Date,
Arthur Andersen's unqualified report thereon (except for (a) the going concern
statement and (b) the fact that the Closing Date Balance Sheet contains no
accrual for current federal income taxes and deferred federal and state income
taxes) and (ii) the Closing Statement of Net Assets to be Sold in order to
obtain and deliver to Purchaser as soon as is practicable, but no later than
sixty (60) days after the Closing Date, Arthur Andersen's report attesting that
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the Closing Statement of Net Assets to be Sold was prepared in accordance with
this Article IV of this Agreement (the "Attestation Report").
4.6 Review of Closing Statement of Net Assets to be Sold.
(a) For a period of thirty (30) days after the delivery of
the last to be delivered of the Closing Date Balance Sheet and Arthur
Andersen's unqualified report thereon or the Closing Statement of Net Assets to
be Sold and Arthur Andersen's Attestation Report thereon, Purchaser and
Purchaser's independent accountants shall be entitled to review such documents
and submit to Arthur Andersen in writing any suggestions for changes to the
Closing Statement of Net Assets to be Sold that Purchaser believes are
appropriate in order to cause the Closing Statement of Net Assets to be Sold to
be prepared in accordance with the requirements of this Agreement. Any
suggestions submitted to Arthur Andersen shall be accompanied by a reasonable
explanation of Purchaser's basis for the suggested change and shall
concurrently be submitted to Seller. Purchaser acknowledges that with respect
to the Space Systems Division's accounting for its Atlas Program, which is
included in the audited Closing Statement of Net Assets to be Sold, Purchaser
will not challenge the underlying accounting practices that are used for the
Atlas Program, as long as such accounting practices are consistent with those
practices that were used in the preparation of the Initial Statement of Net
Assets to be Sold. For a period of fifteen (15) days after the expiration of
such thirty (30) day period, the parties shall consult with each other and with
Arthur Andersen to determine if any such suggested changes and/or the proposed
responses thereto may be resolved to the mutual satisfaction in writing of each
party hereto. If any such suggested change and/or the proposed responses
thereto shall not have been resolved to the mutual written satisfaction of each
party hereto (the "Unresolved Changes") within such fifteen (15) day period or
such additional period as the parties may mutually agree upon in writing, an
independent auditing firm of recognized national standing (the "Arbiter") shall
be selected by Purchaser and Seller, which shall not be the regular auditing
firm of Purchaser or Seller, to review the Unresolved Changes. The parties
hereto shall present their differences in writing (each party simultaneously
providing to the other a copy of all documents submitted) to the Arbiter and
shall cause the Arbiter promptly to review this Agreement and the Unresolved
Changes and determine, as the Arbiter deems necessary or appropriate, to what
extent the Unresolved Changes are appropriate in order to cause the Closing
Statement of Net Assets to be Sold to be prepared (i) in accordance with GAAP
consistently applied, (ii) on a basis consistent with the Initial Statement of
Net Assets to be Sold, and (iii) in accordance with this Agreement. In
reaching such resolution, the Arbiter shall consider only the Unresolved
Changes, it being understood that the Arbiter shall not be retained to conduct
its own independent audit or review, but rather shall be retained to resolve
specific differences between Purchaser and Seller within the range of such
differences. The resolution by the Arbiter of the Unresolved Changes shall be
reflected in the Closing Statement of Net Assets to be Sold. Within three (3)
days after the resolution of the Unresolved Changes or, if there were no
Unresolved Changes, within three (3) days after the expiration of the requisite
review period, such Closing Statement of Net Assets to be Sold (the "Final
Closing Statement of Net Assets to be Sold") shall be delivered concurrently to
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Purchaser and Seller and shall be final and binding upon the parties hereto.
Purchaser and Seller shall each pay one-half of the costs of the Arbiter.
(b) For purposes of complying with the terms set forth in
this Article IV, 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 and shall permit
access to its facilities as may be reasonably required in connection with the
preparation and analysis of the Closing Statement of Net Assets to be Sold, and
the resolution of any Unresolved Changes or other dispute(s) thereunder.
Without limiting the generality of the foregoing, (i) Seller shall permit
Purchaser and its independent accountants and representatives (A) to review all
working papers and computations prepared or used by Seller in preparing such
financial statements and in making any adjustments thereto, (B) to review and
have access to all working papers and computations prepared or used by Arthur
Andersen or any independent accounting firm retained by Seller to review or
assist in the preparation of such financial statements, (C) to observe and
participate in the taking of the physical count of any of the fixed assets,
equipment and inventories of the Space Systems Division deemed necessary by
Arthur Andersen, and (D) to review all Documents and other relevant data of the
Space Systems Division, and (ii) Purchaser shall permit Seller and its
independent public accountants and representatives to (A) review all working
papers and compilations used by Purchaser in reviewing the Closing Statement of
Net Assets to be Sold and in suggesting any proposed adjustments thereto, (B)
have reasonable access to the former employees of Seller who became employees
of Purchaser, (C) to review all working papers used by any independent
accounting firm retained by Purchaser to review or assist in the preparation of
any proposed adjustments, and (D) have reasonable access to the Documents and
other relevant data of the Space Systems Division, in each case, for the
purpose of attempting to resolve the Unresolved Changes. After the Closing,
Purchaser's auditors shall also have access to Arthur Andersen's working papers
for the Final Closing Statement of Net Assets to be Sold as necessary for the
purpose of providing regular auditing services to the Space Systems Division.
4.7 Adjustment of Purchase Price. If the Final Closing Net
Assets to be Sold are less than the Initial Net Assets to be Sold, Seller shall
pay to Purchaser, as an adjustment to the Purchaser Price, an amount equal to
such difference in the manner and with interest as provided below. If the
Final Closing Net Assets to be Sold exceed the Initial Net Assets to be Sold,
Purchaser shall pay to Seller, as an adjustment to the Purchaser Price, an
amount equal to such excess in the manner and with interest as provided below.
Any such payment pursuant to this Section 4.3 shall be made in immediately
available funds within ten (10) business days after receipt of the Final
Closing Statement of the Net Assets to be Sold. The amount of any payment made
pursuant to this Section 4.3 shall bear interest from and including the Closing
Date to, but excluding, the date of payment at the rate per annum equal to the
rate announced by Citibank, N.A. in the City of New York as its base rate as in
effect at the end of the day on the Closing Date.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
The following representations and warranties are made by and with
respect to Seller. Each such representation and warranty shall be deemed to
have been made by each of GDC, SSC and CLS in their individual capacities.
Accordingly Seller hereby represents and warrants to Purchaser 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 jurisdiction of its incorporation with full power and authority,
corporate and otherwise, to own, lease 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 required by virtue of the nature and characteristics of the
assets, business and operations of the Space Systems Division to be duly
qualified or otherwise authorized to do business as a foreign corporation in
each jurisdiction set forth in Schedule 5.1, and Seller is so qualified and in
good standing in each such jurisdiction.
5.2 Authorization of Agreements. The execution, delivery and
performance of this Agreement and each of the Ancillary Agreements 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, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
other similar laws now or hereafter in effect affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
5.3 No Conflicts. The execution, delivery and performance of
this Agreement and each of the Ancillary Agreements to which it is a party by
Seller 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, or result in the
breach or termination of, or constitute a default under, (1) any Authorization
or Contracts 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,
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domestic or foreign, applicable to Seller; or (c) result in the creation of any
lien, charge or encumbrance upon any of the assets or properties of the Space
Systems Division.
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 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, (e) those consents or
approvals which are listed in Schedules 3.1(b) and 5.4 and (f) consents under
Contracts (other than any Government Contract), which Contracts individually or
in the aggregate are not material to the Business.
5.5 Financial Statements. (a) Seller has delivered to
Purchaser balance sheets and statements of operations for the Business as at
and for the periods ended December 31, 1991, December 31, 1992 and August 29,
1993 (collectively, the "Financial Statements"), copies of which are attached
to Schedule 5.5(a) hereto. All such Financial Statements have been prepared
based upon the books and records of the Space Systems Division in conformity
with GAAP consistently applied (except for changes, if any, required by GAAP
and disclosed therein). Such statements of operations present fairly the
results of operations of the Business for the periods covered, and the balance
sheets present fairly the financial condition of the Business as of their
respective dates. The August 29, 1993 Financial Statements reflect all
adjustments (which consist only of normal recurring adjustments or adjustments
not material in amount and include, but are not limited to, estimated
provisions for year-end adjustments) necessary for a fair presentation. Seller
has made available to Purchaser copies of each management letter or other
letter delivered to Seller by Arthur Andersen relating to any review by Arthur
Andersen of the other matters of the Business during the five-year period ended
December 31, 1992 or thereafter. Since December 31, 1992, there has been no
change in any of the significant accounting policies, practices or procedures
of Seller as they relate to the Business.
(b) The August Balance Sheet, the Initial Statement of Net
Assets to be Sold and the Initial Reconciling Statement have been prepared in
accordance with the provisions of Article IV of this Agreement.
(c) Set forth in Schedule 5.5(c) is a complete and correct
list of all Atlas Program and Contract cost reserves (i.e., reserves provided
for in Seller's estimates at completion), reserves for warranties, and reserves
for defective pricing maintained by Seller with respect to the Space Systems
Division as of the date of the Initial Statement of Net Assets to be Sold, and
disclosure of any change in such reserves between the date of the Initial
Statement of Net Assets to be Sold and the Closing Date.
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5.6 Forecasts. Notwithstanding any disclaimers to the contrary
(whether oral or in writing) made by or on behalf of Seller, all forward
looking statements (including, but not limited to, forecasts and projections of
revenues, cash flow, income or losses, capital expenditures, or other financial
items, management plans and objectives for future operations, statements of
future economic performance, and statements of the assumptions underlying or
relating to any of the foregoing), contained in the items identified on
Schedule 5.6, were based upon grounds which, to Seller's Knowledge, were
reasonable when made and were disclosed to Purchaser in good faith.
5.7 Absence of Certain Developments. Since August 29, 1993,
there has not been any material adverse change in the business, condition
(financial or otherwise), revenues, earnings, assets, prospects or results of
operations of the Space Systems Division, other than changes in the prospects
of the Space Systems Division resulting from a General Industry Development.
5.8 Material Contracts. (a) All Contracts of Seller which
relate to the Space Systems Division are in full force and effect and are
valid, binding and enforceable in accordance with their terms, except to the
extent that the failure, individually or in the aggregate, of any Contract to
be valid, binding and enforceable would not have a Material Adverse Effect on
the Space Systems Division, and subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Schedule 5.8(a)(1) sets forth a complete and
correct list of all Contracts which contain an obligation on the part of Seller
to pay more than $1 million, to which Seller is a party relating to the Space
Systems Division, excluding Contracts entered into in the ordinary course of
business relating to products and services provided or to be provided by Seller
to customers of the Space Systems Division (which Contracts are covered by
Section 5.14). Except as set forth in Schedule 5.8(a)(2), there are no
defaults or threatened defaults by Seller under any Contract or, to the best of
Seller's knowledge, by any other party under a Contract, other than such
default or defaults under a Contract (other than a Government Contract) which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Space Systems Division.
(b) Except as set forth in Schedules 5.8(b)(1) through
(b)(9), Seller neither has participated in, nor is bound by or subject to: (1)
any employment, consulting, sales representative or similar Contract relating
to the Space Systems Division which is not terminable without penalty or
further obligation on the part of Seller within 30 days or which contains an
obligation to pay more than $98,000 per year; (2) any Contract which could
result in the imposition on any Person of an excise tax under Section 4999 of
the Code; (3) any Contract of guarantee or indemnification by Seller on behalf
of the Space Systems Division running to any Person which involves,
individually or in the aggregate, an amount of more than $100,000; (4) any
indebtedness of Seller on behalf of the Space Systems Division for borrowed
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money; (5) any indebtedness of whatsoever nature (including, without
limitation, open account indebtedness) to any Affiliate of Seller or any
Contract with or to any Affiliate of Seller; (6) any Contract containing any
covenant limiting the freedom of Seller in respect of the business or
operations of the Space Systems Division to engage in any line of business or
compete with any Person or in any geographic area; (7) any Contract relating
to the disposition or acquisition of the assets of, or any interest in, any
business enterprise which relates to the Space Systems Division; (8) any
Contract relating to capital expenditures in respect of the Space Systems
Division not reflected in the capital spending plan annexed to Schedule
5.8(b)(8) and involving future payments which, together with future payments
under all other Contracts relating to the same capital project, exceed
$100,000; or (9) except for Contracts entered into with customers and suppliers
of the Space Systems Division in the ordinary course of business, any other
Contract which relates to the Space Systems Division and which involves
$100,000 or more and which is not cancelable without penalty within 30 days.
(c) Seller has made available or delivered to Purchaser
complete and correct copies of all Contracts of Seller that relate to the Space
Systems Division, together with all amendments thereto, which involve $98,000
or more.
(d) Schedule 5.8(d) sets forth all bids, proposals or
quotations made by the Space Systems Division and which were outstanding as of
August 29, 1993 (which shall be updated as of the Closing Date). Schedule
5.8(d) identifies each such bid, proposal or quotation by number and the party
to which such bid, proposal or quotation was made, the proposed price and
Seller's current assessment of profit or loss at completion for each such bid,
proposal or quotation. Except as set forth on Schedule 5.8(d), there are no
outstanding bids, proposals or quotations made by the Space Systems Division
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 result in a net loss on the applicable Contract.
5.9 Employee Benefit Plans. (a) Schedule 5.9(a) contains a
complete and correct list of all Employee Benefit Plans and any other employee
benefit arrangements or payroll practices, including, without limitation,
employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policy, plant closing benefits, salary continuation for
disability, consulting or other compensation arrangements, workers'
compensation, retirement, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs, any plans providing benefits or payments in the event of
a change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the Assets of the Seller or the
Business, maintained by Seller or to which Seller has contributed or is or was
obligated to make payments, in each case with respect to any employees (or, if
the Seller has any existing liability, former employees) of Seller who are
employed in the Space Systems Division (hereinafter, the "GD Employee Benefit
Plans"). 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 of Seller who are employed in the Space Systems Division
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(hereinafter, the "GD Employee Pension Plans") are separately listed on
Schedule 5.9(a). Schedule 5.9(a) clearly identifies all GD Employee Benefit
Plans which are (i) Multiemployer Plans, (ii) multiple employer plans subject
to Sections 4063 and 4064 of ERISA ("Multiple Employer Plans"), (iii) plans
other than Multiemployer Plans and Multiple Employer Plans that are subject to
Section 412 of the Code, (iv) plans intended to qualify under Section 401 of
the Code, and (v) "welfare benefit plans" within the meaning of Section 3(1) of
ERISA ("GD Welfare Plans") which provide for continuing benefits or coverage
for any participant or any beneficiary of a participant after such
participant's termination of employment except coverage or benefits required by
Section 4980B of the Code if paid 100% by the participant. Schedule 5.9(a)
describes, and provides copies where applicable, of each written communication
made prior to the date hereof by any officer of Seller or the Director of Human
Resources of the Space Systems Division or any fiduciary with respect to the GD
Employee Benefit Plans to present employees of the Space Systems Division
regarding any Employee Benefit Plan or other employee-related practice, policy,
or arrangement with respect to this Agreement.
(b) Except as set forth on Schedule 5.9(b):
(1) the GD Employee Pension Plans which are defined
contribution plans intended to qualify under Section 401 of the Code (the "GD
Savings Plans") are so qualified and the trusts maintained pursuant thereto are
exempt from federal income taxation under Section 501 of the Code, and nothing
has occurred with respect to the operation of the GD Savings Plans which could
cause the loss of such qualification or exemption or the imposition of any
material liability, penalty, or tax under ERISA or the Code;
(2) to Seller's Knowledge, no GD Employee Benefit
Plans have been amended in any manner which would require the posting of a
security under Section 401(a)(29) of the Code or Section 307 of ERISA;
(3) there are no Multiemployer Plans or Multiple
Employer Plans in which employees of the Space Systems Division currently
participate or have participated in within the last five (5) years;
(4) true, correct and complete copies of the following
documents, with respect to each of the GD Employee Benefit Plans (exclusive of
the defined benefit plans covering employees who are not members of bargaining
units identified on Schedule 5.22) (the "GD Savings and Welfare Plans"), have
been made available or delivered by Seller to Purchaser: (A) all plan
documents, including trust agreements, insurance policies and service
agreements and amendments thereto, (B) the most recent Forms 5500 and any
financial statements attached thereto and those for the prior two years, (C)
the last Internal Revenue Service determination letter, (D) summary plan
descriptions, (E) the most recent actuarial reports and those for the prior two
years, if any, and (F) written descriptions of all non-written agreements
relating to any such plan;
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(5) to Seller's Knowledge, there are no material
pending claims or lawsuits which have been asserted or instituted against the
GD Employee Benefit 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 GD
Employee Benefit Plans (other than routine benefit claims) nor does Seller have
knowledge of facts which could form the basis for any such claim or lawsuit;
(6) all amendments and actions required to bring the
GD Savings Plans into conformity in all material respects with all of the
applicable provisions of ERISA, the Code and any other applicable laws
(including the rules and regulations thereunder) have been made or taken except
to the extent that such amendments or actions are not required by law to be
made or taken until a date after the Closing Date and are disclosed on Schedule
5.9(b)(6);
(7) to Seller's Knowledge, the GD Employee Benefit
Plans have been maintained, in all material respects, in accordance with their
plan documents and with all provisions of the Code and ERISA (including rules
and regulations thereunder) and other applicable law, and neither Seller nor
any "party in interest" or "disqualified person" with respect to the GD
Employee Benefits Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the Code or Title I, Part 4 or ERISA;
(8) to Seller's Knowledge, Seller has not incurred any
outstanding liability under Section 4062 of ERISA to the PBGC, to a trust
established under Section 4041 or 4042 of ERISA, or to a trustee appointed
under Section 4042 of ERISA; and
(9) none of the GD Employee Benefit Plans contain any
provisions which would prohibit the transactions contemplated by this Agreement
or any Ancillary Agreement or which would give rise to any severance,
termination or other payments as a result of the transactions contemplated by
this Agreement or any Ancillary Agreement.
(c) Schedule 5.9(c) contains the most recent quarterly
listing of workers' compensation claims and a schedule of workers' compensation
claims of the Space Systems Division for the last three fiscal years.
(d) Except as disclosed on Schedule 5.9(d), Seller has not
prepaid or prefunded any GD Welfare Plan through a trust, reserve, premium
stabilization or similar account.
5.10 Litigation; Violation of Law. (a) Except as set forth on
Schedule 5.10(a), there are no judicial, arbitral or administrative actions,
proceedings, investigations or audits (including, but not limited to, the
audits and investigations set forth in Section 5.10(b) hereof) pending or
overtly threatened that question the validity of this Agreement or any of the
Ancillary Agreements to which Seller is a party or any action taken or to be
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taken by Seller in connection with this Agreement or any of the Ancillary
Agreements to which it is a party, 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 or any of the Ancillary Agreements to
which it is a party.
(b) Except as set forth on Schedules 5.10(b)(1) through
(b)(3): (1) there are no suits, claims, actions, or legal, administrative,
arbitration or other proceedings or governmental investigations or audits
(other than routine audits under Government Contracts the outcome of which
would not have a material adverse effect on the Business, the Space Systems
Division or any Contract) with respect to the Space Systems Division,
including, without limitation, any thereof related to any Government Contract
or other Contract to which Seller is a party, pending or overtly threatened;
(2) there are no orders, injunctions or decrees outstanding against Seller
related to any Government Contract or other Contract to which the Space Systems
Division (or Seller, in connection with the Space Systems Division) is a party
or pursuant to which the Space Systems Division is performing services or
supplying goods; and (3) to Seller's Knowledge, there are no claims, whether
asserted or unasserted, or other assertions of liability against Seller which
relate to the Space Systems Division 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
$250,000 is sought.
(c) Except as set forth in Schedule 5.10(c), 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 Space Systems
Division, including but not limited to, the federal antitrust 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 Space Systems Division; provided, however, that nothing
contained herein shall modify knowledge qualifications included within the
representations and warranties set forth in Sections 5.9, 5.14, 5.18 and 5.20.
(d) All Authorizations necessary to the current operations
of the Space Systems Division are set forth on Schedule 5.10(d) and are in full
force and effect without any default hereunder by Seller (other than
Authorizations which, if not currently held by Seller, do not adversely affect
in any material respect Seller's ability to conduct the business of the Space
Systems Division and which can be readily obtained without significant cost or
penalty) or, to Seller's Knowledge, 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 Space Systems
Division.
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5.11 Tax and Other Returns and Reports (a) Except as set forth
in Schedule 5.11(a): (1) all federal Tax Returns, all state and local income
or franchise Tax Returns, and all other Tax Returns (or extensions relating
thereto) required to be filed by Seller have been filed on a timely basis with
the appropriate governmental agencies in all jurisdictions in which such Tax
Returns are required to be filed and all Taxes shown as due thereon have been
timely paid; (2) all Taxes (other than federal or deferred state Taxes measured
or assessed on the net income of Seller, including deferred state franchise
Taxes) imposed on Seller (whether or not shown on any Tax Return) in respect of
any taxable period (or portion thereof) ending on or prior to the Closing Date
(A) have been fully and timely paid or (B) are and will be adequately provided
for on the Closing Statement of Net Assets to be Sold and are not and will not
be material, individually or in the aggregate, to the Space Systems Division;
provided, however, that the representations and warranties set forth in this
Section 5.11(a) are made only to the extent that Taxes (i) are or may become
liens on the Purchased Assets or (ii) for which Purchaser is or may be liable
in the capacity of transferee of the Purchased Assets.
(b) Except as set forth in Schedule 5.11(b), 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 Prop. Reg. 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.
(c) Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(d) With respect to Leased Assets placed in service on or
before the date hereof, and except as a result of acts, errors or omissions,
including breaches of representations, by the lessee thereunder, each of the
Lease Contracts (excluding property sold on installment sales contracts) will
be treated as a "true lease" for federal income tax purposes.
(e) The transactions contemplated by this Agreement are not
subject to tax withholding pursuant to the provisions of Section 3406 or
Subchapter A of Chapter 3 of the Code or any other provision of applicable law.
5.12 Absence of Undisclosed Liabilities. (a) Except as set
forth on Schedule 5.12, Seller does not have, in connection with the Space
Systems Division, any liabilities or obligations, either accrued, contingent or
otherwise, of a type normally reflected on a balance sheet or disclosed in a
footnote thereto prepared in accordance with GAAP (including all liabilities
and accruals necessary to present the Space Systems Division as a stand alone
entity inclusive of any liabilities which may have previously been recorded at
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the corporate office level), (1) which, if existing as of December 31, 1992, or
August 29, 1993, have not been reflected in the Financial Statements; or (2)
which, if incurred since the date of the August 29, 1993 Financial Statements
will not be reflected in the Final Closing Statement of Net Assets to be Sold,
except for liabilities arising after the date of the August 29, 1993 Financial
Statements and discharged prior to the Closing Date.
(b) Except as set forth on Schedule 5.12, since December
31, 1992, there has not been, occurred or arisen: (1) any damage or
destruction to properties or assets of Seller, whether covered by insurance or
not, which had or may have a Material Adverse Effect on the Space Systems
Division; (2) any increase in the compensation payable, or to become payable,
by Seller to any officer or employee employed in the Space Systems Division
whose remuneration during 1992 exceeded the rate of $75,000 per year, or any
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 Space Systems
Division; or (3) any waiver by Seller of any rights which, individually or in
the aggregate, would have a Material Adverse Effect on the Space Systems
Division.
5.13 Affiliate Agreements. Except as set forth on Schedule
5.13(a), there are no Contracts between Seller and its Affiliates in connection
with the Space Systems Division, including, without limitation, any such
Contracts relating to the provision of any services by Seller to any such
Affiliate, or by any such Affiliate to Seller, which Contracts are not
terminable at will by Seller without penalty. Schedule 5.13(b) sets forth a
list of all interdivisional Contracts and invoices outstanding as of the date
of this Agreement which relate to (i) the provision of products or services to
the Space Systems Division by any other division, unit, Subsidiary or other
Affiliate of Seller or (ii) the provision of products or services by the Space
Systems Division to any other division, unit, Subsidiary or other Affiliate of
Seller.
5.14 Contracts for the Sale of Products or Services. (a)
Schedule 5.14(a) contains a complete and accurate list of all Contracts
pursuant to which Seller provides, or has agreed to provide, products or
services to customers of the Space Systems Division, including both commercial
Contracts and Government Contracts, but excluding Contracts which individually
involve a dollar amount of less than $500,000.
(b) Except as set forth on Schedules 5.14(b)(1) through
(b)(14):
(1) The Space Systems Division has complied in all
material respects with all applicable federal procurement laws and regulations
including, without limitation, the Truth in Negotiations Act, the Federal
Acquisition Regulation, the Defense Federal Acquisition Regulation Supplement,
the National Aeronautics and Space Administration Federal Acquisition
Regulation Supplement, the Department of Energy Acquisition Regulation and the
Procurement and Integrity Act;
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(2) All of the Contracts set forth on Schedules 5.8
and 5.14(a) and the Leases set forth on Schedule 5.20 are valid and are binding
on the parties thereto and the Space Systems Division is in compliance in all
material respects with all terms and conditions in such Contracts;
(3) The pricing, cost accounting, estimating, property
and resource planning and procurement systems relating to the Space Systems
Division have been disclosed to the extent required by law or regulation to the
United States government and such disclosures are in compliance in all material
respects with applicable federal procurement law regulations;
(4) Neither Seller, nor any officer, director,
employee, agent, or representative of Seller or the Space Systems Division has
made, with respect to the Business (i) any illegal political contributions,
(ii) payments from corporate funds not recorded on the books and records of
Seller or the Space Systems Division, as the case may be, (iii) payments from
corporate funds that were falsely recorded on the books and records of Seller
or the Space Systems Division, as the case may be, (iv) 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
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 Space Systems Division;
(5) Seller, with respect to the Space Systems
Division, has never been debarred or suspended from participation in the award
of 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;
(6) To Seller's Knowledge there are no actual,
asserted or threatened performance or administrative deficiencies under any
Contract, and Seller has not received any notice of a performance or
administrative deficiency, any stop work orders, terminations, cure notices or
notices of default under any of the Contracts;
(7) The Space Systems Division holds such security
clearances as are required to perform its respective Contracts or subcontracts.
There are no facts or circumstances currently existing or which have occurred
that could result in the suspension or termination of such clearances, or that
could render the Space Systems Division ineligible for such security clearances
in the future. All security measures required by the Department of Defense
Industrial Security Manual have been implemented in all material respects;
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(8) There are no Contracts for the sale of products or
services by the Space Systems Division for which the most recent estimated
costs at completion, including allocable overhead and general and
administrative expenses, as estimated in good faith by Seller, exceed the
contract price;
(9) There is no unexercised option for the sale of
products or services by the Space Systems Division 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, would result in a net loss on the applicable Contract;
(10) There are no Contracts for the sale of products
or services by the Space Systems Division for which, at the time of the most
recent scheduled contract milestone, the work schedule was over 60 days late
or, in the absence of scheduled contract milestones, is currently estimated to
be over 60 days late and, in each case, where such delinquency could reasonably
be expected to have a material adverse effect on the ability of the Space
Systems Division to perform the Contract without default or penalty;
(11) There are no Contracts for the sale of products
or services by the Space Systems Division which include provisions for a
reduction in price or a liquidated damages clause for late delivery;
(12) There are no Contracts for the sale of products
or services by the Space Systems Division 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;
(13) There is no outstanding bid for the sale of
products or services where performance has begun or will begin prior to
Contract award, nor are there any existing Contracts that are being performed
without contractual funding; and
(14) There are no claims or requests for equitable
adjustment outstanding or, to the Seller's Knowledge, threatened under any
Contracts in process.
5.15 Export Control and Related Matters. (a) Seller and the
Space Systems Division are in compliance with all United States Export Control
Laws, and are in compliance in all material respects with all Foreign Export
Control Laws.
(b) The Space Systems Division has all necessary authority
under the Export Control Laws to conduct operations including, but not limited
to, (1) all necessary licenses for any pending export transactions, (2) all
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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) Neither Seller nor the Space Systems Division has
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.
5.16 Cooperative Business Agreements. Schedule 5.16 contains a
complete and correct list of all of the teaming arrangements, MOUs and MOAs to
which Seller is a party and which relate to the Space Systems Division. Seller
does not own any Joint Venture Interests which relate to the Space Systems
Division. Each such agreement is the valid, binding, and enforceable
obligation of Seller and, to Seller's knowledge, the other party or parties
thereto, and is in full force and effect, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and other
similar laws now or hereafter in effect affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity). Neither Seller nor, to Seller's knowledge, the other party or
parties thereto, is in breach of any material terms of any such agreement.
5.17 Personal Property. (a) Except as set forth on Schedule
5.17(a), 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 and utilized in the operations of the Space Systems Division and the
Business, 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 5.20(a)(v) hereof. Except
as set forth on Schedule 5.4 and Schedule 5.17 and assuming Purchaser has or
obtains all the Authorizations set forth on Schedule 5.10(d), 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 the Space
Systems Division on the date hereof. All such tangible personal Property of
whatsoever nature owned or leased by Seller which is material to the business,
condition (financial or otherwise), revenues, earnings, assets, prospects or
results of operations of the Space Systems Division, are "Assets" as defined in
this Agreement, and are in good operating condition and repair, ordinary wear
and tear excepted, and are suitable for the purposes for which they are
currently being used.
(b) Schedule 5.17(b) contains a complete and correct list
of all government-owned Property, including, without limitation, tooling and
test equipment, provided under, necessary to perform the obligation under, or
for which Purchaser could be held accountable under, the Government Contracts
transferred to Purchaser pursuant to this Agreement and such government-owned
Property is maintained by Seller in accordance with a government approved
property management system.
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5.18 Environmental Matters. Except as disclosed in Schedule
5.18, (i) the operations of the Space Systems Division comply in all respects
with all applicable Environmental Laws, except where noncompliance would not,
in the aggregate, result in any damage, loss, liability or expense in excess of
$100,000, (ii) the Space Systems Division has all appropriate Permits necessary
for its operations, all such Permits are in full force and effect and the Space
Systems Division is in compliance with all terms and conditions of such
Permits; (iii) none of the operations of the Space Systems Division is subject
to any judicial or administrative civil or criminal proceeding alleging the
violation of any applicable Environmental Laws nor, to Seller's Knowledge, has
any such proceeding been threatened; (iv) to Seller's Knowledge, none of the
operations of the Space Systems Division is the subject of any federal, state
or local investigation evaluating whether any Remedial Action is needed to
respond to a Release of any Contaminant into the environment; (v) neither
Seller nor any of its Subsidiaries or, to Seller's Knowledge, any predecessor
of Seller or any Subsidiary has filed any notice under federal or state law
indicating past or present treatment, storage, or disposal of a hazardous waste
(as defined under 40 C.F.R. Parts 260-270 or similar state hazardous waste
management program in effect as of the date of this Agreement) or Contaminant
or any state equivalent, or reporting a spill or Release of a Contaminant into
the environment; (vi) the Space Systems Division has no known liability in
connection with any Release of any Contaminant into the environment; (vii) the
Space Systems Division has not released any Contaminant into the environment
(including air, surface water, groundwater, and subsurface strata) or in the
vicinity of any premises owned, leased or operated by the Space Systems
Division, and, to Seller's Knowledge, neither has any lessee, prior owner, or
other person; (viii) no asbestos, PCBs, radioactive material (including radon
gas other than that which is naturally occurring), UFI, underground storage
tanks or surface impoundments are on the Facilities; (ix) no lien in favor of
any governmental authority for (A) any liability under Environmental Laws, or
(B) damages arising from or costs incurred by such governmental authority in
response to a Release of a Contaminant into the environment has been filed or
attached to the Facilities; (x) there are no conditions or set of facts which
exist that, if known, would give rise to any matters referred to in clause
(iii), (iv), (vi) or (ix) above; (xi) there are no judgments, decrees,
administrative orders or settlement agreements outstanding against Seller
which, in the aggregate, require or could require Seller or any Subsidiary to
expend over $100,000 to maintain or achieve compliance therewith or which, in
the aggregate, require or could require the payment of a fine, penalty, damages
or any other payment in excess of $100,000; (xii) there are no requirements
under any of the Permits which, in the aggregate, require or would require the
Seller or any Subsidiary (y) to expend over $100,000 in capital expenditures to
maintain compliance therewith, or (z) to make non-capital expenditures which,
in the aggregate, exceed the amounts specifically provided for with respect to
such expenditures included in the estimates at completion; (xiii) none of the
Facilities are listed on or have been proposed for listing on the National
Priorities List, the CERCLIS or any similar list of sites of suspected or known
environmental contamination or of the Release of a Contaminant maintained by
any governmental agency, nor, to Seller's Knowledge, are any properties owned
by any other party and located within a radius of five miles from the
Facilities on or have any such properties been proposed for listing on any such
lists; (xiv) neither Seller nor any Subsidiary or, to Seller's Knowledge, any
predecessor of Seller or any Subsidiary owns or operates or has owned or
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operated a facility at or from which there is or has been a Release of a
Contaminant into the environment, has transported to a facility a Contaminant
for treatment, storage, disposal or other management or handling, or has
disposed or arranged for disposal of a Contaminant at a facility. Neither
Seller nor any Subsidiary or, to Seller's Knowledge, any predecessor of Seller
or any Subsidiary has been named as a "potentially responsible party" with
respect to, or received any request or demand from any party concerning, its
potential involvement in or at any site at which conditions exist which may
give rise to remedial action under any applicable Environmental Laws; and there
is no condition at any of the Facilities which could give rise to Remedial
Action.
5.19 Inventory and Receivables. The inventories of the Space
Systems Division are in all material respects in good and merchantable
condition and usable or saleable in the ordinary course of business for the
purpose for which they are intended. The value of all inventory items recorded
on the Financial Statements, the Initial Statement of Net Assets to be Sold and
the Closing Statement of Net Assets to be Sold, including finished goods, work-
in-progress and raw materials, and any reserves therefor have been and will be
determined in accordance with Seller's historical practices and with GAAP.
Assuming the appropriateness of the estimates at completion assumptions set
forth on Schedule 4.2 hereof and the accounting practices used for the Atlas
Program in the preparation of the Initial Statement of Net Assets to be Sold,
such inventories consist and will consist only of items of quality and quantity
usable and salable in the ordinary course of the Business, except for any items
of obsolete material or material below standard quality, all of which have been
and will be written down to net realizable value, or for which adequate
reserves have been or will be provided, and the present quantities of all
inventories are reasonable in the present circumstances of the Business. To
Seller's Knowledge, all inventoried costs relating to contracts and programs
that are shown on the Financial Statements and the Initial Statement of Net
Assets to be Sold and that will be shown on the Closing Statement of Net Assets
to be Sold are and will be recoverable in accordance with the terms of the
applicable orders or Contracts. All receivables (including unbilled
receivables) of the Space Systems Division which are or will be reflected on
the Financial Statements, the Initial Statement of Net Assets to be Sold and
the Closing Statement of Net Assets to be Sold have arisen or will arise in the
ordinary course of business out of bona fide sales and deliveries of goods,
performances of services or other business transactions. Allowances in
accordance with GAAP have been or will be reflected in the Financial
Statements, the Initial Statement of Net Assets to be Sold and the Closing
Statement of Net Assets to be Sold with respect to the receivables shown
thereon. The reserves for receivables on the Closing Statement of Net Assets
to be Sold will be fully adequate to cover all uncollectible receivables.
Based upon Seller's current contract estimates at completion, (i) all unbilled
amounts included in accounts receivable reflected or to be reflected in the
Financial Statements, the Initial Statement of Net Assets to be Sold and the
Closing Statement of Net Assets to be Sold will, in the ordinary course of the
Business as currently conducted, mature into and become billed accounts
receivable in the same or greater amounts, and (ii) such receivables, when
billed, will be fully collectible in the ordinary course of the Business as
currently conducted without cost to Purchaser in collection efforts therefor
except to the extent of any applicable reserves provided for in the Closing
Statement of Net Assets to be Sold.
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5.20 Real Property. (a) Schedule 5.20(a)(i) 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 of the Space
Systems Division, including, without limitation, the Kearny Mesa Facility and
the Sycamore Canyon Facility (individually, an "Owned Property"), including the
address and description of the improvements thereon. Schedule 5.20(a)(ii) sets
forth a complete list of all real property and interests in real property
leased by Seller and used in, held for use by or related to the Space Systems
Division (individually, a "Leased Property"), as lessee, including the name of
the lessee and lessor and a description of the premises and the lease (the
"Leases") and identifying any consents required for the transfer of Seller's
interest as lessee to Purchaser. Schedule 5.20(a)(iii) sets forth a complete
list of all government owned, contractor operated Facilities that are used in,
held for use by or related to the Space Systems Division. Schedule 5.20(a)(iv)
sets forth a complete list of all Persons with a legal right to occupy any
portion of the Owned Property or Leased Property (the "Occupants"). True,
complete and correct copies of (i) the deeds for the Owned Properties and (ii)
the Leases, other than the Leases on Schedule 1(B) hereto, as the same have
been amended, modified or supplemented, have been delivered to Purchaser by
Seller. Seller or an Affiliate of Seller has (x) good, marketable and
insurable fee simple title to all Owned Properties and (y) good, marketable,
insurable (where recorded) and valid leasehold estates in all Leased Properties
(Owned Property and Leased Property are sometimes referred to as a "Seller
Property" and collectively as "Seller Properties"). Each of the Seller
Properties is free and clear of all Liens and encumbrances of any nature except
(A) Liens and encumbrances set forth on Schedule 5.20(a)(v), (B) Liens for
taxes, special assessments or governmental charges or levies if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or are
being contested in good faith by appropriate proceedings, (C) such Liens and
encumbrances, if any, not listed on Schedule 5.20(a)(v), as do not interfere
with such property's present or, to the extent known to Seller, proposed use,
and (D) in the case of Leased Properties, Liens and encumbrances affecting the
fee interest underlying such Leased Property as do not interfere with such
property's present or, to the extent known to Seller, proposed use. As of the
Closing Date, Seller will have, and will have the ability to convey to
Purchaser, 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 material 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 material default thereunder. For purposes of this Section
5.20(b), a "material" default means any (x) monetary default or (y) non-
monetary default that cannot be cured by expenditure of $50,000 or less. 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
which, if not cured, would prevent or materially interfere with the ability of
Purchaser to continue to use such Leased Properties in the manner currently
used.
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(c) With respect to those Leases that were transferred to
Seller or any of Seller's Affiliates by a third party, all necessary consents
to such transfers have been obtained and are in full force and effect and
neither Seller nor any Affiliates of Seller has received any notice that any
such third party's acts or omissions have given rise to any breach of the
underlying lease or sublease to which it is a party.
(d) Except for environmental matters (with respect to which
Seller has made representations and warranties in Section 5.18), and except to
the extent otherwise disclosed by Seller elsewhere in this Agreement or on
Schedule 5.20(d), each Owned Property and each Leased Property complies in all
material respects, with all applicable Laws (including, without limitation,
zoning laws), and no notice of violation of Law has been received by Seller or
any Affiliate of Seller or, to Seller's Knowledge, 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 or, if known to Seller, proposed use.
(e) All of the Owned Properties, and all components of all
improvements included within the Owned Properties, including, without
limitation, the roofs and structural elements thereof and the sprinkler and
fire protection, heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facilities included therein, are in sufficient condition, working
order and repair and do not require material repair or replacement in order to
serve their intended purpose, including use and operation consistent with their
present use and operation, except for scheduled maintenance, repairs and
replacements conducted or required in the ordinary course of the operation of
the Owned Properties. All water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other
similar systems serving the Owned Properties are installed and operating and
are sufficient to enable the Owned Properties to continue to be used and
operated in the manner currently being used and operated. As of the Closing
Date, Seller shall have made all repairs and replacements required under the
Leases necessary to restore the Leased Properties to their condition on the
commencement dates of the applicable Leases (except for items that can only be
accomplished upon the termination of the applicable Leases) which are to be
made by Seller or its Affiliates.
(f) To the extent that any of the Owned Properties is
dependent for its access, operation or utility on any land, building or other
improvement not part of the Seller Property but a part of the property retained
by Seller, Seller will permit and facilitate such dependency post-Closing,
including, without limitation, the granting without consideration of any
required appurtenant easements. To Seller's knowledge, all utility systems
required in connection with use, occupancy and operation of each Seller's
Property are sufficient for their present purpose, and are fully operational
and in working order.
(g) Except as set forth on Schedule 5.20(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
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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 that would constitute an Asset.
(h) No termination rights have been exercised or, to
Seller's Knowledge or any Affiliate of Seller, threatened by any party with
respect to the Leases.
(i) All material certificates of occupancy and
Authorizations of any governmental entity necessary for the current and
continued use and operation of each Seller Property have been issued. Such
Authorizations have been validly issued by the appropriate governmental bodies
in compliance with all applicable Laws, and Seller has complied with all
conditions thereof in all material respects. No default or violation, or event
that with the lapse of time or giving of notice or both would become a default
or violation, has occurred in the due observance of any Authorization. All
such Authorizations are in full force and effect and do not require further
consent or approval of any Person. Seller has not received any notice from any
governmental entity and has no knowledge to the effect that there is lacking
any Authorization required in connection with the current or continued use or
operation of any Owned Property or Leased Property.
(j) Except as set forth on Schedule 5.20(j), there does not
exist any actual or, to Seller's Knowledge, threatened or contemplated
condemnation or eminent domain proceedings that affect any Owned Property or
Leased Property or any part thereof, and none of Seller or its Affiliates has
received any notice, oral or written, of the intention of any governmental
entity or other Person to make or use all or any part thereof.
(k) 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, and, to Seller's
Knowledge no such improvements have been constructed or planned that would be
paid for by means of assessments upon any Seller Property.
(l) No labor has been performed or material furnished for
any portion of any Owned Property or Leased Property to or for the benefit of
Seller or, to Seller's knowledge, any other Person for which any Lien, the
validity of which is not currently in dispute, having a value in excess of
$50,000 in the aggregate can be claimed.
(m) No improvements constituting a part of any Owned
Property or Leased Property encroach on real property not a part of the Assets,
the removal of which would materially interfere with the current use, occupancy
and operation of such improvements.
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(n) No Seller Property or portion thereof has suffered any
material damage by fire or other casualty that has not been completely restored
to a condition comparable to that existing prior to the casualty.
(o) 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.
(p) The transactions contemplated hereby will not
constitute a default under, or result in any change in the terms of, any Lease,
provided that all necessary consents required by such Lease are obtained prior
to the Closing.
(q) The Seller has, and the Purchaser will have, the right
to use all easements and rights of way relating to the Owned Property and the
Leased Property, including, but not limited to, easements for power lines,
water lines, sewers, railways and roadways and other means of ingress and
egress, which are necessary to conduct the business.
5.21 Intellectual Property. (a) Unless otherwise indicated in
Schedule 5.21(a) or herein, the Purchased Intellectual Property and the rights
licensed pursuant to the License Agreement constitute all of the Intellectual
Property (i) owned, developed or acquired by or on behalf of the Space Systems
Division or (ii) used by Seller in the business and operations of the Space
Systems Division, including, without limitation, future results, developments
and products of the Space Systems Division which are the subject of current
research and development activities. Unless otherwise indicated in Schedule
5.21(a), Seller owns the entire right, title and interest in and to the
Purchased Intellectual Property (including, without limitation, with respect to
owned Intellectual Property, the exclusive right to use and license the same).
Schedule 5.21(a) 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;
(2) all license agreements granting Seller license in
Intellectual Property which licenses are included in the Assets.
(3) all Intellectual Property which is the subject of
the obligations of Seller described in Section 3.1(c) hereof;
(4) all computer software applications programs owned
or used or currently planned for use by Seller, including such programs which
are material, in the business or operations of the Space Systems Division (the
"Software"); and
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(5) all licenses granted by Seller under any of the
Purchased Intellectual Property or Software.
(b) Seller owns, leases, licenses or has the right to use
all the Software. The Software and the Purchased Intellectual Property are
sufficient to conduct the business and operations of the Space Systems Division
as presently conducted in all material respects. Notwithstanding any other
provision of this Agreement, except as indicated in Schedule 5.21(b), upon
consummation of the transactions contemplated by this Agreement, Purchaser will
be entitled to continue to use all of the Purchased Intellectual Property, the
rights licensed pursuant to the License Agreement and the Software to the same
extent and under the same conditions that it has heretofore been used in the
Space Systems Division, without financial obligations to any other Person.
Except as indicated in Schedule 5.21(b), the Purchased Intellectual Property,
the rights licensed pursuant to the License Agreement, and Software comprise
all Intellectual Property and computer software applications programs necessary
to permit the operation of the Business as now being conducted.
(c) Schedule 5.21(c) 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 a third party as a result of the business or
operations of the Space Systems Division or activities of any such customer
with regard to any product or service supplied by the Space Systems Division
and Seller has no knowledge of any basis for any additional claims, suits or
proceedings against it or any customer for any such infringement. Except as
set forth in Schedule 5.21(c), there are no interferences, reexaminations,
oppositions or protests pending or threatened involving any patents, or patent
applications which constitute "Assets," and Seller knows of no basis for any
such interference, nor are there any disputes pending or threatened with former
or present employees of Seller involving rights to any of the Purchased
Intellectual Property.
(d) to Seller's Knowledge, except as indicated in Schedule
5.21(d), no Person is infringing upon or has misappropriated any of the
Purchased Intellectual Property. No Purchased Intellectual Property or
Software is owned or controlled by any officer, director or employee of Seller
or any of its Affiliates, except as indicated in Schedule 5.21(d).
5.22 Employees and Employee Relations.
(a) Seller has provided Purchaser with access to a list of
all employees of the Space Systems Division and the salary for each.
(b) There is no strike, work stoppage, slowdown, picketing
or lockout pending or overtly threatened against or involving the Space Systems
Division with respect to employees of the Space Systems Division. Except as
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set forth on Schedule 5.22, there has been no such strike, work stoppage,
slowdown, picketing or lockout at any time in the past five years.
(c) There is no pending or, to Seller's knowledge,
threatened strike, work stoppage, slowdown, picketing or lockout or other union
activity with respect to the employees of any of the suppliers or customers of
the Space Systems Division that could have a Material Adverse Effect on the
Space Systems Division.
(d) Except as set forth on Schedule 5.22, the Space Systems
Division is not a party to, nor has any obligations under, any collective
bargaining agreement, nor are any employees of the Space Systems Division
covered by any collective bargaining agreements.
(e) There is no organizing activity involving the Space
Systems Division 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 organizations or group of
employees of the Space Systems Division has made a demand for recognition.
(f) Except as set forth on Schedule 5.10, there are no
unfair labor practice charges or complaints pending or threatened by or on
behalf of any employee or group of employees of the Space Systems Division.
(g) Except as set forth on Schedule 5.10, there are no
complaints or charges pending or 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 at the Space Systems
Division.
(h) Except as set forth on Schedule 5.10, Seller is in
compliance with all Laws, and all orders of any court, governmental agency or
arbitrator, relating to access to facilities and 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.
(i) Except as set forth on Schedule 5.22, there are no
collective bargaining agreements to which the Seller is a party containing a
provision which, if enforceable, would require the Purchaser to assume the
obligations of the Seller thereunder, or otherwise impose "successor"
obligations on Purchaser, as a result of the transactions contemplated by this
Agreement or any Ancillary Agreement.
5.23 Insurance. Schedule 5.23 contains an accurate and complete
list of all policies of insurance owned by Seller during the past three fiscal
years under which Seller, in respect of the Space Systems Division, or any
properties or assets of Seller or its Affiliates which are used in the Space
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Systems Division, is insured, including, without limitation, any insurance
providing coverage with respect to product launches, launch services or product
warranties or guarantees provided by Seller (collectively, "Product Warranty
Insurance"). 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 Space Systems Division. Seller is not in default under any of the
insurance policies listed on Schedule 5.23, and, except as set forth on
Schedule 5.23, Seller has not received any notice or other indication from any
insurer or agent of any intent to cancel or not renew any of the insurance
policies listed on Schedule 5.23. Schedule 5.23 also contains a summary of the
Seller's claims histories under its insurance policies and programs for the
past three fiscal years. Except as set forth on Schedule 5.23, after the
Closing, the Purchaser shall be entitled to the benefit of all insurance
policies held by Seller with respect to the Space Systems Division or the
Assets, including all Product Warranty Insurance.
5.24 Backlog.
(a) Schedule 5.24(a) sets forth the backlog of Seller as it
relates to the Space Systems Division as of August 29, 1993 (which shall be
updated as of the Closing Date), for products and services to be provided by
Seller. Schedule 5.24(a) includes the name of each customer, the dollar amount
of backlog, any dollar amounts included which are unfunded by the United States
Congress or any customer in respect of undelivered orders, a brief description
of the products and services to be provided, the proposed delivery
dates therefor and any unexercised valid and subsisting options in the backlog
giving a brief description of the options and the contracts to which they
relate.
(b) Except as set forth on Schedule 5.24(b), all of the
Contracts constituting the backlog of Seller as it relates to the Space Systems
Division (i) have been entered into in the ordinary course of Seller's
business, and (ii) would be capable of performance by Seller, if it retained
the Assets to be transferred and Assumed Liabilities to be assumed hereunder,
and made the planned capital expenditures therefor, in accordance with the
terms and conditions of each such contract.
5.25 Brokers' and Finders' Fees. Except for Goldman, Sachs &
Co., 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 Full Disclosure. All Documents and other papers delivered
by or on behalf of Seller in connection with this Agreement and the Ancillary
Agreements are true, complete, correct and authentic in all material respects.
No statement, representation or warranty made by Seller in this Agreement, any
of the Ancillary Agreements or any Contract or any exhibit or schedule
delivered hereunder or thereunder, or in any certificate or document delivered
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pursuant to this Agreement, any Ancillary Agreement or any Contract, and no
written statement made by or on behalf (except for the offering memoranda
relating to the sale of the Space Systems Division prepared by Goldman, Sachs &
Co.) of Seller to Purchaser or any of its Affiliates pursuant or with respect
to this Agreement, any of the Ancillary Agreements or any Contract, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading. There is no
fact which Seller has not disclosed to Purchaser in writing which Seller
presently believes has or will have (i) a Material Adverse Effect on the Space
Systems Division, or (ii) a material adverse effect on the ability of Seller to
perform this Agreement, the Ancillary Agreements or any Contract to which
Seller is a party.
5.27. Unimpaired Operation. Assuming the receipt of all consents
and approvals required for the transfer of the Assets, upon consummation of the
transactions contemplated under this Agreement, Seller will have sold,
assigned, transferred and conveyed to Purchaser all of the Assets and
Properties used in, held for use by or related to the business of the Space
Systems Division; and, assuming Purchaser holds the Permits and Authorizations
set forth on Schedule 5.10(d), the transfer of the Assets to Purchaser pursuant
to this Agreement will enable Purchaser to operate the Space Systems Division
in the same manner operated by Seller immediately prior to the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller 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 Maryland 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. Subject to the satisfaction of
the condition set forth in Section 8.1(l) of this Agreement, the execution,
delivery and performance by Purchaser of this Agreement and each of the
Ancillary Agreements to which it is a party 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, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws now or hereafter in effect
affecting creditors' rights and remedies generally and subject, as to
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enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
6.3 No Conflicts. The execution, delivery and performance by
Purchaser 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) (a) conflict
with the articles 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.
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 Lehman Brothers,
Inc., 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.
ARTICLE VII
COVENANTS
7.1 Investigations by Purchaser. (a) Through the Closing Date,
Seller will give or cause to be given to Purchaser and its representatives and
agents full access to all the premises, Documents and key employees of Seller,
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to the extent pertaining to the Space Systems Division, and will cause its
officers and employees to furnish to Purchaser such financial and operating
data and other information with respect to the Assets and the conduct of the
Business, in each case as Purchaser shall from time to time reasonably request;
provided, however, that, to the extent reasonably possible, any such
investigation shall be conducted during normal business hours and in such
manner as not to unreasonably interfere with the operation of the business of
Seller or the Space Systems Division. 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.
(b) Purchaser will treat, and will cause its employees,
representatives, consultants and advisors to treat, such Documents and
information concerning Seller or the Space Systems Division 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 July 6, 1993 (the "Confidentiality Agreement"),
between Purchaser and GDC. If the transactions contemplated by this Agreement
are not consummated, Purchaser shall return, and shall cause its
representatives, agents, auditors, attorneys, financial advisors and other
consultants and advisors to return all confidential documents, work papers and
other materials obtained from Seller or any of its Subsidiaries in connection
with this Agreement or the transactions contemplated hereby, and shall destroy,
or cause to be destroyed, any and all materials developed by Purchaser or any
of its officers, directors, representatives, agents, auditors, attorneys,
financial advisors and other consultants and advisors which incorporate any
such confidential information concerning Seller, its Subsidiaries or the Space
Systems Division.
(c) Seller will treat, and will cause its employees,
representatives, consultants and advisors to treat, such Documents and
information concerning Purchaser furnished to Seller or its representatives and
agents in connection with this Agreement confidentially as if Seller were the
party bound by the Confidentiality Agreement. At Purchaser's request, Seller
shall return, and shall cause its representatives, agents, auditors, attorneys,
financial advisors and other consultants and advisors to return, all
confidential documents, work papers and other materials obtained from Purchaser
in connection with this Agreement or the transactions contemplated hereby, and
shall destroy, or cause to be destroyed, any and all materials developed by
Seller, its Affiliates, or any of their respective officers, directors,
representatives, agents, auditors, attorneys, financial advisors and other
consultants and advisors which incorporate any such confidential information
concerning Purchaser.
7.2 Satisfaction of Conditions. Each of the parties hereto
shall use reasonable efforts to cause the conditions to the Closing to be
satisfied as promptly as practicable, except (i) as otherwise provided with
respect to assignments and novations in Section 7.6 hereof, and (ii) that
neither Seller nor Purchaser or any of its Subsidiaries shall be obligated to
pay any consideration to any third party in order to obtain any approval,
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consent or waiver. Purchaser and Seller agree to use all commercially
reasonable efforts (taking into account the effect on the Space Systems
Division of the failure to obtain any required consents or approvals), and to
cooperate and to work together, to obtain all necessary consents and approvals
to transfer all software licenses to Purchaser, and Purchaser and Seller shall
each pay half of all amounts paid to the software vendors in obtaining such
consents and approvals.
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 operate the Business and the Space Systems Division only in the
ordinary and usual course and will use its best efforts (consistent with the
terms of this Agreement) to preserve intact the business organization of the
Business and the Space Systems Division, keep available the services of its
officers and employees who are employed in the Space Systems Division, 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 the Business and the Space Systems Division) and
diligently and prudently pursue new business opportunities including, but not
limited to, Contracts for intermediate expendable launch vehicles. Seller will
also promptly notify Purchaser of the occurrence of any event or state of facts
which is inconsistent with any of the representations, warranties and covenants
of Seller contained herein.
(b) Forbearances. Seller agrees, except as provided by or
as contemplated in this Agreement, that it will not, in connection with the
operation of the Business and the Space Systems Division, without the prior
written consent of Purchaser:
(1) incur any debt, liability or obligation, direct or
indirect, whether accrued, absolute, contingent or otherwise, on behalf of or
with respect to the Space Systems Division, other than unsecured current
liabilities (not including indebtedness for borrowed money) incurred in the
ordinary and usual course of business, or permit any increase in or expansion
of Assumed Liabilities other than as expressly contemplated by existing
Contracts to be assumed by Purchaser at Closing;
(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 Space Systems Division), any other Person,
except in the ordinary and usual course of business in an amount not to exceed
$10,000 for any individual item or event or $250,000 for all such items or
events;
(3) mortgage, pledge or otherwise encumber any of its
properties or assets which are used in the Space Systems Division or would
otherwise comprise Assets;
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(4) sell, license, lease, transfer or dispose of any
of its properties or assets which are used in the Space Systems Division or
would otherwise comprise Assets, or waive or release any rights which relate to
the Space Systems Division, or compromise, release or assign any indebtedness
owed to it or any claims held by it which relate to the Space Systems Division,
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 Space Systems Division whether by contributions to
capital, property transfers or otherwise, or by the purchase of any property or
assets of any other Person, other than as described in the capital spending
plan annexed to Schedule 5.8;
(6) propose, enter into, terminate or substantially
amend or supplement any Contract which relates to the Space Systems Division
unless the same involves a dollar amount of less than $1,000,000 and is done in
the ordinary and usual course of business consistent with the past practices of
the Space Systems Division;
(7) enter into, terminate, modify or supplement any
collective bargaining agreement;
(8) except for currently scheduled base salary
increases and increases pursuant to the collective bargaining agreements
identified on Schedule 5.22, and except for reductions in force and other lay-
offs consistent with the current business plan of the Space Systems Division as
communicated to Purchaser, change in any manner the compensation or fringe
benefits of any of its officers, directors or employees employed in the Space
Systems Division or commit itself to any employment agreement with or for the
benefit of such officer, director, employee or other person which calls for
annual payments in excess of $50,000 per employee or establish or create any,
or modify as to benefits any existing, GD Employee Benefit Plan or other
compensation plan, program or arrangement which relates to any officer,
director or employee employed in the Space Systems Division;
(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 material
value to the properties, assets, business, operations or financial condition of
the Space Systems Division; or
(11) enter into a Contract (other than this Agreement)
to do any of the things described in clauses (1) through (10) above.
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(c) Insurance. Seller will cause all insurance policies
currently in effect with respect to Seller's properties, assets, operations or
employees (to the extent relating to the business or operations of the Space
Systems Division) to be maintained in full force and effect, or replaced with
substantially comparable coverages to be maintained in full force and effect
until the Closing Date. Seller shall transfer to Purchaser at Closing all
Product Warranty Insurance and such other insurance policies designated by
Purchaser (including, without limitation, those insurance policies listed on
Schedule 3.1(b)) which relate to the business or operations of the Space
Systems Division or the Assets and which by their terms can be transferred.
7.4 HSR Act Compliance. Each party hereto hereby agrees with
each other party 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. Nothing in this Agreement, however, shall require Purchaser
to divest or hold separate any of its Properties or any of the Assets, or to
accept any conditions, limitations or restrictions on the business or
operations of Purchaser or its Subsidiaries or Affiliates or the Business
acquired pursuant to this Agreement, which Purchaser determines, in its sole
discretion, to be unacceptable.
7.5 Pending or Threatened Litigation. Between the date hereof
and the Closing Date, each party hereto shall inform the other parties hereto
promptly upon obtaining knowledge of any pending or threatened litigation or
other fact or event which may reasonably be anticipated to (i) prevent, delay
or adversely affect the consummation of the transactions contemplated hereby or
(ii) cause any of its representations and warranties contained herein to be
inaccurate.
7.6 Assignments; Novations. (a) Seller will cooperate fully in
effecting, if necessary, the transfer or assignment of all licenses,
registrations or other documents pertaining to the Space Systems Division which
were issued by government agencies under the authority of the Export Control
Laws.
(b) The parties acknowledge that, in accordance with
Federal Acquisition Regulation ("FAR") Section42.1204, 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 the assignment or the novation of all
Government Contracts, and Seller hereby agrees expeditiously to take all steps
necessary to file and to use its best efforts to obtain approvals of all
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required novations or assignments, including the provision of the guarantee of
performance required for novation of contracts pursuant to FAR Sections
42.1201, 42.1204(d)(3), and 42.1204(e). Nothing in this Agreement, however,
shall require (i) Seller or Purchaser to pay any consideration for any such
assignment or novation, or (ii) 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) With respect to any Government Contracts that cannot be
assigned to Purchaser or novated on the Closing Date, 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. In connection therewith, Purchaser or its Subsidiaries is
authorized to act as agent on behalf of Seller for purposes of performing and
administering Contracts and subcontracts during the period after the Closing
until such Contracts and subcontracts are novated or assigned to Purchaser;
provided, however, such authority to act as agent shall not authorize Purchaser
to settle or compromise claims under such Contracts or subcontracts where such
claims are not Assumed Liabilities. Purchaser shall indemnify and hold Seller
and its directors, officers, employees, affiliates, agents and assigns harmless
from any loss which directly results from any action Purchaser takes pursuant
to the grant of authority to act as agent provided in the preceding sentence.
(d) Effective upon the assignment or novation of a
Government Contract to Purchaser, the Government Contract shall be assumed by
Purchaser provided that Seller shall reimburse Purchaser for any monetary
benefit received by Seller (net of any actual out-of-pocket costs of Seller in
connection with such Government Contract) that would have accrued to Purchaser
had the Government Contract been assigned or novated as of the Closing Date.
Any subcontract or other delegation which Seller and Purchaser have theretofore
entered into or agreed upon in respect of such Government Contract shall be
terminated as of the effective date of such assignment or novation.
(e) Seller and Purchaser shall cooperate with each other to
preserve all bids, quotations and proposals made in the ordinary course of
business by the Space Systems Division 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
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"Government Contracts" for purposes of this Agreement and shall be governed by
this Section 7.6.
7.7 [Intentionally Omitted]
7.8 Noncompete.
(a) For a period of five years after the Closing Date,
Seller shall not and shall cause its Affiliates not to: (i) cause, induce or
encourage any employees of the Space Systems Division who are or become
employees of Purchaser or its Affiliates to leave such employment; (ii) cause,
induce or encourage any material actual or prospective customer, supplier,
manufacturer or licensor of the Space Systems Division, or any other Person who
has a business relationship with Seller which is material to the Space Systems
Division, to terminate or change any such actual or prospective relationship in
a manner which would be adverse to the Space Systems Division; or (iii)
conduct, participate or engage, directly or indirectly, in any business
involving the design, development, production, processing, sale and launching
of expendable launch vehicles and upper stage rockets, other advanced space
programs or energy and magnetics programs (excluding, however, energy and
magnetic programs as they relate to the principal business of the Seller's
Electric Boat and Land Systems divisions), or support of any product or any
business that is competitive with the Space Systems Division, as conducted on
the Closing Date, anywhere in the world (a "Restricted Business"); provided,
that the restrictions contained in this Section 7.8 shall not restrict the
acquisition by Seller, directly or indirectly, of less than 5% of the capital
stock of any Person engaged in a Restricted Business nor shall they restrict
the business conducted by an entity with or into which Seller may merge or be
consolidated or which acquires all or substantially all of Seller's assets,
provided such activity was conducted by such entity on or prior to the date of
such merger, consolidation or acquisition.
(b) The covenants and undertakings contained in this
Section 7.8 relate to matters which are of a special, unique and extraordinary
character and a violation of any of the terms of this Section 7.8 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 7.8. The rights and remedies provided by this Section
7.8 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 7.8, 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) 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 7.8 is unreasonable,
arbitrary or against public policy, then a lesser time period, geographical
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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.
7.9 Non-Solicitation. If this Agreement shall be terminated
pursuant to Section 9.2 hereof (other than by virtue of a default or failure to
perform by Seller), for a period of one year after the date of such
termination, Purchaser shall not, and shall cause its Subsidiaries not to
induce or encourage any employees of the Business to leave such employment
(provided, however, that the foregoing shall not apply to responses to or
follow-up hiring in respect of general solicitations or advertisements for job
positions not specifically directed to employees of the Space Systems Division
or the Business).
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 current or former
employees concerning compensation for inventions, such as, without limitation,
that provided in paragraph 2(f) of the General Dynamics Proprietary Information
and Invention Agreement, form 86 221 R1 (GDP Form 3-243).
7.11 Use of Stationery, etc. To the extent that any stationery,
checks or other printed materials acquired by Purchaser pursuant hereto shall
contain the name "General Dynamics," "Convair" or the name of any Affiliate of
Seller, Purchaser may continue to use such materials until the earlier to occur
of (i) the date that is six months after the Closing Date and (ii) the date on
which the existing supply thereof shall be exhausted, and neither Seller nor
any Affiliate of Seller shall prohibit or bring any action to enjoin the use of
such materials by Purchaser. In addition, Purchaser may retain for six months
after the Closing Date and then shall remove, all exterior signs bearing the
name "General Dynamics" or "Convair" on any of the real Property or buildings
which constitute Assets.
7.12 Administration of Accounts. (a) All payments and
reimbursements made in the ordinary course by any third party in the name of
or to Seller in connection with or arising out of the Assets and Assumed
Liabilities after the Closing Date shall be held by Seller in trust to the
benefit of Purchaser and, immediately upon receipt by Seller of any such
payment or reimbursement, Seller shall pay over to Purchaser the amount of such
payment or reimbursement without right of set off.
(b) All payments and reimbursements made in the ordinary
course by any third party in the name of or to Purchaser in connection with or
arising out of the Excluded Assets and Excluded Liabilities after the Closing
Date shall be held by Purchaser in trust to the benefit of Seller and,
immediately upon receipt by Purchaser of payment or reimbursement, Purchaser
shall pay over to Seller the amount of such payment or reimbursement without
right of set off.
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7.13 1993 Financial Statements. Seller will deliver to
Purchaser as soon as practicable after the end of the period a balance sheet
and statement of operations for the Business as at and for the period ended
December 31, 1993. Such 1993 financial statements shall be subject to the
representations and warranties relating to the Financial Statements contained
in Section 5.5 hereof. Seller will also deliver to Purchaser, with the
cooperation of the Purchaser, as soon as practicable after the Closing Date but
in no event later than sixty (60) days after the Closing Date, the Closing Date
Balance Sheet, the Initial Statement of Net Assets to be Sold and the Closing
Reconciling Statement, which have been prepared in accordance with the
provisions of Article IV of this Agreement.
7.14 Audited Financial Statements. Seller acknowledges that
Purchaser must include audited financial statements for the Space Systems
Division (the "Audited Financial Statements") in Purchaser's filings under the
Securities Act of 1933, as amended (the "1993 Act") and the Securities Exchange
Act of 1934, as amended (the "1934 Act"), including, but not limited to, in a
filing on Form 8-K required to be made in connection with the consummation of
the transactions contemplated by this Agreement. In connection with the
requirement that Purchaser file a Form 8-K under the 1934 Act disclosing the
transactions consummated under this Agreement, Seller, with the cooperation of
the Purchaser, shall promptly, and in any event within sixty (60) days after
the Closing, cause to be delivered to the Purchaser financial statements
audited by Arthur Andersen which Audited Financial Statements (i) will be
prepared in accordance with GAAP and Regulation S-X, (ii) will comply in all
material respects with the requirements of the 1933 Act and the 1934 Act and
(iii) will not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
information contained therein not misleading. Seller agrees, from time to time
upon the request of the Purchaser, to take such actions and provide to Arthur
Andersen and Purchaser such certificates, documents and other information as
may be necessary or appropriate to obtain the consent of Arthur Andersen to
include the Audited Financial Statements and the opinion of Arthur Andersen in
respect thereof in the Purchaser's filings under the 1933 Act and the 1934 Act,
including any filings on Form 8-K.
ARTICLE VIII
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. All
representations and warranties of Seller contained in this Agreement and in all
certificates, schedules and other documents delivered by Seller to Purchaser or
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its representatives pursuant to this Agreement and/or in connection with the
transactions contemplated hereby shall be true, complete and accurate in all
material respects as of the date when made and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except for changes expressly permitted by
this Agreement, and Purchaser shall have been furnished a certificate of an
authorized officer of Seller, dated the Closing Date, to such effect.
(b) Compliance. Seller shall have performed and complied in all
material respects with all obligations and agreements required in this
Agreement to be performed or complied with by Seller prior to the Closing Date,
and Purchaser shall have been furnished a certificate of an authorized officer
of Seller, dated the Closing Date, to such effect and copies of such corporate
resolutions and other documents evidencing the performance thereof as Purchaser
may reasonably request.
(c) No Material Adverse Change. During the period from the date
hereof to the Closing Date, Seller shall not have sustained any loss or damage
to the Assets, whether or not insured, which affects in any material respect
its ability to conduct the business of the Space Systems Division, nor shall
there have been any material adverse change in the business, condition
(financial or otherwise), revenues, prospects or results of operations of the
Space Systems Division other than changes in the prospects of the Space Systems
Division resulting from a General Industry Development. Without limiting the
generality of the foregoing, Seller expressly acknowledges that the failure or
partial failure of any of Seller's Atlas launches or the failure or partial
failure of any of Seller's Centaur rockets (as opposed to a failure or partial
failure of one of Purchaser's Titan rockets that adversely effects one of
Seller's Centaur rockets) after the date of this Agreement and prior to the
Closing shall be deemed a material adverse change in accordance with the
foregoing.
(d) Completion and Review of Disclosure Schedules. Seller shall
have the right, for a period of fifteen (15) days after the date of this
Agreement, to update and supplement the Schedules delivered pursuant to Article
V of this Agreement; provided, however, that if any such updated Schedules
reveal any facts or circumstances which, in the reasonable opinion of
Purchaser, reflect in a material adverse way on the Assets or the Assumed
Liabilities, or the results of operations or the financial condition of the
Space Systems Division, or the Space Systems Division's business, prospects,
assets, liabilities (absolute, contingent or otherwise) or reserves, or
Purchaser's ability to conduct the business and operations of the Space Systems
Division as such is presently conducted, Purchaser may, by written notice to
Seller within twenty five (25) days after the date of this Agreement, terminate
this Agreement.
(e) No Injunctions or Litigation, etc.; Compliance. (1)
No injunction restraining consummation of any of the transactions contemplated
by this Agreement or any of the Ancillary Agreements shall be in effect, and
all statutory requirements, if any, for the valid consummation by Purchaser and
Seller of the transactions contemplated by this Agreement or any of the
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Ancillary Agreements shall have been fulfilled and all authorizations, consents
and approvals of all federal, state, local and foreign governmental agencies
and authorities (including all approvals and waiting period expirations
required under the HSR Act) required to be obtained in order (A) to permit the
consummation by Purchaser and Seller of the transactions contemplated hereby or
thereby and (B) to permit the business presently carried on by the Space
Systems Division to continue unimpaired immediately following the Closing Date
shall have been obtained.
(2) No action or proceeding shall have been instituted and,
at what would otherwise have been the Closing Date, remain pending before a
court or other governmental body or arbitrator to (i) enjoin, restrain or
prohibit the transactions contemplated by this Agreement or any of the
Ancillary Agreements, (ii) place any material limitation on the ability of
Purchaser to conduct the business presently carried
on by the Space Systems Division after Closing or (iii) seek to compel
Purchaser to divest or hold separate any of its properties or any of the
Assets, or to accept any conditions, limitations or restrictions on the
business or operations of Purchaser or its Subsidiaries or Affiliates or the
Business acquired pursuant to this Agreement.
(f) Consents. All licenses, consents and approvals listed on
Schedule 3.1(b) shall have been obtained and delivered to Purchaser.
(g) Bill of Sale. Seller will have delivered to Purchaser the
duly executed Bill of Sale.
(h) Kearny Mesa Lease. Seller will have delivered to Purchaser
executed counterparts of the Kearny Mesa Lease.
(i) Sycamore Canyon Lease. Seller will have delivered to
Purchaser executed counterparts of the Sycamore Canyon Lease.
(j) License Agreement. Seller will have delivered to Purchaser
an executed counterpart of the License Agreement.
(k) Services Agreement. Seller will have delivered to Purchaser
executed counterparts of the Services Agreement.
(l) Government Cooperation. Purchaser shall have determined, in
Purchaser's sole and absolute discretion, that certain financial, regulatory,
policy and other matters will be resolved with the U.S. Government such that
Purchaser will be able to realize the benefits that Purchaser anticipates will
occur as a result of the consummation of the transactions contemplated under
this Agreement and the Ancillary Agreements; provided, however, that this
condition shall be considered not satisfied and this Agreement shall
automatically terminate pursuant to this subsection 8.1(l) unless, within sixty
(60) days after the date of this Agreement, Purchaser (i) waives this condition
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or (ii) gives Seller notice to the effect that it believes in good faith that
progress is being made toward receipt of the assurances necessary for Purchaser
to waive this condition and, within two (2) Business Days after receipt of
Purchaser's notice, Seller gives Purchaser notice that it consents (which
consent shall not be unreasonably withheld) to the extension of the sixty (60)
day period provided for in this subsection for an additional thirty (30) days;
and, provided further, that if Seller properly withholds its consent, Seller
will provide written notice of such decision within two (2) Business Days after
receipt of Purchaser's notice and Purchaser may waive this condition by
providing notice of such waiver to Seller within two (2) Business Days after
its receipt of Seller's notice denying the extension. In the event that the
initial sixty (60) day time period is extended to ninety (90) days as provided
above, this Agreement shall terminate automatically at 11:59 p.m., E.S.T., on
the ninetieth (90th) day after the date of this Agreement unless, prior to such
time, Purchaser shall have notified Seller that this condition has been
satisfied or waived.
(m) Mission Risks Guarantee Coverage. Seller shall have
obtained, or obtained a binding commitment for, mission risk guarantee
coverage, which shall be transferable to Purchaser without further consent,
for the Atlas launch services for the Orion space launch program as described
in Article VII of the agreement between British Aerospace Space Systems Limited
and CLS and the Atlas launch services for the AMSC MSAT satellite program as
described in Article VIII of the agreement between AMSC Subsidiary Corporation
and CLS, in each case in an amount sufficient to satisfy Seller's mission
risks/ refund obligations in full with respect to such launch service programs
for a premium amount not in excess of $52,000,000 for each launch service
program, which premium amount Purchaser agrees is for the account of the Space
Systems Division and will be the responsibility of Purchaser after the Closing.
If the risk guarantee coverage premiums are in excess of $52,000,000 per launch
service program, Seller may satisfy this condition, at its option, by providing
adequate evidence or assurances to Purchaser that Seller has paid or will pay
all risks guarantee coverage premium amounts in excess of $52,000,000 per
launch service program.
(n) AMSC Letter Agreement. Seller will have delivered to
Purchaser executed counterparts of the AMSC Letter Agreement.
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.
All representations and warranties of Purchaser contained in this Agreement and
in all certificates, schedules and other documents delivered by Purchaser to
Seller or its representatives pursuant to this Agreement and/or in connection
with the transactions contemplated hereby shall be true, complete and accurate
in all material respects as of the date when made and as of the Closing Date
with the same force and effect as though such representations and warranties
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had been made on and as of the Closing Date, except for changes expressly
permitted by this Agreement, and Seller shall have been furnished a certificate
of an authorized officer of Purchaser, dated the Closing Date, to such effect.
(b) Compliance. Purchaser shall have performed and complied in
all material respects with all obligations and agreements required in this
Agreement to be performed or complied with by it prior to the Closing Date, and
Seller shall have been furnished a certificate of an authorized officer of
Purchaser, dated the Closing Date, to such effect and copies of such corporate
resolutions and other documents evidencing the performance thereof as Seller
may reasonably request.
(c) No Injunctions, etc.; Compliance. (1) No injunction
restraining consummation of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements shall be in effect, and all
statutory requirements, if any, for the valid consummation by Purchaser and
Seller of the transactions contemplated by this Agreement or any of the
Ancillary Agreements shall have been fulfilled and all authorizations, consents
and approvals of all federal, state, local and foreign governmental agencies
and authorities (including all approvals and waiting period expirations
required under the HSR Act) required to be obtained in order to permit the
consummation by Purchaser and Seller of the transactions contemplated hereby
and thereby shall have been obtained.
(2) No action or proceeding shall have been instituted and, at
what would otherwise have been the Closing Date, remain pending before a court
or other governmental body or arbitrator to enjoin, restrain or prohibit the
transactions contemplated by this Agreement or any of the Ancillary Agreements.
(d) Assumption Agreement. Purchaser will have delivered to
Seller the duly executed Assumption Agreement.
(e) Kearny Mesa Lease. Purchaser will have delivered to Seller
executed counterparts of the Kearny Mesa Lease.
(f) Sycamore Canyon Lease. Purchaser will have delivered to
Seller executed counterparts of the Sycamore Canyon Lease.
(g) Services Agreement. Purchaser will have delivered to Seller
executed counterparts of the Services Agreement.
(h) License Agreement. Purchaser will have delivered to Seller
an executed counterpart of the License Agreement.
(i) AMSC Letter Agreement. Purchaser will have delivered to
Seller an executed counterpart of the AMSC Letter Agreement.
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ARTICLE IX
THE CLOSING; TERMINATION OF AGREEMENT
9.1 The Closing. The Closing shall be held within five Business Days
after the expiration or early termination of all waiting periods in respect of
the transaction herein contemplated under the HSR Act, and 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 Piper & Marbury, 1200
Nineteenth Street, N.W., Washington, D.C. 20036. 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:
(a) By mutual written consent of Purchaser and Seller.
(b) By Purchaser upon 10 days written notice to Seller if
Purchaser reasonably concludes that one or more of the conditions specified in
Sections 8.1(c), 8.1(f) or 8.1(m) of this Agreement is not capable of
satisfaction at or prior to Closing.
(c) By Purchaser as provided in Section 8.1(d);
(d) Pursuant to the provisions of Section 8.1(l); and
(e) 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 April 30, 1994 (the "Termination Date").
In the event this Agreement is terminated pursuant to this Section
9.2, all further obligations of the parties hereunder shall terminate, except
that (i) the obligations set forth in Sections 7.1(b) and (c), 7.9, 12.3 and
13.8 shall survive and continue, (ii) nothing in this Section 9.2 shall relieve
any party hereto of any liability for breach of this Agreement, and (iii) if
the termination is pursuant to Section 8.1(l), the Purchaser shall pay the
Seller a termination fee in the amount of $10,000,000 within three (3) Business
Days after such termination.
ARTICLE X
DELIVERIES AT THE CLOSING
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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 officer's certificates referred to in Sections 8.1(a)
and 8.1(b).
(b) The consents referred to in Section 8.1(f).
(c) The duly executed Bill of Sale and such other executed
deeds, assignments, bills of sale or certificates of title, each dated the
Closing Date and in form and substance 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.
(d) A counterpart of the Services Agreement, duly executed by a
duly authorized officer of Seller.
(e) A counterpart of the Kearny Mesa Lease, duly executed by a
duly authorized officer of Seller.
(f) A counterpart of the Sycamore Canyon Lease, duly executed by
a duly authorized officer of Seller.
(g) A counterpart of the License Agreement, duly executed by a
duly authorized officer of Seller.
(h) A certificate 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).
(i) Duly executed assignments, in a form suitable for recording
in the various appropriate national or regional patent, trademark or copyright
offices, for all patents and trademark, mask work and copyright registrations
and applications for any of them included in the Assets.
(j) Landlord estoppel certificates, from each landlord under the
real estate leases 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.
(k) Certificates of the Secretary or an Assistant 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
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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.
(l) An opinion of Jenner & Block, as counsel to the Seller, in
customary form covering the due incorporation and good standing of Seller and
the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements being executed by Seller in connection herewith.
(m) A counterpart of the AMSC Letter Agreement, duly executed by
a duly authorized officer 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 officer's certificates referred to in Sections 8.2(a)
and 8.2(b).
(b) The duly executed Assumption Agreement and such other
executed documents, assignments, bills of sale or certificates of title, each
dated the Closing Date and in form and substance satisfactory to counsel to
Seller, as are reasonably necessary to evidence the assumption by Purchaser of
the Assumed Liabilities.
(c) A counterpart of the Services Agreement, duly executed by a
duly authorized officer of Purchaser.
(d) A counterpart of the Kearny Mesa Lease, duly executed by a
duly authorized officer of Purchaser.
(e) A counterpart of the Sycamore Canyon Lease, duly executed by
a duly authorized officer of Purchaser.
(f) A counterpart of the License Agreement, duly executed by a
duly authorized officer of Purchaser.
(g) 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.
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(h) An opinion of Piper & Marbury, as counsel to the Purchaser,
in customary form covering the due incorporation and good standing of Purchaser
and the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements being executed by Purchaser in connection herewith.
(i) A counterpart of the AMSC Letter Agreement, duly executed by
a duly authorized officer of Purchaser.
ARTICLE XI
EMPLOYEES AND EMPLOYEE BENEFITS
11.1 Employment. (a) All employees of the Business as of the
Closing Date shall become employees of Purchaser as of the Closing Date,
including, but not limited to, employees on sick leave, personal leave, jury
duty, vacation, military duty, leave recognized under the Family and Medical
Leave Act, or any other approved leave of absence, as well as employees or
former employees receiving or eligible to receive short-term or long-term
disability benefits (such employees being hereafter referred to as the
"Employees"); provided, however, that any employee who retires, is laid-off or
is terminated from Seller prior to the Closing shall not be considered an
Employee unless such person is receiving or is eligible to receive long-term
disability benefits immediately prior to the Closing Date under the GD Employee
Benefit Plans. Seller shall deliver to Purchaser, at least thirty (30) days
prior to the Closing Date, a schedule designating all Employees. To the extent
required pursuant to any collective bargaining agreement assumed pursuant to
Section 11.2 or any applicable Law, Purchaser shall honor any pre-existing
recall rights, reinstatement rights or rights to reemployment of any inactive
or former employee of the Seller's Business existing at the time of Closing,
provided that any such inactive or former employee reinstated or reemployed by
the Purchaser shall be treated as an Employee only upon the effective date of
such recall, reinstatement or reemployment.
(b) The Employees who are covered by collective bargaining
agreements shall be referred to herein as "Transferred Union Employees". The
Employees who are not covered by collective bargaining agreements shall be
referred to herein as "Transferred Non-Union Employees". Collectively, the
Transferred Union Employees and the Transferred Non-Union Employees shall be
referred to herein as the "Transferred Employees".
(c) Except as expressly provided otherwise in this Article
XI, the terms and conditions of the Transferred Employees' employment shall be
upon such terms and conditions as Purchaser, in its sole discretion shall
determine. Upon request of Purchaser, Seller shall provide Purchaser
reasonable access to data before and after the Closing (including computer data
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and personnel records) regarding the ages, dates of hire, benefits,
compensation and job description of Employees. Seller will provide Purchaser
with reasonable opportunities to enter into discussions with and to advise any
of the Employees concerning the terms of any future employment of such
individuals by Purchaser and will permit Purchaser reasonable access to
Employees for such purpose. Seller shall not discourage any Employees from
accepting an offer of employment, if any, made by Purchaser to such Employee.
Purchaser and Seller shall cooperate in preparing and disbursing materials
concerning the transaction contemplated by this Agreement or the effect of the
transaction upon the Employees' employment or the terms or conditions of the
Employees' employment. Seller and Purchaser will provide each other with
reasonable opportunity to review any written materials and to attend any
scheduled meetings concerning the foregoing.
(d) Except with respect to the Assumed Liabilities, Seller and
Purchaser agree that matters arising out of or relating to the terms and
conditions of the employment of employees or former employees of the Space
Systems Division while employed by the Seller prior to the Closing Date
(including but not limited to claims arising out of any GD Employee Benefit
Plans prior to the Closing Date) are the exclusive responsibility of Seller and
that matters arising out of or relating to the terms and conditions of the
employment of Transferred Employees while employed by Purchaser on or after the
Closing Date (including but not limited to benefits under plans maintained by
Purchaser on or after the Closing Date) are the exclusive responsibility of
Purchaser. For the purposes of this Agreement, those liabilities of the Space
Systems Division constituting Assumed Liabilities by virtue of clause (vi) of
Schedule 1(A) are limited to: (i) accrued vacation and sick leave with respect
to Transferred Employees; (ii) 1993 incentive compensation payments to be paid
in 1994 in cash to Transferred Employees; (iii) the CLS Bonus Plan; (iv)
accrued (as of the Closing Date) salary and wages and related payroll taxes;
(v) to the extent provided in Section 11.3, the obligation to provide post
retirement medical benefits to the individuals described in Section 11.3; (vi)
to the extent set forth in Section 11.2, the collective bargaining agreements
listed on Schedule 5.22; (vii) workers compensation liabilities as described in
Schedule 1(A); (viii) long-term disability benefits and associated medical
benefits payable under the GD Employee Benefit Plans to employees or former
employees of the Space Systems Division as described in Schedule 1(A); and (ix)
any incurred but not reported expenses of Employees arising from GD Employee
Benefit Plans that are reserved for on the Closing Statement of Net Assets to
be Sold and not otherwise described in this Section 11.1(d); provided, however,
that in the case of items (i), (ii), (iii), (iv), (v), (vii), (viii) and (ix),
the Assumed Liabilities in each case shall not exceed the reserve for such item
on the Closing Statement of Net Assets to be Sold.
11.2 Collective Bargaining Agreements. At Closing, Purchaser
shall assume until their scheduled expiration dates, the collective bargaining
agreements listed on Schedule 5.22, except to the extent it would be
impracticable for Purchaser to assume or duplicate Seller's benefit plans under
such agreements, in which event Purchaser shall establish and provide subject
to the agreement of affected labor organizations, comparable substitute
benefits, provided, however, that Purchaser explicitly reserves the right to
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renegotiate such collective bargaining agreements prior to or upon the
expiration thereof. To the extent pension benefits have accrued prior to the
Closing Date in accordance with the collective bargaining agreements and the
plans as of the Closing Date, such benefits will be provided by the Seller in
the GD Employee Pension Plans. To the extent pension benefits accrue
subsequent to the Closing Date in accordance with the collective bargaining
agreements, such benefits will be provided by the Purchaser in its designated
plans. Seller shall cooperate with Purchaser prior to the Closing Date in
Purchaser's efforts to reach agreement with affected labor organizations with
respect to providing comparable substitute benefits. Except with respect to
the Assumed Liabilities, Seller (and not Purchaser) shall be solely liable and
shall indemnify Purchaser from any Damages as a result of any claims incurred
prior to the Closing Date by any employee of the Business or retiree arising
under the collective bargaining agreements listed on Schedule 5.22, as well as
any claims arising under any predecessor collective bargaining agreements
covering the bargaining units that include the Transferred Union Employees.
11.3 Retiree Medical and Life Insurance Benefits.
(a) Effective as of the Closing Date, Purchaser will make
available to Transferred Employees who were at least 55 years of age with five
years of service or who were 50 years of age or older with at least 70 age plus
"service" points on July 1, 1993, in the case of Transferred Non-Union
Employees, and on January 1, 1994, in the case of Transferred Union Employees,
a post-retirement medical plan (or plans) which provides medical benefits to
Transferred Employees (and their dependents) who retire on or after the Closing
Date until such retired Transferred Employees reach age 65 (the "Pre-Medicare
Plan"). Subject to the terms of any collective bargaining agreement listed on
Schedule 5.22, participants in such Pre-Medicare Plan will be required to
contribute towards the cost of such plan. The Pre-Medicare Plan will be
subject to the right of the Purchaser to modify or terminate benefits under
such plan at any time. Other than with respect to Transferred Employees
eligible for the Pre-Medicare Plan (and their dependents), Purchaser shall have
no obligation to provide any post-retirement or post-employment medical
insurance benefits to any Employee. Purchaser shall have no obligation to
provide post-retirement or post-employment life insurance benefits. Seller
shall be solely liable and shall indemnify Purchaser for any Damages as a
result of any claims made by any employee or former employee of the Business or
any beneficiary thereof for post-employment or post-retirement medical or life
insurance benefits arising under or relating to the plans maintained by Seller
as of the Closing Date or prior to the Closing Date.
(b) In the event that an individual not covered by a
collective bargaining agreement (i) retires from Seller on or after the date of
this Agreement and prior to the Closing Date, and (ii) subsequently commences
employment with Purchaser, such individual will permanently cease receiving
post-retirement medical benefits from Seller. Seller will advise such
individuals of this condition before any such employee elects to retire.
(c) Seller shall provide complete and adequate notice to
the Employees regarding the effect of their becoming Transferred Employees on
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the benefits provided or promised to them by Seller or under any of the GD
Employee Benefit Plans including the ability of eligible employees to retire
from Seller and receive post-retirement medical benefits prior to the Closing
Date. Seller and Purchaser shall cooperate in coordinating communications to
the Employees.
11.4 Health and Welfare Benefits for Active Employees.
(a) For each of the employee medical, life insurance or
disability plans included on Schedule 5.9 (other than post-retirement and post-
employment medical and life insurance which shall be governed by Section 11.3),
the Purchaser shall adopt, subject to any applicable collective bargaining
agreement listed on Schedule 5.22, as of the Closing Date comparable employee
medical, life insurance and disability plans, and to the extent required by any
collective bargaining agreements assumed pursuant to Section 11.2, other
welfare plans. Seller shall provide Purchaser all reasonable assistance which
Purchaser may request in establishing such plans, including assistance in
duplicating or transferring contracts applicable to such benefits. If any such
contracts cannot be duplicated or transferred to Purchaser by the Closing Date,
Seller shall assist Purchaser until the end of 1994 in administering the plans
and obtaining the duplicate or transferrable contracts. Seller shall provide
Purchaser with administrative and payroll services through its financial
services company in accordance with the terms of the Services Agreement for a
period not to last beyond the earlier to occur of (i) the expiration of the
respective Facility Leases, or (ii) Purchaser no longer has employees at the
Kearny Mesa Facility. Seller shall be entitled to reasonable compensation from
Purchaser with respect to the rendition of such assistance. Any benefits
adopted by Purchaser shall be subject to the right of the Purchaser to modify
or terminate such benefits at any time. With respect to medical, life
insurance and disability benefits offered by Purchaser to Transferred
Employees, Purchaser shall credit the Transferred Employees with service with
Seller for purposes of eligibility for such health and welfare benefits and
with expenses incurred in 1994 for purposes of meeting annual deductible and
out of pocket expense limitations in 1994 under Purchaser's plans; provided,
however, that such plans may contain, in the discretion of Purchaser,
exclusions for pre-existing conditions as were applicable under the plans
provided to such Transferred Employees by Seller before the Closing Date. Any
benefits provided pursuant to this Section 11.4 by Purchaser to Transferred
Employees will apply only to claims incurred by Transferred Employees on or
after the Closing Date, and, except with respect to the Assumed Liabilities,
Purchaser shall have no liability for costs and expenses related to those
claims incurred prior to the Closing Date.
(b) The parties agree that for purposes of providing
welfare benefit continuation coverage pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, welfare benefit plan
coverage under Purchaser's plans will be considered to have commenced on the
Closing Date and all eligible individuals will not be considered to have lost
coverage under Seller's plans on the Closing Date.
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(c) To the extent assets have been accumulated in
connection with any GD Employee Benefit Plans as of the Closing Date, Seller
shall transfer or cause to be transferred to the Purchaser the allocable
portion of the balance existing as of the Closing Date in any trust, voluntary
employee beneficiary association, reserve, premium stabilization account or
other similar account or arrangement established by Seller or any other Person
and which is attributable to the Assumed Liabilities. The transfer shall take
place as soon as practicable but in no event later than December 31, 1994.
Seller shall permit Purchaser to review the process by which it determines,
based on the balance existing as of the Closing Date, the allocable share
attributable to the Assumed Liabilities and shall provide Purchaser with access
to all documentation requested by Purchaser to verify that the allocable share
has been properly determined. In the event Purchaser and Seller do not agree
on the allocable share, Purchaser and Seller shall jointly engage an
independent enrolled actuary to make a determination within sixty (60) days of
the engagement as to the proper allocable share. The conclusion of the
independent enrolled actuary shall be binding on Purchaser and Seller.
Purchaser and Seller shall share equally the cost of the actuary.
11.5 Pension Benefits.
(a) As of the Closing Date, the Seller shall cause each
Employee to become 100% vested in his accrued benefits in each pension plan (as
defined in Section 3(2) of ERISA) maintained by Seller (and where applicable
each collective bargaining agreement assumed by the Purchaser in accordance
with Section 11.2) with respect to each Employee. Seller shall amend its plans
to credit each Employee's service on or after the Closing Date with the
Purchaser and age attained after the Closing Date for purposes of eligibility
for early retirement benefits. Following notification to Purchaser, Seller
shall seek the consent of the representative of each collective bargaining unit
identified in Schedule 5.22 of its intent to vest employee pension benefits in
accordance with Section 11.5. Seller shall retain all liabilities attributable
to accrued benefits under its pension plans (whether qualified or
nonqualified), and within six months after the Closing Date, shall provide
Purchaser a listing of the service credited and the vested benefits payable to
each Employee under the terms of such plans (including the portion attributable
to retiree medical benefits). At the same time, Seller also shall provide each
Transferred Employee with a statement of his vested accrued benefits.
Purchaser shall have no liability of any kind with respect to pension benefits
accrued under Seller's Plans.
(b) As of the Closing Date, Purchaser shall establish a
pension plan (or plans), or designate an existing pension plan (or plans),
intended to be qualified under Section 401(a) of the Code to cover Transferred
Employees (the "Purchaser's Plans"). Purchaser's Plans will contain such terms
as Purchaser may determine in its sole discretion (subject to the terms of
applicable collective bargaining agreements) and will provide for benefits
based on service with Purchaser on or after the Closing Date, except that the
Purchaser's Plans shall recognize service by Transferred Employees with the
Seller prior to the Closing Date for purposes of vesting and participation.
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11.6 Savings Plans.
(a) As of the Closing Date, the Seller shall cause each
Employee to become 100% vested in his account balance in each savings, thrift
or 401(k) plan maintained by Seller with respect to each Employee. Following
notification to Purchaser, Seller shall seek the consent of the representative
of each collective bargaining unit identified in Schedule 5.22 of its intent to
vest employees in their account balances in accordance with this Section 11.6.
(b) As of the Closing Date, Purchaser shall establish or
designate an existing individual account plan (or plans) intended to be
qualified under Section 401(a) of the Code to cover each Transferred Employee.
Purchaser's plans shall permit Transferred Employees who receive a distribution
(as defined in Section 402(f)(2)(A) of the Code) from Seller's Plans to make a
direct rollover in accordance with Section 401(a)(31) of the Code of the cash
portion of such distribution to a plan designated or established pursuant to
this Section 11.6(b).
11.7 Procedural Matters.
(a) Commencing with the date hereof, the Seller shall make
reasonably available to Purchaser and its agents, employees, accountants and
other representatives, such actuarial, financial, personnel and other benefit-
related information as may be requested by Purchaser, including but not limited
to benefit records, employment histories, policies, interpretations, insurance,
service contracts and other related records needed for the administration of
Purchaser's plans.
(b) Purchaser and Seller agree that the flexible spending
accounts on behalf of Transferred Employees will be maintained throughout 1994
in a manner that ensures that each Transferred Employee receives no more and no
less than he would have received had the transactions contemplated by this
Agreement not occurred.
11.8 Incentive Closing Agreements. Seller shall be solely
responsible for the liabilities under any incentive closing agreements entered
into between Seller and employees of the Space Systems Division. Seller has
delivered to Purchaser a letter dated December 21, 1993 (which letter is hereby
incorporated by reference herein) which sets forth a complete and accurate list
of all such incentive closing agreements.
11.9 Indemnification.
(a) Seller shall indemnify and hold Purchaser harmless from
any Damages it may incur with respect to any claims of, or liabilities or
obligations to, Transferred Employees or employees (including former employees)
of Seller arising out of or relating to the terms and conditions of their
employment during their employment with Seller prior to the Closing Date
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whether such claim is made before or after the Closing Date, including, but not
limited to, claims arising out of any GD Employee Benefit Plans), except to the
extent the Damages arise from (i) Purchaser's failure to perform its
obligations under this Article XI (including Damages relating to the Assumed
Liabilities), applicable Law, or collective bargaining agreements assumed by
Purchaser pursuant to 11.2 or (ii) Purchaser's Plans explicitly provide for
benefits based on service prior to the Closing Date; provided however, that
nothing in Section 11.9 shall modify or expand the indemnification contained in
Sections 11.2 or 11.3.
(b) Purchaser shall indemnify and hold Seller harmless from
any Damages it may incur with respect to any claims of, or liabilities or
obligations to, Transferred Employees arising out of or related to the terms
and conditions of their employment during their employment with Purchaser after
the Closing Date, including, but not limited to, claims arising out of any
employee benefit plan maintained by Purchaser unless the Damages result from
(i) Seller failing to perform its obligations under the incentive closing
agreements referred to in Section 11.8 or (ii) incorrect data provided to
Purchaser by Seller under Section 11.7.
11.10 Intellectual Property. Seller shall cooperate with
Purchaser in communicating terms and conditions of employment for Employees
being hired by Purchaser, including advising the Employees that their current
agreements with Seller or its Affiliates concerning proprietary information and
inventions (such as the General Dynamics Proprietary Information and Invention
Agreements, Form 86-221 R1 (GDP Form 3-243)) shall not apply to their
employment relationship with Purchaser, and that all Employees, whether or not
they signed such agreements with Seller, upon becoming Transferred Employees,
shall be required to sign a new agreement containing provisions concerning
inventions, patents and other intellectual property.
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 (i) the
representations and warranties of Seller made in connection with or arising out
of Sections 5.9, 5.10, 5.11, and 5.14(b)(1) through (b)(5), shall survive
Closing and remain in full force and effect until expiration of any rights of
Purchaser or any third party under law or equity with respect thereto and (ii)
the representations and warranties of Seller made in connection with or arising
out of Section 5.18 shall survive Closing and remain in full force and effect
until the tenth anniversary of the Closing Date. All representations and
warranties contained in this Agreement and in the disclosure schedules or in
any certificates or other documents delivered pursuant hereto shall not be
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deemed to be waived or otherwise affected by any prior knowledge of, or any
investigation made by or on behalf of, any party hereto.
12.2 Indemnification.
(a) Purchaser shall 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, (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, and (4) the ownership or occupancy of the Assets
or the operation of the Business (including, without limitation, the design,
manufacture and assembly of products or the provision of services, the leasing
of property (real and personal), the incurrence of commitments and obligations,
the employment of persons, the provision of services and the giving of
warranties and warnings) by Purchaser after the Closing Date, except for the
Excluded Liabilities. Purchaser shall also fully and promptly pay, perform,
discharge, defend, indemnify and hold harmless Seller, and its respective
directors and officers, from and against any and all Loss 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
operations of the Facilities or the act or omission of Purchaser following the
Closing, including without limitation, any investigation, remediation or
removal of any Contaminant; provided, however, that the indemnity provided in
this sentence shall not be assignable by Seller.
(b) Seller shall indemnify and hold harmless Purchaser 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 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 but excluding
any such failure with respect to the representations and warranties made by it
in (A) Section 5.9 to the extent indemnification therefor is available under
Section 11.9, (B) Section 5.18 to the extent indemnification therefor is
available under Section 12.2(d), (C) Section 5.11 to the extent indemnification
therefor is available under Section 12.4, and (D) Sections 5.1 through 5.4,
5.10 and 5.26); (2) the failure of any representation or warranty made by
Seller in any of Sections 5.1 through 5.4, 5.10 and 5.26 hereof (including,
without limitation, all statements made on any Schedule hereto or in any
Exhibit hereto) to have been true and correct in all respects when made or
deemed to have been made, and (3) the breach by Seller of any of the covenants
and agreements on its part to be performed under this Agreement.
(c) Seller shall indemnify and hold harmless Purchaser and
its Affiliates and Subsidiaries and their respective directors, officers,
employees and agents with respect to (A) any and all Damages arising out of or
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resulting from the ownership or occupancy of the Assets (including, without
limitation, the Kearny Mesa Facility, Plant 19 and the Sycamore Canyon
Facility) or the Excluded Assets or the operation of the Business (including,
without limitation, the design, manufacture and assembly of products or the
provision of services, regardless of whether sold before, at or after the
Closing Date, the leasing of property (real and personal), the incurrence of
commitments and obligations, the employment of persons, the provision of
services and the giving of warranties) by GDC, SSC or CLS on or before the
Closing Date, whether asserted before or after the Closing Date, except for the
Assumed Liabilities and (B) without duplication, any and all Excluded
Liabilities. To the extent that a given claim for indemnification in favor of
Purchaser could be deemed to arise under both Section 12.2(b) and this Section
12.2(c), then such claims shall be deemed to only have arisen under this
Section 12.2(c).
(d) 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 Loss or
Damages arising out of, based upon or attributable to (i) any Environmental
Claim or Remedial Action or (ii) the breach of any representation or warranty
under Section 5.18 (including any statement in Schedule 5.18), in each case to
the extent arising out of or based upon anything relating to the Facilities or
their operation by the Seller or other Persons or the act or omission of Seller
or any Subsidiary or any predecessor thereof prior to the Closing, including,
without limitation, any investigation, remediation or removal of any
Contaminant (whether such Contaminant is now located at the Facilities or
elsewhere) and any Environmental Claim or Remedial Action required in respect
of any matter disclosed in or pursuant to Schedule 5.18. Without limiting the
rights or obligations of Purchaser and Seller set forth above, Purchaser agrees
to (x) on a basis consistent with Seller's past practices, continue to seek
payment or reimbursement from the U.S. Government with respect to Environmental
Claims and Remedial Actions relating to Plant 19, Cape Canaveral Air Force
Station and Vandenberg Air Force Base Facilities and (y) otherwise reasonably
cooperate with Seller in its efforts to assert good faith claims for recovery
against third parties in connection with Environmental Claims or Remedial
Actions; provided, however, that, except as set forth in clause (x) above, (i)
the Purchaser shall not be required to pursue claims against third parties
before having a right to make claims against the Seller, (ii) Purchaser shall
have no obligation to continue to pursue the U.S. Government as required by
clause (x) in respect of any Environmental Claim or Remedial Action as to which
no payment has been received within ninety (90) days after the original demand
by Purchaser, and then shall be entitled to immediate indemnification from
Seller as provided herein and (iii) Purchaser shall not in any event be
required to increase its overhead rates in order to facilitate a recovery by
Seller. Seller shall reimburse Purchaser for all costs incurred by Purchaser
in making third party claims or assisting Seller in connection with the
foregoing.
(e) Notwithstanding any contrary provisions herein
contained, including any indemnification provisions, neither Seller or any of
its Affiliates, on the one hand, nor Purchaser or any of its Affiliates, on the
other hand, shall have any liability or obligation to indemnify or hold
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harmless any Person by reason of the fact that the consummation of the
transactions provided for by this Agreement is found, held, determined or
alleged to have violated the antitrust laws of the United States or any foreign
jurisdiction; provided, however, that this Section 12.2(e) shall not, at or
subsequent to the consummation of such transactions, be deemed to relieve any
Person from liability with respect to a knowing and willful misrepresentation
as to the propriety of such transactions under any such laws.
(f) Seller shall indemnify and hold harmless Purchaser, and
its Affiliates and Subsidiaries and their respective directors, officers,
employees, agents and customers from and against any and all Damages based upon
the infringement, or inducing or contributory infringement, of any patent,
copyright, mask work right, or right in trade secret, by reason of the
manufacture, lease, sale or use after the Closing Date of any apparatus
manufactured or sold, or process practiced, by the Space Systems Division at
any time during the six years prior to the Closing Date; provided, however,
that the obligations under this Section 12.2(f) shall not apply to any Damages
for any such infringement, other than contributory or inducing infringement,
based solely on the combination or use of any such product or process with any
other apparatus or process not manufactured, sold or practiced by Seller during
the six years prior to the Closing Date; and provided, further that the
obligations of Seller under this Section 12.2(f) shall not apply to
infringements which occur as a result of any modification to any apparatus or
process from the form in which it was made, used or sold by the Space Systems
Division on or before the Closing Date. Seller's obligations under this
Section 12.2(f) with regard to acts of contributory or inducing infringement
after the Closing Date shall apply only if the same acts which give rise to
such inducing or contributory infringement were also performed by the Space
Systems Division on or before the Closing Date.
(g) For the purposes of administering the indemnification
provisions of this Agreement, 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 Agreement (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. The failure to give notice as required
by this Section 12.2(g)(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.
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(2) After notification is given as aforesaid, the
Indemnitor shall be entitled (but not obligated, except with respect to Assumed
Liabilities, as to which Purchaser shall be so 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
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 by the indemnified party
shall be borne by the Indemnitor and, in the event of clause (C), such counsel
shall be reasonable acceptable to the Indemnitor. In no event shall an
Indemnitor be liable to any indemnified party for the cost of employing or
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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.
(h) From the date hereof until the sixth anniversary of the
Closing Date, each party to this Agreement agrees to retain all Documents with
respect to all matters as to which indemnity may be sought under this Agreement
(except to the extent that such Documents in the possession of a party may be
transferred to the possession of another party at the Closing pursuant to or as
contemplated by this Agreement). Before disposing of or otherwise destroying
any such Documents, the possessor thereof shall give reasonable notice to such
effect and deliver to any Indemnitor, at such Indemnitor's expense and upon its
request, a copy of any such Documents. In addition, each party to this
Agreement agrees to use its reasonable efforts to cause its employees to
cooperate with and assist the appropriate Indemnitor and indemnified party in
connection with any claim, action or proceeding for which indemnity is sought
hereunder or with respect to which an Indemnitor has elected to participate in
the defense.
(i) Seller shall not be liable to any Person under Section
12.2(b)(1) and 12.2(f) unless and until the aggregate amount for which
indemnity would otherwise be due from Seller under Section 12.2(b)(1) and
12.2(f), together with any Basket Limited Liabilities (as defined in Schedule
1(A)), exceeds $2,500,000 (it being understood that Seller shall be liable only
for all amounts in excess thereof) and, provided further, that Seller shall not
be liable under Sections 12.2(b)(1) and 12.2(f) to make payments in excess of
an aggregate of $50,000,000. The foregoing limitations shall not be applicable
in respect of any other obligations of Seller hereunder nor in respect of
obligations of Seller under Section 12.2(f) hereof for products manufactured by
the Space Systems Division on or prior to the Closing Date, whether sold
before, on or after the Closing Date.
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(j) The indemnities provided for in Sections 12.2(a)(1),
12.2(b)(1) and (2) shall survive until the second anniversary of the Closing
Date or, if applicable, such longer period of time as may be specified in
Section 12.1 for survival of the representation or warranty giving rise to such
indemnity claim (except with respect of any Indemnification Event as to which
the indemnified party shall have given the Indemnitor notice prior to the
applicable survival date, which shall survive until the payment in full by the
Indemnitor of any Damages following final settlement or non-appealable judgment
with respect to such Indemnification Event). The remaining indemnities
provided for under this Agreement shall remain in effect in perpetuity
notwithstanding any other provisions of this Agreement.
(k) The indemnities provided for in Sections 12.2(a)(1) and
12.2(b)(1) and (2) shall be the exclusive remedies under this Agreement with
respect to the failure of any representation or warranty covered thereby to
have been true and correct when made or deemed made, except in the case of
intentional misrepresentation or fraud.
(l) Notwithstanding any facilitating undertakings by
Purchaser of Seller's liability to third parties to effectuate or facilitate
the Closing and the transactions contemplated herein, (such as under leases,
contracts, assignments, novations or permits), this Agreement shall be the sole
governing document in determining the rights and liabilities as between the
Purchaser and Seller and no inference shall be formed that an undertaking
contained in any other agreement is an Assumed Liability with respect to a pre-
Closing act, event, omission or condition. In the absence of an express
written provision to the contrary in this Agreement setting forth a specific
third party undertaking as an Assumed Liability under this Agreement, any
undertaking of this type shall not be deemed an Assumed Liability for purposes
of Section 12.2(a) or 12.2(c) of this Agreement nor in any event so as to
operate to lessen or obviate the indemnity protection afforded to Purchaser
under Section 12.2(d) of this Agreement.
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 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
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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. Without limiting
the generality of the foregoing but subject to Section 12.2(h), 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. Purchaser will cause appropriate personnel to
prepare usual and customary tax return packages for (i) the tax period ending
December 31, 1993 (the "1993 Packages") and (ii) the tax period beginning
January 1, 1994, and ending as of the Closing Date (the "Short Period
Packages"). Except as otherwise provided below, the 1993 Packages will be
delivered to Seller not later than April 30, 1994 and the Short Period Packages
will be delivered to Seller not later than 120 days after the Closing Date. If
the Purchaser determines that it is impractical to deliver the Packages on or
before the prescribed times, it shall deliver the Packages to Seller as soon
after the initially prescribed times as is reasonably practicable but in no
event shall the 1993 Packages be delivered later than July 31, 1994, nor shall
the Short Period Packages be delivered later than 210 days after the Closing
Date, Purchaser having no obligation to incur additional out-of-pocket expenses
to accelerate the delivery. Purchaser will provide Seller with any necessary
payroll records attributable to the period prior to the Closing Date.
(b) Any sales, transfer, use or other similar taxes imposed
as a result of the sale of the Assets to Purchaser pursuant to this Agreement
shall be shared equally by Seller and Purchaser. At the Closing, Purchaser
shall remit to Seller such properly completed resale exemption certificates and
other similar certificates or instruments as are necessary to claim available
exemptions from the payment of sales, transfer, use or other similar taxes
under applicable law. All recording, transfer and other similar taxes and fees
payable as a result of the public recordation of the instruments of conveyance
or transfer of the Assets executed and delivered to Purchaser pursuant to this
Agreement shall be allocated between the Purchaser and the Seller in accordance
with the customary practice prevailing in the place where any such Assets are
located.
(c) 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 and Purchaser or its
Affiliates shall be responsible for, and shall indemnify and hold harmless
Seller, its Subsidiaries and Affiliates in respect of any Damages attributable
to all Taxes with respect to the ownership, use or leasing of the Assets after
the Closing Date. Seller's share of all real and personal property Taxes,
state and local ad valorem Taxes and assessments applicable to the Assets for
any period commencing on or prior to the Closing Date and ending after the
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Closing Date shall be determined on a pro rata basis based on the length of
such period and when the Closing Date occurs therein.
(d) 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 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 upon request 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.
(e) The Purchase Price and the liabilities assumed by
Purchaser shall be allocated among the Purchased Assets as provided in Section
1060 of the Code and Treasury Regulations thereunder. Such allocation shall
initially be based on an appraisal by one of the "Big 6" national certified
public accounting firms to be selected by Purchaser, other than the regular
auditing firm of Purchaser. Seller shall have 30 days from the later of (i)
receipt of such initial allocation or (ii) receipt of the appraisal and
supporting work papers, to review and approve the allocation or make suggested
modifications thereto. The final allocation shall be such allocation as is
agreed upon by Purchaser and Seller. Purchaser and Seller agree to provide
reasonable access by their respective employees and representatives (including,
without limitation, the appraiser) to those assets and records of Seller prior
to the Closing necessary for the purpose of making such appraisal and
allocation. Upon agreement as to the final allocation, Purchaser and Seller
shall not take any position on their respective Tax Returns that is
inconsistent with such allocation of the purchase price, and Purchaser and
Seller shall duly prepare and timely file such reports and information returns
as may be required to report the allocation of the purchase price pursuant to
this Section 12.4(h). The parties acknowledge that the purchase price subject
to allocation will be different amounts for each of Purchaser and Seller (e.g.,
due to inclusion of differing amounts of transaction costs). If, after 60
days, Purchaser and Seller are unable to agree upon the final allocation, any
disputed matters shall be finally and conclusively determined by an independent
auditing firm of recognized national standing (the "Allocation Arbiter")
selected by Purchaser and Seller, which shall not be the regular auditing firm
of Purchaser or Seller or the firm which made the initial allocation. The
Allocation Arbiter's determination shall constitute the final allocation of the
purchase price for purposes hereof. Seller shall pay a portion of the fees
incurred in connection with the initial appraisal equal to the lesser of (i)
$100,000 or (ii) 50% of the total amount of such fees. Purchaser shall pay the
remainder of the fees incurred in connection with the initial appraisal. The
Allocation Arbiter's fees shall be paid 50% by Purchaser and 50% by Seller.
(f) Prior to or as of the Closing, Seller will effectively
terminate all safe harbor lease agreements and arrangements under Section
168(f)(8) of the 1954 Code relating to the Assets such that, 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
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pursuant to the provisions of Section 168(f)(8) of the 1954 Code. Seller will
indemnify and hold Purchaser and its Affiliates harmless against (i) any and
all Damages arising pursuant to or in connection with, and all obligations to
any other party to, any and all safe harbor lease agreements or arrangements to
which any of the Assets were subject prior to the Closing and (ii) any and all
damages arising in connection with or pursuant to the termination thereof.
(g) In the event any taxing authority mistakenly delivers
to or otherwise credits Purchaser with a refund of Tax relating to Taxes paid
or arising in periods prior to the Closing Date, Purchaser will promptly
negotiate such refund to Seller or pay an amount equal to such credit to
Seller, as the case may be.
12.5 [Intentionally Omitted]
12.6 Liquidating Events.
(a) For a period of five (5) years after the Closing Date, GDC
shall not distribute all or substantially all of its assets to its shareholders
or a liquidating trust or similar entity, dissolve or sell all or substantially
all of its assets for less than fair value (as determined in good faith by the
board of directors of GDC) unless:
(1) at least thirty (30) days prior thereto Seller
shall have notified Purchaser in writing of the proposed action; and
(2) Seller shall have, together with such notice,
offered to Purchaser such security as Seller deems sufficient to provide
compensation to Purchaser, within any applicable limits of this Agreement, for
all matured, pending, contingent, conditional or unmatured indemnification or
other claims against, or liabilities or obligations of, Seller under this
Agreement, assuming such claims, liabilities or obligations are to mature at
the maximum potential amount thereof; and
(3) Purchaser shall either (a) have notified Seller in
writing that Purchaser accepts such offered security or (b) within 10 days
after receipt of Seller's notice under Section 12.6(a)(2), have notified Seller
in writing that Purchaser rejects such offered security; and
(4) If Purchaser has rejected Seller's offered
security pursuant to Section 12.6(a)(3), Seller has complied with the
requirements of Section 12.6(b) and the security required to be provided to
Purchaser has been determined, as provided therein, and offered to Purchaser.
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(b) If Purchaser rejects any offered security as permitted
by Section 12.6(a)(3), Purchaser and Seller shall determine the required amount
of any security for claims to be provided to Purchaser as follows:
(1) Within fifteen (15) days after Purchaser rejects
any security offered by Seller as permitted by Section 12.6(a)(3), Purchaser
and Seller shall petition an arbitrator, as provided in this Section 12.6(b),
to determine the amount and form of security which would be reasonably likely
to be sufficient to provide compensation to Purchaser for all contingent,
conditional or unmatured claims of Purchaser against Seller under this
Agreement, if such claims mature.
(2) The arbitration required under Section 12.6(b)(1)
shall be resolved by arbitration conducted in accordance with the Commercial
Arbitration Rules or then-existing rules for commercial arbitration of the
American Arbitration Association; provided, however, that the parties shall
select an arbitrator and agree upon a schedule of arbitration such that the
commencement of the arbitrator's hearing shall commence no later than ninety
(90) days after the Purchaser has rejected the Seller's offer of security. The
arbitration shall be final and binding upon the parties to the maximum extent
permitted by Law.
(3) Each party shall pay the fees of its own
attorneys, expenses of witnesses and all other expenses connected with the
presentation of such party's case. One-half the cost of any arbitration
pursuant to this Section 12.6, including the cost of the record or transcripts
thereof, if any, administrative fees, and all other fees involved, shall be
paid by Purchaser, and the balance shall be paid by Seller, except as the
arbitrator may otherwise direct.
(4) Proceedings under and the provisions of this
Section 12.6(b) shall be subject to Section 13.3.
(5) Any arbitration proceedings hereunder shall be
held in the State of Maryland.
ARTICLE XIII
GENERAL
13.1 Amendments. This Agreement may be amended, modified,
superseded or cancelled 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.
13.2 Integrated Contract. This Agreement, including the Schedules
and Exhibits hereto, any written amendments to the foregoing satisfying the
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requirements of Section 13.1 hereof, the Ancillary Agreements and the
Confidentiality Agreements referred to in Section 7.1(b) and (c) 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 Maryland 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:
Martin Marietta Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr., Esq.
Telecopy: (301) 897-6333
with a copy to:
Piper & Marbury
36 South Charles Street
Baltimore, Maryland 21201
Attention: R. W. Smith, Jr., Esq.
Telecopy: (410) 576-1700
(b) if to Seller, to:
General Dynamics Corporation
3150 Fairview Park Drive
Falls Church, Virginia 22042-4523
Attention: Nicholas D. Chabraja, Esq.
Telecopy: (703) 876-3125
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with a copy to:
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: David A. Savner, Esq.
Telecopy: (312) 527-0484
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
Purchaser may assign any or all of its rights and/or obligations hereunder to
any of its direct or indirect Subsidiaries and any such Subsidiary may assign
such rights and/or obligations to another direct or indirect Subsidiary of
Purchaser. 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,
Sections and Schedules 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,
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 necessary or proper in order
to complete, ensure and perfect the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
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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 Bulk Sales Compliance. Each of the parties hereto hereby
waives compliance by each of the other parties hereto with the provisions of
any Bulk Sales Law of any State.
13.12 No Third Party Beneficiaries. Except for the rights and
remedies granted to Purchaser and Seller under this Agreement and the Ancillary
Agreements, nothing contained in this Agreement, express or implied, shall
confer upon any labor organization, Employee, Transferred Employee, employee of
Purchaser, employee of Seller or any other Person any rights or remedies
including, without limitation, any right to any benefit, compensation, payment,
employment or continued employment for any specified period, of any nature or
kind whatsoever under or by reason of this Agreement.
13.13 Agreement Regarding EAC's. Purchaser and Seller acknowledge
that the Purchaser has expressed concern that the estimates at completion
included in the balance sheets of the Space Systems Division prepared pursuant
to this Agreement can be presented as an all-inclusive category of liabilities
and obligations which could be used to subvert the understanding reached in
this Agreement that Purchaser is not assuming any liabilities or obligations of
Seller other than the Assumed Liabilities. Seller agrees that it will apply
the principles of this Agreement in good faith and will not use the estimates
at completion as a general basket category of liabilities and obligations not
specifically related to the original estimates at completion made by Seller and
accepted by Purchaser under this Agreement.
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.
MARTIN MARIETTA CORPORATION
By: /s/ Marcus C. Bennett
Marcus C. Bennett
GENERAL DYNAMICS CORPORATION
By: /s/ Nicholas D. Chabraja, Esq.
Nicholas D. Chabraja, Esq.
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GENERAL DYNAMICS SPACE SERVICES
COMPANY
By: /s/ D.S. Hopke, Jr.
D.S. Hopke, Jr.
GENERAL DYNAMICS COMMERCIAL
LAUNCH SERVICES, INC.
By: /s/ Michael Wynne
Michael Wynne
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Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion
in this Form 8-K of our report dated January 20, 1994, covering the
combined financial statements of the General Dynamics Space Systems
Group (the "Group") as of December 31, 1993 and 1992 and for each of
the three years in the period ended December 31, 1993. It should be
noted that we have not audited any financial statements of the Group
subsequent to December 31, 1993, or performed any audit procedures
subsequent to the date of our report.
By: /s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
San Diego, California
May 13, 1994
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