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UNITED STATES
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
January 4, 1997
Date of Report (Date of earliest event reported)
Commission file number 1-3761
TEXAS INSTRUMENTS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 13500 North Central Expressway 75-0289970
(Jurisdiction of P.O. Box 655474 (I.R.S. Employer
Incorporation or Dallas, Texas 75265-5474 Identification No.)
Organization) (Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (972) 995-3773
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Item 2. Acquisition or Disposition of Assets.
Texas Instruments Incorporated (the "Company") and Raytheon Company
("Raytheon") have entered into an Asset Purchase Agreement (the "Agreement"),
dated as of January 4, 1997, pursuant to which the Company has agreed to sell,
and Raytheon has agreed to purchase, the Company's defense business. The
Company's defense business includes its missile systems division, electronics
systems division, advanced programs division and advanced technology and
components division, its uncooled infrared business, its smart antenna
business and the business of its wholly-owned subsidiary, SAVI Technology,
Inc. The consideration to be paid to the Company in connection with the sale
is $2.875 billion in cash, subject to certain adjustments (and not including
an additional payment of $75 million in respect of a related assignment and
license of certain related intellectual property).
The foregoing description of the Agreement is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Exhibit 2.1 hereto
and is incorporated by reference herein. The press release announcing the
transaction is attached as Exhibit 99.1 hereto and is incorporated by
reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
Exhibit 2.1 Asset Purchase Agreement dated as of January 4, 1997
between Texas Instruments Incorporated and Raytheon
Company (exhibits and schedules omitted).
Exhibit 99.1 Press Release issued by Raytheon Company and Texas
Instruments Incorporated on January 6, 1997.
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.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ Richard J. Agnich
-----------------------------------
Richard J. Agnich
Senior Vice President, Secretary
and General Counsel
Date: January 6, 1997
EXHIBIT INDEX
2.1 Asset Purchase Agreement dated as of January 4, 1997 between Texas
Instruments Incorporated and Raytheon Company (exhibits and
schedules omitted).
99.1 Press Release issued by Raytheon Company and Texas Instruments
Incorporated on January 6, 1997.
CONFORMED COPY
ASSET PURCHASE AGREEMENT
dated as of
January 4, 1997
between
Texas Instruments Incorporated
and
Raytheon Company
TABLE OF CONTENTS
Page
ARTICLE 1 ----
Definitions
Section 1.01. Definitions................................ 1
ARTICLE 2
Purchase and Sale
Section 2.01. Purchase and Sale......................... 16
Section 2.02. Retained Assets........................... 17
Section 2.03. Assumed Liabilities....................... 17
Section 2.04. Retained Liabilities...................... 17
Section 2.05. Nonassignable Contracts................... 17
Section 2.06. Purchase Price............................ 18
Section 2.07. Closing Balance Sheet..................... 18
Section 2.08. Allocation of Purchase Price.............. 19
Section 2.09. Closing................................... 20
ARTICLE 3
Representations and Warranties Of Seller
Section 3.01. Corporate Organization.................... 22
Section 3.02. Corporate Authority....................... 23
Section 3.03. No Violations; Consents and Approvals..... 23
Section 3.04. Subsidiaries.............................. 24
Section 3.05. Acquired Business Financial Statements.... 25
Section 3.06. No Undisclosed Material Liabilities....... 25
Section 3.07. Absence of Certain Events and Changes..... 26
Section 3.08. Compliance with Applicable Laws........... 27
Section 3.09. Title to and Sufficiency of Assets........ 27
Section 3.10. Litigation................................ 29
Section 3.11. Taxes..................................... 29
Section 3.12. Employee Benefit Plans.................... 30
Section 3.13. Environmental Matters..................... 33
Section 3.14. Brokers and Finders....................... 35
Section 3.15. Intellectual Property..................... 35
Section 3.16. Employees................................. 37
Section 3.17. Contracts................................. 37
Section 3.18. Permits................................... 38
Section 3.19. Restrictive Agreements.................... 38
Section 3.20. No Representations or Warranties.......... 39
ARTICLE 4
Representations and Warranties of Buyer
Section 4.01. Corporate Organization and Qualification.. 39
Section 4.02. Corporate Authority....................... 39
Section 4.03. No Violations; Consents and Approvals..... 40
Section 4.04. Brokers and Finders....................... 41
Section 4.05. No Representations or Warranties.......... 41
ARTICLE 5
Covenants of Seller
Section 5.01. Conduct of Seller......................... 41
Section 5.02. Other Offers.............................. 43
Section 5.03. Notices of Certain Events................. 43
Section 5.04. Confidentiality and Standstill Agreements. 44
Section 5.05. No Agreement to Prohibited Actions........ 44
Section 5.06. Confidentiality........................... 44
Section 5.07. Insurance.................................. 45
Section 5.08. Non-Solicitation of Employees............. 46
ARTICLE 6
Covenants of Seller
Section 6.01. Access to Information..................... 47
Section 6.02. Reasonable Efforts....................... 47
Section 6.03. Novation of Government Contracts.......... 48
Section 6.04. Public Announcements...................... 49
Section 6.05. Further Assurances........................ 49
Section 6.06. Notices................................... 49
ARTICLE 7
Covenants of Seller
Section 7.01. Tax Covenants............................. 50
Section 7.02. Allocation of Transfer and Property Taxes. 52
Section 7.03. Cooperation............................... 53
Section 7.04. Allowable Taxes........................... 54
Section 7.05. Long-Term Contracts....................... 54
Section 7.06. Refunds................................... 56
ARTICLE 8
Employee Benefits
Section 8.01. Employees; Allocation of Liabilities...... 56
Section 8.02. Defined Benefit Retirement Plans.......... 56
Section 8.03. Defined Contribution Plans................ 58
Section 8.04. Retiree Health and Other Retiree
Benefit Plans........................... 59
Section 8.05. Stock Options and Restricted Stock Units.. 60
Section 8.06. Other Welfare Benefits.................... 60
Section 8.07. Employment Agreements..................... 62
Section 8.08. Cooperation............................... 62
Section 8.09. Amendment, Modification or Termination of
Benefit Plans........................... 63
Section 8.10. Compensation and Benefits................. 63
Section 8.11. Deferred Compensation..................... 65
Section 8.12. Forms W-2................................. 65
Section 8.13. Foreign Plans............................. 65
Section 8.14. Acquired Subsidiary....................... 67
Section 8.15. Labor Relations........................... 67
ARTICLE 9
Conditions to the Closing
Section 9.01. Conditions to the Obligations of Buyer and
Seller.................................. 68
Section 9.02. Conditions to the Obligations of Seller... 69
Section 9.03. Conditions to the Obligations of Buyer.... 70
ARTICLE 10
Survival; Indemnification
Section 10.01. Survival................................. 71
Section 10.02. Indemnification.......................... 71
Section 10.03. Indemnification Procedures............... 74
ARTICLE 11
Termination
Section 11.01. Termination.............................. 76
Section 11.02. Effect of Termination.................... 76
ARTICLE 12
Miscellaneous
Section 12.01. Entire Agreement......................... 77
Section 12.02. Notices.................................. 77
Section 12.03. Amendments; No Waivers................... 78
Section 12.04. Successors and Assigns................... 78
Section 12.05. Governing Law............................ 78
Section 12.06. Counterparts; Effectiveness.............. 79
Schedules, Exhibits and Annexes
Exhibit A Intellectual Property Assignment and License Agreement
Exhibit B Real Estate Agreements
Exhibit C Systems and Services Transition Agreement
Exhibit D Master Services Agreement
Schedule 1 Acquired Facilities
Schedule 2 Certain Agreements
Schedule 3 Certain Environmental Liabilities
Schedule 4 Certain Other Assumed Liabilities
Schedule 2.07 Net Worth Adjustment
Schedule 4.03 Certain Consents
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of January 4, 1997 between
Texas Instruments Incorporated, a Delaware corporation ( "Seller"), and
Raytheon Company, a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller designs, manufactures, sells, and distributes
certain products constituting the Defense Business (as hereinafter defined);
WHEREAS, Buyer desires to purchase substantially all of the
assets of the Defense Business from Seller, and Seller desires to sell
substantially all of the assets of the Defense Business to Buyer, upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. (a) The following terms used herein shall have
the following meanings:
"Acquired Assets" means (i) all Seller's and its Subsidiaries'
right, title and interest (including minority interests) in and to all Assets
of Seller or any of its Subsidiaries that are used primarily in or held
primarily for use in the operation, as currently conducted, or as proposed to
be conducted in the Confidential Memorandum provided by Seller to Buyer in
connection with proposing the transactions contemplated hereby (including new
developments) of the Defense Business, including without limitation the
Acquired Facilities, (ii) whether or not included within the Assets set forth
in clause (i) above, all Assets reflected on the Acquired Business Interim
Balance Sheet, as such Assets may have been added to, sold in the ordinary
course of business or otherwise changed since such date, (iii) all assets
treated as Acquired Assets in Article 8 hereof, and (iv) all issued and
outstanding shares of capital stock of the Acquired Subsidiary; provided that
"Acquired Assets" shall exclude (i) all patents, patent applications and patent
disclosures not listed on the Seller Disclosure Schedule (but shall include
those listed on the Seller Disclosure Schedule) and third party patent
licenses, (ii) all insurance policies, contracts, arrangements and agreements
relating to medical, dental and other services entered into by Seller for the
benefit of Seller or its employees and all rights of Seller thereunder and
(iii) except as provided in Article 8, cash and cash equivalents.
"Acquired Business" means the Acquired Assets and the Assumed
Liabilities.
"Acquired Business Balance Sheet" means the unaudited combined
statement of assets and liabilities as of December 31, 1995 for the Acquired
Business.
"Acquired Business Financial Statements" means the Acquired
Business Balance Sheet and the unaudited statements of combined income and
combined cash flows for the year ended December 31, 1995 for the Acquired
Business.
"Acquired Business Interim Balance Sheet" means the unaudited
combined statement of assets and liabilities as of September 30, 1996 for the
Acquired Business.
"Acquired Business Interim Financial Statements" means the
Acquired Business Interim Balance Sheet and the unaudited statements of
combined income and combined cash flows for the nine months ended September
30, 1996 for the Acquired Business.
"Acquired Facilities" means the real property and facilities
described on Schedule 1 hereto.
"Acquired Subsidiary" means SAVI Technology, Inc., a California
corporation and a wholly owned subsidiary of Seller.
"Adjusted Purchase Price" means the Purchase Price (i) (a)
minus the amount of any payment made pursuant to Section 2.07(a), or (b) plus
the amount of any payment made pursuant to Section 2.07(b), as the case may
be, and (ii) as adjusted to reflect any payments required by Section 2.07(d).
"Advanced Programs Division" means the organization within
Seller that (a) is engaged in the development of next generation products for
the Electronics Systems Division and the Missile Systems Division, and
includes, without limitation, (i) the Advanced Weapons Department, which is
engaged in the development of systems level technologies for future missile
systems programs, (ii) the Advanced Land Combat Systems department, which
pursues next generation ground-based U.S. Army and U.S. Navy/U.S. Marine Corps
programs and supporting technologies for future ESD programs, and (iii) the
Airborne Systems Department, which is focused on future U.S. Air Force and U.S.
Navy/U.S. Marine Corps aviation programs with system technologies such as
advanced airborne FLIR, IR search and track, airborne data processing system
technologies and advanced RF systems using active electronically scanned
antenna technology and products for broad band-width space based
communications with GaAs MMIC solid-state-based transmitters and other
technologies; and (b) oversees the development and management of new strategic
businesses through (i) the New Business department, which explores developing
defense and related commercial opportunities and (ii) the management of
acquired companies.
"Advanced Technology and Components Division" means the
organization within Seller that provides the Advanced Programs, Electronic
Systems and Missile Systems Divisions access to technology in the fields of
RF/Microwave, Electro-Optics, advanced microelectronics, image/signal
processing and weapon guidance algorithms by supplying advanced component
technology and products for infrared systems, electronically steered arrays,
active RF decoys, missile seeker front-ends, power supply subsystems, digital
signal processors and target recognition tracking algorithms.
"Affiliate" means, with respect to any specified Person, a
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Allowable Tax" means the allocable share of any Tax of Seller
or any of its Affiliates which is an allowable cost under the Federal
Acquisition Regulation, 48 C.F.R. Chapter 1, and associated regulations and
agreements between Seller and any U.S. governmental entity, which agreements
are listed on Schedule 2, allocated based on Seller's existing finance policy
(as it is in effect as of the date hereof).
"Ancillary Agreements" means the following: with respect to
Intellectual Property, the Intellectual Property Assignment and License
Agreement (the "IP Agreement") substantially in the form of Exhibit A hereto,
with respect to real estate, the agreements substantially in the form of
Exhibit B hereto, with respect to information systems, the Systems and
Services Transition Agreement substantially in the form of Exhibit C hereto
and, with respect to administrative services, the Master Services Agreement
substantially in the form of Exhibit D hereto.
"Applicable Interest Rate" means interest at the rate per annum
determined, from time to time, under the provisions of Section 6621(a)(2) of
the Code.
"Assets" means any and all assets, properties and rights,
whether tangible or intangible, whether real, personal or mixed, whether
fixed, contingent or otherwise, and wherever located, including, without
limitation, the following:
(i) real property interests (including leases), land, plants,
buildings and improvements;
(ii) machinery, equipment, vehicles, furniture and fixtures,
leasehold improvements, supplies, repair parts, tools, plant,
laboratory and office equipment and other tangible personal property,
together with any rights or claims arising out of the breach of any
express or implied warranty by the manufacturers or sellers of any of
such assets or any component part thereof;
(iii) inventories, including raw materials, work-in-process,
finished goods, parts, accessories;
(iv) cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary under
letters of credit, advances and performance and surety bonds;
(v) certificates of deposit, banker's acceptances, shares of
stock, securities, bonds, debentures, evidences of indebtedness,
certificates of interest or participation in profit-sharing
agreements, collateral-trust certificates, shares, investment
contracts, voting trust certificates, puts, calls, straddles,
interests in joint ventures, partnerships and other entities,
options, swaps, collars, caps and other securities or hedging
arrangements of any kind;
(vi) financial, accounting and operating data and records
including, without limitation, books, records, electronic data,
notes, sales and sales promotional data, advertising materials,
credit information, cost and pricing information, customer and
supplier lists, reference catalogs, payroll and personnel records,
minute books, stock ledgers, stock transfer records and other
similar property, rights and information;
(vii) Intellectual Property;
(viii) agreements, leases, Contracts, sale orders, purchase
orders, open bids and other commitments and all rights therein;
(ix) prepaid expenses, deposits and retentions held by
third parties;
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied warranties,
rights of recovery, rights of set-off, and rights of subrogation;
(xi) Permits; and
(xii) goodwill and going concern value.
"Assumed Liabilities" means (i) all Liabilities relating
primarily to the Defense Business as presently conducted, including without
limitation all Liabilities relating to the Acquired Facilities (excluding
Liabilities (A) arising under Environmental Laws relating to the facilities
listed on Schedule 3, (B) for Taxes incurred in or attributable to a
Pre-Closing Tax Period, and (C) for "Performance Payments" up to $11,000,000
payable as provided in Section 2.1(e) of the Agreement and Plan of Merger
between Seller and the Acquired Subsidiary dated October 2, 1995 (as defined
therein)), (ii) the Liabilities described on Schedule 4, and (iii) all
Liabilities treated as Assumed Liabilities under Article 8 hereof.
Notwithstanding the foregoing, Assumed Liabilities shall not include any
Retained Liabilities.
"Bridge Employees" means those individuals who are employed in
the Defense Business as of the Closing Date pursuant to "bridge" agreements
which grant a leave of absence from Seller of up to five years until the
employee qualifies for early retirement under a pension plan maintained by
Seller or for benefits under a retiree medical plan maintained by Seller.
"Code" means the Internal Revenue Code of 1986, as amended.
"Buyer Common Stock" means common stock, par value $1.00 per
share, of Buyer.
"Closing Date" means the date of the Closing.
"Commercial Uncooled IR Business" means the organization within
Seller that provides low cost uncooled night vision systems for markets other
than military, such as security, law enforcement and automotive industry
markets.
"Contract" means any written note, bond, mortgage, indenture,
lease, contract, license, agreement or other obligation or commitment.
"Controlled Group Liability" means any and all Liabilities
relating to Employee Plans under (i) Title IV of ERISA, (ii) Section 302 of
ERISA, and (iii) Sections 412 and 4971 of the Code, other than such
Liabilities that are Assumed Liabilities hereunder.
"DGCL" means the General Corporation Law of the State of
Delaware.
"Damages" means any damage, loss, claim, assessment, judgment,
liability and expense (including without limitation reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with
any pending or threatened claim, action, suit, investigation, proceeding or
government directive).
"Defense Business" means (a) Seller's Missile Systems Division,
Electronics Systems Division, Advanced Programs Division, and Advanced
Technology and Components Division, together with the Finance, Engineering,
Business Development, Supply Process, Human Resources, Quality Assurance,
Product Production Process and SG Strategy support activities associated with
said divisions, (b) Seller's Commercial Uncooled IR Business, (c) Seller's
Smart Antenna Business, (d) the business of the Acquired Subsidiary, (e) the
following laboratories of Seller's Corporate and Research Development
Laboratories ("CRDL"): the Systems Components Laboratory, the Sensors and
Infrared Laboratory and the portion of the Materials Science Laboratory that
is engaged in work on gallium arsenide, together with the CRDL management and
administration, marketing and contract, and quality, capital and computer
activities that support said two laboratories, and (f) certain activities
currently performed by corporate staff in support thereof (the cost of which
activities has been fully reflected in the Acquired Business Financial
Statements and the Acquired Business Interim Financial Statements).
"Electronic Systems Division" means the organization within
Seller that provides system solutions in the areas of (a) electro-optical
systems, including the Improved TOW/Acquisition System, the Horizontal
Technology Integration FLIR program (with Hughes Aircraft Company), the
Improved Bradley Acquisition System, the Abrams Commander's Independent
Thermal Viewer, the Combat Vehicle Thermal Targeting System, the F-117
Infrared Acquisition and Designation System, the F-18 NITE Hawk FLIR, the
Surveillance FLIR Systems family of surveillance FLIRs and low-cost uncooled
night vision systems; (b) ocean surveillance and terrain following/terrain
avoidance radar systems, including the ASW/ASUW/Ocean Surveillance Radars, the
LANTIRN/Multi-mode radar, the F-22 radar development program (with Northrop
Grumman), certain proprietary radar programs and microwave components; and (c)
specialized computing components and systems for defense applications,
including the F-16 Modular Mission Computer and ruggedized Memory
Loader/Verifier portable computerized test equipment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a
member of the same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.
"Employee Plans" means each "employee benefit plan," within the
meaning of Section 3(3) of ERISA, and each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which is maintained, administered or contributed to by Seller or any of its
ERISA Affiliates and which covers any Transferred Individual, other than any
such plan, contract, arrangement or policy which is a Foreign Plan.
"Environmental Laws" means any applicable Federal, state, local
or foreign law, treaty, judicial decision, regulation, rule, judgment, order,
decree, injunction, permit, agreement or governmental restriction, each as in
effect on or prior to the Closing Date, relating to the environment or to any
Hazardous Substance.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Determination" shall mean (i) with respect to federal
income Taxes, a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870AD and, with respect to Taxes
other than federal income Taxes, any final determination of liability in
respect of a Tax that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise (including the
expiration of a statute of limitations or a period for the filing of claims
for refunds, amended returns or appeals from adverse determinations) or (ii)
the payment of Tax by Seller, Buyer or any of their Affiliates, whichever is
responsible for payment of such Tax liability under applicable law, with
respect to any item disallowed or adjusted by a Taxing Authority, provided
that such responsible party determines that no action should be taken to recoup
such payment and the indemnifying party, if any, agrees.
"Foreign Plans" means each "employee benefit plan," within the
meaning of Section 3(3) of ERISA, and each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which is maintained, administered or contributed to by Seller or any of its
ERISA Affiliates primarily for non-U.S. citizens or non-U.S. residents and
which covers any Transferred Individual.
"Former Defense Employees" means (i) those individuals who at
their termination were employed by Seller and engaged in the Defense Business,
a preliminary list of whom will be delivered to Buyer as promptly as
practicable, and a definitive list of whom as of the close of business on the
date prior to the Closing Date will be delivered to Buyer at Closing, and (ii)
Bridge Employees.
"GAAP" means United States generally accepted accounting
principles.
"Government Contract" means (i) any Contract relating to the
Acquired Business between Seller or the Acquired Subsidiary and any
Governmental Entity and (ii) any Contract relating to the Acquired Business
entered into by Seller or the Acquired Subsidiary as subcontractor (at any
tier) in connection with a Contract between another Person and any
Governmental Entity.
"Governmental Entity" means any government or any court,
arbitral tribunal, administrative agency, or commission or other governmental
or other regulatory authority or agency, Federal, state, local, transnational
or foreign.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substance" means any substance, pollutant,
contaminant, chemical, waste or material, including petroleum, its
derivatives, by-products and other hydrocarbons, that is listed, identified
in, or regulated under any applicable Federal, state, local or foreign law,
treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, permit, agreement or governmental restriction.
"Income Tax" (and, with correlative meaning, "Income Taxes")
means any Tax imposed on or measured by net income, net worth or capital, or
any alternative minimum Tax or similar Tax, together with any interest or any
penalty, addition to tax or additional amount imposed by any Taxing Authority.
"Intellectual Property" has the meaning set forth in the IP
Agreement.
"Interim Balance Sheet Net Worth" means $611,666,000.
"IRS" means the Internal Revenue Service.
"knowledge" means, with respect to Seller, the actual knowledge
of corporate officers of Seller, the members of the Strategy Leadership Team
of the Defense Business and Messrs. R. Grossman and R. Donaldson.
"Leased Facilities" means Acquired Facilities which are leased
by Seller. The material Leased Facilities are identified on Schedule 1.
"Liabilities" means any and all debts, liabilities,
commitments, claims, allegations, demands and obligations, whether fixed,
contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, known or unknown, whenever or however arising
(including, without limitation, whether arising out of any contract or tort
based on negligence or strict liability) and whether or not the same would be
required by GAAP to be reflected in financial statements or disclosed in the
notes thereto.
"Lien" means any adverse claim, restriction on voting or
transfer or pledge, lien, mortgage, hypothecation, collateral assignment,
charge, encumbrance, easement, covenant, restriction, title defect,
encroachment or security interest of any kind.
"Material Adverse Effect" means, with respect to the Acquired
Business or any entity (or group of entities taken as a whole), such state of
facts, events, change or effect as has had, or would reasonably be expected to
have, a material adverse effect on the business, results of operations or
financial condition of the Acquired Business, taken as a whole, or, such
entity (or group of entities, taken as a whole), or with respect to the
Acquired Business, on the ability of Buyer to own and operate the Acquired
Business following the Closing Date substantially as currently conducted.
"Missile Systems Division" means the organization within Seller
that develops, produces and assembles Seller's precision guided weapons
systems, including, without limitation, the Paveway laser guided bomb family,
the Joint Standoff Weapon series, the Wind Corrected Munitions Dispenser
guidance kit development program (with Alliant Techsystems), the High-speed
Anti-Radar Missile, the Javelin anti-tank weapon (with Lockheed Martin), the
active radar seeker for the McDonnell Douglas Harpoon anti-ship missile, the
Extended Range Guided Munition development program and two proprietary missile
programs referred to as PXX1 and PXX2.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any license, franchise, permit, concession,
order, authorization, approval or registration from, of or with a Governmental
Entity.
"Permitted Liens" means any Liens (i) for Taxes attributable to
a Pre-Closing Tax Period not yet due or payable or being contested in good
faith, (ii) that are not material and constitute mechanics', carriers',
workers' or like liens incurred in the ordinary course of business or (iii)
that, individually or in the aggregate, do not materially impair the use,
utility or value of the property to which they apply or otherwise have a
Material Adverse Effect on the Acquired Business.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or any agency
or instrumentality thereof.
"Pre-Closing Tax Period" means any Tax period, or portion
thereof, ending on or before the close of business on the Closing Date.
"Proprietary Information" means all information with respect to
the Acquired Business that in accordance with Seller's usual practices
would be treated by Seller as "TI PROPRIETARY INFORMATION - STRICTLY
PRIVATE", "TI PROPRIETARY INFORMATION - INTERNAL DATA" or equivalent.
"Retained Assets" means all Assets of Seller other than the
Acquired Assets.
"Retained Liabilities" means all Liabilities of Seller other
than the Assumed Liabilities including, without limitation, (i) any obligation
or liability for Taxes; provided that Transfer Taxes incurred in connection
with the transactions contemplated by this Agreement shall be paid in the
manner set forth in Section 7.2 hereof; (ii) any Liability or obligation
relating to the Retained Assets; (iii) the Liabilities described in the
parenthetical in clause (i) of the definition of "Assumed Liabilities"; (iv)
any Liability to Transferred Employees for severance arising solely as a
result of the consummation of the transactions contemplated by the Transaction
Agreements (except to the extent any such Liability is a result of the failure
by Buyer to fulfill any of its obligations under this Agreement); (v) any
Taxes with respect to the Acquired Subsidiary incurred in or attributable to
a Pre-Closing Tax Period; (vi) all Liabilities treated as Retained Liabilities
under Article 8 hereof; and (vii) any Liability of the Acquired Subsidiary
that would otherwise be a Retained Liability if the Buyer were buying the
Assets of the Acquired Subsidiary used primarily in or held primarily for
use in the operation, as currently conducted, of the Defense Business and
not buying the stock of the Acquired Subsidiary.
"SEC" means the Securities Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller By-laws" means the by-laws of Seller, as amended.
"Seller Charter" means the articles of incorporation of Seller,
as amended.
"Seller Common Stock" means common stock, par value $1.00 per
share, of Seller.
"Seller DB Plan" means the TI Employees Pension Plan.
"Seller DC Plan" means the TI Employees Universal Profit
Sharing Plan, including the Profit Sharing, CODA, VEC and Tax Credit Employees
Stock Ownership Accounts.
"Seller Disclosure Schedule" means the Disclosure Schedule
delivered by Seller to Buyer simultaneously with the execution and delivery of
this Agreement.
"Seller Option" means an option to purchase a share of Seller
Common Stock granted under the Seller Stock Plans.
"Seller Restricted Stock Unit" means a restricted stock unit
granted under the Seller Stock Plans.
"Seller Stock Plans" means the TI 1984 Stock Option Plan, the
TI 1988 Stock Option Plan, the TI Long-Term Incentive Plan, and the TI 1996
Long-Term Incentive Plan.
"Seller VEBA" means the TI Employees Health Benefit Trust.
"Smart Antenna Business" means the organization within Seller
that is developing an antenna for applications on cellular and PCS
transmissions equipment to improve the quality, capacity and coverage of new
and existing cell sites.
"Subsidiary" means, with respect to any Person, (i) any
corporation of which such Person owns, either directly or through its
Subsidiaries, more than 50% of the total combined voting power of all classes
of voting securities of such corporation or (ii) any partnership, association,
joint venture or other form of business organization, whether or not it
constitutes a legal entity, in which such Person, directly or indirectly, owns
more than 50% of the total equity interests.
"Tax" (including with correlative meaning, the terms "Taxes"
and "Taxable") means (A) all forms of taxation, whenever created or imposed,
whether imposed by a local, municipal, state, foreign, Federal or other
governmental body or authority, and, without limiting the generality of the
foregoing, shall include income, gross receipts, ad valorem, excise,
value-added, sales, use, transfer, franchise, license, stamp, occupation,
withholding, employment, payroll, property or environmental tax or premium,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental body or authority responsible for the imposition
of any such tax (a "Taxing Authority"), (B) any liability of the Acquired
Subsidiary for the payment of any amounts of the type described in (A) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby the liability
of the Acquired Subsidiary for payments of such amounts is determined or taken
into account with reference to the liability of any other Person; and (C) any
liability for the payment of any amounts as a result of being party or subject
to any agreement or with respect to the payment of any amounts of the type
described in (A) or (B) as a result of any express or implied obligations to
indemnify any other Person.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including, without
limitation, deductions and credits related to alternative minimum Taxes).
"Tax Return" means any return, report, statement, information
statement and the like required to be filed with any Taxing Authority.
"Termination Date" means December 31, 1997.
"Transaction Agreements" means this Agreement and the Ancillary
Agreements.
"Transferred Employees" means those individuals who are
employed by Seller (or any of its Subsidiaries operating primarily outside the
United States) in the Defense Business as of the Closing Date (other than
Bridge Employees), a preliminary list of whom will be delivered to Buyer as
promptly as practicable and a definitive list of whom as of the close of
business on the date prior to the Closing Date will be delivered to Buyer at
Closing. Transferred Employees shall include all individuals who are
described in the first sentence hereof and who are, as of the Closing Date, on
an approved leave of absence with a right to return to active employment.
"Transferred Individuals" means Transferred Employees and
Former Defense Employees.
(b) The following terms shall have the meanings assigned to
such terms in the following sections:
Term Section
- ---- -------
Accounting Referee 2.08
Allocation 2.08
Apportioned Obligations 7.02(b)
Assumption Agreement 2.09(c)
Buyer Recitals
Buyer DB Plan 8.02(b)
Buyer DC Plan 8.03(a)
Buyer FSAs 8.06(c)
Buyer Retiree Plan 8.04(a)
Buyer VEBA 8.06(d)
Claim 5.07(a)
Closing 2.09
Closing Net Worth Schedule 2.07
Compensation Maintenance Period 8.10(a)
Confidentiality Agreement 6.01
Consideration 2.08
Environmental Permits 3.13(a)(ii)
General Assignment 2.09(b)
indemnified party 10.03(a)
indemnifying party 10.03(a)
IP Agreement 1.01(a)
Long-Term Contract 7.05(a)
Novation Agreement 6.03(a)
Qualified Plans 3.12(b)(i)
Post-Closing Tax Period 7.02(b)
Purchase Price 2.06
Seller Recitals
Seller FSAs 8.06(c)
Seller Insurance Policies 5.07(a)
Seller Representatives 5.06
Tax Benefit 10.02(d)
Technology 3.15(b)
Third Party Claim 10.03(b)
Transfer Taxes 7.02(a)
ARTICLE 2
Purchase And Sale
Section 2.01. Purchase and Sale. Except as otherwise
expressly provided below, upon the terms and subject to the conditions of
this Agreement, Buyer agrees to purchase from Seller and Seller agrees to
sell, convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Buyer at the Closing, free and
clear of all Liens, other than Permitted Liens, the Acquired Assets. Buyer
and Seller agree that Buyer shall have the right to use the name
"Raytheon - TI Systems" in the manner set forth in Section 2.12 of the IP
Agreement.
Section 2.02. Retained Assets. Buyer expressly understands
and agrees that the Retained Assets shall be excluded from the Acquired
Assets.
Section 2.03. Assumed Liabilities. Upon the terms and subject
to the conditions of this Agreement and effective at the time of the Closing:
(a) Buyer shall unconditionally assume and agree to pay, satisfy
and discharge when due in accordance with their terms, and Buyer shall fully
and forever hold Seller and its Affiliates harmless against, any and all
Assumed Liabilities.
(b) Seller shall retain, and Buyer will have no liability with
respect to, and Seller shall fully and forever hold Buyer and its Affiliates
harmless from and against, the Retained Liabilities.
Section 2.04. Retained Liabilities. Notwithstanding any
provision in this Agreement or any other writing to the contrary, Buyer is
assuming only the Assumed Liabilities and is not assuming any of the Retained
Liabilities, which shall be retained by and remain obligations and liabilities
of Seller.
Section 2.05. Nonassignable Contracts. Anything contained
herein to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any lease, license agreement, Contract, agreement, sales
order, purchase order, open bid or other commitment or Acquired Assets if an
assignment or attempted assignment of the same without the consent of another
Person would constitute a breach thereof or in any way impair the rights of
Buyer or Seller thereunder. If any such consent is not obtained or if an
attempted assignment would be ineffective or would impair either Seller's or
Buyer's rights under any such lease, license agreement, Contract, agreement,
sales order, purchase order, open bid or other commitment or Acquired Assets
so that Buyer would not receive all such rights, then (x) Seller shall use
reasonable efforts (it being understood that such efforts shall not include
any requirement of Seller or any of its Subsidiaries to expend material sums
of money or grant any material financial accommodation) to provide or cause to
be provided to Buyer, to the extent permitted by law, the benefits of any such
lease, license agreement, Contract, agreement, sales order, purchase order,
open bid or other commitment or Acquired Assets and Seller shall promptly pay
or cause to be paid to Buyer when received all moneys received by Seller with
respect to any such lease, license agreement, contract, agreement, sales
order, purchase order, open bid or other commitment or Acquired Assets and (y)
in consideration thereof Buyer shall pay, perform and discharge on behalf of
Seller all of Seller's debts, liabilities, obligations and commitments
thereunder in a timely manner and in accordance with the terms thereof. In
addition, Seller shall take such other actions as may reasonably be requested
by Buyer in order to place Buyer, insofar as reasonably possible, in the same
position as if such lease, license agreement, Contract, agreement, sales
order, purchase order, open bid or other commitment or Acquired Assets had
been transferred as contemplated hereby and so all the benefits and burdens
relating thereto, including possession, use, risk of loss, potential for
gain and dominion, control and command, shall inure to Buyer. If and when
such consents and approvals are obtained, the transfer of the applicable
lease, license agreement, contract, agreement, sales order, purchase order,
open bid or other commitment or Acquired Assets shall be effected in
accordance with the terms of this Agreement. Notwithstanding the
foregoing, the provisions of this Section 2.05 shall not relieve Seller of
any of its obligations under this Agreement with respect to any breach of
any representations, warranties, covenants or agreements contained herein
or in any of the Ancillary Agreements, or with respect to any of its
indemnification obligations contained herein or therein.
Section 2.06. Purchase Price. The purchase price for the
Acquired Assets (the "Purchase Price") is $2,875,000,000 in cash. The
Purchase Price shall be paid as provided in Section 2.09, subject to
adjustment as provided in Section 2.07.
Section 2.07. Closing Balance Sheet. (a) If the Closing Net
Worth of the Acquired Business, as calculated in the manner set forth, and as
defined, on Schedule 2.07, is less than the Interim Balance Sheet Net Worth,
then Seller shall pay to the Buyer an amount equal to such shortfall in the
manner set forth in Schedule 2.07.
(b) If the Closing Net Worth is greater than the Interim
Balance Sheet Net Worth, then Buyer shall pay to Seller an amount equal to
such excess in the manner set forth in Schedule 2.07.
(c) Schedule 2.07 sets forth (i) the manner in which the
Closing Net Worth shall be calculated and (ii) the manner in which any payment
required by Sections 2.07(a), 2.07(b) or 2.07(d) shall be made.
(d) There will be a further adjustment to the Purchase Price
(A) for the present value of the future annual after-tax cost or benefit to
Buyer of the Seller's Voluntary Early Retirement Program, giving effect to (i)
increased pension and retiree medical costs, (ii) reduced payroll and benefit
costs in excess of $20 million annually, and (iii) reasonably expected
government cost reimbursements, arising in each case from Seller's Voluntary
Early Retirement Program and (B) to reflect any transfer of Assets or
Liabilities required by Section 8.13. The parties will cooperate in good
faith to jointly make the calculations required by the preceding sentence.
Any disputes between the parties with respect to the adjustment provided
for in this Section 2.07(d) shall be resolved in the manner provided in
Schedule 2.07.
Section 2.08. Allocation of Purchase Price. (a) The Purchase
Price and the Assumed Liabilities (hereinafter, the "Consideration"), to the
extent properly taken into account under Section 1060 of the Code, shall be
allocated among the Acquired Assets, including the stock of the Acquired
Subsidiary, as set forth in this Section 2.08. No later than 30 days prior to
the Closing, Buyer shall deliver to Seller a statement allocating the
Consideration among the Acquired Assets, including the stock of the Acquired
Subsidiary, in accordance with Code Section 1060 and the regulations
promulgated thereunder (the "Allocation"). Seller shall have a period of 10
days after the delivery of the Allocation to present in writing to Buyer
notice of any objections Seller may have to the Allocation. Unless Seller
timely objects, the Allocation shall be binding on the parties without further
adjustment. If Seller shall raise any objections within the 10 day period,
Seller and Buyer shall negotiate in good faith and use their best efforts to
resolve such dispute. If the parties fail to agree within 20 days after
delivery of the notice, then the disputed items shall be resolved by a
mutually agreed upon "Big Six" accounting firm (the "Accounting Referee")
(which firm shall not be Ernst & Young or Coopers & Lybrand). The
Accounting Referee shall resolve the dispute within 30 days after having
the dispute referred to it. The costs, fees and expenses of the Accounting
Referee shall be borne equally by Buyer and Seller.
(b) Except as required by a Final Determination, Seller and
Buyer agree to (i) be bound by the Allocation, (ii) act in accordance with the
Allocation in the preparation of financial statements and filing of all Tax
returns (including, without limitation, filing Form 8594 with its federal
income Tax return for the taxable year that includes the date of the Closing)
and in the course of any Tax audit, Tax review or Tax litigation relating
thereto and (iii) take no position and cause their Affiliates to take no
position inconsistent with the Allocation for federal and state income Tax
purposes.
(c) If an adjustment is made with respect to the Purchase Price
pursuant to Section 2.07, the Allocation shall be adjusted in accordance with
Code Section 1060 and the regulations promulgated thereunder, and as mutually
agreed by Seller and Buyer. In the event that an agreement is not reached
within 20 days after the determination of Closing Net Worth pursuant to
Schedule 2.07 hereto, any disputed items shall be resolved pursuant to Section
2.08(a) hereof. Seller and Buyer agree to file any additional information
return required pursuant to the regulations under Code Section 1060 and to
treat the Allocation as adjusted in the manner described in Section 2.08(c).
(d) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to this transaction, each party shall deliver
to the other party a copy of its Form 8594.
Section 2.09. Closing. The closing (the "Closing") of the
purchase and sale of the Acquired Assets and the assumption of the Assumed
Liabilities hereunder shall take place at the offices of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but
in no event later than 10 business days, after satisfaction of the conditions
set forth in Article 9, or at such other time or place as Buyer and Seller may
agree. At the Closing:
(a) Buyer shall deliver to Seller the Purchase Price in
immediately available funds by wire transfer to an account of Seller with a
bank designated by Seller, by notice to Buyer, not later than two business
days prior to the Closing Date (or if not so designated, then by certified or
official bank check payable in immediately available funds to the order of
Seller in such amount).
(b)Seller shall assign and transfer (or, where appropriate,
cause its Subsidiaries to assign and transfer) to Buyer the Acquired Assets by
delivery of (i) a General Assignment and Bill of Sale in form and substance
reasonably satisfactory to Buyer and Seller (the "General Assignment"), duly
executed by Seller or any appropriate subsidiary of Seller, (ii) an assignment
of the Intellectual Property as evidenced by the IP Agreement, (iii) special
warranty deeds in proper statutory form for recording and otherwise in form
and substance reasonably satisfactory to Buyer conveying good and indefeasible
title to the Acquired Facilities listed in Part (I) of Schedule 1 subject only
to Permitted Liens, (iv) certain of the Ancillary Agreements and assignments
of or subleases of Seller's or any of its Subsidiaries' rights in other Leased
Facilities in form and substance reasonably satisfactory to Buyer and Seller,
and (v) all such other good and sufficient instruments of conveyance,
assignment and transfer, and such affidavits (including, without limitation,
affidavits of title and any FIRPTA affidavits which may be required under
Section 1445 of the Code) and other instruments in form and substance
reasonably acceptable to Buyer's counsel, as shall be effective to transfer to
Buyer the Acquired Assets and to enable Buyer to obtain from a national title
insurance company at standard rates extended coverage Texas-form title
insurance policies with respect to the Acquired Facilities listed in Part (I)
of Schedule 1, subject only to exceptions for the applicable Permitted Liens
and in all respects in form and substance reasonably acceptable to Buyer.
(c) Buyer shall assume from Seller the due payment, performance
and discharge of the Assumed Liabilities by delivery of (i) an Assumption
Agreement in form and substance reasonably satisfactory to Buyer and Seller
(the "Assumption Agreement"), duly executed by Buyer, and (ii) such other good
and sufficient instruments of assumption, in form and substance reasonably
acceptable to Seller's counsel, as shall be effective to cause Buyer to assume
the Assumed Liabilities as and to the extent provided in Section 2.03;
(d) Seller and Buyer shall also deliver the certificates and other
contracts, documents and instruments required to be delivered under Article 9,
including, without limitation, the Ancillary Agreements;
(e) Seller shall deliver to Buyer true, accurate and complete
copies of the stock record and minute books of the Acquired Subsidiary, and
such minute books shall contain minutes of all meetings of the Board of
Directors (including any committees thereof) and of stockholders of the
Acquired Subsidiary; and
(f) Seller and Buyer shall each pay half of all costs and
premiums incurred by Buyer in obtaining title insurance and surveys with
respect to the Acquired Facilities.
ARTICLE 3
Representations and Warranties Of Seller
Seller hereby represents and warrants to Buyer that, except
as set forth in the section of the Seller Disclosure Schedule corresponding
to the Section of this Agreement to which such representation or warranty
pertains:
Section 3.01. Corporate Organization. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. The Acquired Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. The Acquired Subsidiary is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the properties
owned, leased or operated, or the businesses conducted, by it require such
qualification, except for any such failure so to qualify or be in good
standing which, individually or in the aggregate, would not have a Material
Adverse Effect on the Acquired Business, materially impair the ability of
Seller to perform its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement. The Acquired Subsidiary has
the requisite corporate power and authority to carry on its businesses as they
are now being or will be conducted. Seller has heretofore provided to Buyer
complete and correct copies of Seller Charter and Seller By-laws and of the
certificate of incorporation and by-laws of the Acquired Subsidiary each, as
amended to date and currently in full force and effect.
Section 3.02. Corporate Authority. Seller has, or, in the case
of any Ancillary Agreement executed after the date hereof, will have, the
requisite corporate power and authority to execute, deliver and perform each
Transaction Agreement to which it is or will be a party and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
each Transaction Agreement by Seller and the transactions contemplated thereby
have been duly authorized by Seller's Board of Directors, and no other
corporate proceedings on the part of Seller are necessary to authorize any
Transaction Agreement or for Seller to consummate the transactions contemplated
thereby. Each Transaction Agreement to which Seller is, or will be, a party
is, or when executed and delivered will be (assuming such agreement constitutes
a valid and binding obligation of Buyer), a valid and binding agreement of
Seller, enforceable against Seller in accordance with the terms thereof except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights
generally, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 3.03. No Violations; Consents and Approvals. (a) None
of the execution, delivery or performance by Seller of each Transaction
Agreement to which it is or will be a party or the consummation by Seller of
the transactions contemplated thereby (i) will conflict with, or result in a
violation or breach of, Seller's or the Acquired Subsidiary's Charter or
Seller's or the Acquired Subsidiary's By-laws or (ii) subject to the matters
referred to in clause 3.03(b) (A) and (B) below, will conflict with, or result
in a violation or breach of, or constitute a default (with or without notice
or lapse of time or both) under, or give rise to any right of termination,
amendment, cancellation or acceleration of any obligation under, or result in
the creation of a Lien upon any of the properties or assets of, Seller or any
Subsidiary of Seller under, (A) any of the terms, conditions or provisions of
any Contract or of any Permit to which Seller or any of its Subsidiaries is a
party or by which any of their properties or assets may be bound or (B) any
judgment, order, decree, statute, law, regulation or rule applicable to Seller
or any of its Subsidiaries, except, in the case of this clause (ii), for
conflicts, violations, breaches, defaults, rights or Liens that would not,
individually or in the aggregate, (x) have a Material Adverse Effect on the
Acquired Business, (y) materially impair the ability of Seller to perform its
material obligations under the Transaction Agreements or (z) prevent or
materially delay the consummation of the purchase and sale of the Acquired
Assets contemplated by this Agreement.
(b) No consent, approval, order, authorization of or registration,
declaration or filing with any Governmental Entity or any other Person is
required with respect to Seller or any of its Subsidiaries in connection with
the execution, delivery or performance by Seller of each Transaction Agreement
to which it is or will be a party or the consummation by Seller of the
transactions contemplated thereby, except for (A) compliance with any
applicable requirements of the HSR Act, (B) the matters described in Section
3.03 of the Seller Disclosure Schedule, (C) assignment and novation of
Government Contracts and (D) such other consents, approvals, orders,
authorizations, registrations, declarations and filings, the failure to obtain
or to make which would not, individually or in the aggregate, (x) have a
Material Adverse Effect on the Acquired Business, (y) materially impair the
ability of Seller to perform its material obligations under the Transaction
Agreements or (z) prevent or materially delay the consummation of the purchase
and sale of the Acquired Assets contemplated by this Agreement.
Section 3.04. Subsidiaries. (a) Each of the outstanding
shares of capital stock of the Acquired Subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and is owned directly by
Seller free and clear of all Liens. There are no Contracts obligating Seller,
or restricting Seller's rights, to transfer, sell or vote, the capital stock of
the Acquired Subsidiary owned by it, directly or indirectly. There are no
outstanding options, warrants or other rights of any kind to acquire,
obligations to issue, or securities convertible into, shares of capital stock
of any class of, or other equity interests in the Acquired Subsidiary. No
person has any preemptive right, right of first refusal or similar right in
connection with such shares or interests owned by Seller.
(b) Section 3.04 of the Seller Disclosure Schedule lists all
teaming arrangements relating to the Acquired Business to which Seller or any
Subsidiary of Seller is a party. Seller does not, directly or indirectly, own
any capital stock or other ownership interest in any corporation, partnership,
joint venture or other entity that is engaged in the Acquired Business, other
than the capital stock of the Acquired Subsidiary and as listed on Section
3.04 of the Seller Disclosure Schedule. Neither Seller nor the Acquired
Subsidiary is a party to any Contract, other than this Agreement, relating to
the purchase of any interest in, or the obligation to invest in or provide
funds to, any such entity.
Section 3.05. Acquired Business Financial Statements.
Included in Section 3.05 of the Seller Disclosure Schedule are (i) the
Acquired Business Financial Statements, and (ii) Acquired Business Interim
Financial Statements. Each of the Acquired Business Balance Sheet and the
Acquired Business Interim Balance Sheet (including any related notes and
schedules) fairly presents in all material respects the combined financial
position of the Acquired Business as of its date, and each of the statements
of combined income and combined cash flows included in the Acquired Business
Financial Statements and the Acquired Business Interim Financial Statements
(including any related notes and schedules) fairly presents, in all material
respects the combined results of operations and combined cash flows, as the
case may be, of the Acquired Business for the periods set forth therein, in
each case in accordance with GAAP consistently applied, subject, in the case
of the Retained Business Interim Financial Statements, to normal year-end
adjustments which are not material in the aggregate.
Section 3.06. No Undisclosed Material Liabilities. There are
no liabilities of the Seller or any Subsidiary of any kind whatsoever relating
to the Acquired Business, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities provided for in the Acquired Business Interim
Balance Sheet or disclosed in the notes thereto; and
(b) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Acquired Business; provided that Seller
shall have no liability under this Section 3.06 with respect to any matter as
to which there are specific representations herein.
Section 3.07. Absence of Certain Events and Changes. Since
January 1, 1996 Seller and its Subsidiaries have conducted the Acquired
Business in the ordinary course, consistent with past practices, and there
have not been (i) any events, changes or developments which, individually or
in the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on the Acquired Business (as currently conducted and as
conducted since January 1, 1996), or would materially impair the ability of
Seller to perform its material obligations under the Transaction Agreements,
or that would prevent or materially delay the consummation of the purchase and
sale of the Acquired Assets contemplated by this Agreement, other than events,
changes or developments relating to the economy in general or resulting from
industry-wide developments affecting companies in similar businesses; (ii) (x)
any granting by Seller or any of its Subsidiaries to any officer or management
employee who is to be a Transferred Employee of any increase in compensation,
except in the ordinary course of business (including, but not limited to, in
connection with promotions) consistent with past practice or as was required
under employment agreements in effect as of January 1, 1996, (y) any granting
by Seller or any of its Subsidiaries to any such officer or management
employee of any increase in severance or termination pay, except as part of a
standard employment package to any person promoted or hired (but not, in any
case, to any of the five most senior officers), or as was required under
employment, severance or termination agreements in effect as of January 1,
1996, or (z) except in the ordinary course of business consistent with past
practice, any entry by Seller or any of its Subsidiaries into any employment,
consulting, severance, termination or indemnification agreement with any
executive officer or management employee who is to be a Transferred Employee;
(iii) any acquisition or any sale, lease or disposition of any material assets
or properties of the Defense Business by Seller, except in the ordinary
course of business, consistent with past practice; (iv) any change in
accounting methods, principles or practices by Seller or any of its
Subsidiaries, except insofar as such change may have been required by a
change in GAAP; or (v) any entry into any agreement, arrangement or
commitment to take any of the actions set forth in this Section 3.07.
Section 3.08. Compliance with Applicable Laws. Seller and its
Subsidiaries and their respective properties and assets are in compliance with
all statutes, laws, regulations, rules, judgments, orders and decrees of all
Governmental Entities applicable to them that relate to the Acquired Business
(including any statutes, laws, regulations, rules, judgments, orders and
decrees incorporated expressly, by reference or by operation of law into, or
otherwise applicable to, any Government Contract) except where the failure to
be in compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business, materially impair the ability of
Seller to perform its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement. Neither Seller nor any
Acquired Subsidiary has received any written notice of any administrative,
civil or criminal investigation or audit (other than Tax audits) by any
Governmental Entity relating to the Acquired Business which have not been
resolved that, individually or in the aggregate, would have a Material Adverse
Effect on the Acquired Business. This Section 3.8 does not relate to employee
benefits matters (for which Section 3.12 is applicable) or Tax matters (for
which Section 3.11 is applicable) or environmental matters (for which Section
3.13 is applicable).
Section 3.09. Title to and Sufficiency of Assets. (a) Seller
has good title to the personal properties and assets reflected on the Acquired
Business Interim Balance Sheet or acquired since the date of the Acquired
Business Interim Balance Sheet, in each case free and clear of any Liens other
than Permitted Liens, except for properties and assets not material in the
aggregate to the Acquired Business disposed of in the ordinary course of
business consistent with past practice and except for such defects in title
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Acquired Business, materially impair the ability of Seller to
perform its material obligations under the Transaction Agreements or prevent
or materially delay the consummation of the purchase and sale of the Acquired
Assets contemplated by this Agreement.
(b) Seller has (i) good and indefeasible title to its owned
Acquired Facilities (which are accurately listed on Schedule 1) and (ii) valid
and subsisting leasehold interests in its Leased Facilities (the material
Leased Facilities are accurately listed on Schedule 1), in each case, free and
clear of any Liens, subject only to Permitted Liens. Each Acquired Facility
(including, without limitation, all buildings, structures, improvements and
fixtures located thereon, thereunder, thereover or therein, and all
appurtenances thereto and other aspects thereof): (1) is in good operating
condition and repair and is structurally sound and free of defects, with no
material alterations or repairs being required thereto under applicable law
or insurance company requirements; (2) consists of sufficient land, parking
areas, driveways and other improvements and lawful means of access to permit
the use thereof in the manner and for the purposes to which it is presently
devoted; and (3) is otherwise suitable, sufficient, adequate and appropriate
in all respects (whether physical, structural, legal, practical or otherwise)
for its current use, operation and occupancy, except, in each such case, to
the extent that failure to meet such standards does not impair or adversely
affect in any material respect the manner or extent of the current use,
operation or occupancy of such Acquired Facility. The Permitted Liens would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Business or to adversely affect in any material respect the manner or extent
of the current use, operation or occupancy of any material Acquired Facility.
No owned Acquired Facility is subject to any sales contract, option, right of
first refusal or similar agreement or arrangement with any third party and no
material Leased Facility is subject to any sales contact, option, right of
first refusal or similar agreement or arrangement with any third party the
exercise of which would, individually or in the aggregate, reasonably be
expected to (i) adversely affect in any material respect the manner or extent
of the current use, operation or occupancy of ancility, (ii) have a Material
Adverse Effect on the Acquired Business, (iii) materially impair the ability
of Seller to perform its material obligations under the Transaction Agreements
or (iv) prevent or materially delay the purchase and sale of the Acquired
Assets contemplated by this Agreement.
(c) The Acquired Business will, at the Closing Date, include all
right, title and interest in and to all Assets (other than Intellectual
Property) that are used primarily in or that are being held primarily for use
or are otherwise necessary in the operation, as currently conducted, of the
Defense Business of Seller, and will have the rights to Intellectual Property
set forth in the IP Agreement.
Section 3.10. Litigation. There are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending, or to the knowledge of Seller threatened, against Seller that,
individually or in the aggregate, would (i) have a Material Adverse Effect on
the Acquired Business, (ii) materially impair the ability of Seller to perform
its material obligations under the Transaction Agreements or (iii) prevent or
materially delay the purchase and sale of the Acquired Assets contemplated by
this Agreement. There are no outstanding judgments, orders, decrees,
stipulations or awards against Seller or its properties or businesses that,
individually or in the aggregate, would have a Material Adverse Effect on the
Acquired Business, materially impair the ability of Seller to perform its
material obligations under the Transaction Agreements or prevent or materially
delay the consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement. Section 3.10 of the Seller Disclosure
Schedule sets forth, as of the date hereof, (i) each suit, action or
proceeding which seeks damages or other monetary relief of more than $1.0
million and (ii) each criminal investigation, in each case pending (or, to the
knowledge of Seller, threatened) with respect to any of the Acquired Business.
Section 3.11. Taxes. (a) All Tax Returns required to be filed
by the Seller and the Acquired Subsidiary before the date hereof have been
filed, and all Taxes due with respect to the periods covered by such Returns
have been timely paid or adequately reserved for on the books of Seller,
except to the extent that the failure to so file or to pay would not have a
Material Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the Transaction
Agreements or prevent or materially delay the consummation of the purchase and
sale of the Acquired Assets contemplated by this Agreement.
(b)There are no material claims or investigations pending or
threatened in writing with respect to any Tax of the Acquired Subsidiary or
any Taxes (other than Income Taxes) relating to the Acquired Assets.
(c)There is no Tax sharing or allocation agreement under which
the Acquired Subsidiary will have any obligations after the Closing Date.
(d)Seller and the Acquired Subsidiary have timely paid, and
will timely pay, all Tax liabilities which relate to the Acquired Assets and
which are incurred in or attributable to the Pre-Closing Tax Period, other
than Transfer Taxes as defined in Section 7.02(a), the non-payment of which
would result in a Lien on any Acquired Asset, would otherwise adversely affect
the Acquired Business or would result in the Buyer becoming liable therefor.
(e)The Acquired Subsidiary does not report any income in
accordance with the provisions of Section 460 of the Code.
Section 3.12. Employee Benefit Plans. (a) The Seller
Disclosure Schedule lists each Employee Plan and Foreign Plan. Except as set
forth in the next sentence, with respect to each Employee Plan, Seller has
delivered or made available to Buyer, a true, correct and complete copy of:
(i) each writing constituting a part of such Employee Plan and Foreign Plan,
including without limitation all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent determination letter
from the IRS, if any. Foreign plans, insurance contracts, preferred provider
contracts and similar contracts, trust agreements relating to Employee Plans
and executed copies of the Seller incentive pay and employment agreements
described on Section 8.07 of the Seller Disclosure Schedule (a form of which,
in relevant part, has been provided to Buyer) shall be made available prior to
the Closing Date. Except as specifically provided in the foregoing documents
delivered or made available to Buyer, there are no amendments to any Employee
Plan or Foreign Plan that have been adopted or approved nor has Seller
undertaken to make any such amendments.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the Transaction
Agreements or prevent or materially delay the consummation of the purchase and
sale of the Acquired Assets contemplated by this Agreement:
(i) The Seller Disclosure Schedule identifies each Employee
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code ("Qualified Plans"). The Internal Revenue Service has
issued a favorable determination letter with respect to each Qualified Plan
that has not been revoked, and there are no existing circumstances nor any
events that have occurred that could reasonably be expected to adversely
affect the qualified status of any Qualified Plan or the related trust.
(ii) Each Employee Plan and Foreign Plan has been maintained
in compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such Plan.
(iii) All contributions required to be made to any Employee
Plan or Foreign Plan by applicable law or regulation or by any plan document
or other contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Employee Plan, for any period through the
date hereof have been timely made or paid in full, or, to the extent not
required to be made or paid on or before the date hereof, either (A) have been
fully reflected on the Acquired Business Interim Financial Statements; or (B)
will not constitute Assumed Liabilities.
(iv) With respect to each Employee Plan that is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (A) there
does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA, whether or not waived; (B)
except in the case of the Seller DB Plan, the fair market value of the assets
of such Employee Plan equals or exceeds the actuarial present value of all
accrued benefits under such Employee Plan (whether or not vested), on a
termination basis; (C) no reportable event within the meaning of Section
4043(c) of ERISA has occurred (except for any such reportable event for which
the requirement of filing notice with the PBGC has been waived); and (D) all
premiums to the PBGC have been timely paid in full.
(v) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a liability
of Buyer or any of its ERISA Affiliates as a result of transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, neither Seller nor any of its ERISA Affiliates has engaged in any
transaction described in Section 4069 or Section 4204 or 4212 of ERISA.
(vi) No Employee Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or a plan that has two or more
contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA.
(vii) No Transferred Individual will become entitled to any
retirement, severance or similar benefit or enhanced or accelerated benefit
solely as a result of the transactions contemplated hereby, to the extent
Buyer complies with its obligations hereunder. Without limiting the
generality of the foregoing, no amount required to be paid or payable to or
with respect to any Transferred Individual in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(viii) Neither Seller nor any of its ERISA Affiliates has any
liability for post-retirement life, health, medical or other welfare benefits
to Transferred Individuals, except as set forth in the Seller Disclosure
Schedule, and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA.
(ix) At the Closing Date, Buyer will employ no more than 800
Bridge Employees. As soon as practicable after the date hereof, Buyer will
provide Seller with a list of all Bridge Employees as of the date hereof and
(to be provided before the Closing) as of the Closing Date, together with a
schedule of the expirations of such Bridge Employees' leaves of absence. Each
"bridge agreement," within the meaning of the definition of Bridge Employees,
permits Seller to modify or reduce benefits under any welfare benefit plan
under which the relevant Bridge Employee is covered during such Bridge
Employee's leave of absence prior to retirement.
Section 3.13. Environmental Matters. (a) (i) The Acquired Business is in
compliance with all applicable Environmental Laws except where the failure to
be in compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Business, materially impair the ability of
Seller to perform its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement.
(ii) The Acquired Business has all Permits required under
Environmental Laws for the operation of the Acquired Business as presently
conducted (the "Environmental Permits") and there are no violations,
investigations or proceedings or, to the knowledge of Seller, pending or
threatened with respect to such Environmental Permits except where the failure
to have such Environmental Permits or where the violation, investigation or
proceeding relating thereto would not, individually or in the aggregate, have a
Material Adverse Effect on the Acquired Business, materially impair the
ability of Seller to perform its material obligations under the Transaction
Agreements or prevent or materially delay the consummation of the purchase and
sale of the Acquired Assets contemplated by this Agreement.
(iii) Since December 31, 1994, no notice, notification,
demand, request for information, citation, summons, complaint or order
has been received by or, to the knowledge of Seller, is pending or
threatened by any Person against, any part of the Acquired Business or
in respect of any of the Acquired Facilities nor has any material
penalty been assessed against any of the Acquired Business with respect
to any alleged violation of any Environmental Law or liability
thereunder, other than where such notice, notification, demand, request
for information, citation, summons, complaint or order has been fully
resolved, or where resolution would not, individually or in the
aggregate, have a Material Adverse Effect on the Acquired Business,
materially impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or materially
delay the consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(iv) No Hazardous Substance has been discharged, generated,
treated, manufactured, handled, stored, transported, emitted, released or is
present at any property now or previously owned, leased or operated by any
part of the Acquired Business in violation of any Environmental Law, which
circumstance, individually or in the aggregate, would have in a Material
Adverse Effect on the Acquired Business, materially impair the ability of
Seller to perform its material obligations under the Transaction Agreements or
prevent or materially delay the consummation of the purchase and sale of the
Acquired Assets contemplated by this Agreement.
(b) Since January 1, 1994, there has been no environmental
investigation conducted of which Seller has knowledge in relation to the
Acquired Business or any property or facility now or previously owned or
leased with respect to the Acquired Business with respect to any matter which
has had or would, individually or in the aggregate, have a Material Adverse
Effect on the Acquired Business, materially impair the ability of Seller to
perform its material obligations under the Transaction Agreements or prevent
or materially delay the consummation of the purchase and sale of the Acquired
Assets contemplated by this Agreement.
Section 3.14. Brokers and Finders. None of Seller or any of
its directors, officers or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders fees in
connection with the transactions contemplated hereby, other than Morgan
Stanley & Co. Incorporated, the fees and expenses of which shall be paid by
Seller.
Section 3.15. Intellectual Property. (a) Section 3.15(a) of
the Seller Disclosure Schedule sets forth a list of the patents, patent
applications, patent disclosures and trademarks that will be transferred to
the Buyer at the Closing. All of the other Intellectual Property owned by
Seller or any of its Subsidiaries and used primarily, or held primarily for
use, in connection with the Defense Business as conducted on the date hereof
and on the Closing Date will be transferred to the Buyer at the Closing.
Pursuant to the IP Agreement, and subject to the terms therein, the Buyer
shall, as of the Closing Date, have the right to use, hold for use or
otherwise exploit (to the extent set forth in the IP Agreement) all the
Intellectual Property referred to therein, whether or not set forth in Section
3.15(a) of the Seller Disclosure Schedule, in a manner not materially
different than that in which such Intellectual Property is or may be used,
held for use or otherwise exploited by Seller and its Subsidiaries in the
Defense Business as of the date hereof and as of the Closing Date.
(b) Seller and its Subsidiaries own or have the right to use all
material Intellectual Property (other than third party patents and licenses)
and research records, records of inventions, test information, market surveys
and marketing know-how and unregistered copyrights ("Technology") used in
connection with the Defense Business as conducted on the date hereof and as
of the Closing Date. Seller and its Subsidiaries have used commercially
reasonable measures to protect the secrecy, confidentiality and value of the
material Technology used in connection with the Defense Business. To the
knowledge of Seller, no material Technology (other than unregistered
copyrights) used in connection with the Defense Business has been used,
divulged or appropriated for the benefit of any Person other than Seller and
its Subsidiaries, except where such use, divulgence or appropriation would not,
individually or in the aggregate, have a Material Adverse Effect on the
Acquired Business, materially impair the ability of Seller to perform its
material obligations under the Transaction Agreements or prevent or materially
delay the consummation of the purchase and sale of the Acquired Assets
contemplated by this Agreement.
(c) As of the date hereof, neither Seller nor any of its
Subsidiaries has made any claim in writing of a violation, infringement,
misuse or misappropriation by others of rights of Seller and its Subsidiaries
to or in connection with any material Intellectual Property or material
Technology used in connection with the Defense Business.
(d) To the knowledge of Seller, as of the date hereof,
there is no pending or threatened claim by any third Person of a violation,
infringement, misuse or misappropriation by any of Seller or any of its
Subsidiaries in connection with the Defense Business of any Intellectual
Property or Technology owned by any third Person, or of the invalidity of any
patent used in connection with the Defense Business, that would, individually
or in the aggregate, have a Material Adverse Effect on the Defense Business.
To the knowledge of Seller, the conduct of the Acquired Business by Buyer
following the Closing in the manner currently conducted by Seller and its
Subsidiaries will not result in the infringement of any Intellectual Property
or Technology owned by any third Person that would, individually or in the
aggregate, have a Material Adverse Effect on the Acquired Business. There
are no interferences or other contested inter partes proceedings, either
pending or, to the knowledge of Seller, threatened, in any domestic or foreign
copyright office, patent and trademark office or any other Governmental Entity
relating to any pending application with respect to any material Intellectual
Property used in connection with the Defense Business.
(e) Seller is not a party to any exclusive licensing agreement
with respect to any Intellectual Property included in the Acquired Assets.
Section 3.16. Employees. There is no labor strike or work
stoppage pending or, to the knowledge of Seller, threatened against the
Acquired Business that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect on the Acquired
Business. Neither the Seller nor the Acquired Subsidiary is a party to any
collective bargaining agreement relating to the Transferred Employees in the
United States. To the knowledge of Seller, there is no material union
representation or organizing effort pending or threatened against any part of
the Acquired Business.
Section 3.17. Contracts. Neither Seller nor any of its
Subsidiaries is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect under any Contract that is
material to the operation of the Acquired Business. To Seller's knowledge, as
of the date of this Agreement, none of the other parties to any Contract that
is material to the operation of the Acquired Business is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. To Seller's knowledge, as of the date hereof,
there is no pending written claim or request for equitable adjustment under any
Government Contract by any Governmental Entity that would reasonably be
expected to have a Material Adverse Effect on the Acquired Business. As of
the date of this Agreement, except where the same would not, individually or
in the aggregate, have a Material Adverse Effect on the Acquired Business,
neither Seller nor any Subsidiary (i) has received any written notice of the
intention of any party to terminate any Contract, whether as a termination for
convenience or for default of Seller or any Subsidiary thereunder, or (ii)
has, since January 1, 1995, received any written cure notice or show cause
notice (as defined in the Federal Acquisition Regulations Part 49, Paragraph
49.607(a) and (b), respectively) in respect of any such Contract which is a
Government Contract. The Acquired Business is in compliance with all
obligations relating to any equipment or fixtures owned by any Governmental
Entity and loaned, bailed or otherwise furnished to or held by any part of the
Acquired Business, except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on the
Acquired Business.
Section 3.18. Permits. Seller has all Permits relating to the
Acquired Business that are required in order to permit it to carry on its
business as it is presently conducted, except where the failure to have such
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Acquired Business, materially impair the ability of Seller to
perform its material obligations under the Transaction Agreements or prevent
or materially delay the consummation of the purchase and sale of the Acquired
Assets contemplated by this Agreement, and all such Permits are in full force
and effect, and Seller is in compliance with the terms of such Permits, except
where the failure of such Permits to be in full force and effect, or of Seller
to be in compliance with such Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Acquired Business, materially
impair the ability of Seller to perform its material obligations under the
Transaction Agreements or prevent or materially delay the consummation of the
purchase and sale of the Acquired Assets contemplated by this Agreement.
Section 3.19. Restrictive Agreements. Seller and its
Subsidiaries are not parties to or bound by any agreement, contract, policy,
license, Permit, document, instrument, arrangement or commitment relating to
the Acquired Business that, by its terms, would materially limit the freedom
of Buyer or any of its Subsidiaries to compete in any line of business or with
any Person or in any geographic area after the Closing Date.
Section 3.20. No Representations or Warranties. Buyer
acknowledges that none of Seller or any of its Subsidiaries, any of their
respective Affiliates or any other Person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding any of the Acquired Business not included in the
Transaction Agreements. Buyer further acknowledges that, except as expressly
set forth in the Transaction Agreements and including any schedules, exhibits,
annexes or other attachments thereto, there are no representations or
warranties of any kind, expressed or implied, with respect to Acquired
Business.
ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
Section 4.01. Corporate Organization and Qualification. Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation.
Section 4.02. Corporate Authority. Buyer has, or in the case
of any Ancillary Agreement executed after the date hereof, will have, the
requisite corporate power and authority to execute, deliver and perform each
Transaction Agreement and to consummate the transactions contemplated thereby.
The execution, delivery and performance by Buyer of each Transaction Agreement
and the consummation by it of the transactions contemplated thereby have been
duly authorized by its Board of Directors, and no other corporate proceedings
on its part are or will be necessary to authorize any Transaction Agreement or
for it to consummate the transactions contemplated thereby. Each Transaction
Agreement is, or when executed and delivered will be (assuming such agreement
constitutes a valid and binding obligation of Seller), a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with the terms
thereof except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 4.03. No Violations; Consents and Approvals. (a)
None of the execution, delivery or performance by Buyer of each Transaction
Agreement to which it is or will be a party or the consummation by Buyer of
the transactions contemplated hereby (i) will conflict with, or result in a
violation or breach of, the certificate of incorporation or by-laws of
Buyer or (ii) subject to the matters referred to in Section 4.3(b) below,
will conflict with, or result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under, or
give rise to any right of termination, amendment, cancellation or
acceleration of any obligation under, or result in the creation of any Lien
upon any of the properties or assets of Buyer either under (A) any of the
terms, conditions or provisions of any Contract or of any Permit to which
Buyer is a party or by which any of its properties or assets may be bound,
or (B) any judgment, order, decree, statute, law, regulation or rule
applicable to Buyer, except, in the case of clause (ii), for conflicts,
violations, breaches, defaults, rights, losses or Liens that would not,
individually or in the aggregate, (x) materially impair the ability of
Buyer to perform its material obligations under the Transaction Agreements
or (y) prevent or materially delay the consummation of the purchase and
sale of the Acquired Assets contemplated by this Agreement.
(b) No consent, approval, order or authorization of or
registration with any Governmental Entity or any other Person is required with
respect to Buyer in connection with the execution, delivery or performance by
Buyer of each Transaction Agreement to which it is or will be a party or the
consummation by it of the transactions contemplated thereby except for (A)
compliance with any applicable requirements of the HSR Act, (B) the matters
described in Schedule 4.03 hereto, (C) assignment and novation of Government
Contracts, and (D) such other consents, approvals, orders, authorizations,
registrations, declarations, filings and agreements, the failure to obtain or
to make which would not, individually or in the aggregate, (x) materially
impair the ability of Buyer to perform its material obligations under the
Transaction Agreements or (y) prevent or materially delay the consummation of
the purchase and sale of the Acquired Assets contemplated by this Agreement.
Section 4.04. Brokers and Finders. None of Buyer or any of its
directors, officers or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated thereby, except Bear, Stearns &
Co., the fees and expenses of which shall be paid by Buyer.
Section 4.05. No Representations or Warranties. Seller
acknowledges that none of Buyer, any of its Affiliates or any other Person has
made any representation or warranty, expressed or implied, as to the accuracy
or completeness of any information regarding Buyer not included in the
Transaction Agreements. Seller further acknowledges that, except as expressly
set forth in the Transaction Agreements, there are no representations or
warranties of any kind, expressed or implied, with respect to Buyer.
ARTICLE 5
Covenants of Seller
Section 5.01. Conduct of Seller. From the date of this
Agreement until the Closing Date, Seller agrees as to itself and its
Subsidiaries that, except as otherwise contemplated by the Transaction
Agreements or the Seller Disclosure Schedule, or as Buyer shall otherwise
consent in writing:
(a) Ordinary Course. Seller shall conduct the Acquired Business
in the ordinary course consistent with past practice and shall use reasonable
efforts to keep available the services of key employees engaged primarily in
the Acquired Business and to preserve the relationships with key customers,
suppliers and others having business dealings with the Acquired Business.
(b) Governing Documents. Seller will not amend in any material
respect Seller Charter or Seller By-laws, nor will it permit the Acquired
Subsidiary to amend its certificate of incorporation or by-laws or comparable
organizational documents.
(c) No Acquisitions. Seller will not, nor will it permit the
Acquired Subsidiary to, (i) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any material assets, in any such case,
that would be part of and material to the Acquired Business, or (ii) make or
agree to make any material investment in any Person (whether by means of loan,
capital contribution, purchase of capital stock or other securities or
otherwise) that would be part of the Acquired Business, except for
acquisitions or investments by Seller pursuant to contractual obligations
existing on the date hereof and disclosed in Section 5.01(c) of the Seller
Disclosure Schedule.
(d) No Dispositions. Seller will not, nor will it permit the
Acquired Subsidiary to, sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise dispose of
(including by termination of leases), any of the Acquired Assets other than
non-material Assets in the ordinary course of business consistent with past
practice or pursuant to contractual obligations existing on the date hereof
and disclosed in Section 5.01(d) of the Seller Disclosure Schedule.
(e) Liens. Seller will not, and will not permit any of its
Subsidiaries to, create, assume or suffer to exist any Lien on the Acquired
Assets, except for Permitted Liens.
(f) Maintenance of Properties. Seller will, and will cause the
Acquired Subsidiary to, use reasonable efforts to continue to maintain and
repair all property material to the operation of the Acquired Business in a
manner consistent in all material respects with past practice.
(g) Benefit Plans. Except as described in Section 5.1(g) of the
Seller Disclosure Schedule or otherwise expressly contemplated in this
Agreement, or except as required by law, or in the ordinary course of business
consistent with past practice, Seller will not, nor will it permit the
Acquired Subsidiary to, (i) adopt any plan, arrangement or policy which would
become an Employee Plan applicable to the Transferred Employees or Bridge
Employees (or, to the extent it affects Liabilities assumed by Buyer
hereunder, with respect to Former Defense Employees) or amend any Employee Plan
applicable to the Transferred Employees or Bridge Employees (or, to the extent
it affects Liabilities assumed by Buyer hereunder, with respect to Former
Defense Employees), (ii) except for normal increases in the ordinary course of
business consistent with past practice (including, but not limited to, in
connection with promotions), increase the base salary of any Transferred
Employee or (iii) enter into or modify in any material respect any collective
bargaining agreement governing Transferred Employees or Bridge Employees (or,
the extent it affects Liabilities assumed by Buyer hereunder, with respect to
Former Defense Employees).
(h) Project Bids. Seller will not, and will not permit any of
its Subsidiaries to, submit a bid to any Person with respect to any project
which (i) would be material to the Acquired Business and (ii) Seller expects
would have an operating profit margin of less than 6%; provided, however, that
this provision shall not apply in connection with any bidding process in which
Seller has good reason to believe Buyer is participating.
(i) Representation and Warranties. Seller will not take, and
will not permit any Subsidiary to take, or agree or commit to take any action
that would make any representation and warranty of Seller hereunder inaccurate
in any material respect at, or as of any time prior to, the Closing Date or
that would, or would reasonably be expected to, result in any of the
conditions set forth in Article 9 not being satisfied on the Closing Date.
Section 5.02. Other Offers. Seller has, upon execution of this
Agreement, immediately ceased or caused to be terminated any existing
discussions or negotiations with any parties (other than Buyer) conducted on
or prior to the date hereof with respect to any sale or other transaction
involving the Acquired Assets.
Section 5.03. Notices of Certain Events. Seller shall promptly
notify Buyer of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement, other than consents the failure
of which to obtain would not have a Material Adverse Effect on the Acquired
Business, materially impair the ability of Seller to perform its material
obligations under the Transaction Agreements or prevent or materially delay
the consummation of the purchase and sale of the Acquired Assets contemplated
by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by the Transaction Agreements; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened, against Seller or any Subsidiary
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 3.10 or which seek to prevent or delay
the consummation of the transactions contemplated by the Transaction
Agreements.
Section 5.04. Confidentiality and Standstill Agreements. Seller
will not amend, waive or modify any provision of any confidentiality or
standstill agreement entered into with any other party in connection with such
party's interest in acquiring the Acquired Business or the Defense Business or
any substantial portion of the Defense Business.
Section 5.05. No Agreement to Prohibited Actions.Seller will
not, and will not permit any of its Subsidiaries to, agree or commit to take
any action that is prohibited under this Article 5.
Section 5.06. Confidentiality. (a) For five years
following the Closing Date, Seller shall, and shall use reasonable efforts
to cause its Affiliates, Subsidiaries and their respective directors,
officers, employees, agents and representatives ("Seller Representatives")
to, hold in strict confidence and use only for audit, accounting, and Tax
purposes, as well as, to the extent, in the opinion of Seller's counsel
required by law, for purposes of fulfilling disclosure and reporting
obligations, all Proprietary Information in its possession or control.
Seller shall not, and shall use reasonable efforts to cause the Seller
Representatives not to, release or otherwise disclose such Proprietary
Information to any other Person except Seller Representatives who need to
know such information and who shall be bound by the provisions of this
Section 5.06. Seller shall, and shall use reasonable efforts to cause the
Seller Representatives to, protect any such Proprietary Information by
using, at least the same degree of care, but no less than reasonable care,
to prevent the unauthorized use, disclosure, or publication of such
Proprietary Information as each uses with respect to its own information of
like importance.
(b) Notwithstanding the foregoing, Seller may disclose such
Proprietary Information to the extent that (a) disclosure is compelled by
judicial or administrative process or, in the opinion of Seller's counsel, by
other requirements of law, or (b) Seller can show that such Proprietary
Information was (i) publicly available prior to the Closing Date or thereafter
becomes publicly available without any violation of this Agreement on the part
of Seller or the Seller Representatives or (ii) became available to Seller
from a Person other than Buyer, as applicable, that is not subject to any
legally binding obligation to keep such Proprietary Information confidential.
(c) The obligations of Seller and the Seller Representatives under
this Section 5.06 shall be in addition to, and not in lieu of, any obligations
Seller may otherwise have arising under law, contract or otherwise with
respect to any obligation to protect the confidential or privileged nature of
any Proprietary Information.
Section 5.07. Insurance. (a) From and after the Closing Date,
Seller and its Subsidiaries shall use all reasonable efforts to retain the
right to make claims and receive recoveries, for the benefit of Buyer, under
any insurance policies maintained at any time prior to the Closing by Seller
or its Subsidiaries (the "Seller Insurance Policies"), covering any Damages
relating to the Acquired Business and relating to or arising out of
occurrences prior to or at the Closing (a "Claim"). Seller agrees to use
reasonable efforts so that Buyer shall have the right, power and authority,
subject to any required consent of the carriers under the Seller Insurance
Policies, in the name of Seller, to make directly any Claims under the Seller
Insurance Policies and to receive directly recoveries thereunder. Buyer
agrees to notify Seller, promptly upon making any such Claim, of the basis and
amount of such Claim.
(b) Buyer will bear costs relating to any self-retention or
deductible and any gaps in or limits on coverage applicable to a Claim
asserted at any time with respect to the applicable Seller Insurance Policy,
after taking into account the effect of any prior claim payments under the
terms of such Seller Insurance Policy, whether or not the applicable Seller
Insurance Policy solely covers claims of Buyer or covers claims of Buyer, on
the one hand, and Seller, on the other hand. In the event that any legal
action, arbitration, negotiation or other proceedings are required for
coverage to be asserted against any insurer or a Claim to be perfected, (i)
Buyer shall, to the extent possible, do so at its own expense or (ii) if Buyer
is not permitted to assert coverage or perfect a Claim, Seller shall do so,
and, in either event, Buyer shall reimburse Seller for any reasonable costs
and expenses that Seller may incur because of such action.
(c) Each of Buyer and Seller shall use all reasonable efforts (i)
to cooperate fully and to cause its Affiliates to cooperate fully with the
other in submitting good faith Claims on behalf of Seller and its Subsidiaries
and under the Seller Insurance Policies and (ii) to pay promptly over to Buyer
any and all amounts received by Seller or its Subsidiaries under the Seller
Insurance Policies with respect to Claims.
(d) Seller shall retain custody of the Seller Insurance Policies
and any and all service contracts, claim settlements and all other insurance
records relating thereto; and Buyer shall have access to and the right to make
copies of all such documents and records upon reasonable request.
(e) Notwithstanding any provision of this Agreement, Seller shall
not be required to comply with this Section 5.07 or any portion thereof if so
doing would (i) be materially adverse to Seller or its Subsidiaries or (ii)
require Seller or its Subsidiaries to incur any significant costs not
reimbursable by Buyer.
Section 5.08. Non-Solicitation of Employees. Seller, its
Subsidiaries and Affiliates will not, from and after the Closing Date,
directly or indirectly, solicit, encourage, entice or induce any officer,
management employee or key technical employee that is a Transferred Employee
to terminate his or her employment with the Acquired Business; provided, that
nothing herein shall prevent Seller from engaging in discussions regarding
employment, or employing, any Transferred Employee (i) if such Transferred
Employee shall voluntarily initiate such discussions without any such
solicitation, encouragement, enticement or inducement prior thereto on the
part of Seller, its Subsidiaries or Affiliates or (ii) if such discussions
shall be held as a result of or employment be the result of the response by
any such Transferred Employee to a written employment advertisement placed in a
publication of general circulation, general solicitation conducted by
executive search firms, employment agencies or other general employment
services, not directed specifically at officers, management employees, and key
technical employees who are Transferred Employees. Seller agrees that any
remedy at law for any breach by it of this Section 5.08 would be inadequate,
and Buyer would be entitled to injunctive relief in such a case. If it is
ever held that the restriction placed on Seller, its Subsidiaries and
Affiliates by this Section 5.08 is too onerous and is not necessary for the
protection of Buyer, Seller agrees that any court of competent jurisdiction may
impose lesser restrictions which such court may consider to be necessary or
appropriate to properly protect Buyer.
ARTICLE 6
Covenants of Both Parties
The parties hereto agree that:
Section 6.01. Access to Information. From the date hereof
until the Closing Date, Seller will give Buyer, its counsel, financial
advisors, auditors and other authorized representatives reasonable access
during normal business hours to the offices, properties, books and records, of
and relating to the Acquired Business, will furnish to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such
financial and operating data and other information with respect to the
Acquired Business as such Persons may reasonably request and will instruct its
employees, counsel and financial advisors to cooperate with Buyer in its
investigation of the Acquired Business. Any information provided, or caused
to be provided, by Seller pursuant to this Section 6.01 shall be subject to
the terms of the Confidentiality Agreement dated as of October 22, 1996
between Seller and Buyer (the "Confidentiality Agreement").
Section 6.02. Reasonable Efforts. Each party will use
reasonable efforts to take, or cause to be taken, all actions necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by the Transaction Agreements. Without limiting the
generality of the foregoing:
(i) Seller will use reasonable efforts to make or obtain all
consents, approvals, orders, authorizations, registrations, declarations and
filings described in clauses (A) and (B) of Section 3.03(b) and estoppel
certificates reasonably acceptable to Buyer from the landlords for the
material Leased Facilities; and
(ii) Buyer will use reasonable efforts to make or obtain all
consents, approvals, orders, authorizations, registrations, declarations and
filings described in clauses (A) and (B) of Section 4.03(b).
Section 6.03. Novation of Government Contracts. (a) As
soon as practicable following the Closing, Buyer shall prepare (with
Seller's assistance), in accordance with Federal Acquisition Regulations
part 42, (P) 42.12 and any applicable agency regulations or policies, a
written request meeting the requirements of the Federal Acquisition
Regulations part 42, as reasonably interpreted by the Responsible
Contracting Officer (as such term is defined in Federal Acquisition
Regulations Part 42, (P) 42.1202(a)), which shall be submitted by Seller to
each Responsible Contracting officer, for the United States Government (i)
to recognize Buyer as Seller's successor in interest to all the Acquired
Assets constituting Government Contracts); and (ii) to enter into a
novation agreement (a "Novation Agreement") in form and substance
reasonably satisfactory to Buyer and Seller and their respective counsel,
pursuant to which, subject to the requirements of the Federal Acquisition
Regulations Part 42, all of Seller's right, title and interest in and to,
and all of Seller's obligations and liabilities under, each such Government
Contract shall be validly conveyed, transferred and assigned and novated to
Buyer by all parties thereto. Seller shall provide to Buyer promptly any
information regarding Seller required in connection with such request.
Seller and Buyer shall each use all reasonable efforts to obtain all
consents, approvals and waivers required for the purpose of processing,
entering into and completing the Novation Agreements with regard to any of
the Government Contracts, including responding to any requests for
information by the United States Government with regard to such Novation
Agreements.
(b) In connection with obtaining the consents contemplated in
Section 6.3(a) hereof, Seller shall not consent to any modification of any
Government Contract included in the Acquired Assets which would adversely
affect the rights of Buyer under such Government Contract without the prior
written consent of Buyer.
Section 6.04. Public Announcements. (a) The initial press
release relating to the Transaction Agreements and the transactions
contemplated thereby will be a joint release. Buyer and Seller will consult
with each other before issuing any further press release or making any other
public statement with respect to the Transaction Agreements and the
transactions contemplated thereby which differs substantially from previously
approved statements and, except as may be required by applicable law or any
listing agreement with any securities exchange, will not issue any such press
release or make any such public statement unless the text of such statement
shall first have been agreed by the parties.
(b) Seller and Buyer shall cooperate in making communications
with Transferred Employees with respect to employee benefit plans maintained
by Seller or Buyer and with respect to other matters arising in connection
with the sale of the Acquired Assets.
Section 6.05. Further Assurances. At and after the Closing
Date, Seller will execute and deliver any deeds, bills of sale, assignments
or assurances and take and do, any other actions and things reasonably
necessary to vest, perfect or confirm of record or otherwise in Buyer any and
all right, title and interest in, to and under any of the rights, properties
or assets of the Acquired Business acquired or to be acquired by Buyer as a
result of, or in connection with, the purchase and sale of the Acquired Assets.
Section 6.06. Notices. Seller and Buyer will promptly advise
from the date hereof through the Closing Date the other party orally and in
writing of (i) any representation or warranty made by it and contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect, or any such representation that is not so qualified become untrue
or inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) any event or
change, or the impending occurrence of any event or change, or which it has
knowledge and which has resulted or which, insofar as can reasonably be
foreseen, would result in any of the conditions to the Closing set forth in
Article 9 not being satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
ARTICLE 7
Tax Matters
Section 7.01. Tax Covenants. (a) All Returns required to be
filed with any Taxing Authority on or before the Closing Date with respect to
any Pre-Closing Tax Period by, or with respect to, the Acquired Subsidiary
will be filed when due in accordance with all applicable laws (taking into
account any extension of a required filing date) and Seller shall pay or cause
to be paid all Taxes as shown on such Returns and all other Returns required
to be filed with respect to the Acquired Subsidiary (excluding any separate
Returns required to be filed by the Acquired Subsidiary) with respect to any
Pre-Closing Tax Period will be filed by Seller when due (taking into account
any extension of a required filing date) and Seller shall pay or cause to be
paid all Taxes as shown on such Returns. Buyer shall file or cause to be
filed all separate Returns required to be filed by an Acquired Subsidiary after
the Closing Date. Such Returns shall be prepared in a manner consistent with
past practices and without a change of any election or any accounting method,
except as required by a change in applicable law or by a Final Determination.
Each such Return shall be submitted by Buyer to Seller (together with
schedules, statements and, to the extent requested by Seller, supporting
documentation) at least 45 days prior to the due date (including extensions)
of such Return, together with a statement from Buyer setting forth the amount
of reimbursement to which Buyer is entitled under this Section 7.01(a).
Seller shall have the right to review all work papers and procedures used to
prepare any such Return. If Seller, within 15 business days after delivery of
any such Return, notifies Buyer in writing that it objects to any items in
such Return, the parties shall proceed in good faith to resolve the disputed
items and, if they are unable to do so within 10 business days, the disputed
items shall be resolved (within a reasonable time, taking into account the
deadline for filing such Return) in the manner set forth in Section 2.08(a).
Upon resolution of all disputed items, the relevant Return shall be adjusted
to reflect such resolution and shall be binding upon the parties without
further adjustment. Seller shall reimburse the Acquired Subsidiary for the
Taxes shown as payable on any such return which are allocable to the
Pre-Closing Tax Period 10 days after the resolution of all disputed items;
provided that if such Return shall be due prior to the resolution of all
disputed items, Seller shall reimburse the Acquired Subsidiary the amount
agreed by the parties as due, with any additional amounts payable upon
resolution of all the disputed items.
(b) Buyer covenants that it will not, nor will it cause or permit
the Acquired Subsidiary or any Affiliate of Buyer to (i) take any action on the
Closing Date, other than in the ordinary course of business or as contemplated
by this Agreement, that could rise to any Tax liability of Seller or any
indemnification obligation of Seller under this Agreement or (ii) without the
consent of Seller, except as a result of a Final Determination or as otherwise
required by law, or unless Seller is fully indemnified and held harmless (to
Seller's satisfaction) from any resulting liability, make or change any Tax
election, amend any Return or take any position on any Return, take any
action, omit to take any action or enter into any transaction that results in
any increased Tax liability or reduction of any Tax Asset of Seller in respect
of any Pre-Closing Tax Period (including any election under Section 338 of the
Code).
(c) If any claim or demand for Taxes with respect to any
Pre-Closing Tax Period of the Acquired Subsidiary is asserted in writing
against Buyer, any of its Affiliates, or effective upon the Closing, the
Acquired Subsidiary, Buyer shall notify Seller as promptly as practicable
(taking into account the time in which a response is required), but in no
event later than 10 days of such claim or demand, and shall give Seller such
information with respect thereto as Seller may reasonably request. Seller may
discharge, at any time, its indemnification obligation with respect to such
Taxes under this Agreement by paying to Buyer the amount of the indemnifiable
loss (inclusive to any amount payable under Section 10.02(d)), calculated on
the date of such payment. Seller may, at its own expense, participate in and
assume the defense of any such claim, suit, action or proceeding (including any
Tax audit). If Seller assumes such defense, Buyer shall have the right (but
not the duty) to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by Seller. Whether or not
Seller chooses to defend or prosecute any claim, all of the parties hereto
shall cooperate in the defense or prosecution thereof. Seller shall not be
liable under Section 10.03 with respect to any Tax referred to in this Section
7.01(c) resulting from a claim or demand the defense of which Seller was not
offered the opportunity to assume as provided under this Section 7.01(c) to
the extent Seller's liability under this Agreement is adversely affected as a
result thereof.
(d) For all purposes of the Agreement, all Income Taxes for a
taxable period which includes (but does not end on) the Closing Date shall be
allocated based upon a closing-of-the-books method.
Section 7.02. Allocation of Transfer and Property Taxes. (a)
All excise, sales, use, value added, registration stamp, recording,
documentary, conveyancing, franchise, property, transfer, gains and similar
Taxes, levies, charges and fees including any deficiencies, interest,
penalties, additions to tax or additional amounts excluding any Income Taxes
(collectively, "Transfer Taxes") incurred in connection with the transactions
contemplated by this Agreement and the other Transaction Agreements shall be
borne equally by Buyer and Seller. Buyer and Seller shall use reasonable
efforts to minimize the amount of all Transfer Taxes and shall cooperate in
providing each other with any appropriate resale exemption certifications and
other similar documentation. The party that is required by applicable law to
make the filings, reports, or returns and to handle any audits or
controversies with respect to any applicable Transfer Taxes shall do so, and
the other party shall cooperate with respect thereto as necessary.
(b) All real property taxes, personal property taxes and
similar ad valorem obligations levied with respect to the Acquired Assets or
the Assets of the Acquired Subsidiary for a taxable period which includes (but
does not end on) the Closing Date (collectively, the "Apportioned
Obligations") shall be apportioned between Seller and Buyer based on the
number of days of such taxable period included in the Pre-Closing Tax Period
and the number of days of such taxable period after the Closing Date (with
respect to any such taxable period, the "Post-Closing Tax Period"). Seller
shall be liable for the proportionate amount of such taxes that is
attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of such taxes that is attributable to the Post-Closing
Tax Period. Upon receipt of any bill for real or personal property taxes
relating to the Acquired Assets or the Assets of the Acquired Subsidiary, each
of Seller and Buyer shall present a statement to the other setting forth the
amount of reimbursement to which each is entitled under this Section 7.02(b)
together with such supporting evidence as is reasonably necessary to calculate
the proration amount. The proration amount shall be paid by the party owing
it to the other within 30 days after delivery of such statement. In the event
that either Seller or Buyer shall make any payment for which it is entitled to
reimbursement under this Section 7.02(b), the other party shall make such
reimbursement promptly but in no event later than 10 days after the
presentation of a statement setting forth the amount of reimbursement to which
the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
Section 7.03. Cooperation. Buyer and Seller agree to furnish
or cause to be furnished to each other, upon request, as promptly as
practicable, such information and assistance relating to the Acquired
Subsidiary, Acquired Business and the Acquired Assets (including, without
limitation, access to books and records) as is reasonably necessary for the
filing of all Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. Buyer and
Seller shall retain all books and records with respect to Taxes pertaining to
the Acquired Assets for a period of at least six years following the Closing
Date. At the end of such period, each party shall provide the other with at
least thirty days prior written notice before destroying any such books and
records, during which period the party receiving such notice can elect to take
possession, at its own expense, of such books and records. Seller and Buyer
shall cooperate with each other in the conduct of any audit or other
proceeding relating to Taxes involving the Acquired Assets or the Acquired
Business.
Section 7.04. Allowable Taxes. (a) Payments. If Seller has
paid any Allowable Tax which is attributable to a Pre-Closing Tax Period, or
if pursuant to Section 10.02(a) Seller reimburses the Acquired Subsidiary for
any Allowable Tax, Buyer agrees to repay promptly to Seller any portion of
such Allowable Tax that Buyer, any of its Affiliates, or the Acquired
Subsidiary is ultimately able to recover from the United States government.
(b) Refunds. (i) If Buyer, any of its Affiliates or the Acquired
Subsidiary receives a refund with respect to an Allowable Tax that is
attributable to a Pre-Closing Tax Period, Buyer shall pay to Seller the amount
of such refund reduced by the amount, if any, that Buyer will be required to
pay to the United States government or suffer by reason of offset in accordance
with the Federal Acquisition Regulation, 48 C.F.R. Chapter 1, and associated
regulations and agreements between Seller and any U.S. governmental entity.
(ii) If Seller receives a refund after the Closing Date with
respect to an Allowable Tax that is attributable to a Pre-Closing Tax Period,
Seller will pay to Buyer the amount, if any, which Buyer will be required to
pay to the U.S. government, or suffers by reason of an offset, in accordance
with the regulations described in Section 7.04(b)(i) hereof.
(c) Seller and Buyer agree to cooperate with respect to the
calculation of any amounts payable pursuant to this Section 7.04 and to give
each other written notice of events reasonably likely to result in the
increase or decrease in the amount of any Allowable Tax attributable to a
Pre-Closing Tax Period.
Section 7.05. Long-Term Contracts.
(a) In the case of any acquired Contract that is a long-term
contract within the meaning of Code Section 460 (hereinafter a "Long- Term
Contract") the Buyer and the Seller shall for all federal and state Income Tax
purposes (including without limitation the application of the lookback method
described in Code Section 460(b)(2)) take into account all amounts treated as
paid by the customer pursuant to Section 7.05(c)(i) and all contract costs
incurred attributable thereto on the basis of a constructive completion of
such Long-Term Contract on the Closing Date.
(b) The Seller shall be responsible for reporting all taxable
income properly accruing under each Long-Term Contract through the Closing
Date and paying all Taxes (including, when due, any lookback interest when
payable) payable with respect to that period (taking into account all amounts
paid by the customer as defined in Section 7.05(c)(i) and all contract costs
incurred through the Closing Date) while the Buyer shall be responsible for
reporting all taxable income properly accruing under each Long-Term Contract
after the Closing Date and paying all Taxes (including lookback interest)
payable with respect to that period (taking into account all amounts paid by
the customer (other than collection of unpaid accounts receivable and other
amounts assigned to the Buyer hereunder), and all contract costs incurred
after the Closing Date). Any lookback interest refunds for periods through the
Closing Date shall accrue to the Seller, while any lookback interest refunds
for periods after the Closing Date shall accrue to the Buyer.
(c) For purposes of this Section 7.05:
(i) there shall be treated as amounts paid by the customer
to the Seller prior to the Closing Date and attributable to a Long-Term
Contract (A) all amounts received with respect thereto on or prior to the
Closing Date, other than cost underruns, and (B) any then unpaid accounts
receivable, unbilled work in progress at its fair market value (after taking
into account any net progress payments) as determined under Section 2.08, and
claims, disputes and retentions, without regard to whether any interest in
such items is assigned or sold to the Buyer hereunder or whether any such
items that are uncollected as of the Closing Date are ultimately collected;
and
(ii) there shall be treated as contract costs incurred prior
to the Closing Date attributable to a Long-Term Contract all costs properly
accrued as of the Closing Date.
(d) Seller and the Buyer agree to provide the other party any
assistance reasonably necessary or appropriate to carry out the computations
required by, and to file Tax Returns (including refund claims) necessary or
appropriate to give effect to, this Section 7.05
Section 7.06. Refunds. Except as provided in Section 7.04,
Seller shall be entitled to any credits or refunds of Taxes of the Acquired
Subsidiary with respect to any Pre-Closing Tax Period, including interest
thereon, and Buyer shall pay or cause prompt payment to be made to Seller of
any credits or refunds of such Taxes and interest thereon received by Buyer or
any of its Affiliates, reduced by any Income Taxes payable on account of
interest on such credits or refunds.
ARTICLE 8
Employee Benefits
Section 8.01. Employees; Allocation of Liabilities. Buyer
or one of its Subsidiaries shall offer employment at the Closing Date to all
Transferred Employees on the terms described in Section 8.10; provided,
however, that nothing contained herein is intended to confer upon any
Transferred Employee any right to continued employment after the Closing Date.
Seller hereby consents to Buyer or one of its Subsidiaries making such offers.
Except as expressly stated to the contrary in this Agreement, all Liabilities
with respect to employee benefit plans, arrangements or policies maintained by
Seller or its Subsidiaries shall be Retained Liabilities.
Section 8.02. Defined Benefit Retirement Plans.
(a) Effective as of the Closing Date, Seller shall take all
necessary actions to cause the Seller DB Plan to be amended (i) to freeze,
effective immediately prior to the Closing Date, future benefit accruals with
respect to Transferred Employees and Bridge Employees, and (ii) to provide for
the direct trust-to-trust transfer of assets and the assumption of liabilities
as contemplated herein.
(b) Prior to the Closing Date, Buyer or one of its Subsidiaries
shall establish or designate a defined benefit pension plan which shall be
qualified under Section 401(a) of the Code (the "Buyer DB Plan") effective as
of the Closing Date covering Transferred Individuals. As soon as practicable
following the establishment of the Buyer DB Plan, Seller and Buyer shall file
with the IRS proper notice on IRS Form 5310 regarding the transfer of assets
and liabilities from the Seller DB Plan to the Buyer DB Plan.
(c) As soon as practicable after the Closing Date, following
receipt by Buyer and Seller of favorable determination letters or Buyer's
certification to Seller, and Seller's certification to Buyer, in a manner
reasonably acceptable to both Seller and Buyer, that the Buyer DB Plan and
Seller DB Plan are qualified under the applicable provisions of the Code, the
assets and liabilities associated with all Transferred Individuals shall be
transferred from the Seller DB Plan to the Buyer DB Plan. The amount of assets
accumulated to provide pension benefits in the Seller DB Plan that will be
transferred shall be the amount which would be allocated to Transferred
Individuals if the Seller DB Plan were terminated as of the Closing Date and
assets were allocated to participants in accordance with Section 4044 of ERISA
(i) using the methodology of the PBGC for plan terminations, (ii) using the
interest rate and mortality tables used by the PBGC and effective at the
Closing Date for valuing annuities, (iii) assuming participants not in pay
status will retire and elect a lump sum under the Plan commencing at expected
retirement age, as determined in accordance with Appendix D of PBGC Regulation
2619, (iv) using for purposes of determining the lump sum value the interest
rate and mortality table specified in the Seller DB Plan for valuing lump sums
and effective for lump sums made as of the Closing Date, and (v) without
regard to any assets or liabilities associated with any account under the
Seller DB Plan maintained pursuant to Section 401(h) of the Code. In no event
will the assets that remain in the Seller DB Plan to provide pension benefits
be less than the total liabilities computed pursuant to the above methodology
for all participants in the Seller DB Plan other than the Transferred
Individuals. In addition, all assets associated with an account under the
Seller DB Plan maintained under Section 401(h) of the Code will be transferred
to a similar account or accounts under the Buyer DB Plan. The assets to be
transferred shall be credited with earnings on the balance outstanding from
time to time from the Closing Date to the actual date of transfer, at the rate
of earnings on assets of the Seller DB Plan during the period from the Closing
Date to the last day of the month ending prior to the actual date of transfer,
and shall be reduced by any necessary benefit payments made in respect of
Transferred Individuals prior to the actual date of transfer. Notwithstanding
the above, the transfer of assets and liabilities from the Seller DB Plan to
the Buyer DB Plan shall satisfy the requirements of Code Section 414(l).
Buyer and Seller shall each use reasonable efforts to effect the asset and
liability transfers contemplated in this Section 8.02 as soon as practicable
after the Closing Date.
(d) If the Internal Revenue Service determines that the transfer
described in Section 8.02(c) of assets associated with any account maintained
under Section 401(h) of the Code would result in the disqualification of
either the Seller DB Plan or the Buyer DB Plan or the imposition of excise tax
liability on Seller or Buyer, or if the PBGC notifies Seller or Buyer of its
objection to such transfer, such assets shall not be transferred. Instead,
notwithstanding Section 8.04, Seller will retain liability for retiree welfare
benefits which otherwise would have become Buyer's liability hereunder with an
actuarial net present value equal to the (i) the value of such assets,
determined as of the Closing Date plus (ii) imputed earnings on such value for
the period from the Closing Date to the actual date of transfer of the pension
assets pursuant to Section 8.02(c), computed in the same manner as the
earnings credited on the assets transferred from the Seller DB Plan to the
Buyer DB Plan pursuant to the fifth sentence of Section 8.02(c).
(e) Following the transfers of assets and liabilities as provided
in Section 8.02(c) above, the liabilities transferred to or assumed by the
Buyer DB Plan under this Section 8.02 shall be Assumed Liabilities. All other
Liabilities relating to or arising out of the Seller DB Plan shall be Retained
Liabilities.
Section 8.03. Defined Contribution Plans.
(a) Effective as of the Closing Date, Seller shall amend the
Seller DC Plan (i) to cause the active participation of the Transferred
Employees and Bridge Employees therein to cease as of the Closing Date, and
(ii) to permit Transferred Employees and Bridge Employees to elect to take
distributions (subject to applicable law) of their accounts thereunder
(including to the extent practicable, in Buyer's reasonable judgment, any plan
loans) and, if such Employees so elect, to roll them over, directly or
otherwise, in accordance with applicable law and regulations, to an individual
retirement account or to one or more defined contribution retirement plans
qualified under Section 401(a) of the Code (the "Buyer DC Plans") and
maintained by Buyer or one of its Subsidiaries, and the Buyer DC Plans shall
accept such rollovers.
Section 8.04. Retiree Health and Other Retiree Benefit Plans.
(a) Prior to the Closing Date, Buyer or one of its Subsidiaries
shall establish or designate a retiree welfare benefit plan or plans (the
"Buyer Retiree Plan") effective as of the Closing Date covering Transferred
Individuals. The Buyer Retiree Plan shall contain provisions under which
Transferred Individuals are provided with retiree health and other retiree
welfare benefits as determined by Buyer, consistent with this Section 8.04 and
Section 8.10.
(b) After the Closing Date, Buyer or, where appropriate, the Buyer
Retiree Plan, shall assume liability for all retiree health benefits and other
retiree welfare benefits of Transferred Individuals and their beneficiaries
under the retiree welfare benefit plans maintained by Seller (except that
Seller shall retain liability for any benefits relating to claims incurred
prior to the Closing Date). Buyer shall credit the dollar amount of all
expenses incurred by Transferred Individuals and their respective eligible
dependents during the applicable plan year in which occurs the Closing Date
for purposes of satisfying such plan year's deductible and co-payment
limitations and shall credit service with Seller earned prior to the Closing
Date under the Buyer Retiree Plan. All liabilities assumed by Buyer or the
Buyer Retiree Plan under this Section 8.04 shall be Assumed Liabilities.
(c) All insurance policies, contracts, arrangements and agreements
relating to medical, dental and other services entered into by Seller and
existing for the benefit of Seller or employees under or pursuant to retiree
health or other retiree welfare benefit plans and all rights of Seller
thereunder shall be Retained Assets and not Acquired Assets. To the extent
such insurance policies, contracts, arrangements and agreements can be split
between Buyer and Seller, or to the extent Buyer can enter into similar
agreements without additional expense or administration responsibilities for
Seller, then, at Buyer's election, Buyer and Seller shall cooperate in
arranging such agreements for Buyer.
Section 8.05. Stock Options and Restricted Stock Units.
(a) Prior to the Closing Date, Seller shall, if appropriate, amend
the Seller Stock Plans, make adjustments and take actions (and Buyer shall
take such actions as are reasonably required to implement the same) with
respect to Seller Options which are outstanding immediately prior to the
Closing Date and which are held by Transferred Employees or Bridge Employees
and are not vested as of the Closing Date to provide that, pursuant to the
equitable adjustment provisions of the applicable Seller Stock Plan, effective
as of the Closing Date such Seller Options will, at the election of such
Employees, be converted into and represent (pursuant to a methodology
consistent with Section 424 of the Code, with respect to the values of Seller
Common Stock and Buyer Common Stock which is reasonably agreed to by Buyer)
the right to acquire shares of Buyer Common Stock with such other amendments
and adjustments proposed by Buyer as are reasonable and appropriate, which may
include modifying or amending any performance-based vesting acceleration
provisions. Any Liabilities with respect to such converted Seller Options
shall be Assumed Liabilities.
(b) All Assets and Liabilities associated with any Seller
Restricted Stock Units which are held by Transferred Employees or Bridge
Employees will be Retained Assets and Retained Liabilities respectively.
Section 8.06. Other Welfare Benefits.
(a) Effective as of the Closing Date, Buyer shall establish or
maintain "employee welfare benefit plans," as defined in Section 3(1) of
ERISA, and other employee welfare benefit or fringe benefit arrangements as
Buyer shall determine, consistent with Section 8.10, for the benefit of
Transferred Employees and Bridge Employees. Buyer shall credit the dollar
amount of all expenses incurred by Transferred Employees and Bridge Employees
and their respective eligible dependents during the applicable plan year in
which occurs the Closing Date for purposes of satisfying such plan year's
deductible and co-payment limitations and shall credit service with Seller
earned prior to the Closing Date under the relevant welfare benefit plans of
Buyer. Buyer shall credit each Transferred Employee with the unused time bank
days accrued in accordance with the time bank policy of Seller applicable to
such employees in effect as of the Closing Date.
(b) Seller shall be liable for payments to Transferred Employees
and Bridge Employees (and, if applicable, their dependents) arising from claims
incurred under Seller's employee welfare benefit plans and other employee
welfare benefit or fringe benefit arrangements prior to the Closing Date.
Buyer shall recognize service with Seller as service for those health and
welfare arrangements of Buyer which are based in whole or in part on length of
service. With respect to any Transferred Employee or Bridge Employee, as the
case may be, who is subject to pre-existing limitation provisions under
Seller's medical or dental benefit plans as of the Closing Date, pre-existing
limitation provisions under the Buyer medical or dental plans shall lapse on
the date such limitations would have lapsed under the applicable plans of
Seller, had the Transferred Employee or Bridge Employee, as the case may be,
remained in the employ of Seller.
(c) Effective as of the Closing Date, Buyer or one of its
Subsidiaries shall establish or designate "flexible spending arrangements,"
within the meaning of Proposed Treasury Regulation Section 1.125-2, Q/A-7(c),
(the "Buyer FSAs") covering Transferred Employees and Bridge Employees on
substantially the same terms as such Transferred Employees and Bridge
Employees were covered under flexible spending arrangements maintained by
Seller (the "Seller FSAs") prior to the Closing Date. All Liabilities with
respect to Transferred Employees and Bridge Employees under the Seller FSAs
shall be Assumed Liabilities, and all other Liabilities under the Seller FSAs
shall be Retained Liabilities. Until the end of the calendar year in which
occurs the Closing Date, Buyer shall effectuate all payroll deductions with
respect to Transferred Employees and Bridge Employees under the Buyer FSAs in
accordance with such Employees' elections as in effect at the Closing Date (or
in accordance with any valid amendment to such elections after the Closing
Date).
(d) Prior to the Closing Date, Buyer or one of its Subsidiaries
shall establish or designate a trust that qualifies as a voluntary employee
beneficiary association under Section 501(c)(9) of the Code (the "Buyer VEBA")
covering Transferred Individuals. As soon as practicable after the Closing
Date, Seller shall cause the trustee of Seller VEBA to transfer to the trustee
of the Buyer VEBA assets, in kind, representing (i) the balance (as of the
date of transfer) of the account or accounts maintained by the Seller VEBA in
respect of retiree welfare benefits, (ii) amounts associated with any
Liabilities with respect to Transferred Employees or Bridge Employees under
the Seller FSAs, (iii) any compensation deferrals made by Transferred
Employees or Bridge Employees under the Seller FSAs prior to the Closing Date
and not included in clause (ii), and (iv) any amounts attributable to
insurance premiums paid or deferred by Transferred Individuals or Seller or
the Seller VEBA relating to Transferred Individuals prior to the Closing Date
and relating to periods after the Closing Date; provided, that all insurance
policies, contracts and agreements and all contracts, arrangements and
agreements with providers of medical, dental and other services entered into
by the Seller VEBA and existing for the benefit of Seller or employees under or
pursuant to the Seller VEBA and all rights of the Seller VEBA or the trustee
thereof thereunder shall be retained by the Seller VEBA and shall not be
transferred to the Buyer VEBA.
(e) All insurance policies, Contracts, arrangements and agreements
relating to medical, dental and other services entered into by Seller and
existing for the benefit of Seller or employees under or pursuant to the plans
and arrangements described in this Section 8.06 and all rights of Seller
thereunder shall be Retained Assets and not Acquired Assets. To the extent
such insurance policies, Contracts, arrangements and agreements can be split
between Buyer and Seller, or to the extent Buyer can enter into similar
agreements without additional expense or administration responsibilities for
Seller, then, if Buyer so requests, Buyer and Seller shall cooperate in
arranging such agreements for Buyer.
Section 8.07. Employment Agreements. Seller's obligations
under any employment, severance or similar agreement between Seller and any
Transferred Individual which is disclosed on the Seller Disclosure Schedule
shall be Assumed Liabilities, except as otherwise provided in such Schedule,
and Seller's rights under any such agreement shall be Acquired Assets. Buyer
or one of its Subsidiaries will assume each such agreement.
Section 8.08. Cooperation. Without limiting the generality of
Article 6 hereof, Seller and Buyer agree to furnish each other promptly with
such information concerning employees and employee benefit plans, arrangements
or policies as is necessary and appropriate to effect the transactions
contemplated by this Article 8.
Section 8.09. Amendment, Modification or Termination of Benefit
Plans. Except as provided in Section 8.10, from and after the Closing Date,
(i) Seller expressly reserves the right, in accordance with applicable law, to
amend, modify or terminate any benefit plan it sponsors or maintains for its
employees and former employees and (ii) Buyer expressly reserves the right, in
accordance with applicable law, to amend, modify or terminate any benefit plan
it sponsors or maintains for Transferred Individuals.
Section 8.10. Compensation and Benefits. (a) Buyer or one of
its Subsidiaries shall offer employment at or as soon after the Closing Date
as practicable to all Transferred Employees, on terms determined by Buyer.
Following the Closing Date and through December 31, 1998 (the "Compensation
Maintenance Period"), Buyer shall provide the Transferred Employees and Bridge
Employees with compensation and employee benefits reasonably comparable in the
aggregate to those provided by Seller to such Transferred Employees and Bridge
Employees immediately prior to the Closing Date, valuing any stock-based
compensation, for this purpose, under any reasonable method; provided, that
nothing herein shall be construed to require Buyer to provide Transferred
Employees with any stock-based compensation, provided the requirements of this
sentence are otherwise met. Without limiting the preceding sentence, during
the Compensation Maintenance Period Buyer shall maintain severance,
reduction-in-force and pay-in-lieu-of-notice benefits for the Transferred
Employees no less favorable than the severance, reduction-in force and
pay-in-lieu-of-notice benefits provided to such Transferred Employees by
Seller immediately prior to the Closing Date and disclosed on the Seller
Disclosure Schedule. Buyer shall recognize service with Seller, Tiburon,
Inc., and PhotoTelesis Corporation as service for all purposes except benefit
accrual under any pension plan maintained by Buyer. The provisions of this
Section 8.10 shall not create any rights in any employee or former employee of
the Acquired Subsidiary or of any part of the Acquired Business or any other
person who is not a party to this Agreement, and no such person shall have any
rights as a third party beneficiary hereof
(b) Buyer shall provide each Transferred Employee and Bridge
Employee with an accrued benefit under its defined benefit pension plans that
is no less generous than the total such benefit such Transferred Employee or
Bridge Employee, as the case may be, would have accrued, under those of
Buyer's defined benefit pension plans under which such Transferred Employee or
Bridge Employee, as the case may be, is otherwise entitled to a retirement
benefit, assuming that all such Transferred Employee's or Bridge Employee's,
as the case may be, years of service with Seller were treated as service with
Buyer for purposes of benefit accrual.
(c) Without limiting Sections 8.10(a) and 8.10(b), Buyer shall,
until the expiration of the relevant bridge agreements (as defined in the
definition of "Bridge Employees") preserve without reduction under the Buyer
DB Plan the early retirement benefits (including all payment options) to which
Bridge Employees may earn entitlement under the Seller DB Plan (as the Seller
DB Plan is in effect on the date hereof).
(d) All Assets and Liabilities of Seller associated with any
TEXINS Association substantially all the participants in which are Transferred
Employees or Former Defense Employees at any location or plant primarily
related to the Defense Business shall be Acquired Assets and Assumed
Liabilities, respectively. Without limiting Section 8.10(a), Seller will take
all reasonable steps to permit the continued participation of Transferred
Employees and Bridge Employees in the Dallas, Spring Creek, Austin and Sherman
Associations during the Compensation Maintenance Period, provided that Buyer
fulfills its obligations under the next sentence. Buyer shall during the
Compensation Maintenance Period subsidize the continued participation of such
Transferred Employees and Bridge Employees at the same per employee amount of
subsidy as in effect at the date hereof, to the extent that Seller meets its
obligations under the preceding sentence. Nothing herein shall prevent Seller
from discontinuing any TEXINS Association at any location at any time, in
which case participation of the Transferred Employees and Bridge Employees
described in this paragraph shall cease.
(e)All Liabilities assumed by Buyer under this Section 8.10
shall be Assumed Liabilities.
Section 8.11. Deferred Compensation. As soon as practicable
after the date hereof Seller will offer any Transferred Employee or Bridge
Employee who has previously elected to defer compensation payable by Seller
the right to elect to continue to defer receipt of such compensation after the
Closing Date. All Liabilities of Seller with respect to deferred compensation
as to which any such election is made, or which is owed in respect of Former
Defense Employees, shall, to the extent reflected on the Acquired Business
Interim Financial Statements or accrued in the ordinary course after the date
of such Statements, be Assumed Liabilities and not Retained Liabilities.
Buyer shall not modify or alter the payment options applicable to any such
deferred compensation without the written consent of the affected Transferred
Individual or, where applicable, his or her beneficiary. All accrued
nonqualified defined benefit pension obligations with respect to Transferred
Individuals shall, to the extent reflected on the Acquired Business Interim
Financial Statements or accrued in the ordinary course after the date of such
Statements, be Assumed Liabilities. Buyer and Seller will cooperate as
necessary to effectuate this Section 8.11.
Section 8.12. Forms W-2. Buyer and Seller agree to cooperate
and to take all actions reasonably necessary to permit reliance by Seller,
with respect to Transferred Individuals, on the "alternate procedure" provided
under Internal Revenue Service Revenue Procedure 96-60, and to relieve Seller
from the requirement of furnishing Forms W-2 to any such Transferred
Individuals for the calendar year within which occurs the Closing Date.
Without limiting the foregoing, Seller agrees timely to provide Buyer with all
information necessary for Buyer to include on the Forms W-2 it furnishes to
Transferred Individuals for such calendar year the wages paid and taxes
withheld by Seller with respect to such Individuals during such calendar year.
Section 8.13. Foreign Plans. Buyer and Seller agree to
cooperate and to take all actions reasonably necessary to effectuate the
transfer, where agreed or required by law, from Seller or one of its
Subsidiaries to Buyer or one of its Subsidiaries (or from a plan or trust
maintained by Seller or one of its Subsidiaries to a plan or trust maintained
by Buyer or one of its Subsidiaries) of Assets and/or Liabilities attributable
to Transferred Individuals under any Employee Plan maintained primarily for
the benefit of employees stationed outside the United States. Any Assets and
Liabilities transferred pursuant to the preceding sentence shall be Acquired
Assets and Assumed Liabilities, respectively. Buyer or one of its
Subsidiaries will offer continued employment to Transferred Employees whose
principal place of employment is outside the United States on terms sufficient
to avoid incurrence by Seller of any severance or similar liability under any
statute, ordinance or regulation (where such avoidance is legally possible and
not unduly burdensome, for which purpose the terms of employment applicable to
such Employees as of the Closing Date will not be considered unduly
burdensome). Buyer and Seller further agree to cooperate and to take all
other actions reasonably necessary to avoid incurrence by Seller of any
severance or similar liability under any statute, ordinance or regulation with
respect to any Transferred Employee or Bridge Employee whose principal place of
employment is outside the United States. The first sentence of each of
Section 8.01 and Section 8.10(a) shall not apply to Transferred Employees or
Bridge Employees whose principal place of employment is outside the United
States. It is agreed and understood that the remainder of Section 8.10(a)
will apply, substituting references to such Transferred Employees' or Bridge
Employees' employer for references to Seller. Sections 8.04, 8.06 and 8.11
shall not apply to Foreign Plans. Buyer and Seller agree that it is their
mutual intent that Transferred Individuals whose place of employment is
outside the United States (other than any such Transferred Individuals
covered by Employee Plans) and Foreign Plans be treated in a manner
consistent with other Transferred Individuals and Employee Plans. However,
adjustments may be appropriate or required in order to reflect foreign law,
applicable tax law and funding vehicles. If, in connection with Foreign
Plans or Transferred Individuals whose principal place of employment is
outside the United States (other than any such Transferred Individuals
covered by Employee Plans), (i) Assets or Liabilities would be transferred
from Seller or one of its employee benefit plans to Buyer or one of its
employee benefit plans pursuant to the statement of intent in the second
preceding sentence, and (ii) Buyer and Seller have not agreed in writing
prior to the Closing Date to treat such Assets or Liabilities as Acquired
Assets or Assumed Liabilities, as the case may be, then such Assets or
Liabilities shall be Retained Assets or Retained Liabilities, as the case
may be, and the parties will negotiate in good faith an appropriate
adjustment in the Purchase Price (to the extent such adjustment is not
otherwise accomplished under Section 2.07(a)-(c)).
Section 8.14. Acquired Subsidiary. Notwithstanding any other
provision of this Article 8, all Assets and Liabilities associated with any
Employee Plan maintained solely for employees or former employees (or the
beneficiaries or dependents thereof) of the Acquired Subsidiary shall be
Acquired Assets and Assumed Liabilities, respectively. Sections 8.02 and
8.04(a) and (b) shall apply with respect to any employee of the Acquired
Subsidiary who is a Transferred Individual to the extent any such employee is
entitled to any benefits described therein. Section 8.05 and the second,
third and fourth sentences of Section 8.10(a) shall apply to employees of the
Acquired Subsidiary as if such employees were Transferred Employees,
substituting references in such sentences of Section 8.10 to the Acquired
Subsidiary for references to Seller. No other provision of this Article 8
shall apply to the Acquired Subsidiary, or to any insurance policies,
contracts, arrangements or agreements maintained solely for employees or former
employees (or the beneficiaries or dependents thereof) of the Acquired
Subsidiary.
Section 8.15. Labor Relations. Buyer and Seller acknowledge
that, following completion of the transaction contemplated by this Agreement,
employees of Buyer or its Subsidiaries will be working in close proximity to
employees of Seller or its Subsidiaries in several locations. Buyer and
Seller understand and agree that the employees of Buyer or its Subsidiaries
and the employees of Seller or its Subsidiaries will not be integrated or
commingled, but shall be kept separate for purposes of workplace policies and
practices, employee communications and all other labor and human resource
matters. Buyer and Seller agree to take and cause their respective
Subsidiaries to take all steps reasonably necessary or appropriate to comply
with the requests of the other party to accomplish and maintain the complete
separation, to the extent commercially practicable, of the workforces of Buyer
or its Subsidiaries and Seller or its Subsidiaries. Buyer and Seller agree
that, in the event any of the employees of Buyer or its Subsidiaries or Seller
or its Subsidiaries or any labor union or organization representing or seeking
to represent such employees, engages or threatens to engage in any strikes,
work slowdowns, work stoppages or other interferences with the work, or any
picketing, demonstration, distribution, solicitation or organizing activities
of any nature at any locations where Buyer or its Subsidiaries and Seller or
its Subsidiaries share common facilities or are located in close proximity
with each other, Buyer or its Subsidiaries or Seller or its Subsidiaries, as
the case may be, shall take any and all actions reasonably requested by the
other party to separate, to the extent commercially practicable, the employees
or individuals engaging in such activities, or the employees or individuals to
which such activities are directed by any labor union or organization, from
access to the employees of the other party and its Subsidiaries and to
facilities shared with or occupied by employees of the other party and its
Subsidiaries. Such actions shall, without limitation, include designating
or constructing entrances and exits, parking facilities and other
facilities which are separate and apart from facilities used by the
employees of the other party and its Subsidiaries and preventing the use by
employees of such party or its Subsidiaries of facilities used by employees
of the other party and its Subsidiaries.
ARTICLE 9
Conditions to the Closing
Section 9.01. Conditions to the Obligations of Buyer
and Seller. The obligations of each of Seller and Buyer to consummate the
sale of the Acquired Assets and the assumption of the Assumed Liabilities are
subject to the satisfaction of the following conditions:
(a) any applicable waiting period under the HSR Act relating to
the sale of the Acquired Assets shall have expired or been terminated and no
action shall have been instituted by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of such
sale, or the other transactions contemplated by the Transaction Agreements,
other than an action which shall have been withdrawn or terminated;
(b) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
transactions contemplated by the Transaction Agreements;
(c) the Ancillary Agreements, in form and substance reasonably
satisfactory to Seller and Buyer, shall have been executed and delivered by
the parties thereto and shall be in full force and effect; and
(d) each of Seller and Buyer shall have received reasonably
satisfactory assurance that the actions to be taken pursuant to Section 6.03
shall have been taken.
Section 9.02. Conditions to the Obligations of Seller. The
obligation of Seller to consummate the sale of the Acquired Assets is subject
to the satisfaction of each of the following further conditions:
(a) Buyer shall have performed in all material respects all
obligations required to be performed by it under the Transaction Agreements at
or prior to the Closing Date, and Seller shall have received a certificate
signed by an executive officer of Buyer to the foregoing effect;
(b) the representations and warranties of Buyer contained in this
Agreement and in any certificate or other writing delivered by Buyer pursuant
hereto qualified as to materiality shall be true and those not so qualified
shall be true in all material respects at and as of the Closing Date as if
made at and as of such time and Seller shall have received a certificate
signed by an executive officer of Buyer to the foregoing effect;
(c) all consents, approvals, orders, authorizations,
registrations, declarations, and filings required to be obtained or made prior
to the Closing Date (other than those referred to in Section 9.01(a)) shall
have been made or obtained, except where the failure to make or obtain the
same would not, individually or in the aggregate, (i) have a Material Adverse
Effect on the Acquired Assets, or (ii) be reasonably be expected to subject
Seller or any of its Subsidiaries, or any of their Affiliates or any directors
or officers of any of the foregoing, to the risk of criminal liability;
(d) Buyer shall have delivered to Seller $75,000,000 in
immediately available funds as provided in Section 2.4 of the IP Agreement;
and
(e) Seller shall have received all customary closing documents it
may reasonably request relating to the existence of Buyer and the authority of
Buyer for this Agreement and the transactions contemplated hereby, all in form
and substance reasonably satisfactory to Seller.
Section 9.03. Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate the sale of the Acquired Assets and the
assumption of the Assumed Liabilities are subject to the satisfaction of the
following further conditions:
(a) Seller shall have performed in all material respects all
obligations required to be performed by it under the Transaction Agreements at
or prior to the Closing Date, and Buyer shall have received a certificate
signed by an executive officer of Seller to the foregoing effect;
(b) the representations and warranties of Seller contained in this
Agreement and in any certificate or other writing delivered by Seller pursuant
hereto qualified as to materiality shall be true and those not so qualified
shall be true in all material respects at and as of the Closing Date, as if
made at and as of such time and Buyer shall have received a certificate signed
by an executive officer of Seller to the foregoing effect;
(c) all consents, approvals, orders, authorizations,
registrations, declarations and filings required to be made or obtained prior
to the Closing Date (other than those referred to in Section 9.01(a)) shall
have been made or obtained, except where the failure to make or obtain the
same would not, individually or in the aggregate, (i) have a Material Adverse
Effect on the Acquired Business, or (ii) be reasonably be expected to subject
Buyer or any of its Subsidiaries, the Acquired Subsidiary or any of their
respective Affiliates or any directors or officers of any of the foregoing, to
the risk of criminal liability or (iii) prohibit Buyer from operating or
owning the Acquired Business following the Closing substantially as currently
conducted and as conducted immediately prior to the Closing; and
(d) Buyer shall have received all customary closing documents it
may reasonably request relating to the existence of Seller and the authority
of Seller for this Agreement and the transactions contemplated hereby, all in
form and substance reasonably satisfactory to Buyer.
ARTICLE 10
Survival; Indemnification
Section 10.01. Survival. The representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall survive the Closing for a period of one year after the Closing
Date; provided, however, that (i) the representations and warranties set forth
in Section 3.13 shall survive the Closing for a period of two years after the
Closing Date and (ii) the representations and warranties in Sections 3.11 and
3.12(b)(iv), (v) and (vi) shall survive until the expiration of the statute of
limitations applicable to the matters covered thereby, giving effect to any
mitigation, waiver or extension thereof. Notwithstanding the preceding
sentence, any representation or warranty in respect of which indemnity may be
sought under this Agreement shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if notice of the inaccuracy or
breach thereof giving rise to such right of indemnity shall have been given to
the party against whom such indemnity may be sought prior to such time.
Section 10.02. Indemnification. (a) Seller hereby indemnifies
Buyer and each of its Subsidiaries and their respective officers, directors,
employees and agents, and each of the heirs, executors, successors and assigns
of the foregoing, against and agrees to defend and hold them harmless from any
and all Damages incurred or suffered by any of them arising or due out of (i)
any misrepresentation or breach of warranty made by Seller contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or
in connection herewith (provided that, for purposes of determining Seller's
obligations pursuant to this Section 10.02(a), such representations and
warranties shall be read not to include any qualification or limitation with
respect to materiality, including, without limitation, Material Adverse
Effect) or (ii) breaches of covenants or obligations of Seller contained
herein (including with respect to the adjustment of the Purchase Price
pursuant to Section 2.07 hereof) or any Retained Liability; provided, that (a)
Seller shall not be liable under clause (i) of this Section 10.2(a) unless the
aggregate amount of loss with respect to all matters referred to in clause (i)
of this Section 10.02(a) exceeds $50,000,000 and then only to the extent of
such excess, (b) Seller's maximum liability under clause (i) of this Section
10.02(a) shall not exceed the sum of $37,500,000 plus 50% of the Adjusted
Purchase Price and (c) Seller shall only be liable for 90% of the amount of
such excess (as calculated after giving effect to the provisions of Section
10.02(c) and (d)) with respect to any matter referred to in clause (i) of this
Section 10.02(a).
(b) Buyer hereby indemnifies each of Seller and each of its
Subsidiaries and their respective officers, directors, employees and agents,
and each of the heirs, executors, successors and assigns of the foregoing,
against and agrees to defend and hold it harmless from any and all Damages
incurred or suffered by any of them arising or due out of (i) any
misrepresentation or breach of warranty made by Buyer contained in this
Agreement or in any certificate or other writing delivered pursuant hereto or
in connection herewith (provided that, for purposes of determining Buyer's
obligations pursuant to this Section 10.02(b), such representations and
warranties shall be read not to include any qualification or limitation with
respect to materiality, including, without limitation, Material Adverse
Effect) or (ii) any breaches of covenants or obligations of Buyer contained
herein (including with respect to the adjustment of the Purchase Price
pursuant to Section 2.07 hereof) or any Assumed Liability; provided, that (a)
Buyer shall not be liable under clause (i) of this Section 10.02(b) unless the
aggregate amount of loss with respect to all matters referred to in clause (i)
of this Section 10.02(b) exceeds $50,000,000 and then only to the extent of
such excess, (b) Buyer's maximum liability under clause (i) of this Section
10.02(b) shall not exceed the sum of $37,500,000 plus 50% of the Adjusted
Purchase Price and (c) Buyer shall only be liable for 90% of the amount of
such excess (as calculated after giving effect to the provisions of Section
10.02(c) and (d)) with respect to any matter referred to in clause (i) of this
Section 10.02(b).
(c) The amount of any indemnifiable losses or other liability for
which indemnification is provided under this Agreement shall be net of any
amounts actually recovered by the indemnified party from third parties
(including, without limitation, amounts actually recovered under insurance
policies) with respect to such indemnifiable losses or other liability. Any
indemnifying party hereunder shall be subrogated to the rights of the
indemnified party upon payment in full of the amount of the relevant
indemnifiable loss. An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provision hereof, have any subrogation
rights with respect thereto. If any indemnified party recovers an amount from
a third party in respect of an indemnifiable loss for which indemnification is
provided in this Agreement after the full amount of such indemnifiable loss
has been paid by an indemnifying party or after an indemnifying party has made
a partial payment of such indemnifiable loss and the amount received from the
third party exceeds the remaining unpaid balance of such indemnifiable loss,
then the indemnified party shall promptly remit to the indemnifying party the
excess (if any) of (A) the sum of the amount theretofore paid by the
indemnifying party in respect of such indemnifiable loss plus the amount
received from the third party in respect thereof, less (B) the full amount of
such indemnifiable loss or other liability.
(d) The amount of any indemnifiable losses or other liability for
which indemnification is provided under this Article 10 shall be increased by
any Tax imposed on the receipt of any indemnity payment with respect thereto
and decreased to take account of any credit, deduction, amortization,
exclusion from income or other allowance associated with the Damages giving
rise to the payment received by the Indemnitee ("Tax Benefit"). The amount of
such decrease shall be the present value as of the date of any indemnification
payment under this Article 10 of each Tax Benefit multiplied by (i) the
combined effective Federal and state corporate tax rates in effect at the time
of the indemnity payment or (ii) in the case of a credit, 100 percent. The
present value of any Tax Benefit shall be determined using the Applicable
Interest Rate and assuming the party being indemnified has sufficient Taxable
income or other Tax attributes to permit the utilization of such Tax Benefit
at the earliest possible time. Any payment pursuant to this Article 10 will
be treated as non-Taxable to the indemnified party except to the extent that a
Final Determination causes such payment to be Taxable. In the event any Final
Determination renders any payment made pursuant to this Article Taxable to the
recipient, the indemnifying party shall pay an amount that reflects the Tax
consequences to the indemnified party of receiving such payment.
Section 10.03. Indemnification Procedures. (a) Subject to
Section 7.01(c), upon receipt by any Person who may seek indemnity pursuant to
Section 10.02 (the "indemnified party") of actual notice of a loss, claim,
Damage, liability or action in respect of which indemnity may be sought, such
indemnified party shall promptly notify the Person against whom such indemnity
may be sought (the "indemnifying party") in writing (provided, however, that
the failure to so notify the indemnifying party shall only relieve the
indemnifying party of its obligations hereunder to the extent such failure
actually prejudices such indemnifying party in its defense of the loss, claim,
Damage, liability or action) and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate, in such indemnified
party's reasonable judgment, due to actual or potential differing interests
between them, in which case such fees and expenses shall be paid by the
indemnifying party. It is understood that the indemnifying party shall not,
in respect of the legal expenses of any indemnified party in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all indemnified parties and that all such fees and expenses shall
be reimbursed as they are incurred. Subject to the terms of Section 10.03(c),
the indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(b) Upon receipt of the notice described in the first sentence of
Section 10.03(a), an indemnifying party shall promptly notify the indemnified
party of its election to defend or to seek to settle or compromise, at such
indemnifying party's own expense and by such indemnifying party's own counsel,
any claim, action, inquiry or investigation commenced by any person (a "Third
Party Claim") and of its acknowledgment of its indemnification obligation
hereunder. If the indemnifying party elects to assume responsibility for
defending such Third Party Claim, the indemnifying party shall so notify the
claimant or plaintiff of such election and request that all communications
relating to such Third Party Claim be made, delivered or addressed to the
indemnifying party and the indemnified party. After notice by the
indemnifying party to the indemnified party of its election to assume the
defense of a Third Party Claim, subject to the indemnified party's rights to
separate counsel paid for by the indemnifying party pursuant to Section
10.03(a), so long as such indemnifying party continues such defense in good
faith, the indemnifying party shall have no further obligation to the
indemnified party in respect of legal or other expenses not yet incurred by
the indemnified party in connection with such Third Party Claim and shall
promptly reimburse any such expenses already incurred.
(c) If an indemnifying party does not elect to assume
responsibility for a Third Party Claim (which decision not to assume may only
be made in the case of a good faith dispute that a claim is not properly the
subject of an indemnification obligation pursuant to this Article 10), an
indemnified party may not settle or compromise any claim without prior written
notice to the indemnifying party, which shall have the option within 10 days
following such notice (i) to disapprove the settlement and assume all past and
future responsibility for the claim, including reimbursing the indemnified
party for prior expenditures relating thereto, (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the indemnifying party shall have no further right to
contest the amount or reasonableness of the settlement if the indemnified
party elects to proceed therewith, (iii) to approve the amount of the
settlement, reserving the indemnifying party's right to contest the
indemnified party's indemnity right, or (iv) to approve and agree to pay the
settlement (and all expenditures of the indemnified party relating thereto).
If no response is received by the indemnified party, the indemnifying party
shall be deemed to have elected option (ii).
ARTICLE 11
Termination
Section 11.01. Termination. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing Date:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer at any time after the Termination
Date if the Closing shall not have been consummated on or before such date, so
long as the terminating party is not then in material breach of its
obligations hereunder;
(c) by Seller, provided it is not then in breach of any of its
obligations hereunder, if Buyer fails to perform any covenant in this
Agreement when performance thereof is due or Buyer shall have breached in any
material respect any of the representations or warranties contained in this
Agreement and does not cure the failure or breach within 30 business days
after Seller delivers written notice thereof; or
(d) by Buyer, provided it is not then in breach of any of its
obligations hereunder, if Seller fails to perform any covenant in this
Agreement when performance thereof is due or Seller shall have breached in any
material respect any of the representations and warranties contained therein
and does not cure the failure or breach within 30 business days after Buyer
delivers written notice thereof.
Section 11.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 11.01 hereof, this Agreement
shall, except for the provisions of Sections 3.14 and 4.04 and the
confidentiality provisions of Section 6.01, forthwith become null and void
and have no effect, without any liability on the part of any party or its
directors, officers or stockholders. Nothing in this Section 11.02 shall
relieve any party to this Agreement of liability for breach of this Agreement.
ARTICLE 12
Miscellaneous
Section 12.01. Entire Agreement. This Agreement, together
with the Confidentiality Agreement and the Ancillary Agreements,
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
Section 12.02. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy
or similar writing) and shall be given,
if to Seller, to:
Texas Instruments Incorporated
13500 North Central Expressway
P.O. Box 655474
Dallas, TX 75265
Attention: General Counsel MS241
Telecopy: (972) 995-2632
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: E. Deane Leonard, Esq.
Paul R. Kingsley, Esq.
Telecopy: (212) 450-4800
if to Buyer, to:
Raytheon Company
141 Spring Street
Lexington, Massachusetts 02173
Attention: Christoph L. Hoffmann, Esq.
Telecopy: (617) 860-2822
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy: (212) 403-2000
or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
section and the appropriate telecopy confirmation is received, or (b) if given
by any other means, when delivered at the address specified in this Section.
Section 12.03. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Closing Date if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Seller and Buyer or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 12.04. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of parties hereto and
their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that Buyer
may assign its rights and obligations to any one or more wholly owned
Subsidiary or Subsidiaries of Buyer (but no such assignment shall relieve
Buyer of its obligations hereunder).
Section 12.05. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the State of New York
regardless of the laws that might otherwise govern under principles of
conflicts of laws applicable thereto.
Section 12.06. Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts hereof
signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ William A. Aylesworth
-------------------------
Name: William A. Aylesworth
Title: Senior Vice President
RAYTHEON COMPANY
By: /s/ Christoph L. Hoffmann
--------------------------
Name: Christoph L. Hoffmann
Title: Executive Vice President
News Release Exhibit 99.1
C-97004
Media Contacts:
Robert S. McWade Neil McGlone
Raytheon Company Texas Instruments Incorporated
(617) 860-2846 (972) 995-4961
Joele Frank/Mike Pascale
The Abernathy MacGregor Group
(212) 371-5999
Raytheon Purchases Defense Systems & Electronics Business
of Texas Instruments
Acquisition Substantially Strengthens Raytheon's Leadership in
Defense Electronics
Lexington, Massachusetts/Dallas, Texas, January 6, 1997 --
Raytheon Company (NYSE:RTN) and Texas Instruments Incorporated (NYSE:TXN)
announced today that their boards of directors have approved a definitive
agreement for Raytheon to purchase the assets of Texas Instruments defense
operations for $2.95 billion in cash.
This strategic acquisition will increase Raytheon's total
annualized revenues to approximately $15 billion, and strengthens Raytheon's
leadership in defense electronics while enhancing its position for continued
growth in a consolidating industry. The transaction is expected to be
non-dilutive to Raytheon's earning per share in 1997 and to provide
increasingly positive contributions to earnings per share thereafter. The
transaction is subject to Hart-
Scott-Rodino antitrust review and is expected to close in the second quarter
of this year.
Dennis J. Picard, Raytheon chairman and chief executive officer,
commented, "We have consistently said that we will remain a top-tier player in
the defense industry. We are buying a growing, world-class business that
competes successfully in several key defense electronics markets where
Raytheon is not a significant participant. Our combined operations are highly
complementary, making for a powerful extension of our defense electronics
business. We have long admired the Texas Instruments Defense Systems &
Electronics team, and we welcome them to the Raytheon family."
"The acquisition of Texas Instruments' defense business opens new
defense markets worldwide and brings our annualized defense electronics sales
to $8 billion and our current defense electronics backlog to $9.3 billion,"
Picard said.
"This is a great move for everyone, " said Thomas J. Engibous,
president and chief executive officer of Texas Instruments. "Raytheon gets
tremendous technology and employees who are among the finest in the defense
industry. Employees gain the career opportunities associated with a larger
defense company. And Texas Instruments strengthens its focus on digital
solutions for the networked society."
David W. Welp, who will serve as president of what will become
Raytheon TI Systems, a Raytheon Company subsidiary, will report directly to
Mr. Picard. Welp commented, "We are pleased to be joining the Raytheon
family. The natural synergies between our businesses will enable both of us
to offer customers a far broader array of technologies and products than
either of us could offer alone. The outlook and the possibilities are
exciting, and we're eager to start work together."
Texas Instruments Defense Systems & Electronics Group,
headquartered in Lewisville, Texas, is expected to have 1996 revenues of
approximately $1.8 billion. Texas Instruments is a premier supplier of
advanced defense systems, including precision-guided weapons, anti-radiation
and strike missiles, airborne radar, night vision systems and electronic
warfare systems. The Defense Systems & Electronics Group has approximately
12,000 employees, based largely in Texas.
Texas Instruments Defense Systems & Electronics Group brings to
Raytheon leadership positions in a number of major programs. In
precision-guided munitions, Texas Instruments is a leader in the Paveway
laser-guided weapon program. Texas Instruments' Joint Stand-Off Weapon (JSOW)
is a U.S. Navy/U.S. Air Force system for attacking high-value ground targets.
The Javelin program is an anti-tank system for the U.S. Army. Texas
Instruments is a leader in Long Range Precision Strike programs, such as the
High-Speed Anti-Radiation Missile (HARM). HARM and Paveway constituted 65
percent of air-delivered weapons used by Coalition Forces in Operation Desert
Storm.
Texas Instruments' outstanding credentials in airborne radar are
evident by its strong positions in P-3 and S-3 ocean surveillance, F-22
airborne radars, and the LANTIRN terrain-following radar. Texas Instruments
is also among the world leaders in electro-optics, particularly with its
Forward-Looking InfraRed (FLIR) sensors, deployed on platforms such as the M-1
Tank, Bradley Fighting Vehicle, F-117 "Stealth" fighter and the F-18 Hornet.
Despite the steep decline in the U.S. Defense procurement over recent years,
the armed services continue to prioritize airborne and ground systems that
extend capabilities at night and in adverse weather.
Raytheon Electronics Systems (RES) has long been a leader in
air-to-air and ship-defense missiles, with AMRAAM, Sidewinder, Standard
Missile and Sparrow, as well as missile defense systems, such as Patriot and
Hawk. RES has a major presence in ground-based and shipboard radars, military
communications systems and naval combat control, sonar and minehunting
systems. At the forefront of systems integration for defense customers,
Raytheon E-Systems businesses include reconnaissance and surveillance,
command, control and communications, specialized aircraft modification, and
counter measures.
Additionally, Raytheon Aircraft Company (RAC) provides aircraft
training systems to the military. RAC won the 1995 competition for the
multi-billion dollar, next-generation Joint Primary Aircraft Training System
(JPATS) trainer for the U.S. Air Force and U.S. Navy, Raytheon Engineers &
Constructors (RE&C) through its Raytheon Service Company, is one of the
nation's leading government technical contractors, providing operations and
maintenance services for many U.S. defense systems.
Raytheon competes in a variety of commercial businesses, as well.
RE&C is one of the largest engineering, construction, and operations and
maintenance organizations in the world. Its markets include: fossil-fuel and
nuclear power; petroleum and gas; polymers and chemicals; pharmaceuticals and
biotechnology; metals, mining and light industry; food and consumer products
and pulp and paper, among others. Raytheon Aircraft is the world leader in
general aviation, offering the most extensive product line in the industry.
Raytheon Appliances markets some of the finest brand names in appliances,
including Amana refrigerators, microwave ovens, cooking surfaces and washers
and dryers as well as Speed Queen, Huebsch and UniMac commercial laundry
equipment.
Raytheon Company, headquartered in Lexington, Massachusetts, is a
$12 billion international, high-technology company with approximately 75,000
employees worldwide operating in four businesses: commercial and defense
electronics, engineering and construction, aircraft and major appliances.
***
NOTE TO EDITORS: Texas Instruments Incorporated, headquartered in Dallas,
Texas, is one of the word's foremost high-technology companies, with sales or
manufacturing operations in more than 30 countries. TI products and services
include semiconductors; defense electronics systems; software productivity
tools, mobile computing products and consumer electronics products; electrical
controls; and metallurgical materials.
More information about Raytheon and TI is located on the World Wide Web at
http://www.raytheon.com. and http://www.ti.com