EXHIBIT 1
CONTRIBUTION AND ASSUMPTION AGREEMENT
dated
OCTOBER 31, 1997
between
LOCKHEED XXXXXX CORPORATION
and
LMT SUB INC.
TABLE OF CONTENTS
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Page
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ARTICLE 1
Definitions
Section 1.01. Definitions.............................................2
ARTICLE 2
Transactions at Closing
Section 2.01. Contribution of the Transferred Assets and
Assumption of the Assumed Liabilities...................2
Section 2.02. Contribution of the XX Xxxx Contribution Amount.........2
Section 2.03. Issuance of Company Capital Stock.......................2
Section 2.04. Contribution Closing....................................3
Section 2.05. LM Estimate of Net Worth; Closing Balance
Sheets..................................................3
Section 2.06. Adjustments to XX Xxxx Contribution Amount..............5
Section 2.07. Excluded Liabilities....................................7
Section 2.08. License to Intellectual Property Rights.................7
Section 2.09. Delivery of Transfer Documents..........................8
Section 2.10. Assignment of Contracts and Rights......................8
Section 2.11. Conduct of the Businesses on the Closing Date...........9
ARTICLE 3
Representations and Warranties of LM
Section 3.01. Representations and Warranties of LM...................10
ARTICLE 4
Covenants of the Parties
Section 4.01. Conduct of the Businesses Until the Closing............10
Section 4.02. Confidentiality........................................11
Section 4.03. Retention of Assets....................................11
Section 4.04. Change of Lockbox Accounts.............................12
Section 4.05. Maintenance and Enforcement of Insurance
Policies...............................................12
Section 4.06. Transitional Services Agreement........................14
Section 4.07. Thrust Reverser Business...............................14
Section 4.08. Agreement with Sun.....................................16
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Section 4.09. Loan...................................................16
Section 4.10. Protection of Businesses; Non-Solicitation.............16
Section 4.11. Baltimore Facility Lease...............................18
Section 4.12. Xxxxx and Xxxxxxx Claims...............................18
Section 4.13. Certain LM Arrangements................................19
Section 4.14. Customer Introductions.................................20
Section 4.15. Financial Support Arrangements.........................20
Section 4.16. No Inconsistent Positions..............................22
Section 4.17. Equity Securities......................................22
Section 4.18. Certain Contribution...................................22
ARTICLE 5
Tax Matters
Section 5.01. Tax Matters............................................23
ARTICLE 6
Employment and Employee Benefit Matters
Section 6.01. Employment and Employee Benefit Matters................23
ARTICLE 7
Survival; Indemnification
Section 7.01. Survival...............................................23
Section 7.02. Indemnification........................................24
Section 7.03. Indemnification of Company by LM for Certain
Assumed Liabilities....................................25
Section 7.04. Procedures for Third Party Claims......................26
Section 7.05. Procedures for Direct Claims...........................30
Section 7.06. Indemnification of the Company by LM for Certain
Product Matters........................................30
ARTICLE 8
Miscellaneous
Section 8.01. Miscellaneous..........................................32
Section 8.02. Termination............................................32
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EXHIBITS
Exhibit I -- Definitions
Exhibit II -- Representations and Warranties of LM
Exhibit III -- Tax Matters
Exhibit IV -- Employment and Employee Benefit Matters
ATTACHMENTS
Attachment A -- [Intentionally Omitted]
Attachment B -- Terms for Technical Consulting Agreement
Attachment C -- Terms for Loan(s)
Attachment D -- Terms for Baltimore Facility Lease
Attachment E -- Terms and Conditions of Company Preferred Stock
Attachment F -- Form of Tax Assurance Agreement
Attachment G -- Balance Sheets
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CONTRIBUTION DISCLOSURE SCHEDULE
Section 4.13 -- Certain LM Arrangements
Section I.01 -- LM Knowledge Standard
Section II.03 -- Government Authorization
Section II.04 -- Noncontravention
Section II.05 -- Ownership of the Equity Securities; Access Graphics
Foreign Subsidiaries
Section II.06 -- Consents
Section II.08 -- Absence of Certain Changes
Section II.09 -- Sufficiency of and Title to the Transferred Assets
Section II.10 -- No Undisclosed Material Liabilities
Section II.11 -- Litigation; Contract-Related Matters
Section II.12 -- Material Contracts and Bids; Backlog
Section II.15 -- Environmental Compliance
Section II.16 -- Compliance with Laws
Section II.17 -- Government Contracts
Section II.18 -- Intellectual Property
Section III.02 -- Tax Matters
Section IV.02 -- ERISA Representations
Section IV.03 -- Employees and Offers of Employment
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CONTRIBUTION AND ASSUMPTION AGREEMENT
This Agreement is made this 31st day of October, 1997, between
Lockheed Xxxxxx Corporation, a Maryland corporation and the parent corporation
of the Company ("LM"), and LMT Sub Inc., a Delaware corporation (the
"Company"), with reference to the following background.
A. Simultaneously with the execution of this Agreement, General
Electric Company, a New York corporation ("GE"), GE Investments, Inc., a
Nevada corporation ("GEII"), GE Government Services, Inc., a Delaware
corporation ("GEGS"), Client Business Services, Inc., a Delaware corporation
("CBSI", and together with GE, GEII and GEGS, the "GE Entities"), LM and the
Company are entering into an Exchange Agreement dated October 31, 1997 (the
"Exchange Agreement") pursuant to which LM desires to exchange with the GE
Entities, and the GE Entities desire to exchange with LM, all of the
outstanding capital stock of the Company for all of the preferred stock (or
common stock or a combination thereof) of LM owned by the GE Entities (the
"Exchange").
B. LM, among other things, directly and through the Transferor
Subsidiaries, conducts the Thrust Reverser Business and the Access Graphics
Business (each, a "Business" and together, the "Businesses").
C. Under the Exchange Agreement, it is a condition precedent to
the obligations of the GE Entities to consummate the Exchange that LM
contribute all of the assets used or held for use primarily in the conduct of
the Businesses (other than the Excluded Assets), the Equity Securities and an
amount in cash to the Company, and the Company assume certain liabilities
associated with the Businesses.
D. Upon the terms and subject to the conditions of this
Agreement, LM desires to, or desires to cause the Transferor Subsidiaries
to, contribute all of the assets used or held for use primarily in the
conduct of the Businesses (other than the Excluded Assets), the Equity
Securities and an amount in cash to the Company, and the Company desires to
assume certain liabilities associated with the Businesses.
E. LM and the Company are entering into this Agreement and the
Exchange Agreement as a plan of reorganization intended to qualify under
Section 368(a)(1)(D) of the Code.
F. LM and the Company intend that each of the various steps
of the Internal Restructuring will be tax-free either as a reorganization
qualifying under
Section 368(a)(1) of the Code, a liquidation qualifying under Section 332(a) of
the Code, or a transfer qualifying under Section 351(a) of the Code.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Defined terms used in this
Agreement shall have the meanings specified in this Agreement or in Exhibit I.
ARTICLE 2
Transactions at Closing
Section 2.01. Contribution of the Transferred Assets and
Assumption of the Assumed Liabilities. (a) Upon the terms and subject to the
conditions set forth in this Agreement, at the Contribution Closing (i) LM
agrees to, or will cause the Transferor Subsidiaries to, transfer, assign and
deliver to the Company all of the right, title and interest of LM and the
Transferor Subsidiaries in, to and under the Transferred Assets as further
described in Section 2.04 below, and (ii) the Company agrees to accept all of
the right, title and interest of LM and the Transferor Subsidiaries in, to and
under all of such Transferred Assets, and the Company agrees to assume, pay,
perform and discharge promptly and in full when due, all of the Assumed
Liabilities (clauses (i) and (ii) and the Cash Contribution, collectively, the
"Contribution and Assumption").
(b) LM and the Company agree that aggregate fair market value of
the Businesses is not less than $771,300,000 (before giving effect to the
adjustments contemplated by Section 2.06)
Section 2.02. Contribution of the XX Xxxx Contribution Amount. Upon
the terms and subject to the conditions set forth in this Agreement, at the
Contribution Closing LM agrees to contribute the XX Xxxx Contribution Amount to
the Company (the "Cash Contribution").
Section 2.03. Issuance of Company Capital Stock. Upon the terms and
subject to the conditions set forth in this Agreement, at the Contribution
Closing and in consideration for the Contribution and Assumption, the Company
agrees to
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issue to LM an appropriate number of shares of Company Common Stock and the
number of shares of Company Preferred Stock determined under Section 2.01(b)
of the Exchange Agreement.
Section 2.04. Contribution Closing. The closing (the
"Contribution Closing") of the Contribution and Assumption shall take place at
the offices of Xxxxx Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, xx the same day as, but immediately prior to, the closing of the
Exchange (the "Closing"). The parties agree that at the Contribution Closing:
(a) (i) LM shall transfer, assign and deliver, or cause the
Transferor Subsidiaries to transfer, assign and deliver, to the Company all of
the right, title and interest of LM and the Transferor Subsidiaries in, to and
under the Transferred Assets, in the case of the Transferred Assets (other
than the Equity Securities and the capital stock of the Access Graphics
Foreign Subsidiaries), free and clear of all Liens other than Permitted Liens
and, in the case of the Equity Securities and the capital stock of the Access
Graphics Foreign Subsidiaries, as described in Section 2.04(b), and (ii) the
Company shall assume and pay, perform and discharge promptly and in full when
due all of the Assumed Liabilities.
(b) LM shall deliver to the Company (i) certificates for the
Equity Securities to be delivered by LM pursuant to this Agreement and (ii)
certificates for all of the issued and outstanding capital stock of each of
the Access Graphics Foreign Subsidiaries, in each case, free and clear of
all Liens, preemptive or similar rights or any other limitation or
restriction (other than limitations on offers and sales under foreign,
federal and state securities laws), duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps affixed
thereto.
(c) LM shall deliver to the Company the XX Xxxx Contribution
Amount in immediately available funds by wire transfer to an account of the
Company at a bank designated in writing by the Company at least two Business
Days prior to the Contribution Closing.
(d) The Company shall issue to LM an appropriate number of
shares of Company Common Stock and the number of shares of Company
Preferred Stock determined under Section 2.01(b) of the Exchange Agreement,
in such denominations as LM shall designate in writing to the Company not
less than two Business Days prior to the Contribution Closing.
Section 2.05. LM Estimate of Net Worth; Closing Balance Sheets.
(a) Not less than three Business Days prior to the Closing Date, LM will
deliver to
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GE LM's calculations of the Estimate of Thrust Reverser Closing Net Worth and
the Estimate of Access Graphics Closing Net Worth.
(b) As promptly as practicable, but no later than 60 days after the
Closing Date, the Company (with the assistance of LM to the extent requested by
the Company) will cause to be prepared and delivered to LM the Closing Balance
Sheets (as defined below) and certificates based on the Closing Balance Sheets
setting forth the Company's calculations of Thrust Reverser Closing Net Worth
and Access Graphics Closing Net Worth. The Closing Balance Sheets (the "Closing
Balance Sheets") will consist of (i) a balance sheet of the Transferred Assets
and Assumed Liabilities of the Thrust Reverser Business as of the close of
business on the Closing Date (the "Thrust Reverser Closing Balance Sheet") and
(ii) a balance sheet of the Transferred Assets and Assumed Liabilities of the
Access Graphics Business as of the close of business on the Closing Date (the
"Access Graphics Closing Balance Sheet") and, in each case, will present fairly,
in all material respects, the financial position of the Transferred Assets and
Assumed Liabilities of each of the Businesses as of the close of business on the
Closing Date in conformity and on a basis consistent with the Transaction
Accounting Principles, and include line items substantially consistent with
those in the Thrust Reverser Balance Sheet and the Access Graphics Balance
Sheet, as the case may be. Without limiting the generality of the foregoing,
assets not constituting Transferred Assets, liabilities not constituting Assumed
Liabilities, the Equity Securities and the XX Xxxx Contribution Amount shall be
excluded from the calculations of Thrust Reverser Closing Net Worth and Access
Graphics Closing Net Worth. Notwithstanding anything in the foregoing to the
contrary, the Closing Balance Sheets shall reflect, and the Balance Sheets shall
be adjusted to reflect, the actual amount of any deferred tax asset or
liability. In addition, if in connection with the preparation of the Closing
Balance Sheets or the calculations of Thrust Reverser Closing Net Worth or
Access Graphics Closing Net Worth, any errors are discovered that affect the
value of the Transferred Assets or the amount of Assumed Liabilities set forth
on the Balance Sheets, except as otherwise provided in the Transaction
Accounting Principles and in Section 7.08 of the Exchange Agreement, the Balance
Sheets shall be adjusted to correct for the effect of such errors.
(c) If LM disagrees with the Company's calculation of Thrust
Reverser Closing Net Worth or Access Graphics Closing Net Worth delivered
pursuant to Section 2.05(b) or with any assertion by the Company that there
were errors that affect the value of the Transferred Assets or the amount
of the Assumed Liabilities set forth on the Balance Xxxxxx, XX may, within
30 days after delivery of the documents referred to in Section 2.05(b),
deliver a notice to the Company disagreeing with the Company's calculation
of Thrust Reverser Closing Net Worth or Access Graphics Closing Net Worth
or any such asserted errors. Any
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such notice of disagreement shall specify those items or amounts as to which LM
disagrees, and LM shall be deemed to have agreed with all other items and
amounts contained in the Closing Balance Sheets and the Company's calculations
of Thrust Reverser Closing Net Worth and Access Graphics Closing Net Worth
delivered pursuant to Section 2.05(b).
(d) If a notice of disagreement shall be duly delivered
pursuant to Section 2.05(c), the Company and LM shall, during the 30 days
following such delivery, consult with each other to determine if any such
disputed items or amounts may be resolved to the mutual written
satisfaction of the Company and LM in order to determine Thrust Reverser
Closing Net Worth and Access Graphics Closing Net Worth. If any such
disputed items or amounts shall not have been resolved to the mutual
written satisfaction of the Company and LM within such 30-day period, the
Company and LM shall promptly thereafter retain a nationally recognized
accounting firm (the "Accounting Referee") other than KPMG Peat Marwick LLP
or Ernst & Young LLP to promptly review this Agreement and the disputed
items or amounts. In resolving any such disputed items or making any
calculation of Thrust Reverser Closing Net Worth and Access Graphics
Closing Net Worth, the Accounting Referee shall consider only those items
or amounts in the Balance Sheets or the Closing Balance Sheets or the
Company's calculations of Thrust Reverser Closing Net Worth and Access
Graphics Closing Net Worth as to which LM has disagreed and, in considering
such items and amounts, shall apply the Transaction Accounting Principles
and Section 7.08 of the Exchange Agreement. The Accounting Referee shall
deliver to the Company and LM, as promptly as practicable, a report setting
forth each such determination and such calculation. Such report shall be
final and binding upon the Company and LM. The cost of such review and
report shall be borne equally by the Company and LM.
(e) The Company and LM agree that they will, and, to the
extent reasonably required, will cause their respective independent
accountants to, cooperate and assist in the preparation of the Closing
Balance Sheets and the calculation of Closing Net Worth and in the conduct
of the matters referred to in this Section 2.05, including, without
limitation, except as may be deemed appropriate to ensure compliance with
any Applicable Laws (including, without limitation, any requirements with
respect to security clearances) and subject to any applicable privileges
(including, without limitation, the attorney-client privilege), making
available to the extent reasonably required, the books, records and work
papers of the internal and external accountants and personnel of the
Company and LM and, to the extent appropriate, their Affiliates.
Section 2.06. Adjustments to XX Xxxx Contribution Amount. (a)
The XX Xxxx Contribution Amount shall be subject to adjustment as follows:
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(i) Thrust Reverser. If Thrust Reverser Closing Net
Worth, as finally determined pursuant to Section 2.05, is less than the
Estimate of Thrust Reverser Closing Net Worth, then LM shall pay to the
Company as an adjustment to the XX Xxxx Contribution Amount, in the
manner provided in Section 2.06(b), an amount equal to the sum of (A)
the amount of such difference plus (B) an amount computed in the manner
of interest as described in Section 2.06(c) on the amount referred to in
clause (A) above. If Thrust Reverser Closing Net Worth, as finally
determined pursuant to Section 2.05, is greater than the Estimate of
Thrust Reverser Closing Net Worth, then the Company shall pay to LM as
an adjustment to the XX Xxxx Contribution Amount, in the manner provided
in Section 2.06(b), an amount equal to the sum of (C) the amount of such
difference plus (D) an amount computed in the manner of interest as
described in Section 2.06(c) on the amount referred to in clause (C).
(ii) Access Graphics. If Access Graphics Closing Net
Worth, as finally determined pursuant to Section 2.05, is less than the
Estimate of Access Graphics Closing Net Worth, then LM shall pay to the
Company as an adjustment to the XX Xxxx Contribution Amount, in the
manner provided in Section 2.06(b), an amount equal to the sum of (E)
the amount of such difference plus (F) an amount computed in the manner
of interest as described in Section 2.06(c) on the amount referred to in
clause (E). If Access Graphics Closing Net Worth, as finally determined
pursuant to Section 2.05 is greater than the Estimate of Access Graphics
Closing Net Worth, then the Company shall pay to LM as an adjustment to
the XX Xxxx Contribution Amount, in the manner provided in Section
2.06(b), an amount equal to the sum of (G) the amount of such difference
plus (H) an amount computed in the manner of interest as described in
Section 2.06(c) on the amount referred to in clause (G).
(b) Any payment pursuant to Section 2.06(a) shall be made at a
mutually convenient time and place, within five Business Days after Thrust
Reverser Closing Net Worth and Access Graphics Closing Net Worth have been
finally determined pursuant to Section 2.05, by delivery by LM or the Company,
as the case may be, of immediately available funds by wire transfer to an
account of the Company or LM, as the case may be, at a bank designated by the
Company or LM, as the case may be, by notice to LM or the Company, as the case
may be, not later than two Business Days prior to the payment date. A single
payment will be made pursuant to Section 2.06(a), the amount of which payment
will, if applicable, be determined by netting the amounts described in
Sections 2.06(a)(i) and 2.06(a)(ii).
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(c) The amounts referred to in clauses (B), (D), (F) and (H) of
Section 2.06(a) shall be calculated in the manner of interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the one month London Interbank Offered Rate as published in the
Wall Street Journal, Eastern Edition, in effect from time to time during the
period from the Closing Date to the date of payment, calculated daily on the
basis of a year of 360 days and the actual number of days elapsed.
Section 2.07. Excluded Liabilities. The parties agree that the
Company does not hereby agree to, and shall not otherwise, assume or be
responsible for any of the Excluded Liabilities.
Section 2.08. License to Intellectual Property Rights. (a) In
consideration of the grant described in Section 2.08(b), pursuant to an
Intellectual Property License (the "Intellectual Property License") to be
negotiated prior to Closing consistent with the provisions of this Section
2.08, LM shall, and shall cause the Transferor Subsidiaries and any of their
Affiliates to, grant to the Company (with the right of the Company to extend
such license to its Affiliates for so long as they remain Affiliates),
effective as of the Closing Date, a fully paid-up, worldwide, non-exclusive
license in respect of all Intellectual Property Rights owned by LM, any
Transferor Subsidiary or any of their Affiliates other than the LM Trademarks
and Trade Names (as defined in the Exchange Agreement) that are available to,
and used or currently planned for use by, the Businesses (but not constituting
Transferred Assets) on or prior to the Closing Date, to continue such use or
currently planned use in the Businesses with respect to substantially similar
products, services or activities of the Businesses.
(b) In consideration of the grant described in Section 2.08(a),
pursuant to the Intellectual Property License, the Company shall grant to LM
(with the right of LM to extend such license to its Affiliates for so long as
they remain Affiliates), effective as of the Closing Date, a fully paid-up,
worldwide, non-exclusive license in respect of all Intellectual Property Rights
constituting Transferred Assets, for use by LM and its Affiliates in making,
using or selling products, providing services or in conducting other business
activities, subject to Section 4.10(a); provided, that no license shall be
granted with respect to the manufacture or sale of commercial thrust reversers
and parts thereof.
(c) The Company acknowledges and agrees that it shall hold all
Intellectual Property Rights constituting part of the Transferred Assets
subject to any licenses thereof granted by LM, any Transferor Subsidiary or
their Affiliates prior to the Closing Date.
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(d) Subject to Section 2.08(b), the transfer of Intellectual
Property Rights to the Company shall not affect LM's or the Transferor
Subsidiaries' right to use, disclose or otherwise freely deal with any
know-how, trade secrets and other technical information that is resident on
the Closing Date at businesses of LM, the Transferor Subsidiaries or any of
their Affiliates other than the Businesses. However, with respect to
documented technical information relating to the Thrust Reverser Business that
is a Transferred Asset and resides at LM, any Transferor Subsidiary or any of
their Affiliates at Closing and is maintained as proprietary by LM, any
Transferor Subsidiary or any of their Affiliates at Closing, LM shall use the
care and caution it affords its other proprietary data to protect such
technical information from disclosure to third parties, unless provided to a
third party pursuant to an agreement providing for like protection by the
recipient, for a period of five years from the Closing Date or until such
technical information is in the public domain through no fault of LM,
whichever first occurs.
Section 2.09. Delivery of Transfer Documents. Subject to
Section 2.10, at the Contribution Closing, LM shall deliver, or cause the
Transferor Subsidiaries to deliver, to the Company such deeds (which, in the
case of real property, shall be bargain and sale deeds without covenants and
warranties), bills of sale, endorsements, consents, assignments and other good
and sufficient instruments of conveyance and assignment as the parties and
their respective counsel shall deem reasonably necessary or appropriate to
vest in the Company all of LM's and the Transferor Subsidiaries' right, title
and interest in, to and under the Transferred Assets.
Section 2.10. Assignment of Contracts and Rights. (a)
Anything in this Agreement or the Exchange Agreement to the contrary
notwithstanding, neither this Agreement nor the Exchange Agreement shall
constitute an agreement to assign any Transferred Asset or any claim or right
or any benefit arising under such Transferred Asset or resulting therefrom if
such assignment, without the consent of a third party thereto, would
constitute a breach or other contravention of such Transferred Asset, be
ineffective with respect to any party thereto or in any way adversely affect
the rights of the Company or LM with respect to such Transferred Asset. LM
and the Company shall use their best efforts (including, for purposes hereof,
the obligation to expend funds to obtain such consents to the same extent as
GE would have been so obligated under Section 2.03 of the Transfer Agreement
dated November 22, 1992, as amended as of March 28, 1993 among GE, Xxxxxx
Xxxxxxxx Corporation and LM) to obtain the consent of the other parties to any
such Transferred Asset or any claim or right or any benefit arising under any
such Transferred Asset for the assignment of such Transferred Asset to the
Company as the Company may request.
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(b) If any such consent is not obtained, or if an attempted
assignment of any Transferred Asset would be ineffective or would adversely
affect the rights of the Company with respect to any such Transferred Asset so
that the Company would not in fact receive all such rights, as among the parties
hereto, the Company will obtain the claims, rights and benefits of LM or its
Subsidiary, as applicable, and assume the obligations under such Transferred
Asset in accordance with this Agreement, and LM will enforce for the benefit of
the Company, with the Company assuming LM's or such Subsidiary's obligations
(excluding any Excluded Liability), any and all claims, rights and benefits of
LM or such Subsidiary, against a third party to such Transferred Asset. In such
event, LM and the Company shall, to the extent the benefits therefrom and
obligations under any such Transferred Asset have not been provided by alternate
arrangements satisfactory to LM and the Company, negotiate in good faith an
amount to be paid by LM to the Company or by the Company to LM, as the case may
be.
(c) LM will promptly pay to the Company when received all monies
received by LM with respect to any Transferred Asset or any claim or right or
any benefit arising under any Transferred Asset, except to the extent the same
represents an Excluded Asset.
(d) The Company will promptly pay to LM when received all
monies received by the Company with respect to any Excluded Asset or any
claim or right or any benefit arising under any Excluded Asset, except to
the extent the same represents a Transferred Asset.
Section 2.11. Conduct of the Businesses on the Closing Date.
The Company agrees that, from the Closing until the close of business on
the Closing Date, it shall operate the Businesses in accordance with the
historical and customary operating practices relating to the conduct of the
Businesses and, without limiting the foregoing, the Company agrees that it
will not engage in any transaction, other than in the ordinary course of
business consistent with past practices of the Business, that would have an
adverse effect on the Thrust Reverser Closing Net Worth or the Access
Graphics Closing Net Worth.
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ARTICLE 3
Representations and Warranties of LM
Section 3.01. Representations and Warranties of LM. LM
represents and warrants to the Company as set forth in Exhibit II.
ARTICLE 4
Covenants of the Parties
Section 4.01. Conduct of the Businesses Until the Closing.
Except as otherwise provided herein, from the date of this Agreement until the
Closing, LM shall, and shall cause each Transferor Subsidiary to, conduct the
Businesses in accordance with the historical and customary operating practices
relating to the conduct of the Businesses. In addition, from the date of this
Agreement through the Closing Date, subject to any exceptions deemed
appropriate to ensure compliance with Applicable Laws, without the Company's
prior consent, which shall not be unreasonably withheld, LM will not, and will
cause each of the Transferor Subsidiaries not to, take or commit to take any
of the following actions:
(i) capital expenditure, or group of related capital
expenditures, relating to the Businesses or the Transferred
Assets in excess of $2,000,000, individually, or $5,000,000,
in the aggregate;
(ii) sale or other disposal of assets (other than
Inventory) with a value in excess of $2,000,000 that would
constitute Transferred Assets if owned, held or used by LM or
any Transferor Subsidiary on the Closing Date;
(iii) amendment of, or modification to, any Contract
where the effect of such amendment or modification would be a
decrease in the backlog value of the relevant Contract of at
least $10,000,000;
(iv) submission of any Bid which, if accepted, would
result in a fixed price Contract that would constitute a
Transferred Asset with a backlog value in excess of
$10,000,000 or a Loss Contract;
(v) permit the Businesses to enter into or engage in a
line of business not conducted by the Businesses on the date
of this Agreement; or
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(vi) directly or indirectly through an Affiliate, execution
of a Contract or entering into of a commitment with Airbus
relating to the A340-500/600 on terms materially less
favorable to the Thrust Reverser Business than those in the
proposal delivered to Airbus by LM on or about October 1,
1997.
Section 4.02. Confidentiality. LM agrees that, except as
otherwise provided in Section 7.03 of the Exchange Agreement, all
confidential non-public information provided pursuant to this Agreement or
the Exchange Agreement to LM or any of its Representatives, and, from and
after the Closing, all confidential non-public information relating to the
Company, the Businesses, the Transferred Assets and Assumed Liabilities,
will be held in confidence, except to the extent that such information (i)
can be shown to have become generally known to the public other than as a
result of disclosure by LM, any of its Affiliates or any of its
Representatives, or (ii) is disclosed to LM, any of its Affiliates or any
of its Representatives on a non-confidential basis from a source other than
the Company, any of its Affiliates or any of its Representatives, provided
that such source is not known by LM, any of its Affiliates or any if its
Representatives to be bound by a confidentiality agreement with, or other
obligation of secrecy to, the Company. In the event that LM or any of its
Affiliates becomes legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or any law, rule,
regulation or stock exchange requirement or otherwise) to disclose any such
information, LM agrees to provide the Company with prompt notice of such
requirement so that the Company may seek a protective order or other
appropriate remedy. In the event that such protective order or remedy is
not obtained, LM agrees that it will furnish, and will cause any such
Affiliate to furnish, only that portion of such information which LM is
advised by counsel is legally required and to cooperate in the Company's
efforts to obtain assurance that confidential treatment will be accorded
such information.
Section 4.03. Retention of Assets. From and after the date
of this Agreement, LM shall ensure that no assets of any Business are
distributed or otherwise transferred (by dividend, intercompany or
intracompany loan or otherwise, other than by intercompany or intracompany
loan that is consistent with past cash management practices) to LM or any
Affiliate of LM (other than in the ordinary course consistent with past
practices for payments to or allocated to LM or any Affiliate of LM
relating to (i) materials or services used in the Businesses, (ii) costs
advanced to or on behalf of the Businesses or (iii) allocations of
corporate overhead costs). For purposes of the foregoing, LM shall treat
each Business as if it were a separate, incorporated Subsidiary of LM. To
the extent that, from and after the day after the Balance Sheet Date but
prior to the Closing Date, more than a de minimis amount of assets
(including, without
11
limitation, cash) of any Business has been so distributed or otherwise
transferred (by dividend or otherwise) to LM or any Affiliate of LM, LM shall,
and shall cause any such Affiliate of LM to, prior to the Contribution Closing,
to cause such assets (or an equivalent amount in cash) to be contributed or
otherwise transferred to such Business. Any intercompany or intracompany loans
made from and after the date of this Agreement to or from any of the Businesses
consistent with past cash management practices shall be repaid at or prior to
the Closing.
Section 4.04. Change of Lockbox Accounts. Immediately after
the Closing, LM shall take, and shall cause each of its Subsidiaries to
take, such steps as the Company may reasonably request, to cause the
Company or any other Person, as determined by the Company, to be
substituted as the sole party having control over any lockbox or similar
bank account to which customers of LM or any of its Subsidiaries directly
make payments related to the Businesses.
Section 4.05. Maintenance and Enforcement of Insurance
Policies. (a) On and after the date of this Agreement (including after
the Closing Date), LM shall not, and shall not permit any Transferor
Subsidiary to, take or fail to take any action if such action or inaction,
as the case may be, would adversely affect the applicability of any
insurance (including reinsurance and any established reserves under any
self-insurance or deductible programs) in effect on the date of this
Agreement that covers all or any part of the Transferred Assets, the
Businesses or the Transferred Employees in respect of periods ending as of
the Closing. Notwithstanding the foregoing, neither LM nor any Transferor
Subsidiary shall have any obligation to maintain the effectiveness of any
such insurance policy on or after the Closing Date or to make any monetary
payment (other than with respect to reserves under self-insurance or
deductible programs) in connection with any such policy.
(b) Notwithstanding any provision to the contrary in this
Agreement, this Section 4.05(b) shall constitute the parties' agreement
regarding the allocation of insurance proceeds with respect to claims for
Environmental Liabilities that relate to the operation of the Businesses prior
to, or the condition of the Transferred Assets on, the Closing Date
("Environmental Insurance Claims"). The Company acknowledges that insurance
carriers of LM and its predecessor corporations have generally denied
coverage, that LM is diligently pursuing recovery from such carriers and that
LM has a substantial interest in maximizing its recovery from such carriers.
LM shall control the Environmental Insurance Claims and shall have the right
to compromise or settle any Environmental Insurance Claims. LM will act in
good faith and with reasonable prudence to maximize recovery with respect to
Environmental Insurance Claims and will allocate a portion of any recovery
received with respect to such Environmental Insurance Claims as follows:
12
(i) LM shall first deduct its costs to collect such
recovery and all net tax costs related to such recovery.
(ii) LM shall then deduct any amounts it owes to a
Governmental Authority, prime contractor or subcontractor
pursuant to a Government Contract in respect of such
Environmental Liabilities.
With respect to any recovery remaining after the amounts
specified in clauses (i) and (ii) have been deducted (the "Remaining
Recovery"):
(A) if the recovery applies to Environmental
Liabilities that are Assumed Liabilities and to
Environmental Liabilities that are not Assumed
Liabilities, and the recovery was not designated as
arising from specific Environmental Liabilities (e.g., a
global settlement with a carrier), LM will pay the
Company an amount equal to the Remaining Recovery
multiplied by X multiplied by (one minus Y); where X
equals the total of the Environmental Insurance Claims
(estimated as of the date of recovery) under said
insurance policies divided by the total environmental and
toxic tort claims by LM under said insurance policies;
and Y equals LM's past expenditures on said Environmental
Liabilities divided by the total estimated expenditures
in respect of said Environmental Liabilities (estimated
as of the Closing Date), or
(B) if the recovery was designated as arising from a
specific Environmental Liability that is an Assumed
Liability, LM will pay the Company the Remaining Recovery
multiplied by (one minus Y).
Any obligations assumed in such compromise or settlement will be
apportioned between LM and the Company in the same proportion as a recovery
would be allocated pursuant to this Section 4.05(b).
(c) The Company agrees that all insurance policies covering the
Transferred Assets, the Businesses and the Transferred Employees (but with
respect to workers compensation insurance, subject to Exhibit IV) maintained
by or on behalf of LM or any Transferor Subsidiary may be terminated or may
terminate by their terms as of the Closing and that, from and after the Closing
Date, LM and each of the Transferor Subsidiaries shall have no obligation of
any kind to maintain any form of insurance (other than reserves for
self-insurance and deductible programs) covering all or any part of the
Transferred Assets, the Businesses or the Transferred Employees.
13
Section 4.06. Transitional Services Agreement. From and after
the Closing and until the third anniversary of the Closing Date, (i) LM shall,
or shall cause its Subsidiaries to, provide to the Company certain transitional
services to the Businesses and (ii) the Company shall provide to LM certain
transitional services to the VLS Business and the other LM affiliated entities
co-located at the Baltimore Facility, namely, the Lockheed Xxxxxx Federal
Credit Union, Lockheed Xxxxxx Enterprise Information Systems, LMC Properties,
Inc. and Lockheed Xxxxxx Unmanned Systems Division, in each case, pursuant to
a transitional services agreement (the "Transitional Services Agreement") to
be negotiated prior to the Closing. Such services shall be provided by the
providing party using the cost methodology currently used by LM or the
applicable Subsidiary of LM to assess to the applicable Business the same or
similar services, and if there is no such current assessment, then at the
actual cost of the providing party. Except as provided in Exhibit IV, the
Company or LM may elect to terminate any particular service provided to it
upon 180 days' notice to the other party and in the event of a conflict between
this Section and Exhibit IV, the provisions of Exhibit IV will control.
Section 4.07. Thrust Reverser Business. (a) Technical
Consulting Agreement. From and after the Closing Date, (i) LM shall, or shall
cause its Subsidiaries to, provide certain research, development and
engineering support services to the Thrust Reverser Business, and (ii) the
Company shall cause the Thrust Reverser Business to provide certain research,
development and engineering support services to LM, in each case, pursuant to
a Technical Consulting Agreement (the "Technical Consulting Agreement") to be
negotiated prior to the Closing on terms and subject to conditions set forth in
Attachment B.
(b) Option to Purchase Northrop Grumman Thrust Reverser Business.
For a period of six months (the "Option Period") after LM completes its
acquisition of Northrop Grumman Corporation ("Northrop Grumman"), the Company
shall have the option (the "Northrop Grumman Option") to acquire the Northrop
Grumman Commercial Thrust Reverser Business. The Company may exercise the
Northrop Grumman Option at any time during the Option Period by delivery of
written notice to LM. If the Company elects to exercise the Northrop Grumman
Option, the purchase price for the Northrop Grumman Commercial Thrust Reverser
Business (the "Northrop Grumman Purchase Price") shall be an amount equal to
the product of (A) the 1996 earnings before interest, taxes, depreciation and
amortization of the Northrop Grumman Commercial Thrust Reverser Business
multiplied by (B) 11.3. During the Option Period, upon written notice by the
Company to LM and provided that the Company has entered into a customary
confidentiality agreement with LM, for a
14
three-week period, LM will, and will cause each Subsidiary of LM to, (i) give
the Company and its Representatives reasonable access to the offices,
properties, books and records of LM and such Subsidiary relating to the Northrop
Grumman Commercial Thrust Reverser Business, (ii) furnish to the Company and its
Representatives such financial and other operating data and other information
relating to the Northrop Grumman Commercial Thrust Reverser Business as the
Company may reasonably request and (iii) instruct its employees and
Representatives to cooperate with the Company in its investigation of the
Northrop Grumman Commercial Thrust Reverser Business, in each case, except as
may be deemed appropriate to ensure compliance with Applicable Laws (including,
without limitation, any requirements with respect to security clearances) and
subject to any applicable privileges (including, without limitation, the
attorney-client privilege). If the Northrop Grumman Option is exercised during
the Option Period, from the date of exercise of the Northrop Grumman Option
through the closing of the acquisition by the Company of the Northrop Grumman
Commercial Thrust Reverser Business, LM will, and will cause each Subsidiary to,
comply again with the provisions of clauses (i), (ii) and (iii) above. The
closing of the acquisition by the Company of the Northrop Grumman Commercial
Thrust Reverser Business will be subject to representations, warranties,
covenants and agreements consistent with this Agreement and the Exchange
Agreement and closing conditions consistent with the Exchange Agreement with
such adjustments as are appropriate to reflect the expected tax treatment of the
transaction and restrictions applicable to employee benefit plans.
(c) Survival of Certain Rights and Obligations. The parties
hereby acknowledge and agree that the 1993 Thrust Reverser Agreement and
any and all implementing agreements related thereto (including, without
limitation, the related License Agreement and the Thrust Reverser Product
Support Agreement) constitute Transferred Assets and that, with the
exceptions set forth in the next sentence, the liabilities and obligations
of LM associated with the 1993 Thrust Reverser Agreement that otherwise
meet the definition of "Assumed Liabilities" in Exhibit I and which are not
Excluded Liabilities constitute Assumed Liabilities. Notwithstanding the
foregoing or anything to the contrary in Article XXVII of the 1993 Thrust
Reverser Agreement, from and after the Closing, LM shall continue to be
bound only by the obligations set forth in the third and fourth sentences
of Article VIII A, and paragraphs B - E of Article VIII (Information and
Data) and Article XX (Release of Information) of the 1993 Thrust Reverser
Agreement as provided therein, and the provisions of Article XXIX
(Miscellaneous) thereof shall continue to apply with respect to such
obligations.
(d) Parts Manufacturing Authorization. From and after the Closing,
LM shall not exercise its rights under any parts manufacturing authorization
from the
15
Federal Aviation Administration issued to LM for the Products (as such term is
defined in the 1993 Thrust Reverser Agreement).
Section 4.08. Agreement with Sun. From the date of this Agreement
until the Closing, LM shall use best efforts to cause Access Graphics (i) to
enter into a master reseller agreement with Sun Microsystems Computer Company
("Sun") effective not later than January 1, 1998 (the "Sun Master Reseller
Agreement") that contains terms substantially similar to those contained in the
master reseller agreement relating to the 1998 calendar year executed by Access
Graphics, a copy of which was provided to GE, pursuant to which Sun agrees to
permit Access Graphics or its Affiliates to sell returned goods and to continue
to sell goods directly to LM and its Affiliates and (ii) to obtain the
assignment of the rights and obligations of Access Graphics under any existing
contract with Sun and such Sun Master Reseller Agreement to the Company.
Section 4.09. Loan. The Company shall provide to LM, (i) on or
after the third calendar day following the Closing Date but prior to the
payment of any adjustment to the XX Xxxx Contribution Amount pursuant to
Section 2.06, loans in an aggregate principal amount not to exceed 90.0% of
the XX Xxxx Contribution Amount as of the Closing Date and (ii) on or after
the Closing Date, after the payment of any adjustment to the XX Xxxx
Contribution Amount pursuant to Section 2.06, loans in an aggregate principal
amount (including the principal amount of any loan provided pursuant to clause
(i)) not to exceed the XX Xxxx Contribution Amount as adjusted pursuant to
Section 2.06, in either case, on the terms and subject to the conditions set
forth in Attachment C; provided, that the Company shall not be obligated to
provide any such loan to LM, in the case of clause (i), unless the Company
receives a notice in writing from LM requesting such a loan not later than 45
Business Days following the Closing Date and, in the case of clause (ii), not
later than 45 Business Days following the payment of any adjustment to the XX
Xxxx Contribution Amount pursuant to Section 2.06, or in the event that there
is no such adjustment, not later than 45 Business Days following the parties'
agreement on the Closing Balance Sheets.
Section 4.10. Protection of Businesses; Non-Solicitation.
(a) In consideration of the benefits of this Agreement to LM and in order
to induce the Company to enter into this Agreement, LM hereby covenants and
agrees that, from and after the Closing and until the fourth anniversary of
the Closing Date, LM shall not, directly or indirectly, engage anywhere in
the world in any activities that compete, in any material respect, with any
of the Businesses as conducted on the Closing Date (a "Competing
Business"); provided, that this Section 4.10 shall not (i) prevent LM or
any of its Affiliates from engaging anywhere in the world in any activity
that LM or any of its Affiliates is engaged in on the Closing
16
Date after the transfer of the Businesses, (ii) apply to investments by LM or
any of its Affiliates in securities of another entity which constitute, in the
aggregate, less than 5% of the outstanding shares of such entity entitled to
vote generally in the election of directors or similar persons, (iii) prohibit
the acquisition (by merger or otherwise) of the securities or assets of a
business where the gross revenues of such business attributable to Competing
Businesses constitute less than 15% of the total gross revenues of such business
and where the entry into Competing Businesses is not the principal purpose of
such acquisition, (iv) in any manner limit the ability of LM to consummate the
acquisition of Northrop Grumman and to own and operate the business of Northrop
Grumman as conducted on the closing date of LM's acquisition of Northrop
Grumman, provided that (A) LM and its Affiliates (including Northrop Grumman and
its Affiliates after LM's acquisition of Northrop Grumman) may not, directly or
indirectly, until the fourth anniversary of the Closing Date, engage anywhere in
the world in the commercial thrust reverser business with respect to engines
with thrust in excess of 30,000 pounds, other than with respect to commercial
derivatives of Northrop Grumman's C-17 military engine or contracts for any
products (including thrust reversers and components) with The Boeing Company,
provided that LM shall not, directly or indirectly, bid in response to any
requests for proposals of The Boeing Company for any such products issued to two
or more suppliers, (B) if the Company exercises the Northrop Grumman Option, LM
shall not, directly or indirectly, until the fourth anniversary of the Closing
Date, engage anywhere in the world in the commercial thrust reverser business,
other than with respect to commercial derivatives of Northrop Grumman's C-17
military engine or contracts for any products (including thrust reversers and
components) with The Boeing Company, provided that LM shall not, directly or
indirectly, bid in response to any requests for proposals of The Boeing Company
for any such products issued to two or more suppliers, and (C) if, at the time
of the closing of LM's acquisition of Northrop Grumman, Northrop Grumman has,
directly or indirectly, acquired since the date of this Agreement any business
that competes anywhere in the world with the Access Graphics Business, the
Company shall have an option, exercisable at any time during the 90-day period
following such closing, to acquire such business at its fair market value or (v)
in any manner limit the ability of LM or any of its Subsidiaries to dispose of
real property and related personalty.
(b) From and after the date of this Agreement until the second
anniversary of the Closing Date, LM shall not, without prior written approval
of the Company, directly or indirectly solicit any person who is an employee of
any of the Businesses (or the Northrop Grumman Commercial Thrust Reverser
Business if the Company exercises the Northrop Grumman Option) at any time on
or after the date of this Agreement to terminate his or her relationship with
any of the Businesses (or the Northrop Grumman Commercial Thrust Reverser
Business if the Company exercises the Northrop Grumman Option); provided, that
the
17
foregoing shall not apply to persons hired as a result of the use of an
independent employment agency (so long as the agency was not directed to solicit
such person) or as a result of the use of a general solicitation (such as an
advertisement) not specifically directed to employees of the Businesses (or the
Northrop Grumman Commercial Thrust Reverser Business if the Company exercises
the Northrop Grumman Option). Notwithstanding the foregoing, if the Company
exercises the Northrop Grumman Option, the Company agrees that, if LM requests
the Company's approval to solicit certain employees of the Northrop Grumman
Commercial Thrust Reverser Business, the Company will not unreasonably withhold
its written approval.
(c) If any provision contained in this Section 4.10 shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section 4.10, but this Section 4.10 shall be construed
as if such invalid, illegal or unenforceable provision had never been
contained in this Section 4.10. It is the intention of the parties that if
any restriction or covenant contained in this Section 4.10 is held to cover
a geographic area or to be for a length of time that is not permitted by
Applicable Law, or is in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable
under Applicable Law, a court of competent jurisdiction shall construe and
interpret or reform this Section 4.10 to provide for a covenant having the
maximum enforceable geographic area, time period and other provisions (not
greater than those contained in this Section 4.10) as shall be valid, legal
and enforceable under such Applicable Law. LM acknowledges that the
Company would be irreparably harmed by any breach of this Section 4.10 and
that there would be no adequate remedy at law or in damages to compensate
the Company for any such breach. LM agrees that the Company shall be
entitled to injunctive relief requiring specific performance by LM of this
Section 4.10, and LM consents to the entry of such injunctive relief.
Section 4.11. Baltimore Facility Lease. On the Closing Date,
LMC Properties, Inc. and the Company shall enter into a lease agreement (the
"Baltimore Facility Lease") relating to the Premises (as defined in Attachment
D) on terms and subject to the conditions set forth in Attachment D.
Section 4.12. Xxxxx and Xxxxxxx Claims. LM, as the
Indemnifying Party, shall be entitled to settle in accordance with Section
7.04(b)(iv) all claims referred to in clause (j) of the definition of Excluded
Liabilities; provided, that LM has not agreed and shall not agree, as a part
of or in connection with such settlement, to any settlement terms that would
affect the remaining performance, as of the
18
Closing Date, of the P&W Agreement in a manner that would be adverse to the
interests of the Company or any of its Affiliates arising under such contract.
Section 4.13. Certain LM Arrangements. (a) On the Closing
Date, LM will enter into agreements with the Company, effective as of the
Closing Date, such that:
(i) until the second anniversary of the Closing Date, LM
will
(A) continue in all material respects the purchasing
agreements (including, without limitation, the assignment
to the Company of the master purchase order) and
relationships with the Access Graphics Business existing
as of the date of this Agreement whereby LM, on behalf of
itself and certain of its Subsidiaries for its or their
internal use only, purchases a substantial portion of
LM's and such Subsidiaries' requirements for purchase of
Sun, Silicon Graphics, Inc. and other Unix-based products
and related services (including, without limitation, Help
Desk services), on terms no less favorable to the Company
(or its Affiliates providing such products or services)
than the terms in existence on the date of this Agreement
and at levels consistent with purchases of such products
and services during calendar year 1997, provided, that
(x) LM shall be required to purchase Sun products and
services from the Company only to the extent the Company
is permitted by Sun to sell such products and services to
LM, and (y) following LM's acquisition of Northrop
Grumman, this clause shall not apply to any similar
requirements of Northrop Grumman, and
(B) purchase from the Company (or its Affiliates)
all requirements for products and services currently
procured under Intra Lockheed Xxxxxx Work Transfer
Agreements existing as of the date of this Agreement or
as contemplated in the Aerostructures 1998 Long Range
Plan and set forth in Section 4.13 of the Contribution
Disclosure Schedule,
provided, that the obligations of LM pursuant to clauses (A)
and (B) shall continue during such two-year period for so long
as the cost, quality and schedule requirements generally
prevailing on the date of this Agreement are met, and provided
further, that LM shall be afforded terms no less favorable
than historically provided to LM for such products and
services and the profit margins charged on products and
services of the Thrust Reverser Business purchased from the
Company shall be no different than
19
those assumed for such products and services in the Aerostructures
1998 Long Range Plan; and
(ii) for a period of three years following the second
anniversary of the Closing Date, LM shall afford the Company
(and its Affiliates) the opportunity to bid to provide any of
the products or services referred to in clauses (A) and (B) of
clause (i) above, provided, that, with respect to any bids for
such products or services having an aggregate value in excess
of $1,000,000, in the case of the Thrust Reverser Business,
$2,000,000, in the case of services provided by the Access
Graphics Business, and $5,000,000, in the case of products
provided by the Access Graphics Business, the Company shall
have the right to match the offer of any other Person to
supply such products or services to LM and its Subsidiaries
and, so long as the terms on which the Company (or such
Affiliate) offers to provide such products or services are at
least as favorable to LM and its Subsidiaries on the basis of
cost, schedule and quality as any offer received from such
other Person with respect to such products and services, LM
shall accept the Company's (or such Affiliate's) offer in
priority to the offer of such other Person.
(b) From and after the Closing until the third anniversary of
the Closing Date, LM agrees that if it or any of its Subsidiaries purchases
CF6-80C engines for re-engining with respect to C5M aircraft, LM or such
Subsidiary will purchase the thrust reverser for such engines on terms
consistent with the pricing and other standards set forth in GE's September
29, 1997 proposal provided to LM.
Section 4.14. Customer Introductions. From and after the
Closing until the second anniversary of the Closing Date, LM shall, and
shall cause each Transferor Subsidiary to, upon the request of the Company,
to the extent reasonably practicable, introduce the Company, or arrange for
a personal introduction of the Representatives of the Company, to customers
of the Businesses for the purpose of ensuring good customer relationships
following the Closing.
Section 4.15. Financial Support Arrangements. (a) The Company
agrees that not later than July 31, 1998 (the "RELEASE DATE"), and in a manner
reasonably satisfactory to LM, the Company will assume, or otherwise ensure
that LM, each Transferor Subsidiary and their Affiliates are released from all
obligations of LM, such Transferor Subsidiary or any of their Affiliates under
all letters of credit, surety bonds and other financial support arrangements
maintained as of the Closing Date by LM, such Transferor Subsidiary or any of
their Affiliates in connection with the Businesses (collectively, the
"FINANCIAL SUPPORT ARRANGEMENTS"). As promptly as practicable after the
Closing Date, LM shall
20
provide the Company with a list of such Financial Support Arrangements to the
extent not listed in Section II.10 of the Contribution Disclosure Schedule.
(b) LM will use best efforts to cause each Financial Support
Arrangement to remain in full force and effect in accordance with its terms
until the earliest of (i) the Release Date on which the Company assumes, or
otherwise ensures that LM, each Transferor Subsidiary and their Affiliates
are released from, all obligations of LM, each Transferor Subsidiary and
their Affiliates under such Financial Support Arrangement in accordance
with Section 4.15(a), (ii) July 31, 1998 and (iii) the date such Financial
Support Arrangement terminates in accordance with its terms. After the
Closing Date and prior to the Release Date for any such Financial Support
Arrangement, LM will not, and will not permit any Transferor Subsidiary to,
waive any requirements of or agree to amend such Financial Support
Arrangement without the prior written consent of the Company. Upon the
receipt of a written (i) will cause (or, if the consent of another party is
required, will endeavor to cause) the principal or stated amount, as
applicable, of such Financial Support Arrangement to be increased or
decreased as requested and (ii) will cause other provisions thereof to be
modified or amended as requested.
(c) If, after the Closing Date, (i) any amounts are drawn on or
paid under any Financial Support Arrangement where LM, each Transferor
Subsidiary or their Affiliates are obligated to reimburse the Person making
such payment or otherwise to make payment in accordance with the Financial
Support Arrangement or (ii) LM, each Transferor Subsidiary or their Affiliates
pay any fees, costs or expenses relating to any Financial Support Arrangement,
the Company shall pay LM, the applicable Transferor Subsidiary or applicable
Affiliate such amounts promptly after receipt from LM of notice thereof
accompanied by written evidence of the underlying payment obligation.
(d) In the event that the Company fails to assume, or otherwise
ensure that LM, each Transferor Subsidiary and their Affiliates are released
from, all obligations of LM, each Transferor Subsidiary and their Affiliates
under the Financial Support Arrangements not later than July 31, 1998, the
Company shall (i) promptly deposit with LM or the applicable Transferor
Subsidiary or applicable Affiliate cash in an amount equal to the aggregate
principal or stated amount, as may be applicable, of the Financial Support
Arrangements with respect to which the Release Date has not occurred or (ii)
subject to the prior approval of the Treasurer of LM, provide back-up letters
of credit in form and substance satisfactory to the Treasurer of LM with
respect to such Financial Support Arrangements. Any cash deposited with LM or
the applicable Transferor Subsidiary or applicable Affiliate in accordance
with clause (i) shall be held by LM or the applicable Transferor Subsidiary or
applicable Affiliate in a segregated
21
account, shall be used by LM or the applicable Transferor Subsidiary or
applicable Affiliate solely to satisfy its payment obligations in respect of
such Financial Support Arrangements and the unused portion of such cash relating
to a Financial Support Arrangement shall be returned to the Company promptly
after the occurrence of the Release Date with respect to such Financial Support
Arrangement.
Section 4.16. No Inconsistent Positions. LM and the Company
covenant and agree not to, and to cause their Affiliates not to, take any
position after the Closing inconsistent with the fair market value of the
Businesses on the Closing Date being not less than the amount stated in
paragraph (85) of the Officers' Certificate of Xxxxxx X. Xxxxxxx and Xxxx X.
Xxxxxxxx referred to in Section 8.02(d)(i) of the Exchange Agreement or in
paragraph (c) of the Officer's Certificate of Xxxxxx X. Xxxxxxxxx referred to
in Section 8.03(b)(i) of the Exchange Agreement.
Section 4.17. Equity Securities. (a) At Closing, LM shall
deliver to the Company certificates for the Equity Securities, free and clear
of all Liens, preemptive rights or any other limitation or restriction (other
than any applicable limitations on offers and sales under federal and state
securities laws, it being understood that the terms of this parenthetical
clause do not limit or affect LM's obligations under clauses (b) and (c) of
this Section 4.17), duly endorsed or accompanied by stock powers duly endorsed
in blank, with any required transfer stamps fixed thereto, together with the
most recent Warrant Share Offering Prospectus provided by Globalstar to LM
with respect to the Globalstar S-3.
(b) Prior to the Closing Date, LM shall provide a notice to
Globalstar indicating that LM is distributing its Warrant Shares (as such term
is defined in the Warrant Acceleration and Registration Rights Agreement) to
the Company effective on the Closing Date pursuant to the plan of distribution
in the Globalstar S-3.
(c) Prior to the Closing Date, LM shall use best efforts to
(i) deliver to the Company at Closing the Equity Securities on a basis that
such securities are freely transferable under the federal and state
securities laws, and certificates for the Equity Securities without any
restrictive legend of any kind whatsoever, and (ii) assuming compliance
with Sections 4(f) and 8(c) of the Warrant Acceleration and Registration
Rights Agreement, assign to the Company its rights and obligations as a
Warrant Holder under the Warrant Acceleration and Registration Rights
Agreement effective as of the Closing.
Section 4.18. Certain Contribution. Prior to the Closing, LM
shall cause the approximately $66,000,000 payable by Access Graphics B.V.
(Netherlands) to
22
LM to be contributed to the capital of Access Graphics B.V. (Netherlands). LM
agrees that in the event that such contribution has not been made prior to or at
the Contribution Closing, such amount shall be an Excluded Liability.
ARTICLE 5
Tax Matters
Section 5.01. Tax Matters. The parties agree as to Tax matters
as set forth in Exhibit III.
ARTICLE 6
Employment and Employee Benefit Matters
Section 6.01. Employment and Employee Benefit Matters. The
parties agree as to employment and employee benefit matters as set forth in
Exhibit IV.
ARTICLE 7
Survival; Indemnification
Section 7.01. Survival. (a) None of the covenants, agreements,
representations and warranties of the parties contained in this Agreement or
the certificates to be delivered pursuant to Sections 8.02(a)(iii) and
8.03(a)(iii) of the Exchange Agreement shall survive the Closing except for
those contained in Articles 2, 4 (other than Sections 4.01, 4.03, 4.08, 4.11
and 4.17) and 7, Sections 8.01, II.01 (other than with respect to the
qualification to do business in any state other than Maryland), II.02,
II.03(a), II.04 (with respect to clauses (i) and (ii) thereof), II.05, Exhibit
III and Exhibit IV (other than Section IV.01), and those covenants and
agreements which, by their terms, are to have effect after the Closing Date
(each, a "SURVIVING REPRESENTATION OR COVENANT"). It is understood and agreed
that, except as explicitly provided in this Agreement, after the Closing there
shall be no liability or obligation under this Agreement in respect of a
breach or alleged breach of any representation, warranty, covenant or
agreement contained in this Agreement or such certificates. It is further
understood and agreed that none of the representations and warranties that
have been made by any of the parties in any other Transaction Document shall
survive
23
the Closing, except to the extent the survival thereof is expressly provided for
in any Transaction Document.
(b) Except with respect to the Excluded Liabilities and except as
otherwise provided in the Transaction Documents, the Company for itself, its
Affiliates and their respective Representatives, effective as of the Closing,
release and discharge LM, its Affiliates and their respective Representatives
from any and all claims, demands, debts, liabilities, accounts, obligations,
costs, expenses, liens, actions, causes of action (whether in law, in equity or
otherwise), rights of subrogation and contribution and remedies of any nature
whatsoever, known or unknown, relating to or arising out of Environmental
Liabilities or Environmental Laws, in either case, arising in connection with
or in any way relating to the Businesses or the Transferred Assets.
Section 7.02. Indemnification. (a) Effective as of the
Closing, LM hereby indemnifies the Company and its Affiliates and, to the
extent actually indemnified by the Company or any such Affiliate from time to
time, their respective Representatives against and agrees to hold each of them
harmless on an after-Tax basis from any and all Damages incurred or suffered
by any of them arising out of or related in any way to:
(i) any misrepresentation or breach of (A) any Surviving
Representation or Covenant made or to be performed by LM or
any Transferor Subsidiary pursuant to this Agreement, other
than Section 2.01(b) or 4.16, or (B) subject in each case to
Section 9.02(b) of the Exchange Agreement, the Tax Assurance
Agreement or Section 2.01(b) or 4.16 of this Agreement; or
(ii) any Excluded Liability (including, without
limitation, LM's or any Transferor Subsidiary's failure to
perform or in due course pay and discharge any Excluded
Liability).
(b) Effective as of the Closing, the Company hereby indemnifies LM
and its Affiliates and, to the extent actually indemnified by LM or any such
Affiliate from time to time, their respective Representatives against and
agrees to hold each of them harmless on an after-Tax basis from any and all
Damages incurred or suffered by any of them arising out of or related in any
way to:
(i) any misrepresentation or breach of (A) any Surviving
Representation or Covenant made or to be performed by the
Company after the Closing Date pursuant to this Agreement,
other than Section 2.01(b) or 4.16, or (B) subject to Section
9.02(d) of the Exchange
24
Agreement, the Tax Assurance Agreement or Section 2.01(b) or 4.16
of this Agreement; or
(ii) subject to Sections 7.03 and 7.06, any Assumed
Liability (including, without limitation, any failure by the
Company to perform or in due course pay and discharge any
Assumed Liability).
Section 7.03. Indemnification of Company by LM for Certain
Assumed Liabilities. (a) LM hereby indemnifies the Company and its Affiliates
and, to the extent actually indemnified by the Company or such Affiliate from
time to time, each of their respective directors, officers, employees and
agents, against and agrees to hold them harmless on an after-Tax basis from:
(i) in the case of any Matter described in clause
7.03(b)(ii), Actual Net Expenditures; and
(ii) in the case of any Matter described in clause
7.03(b)(i), Actual Net Expenditures and Economic Harm (without
duplication),
in each case only to the extent such Actual Net Expenditures were made by
or such Economic Harm was actually realized by any of them before the tenth
anniversary of the Closing Date; provided, however, that LM shall not have
any obligation to indemnify with respect to any such Matter until the
amount of such Actual Net Expenditures made or Actual Net Expenditures made
and Economic Harm realized, as the case may be, exceeds $15,000,000 (each,
an "EXCESS AMOUNT"); and further, provided, that LM shall have received (A)
notice from the Company specifying such Excess Amount and (B) evidence
reasonably satisfactory to LM that the Company has made such Actual Net
Expenditures or suffered such Economic Harm. Promptly after receipt of
such notice and evidence, LM shall pay any Excess Amount in cash or by wire
transfer of immediately available funds to such account of the Company as
the Company shall specify in a written notice. Any notice made pursuant to
this Section 7.03(a) may not be delivered later than sixty days after the
tenth anniversary of the Closing Date.
(b) For purposes of this Agreement and the Exchange Agreement, a
single matter ("MATTER") shall consist of:
(i) Environmental Liabilities which arise out of a
common root cause and which relate to the operation of the
Businesses prior to, or the condition of the Transferred
Assets as of, the Closing Date; or
25
(ii) liabilities to the U.S. Government arising out of a
common root cause, related to Government Contracts, and based
upon allegations of knowing or intentional misconduct on the
part of LM employees which occurred prior to the Closing Date
in connection with the operation of the Businesses.
(c) No Person shall be entitled to payment of any Excess Amount
if, without LM's prior written consent, the Company (i) other than in good
faith, rejected a settlement proposal in respect of such Matter or failed to
settle such Matter for an amount that would have resulted in Actual Net
Expenditures of less than $15,000,000 in respect of such Matter; (ii) settled
any such Matter, or consented to the entry of judgment in respect of such
Matter, where such settlement or judgment resulted in an Excess Amount; or (iii)
did not allow LM to participate in a substantial manner with the Company in the
defense of such Matter (substantially in the manner contemplated by Section
7.04(b)(ii)).
Section 7.04. Procedures for Third Party Claims. (a) Notice.
The party or parties seeking indemnification under Section 7.02 or the Company
under Section 7.06 (the "INDEMNIFIED PARTIES") agrees to give prompt notice to
the parties against whom indemnity is sought (the "INDEMNIFYING PARTIES") of
the assertion of any third party claim, or the commencement of any suit, action
or proceeding in respect of which indemnity may be sought under Section 7.02
or 7.06 (the "THIRD PARTY CLAIMS"). The failure by any Indemnified Party so
to notify the Indemnifying Parties shall not constitute a waiver of any
Indemnified Party's claims to indemnification in the absence of material
prejudice to the Indemnifying Parties. Any such notice shall be accompanied
by a copy of any papers theretofore served on the Indemnified Party in
connection with the applicable Third Party Claim.
(b) Defense and Settlement of Claims.
(i) Assumption of Defense by LM. Except as provided in
Sections 7.04(b)(ii) and (v), upon receipt of notice from any
Indemnified Party with respect to any Third Party Claim as to
which indemnity is available pursuant to Section 7.02(a) or as
to which indemnity may be available to the Company pursuant to
Section 7.06(a), LM will, subject to the provisions of Section
7.04(b)(ii), (iii), (iv), (vi) and (vii) assume the defense
and control of such Third Party Claim but shall allow the
Indemnified Parties a reasonable opportunity to participate in
the defense thereof with their own counsel and at their own
expense. LM shall select counsel, contractors and consultants
of recognized standing and competence after consultation with
the Company, shall take all steps necessary in the defense or
settlement thereof, and shall at all times
26
diligently and promptly pursue the resolution thereof. In
conducting the defense thereof, LM shall at all times act as if all
Damages or Product Damages, as the case may be, relating to such
Third Party Claim were for its own account and shall act in good
faith and with reasonable prudence to minimize Damages or Product
Damages, as the case may be, therefrom. The Company shall, and
shall cause each of its Affiliates, directors, officers, employees,
and agents to, cooperate fully with LM in the defense of any Third
Party Claim defended by LM.
(ii) Assumption of Defense by the Company. Except as
provided in Section 7.04(b)(i) or 7.04(b)(v), upon receipt of
notice from any Indemnified Party with respect to any Third
Party Claim as to which indemnity is available pursuant to
Section 7.02(b), the Company will, subject to the provisions
of Section 7.04(b)(iii), (iv), (vi) and (vii), assume the
defense and control of such Third Party Claim, but shall allow
the Indemnified Parties a reasonable opportunity to
participate in the defense thereof with their own counsel and
at their own expense. Notwithstanding Section 7.04(b)(i), the
Company may retain the defense and control of any Third Party
Claim to the extent it relates to a Product Matter; provided
that (A) the amount of potential Product Damages in respect of
such claim is less than $5,000,000, and (B) the Company, in
good faith, expects that the resolution of the Product Matter
to which such claim relates will not result in Product Damages
in excess of $15,000,000; and provided further that the
Company shall allow LM a reasonable opportunity to participate
in the defense thereof with its own counsel and at its own
expense. The Company shall select counsel, contractors and
consultants of recognized standing and competence after
consultation with LM, shall take all steps necessary in the
defense or settlement thereof, and shall at all times act as
if all Damages or Product Damages, as the case may be,
relating to such Third Party Claim were for its own account
and shall act in good faith and with reasonable prudence to
minimize Damages or Product Damages, as the case may be,
therefrom. LM shall, and shall cause each of its Affiliates,
directors, officers, employees, and agents to, cooperate fully
with the Company in the defense of any Third Party Claim
defended by the Company.
(iii) Continuing Notice of Certain Claims. Each
Indemnifying Party conducting a defense pursuant to Section
7.04(b)(i) or 7.04(b)(ii) shall give prompt and continuing
notice to the Indemnified Parties in respect of such Third
Party Claim that the Indemnifying Party reasonably believes
may: (A) result in the assertion of criminal liability on the
part of the Indemnified Party or any of its Affiliates,
directors, officers, employees or agents; (B) adversely
affect the ability of the Indemnified
27
Party to do business in any jurisdiction or with any customer; or
(C) materially affect the reputation of the Indemnified Party or
any of its Affiliates, directors, officers, employees or agents.
(iv) Settlement of Claims. Except as provided in
Section 7.04(b)(v) or Section 4.12, the Indemnifying Party
shall be authorized to consent to a settlement of, or the
entry of any judgment arising from any Third Party Claim,
without the consent of any Indemnified Party; provided, that
the Indemnifying Party shall (A) pay or cause to be paid all
amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; (B) shall not
encumber any of the assets of any Indemnified Party or agree
to any restriction or condition that would apply to such
Indemnified Party or to the conduct of that party's business;
and (C) shall obtain, as a condition of any settlement or
other resolution, a complete release of each Indemnified
Party.
(v) Tax Claims. Sections 7.04(b)(i) through
7.04(b)(iv), 7.04(b)(vi) and 7.04(b)(vii) shall not be
applicable to any Third Party Claim relating to income or
franchise taxes. Each of LM and the Company shall keep the
other fully advised with respect to, and shall grant the other
full rights of consultation in connection with, any such Third
Party Claim and the defense or other handling of any audit,
litigation or other proceeding involving the tax treatment of
the Contemplated Transactions.
(vi) Shared Defense. Each party may elect to share the
defense of a Third Party Claim the defense of which has been
assumed or retained by the other party pursuant to Section
7.04(b)(i) or (ii). In that event, the Indemnified Party will
so notify the other party in writing. Thereafter, the Company
and LM shall participate on an equal basis in the defense,
management and control of any such claim. LM and the Company
shall select mutually satisfactory counsel, contractors and
consultants to conduct the defense or settlement thereof, and
shall at all times diligently and promptly pursue the
resolution thereof. LM and the Company shall each be
responsible for one-half of all Damages or Product Damages, as
the case may be, incurred after the Indemnified Party has
provided notice as specified herein, including costs of
defense and investigation, with respect to such claim,
provided, that (A) the Company's Actual Net Expenditures and
Economic Harm with respect to any Matter governed by Section
7.03 shall in no event exceed $15,000,000, (B) the Company's
liability pursuant to Section 7.06(a) shall in no event exceed
the amount set forth therein and (C) the election by the
Company to share in the defense of a Third Party Claim as to
which indemnity is available pursuant
28
to Section 7.06(a) shall not increase LM's liability under such
Section 7.06(a). Notwithstanding the foregoing, the Company shall
manage all Remedial Actions conducted with respect to facilities
which constitute Transferred Assets, provided, that LM and its
Representatives shall have the right, consistent with the Company's
right to manage such Remedial Actions as aforesaid, to participate
fully in all decisions regarding any Remedial Action, including
reasonable access to sites where any Remedial Action is being
conducted, reasonable access to all documents, data, reports or
information regarding the Remedial Action, reasonable access to
employees and consultants of the Businesses with knowledge of
relevant facts about the Remedial Action and the right to attend
all meetings with any government agency or third party regarding
the Remedial Action.
(vii) Dispute Resolution. If LM and the Company are
unable to agree with respect to a procedural matter arising
under Section 7.04(b)(vi), LM and the Company shall, within
ten days after notice of disagreement given by either party,
agree upon a third-party referee ("THIRD PARTY REFEREE"), who
shall be an attorney and who shall have the authority to
review and resolve the disputed matter. The parties shall
present their differences in writing (each party
simultaneously providing to the other a copy of all documents
submitted) to the Third Party Referee and shall cause the
Third Party Referee promptly to review any facts, law or
arguments either LM or the Company may present. The Third
Party Referee shall be retained to resolve specific
differences between the parties within the range of such
differences. Either party may request that all oral arguments
presented to the Third Party Referee by either party be in
each other's presence. The decision of the Third Party
Referee shall be final and binding unless both LM and the
Company agree otherwise. The parties shall share equally all
costs and fees of the Third Party Referee.
(viii) Defense of Criminal/Civil Matters. LM, as the
Indemnifying Party, shall, subject to the obligations set
forth in Section 7.04(b)(iii) and (iv), assume the defense and
control of any claim arising out of any alleged criminal
violation, as referred to in clause (h) of the definition of
"Excluded Liabilities" in Exhibit I ("CRIMINAL CLAIM"), but
shall allow the Indemnified Parties a reasonable opportunity
to participate in the defense of the claim with their own
counsel and at their own expense. In defending a Criminal
Claim, LM shall select counsel, contractors and consultants of
recognized standing and competence after consultation with the
Company, shall take all steps necessary in the defense or
settlement of the claim, and shall at all times diligently and
promptly pursue the resolution of the claim. LM shall defend
such claim with the same diligence and effort as if the claim
were asserted directly against it and any
29
Damages were sought directly from it, and LM shall act prudently
and in good faith to minimize such Damages. The Company shall, and
shall cause each of its Affiliates, directors, officers, employees,
and agents to, cooperate fully with LM in the defense of any
Criminal Claim defended by LM. In the event that any civil action
arises out of the Criminal Claim, or arises out of the facts
underlying the Criminal Claim, as referred to in clause (h) of the
definition of "Excluded Liabilities" in Exhibit I ("Civil Claim"),
the Company shall assume the defense and control of such Civil
Claim. LM shall, and shall cause each of its Affiliates, directors,
officers, employees, and agents to cooperate fully with the Company
in the defense of any Civil Claim defended by the Company.
Section 7.05. Procedures for Direct Claims. In the event any
Indemnified Party should have a claim for indemnity against any Indemnifying
Party that does not involve a Third Party Claim, the Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying
Party. The failure by any Indemnified Party so to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability that it may
have to such Indemnified Party with respect to any claim made pursuant to this
Section 7.05 in the absence of material prejudice to the Indemnifying Party.
The Indemnifying Party shall use best efforts to notify the Indemnified Party
within 30 calendar days following its receipt of such notice whether the
Indemnifying Party disputes or accepts its liability to the Indemnified Party
under this Article 7; provided, that the failure by the Indemnifying Party to
so notify the Indemnified Party shall not create any presumption that the
Indemnifying Party has accepted its liability to the Indemnified Party under
this Article 7. If the Indemnifying Party accepts its liability to the
Indemnified Party under this Article 7, the Indemnifying Party shall pay the
amount of such liability to the Indemnified Party on demand or, in the case of
any notice in which the amount of the claim (or any portion of the claim) is
estimated, on such later date when the amount of such claim (or such portion
of such claim) becomes finally determined. If the Indemnifying Party has
disputed its liability with respect to such claim as provided above, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation.
Section 7.06. Indemnification of the Company by LM for
Certain Product Matters. (a) Effective as of the Closing, LM hereby
indemnifies the Company and its Affiliates and, to the extent actually
indemnified by the Company or such Affiliate from time to time, each of
their respective Representatives against and agree to hold them harmless on
an after-Tax basis from any and all Product Damages arising out of or
related in any way to a Product Matter (as defined below), but only if the
event (other than the common
30
root cause, including, by way of example, an accident involving a commercial
aircraft while in service but not including design of a product incorporated in
the aircraft) giving rise to such Product Matter occurs before the tenth
anniversary of the Closing Date; provided, that LM shall not have any obligation
to indemnify the Company or its Affiliates with respect to any Product Matter
unless the aggregate amount of Product Damages arising out of or related in any
way to such Product Matter exceeds $15,000,000 (such amount exceeding
$15,000,000, the "Product Matter Excess Amount") and in that event such
obligation to indemnify with respect to such Product Matter shall equal 75% of
the Product Matter Excess Amount. Product Damages shall not be increased as a
result of (i) action by the Company after the Closing to amend, modify or waive
any provision of a contract or agreement relating to a Product or (ii) any work
performed after the Closing by the Company as a concession to a customer granted
after the Closing. With respect to each such Product Matter, the Company shall
be obligated to pay (or cause to be paid) the first $15,000,000 of all Product
Damages and 25% of the Product Matter Excess Amount.
(b) For purposes of this Agreement a Product Matter shall
consist of:
(i) Personal and Property Claims which arise out of a
common root cause; or
(ii) Product Liability Claims which arise out of a
common root cause;
provided, that if a particular common root cause gives rise to liabilities
or claims under both clauses (i) and (ii) above, all such liabilities or
claims arising out of such common root cause shall be deemed to constitute
a single Product Matter for purposes of determining whether Product Damages
exceed $15,000,000.
(c) The Company shall provide written notice (a "Product Matter
Indemnity Notice") to LM promptly after becoming aware of any Product Matter,
together with the Company's good faith assessment of whether the Product
Matter will likely result in more than $15,000,000 in Product Damages. In the
event that either the Company or LM becomes aware of any third party claim, or
the commencement of any suit, action or proceeding, in respect of a Product
Matter, the Company or LM, as the case may be, shall promptly notify the other
party of such claim, which shall be treated as a Third Party Claim for
purposes of Section 7.04.
(d) Any party seeking reimbursement of Product Damages from
the other party in accordance with Section 7.06(a) shall notify the other
party specifying the amount so claimed, together with evidence reasonably
satisfactory
31
to the notified party that the notifying party has actually incurred such
Product Damages and is entitled to payment in accordance with the allocation of
Product Damages set forth in Section 7.06(a). Promptly after receipt of such
notice and evidence, the notified party shall pay any amount due in cash or by
wire transfer of immediately available funds to such account of the notifying
party as the notifying party shall specify in a written notice.
ARTICLE 8
Miscellaneous
Section 8.01. Miscellaneous. The provisions of Article 11 of
the Exchange Agreement are incorporated into this Agreement by reference.
Section 8.02. Termination. This Agreement shall terminate upon
the termination of the Exchange Agreement in accordance with Article 10
thereof.
32
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective authorized officers on the day and year first
above written.
LOCKHEED XXXXXX CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President, Financial Strategies
LMT SUB INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
EXHIBIT I
DEFINITIONS
I.01. Definitions. (a) The following terms, as used in any
Transaction Document, have the following meanings:
"Access Graphics" means Access Graphics, Inc., a Delaware
corporation.
"Access Graphics Business" means the business that LM conducts
through Access Graphics (directly or through one or more of its Subsidiaries)
that distributes computer hardware, software and services through independent
resellers to a wide variety of end users by providing "channel integration"
services, which allow hardware manufacturers, software publishers and service
providers to outsource various functions for the management and support of
their indirect sales channels.
"Access Graphics Closing Net Worth" means the excess of (i) the
book value of the Transferred Assets of the Access Graphics Business over (ii)
the amount of the Assumed Liabilities of the Access Graphics Business, in each
case as shown on the Access Graphics Closing Balance Sheet.
"Access Graphics Foreign Subsidiaries" means Access Graphics
S.A. de C.V. (Mexico), Access Graphics (U.K.) Limited, Access Graphics Canada
Inc. and Access Graphics B.V. (Netherlands).
"Access Graphics Initial Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Access Graphics Business over
(ii) the amount of the Assumed Liabilities of the Access Graphics Business, in
each case as shown on the Access Graphics Balance Sheet.
"Actual Net Expenditures" means the actual expenditures made by
a Person (net of any resulting tax benefit and net of any refund or
reimbursement of any portion of such actual expenditures, including, without
limitation, reimbursement by way of insurance, third party indemnification or
the inclusion of any portion of such actual expenditures as a cost under
Government Contracts) in respect of any Matter.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such other Person. It is understood that a Person's Affiliates do not
include its employee
I-1
benefit and compensation plans or any related trusts or plan funding mechanisms
and it is further understood that the Company is an Affiliate of LM prior to the
Closing and is an Affiliate of GE at and after the Closing.
"Aggregate Shares of Globalstar Common Stock" means 5,022,380.
"Aggregate Shares of LM Common Stock" means the sum of (i) the
aggregate number of shares of LM Common Stock into which any of the 20,000,000
shares of LM Preferred Stock outstanding as of the Closing Date is convertible
as of such date and (ii) to the extent that any of the 20,000,000 shares of LM
Preferred Stock have been converted into LM Common Stock prior to the Closing
Date, the aggregate number of shares of LM Common Stock into which any of such
shares of LM Preferred Stock have been converted.
"Applicable Law" means, with respect to any Person, any
domestic or foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any Governmental Authority (including
any Environmental Law) applicable to such Person or any of its Affiliates or
any of their respective properties, assets or Representatives (in connection
with such Representative's activities on behalf of such Person or any of its
Affiliates).
"Assumed Liabilities" means all debts, obligations, contracts,
and liabilities of LM or any of its Affiliates to the extent arising out of
the conduct of the Businesses of any kind, character or description, whether
known or unknown, accrued, absolute, contingent, determined, determinable, or
otherwise, whether presently in existence or arising hereafter, including,
without limitation, to the same extent, the following:
(a) all liabilities set forth on, or referred to in, the
Balance Sheets;
(b) all liabilities and obligations of LM or any of its
Affiliates arising under or relating to Contracts and Bids (other
than Contracts or Bids entered into or made after the date of
this Agreement in violation of this Agreement or the Exchange
Agreement), including, without limitation, obligations arising
from progress xxxxxxxx;
(c) all obligations and liabilities arising from any action,
suit, investigation, or proceeding relating to or arising out of
the Businesses or the Transferred Assets against LM or any
Transferor Subsidiary or any Transferred Asset before or with any
court or arbitrator or any Governmental Authority;
I-2
(d) all liabilities and obligations relating to any products
designed, manufactured or sold, or services rendered, by the
Businesses on or prior to the Closing Date, including, without
limitation warranty obligations and product liabilities;
(e) all deferred income relating primarily to the
Businesses;
(f) all Environmental Liabilities;
(g) all liabilities and obligations with respect to the
Transferred Employees, the Employee Plans and the Benefit
Arrangements, to the extent assumed by the Company as provided in
Exhibit IV; and
(h) all liabilities and obligations under the Financial
Support Agreements;
provided, that in no event shall Assumed Liabilities include any Excluded
Liability.
"Baltimore Facility" means the premises located at 000
Xxxxxxxxxx Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx consisting of approximately
1,481,813 square feet and used by LM primarily for the Thrust Reverser
Business.
"best efforts" by any party to this Agreement or any other
agreement incorporating by reference the definitions in this Agreement means
those efforts that would be made by a reasonable businessperson consistent
with ordinary commercial practice, taking into account the magnitude of the
cost, risk or other consequences both to such party and to the other party or
parties to this Agreement or such other agreement (and to the Affiliates of
such parties), as the case may be, as if borne by such party, were such
efforts not made. Best efforts do not require any party to propose or agree
to any material change in the nature or composition of the Transferred Assets,
or to undertake any action that is impractical or unduly burdensome. If
efforts that are (or otherwise would be) best efforts require a party to incur
any material out-of-pocket costs (other than any cost otherwise required to be
incurred by such party), then (i) such party will provide the other party or
parties to this Agreement or such other agreement, as the case may be, written
notice of the character and a good faith estimate of the amount of such costs,
(ii) each notified party will promptly instruct the notifying party in writing
whether or not such notified party desires that such costs be incurred at the
expense of such notified party, (iii) if the notified party or parties so
instruct(s), the notifying party will undertake such efforts and the notified
party or parties will reimburse such party for such costs, and (iv) in the
absence of
I-3
instructions from a notified party to incur such costs, best efforts shall not
require such costs.
"Bid" means any written quotation, bid or proposal made by LM
or any Transferor Subsidiary in connection with the Businesses that, if
accepted or awarded, would lead to a Contract with the U.S. Government or any
other Person for the design, manufacture and sale of products or the provision
of services by the Businesses.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any rules or
regulations promulgated under such Act.
"CF6 Products" means all products and associated spare parts
manufactured, assembled, sold, distributed, overhauled, repaired or retrofitted
by the Thrust Reverser Business pursuant to the 1993 Thrust Reverser Agreement.
"Closing Date" means the date of the Closing as defined in the
Exchange Agreement.
"Closing Price of LM Common Stock" means the average closing
price of LM Common Stock as traded on the New York Stock Exchange for the 10
consecutive trading days preceding the third Business Day prior to the Closing
Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Capital Stock" means the Company Common Stock and the
Company Preferred Stock.
"Company Common Stock" means the common stock, par value $.01
per share, of the Company.
"Company Preferred Stock" means preferred stock, par value $.01
per share, of the Company having the terms and preferences set forth in
Attachment E.
"Confidentiality Agreement" means the Confidentiality Agreement
dated June 19, 1997 between GE and LM.
I-4
"Consolidated Subsidiaries" means as to any Person each
Subsidiary of such Person the financial statements of which would be
consolidated with the financial statements of such Person in accordance with
generally accepted accounting principles.
"Contemplated Transactions" means the transactions contemplated
by the Transaction Documents (including, without limitation, the Internal
Restructuring).
"Contracts" means all contracts, agreements, leases,
licenses, commitments, sales and purchase orders, internal work orders
(with respect to work by or for other LM businesses) and other instruments
of any kind, whether written or oral, that relate primarily to the
Businesses, other than any contracts, agreements or other arrangements or
instruments of any kind relating to Tax.
"Contribution Disclosure Schedule" means the Disclosure
Schedule relating to this Agreement.
"Damages" means all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement,
including, without limitation, costs, fees and expenses of attorneys, experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents or representatives of such Person (with such amounts to be determined
net of any resulting Tax benefit and net of any refund or reimbursement of any
portion of such amount, including, without limitation, reimbursement by way of
insurance, third party indemnification or the inclusion of any portion of such
amounts as a cost under Government Contracts).
"Economic Harm" means the loss of a revenue producing facility
caused by an action of LM or any of its Subsidiaries prior to the Closing,
provided, that the Company and each of its Affiliates at all times after the
Closing take reasonable management actions to minimize such Economic Harm, and
provided further, that the Company shall have at all times after the Closing
honored LM's right to participate in any and all actions undertaken by the
Company in connection with the events giving rise to such Economic Harm to the
extent provided in Article 7 of this Agreement or Article 9 of the Exchange
Agreement (with such amounts to be determined net of any resulting Tax benefit
and net of any refund or reimbursement of any portion of such amounts,
including, without limitation, reimbursement by way of insurance, third party
indemnification or the inclusion of any portion of such amounts as a cost
under Government Contracts).
I-5
"Environmental Laws" means any and all past, present or
future (except where otherwise noted) federal, state, local and foreign
statutes, laws (including case or common law), regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements or any other
restrictions relating to human health, safety, the environment or to
emissions, discharges or releases of or exposures to pollutants,
contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water,
facilities, structures or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling of pollutants, contaminants, Hazardous Substances or wastes or the
investigation, clean-up or other remediation thereof. Without limiting the
generality of the foregoing, "Environmental Laws" include: (i) The
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.;
(ii) The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 26 U.S.C. Section 4611 and 42 U.S.C. Section 9601 et seq.
("CERCLA"); (iii) The Superfund Amendment and Reauthorization Act of
1984; (iv) The Clean Air Act, 42 U.S.C. Section 7401 et seq.; (v)
The Ctolean Water Act, 33 U.S.C. Section 1251 et seq.; (vi) The Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and (vii) the
Occupational Safety and Health Act of 1970, 29 U.S.C.A. Section 651, and
all rules, regulations, standards, requirements, orders, guidance and
permits promulgated thereunder.
"Environmental Liabilities" means all liabilities to the extent
arising in connection with or in any way relating to the Businesses or LM's or
its Affiliates' use or ownership thereof, whether vested or unvested,
contingent or fixed, actual or potential, which arise under or relate to
Environmental Laws including, without limitation, (i) Remedial Actions,
(ii) personal injury, wrongful death, economic loss or property damage
claims, (iii) claims for natural resource damages, (iv) violations of law or
(v) any other cost, loss or damage with respect thereto.
"Environmental Permits" means all permits, licenses,
franchises, certificates, approvals and other similar authorizations of any
Governmental Authority relating to or required by Environmental Laws and
affecting, or relating in any way to, the Businesses.
"Equity Securities" means the 5,022,380 shares of common
stock, par value $1.00 per share, of Globalstar, beneficially owned by LM
as of the date hereof, and any other securities or consideration which the
holder thereof receives or is entitled to receive as a result of any
dividend, distribution, subdivision, split, combination, consolidation,
merger, reclassification or other similar transaction, it being understood
that the term Equity Securities shall not include any other shares of such
common stock held by LM or any of its Affiliates as security for the
obligations of Loral Space & Communications, Ltd.
I-6
"Estimate of Access Graphics Closing Net Worth" means a good
faith estimate of LM of the excess of (i) the book value of the Transferred
Assets of the Access Graphics Business over (ii) the amount of the Assumed
Liabilities of the Access Graphics Business, in each case as of the Closing
Date.
"Estimate of Thrust Reverser Closing Net Worth" means a good
faith estimate of LM of the excess of (i) the book value of the Transferred
Assets of the Thrust Reverser Business over (ii) the amount of the Assumed
Liabilities of the Thrust Reverser Business, in each case as of the Closing
Date.
"Excluded Assets" means:
(a) all original books and records that LM or any of its
Affiliates is required to retain pursuant to any Applicable Law
(in which case copies of such books and records shall be provided
to the Company), or that contain information relating to any
business or activity of LM or any of its Affiliates not forming a
part of, or any employee of LM or any of its Affiliates not
primarily employed in connection with, the Businesses or the
Transferred Assets;
(b) any rights to receive refunds with respect to any and all
Taxes of LM or any of its Affiliates attributable to any Pre-
Closing Tax Period, including, without limitation, interest
payable with respect thereto;
(c) all assets of LM and its Affiliates not used primarily in
connection with the Businesses (other than the Equity Securities,
the securities of the Access Graphics Foreign Subsidiaries and
the XX Xxxx Contribution Amount);
(d) all assets of LM or any of its Affiliates held or used in
connection with the provision of services, or the sale of goods,
to the Businesses;
(e) the Baltimore Facility, including, without limitation,
that portion of the land and buildings located at the Baltimore
Facility that is used primarily in connection with the Thrust
Reverser Business, which portion of such land and buildings shall
be leased to the Company pursuant to the Baltimore Facility Lease
as referred to in Section 4.11 of this Agreement;
(f) all rights of LM under any of the Transaction Documents
and the agreements and instruments delivered to LM by GE, the
other GE Entities or the Company pursuant to any of the
Transaction Documents; and
(g) any assets of any Employee Plan or Benefit Arrangement
retained by LM or any of its Affiliates pursuant to Exhibit IV.
I-7
"Excluded Liabilities" means:
(a) all debts, obligations, contracts and liabilities of LM
or any of its Affiliates not arising primarily out of the conduct
of the Businesses, except as otherwise specifically provided in
the Transaction Documents;
(b) all Indebtedness for Borrowed Money;
(c) any liability or obligation relatin exclusively any
Excluded Asset;
(d) any liability whether presently in existence or arising
after the date of this Agreement in respect of accounts payable
to or allocated to LM or any Affiliate of LM, except for
practices relating to (i) materials or services used in the
businesses, (ii) costs advanced to or on behalf of the Businesses
and (iii) allocations of corporate overhead costs;
(e) Environmental Liabilities of the Thrust Reserver
Business, other than any such Environmental Liabilities expressly
assumed by the Company pursuant to the Baltimore Facility Lease;
(f) all liabilities or obigations for all Taxes referred to
in Section III.02(b);
(g) any obligation or liability retained by LM or any of its
Affiliates pursuant to Exhibit IV or relating to any employee of
the Businesses who is not a Transferred Employee;
(h) any liability or obligation whether presently in
existence or arising after the date of this Agreement arising out
of any criminal violation or alleged criminal violation of
occurring or existing prior to the Closing, other than any of,
relating to or in conection with any such liability or
obligation;
(i) any liability or obligation whether presently in
existence or arising after the date of this Agreement relating to
fees, commissions or expenses owed to any broker, finder,
investment banker, accountant, attorney or other intermediary or
advisor employed by LM, any Transferor Subsidiary or any of their
Affiliates in connection with the Contemplated Transactions;
I-8
(j) the existing claim (and all liabilities and obligations
related thereto) by Xxxxx & Xxxxxxx against LM (including
liabilities under any settlement arrangement relating thereto)
which relates to late deliveries of Fan Thrust Reversers for use
in connection with PW4000-powered Airbus Industrie Model A330
aircraft;
(k) any liability relating to periods prior to the 1998
calendar year arising as a result of any price adjustments under
or related to Government Contracts;
(l) any liability or obligation relating to or arising from
the Lease Agreement among LM and EBC Enterprises AFC. Inc. dated
September 9, 1997 relating to the property located at Xxxxx 00,
Xxxxxxx Financial Center, 0000 Xxxxxxxxx Xxxx, X.X., Xxxxxxx, XX
00000 and the Lease Agreement among LM and Overseas Partners
(AFC), Inc. dated September 18, 1997 relating to the property
located at Suite 150, Atlanta Financial Center, 0000 Xxxxxxxxx
Xxxx, X.X., Xxxxxxx, XX 00000, and any costs (whether previously
incurred and not paid in full or incurred from and after the date
of this Agreement) associated with the planned relocation of a
portion of the Access Graphics Business to Atlanta; and
(m) any liability whether in existence on the date of this
Agreement or arising after such date in connection with the
operations of the Businesses (prior to the Closing or after the
Closing) to the extent that LM, any Subsidiary of LM or any of
their Affiliates receives reimbursement for or payment of such
liability under any insurance policy (subject to Section 4.05) or
established reserves under any self-insurance or deductible
programs.
"Globalstar" means Globalstar Telecommunications Limited, a
Bermuda corporation.
"Globalstar Common Stock Closing Price" means the average
closing price of the common stock of Globalstar, as traded on the Nasdaq
National Market for the 10 consecutive trading days preceding the third
Business Day prior to the Closing.
"Globalstar S-3" means the Registration Statement on Form S-3 of
Globalstar, No. 333-22063, containing a "Rights Offering Prospectus" and a
"Warrant Share Offering Prospectus", as amended.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission,
I-9
tribunal or organization or any regulatory, administrative or other agency, or
any political or other subdivision, department or branch of any of the
foregoing.
"Government Contract" means any prime contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, change order, Bid or other
arrangement of any kind in writing relating exclusively to the Businesses
between LM or any Transferor Subsidiary and (i) the U.S. Government (acting
on its own behalf or on behalf of another country or international
organization), (ii) any prime contractor of the U.S. Government where LM is
acting as subcontractor to the prime contractor on the Government Contract at
issue or (iii) any subcontractor with respect to any contract described in
clauses (i) or (ii) above.
"Hazardous Substances" means any pollutant, contaminant, waste
or chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substance, waste or material or any substance, waste or
material having any constituent elements displaying any of the foregoing
characteristics including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indebtedness for Borrowed Money" means all obligations for
borrowed money, including (a) any obligation owed for all or any part of
the purchase price of property or other assets or for services or for the
cost of property or other assets constructed or of improvements to such
property or other assets, other than trade accounts payable included in
liabilities and incurred in respect of property or services purchased in
the ordinary course of business, (b) any capital lease obligation, (c) any
obligation (whether fixed or contingent) to reimburse any bank or other
Person in respect of amounts paid or payable under a standby letter of
credit (other than obligations under standby letters of credit securing
performance under Contracts or Bids), (d) any guarantee with respect to
indebtedness for borrowed money (of the kind otherwise described in this
definition) of another Person, (e) any factored or sold receivables and (f)
negative cash and cash-in-transit; provided, that Financial Support
Arrangements shall not constitute Indebtedness for Borrowed Money.
"Intellectual Property Right" means patents, copyrights,
trademarks, trade names, service marks, service names, technology, know-how,
processes, trade secrets, inventions, proprietary data, formulae, research and
development data, computer software programs and other intellectual property
(other than the
I-10
LM Trademarks and Tradenames) and applications for the same owned by LM or the
Transferor Subsidiaries on the Closing Date.
"Inventory" means all items of inventory notwithstanding how
classified in LM's or any Transferor Subsidiary's financial records, including
all raw materials, work-in-process and finished goods.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such property or asset.
"XX Xxxx Contribution Amount" means $1,781,464,467 adjusted as
follows: (i) if the Estimate of Thrust Reverser Closing Net Worth is less than
the Thrust Reverser Initial Net Worth, increased by an amount equal to the
amount of such difference, (ii) if the Estimate of Thrust Reverser Closing Net
Worth is greater than the Thrust Reverser Initial Net Worth, decreased by an
amount equal to the amount of such difference, (iii) if the Estimate of Access
Graphics Closing Net Worth is less than the Access Graphics Initial Net Worth,
increased by an amount equal to the amount of such difference, (iv) if the
Estimate of Access Graphics Closing Net Worth is greater than the Access
Graphics Initial Net Worth, decreased by an amount equal to the amount of such
difference, (v) if the LM Common Stock Closing Price is greater than
$102.7625, increased by an amount equal to (A) the Aggregate Shares of LM
Common Stock multiplied by (B) the difference between the LM Common Stock
Closing Price and $102.7625 multiplied by (C) 0.937, (vi) if the LM Common
Stock Closing Price is less than $102.7625, decreased by an amount equal to
(A) the Aggregate Shares of LM Common Stock multiplied by (B) the difference
between $102.7625 and the LM Common Stock Closing Price multiplied by (C)
0.937, (vii) if the Globalstar Common Stock Closing Price is greater than
$52.1565, decreased by an amount equal to (A) the difference between the
Globalstar Common Stock Closing Price and $52.1565 multiplied by (B) the
Aggregate Shares of Globalstar Common Stock multiplied by (C) 0.96, and (viii)
if the Globalstar Common Stock Closing Price is less than $52.1565, increased
by an amount equal to (A) the difference between $52.1565 and the Globalstar
Common Stock Closing Price multiplied by (B) the Aggregate Shares of
Globalstar Common Stock multiplied by (C) 0.96, and (ix) increased by an
amount equal to the LM Preferred Stock Adjustment Factor; provided, that if at
any time during the period between the date of this Agreement and the Closing
Date, any change in the outstanding shares of capital stock of LM or
Globalstar shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period,
the items in clauses (v) through (viii) shall be adjusted appropriately.
I-11
"LM Common Stock" means the common stock, par value $1.00 per
share, of LM.
"LM Common Stock Closing Price" means the average closing price
of LM Common Stock as traded on the New York Stock Exchange for the 10
consecutive trading days preceding the third Business Day prior to the Closing
Date; provided, that (i) if such average closing price is greater than 110% of
the LM Common Stock Reference Price, the LM Common Stock Closing Price shall
be deemed to be a price equal to 1.1 multiplied by the LM Common Stock
Reference Price and (ii) if such average closing price is less than 90% of the
LM Common Stock Reference Price, the LM Common Stock Closing Price shall be
deemed to be a price equal to 0.9 multiplied by the LM Common Stock Reference
Price.
"LM Common Stock Reference Price" means the average of (i)
$102.7625, which is the average closing price of LM Common Stock as traded on
the New York Stock Exchange for the 10 consecutive trading days ending on and
including October 24, 1997, and (ii) the average closing price of LM Common
Stock as traded on the New York Stock Exchange for the 10 consecutive trading
days beginning on and including October 27, 1997.
"LM Preferred Stock" means the Series A Convertible Preferred
Stock, par value $1.00 per share, of LM.
"LM Preferred Stock Adjustment Factor" means the product of
(i) $164,383.56 multiplied by (ii) the number of calendar days from but not
including the date of the latest calendar quarter end to and including the
earlier of (A) the Closing Date and (B) the date on which all or a portion of
the LM Preferred Stock is converted into LM Common Stock; provided, that if
less than all of the LM Preferred Stock is converted into LM Common Stock, the
product shall be increased by an amount equal to (I) $164,383.56 multiplied by
(II) a fraction, the numerator of which is the number of shares of LM Preferred
Stock outstanding after such portion of the LM Common stock has been converted
into LM Common Stock and the denominator of which is 20,000,000, multiplied by
(III) the number of calendar days from but not including the date on which
such portion of the LM Common Stock was converted into LM Common Stock to and
including the Closing Date.
"Loss" means, with respect to any Contract, the excess, if any,
of the (x) sum of the projected direct costs to be incurred by LM and the
Transferor Subsidiaries in the performance of such Contract and the projected
selling, general and administrative costs to be allocated by LM and the
Transferor Subsidiaries to
I-12
the performance of such Contract over (y) total projected revenues to be derived
from the performance of such Contract.
"Loss Contract" means any Contract with respect to which, at
the time of submission or acceptance (but only to the extent that LM has the
right to withdraw such Contract at the time of acceptance), LM knew would
result in a Loss at the mid-point conservatism.
"Material Adverse Effect" means (i) with respect to the
Businesses, an effect with respect to the Businesses or Transferred Assets, in
either case, taken as a whole, that is of such seriousness and significance
that a reasonable businessperson would not proceed with the Contemplated
Transactions on the basis of the terms set forth in the Transaction Documents,
(ii) with respect to the Company, an effect with respect to the assets or
businesses of the Company, in either case, taken as a whole, that is of such
seriousness and significance that a reasonable businessperson would not
proceed with the Contemplated Transactions on the basis of the terms set forth
in the Transaction Documents or (iii) with respect to GE or the GE Entities,
an effect with respect to the assets or business of GE or the GE Entities, in
either case taken as a whole, that is of such seriousness and significance
that a reasonable businessperson would not proceed with the Contemplated
Transactions on the basis of the terms set forth in the Transaction Documents.
"Nacelle Major Components" means all products and associated
spare parts manufactured, assembled, sold, distributed, overhauled, repaired or
retrofitted by the Thrust Reverser Business (or by the Company after the
Closing) pursuant to the P&W Agreement.
"1993 Thrust Reverser Agreement" means the Thrust Reverser
Agreement dated as of November 1, 1993 between GE and Xxxxxx Xxxxxxxx
Corporation (the predecessor of LM), as amended.
"Northrop Grumman Commercial Thrust Reverser Business" means
Northrop Grumman's commercial aircraft division's nacelle systems business
producing nacelle systems for business jet engines and thrust reverser
components for high-bypass engines as currently conducted at Northrop
Grumman's Stuart, Florida and Milledgeville, Georgia facilities, but excluding
any contracts for any products (including thrust reversers and components) with
The Boeing Company.
"P&W Agreement" means the Growth PW4000 Nacelle Participation
Agreement between United Technologies Corporation Xxxxx & Xxxxxxx Group
Commercial Engine Business and Xxxxxx Xxxxxxxx Corporation dated as of July
25, 1990, as amended.
I-13
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a Governmental Authority.
"Personal and Property Claims" means all liabilities and claims
arising from or relating to an event resulting in or giving rise to any
personal injury or death, and any property damage or loss resulting from such
event or any other event involving a commercial aircraft while in service,
where such event is attributable to (i) the material or workmanship of any
Product (A) completely manufactured or assembled, (B) completely overhauled,
repaired or retrofitted, or (C) sold or provided as a replacement (other than
sourced parts sold or distributed as spare parts), in each case prior to the
Closing, or (ii) the design (as the same exists at the Closing) of any Nacelle
Major Component manufactured, assembled, sold or provided as a replacement,
and as the same may be or have been overhauled, repaired or retrofitted (it
being understood that the Person performing any overhaul, repair or retrofit
shall be responsible for liabilities and claims attributable to its own
defective workmanship or its use of defective materials in connection
therewith), if such Product was completely manufactured, assembled, sold or
provided as a replacement prior to the Closing or during the two-year period
following the Closing.
"Product Damages" means (i) in the case of any Product Matter
described in clause (i) of Section 7.06(b) of the Contribution Agreement or
Section 9.06(b) of the Exchange Agreement, Damages determined without regard
to any refund or reimbursement of any amount by way of insurance and (ii) in
the case of any Product Matter described in clause (ii) of Section 7.06(b) of
the Contribution Agreement or Section 9.06(b) of the Exchange Agreement,
Damages.
"Product Liability Claims" means all liabilities and claims
(other than Personal and Property Claims) arising (i) directly under the terms
and conditions of the Contracts relating to the Products, (ii) indirectly as
a result of the failure, if any, to disclaim warranties arising under
Applicable Law or (iii) notwithstanding the contractual terms, as a result of
the imposition of warranties under Applicable Law or other obligations arising
as a matter of Applicable Law (in each of clause (i) through (iii), taking
into account the terms and conditions of such Contracts in effect as of the
Closing), in each case, attributable to (A) the material or workmanship of any
Product (I) completely manufactured or assembled, (II) completely overhauled,
repaired or retrofitted, or (III) sold or provided as a replacement (other
than sourced parts sold or distributed as spare parts), in each case prior to
Closing, or (B) the design (as the same exists at the Closing) of any Nacelle
Major Component manufactured, assembled, sold or provided as a replacement,
and as the same may be or have been overhauled, repaired or
I-14
retrofitted (it being understood that the Person performing any overhaul, repair
or retrofit shall be responsible for liabilities and claims attributable to its
own defective workmanship or its use of defective materials in connection
therewith), if such Product was completely manufactured, assembled, sold or
provided as a replacement prior to the Closing or during the one-year period
following the Closing.
"Products" means CF6 Products, Nacelle Major Components and
products designated by GE before the Closing in accordance with Section
9.06(e) of the Exchange Agreement, if any.
"Remedial Action(s)" means the investigation, removal, clean-up
or remediation of contamination, environmental degradation or damage caused by,
related to or arising from the generation, use, handling, treatment, storage,
transportation, disposal, discharge, release, or emission of Hazardous
Substances, including, without limitation, investigations, response and
remedial actions under CERCLA, corrective action under the Resource
Conservation and Recovery Act, 42 U.S.C. sections 3004(u), 3004(v), 3008(h)
and 7003, and cleanup requirements under similar Environmental Laws.
"Representatives" means with respect to any Person, the
officers, directors, employees, accountants, counsel, consultants, advisors
and agents of such Person.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by such Person.
"Tax Allocation Agreement" means the Tax Allocation Agreement
dated as of October 31, 1997 among each of the GE Entities, LM and the Company.
"Tax Assurance Agreement" means the Tax Assurance Agreement
between LM and the Company, substantially in the form of Attachment F.
"Thrust Reverser Business" means the business that LM conducts
through the division of LM commonly referred to as Middle River Aerostructures
at the Baltimore Facility that (i) (A) manufactures, sells and distributes
CF6
I-15
Products and Nacelle Major Components and associated spare parts, (B)
manufactures aerostructure detail parts for various customers, including among
others, The Boeing Company, Xxxx Helicopter and Affiliates of LM and (C)
operates aircraft maintenance centers that overhaul CF6 Products and TF-39
thrust reversers, (ii) but excluding the VLS Business and the other LM
affiliated entities co-located at the Baltimore Facility, namely, the Lockheed
Xxxxxx Federal Credit Union, Lockheed Xxxxxx Enterprise Information Systems, LMC
Properties, Inc. and Lockheed Xxxxxx Unmanned Systems Division.
"Thrust Reverser Closing Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Thrust Reverser Business over
(ii) the amount of the Assumed Liabilities of the Thrust Reverser Business,
in each case as shown on the Thrust Reverser Closing Balance Sheet.
"Thrust Reverser Initial Net Worth" means the excess of (i)
the book value of the Transferred Assets of the Thrust Reverser Business over
(ii) the amount of the Assumed Liabilities of the Thrust Reverser Business,
in each case as shown on the Thrust Reverser Balance Sheet.
"to the best of the knowledge of LM" (or any similar phrase)
means, except as otherwise explicitly provided, to the best of the knowledge
of the individuals whose names are set forth on Section I.01 of the
Contribution Disclosure Schedule.
"Transaction Accounting Principles" means generally accepted
accounting principles consistently applied, taking into account (i) the
accounting policies within generally accepted accounting principles and (ii)
the exceptions to generally accepted accounting principles, in each case,
accompanying the Balance Sheets attached as Attachment G.
"Transaction Documents" means this Agreement, the Exchange
Agreement, the Intellectual Property License, the Transitional Services
Agreement, the Technical Consulting Agreement, the Baltimore Facility Lease,
the Tax Assurance Agreement and the Tax Allocation Agreement.
"Transferor Subsidiaries" means any Subsidiary or Affiliate of
LM that owns, leases or is otherwise in possession of any of the Transferred
Assets or is liable or obligated in respect of any of the Assumed Liabilities,
and prior to the Closing, unless the context requires otherwise, the Company;
provided, that for purposes of Exhibit II of this Agreement and Exhibit I of
the Exchange Agreement, the Transferor Subsidiaries shall not include the
Access Graphics Foreign Subsidiaries.
I-16
"Transferred Assets" means all of the assets, properties,
rights, licenses, Permits, Contracts, Bids, causes of action and business of
every kind and description as the same shall exist on the Closing Date,
wherever located, real, personal or mixed, tangible or intangible, owned by,
leased by or in the possession of LM or any Transferor Subsidiary, whether or
not reflected in the books and records thereof, and held or used primarily in
the conduct of the Businesses as the same shall exist on the Closing Date,
including but not limited to all assets reflected on the Balance Sheets and
not disposed of in the ordinary course of business or as permitted or
contemplated by the Transaction Documents, and all assets of the Businesses
acquired by LM or any Transferor Subsidiary, on or prior to the Closing Date
and not disposed of as permitted or contemplated by the Transaction Documents,
and including, without limitation, all right, title and interest of LM, any
Transferor Subsidiary or any of their Affiliates in, to and under:
(a) all real property and leases, whether
capitalized or operating, of, and other interests in, real
property, owned by LM, any Transferor Subsidiary or any of their
Affiliates that are used primarily in the Businesses, in each
case together with all buildings, fixtures, easements, rights of
way, and improvements thereon and appurtenances thereto, but
excluding the Baltimore Facility;
(b) all personal property and interests therein,
including machinery, equipment, furniture, office equipment,
software (to the extent transferable), communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and
other tangible personal property (and interests in any of the
foregoing) owned by LM, any Transferor Subsidiary or any of their
Affiliates that are used primarily in connection with the
Businesses;
(c) all raw materials, work-in-process, finished
goods, supplies and other inventories that are owned by LM, any
Transferor Subsidiary or any of their Affiliates and held for
sale, use or consumption primarily in the Businesses;
(d) all Contracts (including, without limitation,
the 1993 Thrust Reverser Agreement and all implementing
agreements relating thereto) and the Warrant Acceleration and
Registration Rights Agreement;
(e) all Bids (with any Contracts awarded to LM, any
Transferor Subsidiary or any of their Affiliates on or before the
Closing Date in respect of such Bids to be deemed Contracts);
I-17
(f) all accounts, notes and other receivables
(including, without limitation, intercompany receivables relating
to commercial goods and services), together with any unpaid
interest or fees accrued on such accounts, notes and other
receivables or other amounts due with respect to such accounts,
notes and other receivables, of LM, any Transferor Subsidiary or
any of their Affiliates that relate primarily to the Businesses,
and any security or collateral for any of the foregoing;
(g) all expenses that have been prepaid by LM, any
Transferor Subsidiary or any of their Affiliates to the extent
relating primarily to the operation of the Businesses, including
but not limited to ad valorem taxes, lease and rental payments;
(h) (i) working capital held in the form of cash
in an amount of $21,300,000 reflected on the Access Graphics
Balance Sheet and all cash and cash equivalents of LM and any
Transferor Subsidiary arising out of or relating to the operation
of the Businesses after the Balance Sheet Date, including all
xxxxx cash located at the operating facilities of the Businesses,
and (ii) cash on the Balance Sheets in an amount equal to the
amount to be transferred by LM pursuant to Section IV.10(e) of
Exhibit IV relating to the Forfeited Options;
(i) all assets transferred from the Spinoff Plans
to the Successor Plans pursuant to Exhibit IV;
(j) all of LM's, any Transferor Subsidiary's or any
of their Affiliates' rights, claims, credits, causes of action or
rights of set-off against third parties relating primarily to the
Businesses or the Transferred Assets, including, without
limitation, unliquidated rights under manufacturers' and vendors'
warranties;
(k) all Intellectual Property Rights administered
by and used primarily in the Businesses;
(l) all transferable Permits owned by, or granted
to, or held or used by LM, any Transferor Subsidiary or any of
their Affiliates and primarily affecting the Businesses;
(m) all business books, records, files and papers,
whether in hard copy or computer format, of LM, any Transferor
Subsidiary or any of their Affiliates, used primarily in the
Businesses, including, without limitation, bank account records,
books of account, invoices, engineering information, sales and
promotional literature, manuals and data, sales and
I-18
purchase correspondence, lists of present and former suppliers, lists
of present and former customers, personnel and employment records of
present and former employees, documentation developed or used for
accounting, marketing, engineering, manufacturing, or any other
purpose relating to the conduct of the Businesses at any time prior to
the Closing;
(n) LM's, any Transferor Subsidiary's or any of
their Affiliates' interests in partnerships and joint ventures
where such ownership relates primarily to the Businesses or the
Transferred Assets;
(o) all goodwill primarily associated with the
Businesses or the Transferred Assets, together with the right to
represent to third parties that the Company is the successor to
the Businesses;
(p) all of the issued and outstanding capital stock
of the Access Graphics Foreign Subsidiaries; and
(q) the Equity Securities;
provided, that in no event shall Transferred Assets include any Excluded
Asset.
"U.S. Government" means the United States Government and all
agencies, instrumentalities and departments of the United States Government.
"VLS Business" means the business conducted by the division of
LM commonly referred to as Vertical Launching Systems or Naval Launching
Systems which is responsible for the design, development and production of the
MK41Vertical Launching Systems, a shipboard fixed, vertical multi-missile
storage and firing system ("VLS"), as well as new missile integration and life
cycle support under contracts with the U.S. Navy and eight international
navies. Management reporting for VLS moved to Lockheed Xxxxxx Electronics
Sector under Government Electronics Systems in Moorestown, New Jersey in
January 1997, however, program management, engineering and production
operations are co-located with the Thrust Reverser Business at the Baltimore
Facility.
"Warrant Acceleration and Registration Rights Agreement" means
the Warrant Acceleration and Registration Rights Agreement dated as of
February 12, 1997 among Globalstar Telecommunications Limited, Globalstar,
L.P., Loral/Qualcomm Satellite Services, L.P., Loral Space & Communications
Ltd., Space Systems/Loral, Inc., Lockheed Xxxxxx Tactical Systems, Inc.,
QUALCOMM China, Inc. and DASA Globalstar Limited Partner, Inc.
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Access Graphics Balance Sheet 2.05(b)
Access Graphics Closing Balance Sheet 2.05(b)(ii)
Accounting Referee 2.05(d)
Aerospace Plan IV.02(l)
Affiliate Plan IV.01
Anniversary Date IV.10(e)
Balance Sheets II.07(a)
Balance Sheet Date II.07(a)
Baltimore Facility Lease 4.11
Benefit Arrangement IV.01
Business preamble
Businesses preamble
Cash Contribution 2.02
CBSI preamble
Civil Claim 7.04(b)
Closing 2.04
Closing Balance Sheets 2.05(b)
Code III.01
Company preamble
Company Entities III.01
Company Savings Plans IV.07(a)
Competing Business 4.10(a)
Contribution and Assumption 2.01(a)(ii)
Contribution Closing 2.04
Criminal Claim 7.04(b)
Direct Rollover IV.07(a)
Disagreement IV.06(i)
Employee Plan IV.01
Employee Plan Documentation IV.02(a)
Encumbrances II.09(b)
Environmental Insurance Claims 4.05(b)
ERISA IV.01
Excess Amount 7.03(a)
Exchange preamble
Exchange Agreement preamble
Final Determination III.01
Final Pension Transfer Amount IV.06(b)
Financial Support Arrangements 4.15(a)
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Term Section
---- -------
Forfeited Options IV.10(e)
GE preamble
GE Entities preamble
GEGS preamble
GEII preamble
Government Bid II.17(a)
Government Claim IV.06(i)
Indemnified Parties 7.04(a)
Indemnifying Parties 7.04(a)
Initial Pension Transfer Amount IV.06(b)
Intellectual Property License 2.08(a)
Internal Restructuring III.01
LM preamble
LM Assumptions IV.06(b)
LM Savings Plan IV.07(a)
Matter 7.03(b)
Northrop Grumman 4.07(b)
Northrop Grumman Option 4.07(b)
Northrop Grumman Purchase Price 4.07(b)
Option Period 4.07(b)
Payment IV.10(e)
PBO IV.06(b)(i)
Permits II.13
Permitted Liens II.09(b)
Post-Closing Tax Period III.01
Pre-Closing Tax Period III.01
Product Matter 7.06(b)
Product Matter Excess Amount 7.06(a)
Product Matter Indemnity Notice 7.06(c)
Release Date 4.15(a)
Remaining Recovery 4.05(b)(ii)
Required Consents II.06
RIP I IV.02(b)
RIP II IV.02(l)
Spinoff Plans IV.06(a)
Successor Plan IV.06(a)
Sun 4.08
Sun Master Reseller Agreement 4.08
Surviving Representation or Covenant 7.01
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Term Section
---- -------
Tax III.01
Taxpayer III.05(a)
Technical Consulting Agreement 4.07(a)
Third Party Claims 7.04(a)
Third Party Referee 7.04(b)
Thrust Reverser Balance Sheet II.07(a)
Thrust Reverser Closing Balance Sheet 2.05(b)(i)
Transferred Employees IV.01
Transitional Services Agreement 4.06
Trustees IV.06(b)
WARN IV.03(b)
I-22
EXHIBIT II
Representations and Warranties of LM
LM hereby represents and warrants to the Company as of the date
of this Agreement and as of the Closing Date that:
II.01. Corporate Existence and Power. Each of LM and each
Transferor Subsidiary is a corporation or other entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all corporate or other
similar powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on the Businesses as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals has not had, and may not reasonably be expected to have, a Material
Adverse Effect on the Businesses. Each of LM and each Transferor Subsidiary
is duly qualified to do business as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities make such qualification necessary to carry on the Businesses as now
conducted, except where the failure to be so qualified has not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses.
II.02. Corporate Authorization. Except as otherwise disclosed
to the Company prior to the date of this Agreement, the execution, delivery and
performance by LM and each Transferor Subsidiary of the Transaction Documents
to which it is a party and the consummation of the Contemplated Transactions
are within its corporate or other similar powers and have been (or, in the
case of the Transferor Subsidiaries, by the Closing, will be) duly authorized
by all necessary corporate action on the part of LM and such Transferor
Subsidiary. Each Transaction Document to which LM or any Transferor
Subsidiary is a party constitutes a legal, valid and binding agreement of LM
or such Transferor Subsidiary, enforceable against LM or such Transferor
Subsidiary in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding in equity or at law). There is no vote or other approval of any
stockholders of LM required to permit consummation of the Contemplated
Transactions.
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II.03. Governmental Authorization. (a) Except as set forth
in Section II.03 of the Contribution Disclosure Schedule, the execution,
delivery and performance by LM and each Transferor Subsidiary of the
Transaction Documents to which it is a party and the consummation of the
Contemplated Transactions require no action by or in respect of, or consent or
approval of, or filing with, any Governmental Authority other than (i)
compliance with any applicable requirements of the HSR Act; (ii) compliance
with any applicable foreign antitrust regulatory approvals; (iii) compliance
with any applicable requirements of the Securities Exchange Act; (iv)
compliance with any applicable requirements of any relevant state
environmental laws; (v) any necessary approvals of the U.S. Government,
including, without limitation, the Department of Defense, the United States
Air Force or any agencies, departments or instrumentalities thereof; and (vi)
any actions, consents, approvals or filings otherwise expressly referred to in
this Agreement.
(b) To LM's knowledge, there are no facts relating to the
identity or circumstances of LM or any of its Affiliates, that would prevent or
materially delay obtaining any of the consents referred to above in Section
II.03(a), it being understood that LM has been, and currently is, involved in a
number of disputes with the U.S. Government.
II.04. Noncontravention. Except as set forth in Section II.04
of the Contribution Disclosure Schedule, the execution, delivery and
performance by LM and each Transferor Subsidiary of the Transaction Documents
to which it is a party and the consummation of the Contemplated Transactions
do not and will not (i) violate the certificate of incorporation or bylaws or
other organizational documents of LM or such Transferor Subsidiary, (ii)
assuming compliance with the matters referred to in Section II.03, violate any
Applicable Law, (iii) assuming the obtaining of all Required Consents,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of LM or such
Transferor Subsidiaries or any Access Graphics Foreign Subsidiary or to a loss
of any benefit relating primarily to the Businesses to which LM or such
Transferor Subsidiary or any Access Graphics Foreign Subsidiary is entitled
under, any provision of any agreement, contract or other instrument binding
upon LM or such Transferor Subsidiary or any Access Graphics Foreign
Subsidiary and relating primarily to the Businesses or by which any of the
Transferred Assets is or may be bound or any license, franchise, permit or
similar authorization held by LM or such Transferor Subsidiary or any Access
Graphics Foreign Subsidiary relating primarily to the Businesses or (iv)
result in the creation or imposition of any Lien on any Transferred Asset,
other than Permitted Liens, except for such violation referred to in clause
(ii), default, termination, cancellation, acceleration or loss referred to in
clause (iii) or creation or imposition of any Lien on any
II-2
Transferred Asset referred to in clause (iv), that could not reasonably be
expected to have a Material Adverse Effect on the Businesses.
II.05. Ownership of the Equity Securities. LM is the
beneficial and record owner of the Equity Securities and, except as set forth
in Section II.05 of the Contribution Disclosure Schedule, LM owns such
securities free and clear of any Lien and any other limitation or restriction
(including any restriction on the right to vote, transfer, sell or otherwise
dispose of such securities, other than limitations on offers and sales under
foreign, federal and state securities laws). Section II.05 of the
Contribution Disclosure Schedule sets forth a true and complete list of the
Access Graphics Foreign Subsidiaries, all of the issued and outstanding
capital stock of which is owned, directly or indirectly, by Access Graphics.
Upon consummation of the Contemplated Transactions, the Company shall be the
owner of the Equity Securities and all of the issued and outstanding capital
stock of each of the Access Graphics Foreign Subsidiaries, in each case, free
and clear of all Liens, preemptive or similar rights or any other limitation
or restriction (other than limitations on offers and sales under foreign,
federal and state securities laws). LM has registration rights under the
Warrant Acceleration and Registration Rights Agreement with respect to the
Equity Securities.
II.06. Consents. Section II.06 of the Contribution Disclosure
Schedule sets forth each material agreement, contract or other instrument
binding upon LM, any Transferor Subsidiary or any Access Graphics Foreign
Subsidiary or any Permit requiring a consent or other action by any Person as
a result of the execution, delivery and performance of the Transaction
Documents and the consummation of the Contemplated Transactions (the "Required
Consents"), except for such consents or actions which, if not received or
taken by the Closing, would not, individually or in the aggregate, have a
Material Adverse Effect on the Businesses.
II.07. Financial Statements. The unaudited pro forma balance
sheets as of June 29, 1997, in the case of the Thrust Reverser Business, and
June 30, 1997, in the case of the Access Graphics Business (each such date for
the relevant Business, the "Balance Sheet Date") for each of the Thrust
Reverser Business (the "Thrust Reverser Balance Sheet") and the Access Graphics
Business (the "Access Graphics Balance Sheet" and, together with the Thrust
Reverser Balance Sheet, the "Balance Sheets"), and the related statements of
income for the six months then ended present fairly, in all material respects,
in conformity with the Transaction Accounting Principles, the financial
position of the Transferred Assets and Assumed Liabilities of each of the
Thrust Reverser Business and the Access Graphics Business, as the case may be,
as of the date thereof and their respective results of operation for the
period then ended (subject
II-3
to normal year-end adjustments). True and correct copies of the Balance Sheets
are set forth in Attachment G to this Agreement.
II.08. Absence of Certain Changes. Since the Balance Sheet
Date and except as set forth in Section II.08 of the Contribution Disclosure
Schedule, the Businesses have been conducted in all material respects in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances
or facts that has had a Material Adverse Effect on the Businesses, other than
those resulting from changes, whether actual or prospective, in general
conditions applicable to the industries in which the Businesses are involved or
general economic conditions;
(b) any incurrence, assumption or guarantee by LM or any
Transferor Subsidiary of any Indebtedness for Borrowed Money that is an Assumed
Liability and that is material to the Businesses taken as a whole, other than in
the ordinary course of business;
(c) any damage, destruction or other casualty loss affecting the
Businesses or any Transferred Asset that has had a Material Adverse Effect on
the Businesses;
(d) any transaction or commitment made, or any Contract entered
into by LM or any Transferor Subsidiary relating primarily to the Businesses
or any Transferred Asset (including the acquisition or disposition of any
assets) or any relinquishment by LM or any Transferor Subsidiary of any
contract or other right relating primarily to the Businesses, in either case,
material to the Businesses taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past practices
and the Contemplated Transactions; or
(e) except as permitted under Section 4.03, any distribution
or transfer of any assets of any Business (by dividend, intercompany or
intracompany loan or otherwise, other than by intercompany or intracompany
loan that is consistent with past cash management practices) to LM or any
Affiliate of LM (other than in the ordinary course consistent with past
practices for payments to or allocated to LM or any Affiliate of LM
relating to (i) materials or services used in the Businesses, (ii) costs
advanced to or on behalf of the Businesses or (iii) allocations of
corporate overhead costs).
II.09. Sufficiency of and Title to the Transferred Assets.
(a) The Transferred Assets, together with the rights and services to be
provided to the Company pursuant to the Intellectual Property License, the
Transitional Services
II-4
Agreement, the Technical Consulting Agreement and the Baltimore Facility Lease,
constitute and on the Closing Date will constitute, all of the assets and
services that are necessary to permit the operation of the Businesses in
substantially the same manner as such operations have heretofore been conducted.
(b) Upon consummation of the Contemplated Transactions, the
Company will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Transferred Assets that are necessary to
permit the operation of the Businesses in substantially the same manner as
operations have heretofore been conducted, free and clear of all Liens, except
for (i) Liens, title defects, easements, restrictions and invalidities of
leasehold interests (collectively, "Encumbrances") that have not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses, (ii) Liens for taxes not yet due or being contested in good faith,
(iii) Encumbrances in favor of the U.S. Government arising in the ordinary
course of business, (iv) rights and licenses granted to others in Intellectual
Property Rights and (v) Encumbrances disclosed in Section II.09 of the
Contribution Disclosure Schedule or on the Balance Sheets. Liens and
Encumbrances included or referred to in clauses (i) through (v) of this
Section II.09(b) are herein referred to as "Permitted Liens".
II.10. No Undisclosed Material Liabilities. There are no
liabilities of LM or any Transferor Subsidiary relating to the Businesses that
constitute Assumed Liabilities or liabilities of any Access Graphics Foreign
Subsidiary, in each case, of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise other than:
(a) liabilities disclosed or provided for in the Balance
Sheets;
(b) liabilities (i) disclosed in Section II.10 of the
Contribution Disclosure Schedule, (ii) related to any Contract disclosed in
the Contribution Disclosure Schedule or (iii) related to any Employee Plan
or Benefit Arrangement disclosed in Section IV.02 of the Contribution
Disclosure Schedule;
(c) Environmental Liabilities;
(d) liabilities incurred in the ordinary course of business
since the Balance Sheet Date consistent with past practices and not in
violation of this Agreement or the Exchange Agreement which in the
aggregate have not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Businesses; and
II-5
(e) liabilities other than those referred to in the foregoing
clauses (a)-(d) that have not had, and may not reasonably be expected to have,
a Material Adverse Effect on the Businesses.
II.11. Litigation; Contract-Related Matters. (a) Except as
set forth in Section II.11 of the Contribution Disclosure Schedule or referred
to in the Balance Sheets, there is no action, suit, investigation or
proceeding (except for actions, suits or proceedings referred to in Section
II.11(b)) pending against, or to the best of the knowledge of LM, threatened
against or affecting, the Businesses or any Transferred Asset before any
Governmental Authority as to which there is a substantial likelihood of a
determination or resolution adverse to the Businesses and which, if so
adversely determined or resolved, may reasonably be expected to have a
Material Adverse Effect on the Businesses or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Contemplated
Transactions.
(b) Except as set forth in Section II.11 of the Contribution
Disclosure Schedule or referred to in the Balance Sheets, there is no action,
suit, investigation or proceeding relating to any Government Contract or Bid,
or relating to any proposed suspension or debarment of LM or any Transferor
Subsidiary or any of their employees, pending against, or to the best of the
knowledge of LM, threatened against or affecting, the Businesses or any
Transferred Asset before any Governmental Authority as to which there is a
substantial likelihood of a determination or resolution adverse to the
Businesses and which, if so adversely determined or resolved, may reasonably
be expected to have a Material Adverse Effect on the Businesses.
II.12. Material Contracts and Bids; Backlog. (a) Except
as set forth in Section II.12 of the Contribution Disclosure Schedule and
except for inaccuracies in the following clauses (i) and (ii) which,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect on the Businesses, all Government Contracts and
Bids with a backlog value in excess of $10,000,000 in the case of fixed
price Government Contracts (and Bids for such Contracts) and $10,000,000 in
the case of "cost plus" Government Contracts (and Bids for such Contracts)
(i) are being performed or were submitted, as the case may be, in the
ordinary course of business and (ii) are or would be, as the case may be,
capable of performance in accordance with their terms without loss
(determined in accordance with LM's accounting principles consistently
applied), if LM retained the Transferred Assets and made all currently
planned expenditures therefor.
(b) Except as set forth in Section II.12 of the Contribution
Disclosure Schedule, all cost or pricing data submitted or certified in
connection with Bids and Government Contracts are current, accurate and
complete in accordance with
II-6
the Truth in Negotiation Act, as amended, and the rules and regulations
thereunder, except any failures to be current, accurate and complete which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Businesses. The total funded backlog of the
Businesses in respect of awarded Government Contracts as of September 30, 1997
was in excess of $14,000,000.
(c) Except as set forth in Section II.12 of the Contribution
Disclosure Schedule, each Government Contract and each other material Contract
relating to the Businesses is a legal, valid and binding obligation of LM or a
Transferor Subsidiary and, to the best of the knowledge of LM, each other
party to such Contract, enforceable against LM or such Transferor Subsidiary
and, to the best of the knowledge of LM, each such other party in accordance
with its terms (except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers, and subject to
the limitations imposed by general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in equity), and
neither LM nor such Transferor Subsidiary nor, to the best of the knowledge of
LM, any other party to such Contract is in material default or has failed to
perform any material obligation under such Contract, and there does not exist
any event, condition or omission which would constitute a material breach or
material default (whether by lapse of time or notice or both), except for any
such default, failure or breach as has not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses.
II.13. Licenses and Permits. LM, the Transferor Subsidiaries
and the Access Graphics Foreign Subsidiaries have all licenses, franchises,
permits and other similar authorization affecting, or relating in any way to,
the Businesses (the "Permits") required by law to be obtained by LM, any
Transferor Subsidiary or any Access Graphics Foreign Subsidiary to permit LM,
any Transferor Subsidiary or any Access Graphics Foreign Subsidiary to conduct
the Businesses in substantially the same manner as the Businesses have
heretofore been conducted, except where the failure to obtain any such
licenses, franchises, permits or authorizations could not reasonably be
expected to have a Material Adverse Effect on the Businesses.
II.14. Finders' Fees. Other than Xxxxxxx Xxxxx & Co. and
Bear, Xxxxxxx & Co. Inc., whose fees will be paid by LM, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of LM or the Transferor
Subsidiaries who might be entitled to any fee or commission from the
Company in connection with the Contemplated Transactions.
II-7
II.15. Environmental Compliance. (a) Except as set forth in
Section II.15 of the Contribution Disclosure Schedules or referred to in the
Balance Sheets, there are no Environmental Liabilities (other than Excluded
Liabilities) arising under Environmental Laws in effect and applicable to the
Businesses or Transferred Assets as of the date of this Agreement that have
had or may reasonably be expected to have a Material Adverse Effect on the
Businesses.
(b) Except as set forth in Section II.15 of the Contribution
Disclosure Schedule, none of the Transferred Assets is located in New Jersey or
Connecticut.
II.16. Compliance with Laws. Except as set forth in Section
II.16 of the Contribution Disclosure Schedule, except for violations or
infringements of Environmental Laws or Applicable Laws, orders, writs,
injunctions or decrees relating to Contracts or Bids, and except for
violations or infringements as have not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses, the operation
of the Businesses and condition of the Transferred Assets have not violated or
infringed, and do not violate or infringe, in any material respect any
material Applicable Law or any order, writ, injunction or decree of any
Governmental Authority.
II.17. Government Contracts. (a) Except as set forth in
Section II.17 of the Contribution Disclosure Schedule, and except for
inaccuracies in the following as have not had, and may not reasonably be
expected to have, a Material Adverse Effect on the Businesses, with respect to
each fixed price Government Contract with a backlog value in excess of
$10,000,000, each "cost plus" Government Contract with a backlog value in
exceeds of $10,000,000 and each Bid which, if accepted, would result in such a
Government Contract (a "Government Bid") to which LM or any Transferor
Subsidiary is a party with respect to the Businesses, (i) LM or any such
Transferor Subsidiary has complied with all material terms and conditions of
such Government Contract or Government Bid, including all clauses, provisions
and requirements incorporated expressly, by reference or by operation of law
therein; (ii) LM or any Transferor Subsidiary has complied with all
requirements of all material Applicable Laws or agreements pertaining to such
Government Contract or Government Bid; (iii) all representations and
certifications executed, acknowledged or set forth in or pertaining to such
Government Contract or Government Bid were complete and correct as of their
effective date, and LM or any Transferor Subsidiary has complied in all
material respects with all such representations and certifications; (iv)
neither the U.S. Government nor any prime contractor, subcontractor or other
Person has notified LM or any Transferor Subsidiary that LM or any such
Transferor Subsidiary has breached or violated any Applicable Law,
certification, representation, clause, provision or requirement pertaining to
such Government Contract or Government Bid where there is a substantial
likelihood that the matter
II-8
notified to LM or any such Transferor Subsidiary will be resolved in a manner
adverse to LM or any such Transferor Subsidiary, (v) no termination for
convenience, termination for default, cure notice or show cause notice is
currently in effect pertaining to such Government Contract or Government Bid;
(vi) to the best of the knowledge of LM, no cost incurred by LM or any
Transferor Subsidiary pertaining to such Government Contract or Government Bid
has been questioned or challenged, is the subject of any investigation or has
been disallowed by the U.S. Government where, with respect to any question,
challenge or investigation, there is a substantial likelihood of a determination
adverse to LM or any such Transferor Subsidiary; and (vii) to the best of the
knowledge of LM, no money due to LM or any Transferor Subsidiary pertaining to
such Government Contract or Government Bid has been (or has attempted to be)
withheld or set off where there is a substantial likelihood that LM or any such
Transferor Subsidiary will not ultimately be deemed to be entitled to such
money.
(b) Except as set forth in Section II.17 of the
Contribution Disclosure Schedule: (i) to the best of the knowledge of LM,
none of LM's or any Transferor Subsidiary's respective employees,
consultants or agents is (or during the last year has been) under
administrative, civil or criminal investigation, indictment or information
by any Governmental Authority, or any audit or investigation by LM or any
Transferor Subsidiary with respect to any alleged irregularity,
misstatement or omission arising under or relating to any Government
Contract or Government Bid; and (ii) during the last year, LM or any
Transferor Subsidiary has not conducted or initiated any internal
investigation or, to the best of the knowledge of LM, had reason to
conduct, initiate or report any internal investigation, or made a voluntary
disclosure to the U.S. Government, with respect to any alleged
irregularity, misstatement or omission arising under or relating to a
Governmental Contract or Government Bid. Neither LM nor any Transferor
Subsidiary has any knowledge or reason to know of any irregularity,
misstatement or omission arising under or relating to any Government
Contract or Government Bid that has led or could reasonably be expected to
lead, either before or after the Closing Date, to any of the consequences
set forth in clauses (i) or (ii) of the immediately preceding sentence or
any other material damage, penalty assessment, recoupment of payment or
disallowance of cost.
(c) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, or as has not had, and may not reasonably be expected to
have, a Material Adverse Effect with respect to the Businesses, there exist
(i) no outstanding claims against LM or any Transferor Subsidiary, either by
the U.S. Government or by any prime contractor, subcontractor, vendor or other
third party, arising under or relating to any Government Contract or
Government Bid referred to in Section II.17(a) where there is a substantial
likelihood of a determination adverse to LM or any such Transferor Subsidiary
and (ii) no
II-9
disputes between LM or any Transferor Subsidiary and the U.S. Government under
the Contract Disputes Act or any other Federal statute or between LM or any
Transferor Subsidiary and any prime contractor, subcontractor or vendor arising
under or relating to any such Government Contract or Government Bid where there
is a substantial likelihood of a determination adverse to LM or any Transferor
Subsidiary. LM has no knowledge or reason to know of any fact which could
reasonably be expected to result in a claim or a dispute under clause (i) or
(ii) of the immediately preceding sentence.
(d) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, neither LM nor any Transferor Subsidiary (with respect to
the Businesses), nor to the best of the knowledge of LM, any employees,
consultants or agents of any of the Businesses, is (or during the last five
years has been) suspended or debarred from doing business with the U.S.
Government or is (or during such period was) the subject of a finding of a
nonresponsibility or ineligibility for U.S. Government contracting. LM does
not know or have any reason to know of any facts or circumstances that would
warrant the suspension or debarment, or the finding of nonresponsibility or
ineligibility, on the part of LM or any Transferor Subsidiary or any employees,
consultants or agents of any of the Businesses.
(e) Except as set forth in Section II.17 of the Contribution
Disclosure Schedule, and except for any of the following as has not had, and
may not reasonably be expected to have, a Material Adverse Effect on the
Businesses, all material test and inspection results LM or any Transferor
Subsidiary has provided to the U.S. Government pursuant to any Government
Contract referred to in Section II.17(a) or to any other Person pursuant to
any such Government Contract or as a part of the delivery to the U.S.
Government pursuant to any such Government Contract of any article designed,
engineered or manufactured in the Businesses were complete and correct in all
material respects as of the date so provided. Except as set forth in Section
II.17 of the Contribution Disclosure Schedule, and except for any of the
following as has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Businesses, LM or any Transferor Subsidiary has
provided all material test and inspection results to the U.S. Government
pursuant to any such Government Contract as required by Applicable Law and the
terms of the applicable Government Contracts.
(f) Except for any of the following as has not had, and may
not reasonably be expected to have, a Material Adverse Effect on the
Businesses, no statement, representation or warranty made by LM or any
Transferor Subsidiary in any Government Contract, any exhibit thereto or in
any certificate, statement, list, schedule or other document submitted or
furnished to the U.S. Government in connection with any Government
Contract or Government Bid (i) contained on
II-10
the date so furnished or submitted any untrue statement of a material fact, or
failed to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading
or (ii) contains on the date hereof any untrue statement of a material fact, or
fails to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading,
except in the case of both clauses (i) and (ii) any untrue statement or failure
to state a material fact that would not result in any material liability to the
Businesses as a result of such untrue statement or failure to state a material
fact.
II.18. Intellectual Property. With respect to Intellectual
Property Rights that constitute Transferred Assets, except as set forth in
Section II.18 of the Contribution Disclosure Schedule:
(a) LM, the Transferor Subsidiaries or any Access Graphics
Foreign Subsidiaries own, free and clear of all Liens other than Permitted
Liens, all right, title and interest in such Intellectual Property Rights.
To the best of the knowledge of LM, the use of such Intellectual Property
Rights in connection with the operation of the Businesses as heretofore
conducted does not conflict with, infringe upon or violate any patent,
patent licenses, patent application, trademark, trade name, trademark or
trade name registration, copyright, copyright registration, service xxxx,
brand xxxx or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes of any third person, firm
or corporation, except for conflicts, infringements or violations that have
not had and may not reasonably be expected to have a Material Adverse
Effect on the Businesses;
(b) LM, the Transferor Subsidiaries or any Access Graphics
Foreign Subsidiaries have the right to use all inventions, processes,
computer programs, know-how, formulae, trade secrets, patents, chip design,
mask works, trademarks, trade names, brandnames and copyrights which are
used by the Businesses and which are necessary for the continued operation
of the Businesses in substantially the same manner as its operations have
heretofore been conducted except where the failure to have any such right
has not had, and may not reasonably be expected to have, a Material Adverse
Effect on the Businesses; and
(c) Upon the consummation of the Closing, (A) the Company
will be vested with all of LM's, the Transferor Subsidiaries' and the
Access Graphics Foreign Subsidiaries' rights, title and interest in, and
LM's and the Transferor Subsidiaries' and the Access Graphics Foreign
Subsidiaries' rights and authority to use in connection with the
Businesses, all of the Intellectual Property Rights that constitute
Transferred Assets and (B) such Intellectual Property Rights together with
the Intellectual Property Rights licensed to the Company in
II-11
accordance with Section 2.08 and any other interests in intellectual property
transferred hereunder will collectively constitute such rights and interests in
intellectual property which are necessary for the continued operation of the
Businesses as a whole in substantially the same manner as its operations have
heretofore been conducted except where any inaccuracy of clause (B) has not had,
and may not reasonably be expected to have, a Material Adverse Effect on the
Businesses.
II-12
EXHIBIT III
Tax Matters
III.01. Tax Definitions. The following terms, as used herein,
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Entities" means Access Graphics, B.V., Access Graphics,
Access Graphics, Ltd., Access Graphics S.A. de C.V., Advanced Products Group,
Inc., AGT Holdings, Inc., Cad Source, Inc., Canaccess Graphics, Inc.,
Globalstar Telecommunications Limited, and any predecessors and Subsidiaries
of any of the foregoing (determined as of the Closing Date).
"Final Determination" means a determination as defined in
Section 1313(a) of the Code or any other event which finally and conclusively
establishes the amount of any liability for Taxes.
"Internal Restructuring" means, collectively, (i) the formation
by LM of the Company, which has authorized capital consisting of common and
preferred stock, and the contribution of LM of nominal capital to the Company
in exchange for Company Common Stock in a transaction intended to qualify
under Code Section 351(a); (ii) the mergers of Advanced Products Group, Inc.
and Cad Source, Inc. with and into Access Graphics in liquidations intended to
qualify under Code Section 332(a); (iii) the merger of Access Graphics with
and into AGT Holdings, Inc. ("Holdings") in a liquidation intended to qualify
under Code Section 332(a); (iv) the merger of Holdings with and into LM
followed by the contribution by LM of the assets of Holdings to the Company
intended to qualify as a reorganization described in Code Sections 368(a)(1)(A)
and 368(a)(2)(C) and a transaction described in Code Section 351(a); and (v)
the contribution by LM of the Thrust Reverser Business, the Equity Securities,
and cash to the Company in exchange for Company Common Stock and Company
Preferred Stock in a transaction intended to qualify under Code Section 351(a).
"Post-Closing Tax Period" means any Tax period (or portion
thereof) ending after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the Closing Date.
III-1
"Tax" means any tax imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA, or FUTA), real or personal property
tax or ad valorem tax, transfer or recording tax, sales or use tax, excise
tax, stamp tax or duty, any withholding or backup withholding tax, value added
tax, severance tax, prohibited transaction tax, premiums tax, occupation tax,
together with any interest or any penalty, addition to tax or additional
amount imposed by any governmental authority (domestic or foreign) responsible
for the imposition of any such tax.
III.02. Tax Matters. (a) LM will indemnify and hold harmless
the Company and any Affiliate from and against any and all Damages in respect
of Taxes which are Excluded Liabilities.
(b) Taxes (including any Taxes imposed on Company Entities) are
Excluded Liabilities if and only if (i) such Taxes are imposed in respect of
the Contribution and Assumption and the Internal Restructuring (other than
Taxes apportioned to the Company under Section III.03(b)); or (ii) such Taxes
arise from or with respect to the Transferred Assets or the operations of the
Businesses (including any Transferred Assets owned or operations of the
Businesses conducted by an Affiliate of LM) for any Pre-Closing Tax Period and
(A) such Taxes are income or franchise taxes; (B) such Taxes have been
withheld (or were required to be withheld) by LM or any Affiliate as
withholding agent; (C) such Taxes are apportioned to LM under Section
III.03(a); or (D) such Taxes (other than any income or franchise taxes, taxes
imposed in respect of the Contribution and Assumption, taxes withheld (or
required to be withheld) by LM or any Affiliate as withholding agent, or any
real property taxes, personal property taxes, or similar ad valorem
obligations) exceed in the aggregate the provision therefor reflected on the
Closing Balance Sheets (not including any amount properly reflected for
deferred taxes) and then only to the extent of such excess.
(c) LM represents and warrants to the Company that the tax
bases of the Transferred Assets and Assumed Liabilities as of December 31,
1996 set forth in Section III.02 of the Contribution Disclosure Schedule,
which portion of such Contribution Disclosure Schedule will be delivered to
the Company by December 15, 1997, have been determined in a manner
consistent with (i) the consolidated federal income returns filed by LM for
all taxable periods ending on or before December 31, 1996, as adjusted by
amended returns and all agreed Internal Revenue Service audit adjustments
to September 30, 1997, and (ii) the current liability for federal income
taxes as shown in the financial statements of LM for the quarter ended
September 30, 1997.
III-2
(d) For purposes of this Agreement, income, deductions, and
other items will be allocated between the final Pre-Closing Tax Period and
the initial Post-Closing Tax Period based on an actual closing of the books
of the Businesses on the Closing Date. Any amounts attributable to
transactions not in the ordinary course of business at or prior to Closing
will be allocated to the final Pre-Closing Tax Period, and any amounts
attributable to transactions not in the ordinary course of business after
Closing will be allocated to the initial Post-Closing Tax Period.
III.03. Allocation of Taxes. (a) Any liability for real
property tax, personal property tax or any similar ad valorem obligation
levied with respect to any Transferred Asset or the Businesses for a taxable
period which includes (but does not end on) the Closing Date will be
apportioned ratably as of the Closing Date 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 included in the Post-Closing Tax Period. Within one
year after the Closing, LM and the Company will each present a statement to
the other setting forth the amount of reimbursement to which it and its
Affiliates are entitled under this Section III.03(a) together with such
supporting evidence as is reasonably necessary to calculate the proration
amount. The proration amount will be paid by the party owing it to the other
within 30 days after delivery of such statement. Thereafter, LM will notify
the Company upon receipt of any xxxx for real or personal property taxes
relating to the Transferred Assets or the Businesses, part or all of which are
attributable to the Post-Closing Tax Period, and will promptly deliver such
xxxx to the Company which shall pay the same (or cause it to be paid) to the
appropriate taxing authority, provided, that if such xxxx also covers the
Pre-Closing Tax Period, LM will remit prior to the due date of assessment to
the Company payment for the proportionate amount of such xxxx that is
attributable to the Pre-Closing Tax Period. In the event that either LM and
its Affiliates on the one hand or the Company and its Affiliates on the other
hand thereafter makes a payment for which it is entitled to reimbursement
under this Section III.03(a), the other party will make such reimbursement
promptly but in no event later than 30 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. Any payment required
under this Section III.03(a) and not made within 30 days of delivery of the
statement relating thereto will bear interest at the rate per annum
determined, from time to time, under the provisions of Section 6621(a)(2) of
the Code, compounded daily.
(b) Any recording or filing fees with respect to the
transfer of the Transferred Assets or the Businesses to the Company or the
Company Entities in connection with the Contemplated Transactions will be
paid by the Company, and
III-3
any transfer, documentary, sales, use or other Taxes assessed upon or with
respect to such transfer will be shared equally by LM and the Company.
III.04. Tax Cooperation and Consistent Reporting. (a) The
Company and LM agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information and assistance relating
to the Transferred Assets and the Businesses (including, without limitation,
access to books and records) as is reasonably necessary for the filing of all
Tax returns, and making of any election related 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 return. The Company and LM will
cooperate with each other in the conduct of any audit or other proceeding
related to Taxes and all other Tax matters relating to the Transferred Assets
and the Businesses, and each will execute and deliver such powers of attorney
and other documents as are necessary to carry out the intent of this Section
III.04.
(b) Unless there has been a Final Determination to the
contrary, LM and the Company covenant and agree, for all Tax purposes
including all Tax returns and any Tax controversies, to (and to cause any
Affiliate or successor to their assets or businesses to) take each of the
positions set forth below (and not to take any position inconsistent
therewith) after the Closing:
(i) Each step in the Internal Restructuring and the
Contribution and Assumption will be treated for federal income
tax purposes as follows:
(A) The contribution by LM of nominal capital to the
Company in exchange for Company Common Stock will qualify
under Code Section 351(a).
(B) The mergers of Advanced Products Group, Inc.
and Cad Source, Inc. with and into Access Graphics will
qualify as liquidations under Code Section 332(a).
(C) The merger of Access Graphics with and into
Holdings will qualify as a liquidation under Code Section
332(a).
(D) The merger of Holdings with and into LM
followed by the contribution by LM of the assets of Holdings
to the Company will qualify as a transaction described in
Code Sections 368(a)(1)(A) and 368(a)(2)(C) and a transaction
described in Code Section 351(a).
(E) The contribution by LM of the Thrust Reverser
Business, the Equity Securities, and cash to the Company in
exchange for Company Common Stock and Company Preferred Stock
will qualify under Code Section 351(a).
III-4
(ii) The Exchange will qualify as a split-off described in
Section 355(a) of the Code to which Sections 355(d) and 355(e) of
the Code will not apply.
(iii) Any loans made pursuant to Section 4.09 of the
Contribution Agreement will constitute valid indebtedness for
Federal income tax purposes.
(iv) Neither the Company, any Affiliate thereof, nor any
successor to their assets or businesses will be entitled to claim
any deduction in respect of any Assumed Liability to the extent
deducted by LM or a Transferor Subsidiary on a return filed prior
to the date of this Agreement.
(v) The aggregate fair market value of the Businesses on
the Closing Date will be not less than the amount stated in
paragraph (85) of the Officers' Certificate of Xxxxxx X. Xxxxxxx
and Xxxx X. Xxxxxxxx referred to in Section 8.02(d)(i) of the
Exchange Agreement and in paragraph (c) of the Officer's
Certificate of Xxxxxx X. Xxxxxxxxx referred to in Section
8.03(b)(i) of the Exchange Agreement.
(vi) The tax basis of each Transferred Asset to be received
by the Company will be the same as the tax basis of such asset in
the hands of LM or the Transferor Subsidiary immediately before
such assets are received by the Company.
(vii) The tax basis of the Equity Securities in the hands
of LM is $128,000,000.
(viii) Any sale by LM pursuant to an exercise by the
Company of the Northrop Grumman Option described in Section
4.07(b) will be a taxable sale.
Neither LM nor the Company nor any Affiliate of either shall be deemed to
have taken a position contrary to any of the positions set forth in this
Section III.04(b) merely by making a monetary settlement with a Tax
authority.
III-5
(c) LM and the Company agree to report to the other any
communication from or with the Internal Revenue Service (including any
communication from or with an Affiliate) which relates in any way to the
characterization of the Contemplated Transactions. Notwithstanding any such
communication, LM and the Company covenant and agree to (and to cause any
Affiliate or successor to their assets or businesses to) continue to take each
of the positions specified in Section III.04(b) for all Tax purposes (unless
there has been a Final Determination contrary to such position). Without
limiting the generality of the foregoing, (i) LM and any Transferor Subsidiary
will file with its federal income tax return for the taxable year in which the
Exchange is made (which tax return shall be timely filed) the information
required by Treas. Reg. Section 1.355-5(a), and will deliver a copy of that
statement to the Company within ten days thereafter, and (ii) the Company will
cause its ultimate parent to file with its federal income tax return for the
taxable year in which the Exchange is made (which tax return shall be timely
filed) the information required by Treas. Reg. Section 1.355-5(b), and will
deliver a copy of that statement to LM within ten days thereafter.
(d) The Company will keep LM fully advised with respect to,
and will xxxxx XX full rights of consultation in connection with, any claim
or protective claim for refund, or any request made by LM to file such a
claim or protective claim, based on any position contrary to any position
described in Section III.04(b)(i); provided, that (i) unless there has been
a Final Determination contrary to such position described in Section
III.04(b)(i), the Company will not file any such claim or protective claim
unless so requested by LM; (ii) the Company will have the right, in its
reasonable discretion, to accept or reject any such request to file such a
claim or protective claim; (iii) if the Company rejects such request,
then, unless such claim or protective claim is based on a position contrary
to the position described in Section III.04(b)(ii), III.04(b)(iii), or
III.04(b)(v), the Company will be obligated to pay to LM the amount which
(in the judgment of the Accounting Referee) would have been payable
pursuant to Section III.05 if the Company had accepted such request.
(e) Unless and until there has been a Final Determination
to the contrary, LM covenants and agrees, for all Tax purposes, including
all Tax returns and any Tax controversies, that it will not claim, and will
cause any Affiliate not to claim, a deduction with respect to (i) any
vacation pay or other amount subject to Section 404 of the Code that, but
for the Contribution and Assumption, would not be deductible by LM or such
Affiliate on or before the Closing Date or (ii) any incentive compensation
paid by the Company on or after the Closing Date or (iii) any amount paid
by the Company or LM pursuant to Section IV.10(e).
III-6
(f) Neither LM nor any Affiliate shall take any action or
omit to take any action relating to any Pre-Closing Tax Period to the
extent that such action or omission could reasonably be expected to affect
adversely the Tax liabilities of the Company or of any Affiliate of the
Company for any Post-Closing Period, unless such action or omission is
consistent with past practices of LM or such Affiliate in connection with
the operation of the Businesses.
(g) Any payment by LM or the Company under this Exhibit III or
Section 7.02 of this Agreement will be allocated between principal and interest
for purposes of Section 483, Section 1273, and any other relevant provision of
the Code by using as a discount rate the rate per annum determined from time
to time under Section 6621(a)(2) of the Code compounded daily for the period
from the date of Closing to the date on which the payment is made. The
portion of any such payment by LM treated as principal will be treated as
additional XX Xxxx Contribution Amount. Any payment by the Company under this
Exhibit III or Section 7.02 of this Agreement (other than the portion treated
as interest) will be treated as a reduction of the XX Xxxx Contribution
Amount.
(h) LM and the Company shall execute on the Closing Date the Tax
Assurance Agreement.
III.05. Tax Benefit Payments. (a) If a Final Determination is
made contrary to the position described in Section III.04(b)(i), then (in
addition to any other remedies which may be available to LM but without
duplication thereof) the Company will pay to LM for each Post-Closing Tax
Period an amount equal to the excess of (A) the liability for federal, state
and local Taxes to which the Company or any other Affiliates or any successor
to their assets or businesses (collectively, the "Taxpayer") would have been
subject for all Post-Closing Tax Periods in each relevant jurisdiction had the
position described in section III.04(b)(i) been sustained (and had the Company
not been required to make any payments pursuant to this Section III.05), over
(B) the Taxpayer's actual liability for such Taxes for such periods. Such
payment will be due (subject to a ten-day grace period) when, as, and to the
extent the Taxpayer derives an actual benefit (in the form of any refund,
reduction in Tax liability, or otherwise) as the result of such excess. If
any payment required under this Section III.05(a) for any Post-Closing Tax
Period is not made on or before the due date (without extensions) of the
return of such period, then such payment will be made together with interest
at the rate per annum determined from time to time under Section 6621(a)(2) of
the Code compounded daily for the period from such due date to the date on
which the payment is actually made. From the date of receipt of any payment
under this Section III.05(a) relating to any Post-Closing Tax Period until the
expiration of the period of limitations under Section 6501 of the Code in
respect of such period, LM will either (i) maintain a credit rating with
respect to its senior unsecured
III-7
indebtedness of at least AA by Standard & Poor's Corporation or an equivalent
credit rating by any nationally recognized credit rating service, or (ii) within
ten days after receipt of written notice from the Company, provide to the
Company a letter of credit or other assurance reasonably satisfactory to the
Company of the ability of LM to meet its obligations under Section III.05(c). If
LM fails to meet the requirements of the preceding sentence, then (so long as
such failure may continue but in no event beyond the expiration of the relevant
period of limitations under Section 6501 of the Code) the obligations of the
Company to make any payments under this Section III.05 will be suspended.
(b) In addition, the Company will pay to LM, no later than
ten days after each date on which the Taxpayer receives a refund of
federal, state or local Taxes for a Pre-Closing Tax Period, the excess of
such refunds over such refunds to which the Taxpayer would have been
entitled had the position described in Section III.04(b)(i) been sustained
(and had the Company not been required to make any payments under this
Section III.05). If any payment required under this Section III.05(b) is
not made on or before the date such payment is due, then such payment will
be made together with interest at the rate per annum determined from time
to time under Section 6621(a)(2) of the Code compounded daily for the
period from the date such payment was due to the date on which such payment
is actually made. From the date of receipt of any payment under this
Section III.05(b) relating to any refund until the expiration of the period
for recovery of such refund under section 6532(b) of the Code, LM will
either (i) maintain a credit rating with respect to its senior unsecured
indebtedness of at least AA by Standard & Poor's Corporation or an
equivalent credit rating by any nationally recognized credit rating
service, or (ii) within ten days after receipt of written notice from the
Company, provide to the company a letter of credit or other assurance
reasonably satisfactory to the Company a letter of credit or other
assurance reasonably satisfactory to the Company of the ability of LM to
meets its obligations under Section III.05(c). If LM fails to meet the
requirements of the preceding sentence, then (so long as such failure may
continue but in no event beyond the expiration of the relevant period for
recovery of a refund under Section 6532(b) of the Code) any obligation of
the Company to make payments under this Section III.05(b) will be
suspended.
(c) In the event of any adjustment to the Taxpayer's
liability for federal, state or local taxes or entitlement to a refund, as
a result of audit, carryover, carryback, or otherwise, the amounts
previously payable under this Section III.05 will be appropriately adjusted
and the Company or LM, as the case may be, will pay to the other the amount
required as a result of such adjustment, together with interest at the rate
per annum determined from time to time under Section 6621(a)(2) of the Code
compounded daily for the period from the original payment date affected by
the adjustment to the date on which the payment is
III-8
made. At the time of any payment under this Section III.05 (or at the request of
LM if the Company has determined that no payment is due), the Company will
submit a schedule showing in reasonable detail its calculation of the payment to
be made (or the basis for its determination that no payment is due). Any dispute
concerning the calculation of payments due under this Section III.05 will be
resolved by the Accounting Referee.
(d) LM will pay (i) any fees or other amounts due to the
Accounting Referee in respect of the resolution of any dispute pursuant to
Section III.05(c), and (ii) all reasonable costs (including the reasonable
internal costs of the Company or any Affiliate or successor) to comply with
the provisions of this Section III.05.
(e) If a Final Determination is made contrary to a position
described in Section III.04(e), then paragraphs (a) through (d) of this
Section III.05 will apply mutatis mutandis to require such payments by LM to
the Company as may be appropriate.
III-9
EXHIBIT IV
Employment and Employee Benefit Matters
IV.01. Employee Benefit Definitions. The following terms, as
used herein, shall have the following meanings:
"Affiliate Plan" means each Employee Plan and Benefit
Arrangement which is sponsored solely by Access Graphics or its respective
Subsidiaries and which covers Transferred Employees.
"Benefit Arrangement" means each employment, severance,
continuation pay, termination pay, layoff, or other similar written contract,
arrangement or policy and each written plan or arrangement providing for
health, medical, life or other welfare benefit insurance coverage (including
any insured, self-insured or other arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, holiday, education or
vacation benefits, retirement benefits or deferred compensation,
profit-sharing, benefits in the event of a sale of the Businesses or other
change in the control, management or the ownership of the Businesses, bonuses,
stock options, stock appreciation or other forms of incentive compensation
(other than commissions) or post-retirement insurance, compensation or
benefits (including pensions, social security or similar programs under
foreign law) which (i) is not an Employee Plan, (ii) is or has been entered
into, maintained, administered or contributed to, as the case may be, by LM or
any of its Affiliates and (iii) covers any Transferred Employee or for which a
Transferred Employee would be eligible upon retirement or other termination of
service.
"Employee Plan" means each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, which (iv) is subject to any
provision of ERISA, (v) is or has been entered into, maintained, administered
or contributed to by LM or any of its Affiliates and (vi) covers any
Transferred Employee.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Transferred Employee" means any Person who, (vii) on the
Closing Date, is actively employed in the Thrust Reverser Business or who, with
respect to the Thrust Reverser Business, returns to service with the Company
within 12 months of the Closing Date in accordance with Section IV.03 hereof
upon exercise of recall rights or following a leave of absence or (viii) is
employed (whether actively
IV-1
or on leave of absence), as of the Closing Date, in the Access Graphics Business
(including the Access Graphics Foreign Subsidiaries), except for those employees
identified in writing and acceptable to LM.
IV.02. ERISA Representations. Except as set forth in Section
IV.02 of the Contribution Disclosure Schedule, LM hereby represents and
warrants to the Company that:
(a) Section IV.02(a) of the Contribution Disclosure
Schedule lists each Employee Plan which is maintained, administered or
contributed to by LM. With respect to each such Employee Plan, LM will
furnish or make reasonably available to the Company not more than 5
Business Days after the date hereof a true and complete copy of the most
recent plan document (and, if applicable, the most recent draft of any
amendment or restatement proposed to be adopted) and the most current
summary plan description and the most recently filed Form 5500, as
applicable, of each such plan (the "Employee Plan Documentation"). LM will
identify all other Employee Plans to the Company and use best efforts to
furnish or make reasonably available to the Company the Employee Plan
Documentation relating thereto as soon as practicable after the date
hereof.
(b) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be qualified under Section 401(a) of the Code and each trust related
thereto has been determined to be exempt from tax pursuant to Section 501(a)
of the Code and LM is not aware of any event that has occurred since the date
of such determinations, including changes in laws or regulations or
modifications to such Employee Plan and any changes set forth in the draft
restatement of the LM Retirement Income Plan ("RIP I") provided to the Company
prior to the date hereof, that would adversely affect such qualification or
tax exempt status. LM will furnish or make reasonably available to the
Company not more than 5 Business Days after the date hereof copies of the most
recent Internal Revenue Service determination letters with respect to each
Employee Plan. Neither LM nor any of LM's Affiliates has incurred any
liability under Title IV of ERISA in connection with the termination of any
plan covered or previously covered under Title IV of ERISA that could become,
after the Closing Date, an obligation of the Company.
(c) Section IV.02(c) of the Contribution Disclosure
Schedule identifies each material Benefit Arrangement which is or has been
entered into, maintained, administered or contributed to by LM. LM will
furnish or make reasonably available to the Company copies or descriptions
of each such Benefit Arrangement not more than 5 Business Days after the
date hereof. LM shall identify all other Benefit Arrangements to the
Company and use best efforts to
IV-2
furnish or make reasonably available to the Company copies or descriptions of
such other Benefit Arrangements as soon as practicable after the date hereof.
(d) To the best of the knowledge of LM, there are no oral
employee benefits plans or arrangements which, if written, would constitute
Employee Plans or Benefit Arrangements.
(e) No Employee Plan is a "multiemployer plan" as defined in
Section 3(37) of ERISA.
(f) Section IV.02(f) of the Contribution Disclosure
Schedule lists each bargaining agent representing or purporting to
represent any Transferred Employees (whether or not recognized by LM, or
any of its Affiliates as the recognized collective bargaining agent) of
which LM is aware. LM will furnish or make reasonably available to the
Company copies of each collective bargaining agreement currently applicable
to any Transferred Employee to which LM or any LM Affiliate is a party not
more than 5 Business Days after the date hereof.
(g) LM shall identify to the Company within 5 Business Days
of the date hereof, each Employee Plan and Benefit Arrangement pursuant to
which any Transferred Employee will become entitled to any material
compensation, bonus, retirement, severance, job security or similar benefit
or enhanced such benefit solely as a result of the transactions
contemplated by this Agreement.
(h) There is no litigation or benefit dispute pending or
threatened that involves any Employee Plan or Benefit Arrangement that
could reasonably be expected to have a Material Adverse Effect on the
Businesses.
(i) No "reportable event" within the meaning of Section
4043(b) of ERISA has occurred with respect to any Employee Plan since
December 31, 1994 that could have a Material Adverse Effect on the
Businesses (other than reportable events for which the reporting
requirement has been waived by the PBGC or that occur as a result of the
transactions contemplated by this Agreement).
(j) The Accumulated Postretirement Benefit Obligation (as
defined in Statement of Financial Accounting Standards No. 106) as of
October 1, 1997 in respect of postretirement health and life benefits for
Transferred Employees is estimated by LM to be $10,460,000, calculated
using the actuarial assumptions used for the 1996 LM Annual Report.
(k) Each Benefit Arrangement and each Employee Plan has been
maintained in substantial compliance with its plan documents (and, if
applicable, the most recent draft provided to the Company prior to the Closing
Date of any
IV-3
amendment or restatement proposed to be adopted) and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
including, without limitation, ERISA and the Code, except such instances of
noncompliance which, in the aggregate, would not have a Material Adverse Effect
on the Businesses.
(l) As of October 1, 1997, the fair market value of the
assets of each of RIP I, the LM Retirement Income Plan II ("RIP II") and
the LM Aerospace Pension Plan for Employees in the Bargaining Unit (the
"Aerospace Plan") (excluding for these purposes any accrued but unpaid
contributions and any assets attributable to contributions made under
Section 401(h) of the Code) exceeds the present value of all benefits
accrued as of such date under the applicable plan using the 1996 Form 5500
actuarial assumptions for the applicable plan.
(m) The distributions to be made under Section IV.07 below
satisfy the conditions contained in Section 401(k) of the Code and the
regulations thereunder.
IV.03. Employees and Offers of Employment. (a) With respect
to the Thrust Reverser Business, the Company shall offer or cause one of its
Affiliates to offer employment to commence on the Closing Date to all
Transferred Employees and shall be a successor employer for all employment
matters with respect to Transferred Employees as of the Closing Date, except
that in the case of former employees of such Business who exercise recall
rights under a collective bargaining agreement or employees of such Business
who are on leave of absence due to illness, disability, workers' compensation,
military service or other authorized leave of absence as of the Closing Date,
the foregoing obligations of the Company to offer employment and to become a
successor employer shall arise only upon such recall or the expiration of any
such leave of absence period, in either case which shall occur within 12 months
following the Closing Date. (For purposes of this Exhibit IV, with respect to
any such employees or former employees who become employed by the Company
within 12 months of the Closing Date in accordance with the foregoing, such
employees shall become Transferred Employees on the date of reemployment by,
or return to work with, the Company and any obligations of the Company to
"Transferred Employees" that arise upon the Closing Date shall, where
applicable, be treated as applying to each such employee upon such employee's
date of reemployment or return to work). With respect to the Access Graphics
Business, any Transferred Employee shall continue employment with such
Business immediately following the Closing Date. Each Transferred Employee
shall initially be offered a position (or shall continue in a position, as
applicable) similar to his or her position immediately prior to the Closing
Date, at the same job and salary or wage levels, with bonus, incentive plans
(other than commissions) and other employee benefit plans
IV-4
substantially similar to those provided immediately prior to the Closing Date.
Such offers of employment (or continued employment, as applicable) shall
initially be at the same respective locations as those at which such Transferred
Employees are employed immediately prior to the Closing Date. LM shall, within 5
Business Days of the date hereof, provide the Company with a true, correct and
complete list of all employees of the Businesses (including those employees on
leave of absence) together with the annual rate of pay and any bonus, if
applicable, paid to each such employee during the preceding 12 month period, and
the date on which any leave of absence commenced. LM will also provide the
Company with a recall list containing the names of laid off represented
employees who retain recall rights as of the Closing Date. The information
included on these lists shall, at a minimum, enable the Company to determine
vacation eligibility and unpaid vacation for the calendar year in which the
Closing Date occurs. Not later than 45 days following the Closing Date, LM shall
provide the Company with a list of employees of the Businesses which, on a
preliminary basis, estimates the accrued pension benefit for each such employee.
LM shall provide the Company with a final listing of such employees showing each
employee's accrued pension benefit as soon as practicable thereafter.
(b) LM shall provide any notices to Transferred Employees
which may be required under the Worker Adjustment Retraining and
Notification Act, 29 USC 2101 et seq. ("WARN") with respect to events
which occur prior to the Closing Date and the Company shall provide any
notices to Transferred Employees which may be required under WARN with
respect to events which occur on or after the Closing Date.
(c) Subject to Section 4.10(b) of this Agreement, LM will
not take, and will cause each of its Affiliates not to take, any action
which would impede, hinder, interfere or otherwise compete with the
Company's efforts to hire or retain any Transferred Employees.
IV.04. Plans Following the Closing. (a) Except to the extent
changes are required by Applicable Law or necessary to maintain the
tax-favored status of any employee benefit plan or arrangement, from the
Closing Date through December 31, 1998, the Company will maintain or cause to
be maintained employee compensation and benefit plans and arrangements for the
benefit of the Transferred Employees that are substantially similar to the
Employee Plans and Benefit Arrangements (other than the LM Supplemental
Savings Plan and any deferred bonus plan) in the form furnished or made
available to the Company prior to the Closing Date; provided that layoff
benefits and severance benefits shall be identical during this period; and
provided, further, that for those Transferred Employees who are currently
participating in the LM nonqualified defined benefit pension plans, the
Company will provide, or cause to be provided,
IV-5
an equivalent plan or plans during the term of their employment with the Company
and its Affiliates. The Company will give Transferred Employees full credit for
purposes of eligibility, vesting and benefit accrual under any such plans or
arrangements maintained by the Company pursuant to this Section IV.04 for such
Transferred Employees' service recognized for such purposes under the Employee
Plans and Benefit Arrangements.
(b) With respect to RIP I, RIP II and, subject to collectively
bargained obligations, the Aerospace Plan, until December 31, 1998, the
Company will provide Transferred Employees participating in such plans as of
the Closing Date with pension benefits that accrue on a basis no less
favorable to such employees than would accrue under such plans (as in effect
on the Closing Date) assuming the Transferred Employees had continued to
participate therein until December 31, 1998, based on their continued service
and compensation with the Company following the Closing Date.
(c) The Company's plans that are welfare plans (as defined in
Section 3(1) of ERISA) shall not contain a clause excluding coverage for
preexisting conditions and shall provide that any expenses incurred under the
Employee Plans by Transferred Employees during the calendar year in which the
Closing Date occurs shall be taken into account during the first plan year of
such welfare plans for the purposes of satisfying deductible and coinsurance
requirements and satisfaction of maximum out-of-pocket provisions to the same
extent as if such expenses had been incurred after the Closing Date.
(d) The parties agree to cooperate in the equitable treatment of
flexible spending accounts for Transferred Employees, with the obligations of
LM and the Company to be reconciled taking into account the respective payroll
deductions collected, and the claims experience, of each during the plan year
in which the Closing Date occurs. LM shall provide the Company with
information regarding enrollment and election options by each Transferred
Employee for the year following the year in which they become a Transferred
Employee.
(e) Effective as of the Closing Date, LM and the Company will
enter into a benefit administration agreement or agreements, whereby LM shall
provide management and administrative services with respect to benefit plans,
payroll and other services and arrangements adopted by the Company and the
Company shall provide similar services to LM as requested, effective as of the
Closing Date. The term of any such benefit administration agreement(s) shall be
for a period of not less than twelve months, or for such longer period, ending
not later than December 31, 1998, as shall be administratively feasible for LM
or the Company, as applicable, based on consistency of the Company's plans with
plans maintained by LM, and shall contain appropriate provisions regarding
indemnification of XX
XX-6
or the Company, as the case may be, their Affiliates and each officer, employee
and director of LM or the Company and their Affiliates and each fiduciary of any
such benefit plans and arrangements with respect to the provision of such
management and administrative services. The Company and LM agree to negotiate in
good faith the cost of such services and actual terms of any such benefit
administration agreement(s). LM shall provide the Company with at least 60 days'
advance notice of any changes to its plans that are scheduled to go into effect
prior to December 31, 1998 that will affect LM's ability to continue to
administer the Company's plans.
IV.05. Collective Bargaining Agreements. The Company shall
expressly recognize any collective bargaining representative recognized by LM
or any of its Affiliates as of the Closing Date for units consisting of
Transferred Employees and identified on Section IV.02(f) of the Contribution
Disclosure Schedule or otherwise identified to the Company after the date
hereof pursuant to Section IV.02(f) and shall expressly assume any and all of
LM's or any of its Affiliate's obligations under any collective bargaining
agreements existing on the Closing Date with respect to the Transferred
Employees. This obligation to recognize and comply with the terms and
conditions of existing bargaining agreements does not include the obligation to
continue certain LM Employee Plans and Benefit Arrangements which Transferred
Employees will no longer be eligible to participate in after the Closing Date.
The obligations of the Company with respect to the Employee Plans and Benefit
Arrangement are dealt with separately herein.
IV.06. Pension Plans. (a) With respect to RIP I, RIP II and
the Aerospace Plan (the "Spinoff Plans"), the Company shall (or shall cause one
of its Affiliates to) establish or designate a defined benefit plan or plans
(each such plan, together with any successor thereto, being hereinafter
referred to as a "Successor Plan") which provide benefits until December 31,
1998 for the Transferred Employees participating in the Spinoff Plans
substantially similar to the benefits provided on the Closing Date under such
Spinoff Plans. The Company shall take all necessary action to qualify each
Successor Plan under the applicable provisions of the Code. The Successor
Plans shall contain appropriate provisions providing that (i) any transferred
assets held by the trust forming a part of such Successor Plan shall be held
for the exclusive benefit of the participants in such Successor Plan, and with
respect to transferred assets from RIP II, may not upon termination of the
Successor Plan, revert to the employer or sponsor of such Successor Plan and
(ii) the accrued benefits as of the Closing Date under such Successor Plan
may not be decreased by amendment, or otherwise.
(b) As soon as practicable after the Closing Date, but in
any event within 90 days of the Closing Date, LM shall cause the trustees
of the Spinoff Plans
IV-7
trusts ("Trustees") to transfer in cash to the appropriate trustees of the
Successor Plans, and the Company shall cause the trustees of the Successor Plans
to accept, the Initial Pension Transfer Amount, increased for interest pursuant
to paragraph (c) below. The "Initial Pension Transfer Amount" shall be equal to
$17,925,000 in the case of RIP I, $500,000 in the case of RIP II and $9,141,000
in the case of the Aerospace Plan. As soon as practicable following the first
anniversary of the Closing Date, but in any event within 15 months following the
Closing Date, LM shall cause the Trustees of each Spinoff Plan to transfer in
cash to the trustees of the appropriate Successor Plan, and the Company shall
cause the trustees of the Successor Plans to accept, an amount equal to the
Final Pension Transfer Amount minus the Initial Pension Transfer Amount, with
the difference increased for interest pursuant to paragraph (c) below. The
"Final Pension Transfer Amount" shall be calculated separately with respect to
each Spinoff Plan. In the case of the Aerospace Plan, the Final Pension Transfer
Amount shall be equal to the greater of (i) the aggregate projected benefit
obligation ("PBO") of all Transferred Employees under the Aerospace Plan
calculated as of the Closing Date and determined in accordance with the
actuarial assumptions and methodology used in LM's 1996 Corporate Annual Report
(the "LM Assumptions") as applied to the Aerospace Plan or (ii) such amount
determined as of the Closing Date as may be necessary to meet the requirements
of Section 414(l) of the Code. In the case of RIP I, the Final Pension Transfer
Amount shall be equal to the aggregate PBO of all Transferred Employees under
RIP I calculated as of the Closing Date and determined in accordance with the LM
Assumptions as applied to RIP I. In the case of RIP II, the Final Pension
Transfer Amount shall be equal to the aggregate PBO of all Transferred Employees
under RIP II calculated as of the Closing Date and determined in accordance with
the LM Assumptions as applied to RIP II. The Final Pension Transfer Amount for
each Spinoff Plan shall be reduced to reflect any pension payments made by such
Spinoff Plan to Transferred Employees after the Closing Date and prior to the
date of the transfer of the Initial Pension Transfer Amount pursuant to
paragraph (f) below. Each Successor Plan shall receive its appropriate share of
the amounts transferred under this paragraph (b) based on the Transferred
Employees participating in such Successor Plan. In the event the Initial Pension
Transfer Amount exceeds the Final Pension Transfer Amount for any Spinoff Plan,
the appropriate Successor Plan shall transfer the difference to such Spinoff
Plan, increased for interest pursuant to paragraph (c) below. Such transfer
shall be made in cash as soon as practicable following the first anniversary of
the Closing Date, but in any event within 15 months following the Closing Date.
(c) Interest described in paragraph (b) above shall be
credited for the period after the Closing Date (or, with respect to any
transfer described in the last two sentences of paragraph (b) above, after the
transfer of the applicable Initial Pension Transfer Amount) to the date of
transfer as follows:
IV-8
(i) The rate of interest attributable to the Initial
Pension Transfer Amounts shall be based on the 90-day Treasury
Xxxx Rate on the auction date coincident with or immediately
preceding the Closing Date;
(ii) The rate of interest attributable to the final
transfers to be made to or from the Successor Plans no later than
15 months after the Closing Date shall be based on the one-year
Treasury Xxxx Rate reported by the Federal Reserve statistical
release (H.15(519)) as U.S. Government securities, Treasury
Bills, Auction average, one-year, coincident with or immediately
preceding the Closing Date.
(d) Subject to collective bargaining, a former employee
recalled by the Company beyond 12 months following the Closing Date shall
not be a Transferred Employee under this Agreement and no pension assets
and liabilities with respect to such recalled employee shall be
transferred.
(e) All actions taken under this Section, including the
calculation of the amount of pension assets to be transferred, shall in any
event meet the requirements of Section 414(l) of the Code and in no event
shall any transfer provided for above be made prior to 30 days following the
date of filing of any notices required under Section 6058(b) of the Code,
along with the required actuarial certification of the amount to be
transferred, with both LM and the Company to use their best efforts to cause
such calculations and notice to be prepared and filed as promptly as
practicable following the Closing Date.
(f) Transferred Employees shall cease to accrue benefits
under the Spinoff Plans as of the Closing Date and, in consideration for
the transfer of assets described herein, the Company shall, effective as of
the Closing Date, assume or cause its Affiliates to assume all of the
obligations of LM and its Affiliates in respect of benefits accrued by
Transferred Employees under the Spinoff Plans on or prior to the Closing
Date and the Company shall indemnify LM and its Affiliates and each
officer, employee and director of LM and its Affiliates and each fiduciary
of the Spinoff Plans from any and all Damages incurred or suffered by them
arising out of, in respect of, or in connection with the qualified status
of any Successor Plan or the obligations assumed by the Company in this
Section. Prior to the transfer of the Initial Pension Transfer Amount, LM
shall cause the applicable Spinoff Plan to process any pension payments
that become payable to Transferred Employees. All pension payments made
after the date of the transfer of the Initial Pension Transfer Amount in
respect of Transferred Employees shall be paid by the applicable Successor
Plan.
(g) All amounts to be transferred shall be verified by an
enrolled actuary designated by LM as having been determined in accordance
with the terms of this
IV-9
Section. LM shall provide any actuary designated by the Company with all
information necessary to review the calculation of such amounts in all material
respects and to verify that such calculations have been performed in a manner
consistent with the terms of this Section. In the event of a disagreement
between the Company's designated actuary and LM's designated actuary as to the
amount of the Actual Transfer Amount, which disagreement remains unresolved for
a period in excess of 15 Business Days or such additional period as the Company
and LM may agree upon in writing (a "Disagreement"), the Disagreement shall be
submitted to the Chief Financial Officers of each of LM and the ultimate parent
of the Company for their review and resolution in such manner as they deem
necessary or appropriate. In the event such Disagreement remains unresolved for
an additional 30 Business Days, the Company and LM shall agree upon an impartial
enrolled actuary to resolve the Disagreement and determine the Actual Transfer
Amount. The parties shall share equally all costs and fees of such impartial
actuary.
(h) Notwithstanding anything herein to the contrary,
neither the Company, its ultimate parent nor any Successor Plan shall
assume any liability for any act or omission occurring prior to the Closing
Date in violation of any provision of Title I of ERISA.
(i) As of the Closing Date, (i) LM shall indemnify the Company
and its Affiliates and each officer, employee and director of the Company and
its Affiliates and each fiduciary of the Successor Plans from any Damages
resulting from a claim by the Department of Defense, the National Aeronautics
and Space Administration or any other governmental agency with which LM or any
of its Affiliates have or had a government contract with respect to Transferred
Employees on or prior to the Closing Date (a "Government Claim"), that any
portion of the assets retained by any Spinoff Plan immediately after the
transfers set forth in paragraph (b) above constituted surplus assets allocable
to Transferred Employees as of the Closing Date and attributable to work
performed under Government Contracts prior to the Closing Date to which the
claimant asserts entitlement and (ii) the Company shall indemnify LM and its
Affiliates and each officer, employee and director of LM and its Affiliates and
each fiduciary of the Spinoff Plans from any Damages resulting from a Government
Claim arising out of, in respect of, or in connection with assets of the Spinoff
Plans or the Successor Plans allocable to Transferred Employees as of the
Closing Date to the extent such assets are determined to be attributable to work
performed under Government Contracts and attributable to actions of the Company
(other than any Government Claim described in clause (i) above). The
indemnification provided for in each of clauses (i) and (ii) of this Section
IV.06(i) shall be subject to the provisions of Article 7 of the Agreement.
IV-10
(j) Notwithstanding anything set forth in this Agreement to
the contrary, the transfer of pension assets and liabilities as set forth
in Section IV.06(b) shall not result in any adjustment to the XX Xxxx
Contribution Amount or be taken into account in determining Thrust Reverser
Closing Net Worth.
IV.07. LM Savings Plans. (a) On the Closing Date, LM shall
take such action as may be necessary, if any, to permit each Transferred
Employee to exercise their rights under the LM Salaried Savings Plan or the LM
Savings and Investment Plan for Hourly Employees (the "LM Savings Plans") to
effect an immediate distribution of such Transferred Employee's vested account
balances under the Savings Plans or to effect a tax-free rollover of the
taxable portion of the account balances (to the extent permitted by law) into
an eligible retirement plan or plans (within the meaning of Section 401(a)(31)
of the Code, a "Direct Rollover") maintained by the Company or any of its
Affiliates (the "Company Savings Plans") or to an individual retirement
account. LM and the Company shall work together in order to facilitate any
such distribution or rollover and to effect a Direct Rollover for those
participants who elect to rollover their account balances directly into the
Company Savings Plans; provided that, nothing in this Agreement shall prevent
the Company from reasonably limiting Direct Rollovers as to time or the form
of the distribution from the LM Savings Plans. All participant loans of
Transferred Employees who do not elect a Direct Rollover or a distribution
that are outstanding under the LM Savings Plans as of the Closing Date shall
remain outstanding and LM and the Company agree to adopt such procedures as
are reasonably necessary to allow participants to avoid a default of such
loans, including, without limitation, continuation of payroll withholding by
the Company or an Affiliate of the Company or other means of collecting and
remitting participant loan repayments.
(b) On the Closing Date, or as soon as practicable
thereafter, the Company shall establish or designate the Company Savings
Plans in order to accommodate the Direct Rollovers described above and
shall take all action necessary, if any, to qualify the Company Savings
Plans under the applicable provisions of the Code and shall make any and
all filings and submissions to the appropriate governmental agencies
required to be made by it in connection with any Direct Rollover.
IV.08. Vacation and Holidays. As of the Closing Date, the
Company shall adopt at its expense, vacation and holiday plans for
Transferred Employees to succeed the vacation and holiday plans of the
Businesses. For the remainder of the calendar year in which the Closing
Date occurs, such plans shall be equal to and in place of what would have
been provided to such Transferred Employees had they remained employees of
LM and its Affiliates, and neither LM nor any LM Affiliate shall have any
liability or obligation to pay or provide any vacation
IV-11
or holiday payments claimed on or after the Closing Date. Thereafter, such plans
shall be equal to the plans which the Company generally provides for its U.S.
employees except that, as required by Section IV.04, such plans shall provide
vacation and holidays to each eligible Transferred Employee on the basis of his
or her continuous service with LM (or any LM Affiliate) and the Company. The
Company shall honor any banked vacation existing on the Closing Date but will
not be obligated to provide additional banking opportunities after December 31,
1997.
IV.09. Affiliate Plans. Effective as of the Closing Date, LM
shall cease to administer, contribute or have any other obligations in respect
of any Affiliate Plan and shall thereby cease to be responsible for any acts,
omissions, and transactions under or in connection with any such Affiliate
Plan which occur on or after the Closing Date. Effective as of the Closing
Date, the Company or an Affiliate of the Company shall become the sponsor of
each Affiliate Plan, shall assume all obligations of LM and its Affiliates
under each such Affiliate Plan and, in addition, shall become responsible for
all acts, omissions and transactions under or in connection with such
Affiliate Plans which occur on or after the Closing Date. LM agrees to
transfer any plan assets held by any such Affiliate Plan to the Company and to
otherwise assist in the transfer of sponsorship contemplated by this Section
IV.09.
IV.10. Other Employee Plans. Other than with respect to the
Affiliate Plans covered in Section IV.09 above,
(a) LM shall retain all obligations and liabilities under the
Employee Plans and Benefit Arrangements in respect of any employee or prior
employee (including any beneficiary or dependent thereof) who is not a
Transferred Employee.
(b) The Company shall, as of the Closing Date, assume or
cause to be assumed all obligations and liabilities (including, without
limitation, all obligations and liabilities attributable to the period
prior to the Closing Date) of LM and its Affiliates in respect of
Transferred Employees under each Employee Plan and Benefit Arrangement not
covered under Section IV.06 or IV.07 (other than any obligations and
liabilities relating to the LM Supplemental Savings Plan, which obligations
and liabilities shall be retained by LM); provided that the Company does
not agree to assume any obligations and liabilities with respect to any
deferred bonuses; and provided further that on the Closing Date,
Transferred Employees shall cease to accrue or enjoy benefits under the
Employee Plans and Benefit Arrangements and shall commence accrual of
benefits and participation in those employee compensation and benefit plan
and arrangements maintained by the Company pursuant to Section IV.04.
IV-12
(c) Without limiting the generality of Section IV.10(b), the
Company shall assume and honor, in accordance with the terms of the applicable
Benefit Arrangements, all employee incentive bonuses payable in respect of
calendar year 1997. In addition, the Company shall assume and honor, in
accordance with the terms of the applicable contractual arrangements, all
commissions required to be paid to Transferred Employees.
(d) With respect to any workers' compensation claim based on
injuries or illnesses which occurred on or prior to the Closing Date with
respect to a Transferred Employee, the Company and LM agree as follows:
(i) LM shall transfer to the Company all reserves (which
shall include a reserve for incurred but not reported claims)
applicable to such claims;
(ii) the Company or its Affiliates shall be responsible
for managing and adjudicating such claims and shall have the
authority to so manage and adjudicate such claims to the same
extent LM had such authority prior to the Closing;
(iii) LM and/or its carrier shall settle or otherwise
make payment on such claims at the instruction of the Company or
its Affiliates;
(iv) within 30 days of receipt of an invoice, the Company
or its Affiliates shall reimburse LM for the Businesses'
allocated cost of premiums, costs and expenses, including general
and administrative charges as determined by LM in a manner
consistent with prior practices and in conjunction with the Cost
Disclosure Statement filed by LM or with the United States
Government and in effect at the Closing Date or as subsequently
amended; and
(v) The Company agrees to reimburse LM for all future
costs incurred by LM under policy deductibles or retrospective
rating agreements, along with all associated claims handling
charges or similar administrative costs assessed by LM's
carriers, in the manner described under (d)(iv) above.
(e) All stock options to purchase LM Common Stock held by the
Transferred Employees as of the Closing Date that are not then vested and
exercisable shall be forfeited in accordance with their terms (the "Forfeited
Options"). Immediately prior to the Closing, LM will transfer an amount in
cash equal to 61% of the sum of the excess of $125.00 per share over the
exercise price
IV-13
per share of each Forfeited Option. Not later than five Business Days following
the first anniversary of the Closing Date (the "Anniversary Date"), the Company
shall cause to be paid to each Transferred Employee who held a Forfeited Option
and who remains an employee of the Company or its Affiliates on the Anniversary
Date an amount in cash equal to the sum of the excess of $125.00 per share over
the exercise price per share of each Forfeited Option held by such Transferred
Employee (the "Payment") plus such Transferred Employee's pro rata share (based
on the amount to be paid to each eligible employee prior to adjustment for
amounts forfeited) of any amounts forfeited by Transferred Employees who
terminate employment prior to the Anniversary Date other than in accordance with
the following sentence. Notwithstanding the foregoing, each Transferred Employee
whose employment is terminated prior to the Anniversary Date either
involuntarily by his employer, or by reason of retirement, death or disability
shall be entitled to receive a Payment.
IV.11. Representation Limitation. Notwithstanding the
foregoing, to the extent any representation and warranty made in this Exhibit
IV relates to any Employee Plan or Benefit Arrangement which is maintained,
administered or contributed to by any of LM's Affiliates and not by LM
directly, such representation and warranty is made to the best of the
knowledge of LM.
IV.12. Necessary Action. LM and the Company agree to take all
action which may be necessary in order to effectuate the transactions
contemplated by this Exhibit IV, including, without limitation, adopting any
necessary amendments to the Employee Plans and Benefit Arrangements and making
all filings and submissions to the appropriate governmental agencies required
to be made in connection with the segregation and/or transfer of assets
contemplated by Section IV.06, IV.07 and IV.09.
IV.13. Third Party Beneficiaries. No provision of this
Exhibit IV shall create any third party beneficiary rights in any employee or
former employee of the Businesses (including any beneficiary or dependent
thereof), including, without limitation, any right to continued employment or
employment in any particular position by the Company for any specified period
of time after the Closing Date.
IV.14. Indemnification Procedures. The indemnification
provisions included in this Exhibit IV shall be subject to the provisions of
Article 7 of the Agreement.
IV.15. Further Assurances. In the event that either of the
Company or LM is prohibited from taking any action contemplated by this
Exhibit as a result of any Applicable Laws or a decision of a court of
competent jurisdiction, the
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Company and LM will negotiate in good faith to restructure the transactions
contemplated by this Exhibit IV in a manner that achieves the effect with
respect to LM, the Company and the Transferred Employees that would have been
achieved had such action not been prohibited.
IV-15
