AMENDED AND RESTATED
PURCHASE AGREEMENT
BETWEEN
XXXXXXX-XXXXXXX COMPANY,
a California corporation
AND
TRACOR, INC.,
a Delaware corporation
WITH
MARCONI AEROSPACE ELECTRONIC SYSTEMS INC.,
a Pennsylvania corporation
as Assignee of Tracor, Inc.'s rights and obligations hereunder
DATED AS OF AUGUST 18, 1999
TABLE OF CONTENTS
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ARTICLE I THE SALE TRANSACTION ............................................. 1
SECTION 1.1 Purchase and Sale of the TG Business ........................ 1
SECTION 1.2 Purchase Price .............................................. 2
SECTION 1.3 Included and Excluded Assets and Liabilities ................ 2
SECTION 1.4 Post Closing Adjustment ..................................... 2
SECTION 1.5 Closing Adjustment Notice ................................... 3
SECTION 1.6 Title Insurance and Survey .................................. 4
SECTION 1.7 Escrow Fund ................................................. 5
ARTICLE II THE CLOSING ..................................................... 5
SECTION 2.1 The Closing ................................................. 5
SECTION 2.2 Closing Obligations of the Company .......................... 6
SECTION 2.3 Closing Obligations of Buyer ................................ 7
SECTION 2.4 Risk of Loss ................................................ 7
ARTICLE III REPRESENTATIONS AND WARRANTIES ................................. 8
SECTION 3.1 Representations and Warranties of the Company ............... 8
(a) Organization of the Company ...................................... 8
(b) Qualification of the Company ..................................... 9
(c) Articles of Incorporation and By-Laws ............................ 9
(d) Capitalization ................................................... 9
(e) Authority Relative to Agreement .................................. 9
(f) No Conflict; Required Filings and Consents ....................... 9
(g) Compliance with Laws ............................................. 10
(h) SEC Filings and Financial Statements ............................. 11
(i) Information Supplied ............................................. 12
(j) Absence of Certain Changes or Events ............................. 12
(k) Absence of Litigation ............................................ 13
(l) Liabilities ...................................................... 13
(m) Labor Matters .................................................... 13
(n) Environmental Matters ............................................ 13
(o) Employee Benefits ................................................ 15
(p) Tax Matters ...................................................... 16
(q) Tangible Property ................................................ 17
(r) Certain Contracts and Agreements ................................. 18
(s) Government Contracts ............................................. 19
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TABLE OF CONTENTS
(continued)
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(t) Insurance ........................................................ 22
(u) Transactions with Affiliates ..................................... 22
(v) Intellectual Property ............................................ 22
(w) Customs .......................................................... 25
(x) Customers and Suppliers .......................................... 26
(y) Product Warranties; Defects; Liability ........................... 26
(z) Sufficiency of Included Assets ................................... 26
SECTION 3.2 Representations and Warranties of Buyer ..................... 27
(a) Corporate Organization ........................................... 27
(b) Certificate of Incorporation and By-Laws ......................... 27
(c) Authority Relative to Agreement .................................. 27
(d) No Conflict; Required Filings and Consents ....................... 27
(e) Information Supplied ............................................. 28
(f) Absence of Certain Changes or Events ............................. 28
(g) Absence of Litigation ............................................ 28
(h) Financing ........................................................ 29
ARTICLE IV CONDUCT OF TG BUSINESS PENDING THE CLOSING;
OTHER COVENANTS .......................................... 29
SECTION 4.1 Conduct of TG Business Pending the Closing .................. 29
SECTION 4.2 Shareholders Meeting ........................................ 30
SECTION 4.3 Preparation of Proxy Statement .............................. 31
SECTION 4.4 Certain Filings ............................................. 31
SECTION 4.5 Access to Information ....................................... 32
SECTION 4.6 Solicitations ............................................... 32
(a) Offers for the TG Business ....................................... 32
(b) Solicited Offers for the Company or its Other Businesses ......... 33
(c) Unsolicited Inconsistent Offers for the Company .................. 33
SECTION 4.7 Indemnification ............................................. 34
(a) General Indemnification by the Company ........................... 34
(b) General Indemnification by Buyer ................................. 34
(c) Limitations and Expiration ....................................... 35
(d) Indemnification Procedures ....................................... 37
(e) Escrow Fund: Appointment of Escrow Agent; Exclusive Remedy ....... 39
(f) Survival of Representations, Warranties and Covenants ............ 39
(g) Calculation of Losses ............................................ 39
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(continued)
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SECTION 4.8 Tax Matters ................................................. 40
(a) Tax Treatment and Allocations .................................... 40
(b) Returns .......................................................... 41
(c) Indemnity; Liability for Taxes ................................... 42
(d) Refunds and Credits .............................................. 42
(e) Procedures Regarding Tax Changes ................................. 42
(f) Timing of Tax Benefit Payments ................................... 43
(g) Termination of Tax Sharing Agreements ............................ 43
(h) Conduct of Audits or other Procedural Matters .................... 43
(i) Transfer Taxes ................................................... 44
SECTION 4.9 Change of Name; Use of Company's Name and Initials .......... 44
SECTION 4.10 Further Action; Reasonable Commercial Efforts .............. 44
SECTION 4.11 Notification of Certain Matters ............................ 45
SECTION 4.12 Public Announcements ....................................... 45
SECTION 4.13 Employee Transition ........................................ 45
SECTION 4.14 Covenant Not To Compete .................................... 46
SECTION 4.15 U.S. WARN Act .............................................. 47
ARTICLE V CONDITIONS TO CLOSING ............................................ 47
SECTION 5.1 Conditions to Obligation of Each Party to Effect the
Sale Transaction ............................................ 47
SECTION 5.2 Conditions to Obligations of Buyer .......................... 48
SECTION 5.3 Conditions to Obligations of the Company .................... 50
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER ............................... 50
SECTION 6.1 Termination ................................................. 50
SECTION 6.2 Fees and Expenses ........................................... 52
SECTION 6.3 Effect of Termination ....................................... 52
SECTION 6.4 Amendment ................................................... 53
SECTION 6.5 Waiver ...................................................... 53
ARTICLE VII GENERAL PROVISIONS ............................................. 53
SECTION 7.1 Notices ..................................................... 53
SECTION 7.2 Certain Definitions ......................................... 54
SECTION 7.3 Severability ................................................ 55
SECTION 7.4 Entire Agreement; Assignment ................................ 55
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TABLE OF CONTENTS
(continued)
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SECTION 7.5 Parties in Interest ......................................... 56
SECTION 7.6 Applicable Law; Arbitration ................................. 56
SECTION 7.7 Headings; Definitional Cross-Reference Sheet ................ 56
SECTION 7.8 Counterparts ................................................ 57
SIGNATURES .............................................................. 58
ASSIGNMENT OF BUYER'S RIGHTS AND OBLIGATIONS ............................ 59
FORM OF ESCROW AGREEMENT ................................................A-1
FORM OF CROSS LICENSE AGREEMENT .........................................B-1
iv
DEFINITIONAL CROSS-REFERENCE SHEET
(Excluding definitions in the Exhibits)
AAA Article VII, Section 7.6
Accountant Article IV, Section 4.8(a)
Accounting Firm Article I, Section 1.5
Accountant Report Article IV, Section 4.8(a)
Adjusted Closing Date Balance Sheet Article I, Section 1.4
Adjusted Closing Date Balance Sheet Value Article I, Section 1.4
Adjusted Consideration Article II, Section 1.2
Adjusted Preliminary Balance Sheet Value Article I, Section 1.4
Affected Party Article IV, Section 4.8(g)
affiliate Article VII, Section 7.2(a)
Antitrust Authorities Article III, Section 3.1(f)
Bid Article II, Section 3.1(s)(vii)(1)
Board Recital B.
business day Article VII, Section 7.2(b)
Buyer Introductory Paragraph
Buyer Indemnified Party/Parties Article IV, Section 4.7(a)
Buyer Indemnified Party Article IV, Section 4.7(a)
Buyer Material Adverse Effect Article III, Section 3.2(a)
Buyer Material Adverse Consummation Effect Article III, Section 3.2(a)
Buyer Tax Benefits Article IV, Section 4.8(e)(i)
CFIUS Article IV, Section 4.4(b)
Claims Article IV, Section 4.7(d)
Claim Notice Article IV, Section 4.7(d)(i)
Closing Article II, Section 2.1
Closing Adjustment Notice Article I, Section 1.5
Closing Certificate Article I, Section 1.4
Closing Date Article II, Section 2.1
Company Introductory Paragraph
Company Common Stock Recital B.
Company Disclosure Schedule Article III, Section 3.1
Company Indemnified Party/Parties Article IV, Section 4.7(b)
Company Preferred Stock Article III, Section 3.1(d)
Company SEC Filings Article III, Section 3.1(h)(i)
Company Tax Benefits Article IV, Section 4.8(e)(ii)
Competitive Business Article IV, Section 4.14(a)(i)
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DEFINITIONAL CROSS-REFERENCE SHEET
(Excluding definitions in the Exhibits)
Confidentiality Agreements Article IV, Section 4.5(b)
Consulted Party Article IV, Section 4.8(g)
control Article VII, Section 7.2(c)
Cross License Agreement Article V, Section 5.2(f)
Customer-Furnished Items Article III, Section 3.1(s)(vi)
Damages Article IV, Section 4.7(a)
Disagreement Notice Article IV, Section 4.8(a)
DOD Article V, Section 5.1(d)
Environmental Claims Article III, Section 3.1(n)(ii)(7)
Environmental Laws Article III, Section 3.1(n)(i)(2)
Environmental Permits Article III, Section 3.1(n)(ii)(2)
ERISA Article III, Section 3.1(o)
Escrow Agent Article I, Section 1.7
Escrow Agreement Article I, Section 1.7
Escrow Amount Article I, Section 1.7
Escrow Fund Article IV, Section 4.7(e)
Estimated Consideration Article I, Section 1.2
Exchange Act Article III, Section 3.1(f)
Excluded Assets Article I, Section 1.3
Excluded Liabilities Article II, Section 1.3
Exon-Xxxxxx Act Article IV, Section 4.4(b)
Government Contract Article III, Section 3.1(s)(vii)(2)
Governmental Entity Article III, Section 3.1(f)
Xxxx-Xxxxx Act Article III, Section 3.1(f)
Hazardous Substances Article III, Section 3.1(n)(i)(1)
Imported Goods Article III, Section 3.1(w)
Included Assets Article II, Section 1.3
Included Liabilities Article II, Section 1.3
Indemnified Party Article IV, Section 4.7(d)(i)
Indemnifying Party Article IV, Section 4.7(d)(i)
Initial Release Date Article IV, Section 4.7(c)(ii)(A)(1)
Intellectual Property Article III, Section 3.1(v)(i)(6)
knowledge Article VII, Section 7.2(d)
License Agreements Article III, Section 3.1(v)(ii)
MAESI Article IV, Section 3.2(a)
vi
DEFINITIONAL CROSS-REFERENCE SHEET
(Excluding definitions in the Exhibits)
Marconi Article III, Section 4.5(b)
Material Adverse Effect Article III, Section 3.2(a)
Non-TG Transaction Article IV, Section 4.6(b)
Notice of Objection Article IV, Section 4.7(d)(i)
Original Agreement Introductory Paragraph
Other Confidentiality Agreements Article II, Section 2.2(vii)
Party/Parties Introductory Paragraph
Pending Claims Article IV, Section 4.7(c)(ii)(B)
Permitted Encumbrances Article I, Section 1.6(iii)
person Article VII, Section 7.2(e)
Personnel Article III, Section 3.1(v)(vii)
Pre-Closing Period Article IV, Section 4.8(b)
Preliminary Allocation Schedule Article IV, Section 4.8(a)
Proceedings Article IV, Section 4.8(h)
Property Article I, Section 1.6(i)
Proxy Statement Article III, Section 3.1(f)
Registered Intellectual Property Article III, Section 3.1(v)(ii)(3)
Relevant Loss Article III, Section 3.1(s)(iii)
Requisite Governmental Approval Article III, Section 3.1(f)
Requisite Non-Governmental Approvals Article V, Section 5.1(h)
Return Article III, Section 3.1(p)(ii)
SEC Article III, Section 3.1(f)
Shareholders Meeting Article IV, Section 4.2(a)
Straddle Period Article IV, Section 4.8(b)
subsidiary/subsidiaries Article VII, Section 7.2(f)
Survey Article I, Section 1.6(i)
Tax Agency Article III, Section 3.1(p)(i)
Tax Code Article III, Section 3.1(o)
Tax/Taxes Article III, Section 3.1(p)(i)
Terminal Date Article VI, Section 6.1(e)
Termination Fee Article VI, Section 6.2(a)
TG Business Recital A
TG Business Material Adverse Effect Article III, Section 3.1(a)
TG Employees Article III, Section 3.1(j)
TG Employment Contracts Article III, Section 3.1(o)
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DEFINITIONAL CROSS-REFERENCE SHEET
(Excluding definitions in the Exhibits)
TG Financial Statements Article III, Section 3.1(h)(ii)
TG Interim Financials Article III, Section 3.1 (h)(ii)
TG Leases Article III, Section 3.1(q)(iii)
TG Material Contract Article III, Section 3.1(r)(i)
TG Plans Article III, Section 3.1(o)
TG Taxes Article IV, Section 4.8(b)
TG Year-End Financials Article III, Section 3.1(h)(ii)
Third Party Claim Article IV, Section 4.7(d)(ii)(A)
Title Affidavit Article I, Section 1.6(i)
Title Company Article I, Section 1.6(i)
Title Exceptions Article I, Section 1.6(ii)
Title Policy Article I, Section 1.6(i)
Title Report Article I, Section 1.6(ii)
Trade Secrets Article III, Section 3.1(v)(i)(6)
Trademarks Article III, Section 3.1(v)(i)(1)
User Agreements Article III, Section 3.1(v)(ii)
U.S. Government Article III, Section 3.1(s)(vii)(3)
Updated Allocation Schedule Article IV, Section 4.8(a)
WARN Article IV, Section 4.15
Year 2000 Compliant Article III, Section 3.1(x)
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AMENDED AND RESTATED
PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (this "Agreement") is
dated as of August 18, 1999, between TRACOR, INC., a Delaware corporation
("Buyer"), and XXXXXXX-XXXXXXX COMPANY, a California corporation (the "Company;"
Buyer and the Company are referred to herein individually as a "Party" and
together as the "Parties") and amends and restates in its entirety the Purchase
Agreement dated as of the same date between the Parties (the "Original
Agreement").
RECITALS
A. The Boards of Directors of the Company and Buyer have approved the
sale to Buyer, on the terms and subject to the conditions set forth in this
Agreement, of substantially all of the assets of the Company's
telecommunications equipment business, which designs, manufactures and services
processes and related equipment with applications in government intelligence,
signal surveillance and military communications (the "TG Business").
B. The Board of Directors of the Company (the "Board") has unanimously
determined that this Agreement is in the best interests of the holders of the
Common Stock, no par value, of the Company ("Company Common Stock") and the
Board has decided to recommend the approval and adoption of this Agreement by
such holders. The Board has made this decision after having taken into account
(among other factors) (i) the results of the Company's exploration, with the
assistance of its investment bankers CIBC World Markets Corp., of various
alternatives for implementing the Board's strategy, publicly announced on March
1, 1999, to pursue the sale of the Company in its entirety or in separate
transactions, including the expressions of interest received by various parties
in addition to Buyer, and (ii) the opinion of its investment bankers that the
estimated consideration of $57,900,000 (subject to adjustment, as specified in
this Agreement) to be received by the Company in respect of the sale of the TG
Business hereunder is fair to the Company from a financial point of view.
C. Buyer and the Company desire to make certain representations,
warranties and agreements, and prescribe various conditions, in connection with
the foregoing.
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE I
THE SALE TRANSACTION
SECTION 1.1 Purchase and Sale of the TG Business. Upon the terms and
subject to
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the conditions set forth in this Agreement, at the Closing (as defined in
Section 2.1) the Company shall sell, assign, transfer, convey and deliver to
Buyer, and Buyer shall purchase from the Company, all of the Company's right,
title and interest, as of the Closing, to and in the Included Assets (as defined
in Section 1.3).
SECTION 1.2 Purchase Price. In consideration for the sale of the
Included Assets pursuant to this Agreement, Buyer shall (i) pay to the Company,
by wire transfer, a cash payment equal to $57,900,000 (the "Estimated
Consideration"), and (ii) assume the Included Liabilities (as defined in Section
1.3). The Estimated Consideration shall be subject to adjustment pursuant to
Sections 1.4, 1.5 and 4.8(i) (as so adjusted, the "Adjusted Consideration").
SECTION 1.3 Included and Excluded Assets and Liabilities. The "Included
Assets" shall consist of all the business, properties, assets, goodwill and
rights of the Company of whatever kind and nature, real or personal, tangible or
intangible, that are owned or leased by, or licensed to, the Company as of the
Closing and used, held for use or intended to be used primarily in the operation
or conduct of the TG Business, including, but not limited to, those assets of
the Company set forth on Schedule 1.3 as Included Assets, other than those
assets designated in such Schedule as excluded (the "Excluded Assets"). The
"Included Liabilities" shall consist only of those liabilities set forth on
Schedule 1.3 as Included Liabilities and shall exclude all of the liabilities
designated in such Schedule as excluded (the "Excluded Liabilities)." The
purchase and sale of the Included Assets between the Company and Buyer
hereunder, and the assumption by Buyer of the Included Liabilities hereunder,
are together referred to as the "Sale Transaction."
SECTION 1.4 Post Closing Adjustment. The Parties acknowledge that the
Estimated Consideration was based upon the adjusted unaudited balance sheet of
the TG Business at June 25, 1999 set forth in Schedule 1.4 (the "Adjusted
Preliminary Balance Sheet Value"). Within thirty (30) days after the Closing
Date (as defined in Section 2.1), the Company shall deliver to Buyer a
certificate (the "Closing Certificate"). The Closing Certificate shall set forth
the unaudited balance sheet of the TG Business as of the Closing Date (the
"Adjusted Closing Date Balance Sheet"), which shall be (i) prepared on the basis
of generally accepted accounting principles as in effect from time to time in
the United States ("GAAP") applied consistently with the manner in which the
Company applied them historically (as reflected in the financial statements
specified in Section 3.1(h)(ii)) and (ii) adjusted in a manner consistent with
the adjustments to the June 25, 1999 unaudited balance sheet described in
Schedule 1.4. The amount shown on the Adjusted Closing Date Balance Sheet as the
"Net Assets" amount shall be shown on the Closing Certificate as the "Adjusted
Closing Date Balance Sheet Value." The Closing Certificate shall be signed by
the President or Executive Vice President of the Company. In addition, in order
to verify the Adjusted Closing Date Balance Sheet Value, the
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Company shall, immediately prior to the Closing or as soon as practicable
thereafter, with the reasonable assistance of Buyer, perform a physical
inspection and count of the inventory and equipment included in the Included
Assets to determine the value of those Included Assets as of the Closing Date.
Representatives of the Buyer shall observe the physical inventory, inspection
and count.
SECTION 1.5 Closing Adjustment Notice. Buyer shall have thirty-five
(35) days from the date of receipt of the Closing Certificate to review the
Closing Certificate. On or before the thirty-fifth (35th) day following receipt
of the Closing Certificate, Buyer shall deliver to the Company a written notice
(the "Closing Adjustment Notice") either (i) stating that Buyer agrees and
accepts the calculation of the Adjusted Closing Date Balance Sheet Value set
forth in the Closing Certificate or (ii) stating that Buyer does not agree with
such calculation and setting forth Buyer's calculation of the Adjusted Closing
Date Balance Sheet Value. The Parties shall in good faith attempt to resolve any
difference between their respective calculations of the Adjusted Closing Date
Balance Sheet Value. If the Parties do not resolve any such difference within
thirty-five (35) days after Buyer's delivery of the Closing Adjustment Notice,
they shall engage the firm of Deloitte & Touche LLP or, if such firm is unable
or unwilling to perform such services, a mutually agreed-upon independent
accounting firm of national standing and reputation (the "Accounting Firm"), to
determine the Adjusted Closing Date Balance Sheet Value. Such determination by
the Accounting Firm shall be final and binding on the Parties. The cost of the
services of the Accounting Firm shall be borne by the Party whose determination
of the Adjusted Closing Date Balance Sheet Value is further from the
determination of the Accounting Firm or, if the determination by the Accounting
Firm is equally distant from the Parties' respective valuations, the costs shall
be split equally between the Parties. The Accounting Firm shall determine, in
accordance with the principles set forth in the foregoing sentence, which Party
shall bear the costs of the Accounting Firm's services. Each Party shall, and
shall use reasonable efforts to cause its officers, directors and employees to,
cooperate, with the other Party and the Accounting Firm to determine the
Adjusted Closing Date Balance Sheet Value by furnishing information, documents,
evidence and other assistance to the other Party and the Accounting Firm to
facilitate the completion of the review and determination of the Adjusted
Closing Date Balance Sheet Value. If the Adjusted Closing Date Balance Sheet
Value is less than the Adjusted Preliminary Balance Sheet Value, the Company
shall pay Buyer the difference in cash within ten (10) business days after final
determination of the Adjusted Closing Date Balance Sheet Value (whether by
mutual agreement between the Parties or by the Accounting Firm). If the Adjusted
Closing Date Balance Sheet Value is greater than the Adjusted Preliminary
Balance Sheet Value, Buyer shall pay the Company the difference in cash within
ten (10) business days after final determination of the Adjusted Closing Date
Balance Sheet Value (whether by mutual agreement between the Parties or by the
Accounting Firm).
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SECTION 1.6 Title Insurance and Survey.
(i) Prior to the Closing, the Company shall have
obtained for the benefit of Buyer, in connection with the transfer of the
property in Gaithersburg, Maryland listed on Schedule 1.6(i) (the "Property") at
the Closing, a signed commitment for the issuance of a 1970 ALTA title insurance
policy with respect to the Property (the "Title Policy") and an insured closing
letter to be issued to Buyer at the Closing, issued by Lawyers Title Insurance
Company or such other reputable title insurance company as is reasonably
acceptable to Buyer (the "Title Company") with a CLTA Form 100, Comprehensive
Endorsement, or local equivalent, and (subject to Section 1.6(ii)) such other
endorsements as may be available in Maryland and requested by Buyer prior to the
Closing, which Title Policy shall (1) omit (or modify, so as to comply with the
Company's representations in Section 3.1(q)(ii) that the Property is free and
clear of all liens and encumbrances except for Permitted Encumbrances (as
defined in clause (iii) below)), the so-called 'printed exceptions' (included
among which, among others, are a survey exception and an exception for
unrecorded leases, options, easements and other restrictions not of record), and
(2) insure Buyer's acquisition of good and marketable fee title to the Property
from the Company, free and clear of all liens and encumbrances other than
Permitted Encumbrances, the amount of the Title Policy to be in the amount of
$10 million. In order to obtain such deletion (or such modification) of the
'printed exceptions' from the Title Policy by the Title Company, the Company
shall execute and deliver to the Title Company prior to the Closing such
customary Owners' Title Affidavit as the Title Company may require to enable it
to so delete (or so modify) the 'printed exceptions' (the "Title Affidavit").
The Title Policy shall be in full force and effect at the Closing for the
benefit of Buyer. The Company has delivered to Buyer an ALTA Survey on the
Property (the "Survey") and shall, as promptly and reasonably practicable
following the date of this Agreement, and in any event no later than ten (10)
days prior to the Closing Date, cause the Survey to be redated and certified to
Buyer and deliver the same to Buyer. The cost of the Title Policy and the Survey
shall be shared equally by Buyer and the Company. Except as otherwise provided
in Section 4.8(i), all other costs associated with the transfer of the
Properties (including all Closing costs) shall be borne by the Company.
(ii) Buyer acknowledges that the Company has made
available to Buyer a preliminary title report (the "Title Report") delivered by
the Title Company with respect to the Property and documents and information
pertaining to the exceptions to title listed in the Title Report. Buyer may
secure at its sole cost any additional title report or survey updates desired by
Buyer. Any title exceptions or issues disclosed by the Title Report, the Survey,
any preliminary title report or survey updates obtained by Buyer, or otherwise
affecting the Property shall be referred to as the "Title Exceptions." Buyer
shall have the right to request that the Title Company provide at Buyer's sole
cost and expense any endorsements Buyer shall request, provided that the
issuance of such endorsements shall not be a condition to or delay the Closing.
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(iii) "Permitted Encumbrances" shall include and
refer to: (1) any and all Title Exceptions listed on Schedule 1.6(iii); (2)
zoning ordinances and regulations and other laws or regulations governing use or
enjoyment of the Property; (3) liens to secure taxes and assessments not yet due
and payable; and (4) Title Exceptions caused by or created with the written
consent of Buyer. Notwithstanding the foregoing, Seller shall remove at the
Company's sole cost and expense, on or prior to the Closing Date any monetary
liens or any mortgages or deeds of trust securing indebtedness of the Company,
which shall not be treated as Permitted Encumbrances.
(iv) The Company shall have no obligation to execute
any affidavits or indemnifications in connection with the issuance of the Title
Policy excepting only (1) the Owners' Title Affidavit referred to in Section
1.6(i) and (2) customary affidavits as to authority, the rights of tenants in
occupancy and the status of mechanics' liens.
SECTION 1.7 Escrow Fund. At the Closing, Buyer shall deliver, or cause
to be delivered, to an escrow agent to be selected prior to Closing (the "Escrow
Agent") an amount in cash equal to $1,000,000 (the "Escrow Amount"), to be
deducted from the Estimated Consideration and held in the Escrow Fund (as
defined in Section 4.7(e)) pursuant to the terms set forth herein and in an
escrow agreement to be entered into by and among Buyer, the Company and the
Escrow Agent, substantially in the form attached hereto as Exhibit A (the
"Escrow Agreement"). Subject to the terms of this Agreement, the Escrow Fund
shall be (a) available to satisfy any indemnification obligations of the Company
pursuant to Section 4.7 for Claims, including, without limitation, Third Party
Claims (as the terms Claims and Third Party Claims are defined in Section
4.7(d)) made on or prior to the Initial Release Date (as defined in Section
4.7(c)(ii)(A)(1)) and (b) paid out as provided in Section 4.7(e) and the Escrow
Agreement.
ARTICLE II
THE CLOSING
SECTION 2.1 The Closing. Unless this Agreement shall have been
terminated pursuant to Section 6. 1, and subject to the satisfaction or waiver
of the conditions set forth in Article V, the closing of the Sale Transaction
(the "Closing") shall take place as promptly as practicable following
satisfaction or waiver of the conditions set forth in Article V, other than
those conditions which by their terms are to be satisfied at the Closing, but
not earlier than the later of (a) five (5) business days following such
satisfaction or waiver or (b) the next month-end closing of the Company's books
for accounting and financial reporting purposes in accordance with its customary
practices, at the offices of Xxxxxx Xxxxxx White & XxXxxxxxx, 000 Xxxxxxxxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, unless another date, time or place is
agreed to in writing by the Parties. The date of the Closing is referred to as
the "Closing Date."
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SECTION 2.2 Closing Obligations of the Company. At the Closing, the
Company shall deliver to Buyer:
(i) such bills of sale, deeds (in recordable form, if
reasonably requested by Buyer), conveyances, assignments and other instruments
of transfer, duly executed by the Company, as Buyer may reasonably request in
order for the Company to sell, convey, transfer and assign to Buyer all of the
Company's right, title and interest in, and ownership of, the Included Assets;
(ii) the confirmatory certificates referred to in
Sections 5.2(a) and (b) and such other certificates, duly executed by
appropriate officers of the Company, as Buyer may reasonably request in order to
evidence (to the extent such evidence is reasonably available to the Company and
not otherwise in Buyer's possession) satisfaction of the other conditions set
forth in Section 5.1 and 5.2 (including, without limitation, the conditions set
forth in Sections 5.1(g) and (h));
(iii) a copy of the Escrow Agreement signed by the
Company and the Escrow Agent;
(iv) the Title Policy;
(v) a cross receipt for the payment specified in
Section 2.3(i);
(vi) the books and records relating to the TG
Business, the Included Assets and the Included Liabilities (it being agreed and
understood that the Company may permanently retain copies of all such books and
records, which shall, to the fullest extent consistent with applicable law, be
held in strict confidence and shall be accessible only to these directors,
officers, agents and representatives of the Company and any controlling person
of the Company who may need such access to further legitimately the interests of
the Company or such controlling person, as the case may be, in a manner
consistent with the other provisions of this Agreement);
(vii) copies of each of the confidentiality
agreements (the "Other Confidentiality Agreements") between the Company and all
the potential purchasers of the TG Business, other than Buyer, who signed such
an agreement, and received thereunder any non-public information about the TG
Business, within two years prior to the Closing except for any Other
Confidentiality Agreement which, by its terms, prohibited the Company from
disclosing the other signatory thereto or the pendency of discussions between
the Company and such signatory (the Company shall, however, advise the Buyer of
the total number of Other Confidentiality Agreements containing such a
prohibition and the Company hereby represents and warrants to Buyer that no
third parties who were invited, but declined, to sign similar confidentiality
agreements with
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respect to the TG Business were provided with material non-public information
above the TG Business within two years prior to the date of this Agreement);
(viii) opinions of (1) counsel for the Company and
(2) special counsel to the Company substantially in the forms set forth in
Schedules 2(viii)(1) and (2), respectively; and
(ix) the unaudited balance sheet of the TG Business
as of the last day of the most recently-completed calendar month for which the
Company has, consistently with its customary practices, closed the books of the
TG Business for accounting and financial reporting purposes, and the related
unaudited statements of earnings and cash flows for the year-to-date period then
ended, in each case prepared on a basis consistent with the basis of preparation
of the TG Interim Financials (as defined in Section 3.1(h)(ii)).
SECTION 2.3 Closing Obligations of Buyer. At the Closing, Buyer shall
deliver to the Company:
(i) an amount equal to the Estimated Consideration,
less the Escrow Amount, such amount being payable by wire transfer to the
account specified in Schedule 2.3 to this Agreement; and
(ii) such instruments of assumption, duly executed by
Buyer, and such consents and approvals, duly executed by the applicable third
parties, as the Company may reasonably request (taking into account the
parenthetical provision of Section 5.1(g)) in order for Buyer to assume, and be
liable in place of the Company for, the Included Liabilities;
(iii) the confirmatory certificates referred to in
Sections 5.3(a) and (b) and such other certificates, duly executed by
appropriate officers of Buyer, as the Company may reasonably request in order to
evidence (to the extent such evidence is reasonably available to Buyer and not
otherwise in Buyer's possession) satisfaction of the other conditions set forth
in Sections 5.1 and 5.3;
(iv) a copy of the Escrow Agreement signed by Buyer;
and
(v) an opinion of counsel for Buyer covering the
matters set forth in Schedule 2.3(iv).
SECTION 2.4 Risk of Loss. Until the Closing, any loss or damage to any
of the Included Assets from fire, casualty or any other occurrence shall be the
sole responsibility of the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except to
the extent that any of the following representations and warranties is qualified
by a Schedule that (i) is included in the Company's Disclosure Schedules
delivered to Buyer at the same time as the execution of this Agreement and
accepted by Buyer under this Agreement (the "Company Disclosure Schedules") and
(ii) specifically identifies the representation and warranty qualified by such
Schedule (in which case, the specified representation and warranty shall be
deemed made with such qualification), the Company hereby represents and warrants
to Buyer as follows:
(a) Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals could not, individually or in the aggregate,
reasonably be expected to have a TG Business Material Adverse Effect (as defined
below in this Section 3.1(a)). The term "TG Business Material Adverse Effect"
means (to the exclusion of any other meaning) any of the following: (i) any
adverse change in or effect on the business, results of operations or condition
(financial or other) of the TG Business with a reasonably estimable value
(measured, as of the date of determination, by reference to operating profit, as
determined in accordance with GAAP applied consistently with the manner in which
the Company prepared the TG Financial Statements (as defined in Section
3.1(h)(ii)), of at least $1,279,000 (it being agreed that, for all purposes of
this Agreement, there shall be only a single test of $1,279,000 applicable to
determine the existence of a TG Business Material Adverse Effect not only in
connection with any individual provision of this Agreement which refers to a TG
Business Material Adverse Effect but also in connection with all such provisions
taken collectively and such test shall be applied to each such provision and all
such provisions taken collectively (including all the provisions of this Section
3.1) on the basis of the cumulative effect on operating profit of all of such
material adverse changes and effects); (ii) any material adverse change in or
effect on the ability of the Company to consummate the Sale Transaction before
the Terminal Date (as defined in Section 6.1(e)); or (iii) any debarment order
issued by the U.S. Government (as defined in Section 3.1(s)(vii)) precluding the
Company from bidding on or performing any present or future Government Contract
(as defined in Section 3.1(s)) and any written allegation that could, as of the
determination date (in light of all relevant facts and circumstances, including
the Company's position with respect to such allegation), be reasonably viewed as
likely to result in any such debarment order.
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(b) Qualification of the Company. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a TG Business Material Adverse
Effect.
(c) Articles of Incorporation and By-Laws. The Company has
furnished to Buyer a complete and correct copy of the Articles of Incorporation
and the By-Laws of the Company as currently in effect. The Company is not in
violation of any of the provisions of such Articles of Incorporation or By-Laws.
(d) Capitalization. The authorized capital stock of the
Company consists of 45,000,000 shares of Company Common Stock and 500,000 shares
of preferred stock, $1.00 par value ("Company Preferred Stock"). As of June 25,
1999: (i) 6,569,021 shares of Company Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable and not subject to
preemptive rights; and (ii) 1,546,979 shares of Company Common Stock were
issuable pursuant to outstanding options previously granted to employees, non
employee directors and consultants to purchase Company Common Stock pursuant to
the Company's stock option plans (the "Stock Option Plans"). No shares of
Company Preferred Stock are outstanding.
(e) Authority Relative to Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations under this Agreement and to consummate the Sale
Transaction. The execution, delivery and performance of this Agreement by the
Company have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Sale Transaction, other than the
approval of this Agreement and the Sale Transaction by the shareholders of the
Company. This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the Buyer, constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. The only vote of the holders of any class
or series of outstanding securities of the Company required for approval of this
Agreement is the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock.
(f) No Conflict; Required Filings and Consents. Other than in
connection with or in compliance with the specific provisions of (i) the
California Corporations Code and the Company's Articles of Incorporation
relating to the approval of this Agreement and the Sale Transaction by the
Company's shareholders, (ii) the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted under such Act
-9-
(collectively, the "Exchange Act"), relating to (I) the filing with, and
clearance by, the Securities and Exchange Commission (the "SEC") of a proxy
statement relating to the Shareholders Meeting referred to in Section 4.2 (such
proxy statement, as amended or supplemented from time to time, being referred to
as the "Proxy Statement") and (II) the filing of any other reports and documents
with the SEC relating to this Agreement or any of the transactions contemplated
hereby, (iii) the "blue sky" laws of the various states, (iv) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"Xxxx-Xxxxx Act") relating to the filing of notification regarding the Sale
Transaction with the Antitrust Division of the Department of Justice and the
Federal Trade Commission (collectively, the "Antitrust Authorities") and the
expiration of the applicable waiting period under the Xxxx-Xxxxx Act, and (v)
applicable local permit laws, rules and regulations pertaining to the operation
of the TG Business, the execution, delivery and performance of this Agreement by
the Company do not and will not: (1) violate any provision of the Articles of
Incorporation or By-Laws of the Company; (2) violate any statute, ordinance,
rule, regulation, order or decree of any court or of any governmental or
regulatory body, agency or authority, Federal, state, local or foreign (a
"Governmental Entity"), applicable to the Company or by which any of properties
or assets of the TG Business may be bound; (3) require any filing with, or
permit, consent or approval of, or the giving of any notice to, any Governmental
Entity (a "Requisite Governmental Approval"); or (4) result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default under, or result in the creation of any lien, security
interest, charge or encumbrance on any of the properties or assets of the TG
Business under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, contract, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party, or by which any of the
properties or assets of the Company relating to the TG Business is bound or
affected, except (A) in the case of sub-clauses (2) and (3) above, where the
failure to obtain or make any such filing, permit, consent, or approval or the
failure to give such notice or (B) in the case of sub-clause (4) above, where
such violation, could not, individually or in the aggregate, reasonably be
expected to have a TG Business Material Adverse Effect.
(g) Compliance with Laws. The Company is in compliance with
all applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply could not, individually or in the aggregate, reasonably be
expected to have a TG Business Material Adverse Effect. There is no claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
overtly threatened against the Company by, on behalf of or before any court,
arbitrator or Governmental Entity which, individually or in the aggregate, could
reasonably be expected to have a TG Business Material Adverse Effect. No
investigation by any Governmental Entity with respect to Company is pending or,
to the knowledge of the Company, overtly threatened, other than, in each case,
those the outcome of which, individually or in the aggregate, could not
reasonably be expected to have a TG Business Material Adverse Effect.
-10-
(h) SEC Filings and Financial Statements.
(i) Since December 31, 1995, the Company has filed
all forms, reports and documents with the SEC required to be filed by it
pursuant to the Federal securities laws and the SEC rules and regulations
thereunder, and all forms, reports and documents filed with the SEC by the
Company during such period (the "Company SEC Filings") have complied in all
material respects with all applicable requirements of the Federal securities
laws and the SEC rules and regulations adopted under those laws. As of their
respective dates, the Company SEC Filings did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated financial statements included in the Company SEC Filings was
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto), and fairly presented in
all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the date of such consolidated financial
statements and the results of their operations and their cash flows for the
period then ended (subject, in the case of any unaudited financial statements,
to normal year-end audit adjustments).
(ii) Schedule 3.1(h) of the Company Disclosure
Schedules sets forth the unaudited balance sheet of the TG Business as of
December 31, 1998 and the related unaudited statements of earnings and cash
flows for the twelve (12)-month period then ended (collectively, the "TG
Year-End Financials"). Schedule 3.1(h) also sets forth the unaudited balance
sheet of the TG Business as of June 25, 1999 and the related unaudited
statements of earnings and cash flows for the six (6)-month period then ended
(collectively, the "TG Interim Financials" and, together with the TG Year-End
Financials, the "TG Financial Statements"). Each of the TG Financial Statements
was prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the notes or schedules thereto), and fairly
presented in all material respects the financial position of the TG Business as
of the date of such TG Financial Statement and the results of operations of the
TG Business and its cash flows for the period then ended (subject, in the case
of the TG Interim Financials, to normal year-end adjustments).
(iii) The Company will deliver to Buyer, as soon as
they become available, true and complete copies of any report or statement
mailed by the Company to its shareholders generally or filed by the Company with
the SEC subsequent to the date of this Agreement and prior to the Closing. As of
their respective dates, such reports and statements (excluding any written
information provided for inclusion therein by or on behalf of Buyer, as to which
the Company makes no representation) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and will comply in all material respects
with all
-11-
applicable requirements of the Federal securities laws and the SEC rules and
regulations thereunder. The consolidated financial statements of the Company to
be included in such reports and statements (excluding any information therein
provided by Buyer, as to which the Company makes no representation) will be
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto), and will fairly present
in all material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the respective dates of such consolidated
financial statements and the results of their operations and their cash flows
for the respective periods then ended (subject, in the case of any unaudited
financial statements, to normal year-end audit adjustments).
(i) Information Supplied.
(i) None of the information included in the Proxy
Statement (other than information supplied by or on behalf of Buyer for
inclusion in the Proxy Statement) will contain, at the date it is first mailed
to the Company's shareholders or at the time of the Shareholders Meeting (as
defined in Section 4.2), any statement which, in the light of the circumstances
under which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of any proxy for
the Shareholders Meeting or any amendment or supplement thereto.
(ii) The Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act except that the
Company makes no representation with respect to any statements made based on
information supplied by or on behalf of Buyer for inclusion in the Proxy
Statement.
(j) Absence of Certain Changes or Events. Except as disclosed
in any Company SEC Filing made on or before July 30, 1999, since June 25, 1999
there has not been (i) any change, event or development in or affecting the TG
Business that, individually or in the aggregate, constituted or could reasonably
be expected to have a TG Business Material Adverse Effect, (ii) any change by
the Company in its accounting methods, principles or practices relating to the
TG Business, except as required by changes in GAAP or as recommended by the
Company's independent accountants, or (iii) with respect to any employees
directly involved (solely or primarily) in the TG Business (the "TG Employees"),
any increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, or any other increase in the
compensation payable or to become payable to any present or former TG Employee
at or above the rank
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of Vice President for the TG Business, except for increases in base compensation
and annual cash bonuses, in each case in the ordinary course of business and
consistent with past practice.
(k) Absence of Litigation. There are no suits, claims,
actions, proceedings or investigations pending or overtly threatened against the
TG Business or any properties of the Company relating to the TG Business before
any court, arbitrator or other Governmental Entity. Neither the Company nor any
of its respective properties or assets used in the TG Business is subject to any
order, writ, judgment, injunction, decree, determination or award relating to
the TG Business. The updated Schedule 3.1(k) to be provided to Buyer at the
Closing in accordance with Section 5.2(a) shall be true and correct in all
respects as of the Closing.
(l) Liabilities. Other than regular quarterly cash dividends
on Company Common Stock, since June 25, 1999 neither the Company nor the TG
Business has incurred any material outstanding claims, liabilities or
indebtedness, contingent or otherwise, that would be required to be disclosed in
the Company's consolidated financial statements (or the notes thereto) or the TG
Financial Statements (or the notes thereto), in each case prepared in accordance
with GAAP, applied on a consistent basis, other than liabilities incurred in the
ordinary course of business not involving borrowings by the Company.
(m) Labor Matters. The Company has complied in all respects
with all laws, rules and regulations pertaining to employment practices with
respect to the TG Employees, including, without limitation, the Worker
Adjustment Retraining Notification Act, the wage hour laws, the Americans with
Disabilities Act, and the discrimination laws, and no fact or event exists with
respect to the TG Employees that could give rise to liability under such acts,
laws, rules or regulations, except for such occurrences, noncompliances and
liabilities as could not, individually or in the aggregate, reasonably be
expected to have a TG Business Material Adverse Effect. The Company is not a
party to any collective bargaining agreement with respect to the TG Employees.
Since December 31, 1995, the Company has not (i) had any employees strikes, work
stoppages, slowdowns or lockouts with respect to the TG Employees, (ii) received
any requests for certifications of bargaining units or any other requests for
collective bargaining with respect to the TG Employees, or (iii) become aware of
any efforts to organize the TG Employees into a collective bargaining unit.
(n) Environmental Matters.
(i) For purposes of this Agreement, the following
terms shall have the following meanings: (1) "Hazardous Substances" means (A)
those substances defined in or regulated under the following Federal statutes
and their state counterparts, as each may
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be amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, 49 U.S.C. 5110 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq., the Clean
Water Act, 33 U.S.C. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. 300f
et seq., the Atomic Energy Act, 42 U.S.C. 2014 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. 136 et seq., the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq., the Occupational Health and Safety Act, 29
U.S.C. 651 et seq., and the Clean Air Act, 42 U.S.C. 7401 et seq., and their
state counterparts, as each may be amended from time to time, and all
regulations adopted under all of the foregoing Federal and state laws, (B)
petroleum and petroleum products, byproducts and breakdown products including
crude oil and any fractions thereof , (C) natural gas, synthetic gas, and any
mixtures thereof, (D) polychlorinated biphenyls, (E) any other chemicals,
materials or substances defined or regulated as toxic or hazardous or as a
pollutant or contaminant or as a waste under any applicable Environmental Law,
and (F) any substance with respect to which a Governmental Entity requires
environmental investigation, monitoring, reporting or remediation; provided,
however, that Hazardous Substances shall not include office and janitorial
supplies in types and quantities used in the normal course of business; and (2)
"Environmental Laws" means any Federal, state, foreign, or local law, rule or
regulation, now in effect and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the environment,
health, safety or natural resources, including without limitation, those
relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances or (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances.
(ii) Except as could not reasonably be expected,
individually or in the aggregate, to result in a TG Business Material Adverse
Effect: (1) the Company is and has been in compliance with all applicable
Environmental Laws in connection with the TG Business; (2) the Company has
obtained all permits, approvals, identification numbers, licenses or other
authorizations required under any applicable Environmental Laws with respect to
the TG Business (the "Environmental Permits") and is and has been in compliance
with their requirements; (3) there are no underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Substances are being or have been treated, stored or disposed of on
any real property presently owned, leased or operated by the Company and used in
connection with the TG Business and to, the Company's knowledge, the foregoing
statement in this clause (3) is correct with respect to any real property
formerly owned, leased or operated by the Company and used in connection with
the TG Business; (4) there is no asbestos or asbestos-containing material on any
real property presently owned, leased or operated by the Company and used in
connection with the TG Business where the presence of such
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material is in violation of any applicable Environmental Laws and, to the
Company's knowledge, the foregoing statement in this clause (4) is correct with
respect to any real property formerly owned, leased or operated by the Company
and used in connection with the TG Business; (5) the Company has not, and to the
Company's knowledge no other person has, released, discharged or disposed of
Hazardous Substances on any real property presently owned, leased or operated by
the Company and used in connection with the TG Business and none of such
property contains any Hazardous Substances at a concentration level or in a
quantity that is reportable under any Environmental Laws and, to the Company's
knowledge, the foregoing statement in this clause (5) is true with respect to
any real property formerly owned, leased or operated by the Company and used in
connection with the TG Business; (6) the Company is not undertaking, and has not
completed, any investigation or assessment or remedial or response action
relating to any such prior release, discharge or disposal of or contamination
with Hazardous Substances at any site, location or operation used in connection
with the TG Business either voluntarily or pursuant to the order of any
Governmental Entity or the requirements of any Environmental Laws; and (7) there
are no (A) pending, past or overtly threatened actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders or
consent agreements relating to any Environmental Laws, any Environmental Permits
or any Hazardous Substances ("Environmental Claims") against the Company in
connection with the TG Business or relating to any real property presently
owned, leased or operated by the Company and used in connection with the TG
Business, or (B) circumstances that could reasonably be expected to form the
basis of any Environmental Claim, including without limitation with respect to
any off-site disposal location presently used by the Company in connection with
the TG Business and, to the Company's knowledge, the foregoing statements in
sub-clauses (A) and (B) of this clause (7) are true with respect to any real
property formerly owned, leased or operated by the Company and used in
connection with the TG Business and with respect to any off-site disposal
location formerly used the Company or any of its predecessors in connection with
the TG Business.
(iii) The Company has made available to Buyer copies
of all environmental reports, studies or analyses in its possession or under its
control relating to currently or formerly owned, leased or operated real
property used in connection with the TG Business.
(o) Employee Benefits. Schedule 3.1(o) of the Company
Disclosure Schedules lists (i) all employee benefit plans, programs and
arrangements maintained for the benefit of any current or former TG Employee,
other than the Stock Option Plans (the "TG Plans") and (ii) all written
agreements relating to employment or severance with any of the TG Employees
other than, in each case, any such agreement that is terminable by the Company
at will without penalty or other consequence (the "TG Employment
-15-
Contracts"). Schedule 3.1(o) of the Company Disclosure Schedule sets forth the
name of each current TG Employee with an annual base salary greater than
$150,000 and the annual base compensation applicable to each such TG Employee.
The Company has made available to Buyer a copy of each TG Plan, each material
document prepared in connection with each TG Plan and each TG Employment
Contract. None of the TG Plans is a "multi employer plan" within the meaning of
Sections 3(34) and 4007(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). None of the TG Plans or the TG Employment Contracts
promises or provides retiree medical or retiree life insurance benefits to any
person. Each TG Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code, as amended (the "Tax Code"), is so qualified. Each TG
Plan has been operated in all material respects in accordance with its terms and
the requirements of applicable law. Neither the Company nor any of its
affiliates has incurred any direct or indirect material liability under, arising
out of or by operation of Title IV of ERISA in connection with the termination
of, or withdrawal from, any TG Plan or any other plan subject to Title IV of
ERISA and no fact exists or event has occurred that could reasonably be expected
to give rise to any such liability. No TG Plan is subject to, or has been
covered by, Title IV of ERISA or Section 412 of the Tax Code. All contributions
required to have been made to the TG Plans have been timely made. Except as
provided in the TG Plans and the TG Employment Contracts listed on Schedule
3.1(o), no TG Employee will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits as a result of
the Sale Transaction.
(p) Tax Matters.
(i) For the purposes of this Agreement: (1) "Tax" or,
collectively, "Taxes," means: (A) any and all Federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts; (B) any liability for the payment of any amounts of the type
described in clause (A) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (C) any liability
for the payment of any amounts of the type described in clause (A) or (B) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for Taxes of a
predecessor entity; and (2) "Return" means Federal, state, local and foreign
returns, estimates, information, statements and reports relating to any and all
Taxes concerning or attributable to the Included Assets or the TG Business.
-16-
(ii) The Company, and any affiliated group, within
the meaning of Section 1504 of the Tax Code, of which the Company is or has been
a member, has: (1) filed all Returns required to be filed by it prior to the
date of this Agreement (taking into account extensions); (2) paid all Taxes
shown as due on such Returns and paid all applicable ad valorem and value added
Taxes as are due; and (3) paid all Taxes with respect to the TG Business for
which a notice of assessment or collection has been received (other than amounts
being contested in good faith by appropriate proceedings), except, in the case
of clauses (1), (2) and (3), for any such filings and payments which could not,
individually or in the aggregate, reasonably be expected to have a TG Business
Material Adverse Effect. Neither the Internal Revenue Service nor any other
Federal, state, local or foreign taxing authority (a "Tax Agency") has asserted
in writing any claims for Taxes with respect to the TG Business, which claims,
individually or in the aggregate, could reasonably be expected to have a TG
Business Material Adverse Effect. The Company has withheld or collected and paid
over to the appropriate Tax Agency (or is properly holding for such payment) all
Taxes required by law to be withheld or collected with respect to the TG
Business, except for amounts which could not, individually or in the aggregate,
reasonably be expected to have a TG Business Material Adverse Effect. There are
no liens for Taxes upon the Included Assets (other than liens for Taxes that are
not yet due or that are being contested in good faith by appropriate
proceedings), except for liens which could not, individually or in the
aggregate, reasonably be expected to have a TG Business Material Adverse Effect.
(iii) None of the Included Assets is treated as "tax
exempt use property," within the meaning of Section 168(h) of the Tax Code.
(iv) Neither the Company nor any of its subsidiaries
has given, with respect to the Company or any assets of the TG Business, any
consent under Section 341 of the Tax Code.
(v) None of the Included Assets is a lease made
pursuant to Section 168(f)(8) of the Tax Code.
(vi) The Company is not a "foreign person" within the
meaning of Section 1445 of the Tax Code.
(q) Tangible Property.
(i) As of the Closing, the Company will have good and
marketable title to all tangible properties and assets included in the Included
Assets, with only such exceptions as, individually or in the aggregate, could
not reasonably be expected to have a TG Business Material Adverse Effect;
provided, however, that the foregoing representation is not made with respect to
the Property, the TG Leases (as defined in Section 3.1(q)(iii)) and any other
interests in real property included in the Included
-17-
Assets, as to all of which the representations contained in the next sentence
and in sections 3.1(q) (ii) and (iii) below, as applicable, shall apply. All of
the tangible properties and assets included in the Included Assets have been
maintained and repaired for their continued operation and are in good operating
condition, reasonable wear and tear excepted, and usable in the ordinary course
of business.
(ii) All of the Included Assets are free and clear of
all liens and encumbrances, except (1) liens for taxes not yet due and payable,
(2) liens of landlords, vendors, warehousemen and mechanics, and (3) Permitted
Encumbrances. To the knowledge of the Company, all real estate properties that
are Included Assets (whether owned or leased) are in compliance with all
applicable laws, statutes, rules and regulations (including, without limitation,
building and zoning laws) and all covenants, conditions, restrictions or
easements affecting the property or its use or occupancy, the failure to comply
with which could, individually or in the aggregate, reasonably be expected to
have a TG Business Material Adverse Effect, and no notices of any such failures
to comply have been received by the Company; provided, however, that the
foregoing representation is not made with respect to Environmental Laws, as to
which the representations contained in Section 3.1(n) shall apply.
(iii) Each of the leases (the "TG Leases") listed as
an Included Asset is unmodified and in full force and effect (and true and
complete copies thereof, together with any additional amendments and supplements
thereto, have been delivered to Buyer and are included in Section 3.1(q) of the
Company Disclosure Schedule, and, to the knowledge of the Company, there are no
other agreements, written or oral, between the Company and any third parties
claiming an interest in the interest of the Company in, or otherwise affecting
the use and occupancy of, the property leased under each TG Lease. The Company
is not in material default under the TG Leases, no material defaults (whether or
not subsequently cured) by the Company have been alleged thereunder and no event
has occurred that, with the giving of notice or the passage of time, would
constitute a material default thereunder. To the knowledge of the Company, no
lessor named in any of the TG Leases is in default thereunder, and no defaults
(whether or not subsequently cured) by such lessor have been alleged thereunder.
(r) Certain Contracts and Agreements.
(i) Schedule 3.1(r)(i) of the Company Disclosure
Schedules lists each contract (other than a Government Contract, as defined in
Section 3.1(s), and any contract listed in Section 3.1(v) of the Company
Disclosure Schedule) in effect as of June 25, 1999 and relating to the TG
Business which is required by its terms or is currently expected to result in
the payment or receipt by the Company of more than $200,000 and which is not
terminable by the Company without the payment of any penalty or fine on not more
than three months' notice, other than the TG Plans (a "TG Material Contract").
-18-
Each TG Material Contract is, to the knowledge of the Company, in full force and
effect and is enforceable against the parties thereto (other than the Company)
in accordance with its terms and no condition or state of facts exists that,
with notice or the passage of time, or both, would constitute a material default
by the Company or, to the knowledge of the Company, any third party under any TG
Material Contract. The Company has duly complied in all material respects with
the provisions of each TG Material Contract to which it is a party.
(ii) Schedule 3.1(r)(ii) of the Company Disclosure
Schedules lists: (1) all agreements relating to joint ventures, partnerships and
equity or debt investments involving the TG Business; (2) all non-compete
agreements with the Company relating to the TG Business (whether as beneficiary
or obligor); (3) all agreements, notes, bonds, indentures or other instruments
governing indebtedness for borrowed money of the Company relating to the TG
Business, and any guarantee thereof or the pledge of any assets or other
security therefor; (4) each lease relating to the TG Business that provides for
annual lease payments by the Company in an amount in excess of $200,000; (5)
each material agreement between the Company and any hospital, hospital
management company, health maintenance organization or other managed care payor
relating to the TG Employees; (6) each management contract and contract with
independent contractors or consultants (or similar arrangements) relating to the
TG Business that includes exclusive rights or requires payments in excess of
$200,000 individually or $500,000 in the aggregate to which the Company is a
party, which are not cancelable without penalty or further payment upon 30 days'
or less notice; and (7) each other agreement of the Company relating to the TG
Business not made in the ordinary course of business that is to be performed on
or after the date of this Agreement, except for any agreement (A) which is
required by any other provision of this Section 3.1 to be included on a Company
Disclosure Schedule delivered under that provision, or (B) the termination, or
breach of any provision, of which agreement could not reasonably be expected to
have a TG Business Material Adverse Effect.
(s) Government Contracts.
(i) Schedule 3.1(s) of the Company Disclosure
Schedules sets forth each Government Contract in effect as of June 25, 1999 and
each Bid pending as of such date (as such terms are defined in clause (vii)
below).
(ii) Except for such matters as could not reasonably
be expected, individually or in the aggregate, to result in a TG Business
Material Adverse Effect, the Company has, since December 31, 1986, complied with
all applicable requirements of the U.S. Government Cost Accounting Standards,
the Federal Truth in Negotiations Act and other U.S. laws, rules, regulations or
orders applicable to Government Contracts or Bids.
-19-
(iii) Except for such matters as could not reasonably
be expected, individually or in the aggregate, to result in a loss (a "Relevant
Loss") of at least $250,000 individually or $500,000 when aggregated with all
other such losses, Schedule 3.1(s) of the Company Disclosure Schedules
identifies each Government Contract with respect to which, to the Company's
knowledge, as of the date hereof: (1) the Company is in breach; (2) aggregate
costs (direct and indirect) incurred or currently expected to be incurred in
connection with any fully-funded Government Contract will exceed any
limitation-of-costs provision in such Contract; (3) the Company expects to
recognize a loss at the gross profit level (determined in accordance with GAAP
applied on a basis consistent with the preparation of the financial statements
referred to in Schedule 3.1(h)(ii) of the Company Disclosure Schedules)) in
connection with such Government Contract; (4) in the case of a multi-year
contract, full funding (pursuant to multi-year contract provisions) has not been
established; or (5) there has been a material amendment or modification since
March 31, 1999.
(iv) Except for such matters as could not reasonably
be expected, individually or in the aggregate, to result in a Relevant Loss: (1)
to the Company's knowledge, there are no audits (other than those conducted in
the ordinary course of business) of any Government Contracts being conducted by
the U.S. Government, a prime contractor of the U.S. Government or any other
party to any Government Contract; (2) except to the extent that the same has
been finally resolved (and any liability relating thereto has been paid or
reflected in the balance sheet referred to in Section 3.1(h)(ii)), the Company
has not, with respect to any current Government Contract, received: (A) any
written cure notice or show cause notice (as defined in the Federal Acquisition
Regulation Part 49, P. 49.607(a) and (b), respectively) pursuant to applicable
contract default provisions or notice-of-default provisions; (B) any written
contract termination, whether for default, convenience, cancellation or lack of
funding or other reasons; (C) any written final decision assessing a price
reduction, penalty or claim for damages or other remedy; (D) any written claim
(as defined in the Federal Acquisition Regulation at P. 33,201) based on
assertions of defective pricing or violations of government cost accounting
standards or cost principles; (E) any written request for an equitable
adjustment of, or claim (as defined in the Federal Acquisitions Regulations at
P. 33,201) concerning, such Government Contract by any of the Company's
customers, subcontractors or suppliers; (F) any written disallowance, written
questioning or other written challenging of material costs (direct or indirect);
or (G) any written notice of any investigation or enforcement proceeding of a
criminal, civil or administrative nature by any investigative or enforcement
agency of any government (including any notice of qui tam action brought under
the Civil False Claims Act alleging any irregularity, misstatement or omission
arising under or relating to such Government Contract); and (3) to the Company's
knowledge, other than nominal retainage, no amount of money due to the Company
pertaining to any Government Contract has been withheld or set off nor has any
claim
-20-
been made to withhold or set off money and the Company is entitled to all
progress payments received with respect thereto.
(v) Neither the Company nor any of the Company's
officers or any of the TG Employees has been suspended or debarred from or
determined to be ineligible for bidding or submitting offers on Government
Contracts, no such suspension, debarment or ineligibility has been initiated or
determined or, to the Company's knowledge, overtly threatened or noticed in
writing, and, to the Company's knowledge, the consummation of the Sale
Transaction will not result in any such suspension, debarment or ineligibility
(assuming that no such suspension, debarment or ineligibility will result from
the identity, nationality or conduct of Buyer or of persons associated with
and/or controlling Buyer).
(vi) Except for such matters as could not reasonably
be expected, individually or in the aggregate, to result in a TG Business
Material Adverse Effect: (1) all personal property, equipment and fixtures
loaned, bailed or otherwise furnished to the Company by or on behalf of the
United States Government in connection with the TG Business that are or should
be in the possession of the Company ("Customer-Furnished Items"), in the
aggregate, are in a good state of maintenance and repair (ordinary wear and tear
excepted), have been regularly and appropriately maintained and repaired in
accordance with all contractual, legal and regulatory requirements and, unless
returned to the United States Government, will be in the possession of the
Company on the Closing Date; and (2) the Company has complied with its
obligations relating to the Customer-Furnished Items and, upon the return
thereof, would have no material liability to the United States Government with
respect thereto.
(vii) The following terms, as used in this Agreement,
have the following meanings: (1) "Bid" means any written offer by the Company
that if accepted would lead to a Government Contract; (2) "Government Contract"
means any prime contract, subcontract, teaming agreement or arrangement, joint
venture, basic ordering agreement, letter contract, purchase order, delivery
order or other procurement arrangement of any kind in writing, valued at $10,000
or more and relating to the TG Business (A) between the Company 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 or
(III) any subcontractor to a prime contractor of the U.S. Government but only in
any case where the contract between the Company and such subcontractor expressly
indicates that such contract with the Company is being entered into in
connection with a Government Contract under which the other party to such
contract with the Company is a subcontractor, or (B) financed by the U.S.
Government and subject to the rules and regulations of the U.S. Government
concerning procurement; and (3) "U.S. Government" means the United States
Government and any agencies, instrumentalities and departments thereof.
-21-
(t) Insurance. The Company has in full force and effect the
policies of fire, liability, title, errors and omissions and other forms of
insurance relating to the TG Business listed on Schedule 3.1(t) of the Company
Disclosure Schedules. The Company is not in default under any such policies,
which default could reasonably be expected to have a TG Business Material
Adverse Effect, and there is no material inaccuracy in any application for such
policies. Each of the Company's activities and operations relating to the TG
Business have been conducted in a manner so as to conform in all material
respects to the applicable provisions of such policies. The Company has not
received a notice of cancellation or non renewal with respect to any such
policy. Schedule 3.1(t) of the Company's Disclosure Schedule lists all pending
claims relating to the TG Business under any of such policies in excess of
$10,000 and timely notice has been given of all such claims.
(u) Transactions with Affiliates. Except as disclosed in any
of the Company SEC Filings and excluding the TG Employment Contracts, there are
no contracts, agreements, arrangements or understandings of any kind between any
affiliate of the Company, on the one hand, and the Company, on the other hand,
other than any such contracts, agreements, arrangements and understandings that
either individually or in the aggregate are de minimis in nature or do not
relate to the TG Business.
(v) Intellectual Property.
(i) The Company is entitled to use all of the
following which are used in or necessary for the conduct of the TG Business as
currently conducted, namely: (1) trademarks, logos, service marks, trade names,
internet domain names, designs, slogans, and general intangibles of like nature,
together with all goodwill related to the foregoing (collectively, the
"Trademarks"), (2) patents and patent applications, (3) copyrights (including
any registrations, renewals and applications for any of the foregoing), (4)
software, (5) technology, and (6) trade secrets and other confidential
information, know how, proprietary processes, formulae, algorithms, models,
methodologies and inventions (collectively, the "Trade Secrets" and, together
with items (1) through (5) above, the "Intellectual Property"), the absence of
which could, individually or in the aggregate, reasonably be expected to have a
TG Business Material Adverse Effect.
(ii) Schedule 3.1(v) of the Company Disclosure
Schedules sets forth, for the Intellectual Property owned by the Company, a
complete and accurate list of all U.S. and foreign (1) patents and patent
applications, (2) registrations of Trademarks (including internet domain
registrations) and applications; and (3) copyright registrations and
applications (collectively, the "Registered Intellectual Property"). Schedule
3.1(v) sets forth a complete and accurate list of all license agreements
relating to the TG Business (except for end user license and support/maintenance
agreements entered into in the
-22-
ordinary course of business (the "User Agreements")) granting any right to use
or practice any Intellectual Property, whether the Company is the licensee or
licensor thereunder, and any written settlements relating to any Intellectual
Property to which the Company is a party or otherwise bound (collectively, the
"License Agreements"), indicating for each the title, the parties, and the date
executed.
(iii) Except for the User Agreements and License
Agreements, to the Company's knowledge, (1) the Company has the right to use the
Intellectual Property free and clear of all liens and obligations and (2) after
the Closing, Buyer shall have the right to use the Intellectual Property free
and clear of all liens and obligations subject to the User Agreements and the
License Agreements.
(iv) The Registered Intellectual Property is
subsisting and has not been canceled, expired, or abandoned, and, to the
Company's knowledge, the Registered Intellectual Property is valid. There is no
pending or, to the Company's knowledge, overtly threatened opposition,
interference or cancellation proceeding before any court or registration
authority in any jurisdiction against the Registered Intellectual Property.
(v) To the Company's knowledge, the conduct of the TG
Business as currently conducted does not infringe upon any intellectual property
rights owned or controlled by any third party. There are no claims or suits
pending or, to the Company's knowledge, overtly threatened, and the Company has
not received any notice of a third party claim or suit, (1) alleging that its
activities with respect to any Intellectual Property, or the conduct of the TG
Business, infringes upon, violates, or constitutes the unauthorized use of the
intellectual property rights of any third party, or (2) challenging the
ownership, use, validity or enforceability of any Intellectual Property.
(vi) There are no settlements, forbearances to xxx,
consents, judgments, or orders to which the Company is a party which (1)
restrict the Company's rights to use any Intellectual Property, (2) restrict the
TG Business in order to accommodate a third party's intellectual property
rights, or (3) permit third parties to use any Intellectual Property used in or
necessary for the conduct of the TG Business. The Company has not licensed or
sublicensed its rights in any material Intellectual Property other than pursuant
to the User Agreements and/or the License Agreements, and no royalties,
honoraria or other fees are payable by the Company for its use of or right to
use any Intellectual Property, except pursuant to the License Agreements. To the
Company's knowledge, the License Agreements are valid and binding obligations of
all parties thereto, enforceable in accordance with their terms, subject to,
bankruptcy, insolvency and similar laws affecting creditors' rights and to the
discretionary nature of equitable remedies, and, to the Company's knowledge,
there exists no event or condition which will result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default by any party under, any such License Agreement which violation, breach
or default could,
-23-
individually or in the aggregate, reasonably be expected to have a TG Business
Material Adverse Effect.
(vii) All material Trade Secrets and other
confidential Intellectual Property have been maintained in confidence in
accordance with protection procedures customarily used in the industry to
protect rights of like importance, but not less than reasonable care. All
current members of management and key personnel of the TG Business, including
all current employees, agents, consultants and independent contractors (except
for any independent contractors which are parties to License Agreements) who
have contributed to or participated in the conception or development of material
Trade Secrets or other confidential Intellectual Property the disclosure of
which, individually or in the aggregate, could reasonably be expected to have a
TG Business Material Adverse Effect (collectively "Personnel"), and to the
Company's knowledge all former Personnel, have executed and delivered to the
Company an employment or a nondisclosure agreement restricting such person's
right to disclose Trade Secrets and other confidential Intellectual Property. To
the Company's knowledge, no party to any nondisclosure agreement with the
Company relating to any Trade Secrets or other confidential Intellectual
Property is in breach or default thereof. All current Personnel, and to the
Company's knowledge all former Personnel, either (i) have been party to a
"work-for-hire" or other arrangement or agreement with the Company, in
accordance with all applicable laws, that has accorded the Company full,
effective, exclusive ownership of all tangible and intangible property thereby
arising in the course of their employment by the Company or (ii) have executed
appropriate instruments of assignment in favor of the Company as assignee that
have conveyed to the Company full, effective and exclusive ownership of all
tangible and intangible property arising in the course of their employment by
the Company excepting, in the case of either subclause (i) or (ii) above, where
the failure of the statement made in such subclause to be true could not,
individually or in the aggregate, reasonably be expected to have a TG Business
Material Adverse Effect. No current Personnel, and to the Company's knowledge no
former Personnel, have a meritorious claim against the Company in connection
with such person's involvement in the conception or development of any Trade
Secret or other Intellectual Property and no such claim has been asserted or is
overtly threatened. None of the current officers and employees of the Company
has any patents issued or applications pending for any device, process, design
or invention of any kind now used or needed by the Company in the furtherance of
the TG Business, which patents or applications have not been assigned to the
Company under an assignment duly recorded in the United States Patent and
Trademark Office or other appropriate Governmental Entity in the case of any
foreign patents or patent applications.
(viii) To the knowledge of the Company, no third
party is misappropriating, infringing, diluting, or violating any Intellectual
Property, and no such claims have been brought against any third party by the
Company.
-24-
(ix) The consummation of the Sale Transaction will
not (1) result in the loss or impairment of the Company's right to use any
Intellectual Property, nor (2) require the consent of any Governmental Entity or
third party in respect of any Intellectual Property, which loss or impairment,
or the failure to obtain which consent, could, individually or in the aggregate,
reasonably be expected to have a TG Business Material Adverse Effect.
(x) To the extent used in accordance with their
intended purpose as set forth in any manuals or materials (as amended or
supplemented) delivered in connection therewith, all of the products, as
upgraded to be Year 2000 Compliant (as defined below in this clause (x)), of the
Company used in or necessary for the conduct of the TG Business and listed as
Included Assets (including products currently under development) will, after the
Closing, except as could not, individually or in the aggregate, reasonably be
expected to have a TG Business Material Adverse Effect, accurately record,
store, process, calculate and present calendar dates falling on and after (and
if applicable, spans of time including) January 1, 2000, and will accurately
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as such
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Compliant"). All of the products of the
Company used in or necessary for the conduct of the TG Business and listed as
Included Assets (i) will, after the Closing, except as could not, individually
or in the aggregate, reasonably be expected to have a TG Business Material
Adverse Effect, lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000 and (ii) will be
operable without error with other products used and distributed by the Company
that may deliver records to the products of the Company or receive records from
the products of the Company, or interact with the products, including but not
limited to back up and archived data, provided that such other products are also
Year 2000 Compliant. Schedule 3.1(x) of the Company Disclosure Schedule contains
a true and correct statement of the extent to which the internal computer and
technology products and systems used in the TG Business are Year 2000 Compliant.
The Company has taken all actions represented in such statement to have been
taken by it.
(w) Customs. All goods imported into the United States or any
other country in connection with the TG Business (the "Imported Goods") have
been properly valued and classified in accordance with applicable tariff laws,
rules and regulations, and all proper duties, tariffs or excise taxes have been
paid with respect to the Imported Goods. No penalties have been assessed,
asserted or claimed with respect to any Imported Goods. All Imported Goods have
been properly marked as to country of origin, content and material.
-25-
(x) Customers and Suppliers.
(i) Schedule 3. 1(x)(i) of the Company Disclosure
Schedules sets forth (to the extent permitted by applicable law and contractual
provisions) a complete and accurate list of the customers of the TG Business who
have purchased products or services from the Company during the Company's prior
fiscal year or any interim period from the end of the Company's prior fiscal
year to the date of this Agreement. To the Company's knowledge, there exists no
actual or overtly threatened termination, cancellation or material limitation
of, or any material modification or material change to the configuration of,
orders contained in outstanding backlog for the TG Business as of June 25, 1999,
as set forth in Schedule 3.1(x)(i). Each of the customers listed on Schedule
3.1(w)(i) has purchased products or services in the TG Business pursuant to a
standard purchase order, a form of which is attached to Schedule 3.1(x)(i).
(ii) Schedule 3.1(x)(ii) of the Company Disclosure
Schedules contains a complete and accurate list of all suppliers of significant
materials or services to the Company in connection with the TG Business. To the
Company's knowledge, there exists no actual or overtly threatened termination,
cancellation or limitation of any agreement with, or any modification or change
in the business relationship of the Company with, any supplier or group of
suppliers listed on Schedule 3.1(x)(ii).
(y) Product Warranties; Defects; Liability. Each product
manufactured, sold, leased, or delivered by the Company has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Company does not have any liability (and, to the Company's
knowledge, there is no basis for any present or future action, suit proceeding,
hearing, investigation, charge, complaint, claim, or demand against it giving
rise to any liability) for replacement or repair thereof or other damages in
connection therewith, except where any such non-conformity or any such liability
could not, individually or in the aggregate, reasonably be expected to have a TG
Business Material Adverse Effect. No product manufactured, sold, leased or
delivered by the Company in the ordinary course of the TG Business is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale or lease or beyond that implied or imposed by applicable
law. Schedule 3.1(y) includes copies of the Company's standard terms and
conditions of sale or lease relating to the TG Business.
(z) Sufficiency of Included Assets. As of the Closing, the
Included Assets, together with the Intellectual Property licensed to Buyer
pursuant to the Cross License Agreement referred to in Section 5.2(f), will
constitute all of the assets necessary to enable Buyer to continue operating the
TG Business in substantially the same manner it is being operated on the date of
this Agreement, subject to the right of Buyer to change such operations
following the Closing.
-26-
SECTION 3.2 Representations and Warranties of Buyer. Buyer hereby
represents and warrants to the Company as follows:
(a) Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
Buyer is a direct wholly-owned subsidiary of Marconi North America, Inc., a
Delaware corporation ("Marconi"), and Marconi Aerospace Electronic Systems Inc.,
a Pennsylvania corporation ("MAESI"), is a direct wholly-owned subsidiary of
Buyer. Buyer has the requisite corporate power and authority and any necessary
governmental approvals to own, operate or lease its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals could not, individually or in the aggregate, reasonably
be expected to have a Buyer Material Adverse Effect. The term "Buyer Material
Adverse Effect" means any material adverse change in or effect on (i) the
business, results of operations or condition (financial or other) of Buyer and
its subsidiaries taken as a whole or (ii) the ability of Buyer to consummate the
Sale Transaction on or before the Terminal Date (a Buyer Material Adverse Effect
of the kind included in this clause (ii) being referred to as a "Buyer Material
Adverse Consummation Effect").
(b) Certificate of Incorporation and By-Laws. Buyer has
furnished to the Company a complete and correct copy of its Certificate of
Incorporation and By-Laws as currently in effect and the corresponding corporate
documents of MAESI. Buyer is not in violation of any of the provisions of such
Certificate of Incorporation or By-Laws and MAESI is not in violation of any of
the provisions of such corresponding corporate documents.
(c) Authority Relative to Agreement. Buyer has all necessary
corporate power and authority to enter into this Agreement, to perform its
obligations under this Agreement and to consummate the Sale Transaction. The
execution, delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the Sale Transaction have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and no other
corporate proceedings on the part of Buyer are necessary to authorize or
consummate the Sale Transaction. This Agreement has been duly executed and
delivered by Buyer and, assuming due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
(d) No Conflict; Required Filings and Consents.
(i) The execution, delivery and performance of this
Agreement by Buyer does not and will not: (1) conflict with or violate the
Certificate of Incorporation or By-Laws of Buyer; (2) assuming that all
consents, approvals and authorizations contemplated
-27-
by Section 3.2(d)(ii) have been obtained, all filings described in such Section
have been made and all notification periods referred to in such Section have
expired, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Buyer or by which Buyer or its properties are bound or
affected; or (3) result in any breach or violation of or constitute a default
(or an event which with notice or lapse of time or both could become a default)
or result in the loss of a material benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien, security interest, change or encumbrance on any of the
properties or assets of Buyer pursuant to, any note, bond, mortgage, indenture,
contract, lease, license, permit, franchise or other instrument or obligation to
which Buyer is a party or by which Buyer or any of properties or assets of Buyer
is bound or affected, except, in the case of clauses (2) and (3), for any such
conflicts, violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, reasonably be expected to result in a Buyer
Material Adverse Effect.
(ii) The execution, delivery and performance of this
Agreement by Buyer and the consummation of the Sale Transaction by Buyer do not
and will not require any consent, approval, authorization or permit of, action
by, filing with or notification to, any Governmental Entity, except for: (1)
applicable filings under the Xxxx-Xxxxx Act and the Exon-Xxxxxx Act and the
expiration of the waiting periods under those Acts; (2) clearance under the
Federal rules and regulations referred to in Section 5.1(d); and (3) such other
Requisite Governmental Approvals as shall have been specified by Buyer to the
Company in writing prior to the date of this Agreement.
(e) Information Supplied. None of the information supplied or
to be supplied by or on behalf of Buyer in writing or otherwise approved by
Buyer for inclusion in the Proxy Statement will contain, at the date the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders Meeting, any statement which, in the light of the circumstances
under which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of any proxy for
the Shareholders Meeting or any amendment or supplement thereto.
(f) Absence of Certain Changes or Events. Since December 31,
1998, there has not been any change, event or development in or affecting Buyer
that, individually or in the aggregate, constituted, or could reasonably be
expected to have, a Buyer Material Adverse Consummation Effect.
(g) Absence of Litigation. There are no suits, claims,
actions, proceedings or investigations pending or, to the knowledge of Buyer,
overtly threatened against Buyer or any of its subsidiaries, or any properties
of Buyer or any of its subsidiaries, before any
-28-
court, arbitrator or Governmental Entity that, individually or in the aggregate,
could reasonably be expected to have a Buyer Material Adverse Effect. Neither
Buyer nor any of its subsidiaries nor any of their respective properties or
assets is or are subject to any order, writ, judgment, injunction, decree,
determination or award having, or which could reasonably be expected to have, a
Buyer Material Adverse Consummation Effect.
(h) Financing. Buyer has and will provide the funds necessary
to consummate the Sale Transaction in accordance with the terms of this
Agreement. The Included Assets will not be used to secure any indebtedness
incurred to provide such funds.
ARTICLE IV
CONDUCT OF TG BUSINESS PENDING THE CLOSING; OTHER COVENANTS
SECTION 4.1 Conduct of TG Business Pending the Closing. Except as
otherwise required by the terms of this Agreement or unless Buyer shall
otherwise agree in writing (such agreement not to be unreasonably withheld): (i)
the TG Business shall be conducted only in, and the Company shall not take any
action with respect to the TG Business except in, the ordinary course of
business and in a manner consistent with past practice and in compliance with
applicable laws; (ii) the Company shall use its reasonable commercial efforts to
preserve intact the TG Business and its organization, to keep available the
services of the current TG Employees, to preserve the present relationships of
the Company with the customers and suppliers of the TG Business and other
persons with whom the Company has significant business relations in connection
with the TG Business, and to keep in place, consistent with past practice, the
insurance coverages (other than title insurance) listed on Schedule 3.1(t) of
the Company Disclosure Schedules; and (iii) by way of amplification and not
limitation of the foregoing, the Company shall not directly or indirectly do, or
propose or commit to do, any of the following:
(a) Except to the extent required under the Stock Option
Plans, the TG Plans or the TG Employment Contracts, in each case as in effect on
the date of this Agreement: (i) increase the compensation or fringe benefits of
any of the TG Employees, except for increases in compensation in the ordinary
course of business in accordance with past practice; or (ii) grant any severance
or termination pay to any TG Employees, or (iii) establish, adopt, enter into or
amend or terminate any TG Plan or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any TG Employees except as required by law or as
provided in this Agreement; provided, however, that this Section 4.1(b) shall
not prohibit the Company, to the extent consistent with past practice, from
hiring personnel from time to time in the ordinary course of the TG Business and
providing such personnel with benefits deemed appropriate by the Company, in
each case subject to prior consultation with Buyer;
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(b) Sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of the Included Assets other
than in the ordinary course of business consistent with past practice and in
amounts that could not, individually or in the aggregate, reasonably be expected
to have a TG Business Material Adverse Effect;
(c) Except for (i) current capital expenditure plans set forth
on Schedule 4.1(c) of the Company Disclosure Schedules, (ii) individual
expenditures of less than $100,000, (iii) expenditures under contracts or
commitments permitted by Section 4.1(g), expend, or commit to expend, funds for
expenditures related to the TG Business;
(d) Adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation;
(e) Recognize any labor union for TG Employees (unless legally
required to do so) or enter into any collective bargaining agreement related to
the TG Business;
(f) Except as may be required as a result of a change in
United States generally accepted accounting principles or as recommended by the
Company's independent accountants and consented to in writing by Buyer (which
consent shall not be unreasonably withheld) prior to such change, change any of
the accounting methods, practices or principles used by the Company;
(g) Either (i) enter into any contract or commitment relating
to the TG Business providing for payments to the Company of more than (1)
$10,000,000 in connection with standard, non-developmental products sold at
standard or catalog prices, (2) $1,000,000 in connection with developmental
programs, bids or contracts (whether funded by customers or internal research
and development), or (3) $2,000,000 in connection with non-standard programs or
pricing or significant deviations from the TG Business' standard terms and
conditions or the terms and conditions contained in the Government Contracts
listed on Schedule 3.1(s), in each case either in connection with an individual
transaction or a series of related transactions, or (ii) make any bid which, if
accepted, would result in any such contract or commitment; or
(h) Authorize any of, or commit or agree to take any of, the
foregoing actions or any action which would make any of the representations or
warranties of the Company contained in this Agreement untrue as of the date when
made if such action had then been taken.
SECTION 4.2 Shareholders Meeting. In connection with the requirement
that this Agreement and the Sale Transaction be approved by the Company's
shareholders: (a) the Company shall take all action necessary, in accordance
with and subject to the California Code and its Articles of Incorporation and
By-Laws, to convene a meeting of its shareholders (the "Shareholders Meeting")
as soon as reasonably practicable after the
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date of this Agreement to consider and vote upon the adoption and approval of
this Agreement and the Sale Transaction, and such other matters (if any) as the
Company may wish to submit for a separate vote at the Shareholders Meeting; (b)
subject to clause (c) below, the Company, through the Board, shall recommend to
its shareholders approval of this Agreement and the Sale Transaction and such
recommendation shall be included in the Proxy Statement; and (c) the Board may
fail to make such recommendation, or withdraw, modify or change such
recommendation, or take the position described in Section 6.1(g)(ii) with
respect to a tender offer of the kind therein specified, if and only if the
Board, having been advised in writing by outside counsel, determines in good
faith that the making of such recommendation, or the failure to so withdraw,
modify or change such recommendation, could constitute a breach of the Board's
fiduciary duties to the Company's shareholders under California law (but the
foregoing shall not entitle the Company to delay or defer the Shareholders
Meeting).
SECTION 4.3 Preparation of Proxy Statement. As soon as reasonably
practicable following the date of this Agreement, the Company shall prepare the
Proxy Statement and, following approval by Buyer (which approval shall not be
reasonably withheld), shall file the Proxy Statement with the SEC. The Company
shall use its reasonable commercial efforts to have the Proxy Statement cleared
by the SEC as promptly as practicable after such filing. The Company shall use
its reasonable commercial efforts to cause the Proxy Statement to be mailed to
the Company's shareholders as promptly as practicable after the Proxy Statement
is cleared by the SEC. The Company and Buyer shall each correct any information
provided by it for use in the Proxy Statement which shall have become false or
misleading.
SECTION 4.4 Certain Filings. Promptly following the date of this
Agreement: (a) the Company and Buyer shall prepare and file with the Antitrust
Authorities all documents and forms required under the Xxxx-Xxxxx Act, and
thereafter each of the Company and Buyer shall use its reasonable commercial
efforts to obtain the timely expiration of the waiting period applicable to the
Sale Transaction under the Xxxx-Xxxxx Act; (b) Buyer shall make application to
the Committee on Foreign Investment in the United States ("CFIUS") under Section
721 of the Defense Production Act of 1950 (the "Exon-Xxxxxx Act") for a
favorable review of the Sale Transaction and the Company shall cooperate
thereafter with Buyer to achieve a favorable review of the Sale Transaction by
CFIUS; and (c) Buyer shall make the applications necessary to satisfy the
condition set forth in Section 5.1(d) and the Company shall thereafter cooperate
with Buyer to satisfy such condition. Where required or appropriate under
applicable law, any person in control of Buyer may take any of the actions
required to be taken by Buyer under this Section 4.4 but nothing shall relieve
Buyer of its obligations under this Section 4.4 with respect to any actions
required by this Section 4.4.
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SECTION 4.5 Access to Information.
(a) The Company: (i) shall, and shall cause its auditors and
other agents to, afford the officers, auditors and other agents of Buyer
reasonable access at all reasonable times (during normal business hours so as
not to unduly or unreasonably interfere with the TG Business or any other
business of the Company) to its senior officers, agents, independent
accountants, properties, offices and other facilities involved in the TG
Business and (subject to restrictions imposed by applicable law or by contract)
to all books and records (including all Returns, and the work papers and other
documents of the Company's independent accountants), and to all financial,
operating and other data and information, in each case relating to the TG
Business, the Included Assets and the Included Liabilities, as Buyer, through
its officers, may from time to time reasonably request (including all internal
financial and operating reports and results); (ii) shall make available its
senior officers, its independent accountants and (subject to all applicable
privileges, which shall not be deemed waived) its outside counsel, in each case
upon reasonable prior notice and during normal business hours, to confer on a
regular basis with the appropriate officers of Buyer regarding the ongoing
operations of the TG Business, the implementation of the transactions
contemplated by this Agreement and other matters reasonably related thereto;
(iii) shall, promptly after it has, consistently into its customary practices,
closed its books for accounting and financial reporting purposes with respect to
each completed calendar month prior to the Closing (excluding the month covered
by the unaudited financial statements referred to in Section 2.2(ix)), furnish
to Buyer the unaudited balance sheet of the TG Business as of the last day of
such month, and the related unaudited statements of earnings and cash flows for
the year-to-date period then ended, in each case prepared on a basis consistent
with the basis of preparation of the TG Interim Financials; and (iv) shall
promptly notify Buyer of any change by the Company in its accounting methods,
principles or practices (whether or not required by changes in GAAP or
recommended by the Company's independent accountants). No investigation pursuant
to this Section 4.5(a) shall affect any representations or warranties of the
Parties made in this Agreement or the conditions to the obligations of the
Parties under this Agreement.
(b) Buyer shall hold information it receives pursuant to
Section 4.5(a) which is nonpublic in confidence and shall not disclose such
information to any third party without the written consent of the Company. Such
information shall be subject to the Confidentiality Agreement dated March 31,
1999 between the Company and Marconi (the "Confidentiality Agreement").
SECTION 4.6 Solicitations.
(a) Offers for the TG Business. The Company shall not,
directly or indirectly, through any officer, director or agent, solicit,
initiate or encourage the submission of any
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proposal or offer from any person relating to (and limited to) any acquisition
or purchase of all or any material portion (other than inventory in the ordinary
course) of the assets of, or any equity interest in, the TG Business or solicit,
participate in or initiate any negotiations regarding, or furnish to any other
person any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person to do or seek to do any of the foregoing, and all efforts being
conducted by or on behalf of the Company on the date of this Agreement to
solicit purchasers of the TG Business shall be discontinued forthwith. Also, the
Company shall not release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party insofar
as such agreement relates to the TG Business.
(b) Solicited Offers for the Company or its Other Businesses.
Nothing in this Agreement shall preclude the Company from continuing its efforts
to sell either the Company as an entirety or the Company's component businesses
other than the TG Business pursuant to a merger, consolidation, share exchange,
business combination, tender or exchange offer, asset acquisition or other
similar transaction (a "Non-TG Transaction"); provided, however, that: (i) the
Company shall inform all third parties from which it solicits an offer or
proposal for, and with which it negotiates, any Non-TG Transaction that the
Company is bound by the provisions of this Agreement, including Section 4.6(a);
(ii) the Company shall not solicit, initiate or encourage the submission of a
proposal for, or enter into any agreement providing for, a Non-TG Transaction on
terms that would prevent the Company from consummating the Sale Transaction;
(iii) the Company shall not solicit, initiate or encourage the submission of a
proposal for, or enter into any agreement providing for, a Non-TG Transaction
pursuant to which control of the Company as an entirety would be acquired prior
to the consummation of the Sale Transaction unless the terms of such Non-TG
Transaction require the acquiror to acknowledge the existence of, and cause the
Company to comply with its obligations under, this Agreement and the Escrow
Agreement; and (iv) all efforts being conducted by or on behalf of the Company
on the date of this Agreement to solicit, initiate or encourage any proposal
inconsistent with this Section 4.6(b) shall be discontinued forthwith and each
of the parties to the Other Confidentiality Agreements shall promptly be
informed that the Company has agreed with Buyer to cease soliciting and
accepting any proposals involving the direct or indirect acquisition of the TG
Business.
(c) Unsolicited Inconsistent Offers for the Company. Nothing
in Sections 4.6(a) or (b) shall prohibit the Company from informing its
shareholders, and taking action under clause (c) of Section 4.2, if it receives
an unsolicited written bona-fide proposal made to the Company after the date of
this Agreement to consummate a transaction that would (directly or through an
acquisition of the Company as an entirety) include the TG Business and preclude
the Company from consummating the Sale
-33-
Transaction provided that: (i) the Company gives Buyer, as promptly as
practicable, written notice of the receipt of any such proposal together with a
copy of such proposal or an accurate and reasonably detailed summary of the
material terms thereof and a statement of the identity of the proponent; and
(ii) the Company does not, directly or indirectly, through any officer,
director, agent or otherwise, furnish information to, or enter into discussions
or negotiations with, such other bidder until after the shareholders of the
Company have voted on the Sale Transaction and then only if such vote shall fail
to approve the Sale Transaction.
SECTION 4.7 Indemnification.
(a) General Indemnification by the Company. The Company
covenants and agrees, from and after the Closing, to indemnify, defend, protect
and hold harmless Buyer and its respective officers, directors, employees,
assigns, successors and affiliates (individually, a "Buyer Indemnified Party"
and, collectively, the "Buyer Indemnified Parties") from, against and in respect
of all liabilities, losses, claims, damages, business disruption, consequential
damages, punitive damages, causes of action, lawsuits, administrative
proceedings (including informal proceedings), investigations, audits, demands,
assessments, judgments, settlement payments, deficiencies, penalties, fines,
interest payable to third persons and reasonable costs and expenses (including
without limitation reasonable attorneys' fees and other disbursements)
(collectively, "Damages") suffered, sustained, incurred or paid by the Buyer
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly: (i) any inaccuracy or breach of any representation or
warranty of the Company set forth in this Agreement (as qualified by the Company
Disclosure Schedules) or any certificate delivered by or on behalf of Company at
the Closing; (ii) any nonfulfillment of any covenant or agreement of the Company
in this Agreement; (iii) any Excluded Liabilities; or (iv) any liabilities of
the Company that are not Included Liabilities.
(b) General Indemnification by Buyer. Buyer covenants and
agrees, from and after the Closing, to indemnify, defend and protect and hold
harmless the Company and its respective officers, directors, employees, assigns,
successors and affiliates (individually a "Company Indemnified Party" and,
collectively, the "Company Indemnified Parties") from, against and in respect of
all Damages suffered, sustained, incurred or paid by the Company Indemnified
Parties in connection with, resulting from or arising out, directly or
indirectly: (i) any inaccuracy or breach of any representation or warranty of
Buyer set forth in this Agreement or any certificate delivered by or on behalf
of Buyer at the Closing; (ii) any nonfulfillment of any covenant or agreement of
Buyer in this Agreement; (iii) any Included Liability; (iv) any liabilities of
Buyer or the TG Business that are attributable to any act, omission or event
occurring after the Closing; (v) any liability of the Company to the extent that
it is attributable to the conduct of the
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TG Business after the Closing; or (vi) any liabilities of Buyer that are not
Excluded Liabilities.
(c) Limitations and Expiration. Notwithstanding Sections
4.7(a) and (b):
(i) The aggregate amount for which the Company is
required to indemnify the Buyer Indemnified Parties under this Section 4.7 shall
not exceed the Escrow Fund; provided, however, that this limitation shall not
apply to, and the Buyer Indemnified Parties shall not be obligated to apply any
claims against the Escrow Fund with respect to, the Company's liability for (i)
Damages arising out of any liabilities referenced in Sections 4.7(a)(iii) or
(iv); (ii) any indemnity under Section 4.8(b) or any Damages arising out of any
breaches of the covenants of the Company set forth in Section 4.8; (iii) Damages
based on fraud or willful breaches by Company, or any of its affiliates or
agents on behalf of Company, of any of its representations or warranties
contained in this Agreement (as qualified by the Company Disclosure Schedules)
or in any certificate delivered by or on behalf of Company at the Closing; or
(iv) any adjustment to the Estimated Consideration under Sections 1.3, and 1.4
(it being understood that any matter with respect to which any such adjustment
is made under Section 1.4 shall not also be considered a breach of any
representation or warranty of Company contained in this Agreement).
(ii) The indemnification obligations of Company under
this Section 4.7 shall terminate at the date that is the later of the dates
specified in clause (A) and (B) of this Section 4.7(c)(ii):
(A) (1) Except as to representations,
warranties and covenants specified in clauses (A)(2) and (A)(3) of this Section
4.7(c)(ii), and subject to clause (B) of this Section 4.7(c)(ii), the Initial
Release Date as defined in Section 9(a) of the Escrow Agreement (the "Initial
Release Date"); provided, however, that, notwithstanding any other provision of
this Agreement, no Claim (as defined in Section 4.7(d) below) with respect to
any of the matters referenced in this clause (A)(1) shall be effective unless
Buyer gives the Company a Claim Notice (as defined in Section 4.7(d)) on or
prior to the Initial Release Date; or
(2) With respect to the covenants of
the Company set forth in Section 4.8, the expiration of all relevant Federal,
state or foreign statute of limitation (including extensions thereof); or
(3) With respect to Excluded
Liabilities or any liabilities of the Company that are not Included Liabilities,
and except as set forth in clause (A)(2) of this Section 4.7(c)(ii), the
indemnification of the Company shall survive forever; or
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(B) Notwithstanding clause (A) of this
Section 4.7(c)(ii), as to any Claim for which a Claim Notice has been delivered
to the Company as of the relevant date described in clause (A) of this Section
4.7(c)(ii) (all such claims, and the claims referred to in Section 4.7(c)(iii),
being referred to as "Pending Claims"), the final resolution of such Pending
Claim (notwithstanding the earlier occurrence of the date applicable thereto
under Section 4.7(c)(ii)(A) above).
(iii) The indemnification obligations of Buyer shall
terminate at the date that is the later of (A) the Initial Release Date, except
that the indemnification obligations of Buyer to the Company set forth in
Section 4.7(b)(iii), (iv), (v) and (vi) and with respect to the covenants of
Buyer set forth in Section 4.8 shall terminate on the expiration of all relevant
Federal, state or foreign statute of limitations (including extensions thereof)
and (B) the resolution of all Pending Claims against Buyer under Section 4.7(b).
(iv) Notwithstanding anything to the contrary in this
Agreement: (I) no Buyer Indemnified Party shall be entitled to indemnification
under this Agreement unless and until the sum of all otherwise indemnifiable
amounts payable to all the Buyer Indemnified Parties together exceeds $250,000,
in which case, subject to the other provisions of this Agreement, the amount
indemnifiable shall be the entire aggregate amount due, including the first
$250,000; and (II) no Company Indemnified Party shall be entitled to
indemnification under this Agreement unless and until the sum of all otherwise
indemnifiable amounts payable to all the Company Indemnified Parties together
exceeds $250,000, in which case, subject to the other provisions of this
Agreement, the amount indemnifiable shall be the entire aggregate amount due,
including the first $250,000. The foregoing limitations of clauses (I) and (II)
shall not apply to the indemnification obligations of either Party with respect
to their respective covenants set forth in Section 4.8 and the indemnification
obligations of Company set forth in Section 4.7(c)(ii)(A)(3) and shall also not
apply to the obligations of either Party with respect to the matters specified
in Section 4.7(a)(iii)(iv), Section 4.7(b)(v) or (vi), Section 4.7(c)(i)(iv) or
Section 6.2.
(v) The aggregate amount for which Buyer is required
to indemnify the Company Indemnified Parties under this Section 4.7 shall not
exceed $1,000,000; provided, however, that this limitation shall not apply to
Buyer's liability for: (i) Damages arising out of any liabilities referenced in
Sections 4.7(b)(iii), (iv), (v) or (vi); (ii) any indemnity under Section 4.8(c)
or any Damages arising out of any breaches of the covenants of Buyer set forth
in Section 4.8; or (iii) Damages based on fraud or willful breaches by Buyer, or
any of its affiliates or agents on behalf of Buyer, of any of its
representations or warranties contained in this Agreement or in any certificate
delivered by or on behalf of Buyer at the Closing.
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(d) Indemnification Procedures. All claims or demands for
indemnification under this Section 4.7 ("Claims") shall be asserted and resolved
as follows:
(i) In the event that any Company Indemnified Party
or Buyer Indemnified Party (an "Indemnified Party") has a Claim against any
party obligated to provide indemnification pursuant to Section 4.7(a) or (b) (an
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness give written notice (the "Claim Notice") of such Claim to
the Indemnifying Party, with a copy to the Escrow Agent, if applicable,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible. If the Indemnifying Party does not notify
in writing the Indemnified Party within thirty (30) days after the date of
delivery of the Claim Notice that the Indemnifying Party disputes such Claim,
with a statement in reasonable detail (to enable the Indemnified Party to
understand the nature of the dispute) of the basis of such position (a "Notice
of Objection"), a copy of which is delivered to the Escrow Agent, if applicable,
the amount of such Claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. In case a Notice of Objection is delivered to the
Indemnified Party in accordance with this Section 4.7(d)(i), the Indemnified
Party shall respond in a written statement to the Notice of Objection within
thirty (30) days and, for sixty (60) days thereafter, the parties shall attempt
in good faith to resolve such dispute (and, if the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties). If the parties do not resolve the dispute within such sixty (60) day
period, either party may demand arbitration of the matter unless the amount of
the Damages is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until the amount is ascertained or both
parties agree to arbitration. Any arbitration under this Section 4.7(d) shall be
conducted in accordance with Section 7.6.
(ii) (A) In the event that any Claim for which
the Indemnifying Party would be liable to an Indemnified Party hereunder is
asserted against an Indemnified Party by a third party (a "Third Party Claim"),
the Indemnified Party shall promptly deliver a Claim Notice to the Indemnifying
Party. The Indemnifying Party shall have thirty (30) days from the date of
delivery of the Claim Notice to notify the Indemnified Party (I) whether the
Indemnifying Party disputes liability to the Indemnified Party hereunder with
respect to the Third Party Claim, and, if so, the basis for such a dispute, and
(II) whether or not the Indemnifying Party desires, at the sole cost and expense
of the Indemnifying Party, to defend against the Third Party Claim, provided
that the Indemnified Party, at the sole cost and expense, is hereby authorized
(but not obligated) to file any motion, answer or other pleading and to take any
other reasonable action which the Indemnified Party shall deem necessary or
appropriate to protect the Indemnified Party's interests.
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(B) If the Indemnifying Party elects to
defend the Indemnified Party against such Third Party Claim by appropriate
proceedings, then, unless the Indemnified Party otherwise agrees in writing, the
Indemnifying Party may not settle any Third Party Claim (in whole or in part) if
such Indemnified Party desires to participate in, but not control, any such
defense or settlement the Indemnified Party may do so at its sole cost and
expense. If the Indemnifying Party elects not to defend the Indemnified Party
against a Third Party Claim, whether by failure of the Indemnifying Party to
give the Indemnified Party timely notice as provided herein or otherwise, then
the Indemnified Party, without waiving any rights against such party, may settle
or defend against such Third Party Claim in the Indemnified Party's reasonable
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party or the Escrow Fund, as provided in Section 4.7(e), the amount
of any settlement or judgment and, on an ongoing basis, all indemnifiable costs
and expenses of the Indemnified Party with respect thereto.
(C) If at any time, in the reasonable
opinion of the Indemnified Party, notice of which shall be given in writing to
the Indemnifying Party, any Third Party Claim seeks material prospective relief
which could have an adverse effect on any Indemnified Party or the TG Business,
the Indemnified Party shall have the right to control or assume (as the case may
be) the defense of any such Third Party Claim and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be included as
part of the indemnification obligations of the Indemnifying Party hereunder. If
the Indemnified Party elects to exercise such right, the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
Third Party Claim at the sole cost and expense of the Indemnifying Party.
(iii) The Indemnified Party shall cooperate fully
with the Indemnifying Party to defend Third Party Claims as reasonably requested
by the Indemnifying Party by, for example, making relevant employees reasonably
available and providing reasonable access to documents and information during
normal business hours and with prior notification.
(iv) Subject to Section 4.7(c), nothing herein shall
be deemed to prevent the Indemnified Party from making a Claim, and an
Indemnified Party may make a Claim hereunder, for potential or contingent
Damages; provided, however, that within thirty (30) days of notifying the
Indemnifying Party of such potential or contingent claim, the Indemnified Party
delivers to the Indemnifying Party a Claim Notice that sets forth the specific
basis for any such Claim.
(v) Subject to the provisions of Section 4.7(c), the
Indemnified Party's failure to give reasonably prompt notice as required by
Section 4.7(d) of any actual, threatened or possible claim or demand which may
give rise to a right of indemnification hereunder shall not relieve the
Indemnifying Party of any liability which the
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Indemnifying Party may have to the Indemnified Party unless the failure to give
such notice materially and adversely prejudiced the Indemnifying Party.
(vi) In the event of any inconsistency between the
procedures set forth in this Section 4.7(d) and the procedures set forth in
Section 4.8 (relating to Taxes), Section 4.8 (relating to Taxes) shall control.
(e) Escrow Fund: Appointment of Escrow Agent; Exclusive
Remedy. The Company and Buyer hereby agree to the creation of an escrow fund to
satisfy the Company's indemnification obligations to the Buyer Indemnified
Parties pursuant to the terms of this Section 4.7. The Company shall be deemed
to have received and deposited with the Escrow Agent the Escrow Amount and all
interest and earnings accruing on the Escrow Amount shall accrue to (and be
taxable currently to) Company. The Escrow Amount and all interest and earnings
thereon, as increased or decreased from time to time in accordance with the
Escrow Agreement (collectively, the "Escrow Fund"), and all claims or demands
for payment out of the Escrow Fund shall be governed by the terms of the Escrow
Agreement. The Company and Buyer hereby appoint an Escrow Agent to administer
the Escrow Fund. The Company and Buyer shall each bear one half of the fees and
expenses of the Escrow Agent incurred in connection with the establishment and
maintenance of the Escrow Fund. The Parties agree and acknowledge that,
notwithstanding any other provision of this Agreement, payments from the Escrow
Fund shall be the Buyer Indemnified Parties' sole and exclusive remedy for
Damages for which the Company shall be liable under Section 4.7(a), and no Claim
may first be made once the balance in the Escrow Fund has fallen to zero, in
each case except as set forth in Section 4.7(c)(i).
(f) Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company shall survive the Closing, shall
remain in effect until, and shall (subject to the final sentence of Section
4.7(e)) expire in accordance with, Section 4.7(c)(ii). The representations and
warranties of Buyer shall survive the Closing, shall remain in effect until, and
shall expire in accordance with, Section 4.7(c)(iii).
(g) Calculation of Losses. The amount of any Damages for which
indemnification is provided under this Section 4.7 or Sections 4.8(b) or (c)
shall be net of any amounts actually recovered by the Indemnified Party under
insurance policies with respect to such Damages and shall be (i) increased to
take account of any net Tax cost incurred by the Indemnified Party arising from
the receipt of indemnity payments hereunder (grossed up for such increase) and
(ii) reduced to take account of any net Tax benefit realized by the Indemnified
Party arising from the incurrence or payment of any such Damages, in each case
calculated at the time of payment, using the characterization described below
and assuming that all income and deductions bear (or relieve) Tax at an
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effective corporate rate based on the maximum marginal Federal rate and a state
rate of 7.0%, taking into account the deductibility (if then allowed) of state
tax from Federal taxable income. Any indemnity payment under this Section 4.7 or
Sections 4.8(b) or (c) shall be treated as an adjustment to the Adjusted
Consideration for Tax purposes, or as settlement of an obligation intended to be
retained by the Company although paid by Buyer, unless a final determination
(which shall include the execution of a Form 870-AD or successor form) with
respect to the Indemnified Party or any of its affiliates causes any such
payment not to be treated as an adjustment to the Adjusted Consideration for
United States Federal income tax purposes. If any Tax Agency asserts in writing
during the examination of any Return of Buyer or the Company that any indemnity
payment should be characterized other than as provided in this Section 4.7(g),
the Party that receives the proposed recharacterization (the "Affected Party")
shall promptly notify the other Party (the "Consulted Party") in writing, with a
copy of the proposed recharacterization. The Affected Party may control any
proceedings involving the proposed recharacterization but (1) shall resist, in
good faith and by appropriate proceedings, the proposed recharacterization, (2)
shall provide the Consulted Party with copies of the portions of all
communications from the relevant Tax Agency and all proposed filings and
submissions regarding the proposed recharacterization, (3) shall consult with
the Consulted Party regarding the conduct of the contest, and (4) shall not
settle or concede the proposed recharacterization without the consent of the
Consulted Party. If the Affected Party materially breaches its obligations under
the preceding sentence, the Consulted Party may, in computing the amount of any
indemnity payable to the Affected Party, continue to treat its indemnity
payments as an adjustment to the Adjusted Consideration and not as provided in
any final determination made with respect to the Affected Party.
SECTION 4.8 Tax Matters. The Company and Buyer hereby covenant and
agree with respect to certain Tax matters as follows:
(a) Tax Treatment and Allocations. Within sixty 60 days after
the date of this Agreement, Buyer shall provide to the Company a schedule
setting forth the proposed allocation (the "Preliminary Allocation Schedule") of
the Estimated Consideration to and among the Included Assets, such Preliminary
Allocation Schedule to be adjusted following the Closing Date to reflect events
occurring between the date of this Agreement and the Closing Date with a final
version thereof (the "Updated Allocation Schedule") to be prepared by Buyer
within 35 days after the Closing Date. Such allocations shall be made in
accordance with Section 1060 of the Tax Code and any applicable Treasury
Regulations and shall also reflect an appropriate allocation to Included Assets
subject to sales or other transfer taxes. The Company shall be deemed to have
accepted the Updated Allocation Schedule, and it shall be deemed final, unless
the Company provides written notice of disagreement to Buyer within thirty (30)
days of receipt of the Updated Allocation Schedule (the "Disagreement Notice").
If the Company provides a Disagreement Notice, the Parties shall negotiate in
good faith to resolve the differences.
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If the disagreements are not resolved within thirty (30) days of Buyer's receipt
of the Disagreement Notice, Buyer shall engage a national independent accounting
firm (the "Accountant") reasonably acceptable to the Company to resolve the
difference. The Accountant will be requested to resolve the dispute and
determine the correct allocation in accord with Section 1060 of the Tax Code
and, within thirty (30) days of engagement, to issue its report in writing to
Buyer and the Company (the "Accountant Report"). One half of the fees of the
Accountant shall be borne by the Company and one half of such fees shall be
borne by Buyer. Neither Party shall take a position on any Return, before any
Tax Agency or in any judicial proceeding that is inconsistent with the Updated
Allocation Schedule, if final, or the Accountant Report, except as required by
law.
(b) Returns. The Company shall prepare and file (or cause to
be prepared and filed) on a timely basis (to the extent not filed on or before
the date of this Agreement) all Returns for all taxable periods ending on or
before the Closing Date, shall (subject to Section 4.8(i)) pay all Taxes shown
to be due on such Returns, and shall indemnify and hold Buyer harmless against,
from and in respect of (i) all Taxes of the Company attributable to the Included
Assets or the operation of the TG Business (the "TG Taxes") for all taxable
periods (or any portion thereof) which end on or before the Closing Date (except
to the extent such TG Taxes have been included in the Adjusted Closing Date
Balance Sheet); (ii) all TG Taxes for any taxable period or periods for all
members of any affiliated, consolidated, combined or unitary group of which the
Company is or has been a member prior to the Closing Date; and (iii) with
respect to any taxable period commencing before the Closing Date and ending
after the Closing Date (a "Straddle Period"), all TG Taxes attributable to the
portion of the Straddle Period prior to and including the Closing Date (the
"Pre-Closing Period") (except to the extent such TG Taxes have been included in
the Adjusted Closing Date Balance Sheet). For purposes of this Agreement, the
portion of any Tax which is the subject of this Section 4.8 that is attributable
to the Pre-Closing Period shall be (i) in the case of a Tax (including any
property or ad valorem Tax) that is not based on net income, gross income,
premiums or gross receipts, the total amount of such Tax for the period in
question multiplied by a fraction, the numerator of which is the number of days
in the Pre-Closing Period, and the denominator of which is the total number of
days in such Straddle Period, and (ii) in the case of a Tax which is the subject
of this Section 4.8 that is based on any of net income, gross income, premiums
or gross receipts, the Tax that would be due with respect to the Pre-Closing
Period if such Pre-Closing Period were a separate taxable period, except that
exemptions, allowances, deductions or credits that are calculated on an annual
basis (such as the deduction for depreciation or capital allowances) shall be
apportioned on a per diem basis. For purposes hereof, all Taxes which are the
subject of this Section 4.8 arising from the Sale Transaction, except as set
forth in Section 4.8(i), shall be deemed to be Taxes attributable to the
Pre-Closing Period and shall be the responsibility of Company.
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(c) Indemnity; Liability for Taxes. Buyer shall prepare and
file (or cause to be prepared and filed) on a timely basis all Returns for all
taxable periods beginning after the Closing Date, shall, subject to Sections
4.8(d) through (f), pay all Taxes shown to be due on such Returns, and shall
indemnify and hold the Company harmless against, from and in respect of all TG
Taxes (i) for any taxable year or period commencing after the Closing Date, and
(ii) for any Straddle Period, other than Taxes attributable to the Pre-Closing
Period. The principles of the first sentence of Section 4.7(g) shall apply to
any indemnification payment by either Party to the other under this Section 4.8.
(d) Refunds and Credits. All refunds or credits of TG Taxes
for or attributable to taxable years or periods ending on or before the Closing
Date (or the Pre-Closing Period, in the case of a Straddle Period) shall be for
the account of the Company, except to the extent such refund or credit is
included in the Adjusted Closing Date Balance Sheet. Following the Closing,
Buyer shall forward (or cause to be forwarded) to the Company any such refunds
or credits due to the Company pursuant to this Section 4.8 and the Company shall
forward (or cause to be forwarded) to Buyer all refunds or credits due to Buyer
pursuant to this Section 4.8, in each case in accordance with the provisions of
Section 4.8(f).
(e) Procedures Regarding Tax Changes.
(i) If an audit examination of any Return of the
Company for any taxable period ending on or before the Closing Date shall result
(by settlement or otherwise) in any adjustment the effect of which is to
increase deductions, losses or tax credits or decrease income, gains, premiums,
revenues or recapture of Tax credits ("Changes") reflected on a Return of Buyer
for any taxable period ending after the Closing Date, the Company shall notify
Buyer and provide it with all necessary information so that it can reflect on
the appropriate Return any appropriate Changes. If, as a result of such Changes,
Buyer or its subsidiaries enjoy a net Tax benefit (taking into account all Tax
effects) from an increase in deductions, losses or tax credits and/or a decrease
in income, gains, premiums, revenues or recapture of tax credits ("Buyer Tax
Benefits") for taxable periods ending after the Closing Date, Buyer shall pay to
Company the amount of such Buyer Tax Benefit within thirty (30) days of when
such Buyer Tax Benefits were actually realized by Buyer in accordance with
Section 4.8(f).
(ii) If an audit examination of any Tax Return of
Buyer or its subsidiaries for taxable period ending after the Closing Date shall
result (by settlement or otherwise) in any Change reflected on a Return of the
Company or its subsidiaries for any taxable periods ending on or before the
Closing Date, Buyer shall notify the Company and provide it with all the
necessary information so that the Company can reflect any appropriate Changes on
its Return. If, as a result of such Changes, the Company or its subsidiaries
enjoy a net Tax benefit (taking into account all Tax effects) from an increase
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in deductions, losses or tax credits and/or a decrease in the income, gains,
premiums, revenues, or recapture of tax credits the ("Company Tax Benefits") for
taxable periods ending on or before the Closing Date, the Company shall pay to
Buyer the amount of such Company Tax Benefits within thirty (30) days of when
such Company Tax Benefits are actually realized by the Company or its
subsidiary, in accordance with Section 4.8(f).
(f) Timing of Tax Benefit Payments. Any payments or refunds or
credits for Taxes, or any payment of Buyer Tax Benefits or Company Tax Benefits,
that are required to be paid under this Agreement shall be made within thirty
(30) business days of receipt of any refund or thirty (30) business days of the
actual realization of any tax benefit, as the case may be.
(g) Termination of Tax Sharing Agreements. The Company hereby
agrees that, except for this Agreement, there are no, and as of the Closing
there will be no, obligations of the Company relating to the TG Business
pursuant to any tax sharing agreement or any similar arrangement, and any
further obligations that might otherwise have existed thereunder shall be
extinguished as of the Closing.
(h) Conduct of Audits or other Procedural Matters. Each Party
shall, at its own expense, control any audit or examination by any Tax Agency,
and have the right to initiate any claim for refund or amended Returns and
contest, resolve and defend against any assessment, notice of deficiency or
other adjustment or proposed adjustment of Taxes (the "Proceedings") for any
taxable period for which that Party is charged with payment or indemnification
responsibility under this Agreement. Each Party shall promptly forward to the
other all written notifications and other written communications including, if
applicable, the original envelope showing any postmark, for any Tax Agency
received by such Party or its affiliates relating to any liability for Taxes for
any taxable period for which such other Party or any of its affiliates is
charged with sole payment or indemnification responsibility under this Agreement
and each Indemnifying Party shall promptly notify, and consult with, each
Indemnified Party to any action it proposes to take with respect to any
liability for Taxes for which it is required to indemnify the other Party and
shall not enter into any closing agreement or final settlement with any Tax
Agency with respect to any such liability without the written consent of the
Indemnified Parties, which consent shall not be unreasonably withheld. In the
case of any Proceedings relating to a Straddle Period, Buyer shall control such
Proceedings and shall consult in good faith with the Company as to the conduct
of such Proceedings. The Company shall reimburse Buyer for such portion of the
costs, including legal costs, of conducting such Proceedings as is represented
by the portion of the Tax with respect to such Straddle Period for which the
Company is liable pursuant to this Agreement. Each Party shall, at the request
and expense of the other, execute or cause to be executed any powers of attorney
or other documents reasonably requested by such requesting Party to enable it to
take any and all actions the requesting Party reasonably requires with respect
to any
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Proceedings which the requesting Party controls. The failure by a Party to
provide timely notice under this Section 4.8(h) shall relieve the other Party
from its obligations under this Section 4.8 with respect to the subject matter
of any notification not timely forwarded, but only to the extent the other Party
has suffered a loss or other economic detriment because of such failure to
provide notification in a timely fashion.
(i) Transfer Taxes. Notwithstanding anything to the contrary
in this Agreement, including this Section 4.8, all transfer, documentary, sales,
use, stamp, registration, and other such Taxes incurred in connection with the
transactions contemplated by this Agreement shall be paid by Buyer when due,
with 50% of such payment to be deducted from the Estimated Consideration. Buyer
and the Company shall cooperate in the filing of all necessary Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes.
SECTION 4.9 Change of Name; Use of Company's Name and Initials As
promptly as practicable after the Closing, Buyer shall take any and all actions
necessary to (i) remove the Company's name from the name in which the TG
Business is conducted, (ii) remove or cause to be removed all references to the
Company at the sites where the TG Business is conducted, and, (iii) except to
the extent expressly permitted by the next sentence, cease using that name, the
initials "WJ" and any similar name or initials in its operations or otherwise.
Effective as of the Closing, the Company hereby grants Buyer and its affiliates
a royalty-free world wide perpetual license to use the Company's name and the
initials "WJ" in the names of products and related services and manuals
currently being commercialized in the TG Business. Buyer acknowledges that the
sole ownership such name and initials remains with Company. Buyer agrees that it
shall do nothing inconsistent with such ownership. Buyer shall comply with all
reasonable requests of the Company or any successor in interest (by merger or
otherwise) to the Company in connection with Buyer's use of such name and
initials. Buyer's use of such name and initials shall reasonably conform with
the standards practiced by the Company in the past.
SECTION 4.10 Further Action; Reasonable Commercial Efforts. Upon the
terms and subject to the conditions of this Agreement, each Party shall use its
reasonable commercial efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including but not limited to (i)
cooperating in the preparation and filing of the Proxy Statement, and any
amendments thereto, (ii) using its reasonable commercial efforts to make all
required regulatory filings and applications and to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Entities and third parties to contracts with the Company and its
subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the
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conditions to the Sale Transaction; and (iii) cooperating to effect the novation
of each Government Contract and Bid which (as set forth in Schedule 3.1(f)) is
required to be novated in accordance with all applicable governmental rules,
regulations and requests, provided, however, that the Company shall not be
released from any obligations to the Buyer expressly provided for in this
Agreement solely by reason of such novation and further provided that, following
the Closing, the Company's obligation with respect to the process of continuing
to seek such novations shall be to assist Buyer, which shall be primarily
responsible for pursuing such novations, to the extent that Buyer reasonable
requests such assistance. To the extent practicable in the circumstances and
subject to applicable laws, each Party shall provide the other with the
opportunity to review any information relating to such Party, or any of its
subsidiaries, which appears in any filing made with, or written materials
submitted to, any Governmental Entity or any non-governmental person in
connection with obtaining the Requisite Governmental Approvals and the Requisite
Non-Governmental Approvals (as such latter term is defined in Section 5.1(h)).
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each Party shall use their reasonable commercial efforts to take
all such necessary action.
SECTION 4.11 Notification of Certain Matters. The Company shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect,
and (ii) any failure of the Company or Buyer, as the case may be, to comply with
or satisfy in any material respect any covenant or agreement to be complied
with, or condition to be satisfied, by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 4.11 shall not limit or
otherwise affect the remedies available hereunder to the Party receiving such
notice.
SECTION 4.12 Public Announcements. Each Party shall consult with the
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with its securities exchange or
quotation system.
SECTION 4.13 Employee Transition.
(a) Prior to the Closing, the Company shall use its reasonable
commercial efforts to assist Buyer in hiring the services of those TG Employees
and consultants of the TG Business identified by Buyer; provided, however, that
the Company shall not be required to offer any TG Employees additional monetary
or other inducements to achieve that end beyond those in place on the day of
this Agreement, all of which shall be borne by the Company. Buyer has informed
the Company that it intends to give appropriate
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consideration to the employment of the TG Employees by Buyer but nothing herein
shall be construed as requiring Buyer to continue the employment of any specific
TG Employee or to maintain any particular TG Plan.
(b) Prior to the Closing, the Company shall deliver to Buyer a
schedule setting forth, with respect to all TG Employees (to the extent
permitted by applicable law), their respective employment arrangements and
entitlements, including their respective annual salaries or hourly rates, start
dates, positions, benefits and severance or reduction-in-force entitlements
under the TG Plans.
(c) Subject to any contrary provision in Schedule 1.3, as to
those persons who are TG Employees immediately before the Closing or were TG
Employees at any previous time, all payments and other benefits due to them (and
their beneficiaries and dependents) in respect of their employment by the
Company before the Closing, as well as for any severance, termination or
reduction-in-force payment payable directly as a result of the consummation of
the Sale Transaction, shall be for the account of the Company and the Company
shall indemnify Buyer and hold Buyer harmless against, from and in respect of
the costs of such payments and benefits and shall retain sponsorship and
liability with respect to all TG Plans.
SECTION 4.14 Covenant Not To Compete.
(a) For a period of three (3) years from the Closing Date,
neither the Company nor any of its affiliates that is a corporation or other
juridical entity shall directly or indirectly: (i) directly, or indirectly
through any employee or affiliate, manage or control any entity in, or conduct,
a business that would, determined as of the Closing Date, be competitive with
the TG Business in any territory worldwide (a "Competitive Business"), provided,
however, that the foregoing prohibition of this clause (i) shall not apply to
any other person which, having acquired control of the Company, (1) continues
(either directly or through any affiliate) in any Competitive Business in which
it was (directly or through any subsidiary) engaged prior to such acquisition,
or (2) develops any Competitive Business independently so long as, in any such
case, such person does not use the assets or properties (including the
Intellectual Property) of the TG Business or any TG Employee to participate in
or assist (directly or indirectly) the conduct or development of Competitive
Business, or (3) in the case of any present or future affiliate of the Company,
such affiliate exercises the rights held by it on the date of this Agreement
under any License Agreement included in Schedule 3.1(v); (ii) solicit any of the
TG Employees for purposes of obtaining their services, or hire any TG Employee
unless such TG Employee is not on the date of hire, and has not been for a
period of three months prior to the date of hire, a TG Employee, provided,
however, that, the foregoing prohibition of this clause (ii) shall not prohibit
the Company from placing advertisements in general circulation publications for
employment opportunities, which shall not be
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deemed a direct or indirect solicitation of the TG Employees; or (iii) solicit
any customer of the TG Business to become a customer of any Competitive
Business. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 4.14 is invalid or unenforceable, the
parties hereto agree that, without limiting the generality of Section 7.3, the
court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Section 4.14 shall be enforceable as so modified.
(b) The Company acknowledges that Buyer would be irreparably
harmed by any breach of Section 4.14(a) and that there would be no adequate
remedy at law or in damages to compensate Buyer for such breach. The Company
agrees that, in the event of any such breach, Buyer shall be entitled to
injunctive relief requiring specific performance by the Company of the breached
provisions of Section 4.14(a) and the Company consents to the entry thereof.
SECTION 4.15. U.S. WARN Act. The Company agrees to provide any required
notice under the Worker Adjustment and Retraining Notification Act ("WARN") and
any other applicable law and to otherwise comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in WARN) or similar
event affecting employees and occurring on or after the Closing or arising as a
result of the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to Obligation of Each Party to Effect the Sale
Transaction. The respective obligations of each Party to effect the Sale
Transaction shall be subject to the satisfaction or (to the extent permitted by
applicable law) waiver, at or prior to the Closing, of the following conditions:
(a) This Agreement and the Sale Transaction shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition making the consummation of the Sale Transaction
unlawful shall be in effect,
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nor shall any proceeding by any Governmental Entity seeking any of the foregoing
be pending;
(c) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the Sale
Transaction, which makes the consummation of the Sale Transaction illegal;
(d) Under the Federal rules and regulations relating to the
National Industrial Security Program, and in the form of approvals and
agreements prescribed by the U.S. Department of Defense (the "DOD"), clearance
shall have been obtained from the DOD for Buyer to own and operate those
portions of the TG Business that are governed by such Program, such clearance
being either unconditional or subject only to such conditions as are customarily
imposed under such Program and are not, in Buyer's reasonable judgment,
materially burdensome to Buyer;
(e) The waiting period applicable to the Sale Transaction
under the HSR Act shall have expired or been terminated without any objection by
the Antitrust Authorities to the consummation of the Sale Transaction;
(f) The period of time for any applicable review process by
CFIUS relating to the determination of any threat to national security in
respect of the Sale Transaction under the Exon-Xxxxxx Act shall have expired,
and CFIUS shall not have taken any action or made any recommendation to the
President of the United States to block or prevent consummation of the Sale
Transaction; and
(g) All Requisite Governmental Approvals (including, without
limitation, under the Exchange Act but excluding those referred to in Sections
5.2(e) and (f)), other than those the absence of which could not, individually
or in the aggregate, reasonably be expected to have a TG Business Material
Adverse Effect, shall have been obtained or made or shall have occurred, and all
conditions, if any, to such Requisite Governmental Approvals shall have been
satisfied and all such Requisite Governmental Approvals shall be in full force
and effect (it being agreed and understood that the novation referred to in
Section 4.10(iii) may not be obtained from the U.S. Government until after the
Closing).
SECTION 5.2 Conditions to Obligations of Buyer. The obligation of Buyer
to effect the Sale Transaction is subject to the satisfaction of all the
following conditions except to the extent lawfully waived by Buyer:
(a) The representations and warranties of Company set forth in
this Agreement shall be true and correct in all respects as of the date of this
Agreement and (except for those representations and warranties made only as of a
specified date) as of the Closing Date as though made on and as of the Closing
Date, and Buyer shall have received a certificate signed on behalf of Company by
its Chief Executive Officer and by its Chief
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Financial Officer to such effect; provided, however, that the representation and
warranty contained in Section 3.1(k) need be true and correct as of the Closing
Date only with respect to an updated Schedule 3.1(k) delivered at the Closing
and, in connection with such updated Schedule 3.1(k), Section 3.1(k) shall be
deemed (notwithstanding any contrary provision thereof) to be a representation
and warranty that the statements made therein are true and correct except
insofar as their failure to be true and correct as of the Closing Date could
not, individually or in the aggregate, reasonably be expected to have a TG
Business Material Adverse Effect;
(b) The Company shall have performed all obligations required
to be performed by it under this Agreement at or prior to the Closing Date with
such exceptions (except that no exceptions shall be permitted to the Company's
obligations under Section 1.6) as, either individually or in the aggregate, have
not constituted, and could not reasonably be expected to have, a TG Business
Material Adverse Effect, and Buyer shall have received a certificate signed on
behalf of Company by its Chief Executive Officer and by its Chief Financial
Officer to such effect;
(c) Prior to the Closing, all intercompany payables on the
books of the Company relating to the TG Business shall have been paid or
canceled;
(d) The Escrow Agent and the Company shall have executed the
Escrow Agreement;
(e) The Company shall, as required by Section 1.6(i), have (i)
delivered to the Title Company the Title Affidavit, (ii) obtained and furnished
to Buyer, for the benefit of Buyer, the Title Policy, and (iii) delivered to
Buyer the Survey, re-dated and certified to Buyer;
(f) A cross license agreement substantially in the form
attached hereto as Exhibit B (the "Cross License Agreement") shall have been
executed by the Company;
(g) All of the deliveries required to be made by the Company
under Section 2.2 shall have been tendered to Buyer; and
(h) All consents, approvals, authorizations or permits of,
actions by, notifications to, or waiting periods imposed by, any contract,
agreement or arrangement between either the Company or Buyer, on the one hand,
and any other person (except a Governmental Entity), on the other hand, which
are necessary for the consummation of the Sale Transaction (all such consents,
approvals, authorizations, permits, actions and notifications, and the
expiration of all such waiting periods, being referred to as the "Requisite
Non-Governmental Approvals"), other than those the absence of which could not,
individually or in the aggregate, reasonably be expected to have a TG Business
Material Adverse Effect, shall have been obtained or made or shall have
occurred, all
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conditions, if any, to such Requisite Non-Governmental Approvals shall have been
satisfied and all of such Requisite Non-Governmental Approvals shall be in full
force and effect.
SECTION 5.3 Conditions to Obligations of the Company. The obligation of
Company to effect the Sale Transaction is subject to the satisfaction of all the
following conditions except to the extent lawfully waived by the Company:
(a) The representations and warranties of Buyer set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except for those representations and warranties made only
as of a specified date) as of the Closing Date as though made on or as of the
Closing Date, and the Company shall have received a certificate signed on behalf
of Buyer by the Chief Executive Officer of Buyer and by the Chief Financial
Officer of Buyer to such effect;
(b) Buyer shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, with such
exceptions as, either individually or in the aggregate, have not constituted,
and could not reasonably be expected to have, a Buyer Material Adverse Effect,
and the Company shall have received a certificate signed on behalf of Buyer by
its Chief Executive Officer and by its Chief Financial Officer to such effect;
(c) The Escrow Agent and Buyer shall have executed and
delivered the Escrow Agreement;
(d) The Cross License Agreement shall have been executed by
Buyer; and
(e) All other deliveries required to be made by Buyer under
Section 2.3 shall have been tendered to the Company.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing, either before or after approval thereof by the shareholders of the
Company:
(a) by mutual written consent of Buyer and the Company;
(b) by Buyer, upon any breach of any representation, warranty,
covenant or agreement of the Company set forth in this Agreement where such
breach: (i) would prevent, either individually or in the aggregate with all such
other breaches, the
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satisfaction of the condition set forth in Section 5.2(a) or (b) and either (1)
cannot be cured prior to the Terminal Date, or (2) has not been cured within
thirty (30) days after the date on which written notice of such breach,
specifying in reasonable detail the nature of such breach, was given by Buyer to
the Company; or (ii) was a violation of Section 4.6;
(c) by the Company, upon any breach of any representation,
warranty or agreement of Buyer set forth in this Agreement that, either
individually or in the aggregate, would prevent the satisfaction of the
condition set forth in Section 5.3(a) or (b), if either (i) such breach cannot
be cured prior to the Terminal Date, or (ii) has not been cured within thirty
(30) days after the date on which written notice of such breach is given by the
Company to Buyer specifying in reasonable detail the nature of such breach;
(d) by either Buyer or the Company, if any permanent
injunction or action by any Governmental Entity preventing the consummation of
the Sale Transaction shall have become final and nonappealable; provided
however, that such right of termination shall not be available to either Party
if such Party shall have failed to make reasonable efforts to prevent or contest
the imposition of such injunction or action and such failure materially
contributed to such imposition;
(e) by either Buyer or the Company, if (other than due to the
willful failure of the Party seeking to terminate this Agreement to perform its
obligations hereunder which are required to be performed at or prior to the
Closing) the Closing shall not have occurred on or prior to January 14, 2000,
unless extended in writing by Buyer and Company (such date, or any date to which
it is so extended, being referred to as the "Terminal Date");
(f) by either Buyer or the Company, if (i) the vote of the
shareholders of the Company on a motion to adopt and approve this Agreement and
the Sale Transaction has been taken at the Shareholders Meeting or any
postponement or adjournment thereof and (ii) the vote in favor of such adoption
and approval was not sufficient, under the California Code and the Articles of
Incorporation of the Company, to cause such motion to pass; or
(g) by Buyer, if (i) the Board shall have withdrawn, modified
or changed its approval or recommendation of this Agreement or the Sale
Transaction in any manner which is adverse to Buyer, or shall have adopted a
resolution to do the foregoing, or (ii) a tender offer or exchange offer for 25%
or more of the outstanding shares of the Company Common Stock is commenced
(other than by Buyer or any of its subsidiaries or affiliates), the terms of
which offer do not expressly contemplate and permit the consummation of the Sale
Transaction, and the Board recommends that the shareholders of the Company
tender their shares in such offer or otherwise fails to recommend that
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such shareholders reject such offer within ten (10) business days of the
commencement thereof.
SECTION 6.2 Fees and Expenses.
(a) Subject to Section 6.2(c), the Company shall pay Buyer a
termination fee of $2,000,000 (the "Termination Fee") either: (i) within one
business day following the termination of this Agreement by Buyer pursuant to
Section 6.1(g); or (ii) upon the execution of any definitive agreement between
the Company and any third party providing for the sale of the TG Business
(directly or through an acquisition of the Company as an entirety) where (1)
such definitive agreement is executed within 275 days from (and including) the
date on which this Agreement was terminated by either Buyer or the Company under
Section 6.1(f), (2) at the time at which the vote was taken at the Shareholders
Meeting on the motion referred to in Section 6.1(f) there was pending, and had
not been withdrawn, a publicly announced offer of the kind referred to in
Section 4.6(c), and (3) the Board had not withdrawn, modified or changed its
approval or recommendation of this Agreement and the Sale Transaction, so as to
entitle Buyer to terminate this Agreement under Section 6.1(g), by the time such
vote was taken.
(b) Except as set forth in Sections 6.2(a) and 6.2(c), all
costs and expenses incurred in connection with this Agreement shall be paid by
the Party incurring such costs and expenses, whether or not the Sale Transaction
is consummated.
(c) The Company acknowledges that a violation of Section 4.6
may inflict on Buyer damages which are substantial but difficult to quantify.
Accordingly, the Company agrees that if Buyer terminates this Agreement under
Section 6.1(b)(ii), Buyer shall be entitled to recover, as liquidated damages
and in lieu of any and all other damages or other relief for the applicable
violation of Section 4.6, the sum of $4,000,000 plus the fees, costs and
expenses reasonably incurred by Buyer in connection with the negotiation,
execution and performance of this Agreement; provided, however, that under any
circumstances in which the Termination Fee and the liquidated damages provided
for in this Section 6.2(c) would otherwise both be payable as a result of such
termination, the liquidated damages provided for in this Section 6.2(c) shall be
Buyer's sole entitlement and remedy, and the Termination Fee shall not be
payable.
SECTION 6.3 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Party except that the
provisions of Section 4.5(b), Section 6.2 and all of Article VII shall survive
such termination indefinitely (or to such earlier date as may be specified by
the terms of such provision); provided, however, that nothing herein shall
relieve any Party from liability for any willful and material breach hereof; and
provided further, that any action that the Board takes in compliance with
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Sections 4.2(c) or 4.6(c) shall not constitute a willful and material breach of
this Agreement by the Company.
SECTION 6.4 Amendment. This Agreement may be amended by the Parties by
action taken by the Board and the Board of Directors of Buyer at any time prior
to the Closing; provided, however, that, after approval of this Agreement by the
shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration to be received. This Agreement may
not be amended except by an instrument in writing signed by the Parties.
SECTION 6.5 Waiver. At any time prior to the Closing, either Party may
(a) extend the time for the performance of any of the obligations or other acts
of the other Party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the Party or Parties to be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt or, in the case of notice by
registered or certified mail, five (5) business days after deposit with the
United States Postal Service) by delivery in person, by cable, facsimile,
telecopy transmission, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective Party at the
following address (or at such other address for a Party as shall be specified by
like notice):
(i) if to Buyer or its permitted assignee(s), to:
Tracor, Inc.
c/o Marconi North America, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Esq.
Vice President and Associate General Counsel
Facsimile: 000-000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
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Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile: 212-474-3700; and
(ii) if to the Company, to:
Xxxxxxx-Xxxxxxx Company
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile: 000-000-0000
SECTION 7.2 Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first-mentioned person;
(b) "business day" means any day other than a Saturday, Sunday
or other day on which commercial banks in Palo Alto, California are
required or permitted to be closed;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "knowledge" means the actual subjective knowledge, without
independent inquiry or verification, of (i) in the case of the Company,
any of the individuals identified on Schedule 7.2(d)(i); and (ii) in
the case of Buyer, any of the individuals identified in Schedule
7.2(d)(ii);
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(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of either Party or other
person means any corporation, partnership, joint venture or other legal
entity of which the Company or Buyer or such other person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 7.3 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
SECTION 7.4 Entire Agreement; Assignment. This Agreement, together with
its Exhibits and Schedules, constitutes the entire agreement among the Parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, between the Parties, with respect to
the subject matter hereof, except the Confidentiality Agreement, which shall
continue in effect in accordance with its terms. The provisions of this
Agreement shall be binding upon, and inure to the benefit of, the Parties and
their respective successors and assigns. This Agreement shall not be assigned by
operation of law or otherwise; provided, however, that: (a) Buyer may assign all
or any of its respective rights and obligations hereunder to any direct
subsidiary or subsidiaries of Buyer headquartered in the continental United
States or to its direct parent company, Marconi or any direct subsidiary or
subsidiaries thereof other than Buyer headquartered in the continental United
States provided such assignee undertakes to the Company in writing, at the time
of such assignment, to be bound by all of Buyer's obligations under this
Agreement and confirms to the Company in writing (i) with respect to itself, all
of Buyer's representations and warranties made in this Agreement as if
references therein to Buyer were references to such assignee, and (ii) that all
Company Disclosure Schedules and all other schedules and documents delivered by
the Company to Buyer under this Agreement or the Original Agreement prior to
such assignment shall be
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deemed to have been delivered to such assignee, but no such assignment shall
relieve the Buyer of its obligations hereunder; and (b) if the Company is a
party to a merger transaction in which the Company is not the surviving
corporation, the Company's rights and obligations shall be assigned to, and
assumed by, such surviving corporation.
SECTION 7.5 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each Party. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement; provided however, that each Indemnified Party is intended to be a
third party beneficiary of, and have the individual right to seek compliance
with, Section 4.7.
SECTION 7.6 Applicable Law; Arbitration. This Agreement and the legal
relations between the Parties shall be governed by and construed in accordance
with the laws of the state of Delaware, without regard to the conflict of law
rules thereof. Except as otherwise provided in this Agreement, any claim or
dispute arising out of or relating to this Agreement, or the interpretation,
making, performance, breach or termination thereof, shall be finally settled by
binding arbitration in San Francisco, California, under the rules of the
American Arbitration Association ("AAA") then in effect by a single arbitrator
mutually agreeable to the Company and Buyer. In the event that within thirty
(30) days after submission of any dispute to arbitration, the Company and Buyer
do not mutually agree on a single arbitrator, the Company, on the one hand, and
Buyer, on the other hand, shall each select one arbitrator and the AAA shall
select a third arbitrator. The arbitrator(s) shall have the authority to grant
any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a dispute. Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
arbitrator(s) may award to the prevailing Party, if any, as determined by the
arbitrator(s) all of its costs and fees, including AAA administrative fees,
arbitrator fees, attorneys' fees, expert fees, witness fees, travel expenses and
out of pocket expenses (including such expenses as copying, telephone,
facsimile, postage and courier fees). The Parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary injunction
or other interim or conservatory relief as necessary without breach of this
arbitration provision without any abridgment of the powers of the arbitrator(s).
The Parties agree that, the provisions of applicable law notwithstanding, they
will not request and the arbitrator(s) shall have no authority to award punitive
or exemplary damages against any party.
SECTION 7.7 Headings; Definitional Cross-Reference Sheet. The
descriptive headings contained in this Agreement, and the Definitional
Cross-Reference Sheet that precedes this Agreement, are included for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
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SECTION 7.8 Counterparts. This Agreement may be executed in one or more
counterparts, and by each of the Parties in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, Buyer and Company have caused this Amended and
Restated Purchase Agreement to be executed by their respective officers
thereunto duly authorized, all as of September 27, 1999, with the intent that
such execution be effective as of the date of the Original Agreement above.
TRACOR, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
XXXXXXX-XXXXXXX COMPANY
By: /s/ W. Xxxxx Xxxxxxx
Name: W. Xxxxx Xxxxxxx
Title: President and CEO
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ASSIGNMENT OF BUYER'S RIGHTS AND OBLIGATIONS
Pursuant to and in accordance with Section 7.4 of the foregoing Amended
and Restated Purchase Agreement (the "Agreement," all capitalized and
non-capitalized terms used in this Assignment of Buyer's Rights having the
meanings given to them in the Agreement):
1. Buyer hereby assigns all of its respective rights and obligations under the
Agreement to MAESI and acknowledges that such assignment shall not relieve Buyer
of its obligations under the Agreement.
2. MAESI hereby agrees to be bound by all of Buyer's obligations under this
Agreement and confirms to the Company: (i) with respect to MAESI, all of Buyer's
representations and warranties included in the Agreement as if the references
therein to Buyer were references to MAESI; and (ii) that all Company Disclosure
Schedules and other schedules and documents delivered by the Company to Buyer
under the Original Agreement prior to the foregoing assignment shall be deemed
to have been delivered to MAESI.
IN WITNESS WHEREOF, Buyer and MAESI have caused this Assignment of
Buyer's Rights and Obligations to be executed by the respective officers thereto
duly authorized, all as of September 27, 1999.
MARCONI AEROSPACE
TRACOR, INC. ELECTRONIC SYSTEMS INC.
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------- -------------------------
Name: Xxxx X. Xxxxxx Name: Xxxx X. Xxxxxxx
----------------------- -----------------------
Title: President Title: Vice President
The undersigned hereby acknowledges the foregoing Assignment of Buyer's
Rights and Obligations under Section 7.4 of the Amended and Restated Purchase
Agreement referred to therein.
XXXXXXX-XXXXXXX COMPANY
By: /s/ W. Xxxxx Xxxxxxx
-----------------------
Name: W. Xxxxx Xxxxxxx
Title: President and CEO
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EXHIBIT A
FORM OF ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is made and entered
into as of _________________ ___, _____, by and among MARCONI AEROSPACE
ELECTRONIC SYSTEMS INC., a Pennsylvania corporation ("Buyer"), XXXXXXX-XXXXXXX
COMPANY, a California corporation (the "Company"), and _____________, as escrow
agent (the "Escrow Agent").
RECITALS
A. Tracor, Inc., a Delaware corporation ("Tracor"), and the Company are
parties to that certain Amended and Restated Purchase Agreement dated as of
August 18, 1999 (the "Purchase Agreement") providing for the acquisition by
Tracor of substantially all of the assets of the TG Business from the Company.
All terms used herein (whether or not capitalized) to which definitions are
assigned by the Purchase Agreement shall have the same meanings herein.
B. Pursuant to and in accordance with Section 7.4 of the Purchase
Agreement, Tracor has assigned all of its rights and obligations under the
Purchase Agreement to Buyer by means of an Assignment of Buyer's Rights and
Obligations dated as of September ___, 1999;
C. One of the conditions to the Closing, as set forth in the Purchase
Agreement, is the execution and delivery of this Escrow Agreement.
D. Pursuant to Section 1.7 of the Purchase Agreement, Buyer shall
deposit, or shall cause to be deposited, with the Escrow Agent the Escrow Amount
of $1,000,000 in cash, to be held in the Escrow Fund hereunder. The Escrow Fund
will be used to satisfy certain indemnification obligations of the Company to
any Buyer Indemnified Party for Damages as set forth in Section 4.7 of the
Purchase Agreement.
E. This Escrow Agreement sets forth the basis on which the Escrow Agent
will receive and hold, and make disbursements from, the Escrow Fund and the
duties for which the Escrow Agent will be responsible.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
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1. Appointment. Buyer and the Company hereby appoint the Escrow Agent
as escrow agent to serve in such capacity, in accordance with the terms and
conditions set forth in this Escrow Agreement. The Escrow Agent hereby accepts
such appointment.
2. Purchase Agreement. The Escrow Agent acknowledges receipt of a copy
of the Purchase Agreement; provided, however, that, except for reference thereto
for definitions of certain words or terms not defined herein, the Escrow Agent
is not charged with any duties or responsibilities with respect to the Purchase
Agreement.
3. Escrow Amount; Escrow Fund. On the Closing Date, Buyer shall
deposit, or shall cause to be deposited, the Escrow Amount directly with the
Escrow Agent, the receipt of which shall be acknowledged to Buyer and the
Company, and shall be accepted by the Escrow Agent as escrow agent, and held in
the Escrow Fund, hereunder.
4. Investment.
(a) The Escrow Fund shall be invested by the Escrow Agent,
without distinction as to principal and income, upon receipt of written
instructions in the form attached hereto as Exhibit A executed by one of the
officers of Buyer named in Exhibit B hereto and by one of the officers of the
Company named in Exhibit C hereto, in one or more of the following investments:
(i) interest bearing open ended or time deposits of any United States bank with
assets in excess of U.S. $500,000,000 (including any affiliate of Escrow Agent
that meets such capital requirements); or (ii) any other investment vehicle
pursuant to the written instructions from Buyer and the Company including,
without limitation, money market and other mutual funds offered or advised by
Escrow Agent or any of Escrow Agent's affiliates. The Escrow Agent shall not be
liable for any loss resulting from any investment made pursuant to written
instructions of Buyer and the Company. Notwithstanding the foregoing, the Escrow
Agent shall have the power to sell or liquidate the foregoing investments
whenever the Escrow Agent shall be required to release all or any portion of the
Escrow Fund pursuant to Section 5. In effecting any such sale or liquidation,
the Escrow Agent may, without inquiry, rely upon written instructions from one
of the officers of Buyer named in Exhibit B and one of the officers of the
Company named in Exhibit C, or a successor of any such authorized officer, as to
which investments to sell or liquidate.
(b) The parties to this Escrow Agreement (the "Parties")
acknowledge that payment of any interest earned on the this Escrow Amount will
be subject to backup withholding penalties unless either a properly completed
Internal Revenue Service Form W8 or W9 certification is submitted to the Escrow
Agent at the time of execution of this Escrow Agreement.
5. Claims Upon Escrow Fund.
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(a) In the event that any Buyer Indemnified Party has a Claim
against the Company for which such Buyer Indemnified Party desires to be
indemnified as provided in the Purchase Agreement, the Indemnified Party shall
notify the Company of such Claim in accordance with Section 4.7 of the Purchase
Agreement, with a copy to the Escrow Agent, specifying the nature of such Claim
and the amount or the estimated amount thereof to the extent then feasible (the
"Claim Notice"). If the Company does not notify in writing the Buyer Indemnified
Party within thirty (30) days after the date of delivery of the Claim Notice
that the Company disputes such Claim, with a statement in reasonable detail (to
enable the Indemnified Party to understand the nature of the dispute) of the
basis of such position (a "Notice of Objection"), a copy of which is delivered
to the Escrow Agent, the amount of such Claim shall be conclusively deemed
indemnifiable from the Escrow Fund, and the Escrow Agent shall deliver to the
Buyer Indemnified Party out of the Escrow Fund cash in an amount equal to the
Damages as specified in the Claim Notice.
(b) In case a Notice of Objection is delivered to the
Indemnified Party in accordance with this Section 5, the Indemnified Party shall
respond in a written statement to the Notice of Objection within thirty (30)
days and, for sixty (60) days thereafter, the parties shall attempt in good
faith to resolve such dispute. If the parties should so agree, a memorandum (a
"Certificate of Resolution") setting forth such agreement shall be prepared and
signed by both parties, and the Escrow Agent shall be entitled to rely on the
Certificate of Resolution and distribute cash from the Escrow Fund in accordance
with the terms thereof.
(c) If the parties do not resolve the dispute within such
sixty (60) day period, either party may demand arbitration of the matter unless
the amount of the Damages is at issue in pending litigation with a third party
or is based on an asserted claim by a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration. Any arbitration under this Section 5 shall be conducted in
accordance with Section 7.6 of the Purchase Agreement and the decision of the
arbitrator(s) shall be written and shall be supported by written findings of
fact and conclusions which shall set forth the award, judgment, decree or order
(an "Award") determined by the arbitrators. The Escrow Agent shall be entitled
to act in accordance with an Award and make or withhold payments out of the
Escrow Fund in accordance herewith.
6. Escrow Provisions.
(a) The Escrow Agent may rely, without inquiry or
investigation, and shall be protected in acting or refraining from acting, upon
any written notice, request, waiver, consent, receipt or other paper or document
from any officer of the Company named in Exhibit C or any officer of Buyer named
in Exhibit B, not only as to its due
A-3
execution and the validity and effectiveness of its provisions, but also as to
the truth of any information therein contained, that the Escrow Agent in good
faith believes to be genuine. The Escrow Agent may disregard any and all notices
or instructions received from any source, except only (i) such notices or
instructions as are specifically provided for in this Escrow Agreement or any
other notice signed by the Company and Buyer and (ii) orders or process of any
court entered or issued with or without jurisdiction. If from time to time any
property held pursuant to this Escrow Agreement becomes subject to any levy,
attachment, order, judgment, decree, injunction or other judicial,
administrative, or regulatory process ("Order"), the Escrow Agent may comply
with any such Order without liability to any person, even though such Order may
thereafter be annulled, reversed, modified or vacated.
(b) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or refrain from
doing in connection herewith, except for any liability arising from its own
gross negligence, willful misconduct or bad faith. In no event shall the Escrow
Agent be liable to any person, for punitive, special, indirect or consequential
damages of any kind, even if it is advised of the possibility thereof.
(c) The Escrow Agent shall be entitled to consult with outside
counsel, of its choice with respect to the interpretation of the provisions
hereof and any other legal matters relating hereto, and shall be fully protected
in taking any action or omitting to take any action in good faith in accordance
with the written advice of such outside counsel provided the other parties
hereto have been given prior notice of the Escrow Agent's selection of outside
counsel and a copy of such written advice.
(d) Each of Buyer and the Company agrees to indemnify and hold
the Escrow Agent harmless for one-half (1/2) of any and all claims, liabilities,
costs, payments and expenses of the Escrow Agent in connection with its
performance of its duties hereunder, including without limitation, reasonable
fees and expenses of counsel for court actions, or for anything done or omitted
by it in the performance of this Escrow Agreement, except as a result of the
Escrow Agent's own gross negligence, willful misconduct or bad faith.
(e) All evidence of investment of funds in the Escrow Fund
(including, but not limited to, savings account passbooks, certificates, notes
and other similar items) shall be kept in a place of safekeeping at an office of
the Escrow Agent, or with a safe deposit company, including any such safe
deposit company owned in whole or in part by the Escrow Agent or by any
affiliate of the Escrow Agent. The Escrow Agent shall keep accurate accounts of
all income and interest earned by the funds in the Escrow Fund. Within thirty
(30) days after the close of each calendar month, the Escrow Agent shall
A-4
provide the Company and Buyer statements on deposits and other investments of
the Escrow Fund in accord with its usual practices.
(f) One half (1/2) of the fees and related expenses of the
Escrow Agent for its services hereunder (including fees and expenses of its
outside counsel) shall be paid by Buyer and one half (1/2) of such fees and
expenses shall be paid by the Company. The Escrow Agent's fees for its duties
shall be $__________ per year plus reasonable out-of-pocket costs. Such amounts
shall be in addition to other amounts payable by the parties pursuant to Section
6(d) and other provisions hereof.
(g) None of the provisions contained in this Escrow Agreement
shall require the Escrow Agent to advance or risk its own funds in the
performance of its duties herein described.
(h) Without limiting the Escrow Agent's rights under any other
provision hereof, whenever the Escrow Agent should receive or become aware of
any conflicting demands or claims with respect to this Escrow Agreement or the
rights of any of the parties hereto or any property held hereunder, the Escrow
Agent may without liability refrain from any action until the conflict has been
resolved, or alternatively, may tender into the registry or custody of any court
which the Escrow Agent determines to have jurisdiction all money or property in
its hands under this Escrow Agreement, together with such legal pleadings as it
deems appropriate, less a reasonable allowance for its legal fees and expenses,
and thereupon be discharged from all further duties and liabilities under this
Escrow Agreement. Any inaction or filing of proceedings pursuant to this section
shall not deprive the Escrow Agent of its compensation during such inaction or
prior filing.
(i) Except as and if specifically provided herein concerning
investments of cash, the Escrow Agent shall have no liability to pay interest on
any money held pursuant to this Escrow Agreement. The Escrow Agent may use its
own bond department or any affiliate of Escrow Agent in purchasing or selling
securities. The Escrow Agent shall not be liable for any depreciation or change
in the value of such documents or securities or any property evidenced thereby
or for any losses incurred in liquidating securities or other property to
satisfy a distribution request. All distributions provided for hereunder shall
be made by the Escrow Agent from the Escrow Fund to the extent thereof, subject
to deductions allowed to be made by Escrow Agent as provided elsewhere herein.
(j) The Escrow Agent shall not be responsible for any recitals
of fact in this Escrow Agreement, or for the sufficiency, form, execution,
validity or genuineness of any documents or securities deposited under this
Escrow Agreement or for any signature, endorsement or lack of endorsement
thereon, or for the accuracy of any description
A-5
therein, or for the identity, authority or rights to the persons executing or
delivering the same or this Escrow Agreement.
(k) Although the Escrow Agent may demand specific
authorizations (including corporate resolutions, incumbency certificates and the
like) or identification from another Party or its representative prior to taking
any action hereunder, no such demand shall constitute a waiver or deprive the
Escrow Agent of the protections afforded by this Escrow Agreement.
(l) The Escrow Agent shall not be responsible for any delays
or failure to perform caused by circumstances reasonably beyond its control,
including but not limited to: breaches by other parties of their obligations
hereunder, delays by messengers or other independent contractors; mechanical or
computer failures; malfunctioning or breakdowns in public utilities, securities
exchanges; Federal Reserve Banks or securities depositories; interference by
governmental units; strikes, lockouts or civil disobedience; fires or other
casualties; acts of God or other similar occurrences.
7. Successor Escrow Agent. The Escrow Agent, or any successor, may
resign at any time upon giving written notice to Buyer and the Company at least
thirty (30) days before such resignation shall take effect. In addition, Buyer
and the Company may terminate the Escrow Agent's appointment as escrow agent
upon giving written notice (jointly signed by Buyer and the Company) to the
Escrow Agent at least thirty (30) days before such termination shall take
effect. If the Escrow Agent shall resign, be terminated or be unable to serve,
then it shall be succeeded by such bank or trust company jointly named by Buyer
and the Company in such thirty (30) day period, or if no such appointment is
made by that time then it shall be succeeded by a bank or trust company
appointed by a court of competent jurisdiction upon petition by any of the
Escrow Agent, Buyer or the Company (in which action the other parties shall be
afforded a reasonable opportunity to participate) to appoint a successor escrow
agent, or the Escrow Agent may tender the Escrow Fund into court as provided
elsewhere in this Escrow Agreement. The Escrow Agent shall transfer the Escrow
Fund to its successor and shall thereupon be discharged from any obligation to
perform further services under this Escrow Agreement, and the successor shall
thereupon succeed to all of the rights, powers and duties and shall assume all
of the obligations of the Escrow Agent originally named in this Escrow
Agreement. Notwithstanding any other provision hereof, the respective
obligations of Buyer and the Company to the Escrow Agent under Section 6(d) and
6(f) shall survive any resignation or removal of Escrow Agent or any termination
of this Escrow Agreement.
8. Payment of Taxes. The Company shall be treated as the owner of the
Escrow Fund for all Tax purposes while and to the extent that the Escrow Fund is
held by
A-6
the Escrow Agent. The Escrow Agent shall furnish such information to the other
Parties as shall be requested in writing for tax preparation purposes by such
Parties.
9. Release Dates; Termination.
(a) Subject to paragraph (b) of this Section 9, the Escrow
Agent shall release from escrow hereunder, and distribute to the Company, the
Escrow Fund on the 90th day from (and including) the Closing Date (the "Initial
Release Date").
(b) Notwithstanding any provision of paragraph (a) of this
Section 9, if, on the Initial Release Date, the amount (the "Retention Amount")
that is the sum of (i) the maximum aggregate amount (determined on the basis of
the applicable Claims Notices) that would be necessary to satisfy all Pending
Claims of Buyer existing on the Initial Release Date which have not been the
subject of a Certificate of Resolution or an Award, (ii) the aggregate amount
that is then payable to Buyer under any Certificate of Resolution but has not
yet been paid, and (iii) the aggregate amount that is then payable to Buyer
under any Award but has not yet been paid, is greater than zero, the Retention
Amount shall be withheld from release and the amount that would otherwise be
released shall be reduced (to zero if necessary), dollar for dollar, by the
Retention Amount.
(c) If, in accordance with paragraph (b) of this Section 9,
less than all of the Escrow Fund is released and distributed to the Company on
the Initial Release Date, the Retention Amount shall continue to be held in
escrow in accordance with this Escrow Agreement until all Pending Claims of
Buyer existing on the Initial Release Date have been definitively resolved and
payment has been made of the aggregate of (i) all amounts payable to Buyer under
all Certificates of Resolution issued after the Initial Release Date with
respect to such Pending Claims and (ii) all amounts payable to Buyer under all
Awards issued after the Initial Release Date with respect to such Pending
Claims, whereupon the balance remaining in the Escrow Fund shall be released
from the Escrow Fund as the final release thereof and shall be distributed to
the Company (the "Final Release").
(d) Unless extended in writing by the Parties, the escrow
provided for in this Escrow Agreement shall expire on the date (the "Termination
Date") which is the later of (i) the Initial Release Date or (ii) the date of
the Final Release.
A-7
10. General Provisions.
(a) Except as is otherwise required by applicable law, this
Escrow Agreement may be amended by the Parties at any time by execution of an
instrument in writing signed on behalf of each of the Parties.
(b) Buyer, on the one hand, and the Company, on the other,
may, to the extent legally allowed, waive compliance with any of the agreements
or conditions for the benefit of such party contained herein. Any agreement on
the part of a Party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such Party.
(c) All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
A-8
(i) if to Buyer, to:
Marconi Aerospace Electronic Systems Inc.
c/o Marconi North America, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Esq.
Vice President and Associate General Counsel
Facsimile: 000-000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile: 212-474-3700
(ii) if to Company, to:
Xxxxxxx-Xxxxxxx Company
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chief Financial Officer
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile: 000-000-0000; and
(ii) if to the Escrow Agent:
[Name] _______________________________
[Address] ____________________________
______________________________________
[Facsimile No.:] _____________________
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(d) The words "include," "includes" and "including" when used
in this Escrow Agreement shall be deemed in each case to be followed by the
words "without limitation." The headings contained in this Escrow Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Escrow Agreement.
(e) This Escrow Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
(f) This Escrow Agreement, the Purchase Agreement (but only
for purposes of the definitions set forth therein and any other provisions
thereof expressly referenced in this Escrow Agreement) and the exhibits hereto,
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter hereof.
(g) Neither this Escrow Agreement nor any beneficial interest
therein may be sold, assigned or otherwise transferred, including by operation
of law, by Buyer or the Company or be taken or reached by any legal or equitable
process in satisfaction of any debt or other liability of Buyer or the Company,
except as provided herein or as would not adversely affect the rights of the
Company or Buyer, respectively, under this Escrow Agreement. Any such attempted
transfer in violation of this Section 10(g) shall be null and void.
(h) This Escrow Agreement and all action taken hereunder in
accordance with its terms shall be binding upon and inure to the benefit of
Buyer and its subsidiaries, and their respective successors and assigns, the
Escrow Agent and its successors, and the Company and its respective successors,
assigns, administrators and legal representatives.
(i) In the event that any provision of this Escrow Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Escrow
Agreement shall continue in full force and effect and the application of such
provision to other persons or circumstances shall be interpreted so as
reasonably to effect the intent of the parties hereto. The Parties further agree
to replace such void or unenforceable provision of this Escrow Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
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(j) Except as otherwise provided in this Escrow Agreement, any
and all remedies herein expressly conferred upon a Party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such Party, and the exercise by a Party of any one remedy
will not preclude the exercise of any other remedy by such Party.
(k) This Escrow Agreement shall be governed by and construed
in accordance with the laws of California regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(l) No provisions of this Escrow Agreement are intended, nor
shall be interpreted, to provide or create any third party beneficiary rights or
any other rights of any kind in any client, customer, affiliate, partner of any
party hereto or any other Person unless specifically provided otherwise herein.
(m) Time is of the essence in performing any of the actions
hereunder.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the parties have executed or caused this Escrow
Agreement to be duly executed as of the day and year first above written.
MARCONI AEROSPACE
ELECTRONIC SYSTEMS INC.
By: ____________________________
Name: __________________________
Title: _________________________
XXXXXXX-XXXXXXX COMPANY
By: ____________________________
Name: __________________________
Title: _________________________
ESCROW AGENT:
[Insert Name]
By: ____________________________
Name: __________________________
Title: _________________________
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EXHIBIT A
[Date]
[Name of Escrow Agent)
_______________________________
_______________________________
_______________________________
Attn:
Telecopy No.:
Telephone No.:
Re: Escrow Fund Investment Instructions
To: The Escrow Agent under the Escrow Agreement, dated __________, ____
among (1) Xxxxxxx-Xxxxxxx Company, (2) Marconi Aerospace Electronic
Systems Inc. and (3) you as Escrow Agent (the "Escrow Agreement")
Pursuant to the terms of the Escrow Agreement, you are hereby
instructed to invest the funds held in the Escrow Fund in the following
investment(s):
Interest income should be reinvested in such investment vehicle. Thank
you for your assistance in this matter.
MARCONI AEROSPACE ELECTRONIC SYSTEMS INC.
By: ____________________________
Name: __________________________
Title: _________________________
XXXXXXX-XXXXXXX COMPANY
By: ____________________________
Name: __________________________
Title: _________________________
A-13
EXHIBIT B
MARCONI AEROSPACE ELECTRONIC SYSTEMS INC.
AUTHORIZED OFFICERS
Name and Title Signature
------------------------------- -------------------------------
------------------------------- -------------------------------
Chief Executive Officer
------------------------------- -------------------------------
Chief Financial Officer
A-14
EXHIBIT C
XXXXXXX-XXXXXXX COMPANY
AUTHORIZED OFFICERS
Name and Title Signature
------------------------------- -------------------------------
------------------------------- -------------------------------
President and
Chief Executive Officer
------------------------------- -------------------------------
Executive Vice President and
Chief Financial Officer
------------------------------- -------------------------------
Controller
A-15
EXHIBIT B
FORM OF CROSS LICENSE AGREEMENT
THIS CROSS LICENSE AGREEMENT ( this "Cross License Agreement") is made
and entered into as of ___________, ____ by and between XXXXXXX-XXXXXXX COMPANY,
a California corporation ( the "Company"), and MARCONI AEROSPACE ELECTRONIC
SYSTEMS INC., a Pennsylvania corporation ("Buyer," which term includes any
designee of MARCONI AEROSPACE ELECTRONIC SYSTEMS INC. hereunder).
RECITALS
WHEREAS, the Company has entered into an Amended and Restated Purchase
Agreement dated as of August 18, 1999 (the "Purchase Agreement") with Tracor,
Inc. ("Tracor") providing for the acquisition by Tracor of the TG Business from
the Company;
WHEREAS, pursuant to and in accordance with Section 7.4 of the Purchase
Agreement, Tracor has assigned all of its rights and obligations under the
Purchase Agreement to Buyer by means of an Assignment of Buyer's Rights and
Obligations dated as of September ___, 1999;
WHEREAS, the Company is concurrently herewith transferring and
assigning to Buyer certain patents, patent applications and associated know-how
used or useful in the TG Business;
WHEREAS, the Company desires to be licensed under a subset of certain
of said patents, patent applications and associated know-how being transferred
to Buyer, and Buyer desires to be licensed under a subset of certain patents,
patent applications and associated know-how being retained by the Company;
WHEREAS, one of the conditions to the Closing as set forth in the
Purchase Agreement is the execution and delivery of this Cross License
Agreement; and
WHEREAS, concurrently herewith the Closing is occurring;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties to this Cross License Agreement (the "Parties")
agree as follows:
I. DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings set forth below (all terms used herein (whether or not capitalized) to
which definitions are
B-1
assigned by the Purchase Agreement shall have the same meanings herein, unless
otherwise indicated);
"Company Associated Know-How" means proprietary and confidential
designs, information, mask works, formulas, trade secrets, data, flow diagrams,
process designs, software, computer programs, computer firmware, testing
procedures, specifications, drawings, assembly procedures, services, and other
such technology, which is directly associated with the inventions embodied in
the Schedule 1 Patents or Schedule 2 Patents, as the case may be, and further
developments directly related to such inventions that are made during the period
between the date of filing of the Schedule 1 and Schedule 2 Patents and the
Closing Date.
"Company Field of Use" means applications, designs, manufacture,
services, processes and equipment in commercial (i.e. non-military) RF
communications.
"Company Patents" means the Schedule 1 Patents and the Schedule 2
Patents collectively.
"Confidential Information" means information disclosed by one Party to
the other pursuant to this Cross License Agreement and which is submitted in
written, graphic, pictorial, machine readable, or other tangible form and is
designated as trade secret, proprietary, or confidential to indicate its
confidential nature.
"Schedule 1 Patents" means (a) the patents and patent applications
listed on Schedule 1 which is attached and made a part hereof, owned or
controlled by, or licensed to, the Company; (b) all continuations, divisionals,
reexamination certificates, reissues or extensions, including supplemental
protection certificates, and other patent rights of any of (a) above; and (c)
all foreign counterparts of (a) or (b) above.
"Schedule 2 Patents" means (a) the patents and patent applications
listed on Schedule 2 which is attached and made a part hereof, owned or
controlled by, or licensed to, the Company; (b) all continuations, divisionals,
reexamination certificates, reissues or extensions, including supplemental
protection certificates, and other patent rights of any of (a) above; and (c)
all foreign counterparts of (a) or (b) above.
"Schedule 3 Patents" means (a) the patents and patent applications
listed on Schedule 3 which is attached and made a part hereof, owned or
controlled by, or licensed to, Buyer; (b) all continuations, divisionals,
reexamination certificates, reissues or extensions, including supplemental
protection certificates, and other patent rights of any of (a) above; and (c)
all foreign counterparts of (a) or (b) above.
"TG Associated Know-How" means proprietary and confidential designs,
information, mask works, formulas, trade secrets, data, flow diagrams, process
designs,
B-2
software, computer programs, computer firmware, testing procedures,
specifications, drawings, assembly procedures, services, and other such
technology, which is directly associated with the inventions embodied in the
Schedule 3 Patents, and further developments directly related to such inventions
that are made during the period between the date of filing of the Schedule 3
Patents and the Closing Date.
"TG Field of Use" means applications, designs, manufacture, services,
processes and equipment in governmental intelligence, signal surveillance and
military communications.
II. LICENSE GRANT
2.1 Grant by the Company
Subject to the terms and conditions of this Cross License Agreement,
the Company hereby grants to Buyer:
(a) an irrevocable, fully paid up, royalty-free, transferable
subject to Section 7.1, worldwide, perpetual, exclusive license (exclusive even
as to Company), with the right to sublicense, under the Schedule 1 Patents and
the Company Associated Know-How to make, have made, use, sell (either directly
or indirectly), modify, import, export, to offer for sale, to lease, and dispose
of, products and services covered by the Schedule 1 Patents, and to otherwise
practice the inventions embodied in the Schedule 1 Patents, in the TG Field of
Use; and
(b) an irrevocable, fully paid up, royalty-free, transferable
subject to Section 7.1, worldwide, perpetual, non-exclusive license (subject to
those licenses previously granted and listed on Schedule 4 attached and made
part hereof), with the right to sublicense, under the Schedule 2 Patents and
Company Associated Know-How to make, have made, use, sell (either directly or
indirectly), modify, import, export, to offer for sale, to lease, and dispose
of, products and services covered by the Schedule 2 Patents, and to otherwise
practice the inventions embodied in the Schedule 2 Patents, in the TG Field of
Use.
2.2 Grant by Buyer
Subject to the terms and conditions of this Cross License Agreement,
Buyer hereby grants to the Company an irrevocable, fully paid up, royalty-free,
transferable subject to Section 7.1, worldwide, perpetual, exclusive license
(subject to those licenses previously granted and listed on Schedule 5 attached
and made a part hereof, and exclusive even as to Buyer), with the right to
sublicense, under the Schedule 3 Patents and TG Associated Know-How to make,
have made, use, sell (either directly or indirectly), modify, import, export, to
offer for sale, to lease, and dispose of, products and
B-3
services covered by the Schedule 3 Patents, and to otherwise practice the
inventions embodied in the Schedule 3 Patents, in the Company Field of Use.
III. PATENT PROSECUTION
3.1 Prosecution by the Company
The Company shall have the right at its sole discretion, but not the
obligation, to prepare, file, prosecute (including the filing of continuation
and divisional applications) and maintain the Company Patents, and to conduct
any interferences, reexaminations, reissues, oppositions, or request term
extensions with respect to the Company Patents. In the event the Company decides
not to prepare, file, prosecute or maintain any of the Company Patents, the
Company shall promptly and timely so notify Buyer and Buyer shall be given the
right and the opportunity to do so at its own expense. If Buyer chooses to
assume such rights, then the Company shall assign its rights in the particular
Company Patents to Buyer, and Buyer shall grant back a license to the Company in
the particular Company Patents under the same terms and conditions as set forth
in Section 2.2 above.
3.2 Prosecution by Buyer
Buyer shall have the right at its sole discretion, but not the
obligation, to prepare, file, prosecute (including the filing of continuation
and divisional applications) and maintain the Schedule 3 Patents, and to conduct
any interferences, reexaminations, reissues, oppositions, or request term
extensions with respect to the Schedule 3 Patents. In the event Buyer decides
not to prepare, file, prosecute or maintain any of the Schedule 3 Patents, Buyer
shall promptly and timely so notify the Company and the Company shall be given
the right and the opportunity to do so at its own expense. If the Company
chooses to assume such rights, then Buyer shall assign its rights in the
particular Schedule 3 Patents to the Company, and the Company shall grant back a
license to Buyer in the particular Schedule 3 Patents under the same terms and
conditions as set forth in Section 2.1 above.
IV. INFRINGEMENT
4.1 Notice of Infringement
If either Party becomes aware of any action by a third party which may
infringe any of the patents or know-how licensed hereunder, then such Party
shall promptly give written notice thereof to the other Party.
4.2 Enforcement Against Infringers
Upon receipt of the notification in Section 4.1, the Party which has
title to the patents or know-how at issue shall have the right, but not the
obligation, to take action, at
B-4
its own expense, to protect the rights of the Parties, including but not limited
to the filing of lawsuits. In the event the Party who has title to the patents
or know-how at issue decides not to commence an action or pursue claims with
respect to any acts of infringement, then the other Party shall have the right,
but not the obligation, at its own expense, to pursue the action in its name,
and the Party which has title shall take all steps necessary to provide standing
to the other Party. The non-acting Party shall reasonably cooperate with the
Party bringing the action, and shall bear its own expenses in connection with
assisting the Party bringing the action. All damages, awards and settlement
proceeds in such actions shall be retained by the Party bringing the action.
Notwithstanding anything to the contrary, in no event shall the Party bringing
the action be permitted, as part of the settlement of any such action, to admit
the invalidity of any patent or know-how to which the other Party has title or
under which the other Party has a license without the other Party's written
consent, which consent shall not be unreasonably withheld or delayed.
4.3 Infringement Claims
If the production, sale or use of any products or services pursuant to
this Cross License Agreement results in any claim or action by a third party
alleging patent infringement against either Party, then the Party who is the
subject of the claim or action shall have the exclusive right to defend and
control the defense of any such claim or action, at its own expense; provided,
however, that the other Party shall have the right to participate in such
defense at its own expense if the disposition of the claim or action may affect
the rights or interest of such other Party granted under this Cross License
Agreement. If both Parties are the subject of the claim or action, then both
Parties shall share control of the defense and shall equally bear the expense of
the claim or action. Notwithstanding anything to the contrary herein, in no
event shall the Party having sole or shared control of the defense be permitted,
as part of the settlement of any such claim or action, to admit the invalidity
of any patent or know-how to which the other Party has title or under which the
other Party has a license, without that other Party's written consent, which
consent shall not be unreasonably withheld or delayed.
V. CONFIDENTIALITY
5.1 The Parties acknowledge that certain of the Company Associated
Know-How and TG Associated Know-How licensed hereunder may be Confidential
Information. Each Party shall treat as confidential all such Confidential
Information and all other Confidential Information of the other Party and shall
not use any such Confidential Information except as permitted under this Cross
License Agreement. Neither Party shall disclose the Confidential Information of
the other Party to any third party except as may be allowed in connection with
the rights of the other Party, and in such case the third party shall be bound
by similar confidentiality terms. Each Party shall
B-5
use at least the same procedures and degree of care for the other Party's
Confidential Information which it uses to prevent the disclosure of its own
confidential information of like importance, but in no event less than due care.
5.2 Notwithstanding Section 5.1 above, neither Party shall have
liability to the other Party with regard to any Confidential Information of the
other Party which:
(a) was generally known in the public domain at the time it
was disclosed, or becomes generally known in the public domain through no fault
of the receiving Party;
(b) becomes known to the receiving Party from a source other
than the disclosing Party without breach of this Cross License Agreement by the
receiving Party, and otherwise not in violation of the disclosing Party's
rights;
(c) is independently developed by the receiving Party without
access to the Confidential Information of the disclosing Party;
(d) is disclosed with the prior written approval of the
disclosing Party;
(e) is disclosed by the disclosing Party to any third party
without imposing similar restrictions of confidentiality; or
(f) is disclosed pursuant to the requirement or request of a
court on Governmental Entity, or by operation of law; provided, however, that,
if possible, the disclosing Party is first given an opportunity to object to
such disclosure.
This Article V shall survive termination of this Cross License
Agreement.
VI. TERM
This Cross License Agreement and the licenses granted hereunder shall
continue in perpetuity.
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VII. GENERAL PROVISIONS
7.1 Assignment
This Cross License Agreement and the licenses granted hereunder may not
be assigned, in whole or in part, by either Party without the consent of the
other Party, except by a Party to (a) an entity controlling, under common
control with, or controlled by such Party, or (b) an entity that acquires all or
substantially all of the assets of such Party and who agrees to be bound by the
terms of this Cross License Agreement. The terms and conditions of this Cross
License Agreement shall be binding on and inure to the benefit of the successor
and assigns of the Parties. Assignment by the Company or Buyer of any of the
Company Patents or Schedule 3 Patents, as the case may be, shall not affect the
license rights granted in the same under this Cross License Agreement, and any
such assignment shall be subject to the continuing license rights granted
hereunder.
7.2 Governing Law
This Cross License Agreement and any action, whether contractual or
non-contractual, instituted by any of the Parties with respect to the matters
arising under, or in connection with, this Cross License Agreement shall be
governed by and construed in accordance with (a) the laws of the State of
California without regard to conflict of law doctrines, except to the extent
that certain matters are preempted by Federal law, and (b) the patent laws of
the United States, U.S. Code Title 35.
7.3 Arbitration
Any claim or dispute arising out of or relating to this Cross License
Agreement, or the interpretation, making, performance, breach or termination
thereof, shall be finally settled by binding arbitration in San Francisco,
California under the rules of the American Arbitration Association ("AAA") then
in effect by a single arbitrator mutually agreeable to the Company and Buyer. In
the event that within thirty (30) days after submission of any dispute to
arbitration, the Company and Buyer do not mutually agree on a single arbitrator,
the Company, on the one hand, and Buyer, on the other hand, shall each select
one arbitrator and the AAA shall select a third arbitrator. The arbitrator(s)
shall have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve a dispute. Judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator(s) may award to the prevailing party, if
any, as determined by the arbitrator(s) all of its costs and fees, including AAA
administrative fees, arbitrator fees, attorney's fees, expert fees, witness
fees, travel expenses and out of pocket expenses (including such expenses as
copying, telephone, facsimile, postage and courier fees). The Parties may apply
to any court of competent jurisdiction for a temporary restraining order,
preliminary injection or other interim or conservatory relief as necessary
without breach of this arbitration
B-7
provision without any abridgment of the powers of the arbitrator(s). The Parties
agree that, the provisions of applicable law notwithstanding, they will not
request and the arbitrator(s) shall have no authority to award punitive or
exemplary damages against any party.
7.4 Amendments
No amendment or supplement to this Cross License Agreement shall be
effective for any purpose unless in writing expressly referencing this Agreement
and signed by an authorized officer of each party hereto.
7.5 No Waiver
No waiver, forbearance, or failure by either Party to enforce any
provision of this Cross License Agreement shall constitute a waiver or estoppel
of such Party's right to enforce such provision thereafter, or to enforce any
other provision of this Cross License Agreement.
7.6 Entire Agreement
This Cross License Agreement, including its Schedules 1 through 5 and
together with the associated Purchase Agreement, constitutes the entire
agreement and understanding between the Parties in respect to the subject matter
hereof, and supersedes and cancels all previous negotiations, representations,
undertakings, understandings and agreements, both written and oral, made between
the Parties in respect to this subject matter.
7.7 Severability
If any term or other provision of this Cross License Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Cross License
Agreement shall nevertheless remain in full force and shall be interpreted so as
to reasonably effect the intent of the parties hereto.
7.8 Notices
All notices and other communications hereunder shall be in writing and
shall be deemed as given if delivered personally or by commercial delivery
service, or mailed by registered or certified mail with return receipt
requested, or sent via facsimile with acknowledgment of complete transmission to
the parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
B-8
(i) if to Buyer, to:
Marconi Aerospace Electronic Systems Inc.
c/o Marconi North America, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Esq.
Vice President and Associate General Counsel
Facsimile: 000-000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile: 212-474-3700; and
(ii) if to the Company, to:
Xxxxxxx-Xxxxxxx Company
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile: 000-000-0000
and to:
Flehr Xxxxxxx Test Xxxxxxxxx & Xxxxxxx, LLP
000 Xxxxxx Xxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: 000-000-0000
B-9
7.9 Headings
The descriptive headings contained in this Cross License Agreement are
included for convenience of reference only and shall not affect in any way the
construction, meaning or interpretation of this Cross License Agreement.
7.10 Counterparts
This Cross License Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Cross License
Agreement to be executed by their duly authorized representatives as of the date
first written above.
XXXXXXX-XXXXXXX COMPANY
By: ____________________________
Name: __________________________
Title: _________________________
MARCONI AEROSPACE
ELECTRONIC SYSTEMS INC.
By: ____________________________
Name: __________________________
Title: _________________________
B-10
