EXHIBIT 2.1
ASSET PURCHASE AGREEMENT dated as of January 3, 1996,
between WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania
Corporation ("Seller"), and Northrop Grumman Corporation, a
Delaware corporation ("Purchaser").
Seller wishes to sell to Purchaser, and Purchaser wishes to purchase
from Seller, substantially all the assets of Seller's Electronic Systems Group,
excluding the security systems, wireless communications and airship businesses
thereof and the business of Westinghouse Landmark GIS, Inc., (the "Division"),
which Division includes certain assets owned by subsidiaries of Seller, upon the
terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
ARTICLE I
Purchase and Sale of Acquired Assets
------------------------------------
SECTION 1.1. Purchase and Sale. Upon the terms and subject to the
------------------
conditions of this Agreement, at the Closing (as defined in Section 2.1) Seller
agrees to sell, assign, transfer, convey and deliver to Purchaser all of
Seller's right, title and interest in, to and under the Acquired Assets (as
defined in Section 1.2(a)) and to cause any Subsidiary (as defined below) of
Seller, other than any Sold Subsidiary (as defined in Section 1.2(a)(x)), having
any right, title or interest in, to or under the Acquired
Assets or any obligations or liabilities included in the Assumed Liabilities (as
defined in Section 1.3(a)) (each such Subsidiary other than a Sold Subsidiary, a
"Selling Subsidiary") to sell, assign, transfer, convey and deliver to Purchaser
all of such Selling Subsidiary's right, title and interest in, to and under the
Acquired Assets, and Purchaser agrees to purchase, acquire and accept from
Seller and each Selling Subsidiary (collectively, "Sellers") all such right,
title and interest in, to and under the Acquired Assets. The term "Subsidiary"
means a corporation more than 50% of the capital stock of which is owned
directly or indirectly by Seller.
SECTION 1.2. Acquired Assets and Excluded Assets. (a) The term
------------------------------------
"Acquired Assets" means all the business, properties, assets, goodwill and
rights of Sellers of whatever kind and nature, real or personal, tangible
or intangible, other than the Excluded Assets (as defined in Section
1.2(b)), owned by any of Sellers on the Closing Date (as defined in Section
2.1) and used or held for use primarily in the Division, including:
(i) all real property, leaseholds and other interests in real
property of Sellers listed in Schedules 3.1(g)-1 and 3.1(g)-2, in each case
together with Sellers' right, title and interest in all
buildings, improvements, fixtures and all other appurtenances thereto (the
"Premises");
(ii) all raw materials, work-in-process, finished goods, supplies,
parts and other inventories ("Inventory") of Sellers that on the Closing
Date is located on the Premises and all other Inventory, including
Inventory in transit, of Sellers on the Closing Date that is used or held
for use primarily by or for the Division;
(iii) all machinery and equipment of Sellers that is used or held
for use primarily by or for the Division;
(iv) all accounts receivable of Sellers on the Closing Date arising
out of operations of the Division;
(v) subject to the license to be granted pursuant to Section
4.9(a), all domestic and foreign patents, patent applications, trademarks,
trademark registrations, servicemarks, trade names, registered copyrights
and licenses with respect to the foregoing ("Intellectual Property") owned
by Sellers that relate primarily to the operations of the Division
(excluding the names and marks "Westinghouse Electric Corporation",
"Westinghouse" and "Circle W" (in logotype design or any other style or
-
design), and any
name or xxxx derived from or including any of the foregoing);
(vi) subject to the license to be granted pursuant to Section
4.9(a), all trade secrets, inventions, know-how, formulae, processes,
procedures, research records, records of inventions, test information,
market surveys and marketing know-how and unregistered copyrights
("Technology") owned by Sellers that relate primarily to the operations of
the Division;
(vii) all permits, licenses, franchises, approvals and authorizations
by governmental or regulatory authorities or bodies ("Permits") owned by
Sellers that relate primarily to the operations of the Division;
(viii) all contracts, leases, indentures, joint venture, environmental
indemnity and other agreements, commitments and all other legally binding
arrangements, whether oral or written, to which any of Sellers is a party
or by which any of Sellers is bound, including any contracts, agreements,
commitments and other legally binding arrangements relating to plans and
arrangements referred to in Section 3.1(o) to the extent provided in
Section 4.5 excluding such contracts, agreements, commitments and other
legally binding arrangements relating to plans and arrangements
referred to in Section 3.1(o), ("Contracts") that are listed in Schedule
3.1(g)-1, 3.1(g)-2, 3.1(j) or 3.1(q) and all other Contracts that relate
primarily to the Division and that are not required to be listed in such
Schedules;
(ix) all bids, quotations and proposals for Contracts, whether oral or
written, to which any of Sellers is a party or by which any of Sellers is
bound that relate primarily to the Division;
(x) all capital stock, partnership interests and other equity
interests owned by Sellers in any corporation, partnership, joint venture,
trust or other business association ("Investments") listed in Schedule
3.1(k), including all capital stock owned by Sellers in the corporations
listed in Schedule 3.1(r) under the caption "Sold Subsidiaries" (each, a
"Sold Subsidiary"), and all other Investments relating primarily to the
Division acquired by any of Sellers after the date of this Agreement;
(xi) all books of account, general, financial, accounting and
personnel records, files, invoices, customers' and suppliers' lists and
other data owned by Sellers on the Closing Date and used or held for use
primarily by or for the Division, except to the extent
relating to the Excluded Assets or the Excluded Liabilities (as defined in
Section 1.3(b));
(xii) all personal property of Sellers that is used or held for use
primarily by or for the Division; and
(xiii) all rights, claims and causes of action to the extent relating
to any of the Assumed Liabilities or the Acquired Assets, including,
subject to Section 4.19, rights, claims and causes of action under
insurance policies relating thereto, but excluding claims for refunds of
Income Taxes as provided in Section 1.2(b).
The term "Acquired Assets" shall also include all equipment (including any
equipment constituting a fixture) and personal property owned by any of Sellers
on the Closing Date and used or held for use primarily in the portion of
Sellers' Science and Technology Center which primarily provides research and
development support to the business comprised of the Division and the
performance of third party Contracts of the type listed in Schedule 3.1(j)
pursuant to Section 3.1(j)(xiv) (such portion, the "Center"), and any such
Contracts so listed or entered into in the ordinary course of business between
the date of this Agreement and the Closing Date, and any Intellectual Property
and
Technology relating primarily to the Division or the performance of such third
party Contracts. For the avoidance of doubt, "Acquired Assets" shall include all
assets set forth on the Closing Balance Sheet (as defined in Section 2.3(a)).
(b) The term "Excluded Assets" means:
(i) all cash on hand or in banks and all cash equivalents, except any
cash or cash equivalents reflected on the Closing Statement (as defined in
Section 2.3(a));
(ii) all rights of Sellers under this Agreement and the agreements,
instruments and certificates delivered in connection with this Agreement;
(iii) all records prepared in connection with the sale of the
Division, including bids received from third persons and analyses relating
to the Division;
(iv) all rights, claims and causes of action relating to any of the
Excluded Liabilities or the Excluded Assets, including rights, claims and
causes of action under insurance policies relating thereto;
(v) all rights to claims, available to or being pursued by Sellers or
any Sold Subsidiary, for refunds of or credits against Income Taxes (as
defined in Section 4.14(g)(ii)) (including all refunds or credits
relating to any FSC for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), investment tax credits, research credits and credits
for prepayments of Income Taxes) attributable to the Division for taxable
periods ending on or before the Closing Date and for the portion ending on
the Closing Date of any taxable period that includes but does not end on
the Closing Date (the "Pre-Closing Tax Periods") (determined as if such
taxable period ended as of the close of business on the Closing Date);
provided, however, that in the case of a taxable period that includes
-------- -------
but does not end on the Closing Date, if a taxable loss exists for the
portion of such period that is included in the Pre-Closing Tax Period, then
the amount of such refund that constitutes an Excluded Asset shall not
exceed the amount of Income Taxes (including estimated Income Taxes)
actually paid by Seller, any of its affiliates or any other Person (as
defined in Section 1.3(c)) prior to the Closing Date with respect to such
taxable period; and provided, further, to the extent that any such
-------- -------
refunds or credits of state Income Taxes relate to any "allowable cost"
that is credited to the United States Government as a cost reduction by
credit or actual refund, the amount
of such tax refunds or credits so credited or refunded, less any amount
that was reserved for such taxes through the fee and rate reserve reflected
on the Closing Balance Sheet, shall not constitute an Excluded Asset and
shall be for the benefit of Purchaser, and Seller shall cause such amount
to be promptly paid to Purchaser;
(vi) any consolidated, combined, unitary or separate company Tax
Return (as defined in Section 4.14(g)(iii)) relating to Income Taxes that
includes any of Sellers or any Sold Subsidiary, and records and work papers
used in preparation thereof;
(vii) the names and marks "Westinghouse Electric Corporation",
"Westinghouse" and "Circle W" (in logotype design or any other style or
-
design), and any name or xxxx derived from or including any of the
foregoing); and
(viii) all assets identified in Schedule 1.2(b).
SECTION 1.3. Assumption of Liabilities. (a) Upon the terms
--------------------------
and subject to the conditions of this Agreement, Purchaser hereby assumes,
effective as of the Closing, and agrees to pay, perform and discharge when due,
and indemnify Seller, its affiliates (including the Selling Subsidiaries) and
their respective officers, directors, employees,
stockholders, agents and representatives against and hold them harmless from and
after the Closing from all obligations and liabilities of Sellers and the Sold
Subsidiaries of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, in the case of
Sellers, arising out of, relating to or otherwise in respect of the Acquired
Assets, the Division or the operations of the Division before, on or after the
Closing Date (collectively, the "Assumed Liabilities"), excluding any Excluded
Liabilities, but otherwise including:
(i) all obligations and liabilities of Sellers under Contracts that
are to be acquired by Purchaser pursuant to the provisions of this
Agreement;
(ii) all accounts payable owed by Sellers arising out of operations of
the Division or otherwise in respect of the Division;
(iii) all obligations and liabilities in respect of any and all
products sold by the Division at any time, including obligations and
liabilities for refunds, adjustments, allowances, repairs, exchanges,
returns and warranty, merchantability and other claims;
(iv) subject to the rights of Purchaser under Section 7.3, all
obligations and liabilities arising as
a result of at any time being the owner or occupant of, or the operator of
the activities conducted at, the Premises included in the Acquired Assets
or any other real property owned or leased at any time by any of Sellers
for use primarily in the Division or by any Sold Subsidiary, including all
obligations and liabilities relating to personal injury, property damage,
the environment and on-site or off-site waste disposal;
(v) other than the items included in Section 1.3(a)(vi), which are
assumed only to the extent provided in Section 4.5, and subject to the
rights of Purchaser under Section 7.4, all obligations and liabilities
relating to the employment or termination of employment of (x) any employee
of the Division and (y) any employee of the Center, at any time;
(vi) to the extent provided in Section 4.5, all obligations or
liabilities arising under or in connection with any bonus, pension, profit
sharing, deferred compensation, retirement, vacation, severance pay,
disability benefits, death benefits, hospitalization, insurance or other
similar plan or arrangement or understanding (whether or not legally
binding) providing benefits, including postretirement benefits, to Division
or Center employees;
(vii) all obligations and liabilities for taxes (other than Income
Taxes described in Section 1.3(b)(ii)) attributable to the Division
(including the Sold Subsidiaries) for all taxable periods;
(viii) other than the items included in Section 1.3(a)(vi), which
are assumed only to the extent provided in Section 4.5, and subject to the
rights of Purchaser under Sections 7.3, 7.4 and 7.5, all obligations and
liabilities in respect of lawsuits, actions and proceedings, pending or
threatened, and claims, whether or not presently asserted, arising out of,
relating to or otherwise in any way in respect of the Division or the
operations of the Division at any time; and
(ix) subject to the rights of Purchaser under Sections 7.3, 7.4 and
7.5, all obligations and liabilities of Sellers and the Sold Subsidiaries
as of the Closing Date of the type reflected on the Balance Sheet (as
defined in Section 3.1(c)), including the notes thereto.
(b) The term "Excluded Liabilities" means:
(i) any obligation or liability of Sellers to the extent related to
the Excluded Assets; and
(ii) any obligation or liability of Sellers or any Sold Subsidiary for
Income Taxes attributable to the Division (including the Sold Subsidiaries)
for Pre-Closing Tax Periods, including (A) Income Taxes of Seller's
Federal Consolidated Income Tax group (and any other Income Tax group or
predecessor Income Tax group which included a Sold Subsidiary) under any
Treasury Regulation under Section 1502 of the Code or any comparable
provisions of foreign, state or local law, (B) Income Taxes resulting from
any transferee liability or successor liability of a Sold Subsidiary
attributable to Pre-Closing Tax Periods and (C) Income Taxes resulting from
the sale and transfer from Seller to Purchaser of the Acquired Assets
(including Income Taxes resulting from the Section 338 Elections (as
defined in Section 4.14(c)), and any state Income Taxes imposed by states
which do not recognize an election comparable to the election under Section
338(h)(10) of the Code and for which a regular Section 338 election is made
or deemed made), but excluding (X) any Transfer Taxes (as defined in
Section 4.14(d)), (Y) any taxes resulting from actions taken by Purchaser
or its
affiliates after the Closing and (Z) any state Income Taxes resulting from
a regular Section 338 election with respect to a Sold Subsidiary created
pursuant to Section 4.14(l).
(c) Notwithstanding anything to the contrary contained herein, but
subject to the provisions of Section 4.4, this Agreement shall not operate to
assign any Intellectual Property, Technology or Contract (including any
Government Contract as defined in Section 4.4(a)) or any claim, right or benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), or any individual, corporation, partnership, limited liability
company, joint venture, trust, business association or other entity (a "Person",
which term shall include a Governmental Entity), would constitute a breach,
default or other contravention thereof or a violation of applicable law. Except
as otherwise contemplated in Section 4.4(a), Seller and Purchaser shall each use
all reasonable efforts to obtain the consent of such Persons for the assignment
thereof to Purchaser prior to the Closing (it being understood that the failure
to obtain such consents shall not relieve either
party from its obligation to consummate at the Closing the transactions
contemplated by this Agreement) and shall otherwise comply with the provisions
of Section 4.4.
(d) Notwithstanding anything to the contrary in any agreement or
otherwise, any rights, express or implied, of any Sold Subsidiary to use any
Intellectual Property or Technology owned by Sellers shall terminate at the
Closing, except to the extent any such Intellectual Property or Technology is an
Acquired Asset and except as otherwise contemplated by the license to be granted
pursuant to Section 4.9(b).
SECTION 1.4. Purchase Price. The purchase price for the
---------------
Acquired Assets shall be $3,000,000,000 (the "Purchase Price"), payable as set
forth in Section 2.2(b) and subject to adjustment as provided in Section 2.3,
together with the assumption of the Assumed Liabilities as provided in Section
1.3.
ARTICLE II
The Closing; Purchase Price Adjustment
--------------------------------------
SECTION 2.1. Closing Date. The closing of the sale and transfer
-------------
of the Acquired Assets and the assumption of the Assumed Liabilities (the
"Closing") shall take place at the offices of Cravath, Swaine & Xxxxx, 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on March 1,
1996, or, if the conditions to the Closing set forth in Article V shall not have
been satisfied by such date, as soon as practicable after such conditions shall
have been satisfied. The date on which the Closing shall occur is herein
referred to as the "Closing Date".
SECTION 2.2. Transactions To Be Effected at the Closing. At the
-------------------------------------------
Closing:
(a) Seller shall deliver or cause to be delivered to Purchaser
such appropriately executed deeds, bills of sale, assignments and other
instruments of transfer providing for the sale, assignment, transfer,
conveyance and delivery as contemplated by this Agreement of the Acquired
Assets in form and substance reasonably satisfactory to Purchaser and its
counsel (it being understood that any such deed, xxxx of sale, assignment
or other instrument shall not provide for any representations or warranties
or any obligations or liabilities that are not otherwise expressly provided
for in this Agreement), together with resignations as director of each
director of each Sold Subsidiary; and
(b) Purchaser shall deliver to Seller (or, at Seller's direction, one
or more Selling Subsidiaries) (i) by wire transfer to an account designated
in writing by Seller prior to the Closing of immediately
available funds in an amount equal to the Purchase Price plus or minus an
estimate prepared by Seller and delivered to Purchaser at least two
business days prior to the Closing Date of any adjustment to the Purchase
Price under Section 2.3 (the Purchase Price plus or minus such estimate
being herein referred to as the "Closing Date Amount") and (ii) such
appropriately executed assumption agreements and other instruments of
assumption providing for the assumption of, and indemnification against,
the Assumed Liabilities as contemplated by this Agreement in form and
substance reasonably satisfactory to Seller and its counsel (it being
understood that any such deed, xxxx of sale, assignment or other instrument
shall not provide for any representations or warranties or any obligations
or liabilities that are not otherwise expressly provided for in this
Agreement).
SECTION 2.3. Purchase Price Adjustment. (a) Within 60 days
--------------------------
after the Closing Date, Seller shall prepare and deliver to Purchaser (i) an
audited combined balance sheet of the Division as of the Closing Date (the
"Closing Balance Sheet"), prepared from the books and records of Seller and its
subsidiaries relating to the Division in accordance with generally accepted
accounting principles
applied on a consistent basis with the Balance Sheet, together with a report
thereon prepared and certified by Price Waterhouse, (ii) a statement (the
"Closing Statement") setting forth Working Capital (as defined below) as of the
close of business on the Closing Date ("Closing Working Capital"), together with
a certificate of Price Waterhouse that the Closing Statement has been prepared
in compliance with the requirements of this Section 2.3 , (iii) a statement
setting forth the Restructuring Amount (as defined below) as of the close of
business on the Closing Date and (iv) a statement setting forth the Norden
Amount (as defined below) as of the close of business on the Closing Date.
Purchaser shall cause the employees of the Division to assist Seller
in the preparation of the Closing Balance Sheet and the Closing Statement and
shall provide Seller access at all reasonable times to the personnel,
properties, books and records of the Division for such purpose. Seller's
independent auditors may participate in the preparation of the Closing Statement
and Purchaser's independent auditors may review the preparation of, and all
working papers related to, the Closing Balance Sheet and the Closing Statement;
provided, however, that Purchaser acknowledges that Seller shall have the
-------- -------
primary
responsibility and authority for preparing the Closing Balance Sheet and
the Closing Statement.
At Purchaser's option and expense, a physical of the inventory shall
be conducted by Sellers consistent with past practice on or before the Closing
Date for the purpose of preparing the Closing Balance Sheet, and each of Seller
and Purchaser and their respective independent auditors shall have the right to
observe the taking of such physical inventory. Any costs or expenses incurred by
the Division in connection with such taking of such physical inventory shall be
added back in determining Closing Working Capital.
During the 30-day period following Purchaser's receipt of the Closing
Statement, subject to signing of customary releases, Purchaser and its
independent auditors shall be permitted to review Seller's independent auditors'
working papers relating to the Closing Balance Sheet and the Closing Statement.
The Closing Statement shall become final and binding upon the parties on the
thirtieth day following delivery thereof, unless Purchaser gives written notice
of its disagreement with the Closing Statement ("Notice of Disagreement") to
Seller prior to such date. Any Notice of Disagreement shall (A) specify in
reasonable detail the nature of any disagreement so asserted, (B) only include
disagreements based on Closing Working Capital not being calculated in
accordance with this Section 2.3 (which includes disagreements based on the
Closing Balance Sheet and the Closing Statement not being in compliance with the
requirements of this Section 2.3) and (C) be accompanied by a certificate of
Purchaser that it has complied with the covenants set forth in Section 2.3(f).
If a Notice of Disagreement is received by Seller in a timely manner, then the
Closing Statement (as revised in accordance with clause (I) or (II) below) shall
become final and binding upon Seller and Purchaser on the earlier of (I) the
date Seller and Purchaser resolve in writing any differences they have with
respect to the matters specified in the Notice of Disagreement or (II) the date
any disputed matters are finally resolved in writing by the Accounting Firm (as
defined below).
During the 30-day period following the delivery of a Notice of
Disagreement, Seller and Purchaser shall seek in good faith to resolve in
writing any differences which they may have with respect to the matters
specified in the Notice of Disagreement. During such period Seller and its
independent auditors shall have access to the working papers relating to the
Notice of Disagreement. At the end of such 30-day period, Seller and Purchaser
shall submit to an
independent accounting firm (the "Accounting Firm") for review and resolution
any and all matters which remain in dispute and which were properly included in
the Notice of Disagreement. The Accounting Firm shall be Ernst & Young or, if
such firm is unable or unwilling to act, such other nationally recognized
independent public accounting firm as shall be agreed upon by the parties hereto
in writing. Seller and Purchaser shall jointly use all reasonable efforts to
cause the Accounting Firm to render a decision resolving the matters submitted
to the Accounting Firm within 30 days following submission. Seller and
Purchaser agree that judgment may be entered upon the determination of the
Accounting Firm in any court having jurisdiction over the party against which
such determination is to be enforced. The cost of any arbitration (including
the fees and expenses of the Accounting Firm and reasonable attorney fees and
expenses of the parties) pursuant to this Section 2.3 shall be borne by
Purchaser and Seller in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, which proportionate allocations shall also be
determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the merits of the matters submitted. The fees
and disbursements of Seller's independent auditors incurred in connection with
their review of any Notice of Disagreement shall be borne by Seller, and the
fees and disbursements of Purchaser's independent auditors incurred in
connection with their review of the Closing Statement shall be borne by
Purchaser.
(b) The Purchase Price shall be increased by the Restructuring
Amount, by the Norden Amount and by the amount by which Closing Working Capital
exceeds $349,000,000 (the "WC Amount"), and the Purchase Price shall be
decreased by the amount by which Closing Working Capital is less than the WC
Amount (the Purchase Price as so increased or decreased is herein referred to as
the "Adjusted Purchase Price"). If the Closing Date Amount is less than the
Adjusted Purchase Price, Purchaser shall, and if the Closing Date Amount is more
than the Adjusted Purchase Price, Seller shall, within 10 business days after
the Closing Statement becomes final and binding on the parties, make payment by
wire transfer in immediately available funds of the amount of such difference,
together with interest thereon at the rate of 8.5% per annum, calculated on the
basis of the actual number of days elapsed divided by 365, from the Closing Date
to the date of actual payment, compounded annually.
(c) The term "Working Capital" shall mean Current Assets minus
Current Liabilities (in each case as defined below). The WC Amount equals
Working Capital as set forth
on the Statement of Working Capital as of September 30, 1995, attached as
Schedule 2.3 (the "September 30 Statement") plus $12,000,000, and shall not be
subject to change regardless of whether the items included therein were in
accordance with generally accepted accounting principles or for any other reason
whatsoever. Subject to the adjustments described in Schedule 2.3(c), the terms
"Current Assets" and "Current Liabilities" shall mean the current assets (other
than any Excluded Assets) and current liabilities (other than any Excluded
Liabilities), respectively, of the Division, determined in the same way, using
the same methods, estimates, methodologies and judgments, as the line items
comprising Working Capital on the September 30 Statement (but only to the extent
doing so would be in accordance with generally accepted accounting principles
consistently applied). The amounts used in preparing the Closing Statement for
each category of Current Assets and Current Liabilities shall be the
corresponding amount shown on the Closing Balance Sheet with the respective
adjustments thereto described on Schedule 2.3(c). Without limiting the
generality of the foregoing, Closing Working Capital and the amounts shown on
the Closing Balance Sheet are to be determined in the same way, using the same
methods, estimates, methodologies and judgments, employed in
determining the WC Amount, including using the same accounting methods,
policies, practices, assumptions and procedures with consistent classifications,
judgments and valuation and estimation methodologies, and using the same
methodologies used by Seller in determining its estimates and judgments for
evaluating the status of its Contracts (but only to the extent doing so would be
in accordance with generally accepted accounting principles consistently
applied). Purchaser acknowledges that it has had the opportunity to review
Seller's contract estimates at completion. Purchaser agrees that, in calculating
the Closing Working Capital, no changes will be made in the estimates at
completion except to reflect events occurring between the date of this Agreement
and the Closing Date and that any items relating to contract estimates at
completion in any Notice of Disagreement will be limited to those proposed
changes in contract estimates at completion which are based on such intervening
events. The scope of the disputes to be resolved by the Accounting Firm is
limited to whether the Closing Statement was prepared in compliance with the
requirements of this Section 2.3, and the Accounting Firm is not to make any
other determination (including as to whether the WC Amount is correct).
(d) The term "Restructuring Amount" shall mean the
amount by which the cash expenditures by Sellers and the Sold Subsidiaries
during the period from October 1, 1995 to the Closing Date, in respect of the
restructuring actions described in the second paragraph of note 16 to the
Financial Statements (as defined in Section 3.1(c)) (other than the
approximately $35 million portion thereof in respect of pension curtailment),
exceed the economic benefit realized by Sellers during such period as a result
of such expenditures (it being agreed that such economic benefit shall consist
of any increased operating margins realized by Sellers during such period as a
result of the expense reductions associated with such restructuring actions and
any cost recoveries of such expenditures realized by Sellers during such period
as a result of increases in billing rates on government contracts).
(e) The term "Norden Amount" shall mean the amount by which the
cash expenditures by Sellers and the Sold Subsidiaries during the period from
October 1, 1995 to the Closing Date, in respect of the restructuring actions
described in the third paragraph of note 16 to the Financial Statements, exceed
the economic benefit realized by Sellers during such period as a result of such
expenditures (it being agreed that such economic benefit shall consist of any
increased operating margins realized during such period as a
result of the expense reductions associated with such restructuring actions and
any cost recoveries of such expenditures realized during such period as a result
of increases in billing rates on government contracts).
(f) During the period of time from and after the Closing Date
through the resolution of any adjustment to the Purchase Price contemplated by
this Section 2.3, Purchaser agrees that it shall maintain the accounting books
and records of the Division on which the Closing Balance Sheet is to be based in
a manner consistent with the Division's past practices. Without limiting the
generality of the foregoing, during the period of time from and after the date
of this Agreement through the resolution of any adjustment to the Purchase Price
contemplated by this Section 2.3, Purchaser and Seller agree that no changes
shall be made in any reserve or other account existing as of September 30, 1995,
except as a result of specific events occurring after September 30, 1995, and,
in such event, only in a manner consistent with generally accepted accounting
principles and past practices. Purchaser shall cooperate in the preparation of
the Closing Balance Sheet and the Closing Statement.
(g) During the period of time from and after the Closing Date through
the resolution of any adjustment to the Purchase Price contemplated by this
Section 2.3, Purchaser shall afford to Seller and any accountants, counsel or
financial advisers retained by Seller in connection with any adjustment to the
Purchase Price contemplated by this
Section 2.3 reasonable access during normal business hours to all the Division's
properties, books, contracts, personnel and records relevant to the adjustment
contemplated by this Section 2.3.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.1. Representations and Warranties of Seller. Seller
-----------------------------------------
hereby represents and warrants to Purchaser as follows:
(a) Organization, Standing and Power. Seller is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the requisite power and authority to own
the Acquired Assets owned by it and to carry on the business of the Division as
now being conducted.
(b) Authority. Seller has the requisite corporate power and
----------
authority to execute this Agreement. Sellers have the requisite corporate
power and authority to execute the agreements to be entered into by them at the
Closing pursuant hereto (the "Seller Ancillary Documents") and to consummate the
transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Sellers, or, in the case of the Selling
Subsidiaries and in the case of the Seller Ancillary Documents, will be
authorized by all necessary corporate action on the part of Sellers prior to the
Closing, and do not and will not require the approval of the stockholders of
Seller. This Agreement has been duly executed and delivered by Seller and
constitutes, and each Seller Ancillary Document to be entered into by any of
Sellers will be duly executed and delivered at the Closing and when so executed
and delivered will constitute, its legal, valid and binding obligation
enforceable against it in accordance with its terms. The execution and delivery
of this Agreement by Seller do not, and the consummation by Sellers of the
transactions contemplated hereby and the compliance by Sellers with the terms
hereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation (except any
acceleration of vesting under the Westinghouse Savings Program) or to loss of a
material benefit under, or result in the creation of any Lien (as
defined in Section 3.1(f)) upon any of the Acquired Assets under, any provision
of (i) the Business Corporation Law of the Commonwealth of Pennsylvania, (ii)
the certificate of incorporation or by-laws (or comparable organizational
documents) of any of Sellers, (iii) except as disclosed on Schedule 3.1(b), any
Intellectual Property, Technology or Contract which is not subject to Section
4.4 or (iv) subject to the filings and other matters referred to in the
following sentence, any law, judgment, order, decree, statute, ordinance, rule
or regulation applicable to Sellers or the Acquired Assets, other than, in the
case of clauses (iii) and (iv) above, any such conflicts, violations, defaults,
rights or Liens that, individually or in the aggregate, would not (A) have a
material adverse effect on the business or financial condition of the Division
or (B) materially impair the ability of Seller to perform its obligations under
this Agreement. No consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required to be obtained or made by or with respect to Sellers or the Acquired
Assets in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) compliance
with and filings under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) compliance
with and filings under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (iii) compliance with the facilities clearance
requirements of the Defense Investigative Service of the United States
Department of Defense ("DIS"), as set forth in the DIS Industrial Security
Regulation and the DIS Industrial Security Manual, as amended from time to time,
(iv) consents or novations which may be required for the assignment of any
Intellectual Property, Technology or Contract as contemplated in Section 4.4,
(v) compliance with, and notices and filings under, environmental permits,
statutes and regulations, including the Connecticut Transfer Act, Conn. Gen.
Stat. (S) 22a-134 et seq. (1993), and the California Health and Safety Code (S)
-- ----
25359.7 (1992), (vi) those that may be required solely by reason of Purchaser's
(as opposed to any other Person's) participation in the transactions
contemplated hereby and (vii) those the failure of which to obtain or make,
individually or in the aggregate, would not (A) have a material adverse effect
on the business or financial condition of the Division or (B) materially impair
the ability of Seller to perform its obligations under this Agreement.
(c) Financial Statements. Schedule 3.1(c) sets forth the unaudited
---------------------
combined balance sheet of the Division as of September 30, 1995 (the "Balance
Sheet"), and the unaudited combined statement of income of the Division for the
nine months ended September 30, 1995, together with the notes to such financial
statements (the "Financial Statements"). The Financial Statements have been
prepared from the books and records of Seller and its subsidiaries relating to
the Division and, except as described in the notes thereto, have been prepared
in accordance with generally accepted accounting principles and fairly present,
in all material respects, the financial condition and the results of operations
of the Division as at the date and for the period indicated. The estimated
allocation of assets of the Westinghouse Pension Plan between Seller's
Electronic Systems Group active employees and other employees as reflected in
Note 13 of the Financial Statements is based on application of the Pension
Benefit Guaranty Corporation ("PBGC") safe harbor assumptions set forth in
Treas. Reg. (S)1.414(l)-(b)(5)(ii) (the projected benefit obligation in Note 13
having been calculated using other assumptions, as set forth therein).
(d) Compliance with Applicable Laws. Subject to Section 4.4, Sellers
--------------------------------
have complied with all laws,
regulations, rules and orders of all Governmental Entities applicable to them
which relate to the Acquired Assets (including the Truth-In-Negotiations-Act,
the Procurement Integrity Act, the Foreign Corrupt Practices Act, the Cost
Accounting Standards, the regulations and rules of applicable Governmental
Entities governing foreign military sales, the regulations and rules of
applicable Governmental Entities governing the submission of progress payment
requests on Government Contracts, the regulations and rules of applicable
Governmental Entities governing cost accounting and procurement systems with
respect to Government Contracts, and any laws, regulations, rules and orders
incorporated expressly, by reference or by operation of law into any Government
Contract), except where the failure to so comply would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
business or financial condition of the Division. Except as set forth in Schedule
3.1(d), since January 1, 1995, Sellers have not received any written notice
alleging any non-compliance in a material respect with any such laws,
regulations, rules or orders. Except as set forth in Schedule 3.1(d), since
January 1, 1995, Sellers have not received any written notice of any
administrative, civil or criminal investigation or audit by any Governmental
Entity (including any qui tam action brought under the Civil False Claims Act
-------
alleging any irregularity, misstatement or omission arising under or relating to
any Contract) relating to the Division which is reasonably likely to be
adversely determined and which if adversely determined would have a material
adverse effect on the business or financial condition of the Division. This
Section 3.1(d) does not relate to labor and employment matters for which Section
3.1(e) is applicable, employee benefits matters for which Section 3.1(o) is
applicable, Environmental Laws (as defined in Section 3.1(p)) for which Section
3.1(p) is applicable or to tax matters for which Section 3.1(q) is applicable.
(e) Litigation; Decrees. Schedule 3.1(e) sets forth a list as of
--------------------
the date of this Agreement of certain lawsuits, actions and proceedings.
Except as set forth in Schedule 3.1(e) and except for any lawsuit, action or
proceeding brought after the date of this Agreement by any Person seeking to
delay or prevent, or otherwise challenging, the transactions contemplated
hereby, there is no lawsuit, action or proceeding pending, or, to Seller's
knowledge, threatened, against any of Sellers relating to the Division
(including any relating to the suspension, debarment or similar preclusion of
Seller from doing business with a Governmental Entity) which is reasonably
likely to be adversely determined and which if adversely determined would have a
material adverse effect on the business or financial condition of the Division.
Sellers are not in default under any material judgment, order, injunction or
decree of any Governmental Entity or arbitrator entered against any of Sellers
and relating to the Division.
(f) Title to Acquired Assets. Sellers have good and valid title to
-------------------------
all the Acquired Assets free and clear of all mortgages, liens, security
interests, easements, rights of way, pledges, restrictions or encumbrances of
any nature whatsoever (collectively, "Liens"), except for (i) Liens disclosed in
Schedule 3.1(f) or in the Financial Statements or securing debt reflected as a
liability on the Balance Sheet, (ii) any progress payment liens arising in the
ordinary course of business from progress payments made by the United States
Government or any agency thereof or any other Governmental Entity on Government
Contracts and (iii) (A) mechanics', carriers', workmen's, repairmen's and other
like Liens arising or incurred in the ordinary course of business, (B) Liens for
taxes, assessments and other governmental charges that are not yet due and
payable or that may thereafter be paid without penalty or that are being
contested in good faith by appropriate proceedings and
(C) imperfections of title and other Liens that, individually or in the
aggregate, do not materially impair the continued operation of the business of
the Division as presently conducted (the Liens described in clauses (i), (ii)
and (iii) being herein referred to as "Permitted Liens"). This Section 3.1(f)
does not relate to Intellectual Property, Technology, real property, interests
in real property or leasehold interests (except that the defined term "Permitted
Liens" shall be applicable to Section 3.1(g) to the extent used therein).
(g) Real Property. Schedule 3.1(g)-1 sets forth a list of all
--------------
material real property and interests in real property owned in fee by Sellers
and used by Sellers primarily with respect to the operations of the Division,
other than any Excluded Assets (individually, an "Owned Property"). There is no
real property or interest in real property owned in fee by Sellers (other than
any Excluded Assets) which is material to the operations of the Division as
presently conducted which is not listed on Schedule 3.1(g)-1. Schedule 3.1(g)-2
sets forth a list of all material real property and interests in real property
leased by Sellers and used by Sellers primarily with respect to the operations
of the Division (other than any Excluded Assets) (individually, a "Leased
Property"). Sellers have good and
insurable fee title to all Owned Property free and clear of all Liens other than
(i) Permitted Liens, (ii) easements, covenants, rights-of-way and other
encumbrances or restrictions of record, (iii) any conditions that a current,
accurate survey or physical inspection of any Owned Property may show, (iv)
zoning, building and other similar restrictions, (v) unrecorded easements,
covenants, rights- of-way or other restrictions, (vi) Liens that have been
placed by any developer, landlord or other Person (other than Sellers) on
property over which any of Sellers has easement rights, none of which items set
forth in clauses (iii), (iv), (v) or (vi) above, individually or in the
aggregate, materially impair the continued operation of the business of the
Division as presently conducted. Except as set forth on Schedule 3.1(g)-2, one
of Sellers is the lessee of all the Leased Property and is in possession of the
premises purported to be leased thereunder, and each such lease is a valid
obligation of one of Sellers without any material default thereunder by Sellers,
or, to Seller's knowledge, by the applicable lessor.
(h) Intellectual Property and Technology. Schedule 3.1(h) sets forth
-------------------------------------
a list, as of the date of this Agreement, of all material Intellectual Property
(other than licenses) included in the Acquired Assets and, to the extent
indicated on such Schedule, such Intellectual Property has been duly registered
in, filed in or issued by the United States Copyright Office or the United
States Patent and Trademark Office, the appropriate offices in the various
states of the United States and the appropriate offices of other jurisdictions.
Except as set forth on Schedule 3.1(h), Sellers are the sole and exclusive owner
of all material Intellectual Property (other than licenses) and material
Technology included in the Acquired Assets. Except as set forth on Schedule
3.1(h), Sellers have not received any written notice from any other Person
challenging in any material respect the right of Sellers to use any of the
material Intellectual Property or material Technology included in the Acquired
Assets or any rights thereunder. Sellers have taken measures, consistent with
Seller's corporate practice, to protect the secrecy, confidentiality and value
of the material Technology included in the Acquired Assets. Except as set forth
in Schedule 3.1(h), to Seller's knowledge, no material Technology (other than
unregistered copyrights) included in the Acquired Assets has been used, divulged
or appropriated for the benefit of any Person other than Sellers, except where
such use, divulgence or appropriation would not, individually or in the
aggregate, reasonably be expected to have a material adverse
effect on the business or financial condition of the Division. Sellers have not
made any claim in writing of a violation, infringement, misuse or
misappropriation by others of their rights to or in connection with any material
Intellectual Property or material Technology included in the Acquired Assets.
Except as set forth on Schedule 3.1(h), to Seller's knowledge, as of the date of
this Agreement, there is no pending or threatened claim by any third Person of a
violation, infringement, misuse or misappropriation by any of Sellers of any
Intellectual Property or Technology owned by any third Person, or of the
invalidity of any patent included in the Acquired Assets, which is reasonably
likely to be adversely determined and which if adversely determined would have a
material adverse effect on the business or financial condition of the Division.
There are no interferences or other contested inter partes proceedings, either
pending or, to the knowledge of Seller, threatened, in the United States
Copyright Office, the United States Patent and Trademark Office or any Federal,
state or local court or before any other Governmental Entity relating to any
pending application with respect to any material Intellectual Property included
in the Acquired Assets.
(i) Insurance. All the material properties and businesses
----------
constituting any part of the Acquired Assets are
insured for Sellers' benefit, and will be so insured through the Closing, in
amounts and against risks consistent with Seller's corporate practice. Except as
set forth on Schedule 3.1(i), Seller does not self-insure any material risks
with respect to the Division other than employee benefit plans.
(j) Contracts. Except for Contracts listed on Schedule 3.1(g)-1,
----------
3.1(g)-2, 3.1(j) or 3.1(q), none of Sellers is a party to or bound by any
Contract relating primarily to the Division that is:
(i) a Contract for the employment of any Person with an annual base
salary in excess of $150,000 or any consulting agreement with any Person
involving payments by Sellers in excess of $200,000;
(ii) a Contract with any labor union;
(iii) other than Contracts in the ordinary course of business for the
purchase or sale of products or services from or to the Division and other
than arrangements between the Division and the Center, a Contract with any
director, officer, subsidiary or affiliate of Seller that will not be
terminated at or prior to the Closing;
(iv) other than any of the following entered into in the ordinary
course of business between the date of
this Agreement and the Closing Date and other than letters of credit
obtained in the ordinary course of business, an indenture, note, loan or
credit agreement or other Contract relating to the borrowing of money in an
amount in excess of $1,000,000 by any of Sellers or to the direct or
indirect guarantee or assumption by any of Sellers of the obligations of
any other Person (other than one of Sellers) for borrowed money in an
amount in excess of $1,000,000, including any arrangement which has the
economic effect although not the legal form of such a guarantee;
(v) a power of attorney (other than powers of attorney given in the
ordinary course of the Division's business with respect to routine tax and
securities matters or with respect to the entering into or administration
of Contracts or joint ventures);
(vi) a covenant not to compete (other than those contained in teaming
agreements and those of which the Division is the beneficiary of the
covenant in employee-related agreements);
(vii) a lease or similar agreement under which (A) any of Sellers is a
lessee of, or holds or operates, any real property owned by any third
Person for an annual rent in excess of $150,000 or (B) any of Sellers
is a lessor of, or makes available for use by any third Person, any real
property owned or held as lessee by Sellers for an annual rent in excess of
$250,000;
(viii) a lease or similar agreement under which (A) any of Sellers is
lessee of, or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by any third Person for an annual rent in
excess of $50,000 or (B) any of Sellers is a lessor of, or makes available
for use by any third Person, any tangible personal property owned
(including ownership for tax purposes) by Sellers having a fair market
value in excess of $50,000;
(ix) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
a Contract (including purchase orders), involving the obligation of Sellers
to purchase products or services for payment by Sellers of more than
$2,000,000 (unless terminable by one of Sellers without payment or penalty
of not more than $250,000 upon no more than 60 days' notice);
(x) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
a Contract (including sales orders) involving the obligation of
Sellers to deliver products or services with an unfilled order balance of
more than $5,000,000, (unless terminable by one of Sellers without payment
or penalty of not more than $250,000 upon no more than 60 days' notice)
(the Contracts set forth on Schedule 3.1(j) pursuant to this clause (x)
representing approximately 70% of the backlog of the Division as reflected
in the records of the Division as of November 30, 1995);
(xi) other than any progress payment liens arising from progress
payments made by the United States Government or any agency thereof or any
other Governmental Entity on Government Contracts, a mortgage, pledge,
security agreement, deed of trust or other document granting a material
Lien (including Liens upon properties acquired under conditional sales,
capital lease or other title retention or security devices);
(xii) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
a Contract providing for the formation of a joint venture, teaming
agreement or partnership;
(xiii) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
any
financing arrangement with any third Person with respect to the performance
of any Government Contract; or
(xiv) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
a third party Contract that relates primarily to the Center.
Subject to Section 4.4 and except as disclosed in Schedule 3.1(g)-1, 3.1(g)-2
or 3.1(j), Sellers are not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect under any Contract
listed in Schedule 3.1(g)-1, 3.1(g)-2 or 3.1(j). To Seller's knowledge, except
as disclosed in Schedule 3.1(g)-1, 3.1(g)-2 or 3.1(j), as of the date of this
Agreement, none of the other parties to any such Contract is (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. As of the date of this Agreement, Sellers have
not, except as disclosed in Schedule 3.1(g)-1, 3.1(g)-2 or 3.1(j), (i) received
any written notice of the intention of any party to terminate any Contract
listed in Schedule 3.1(g)-1, 3.1(g)-2 or 3.1(j), whether as a termination for
convenience or for default of any of Sellers thereunder, or (ii) since January
1, 1995, received any written cure notice
or show cause notice (as defined in the Federal Acquisition Regulations Part 49,
(P) 49.607(a) and (b), respectively) in respect of any such Contract which is a
Government Contract. To Seller's knowledge, except as disclosed in Schedule
3.1(g)-1, 3.1(g)-2 or 3.1(j), as of the date of this Agreement, there is no
pending claim or request for equitable adjustment under any Government Contract
by any Governmental Entity which is reasonably likely to be adversely determined
and which if adversely determined would have a material adverse effect on the
business or financial condition of the Division. To Seller's knowledge, Sellers
have complied in all material respects with all of their obligations relating to
any equipment or fixtures owned by any Governmental Entity and loaned, bailed or
otherwise furnished to or held by any of Sellers, except where the failure to so
comply would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the business or financial condition of the
Division. Complete and correct copies of all Contracts referred to in Schedule
3.1(g)-1, 3.1(g)-2 and 3.1(j), together with all amendments thereto (other than
any amendments thereto entered into after the date of this Agreement in the
ordinary course of business), have been delivered or made available to
Purchaser.
(k) Investments. Schedule 3.1(k) is a list of all Investments (other
------------
than Investments that are Excluded Assets) owned by Sellers on the date of this
Agreement relating primarily to the Division.
(l) Suppliers. Schedule 3.1(l) contains a list of the names and
----------
addresses of the ten largest suppliers (indicating dollar volume of product
purchases for each) of products and services to the Division for the twelve
months ended December 31, 1995.
(m) Sufficiency of Acquired Assets. The Acquired Assets (including
-------------------------------
all contract and other rights included therein) comprise all the assets owned by
Sellers that (taking into account the assets of the Sold Subsidiaries and the
license to be granted pursuant to Section 4.9(b)) are necessary for the conduct
of the Division's business in all material respects as presently conducted,
except for the Excluded Assets.
(n) Absence of Certain Changes or Events. Except as set forth in the
------------------------------------
Schedules hereto or as contemplated by this Agreement, since the date of the
Financial Statements Sellers have conducted the business of the Division in all
material respects only in the ordinary course consistent with past practice.
Except as set forth in the Schedules hereto or as contemplated by this
Agreement, since the date of the Financial Statements there
has not been any material adverse change in the business or financial condition
of the Division, other than seasonal changes, changes relating to the economy in
general or changes relating to the Division's industry in general. Purchaser
acknowledges that there may be disruptions to the Division's business as a
result of Purchaser's identity as the proposed acquiror of the Division, and
Purchaser agrees that such disruptions and any changes attributable thereto
shall not constitute a breach of this Section 3.1(n).
(o) Employee Benefits. (i) Schedule 3.1(o)(i) contains a list of
------------------
each "employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (hereinafter a
"Pension Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) (hereinafter a "Welfare Plan") and each other material plan, arrangement
or policy relating to stock options, stock purchases, compensation, deferred
compensation, severance, fringe benefits or other employee benefits, in each
case currently maintained or contributed to by Sellers or their affiliates on
behalf of active employees of the Division or the Center who are employed in the
United States (all the foregoing being herein called "Benefit Plans") and, to
the knowledge of Seller, each employee benefit plan maintained or contributed to
by
Sellers or their affiliates outside the United States on behalf of active
foreign employees of the Division who are employed outside the United States
("Foreign Plans"). Seller has made available (or, in the case of item (4) of
this sentence, shall make available as soon as practicable after the date of
this Agreement) to Purchaser copies of (1) each Benefit Plan, (2) the most
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan, (3) the most recent summary plan description (or
similar document) for each Benefit Plan and (4) all insurance policies and
material service agreements relating to the Benefit Plans. Each Benefit Plan and
each Foreign Plan which is currently maintained or contributed to by Sellers or
their affiliates solely on behalf of the Division (each, a "Free-Standing Plan")
is so indicated on Schedule 3.1(o)(i).
(ii) To the knowledge of Seller, except as disclosed in Schedule
3.1(o)(ii), there are no investigations by any governmental agency, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against or involving any
Benefit Plan or asserting any rights or claims to benefits under any Benefit
Plan that could give rise to any material liability to Purchaser.
(iii) Except as disclosed in Schedule 3.1(o)(iii), (x) all
contributions to Benefit Plans that are Pension Plans (hereinafter "Business
Pension Plans") that were required to be made in accordance with Section 302 of
ERISA or Section 412 of the Code, have been timely made, (y) no Business Pension
Plan has applied for or received a waiver of the minimum funding standards
imposed by Section 412 of the Code and (z) no Business Pension Plan has an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code as of its most recent plan year.
(iv) Except as disclosed in Schedule 3.1(o)(iv), all the Benefit
Plans, as adopted or as they may have been amended, to the knowledge of Seller,
comply in all material respects with currently applicable provisions of the Code
and ERISA and other applicable laws. Seller has made available to Purchaser a
copy of the most recent determination letter received with respect to each
Business Pension Plan for which such a letter has been issued.
(v) Except as disclosed in Schedule 3.1(o)(v), with respect to any
Business Pension Plan subject to Title IV of ERISA, to the knowledge of Seller,
no event has occurred, or is reasonably expected to occur as a result of the
transactions contemplated by this Agreement, which will result in any material
liability to any such plan or to the
PBGC, other than for the payment of contributions or premiums, all of which have
been paid when due. Seller has made available to Purchaser the most recent
actuarial report or valuation with respect to each Business Pension Plan that is
a "defined benefit plan" (as defined in Section 3(35) of ERISA).
(vi) Except as disclosed in Schedule 3.1(o)(vi), to the knowledge of
Seller, Sellers comply in all material respects with the applicable requirements
of Section 4980B(f) of the Code with respect to each Benefit Plan that is a
"group health plan" (as such term is defined in Section 5000(b)(1) of the Code).
(vii) Except as disclosed in Schedule 3.1(o)(vii), neither the
Westinghouse Pension Plan nor any Benefit Plan disclosed in Schedule 3.1(o)(i)
which is a Welfare Plan that provides for post-retirement medical or dental
benefits has been amended in any material respect since September 30, 1995, that
has increased the benefits provided to individual participants or beneficiaries
thereunder.
(p) Environmental Matters. Except as disclosed to Purchaser prior to
----------------------
the execution of this Agreement or as disclosed on Schedule 3.1(p):
(i) Sellers are in compliance with all Environmental Laws (as defined
below), except for violations of Environmental Laws that would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business or financial condition of the Division;
(ii) Sellers hold, and are in compliance with, all Permits required
under Environmental Laws for Sellers to conduct the business of the
Division conducted by them, except for the absence of, or noncompliance
with, such Permits that would not, in all such cases taken individually or
in the aggregate, reasonably be expected to have a material adverse effect
on the business or financial condition of the Division; and
(iii) prior to the date of this Agreement, (A) to Seller's knowledge,
there are no events, conditions, actions, or omissions relating to the
conduct of the business of the Division that have given or will give rise
to any Environmental Liability (as defined below) based on or related to
the use, processing, generation, treatment, storage, disposal, transport,
emission, discharge, release or threatened release of any Hazardous
Substance (as defined below), and (B) Seller
has not received any written notice of the institution or pendency of any
lawsuit, action, proceeding, investigation or claim by any Person alleging
any Environmental Liability arising from or relating to the conduct of the
business of the Division, except for all such cases under (A) and (B) that
would not, taken individually or in the aggregate, reasonably be expected
to have a material adverse effect on the business or financial condition of
the Division.
(iv) As used herein:
"Environmental Laws" means any domestic or foreign, Federal, state,
interstate or local statute, law or regulation having the force of law and in
effect and promulgated as such as of the Closing Date (collectively "Pre-Closing
Environmental Laws and Regulations") or any order, injunction, judgment, decree,
common law or other enforceable requirement of any Governmental Entity, except
to the extent that it sets forth more stringent or additional requirements than
those authorized by Pre-Closing Environmental Laws and Regulations, and relating
to the protection of human health, safety or the environment, including any of
the foregoing related to: (i) Remedial Actions; (ii) the reporting, licensing,
permitting, or investigating of the emission, discharge, release or
threatened release of Hazardous Substances into the air, surface water,
groundwater or land; (iii) the manufacture, release, distribution, use,
generation, treatment, storage, disposal, transport or handling of Hazardous
Substances; or (iv) the protection of the health and safety of employees or the
public.
"Environmental Liability" means any liability or obligation arising under
Environmental Laws in connection with the Acquired Assets or the business or
operation of the Division to the extent arising from any condition existing or
any act or omission of Seller at or prior to the Closing Date, including claims,
demands, assessments, judgments, orders, causes of action (including toxic tort
suits), notices of actual or alleged violations or liability (including such
notices regarding the disposal or release of Hazardous Substances on the
Premises or elsewhere), proceedings and any associated costs, assessments,
losses, damages (except consequential damages), obligations, liabilities,
awards, fines, sanctions, penalties, or amounts paid in settlement (including
reasonable costs, fees and expenses of attorneys, accountants, consultants and
other agents of such Person).
"Hazardous Substance" means any substance or material: (i) that is defined
as a "hazardous waste" or
"hazardous substance" under any Environmental Law; (ii) that is considered
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise regulated under any Environmental Law; or (iii) that
contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated
biphenyls or asbestos.
"Remedial Action" means any response action, removal action, remedial
action, corrective action, monitoring program, sampling program, investigation
or other cleanup activity required by any Environmental Law to clean up, remove,
remediate, treat or xxxxx any Hazardous Substance in the environment.
(q) Taxes. Except as set forth on Schedule 3.1(q):
------
(i) Seller and the Sold Subsidiaries have timely filed, after giving
effect to any applicable extensions, all material Tax Returns required to
be filed with respect to the Acquired Assets and the income or operations
of the Division, and all such Tax Returns were complete and correct at the
time of filing. Each of Seller and the Sold Subsidiaries has timely paid,
after giving effect to any applicable extensions, all material taxes
required to be paid by it with respect to the Acquired Assets and the
income
or operations of the Division, or such taxes have been paid on its behalf.
(ii) No taxing authority is asserting in writing any material tax
deficiency that has not been adequately reserved for, and no liens for
material taxes exist (other than liens for taxes not yet due or for taxes
being contested in good faith), with respect to the Acquired Assets or the
income or operations of the Division.
(iii) All material amounts that are required to be collected or
withheld by Seller or the Sold Subsidiaries with respect to the Division
have been duly collected and withheld, and any such amounts that are
required to have been remitted to any taxing authority have been duly
remitted.
(iv) (A) No Acquired Asset or asset of any Sold Subsidiary is
property that is required to be treated as owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and (B) to the knowledge
of Seller, no material Acquired Asset or material asset of any Sold
Subsidiary constitutes "tax exempt use property" within the meaning of
Section
168(h) of the Code. The applicable safe harbor leases are set forth on
Schedule 3.1(q).
(v) To the knowledge of Seller, no material Acquired Asset or
material asset of any Sold Subsidiary secures any debt the interest on
which is tax exempt under Section 103 of the Code.
(vi) The statute of limitations (A) in respect of the Division's
Federal Income Taxes has closed for all taxable periods up to and including
the taxable year ended December 31, 1989 and (B) in respect of Seller's,
Xetron Corporation's and Perceptics Corporation's sales and use taxes
relating to the Division has not been extended.
(vii) No Sold Subsidiary is a party to any agreement providing
for the sharing of taxes among members of a group filing consolidated,
combined or unitary Tax Returns (or comparable Tax Returns for foreign
purposes).
(viii) No material contract of the Division that is a long-term
contract (for purposes of Section 460 of the Code) and that was entered
into after June 20, 1988 has been reported on a method of tax accounting
other than the 100 percent percentage of completion method for Income Tax
purposes.
(r) Sold Subsidiaries. Each Sold Subsidiary is a corporation duly
------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own
its assets and to carry on its business as now being conducted. Except as
disclosed to Purchaser prior to the execution of this Agreement, Seller has
heretofore delivered to Purchaser true and complete copies of the certificate of
incorporation and by-laws of each Sold Subsidiary, as amended through the date
of this Agreement. The authorized and outstanding capital stock of each Sold
Subsidiary is as set forth on Schedule 3.1(r), and, except as set forth on such
Schedule (and except for directors' qualifying shares), one of Sellers is the
record and beneficial owner of all such outstanding capital stock.
(s) Clearances. Except to the extent prohibited by the National
-----------
Industrial Security Program Operating Manual (NISPOM), Schedule 3.1(s) sets
forth, as of the date set forth therein, all facility security clearances held
by Sellers to the extent relating to the Acquired Assets and the number of
personnel holding security clearances at each such facility.
(t) Sales Representatives. To the knowledge of Seller, Schedule
----------------------
3.1(t) sets forth, as of the date set forth
therein, the names of all sales representatives providing sales representation
services to the Division to the extent relating to the Acquired Assets.
SECTION 3.2. Representations and Warranties of Purchaser. Purchaser
--------------------------------------------
hereby represents and warrants to Seller as follows:
(a) Organization, Standing and Power. Purchaser is a corporation
---------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted.
(b) Authority. Purchaser has the requisite corporate power and
----------
authority to execute this Agreement and the agreements to be entered into by it
at the Closing pursuant hereto (the "Purchaser Ancillary Documents") and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Purchaser, or, in the case of Purchaser Ancillary Documents, will be duly
authorized by all necessary corporate action on the part of Purchaser prior to
the Closing, and do not and will not require the approval of
the stockholders of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes, and each Purchaser Ancillary Document
will be duly executed and delivered by Purchaser at or prior to the Closing and
when so executed and delivered will constitute, a legal, valid and binding
obligation of Purchaser enforceable in accordance with its terms. The execution
and delivery of this Agreement by Purchaser do not, and the consummation by
Purchaser of the transactions contemplated hereby and the compliance by
Purchaser with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of Purchaser's assets under, any provision of (i) the
General Corporation Law of the State of Delaware, (ii) the certificate of
incorporation or by-laws (or comparable organizational documents) of Purchaser
or (iii) subject to the filings and other matters referred to in the following
sentence, any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to Purchaser, other than, in the case of clause (iii)
above, any such conflicts, violations, defaults, rights or Liens that,
individually or
in the aggregate, would not materially impair the ability of Purchaser to
perform its obligations under this Agreement. No consent, approval, license,
permit, order or authorization of, or registration, declaration or filing with,
any Governmental Entity is required to be obtained or made by or with respect to
Purchaser in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) compliance
with and filings under the HSR Act, (ii) compliance with and filings under
Section 13(a) of the Exchange Act, (iii) compliance with the facilities
clearance requirements of the DIS, as set forth in the DIS Industrial Security
Regulation and the DIS Industrial Security Manual, as amended from time to time,
(iv) consents or novations which may be required for the assignment of any
Intellectual Property, Technology or Contract as contemplated in Section 4.4,
(v) compliance with, and notices and filings under, environmental permits,
statutes and regulations, including the Connecticut Transfer Act, Conn. Gen.
Stat. (S) 22a-134 et seq. (1993), and the California Health and Safety Code (S)
25359.7 (1992), and (vi) those the failure of which to obtain or make,
individually or in the aggregate, would not materially impair the ability of
Purchaser to perform its obligations under this Agreement.
(c) Security Clearance. Purchaser controls facilities classified for
-------------------
United States government security purposes as high as the level of "Top Secret",
and employs individuals holding United States government security clearances as
high as the level of "Top Secret".
(d) Financing. Purchaser has obtained from certain financial
----------
institutions (the "Banks") firm commitments pursuant to a commitment letter
dated January 2, 1996, (as in effect on the date of this Agreement, the
"Commitments") to provide financing sufficient to enable it to consummate the
transactions contemplated hereby. A true and complete copy of such commitment
letter has been provided to Seller.
ARTICLE IV
Covenants
---------
SECTION 4.1. Covenants of Seller Relating to Conduct of Business.
----------------------------------------------------
During the period from the date of this Agreement and continuing until the
Closing, Seller agrees (except as expressly provided in this Agreement or the
Schedules or to the extent that Purchaser shall otherwise consent in writing)
that:
(a) Ordinary Course. Sellers shall carry on the business of the
----------------
Division in the ordinary course in substantially the same manner as presently
conducted and use
all reasonable efforts consistent with past practices (including as to levels
of capital expenditures) to preserve intact the Division's present business
organization, keep available the services of the Division's present officers and
employees and preserve the Division's relationships with customers, suppliers
and others having business dealings with the Division. Seller shall not sell,
assign or convey any material long term asset (other than as requested by
Purchaser pursuant to Section 4.14(l) or among any of Sellers or any Sold
Subsidiary) constituting an Acquired Asset. Seller shall not incur any long
term indebtedness for borrowed money (including purchase money financing) which
would constitute an Assumed Liability.
(b) No Other Bids. Seller shall not, nor shall it authorize or
--------------
permit any officer, director or employee of, or any investment banker, attorney,
accountant or other representative retained by, Seller to, (i) solicit or
encourage (including by way of furnishing non-public information) any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any "other acquisition" or (ii) engage in any discussions or
negotiations or enter into any agreement with respect to any other acquisition.
Seller shall promptly advise Purchaser orally and in writing of any such
inquiries or proposals. As
used in this paragraph, "other acquisition" shall mean any transaction involving
the acquisition by a Person other than Purchaser in any manner of all or
substantially all the Division.
(c) Other Actions. Seller shall not take any action that would, or
--------------
that would reasonably be expected to, result in any of the conditions to the
Closing set forth in Article V not being satisfied.
(d) Advise of Changes. Seller shall promptly advise Purchaser in
------------------
writing of the occurrence of any material adverse change in the business or
financial condition of the Division.
SECTION 4.2. Access to Information. Seller shall afford to
----------------------
Purchaser and its accountants, counsel and other representatives reasonable
access during normal business hours during the period prior to the Closing to
all the properties, books, Contracts, commitments, tax returns and records of
the Division (other than the Excluded Assets), and, during such period shall
furnish promptly to Purchaser any information concerning the Division (other
than the Excluded Assets) as Purchaser may reasonably request; provided,
--------
however, that Seller is under no obligation to disclose to Purchaser any (i)
-------
"Classified Information" other than in compliance with the DIS Industrial
Security
Regulations, the DIS Industrial Security Manual and any other applicable
government security regulations, (ii) any information the disclosure of which is
restricted by Contract or applicable law except in strict compliance with the
applicable Contract or law and (iii) any information as to which the attorney-
client privilege may be available, until a mutually satisfactory joint defense
agreement has been executed by Purchaser and Seller. Purchaser acknowledges that
any information being provided to it or its representatives by Sellers pursuant
to or in connection with this Agreement is subject to the terms of a
confidentiality agreement between Purchaser and Seller dated December 7, 1995
(the "Confidentiality Agreement"), which terms are incorporated herein by
reference.
SECTION 4.3. Governmental Approvals, etc. (a) Each of Purchaser and
----------------------------
Seller shall as promptly as practicable, but in no event later than five
business days following the execution and delivery of this Agreement, file with
the United States Federal Trade Commission and the United States Department of
Justice, the notification and report form under the HSR Act required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act. Each of Purchaser and Seller shall
as promptly as
practicable comply with any other laws of any country and the European Union
which are applicable to any of the transactions contemplated hereby and pursuant
to which any consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person in
connection with such transactions is necessary. Each of Purchaser and Seller
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with its preparation of any filing,
registration or declaration which is necessary under the HSR Act or any other
such laws. Purchaser and Seller shall keep each other apprised of the status of
any communications with, and any inquiries or requests for additional
information from, any Governmental Entity, and shall comply promptly with any
such inquiry or request. Purchaser shall use its best efforts to obtain any
clearance under the HSR Act or any other consent, approval, order or
authorization of any Governmental Entity, necessary in connection with the
transactions contemplated hereby or to resolve any objections which may be
asserted by any Governmental Entity with respect to the transactions
contemplated hereby, including by executing agreements and submitting to
judicial or administrative orders to hold
separate and divest any business or assets of the Division or of Purchaser or
any of its subsidiaries.
(b) Subject to the terms and conditions of this Agreement, each
party shall use its best efforts to cause the Closing to occur, including (i) as
contemplated by Section 4.3(a) or 4.4, (ii) defending against any lawsuits,
actions or proceedings, judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including seeking
to have any preliminary injunction, temporary restraining order, stay or other
legal restraint or prohibition entered or imposed by any court or other
Governmental Entity that is not yet final and nonappealable vacated or reversed;
provided, however, that none of Sellers or their affiliates shall be
-------- -------
required to make any material monetary expenditure, commence or be a plaintiff
in any litigation or offer or grant any material accommodation (financial or
otherwise) to any third Person. Without limiting the foregoing, each party
shall use its best efforts (subject to the proviso in the immediately preceding
sentence) to cause the Closing to occur by March 1, 1996.
SECTION 4.4. Novation of Government Contracts and Third Party
------------------------------------------------
Consents. (a) As soon as practicable following the Closing, Purchaser shall
--------
prepare (with Seller's
assistance), in accordance with Federal Acquisition Regulations Part 42, (P)
42.12 and any applicable agency regulations or policies, a written request
meeting the requirements of the Federal Acquisition Regulations Part 42, as
reasonably interpreted by the Responsible Contracting Officer (as such term is
defined in Federal Acquisition Regulations Part 42, (P) 42.1202(a)), which shall
be submitted by Seller to each Responsible Contracting Officer, for the United
States Government to (i) recognize Purchaser as Sellers' successor in interest
to all the Acquired Assets constituting Contracts made with the United States
Government (collectively, "Government Contracts"); and (ii) to enter into a
novation agreement (a "Novation Agreement") in form and substance reasonably
satisfactory to Purchaser and Seller and their respective counsel, pursuant to
which, subject to the requirements of the Federal Acquisition Regulations Part
42, all of Sellers' right, title and interest in and to, and all of Sellers'
obligations and liabilities under, each such Government Contract shall be
validly conveyed, transferred and assigned and novated to Purchaser by all
parties thereto. Purchaser shall provide to Seller promptly any information
regarding Purchaser required in connection with such request. Seller and
Purchaser shall each use all reasonable efforts to obtain
all consents, approvals and waivers required for the purpose of processing,
entering into and completing the Novation Agreements with regard to any of the
Government Contracts, including responding to any requests for information by
the United States Government with regard to such Novation Agreements.
(b) In the event that any and all novations, transfer or other
agreements, consents, approvals or waivers necessary for the assignment,
transfer or novation of any Acquired Asset constituting Intellectual Property,
Technology or a Contract, or any claim, right or benefit arising thereunder or
resulting therefrom, shall not have been obtained prior to the Closing Date,
then as of the Closing, this Agreement, to the extent permitted by law, shall
constitute full and equitable assignment by Sellers to Purchaser of all of
Sellers' right, title and interest in and to, and all of Sellers' obligations
and liabilities under, such Intellectual Property, Technology and Contracts,
and, in the
case of Contracts, Purchaser shall be deemed Sellers' agent for purpose of
completing, fulfilling and discharging all of Sellers' liabilities under any
such Contract. The parties shall take all necessary steps and actions to provide
Purchaser with the benefits of such Intellectual Property, Technology and
Contracts, and, in the case of Contracts, to relieve Sellers of the performance
and other obligations thereunder, including entry into subcontracts for the
performance thereof. Purchaser agrees to pay, perform and discharge, and
indemnify Sellers against and hold Sellers harmless from, all obligations and
liabilities of Sellers relating to such performance or failure to perform under
such Contracts.
(c) In the event Sellers shall be unable to make the equitable
assignment described in Section 4.4(b), or if such attempted assignment would
give rise to any right of termination, or would otherwise adversely affect the
rights of Sellers or Purchaser under such Intellectual Property, Technology or
Contract, or would not assign all Sellers' rights thereunder at the Closing,
Sellers and Purchaser shall continue to cooperate and use all reasonable efforts
to provide Purchaser with all such rights. To the extent that any such consents
and waivers are not obtained, or until the impediments to such assignment are
resolved, Sellers shall use all reasonable efforts (without the expenditure, in
the aggregate, of any material sum) to (i) provide to Purchaser, at the request
of Purchaser, the benefits of any such Intellectual Property, Technology or
Contract to the extent related to the Division, (ii) cooperate in any lawful
arrangement designed to provide such
benefits to Purchaser and (iii) enforce, at the request of and for the account
of Purchaser, any rights of Sellers arising from any such Intellectual Property,
Technology or Contract against any third Person (including any Governmental
Entity) including the right to elect to terminate in accordance with the terms
thereof upon the advice of Purchaser. To the extent that Purchaser is provided
the benefits of any Intellectual Property, Technology or Contract referred to
herein (whether from Sellers or otherwise), Purchaser shall perform at the
direction of Seller and for the benefit of any third Person (including any
Governmental Entity) the obligations of Sellers thereunder or in connection
therewith, and Purchaser agrees to pay, perform and discharge, and indemnify
Sellers against and hold Sellers harmless from, all obligations and liabilities
of Sellers relating to such performance or failure to perform, and in the event
of a failure of such indemnity, Sellers shall cease to be obligated under this
Agreement in respect of the Intellectual Property, Technology or Contract which
is the subject of such failure.
(d) In connection with obtaining the consents contemplated by this
Section 4.4, Sellers shall not consent to any modification of any Contract
included in the Acquired Assets which would adversely affect the rights of
Purchaser
under such Contract without the prior written consent of Purchaser.
SECTION 4.5. (a) Employment.
-----------
(i) Continuation of Employment. Purchaser shall offer employment to
---------------------------
(x) each Division employee (including any individual whose principal place of
employment is on the Premises, who primarily renders services on behalf of the
Division and whose compensation cost is borne primarily by the Division) of
Sellers or their affiliates (a "Division Employee") who is actively at work on
the Closing Date and (y) each employee in the Center, but excluding any employee
in the Information Technology Group (each employee in the Center other than an
employee of the Information Technology Group being referred to herein as a
"Center Employee") who is actively at work on the Closing Date (Division
Employees and Center Employees being collectively referred to herein as "Active
Employees"). Purchaser shall also honor any legal obligation of Sellers or
Purchaser to reemploy any Division Employee and Center Employee who is not
actively at work on the Closing Date due to leave of absence, disability leave,
military leave or layoff with recall rights (collectively, "Inactive
Employees"). The period of such employment shall in the case of Active Employees
begin on the Closing Date and in the case of Inactive Employees on
the date that they first become eligible for reemployment. For purposes hereof,
any Division Employee or Center Employee who is not actively at work on the
Closing Date due to a short-term absence (including due to vacation, holiday,
illness or injury of shorter duration than a short-term disability, jury duty or
death leave) in accordance with applicable policies of the Sellers or their
affiliates shall be deemed an Active Employee. For purposes of this Agreement,
Active Employees who immediately following the Closing continue their employment
with the Division or Center, as applicable, and Inactive Employees, whether or
not they become reemployed by Purchaser (but excluding any Division Employee or
Center Employee whose recall rights result solely from a scheduled reduction in
force) shall be referred to herein collectively as "Transferred Employees".
(ii) Terms of Offer/Continuation of Compensation and Benefits.
---------------------------------------------------------
Subject to subsections (b), (c), (d), (e) and (f) of this Section 4.5,
Purchaser's offer of employment under (i) above shall provide, and Purchaser
shall maintain, compensation and benefit plans and arrangements which in the
aggregate as to each Transferred Employee are comparable to the wages and
benefits in effect on the date of this Agreement for a period of not less than
two years following the Closing Date (or, in the case of Transferred Employees
who are subject to a collective bargaining agreement, the period required
therein). Purchaser shall have welfare benefit plans in effect on the Closing
Date providing continuous uninterrupted medical and dental benefits, life
insurance and disability benefit coverage for the Transferred Employees and
their dependents who immediately prior to the Closing were covered under welfare
benefit plans by Sellers. Purchaser shall recognize each Transferred Employee's
eligibility service with Sellers or their affiliates as of the Closing Date as
eligibility service with Purchaser for purposes of determining eligibility and
benefit levels as applicable in Purchaser's welfare benefit plans, vacation,
disability, severance and similar benefits. Purchaser shall cause to be waived
any pre-existing condition limitation under the welfare plans applicable to
Transferred Employees or their dependents and shall recognize (or cause to be
recognized) the dollar amount of all expenses incurred by Transferred Employees
and their dependents during the 1996 calendar year for purposes of satisfying
the 1996 calendar year deductibles and co-payments limitations under the
relevant welfare benefit plans of Purchaser.
(b) Accrued Vacation. Purchaser shall credit each Transferred
-----------------
Employee with the unused vacation days and
any personal and sickness days accrued in accordance with the vacation and
personnel policies and labor agreements of Sellers or their affiliates in effect
as of the Closing Date.
(c) Union Representation. Purchaser agrees to (i) recognize each
---------------------
union which at the Closing Date represents any of the Transferred Employees as
the collective bargaining representatives of such employees as of the Closing
Date and (ii) provide such employees with comparable wages and benefits as those
in effect on the date of this Agreement.
(d) Benefit Plans.
--------------
(i) Pension Plan. Purchaser shall, effective as of the Closing,
-------------
establish a defined benefit plan (or designate an existing defined benefit plan
of Purchaser), intended to qualify under Section 401(a) of the Code and
providing benefits to Transferred Employees who immediately prior to the Closing
were participating in, and accruing eligibility service under, the Westinghouse
Pension Plan (such new or existing defined benefit plan of Purchaser being
referred to herein as "Purchaser's Pension Plan"). Each Transferred Employee
participating in the Westinghouse Pension Plan prior to the Closing shall
thereupon become a participant in Purchaser's Pension Plan, with credit
(without duplication) for all service with Sellers and their affiliates for
purposes of eligibility, vesting and benefit accrual (including eligibility for
early retirement and ancillary benefits).
As soon as practicable after the Closing, Seller shall cause to be
transferred from the Westinghouse Pension Plan to Purchaser's Pension Plan all
accrued benefits and other liabilities of the Westinghouse Pension Plan relating
to Transferred Employees (the "Transferred Benefits") in the form and manner
described below.
Following the transfer of assets and liabilities from the Westinghouse
Pension Plan to Purchaser's Pension Plan as provided herein, Sellers and their
affiliates shall have no further liability whatsoever (either under this
Agreement or otherwise) with respect to the Transferred Employees for benefits
under the Westinghouse Pension Plan.
Seller shall cause Kwasha Lipton ("Seller's Actuary") to determine the
amount of assets required by Section 414(l) of the Code for the Transferred
Benefits obligation based on allocating assets by priority categories described
in Section 4044(a) of ERISA (the "414(l) Amount"), to be transferred from the
Westinghouse Pension Plan to Purchaser's Pension Plan. The 414(l) Amount shall
be determined as of the Closing Date by Seller's Actuary on the
basis of the PBGC's safe harbor assumptions set forth in Treasury Regulation
Section 1.414(l)-1(b)(5)(ii). The actuarial calculation of the liabilities by
PBGC priority categories underlying the 414(l) Amount determined by Seller's
Actuary shall be reviewed by an actuarial firm designated by Purchaser
("Purchaser's Actuary"). In the event of a dispute between Seller's Actuary and
Purchaser's Actuary as to whether the actuarial calculation so determined by
Seller's Actuary satisfies the requirements of Section 414(l) of the Code and
Section 4044 of ERISA, Seller's Actuary and Purchaser's Actuary shall jointly
select a third actuarial firm of national repute to review the calculation, and
the determination of such third firm shall be final and binding upon the
parties. Seller and Purchaser shall each pay the cost of its own actuary and the
cost of the third actuarial firm shall be shared equally by Seller and
Purchaser. As soon as practicable following (i) the Closing Date, and (ii)
receipt by Seller of an opinion of Purchaser's counsel, reasonably satisfactory
to Seller, that Purchaser's Pension Plan meets the requirements for
qualification under Section 401(a) of the Code, Seller shall cause to be
transferred from the Master Trust for the Westinghouse Pension Plan (the "Master
Trust") to the trust established for Purchaser's Pension Plan, in the form of
cash and other assets mutually acceptable to Seller and Purchaser, the 414(1)
Amount, plus or minus any earnings and losses thereon (based upon the earnings
and losses of the Master Trust from the Closing Date through the date of
transfer to Purchaser's Pension Plan) and minus distributions, if any, from, and
expenses of administration under, the Westinghouse Pension Plan for benefits or
other purposes made with respect to Transferred Employees from the Closing Date
through the date of transfer.
(ii) Savings Plan. Effective as of the Closing Date, Purchaser shall
-------------
in effect a defined contribution plan that includes a qualified cash or
deferred arrangement within the meaning of Section 401(k) of the Code
("Purchaser's 401(k) Plan") providing benefits as of the Closing to Transferred
Employees participating in the Westinghouse Savings Program as of the Closing.
Each Transferred Employee who was participating in the Westinghouse Savings
Program as of the Closing shall become a participant in Purchaser's 401(k) Plan
as of the Closing. Transferred Employees shall receive credit for all service
with Sellers and their affiliates for purposes of eligibility and vesting under
Purchaser's 401(k) Plan. The Westinghouse Savings Program shall retain all
assets and liabilities with respect to the accounts of retirees or
other former employees of the Division or Center ("Former Employees")
thereunder.
Upon receipt by Purchaser of a favorable determination letter to the
effect that Purchaser's 401(k) Plan is qualified under Section 401(a) of the
Code (or an opinion of Purchaser's counsel, reasonably satisfactory to Seller,
to such effect), Sellers shall cause to be transferred from the Westinghouse
Savings Program to Purchaser's 401(k) Plan assets having a fair market value
equal to the aggregate value of the account balances in the Westinghouse Savings
Program as of the date of transfer (such transfer to be in shares of common
stock of Seller to the extent of shares in the Westinghouse Common Stock Fund
applicable to Transferred Employees, in notes evidencing loans to Transferred
Employees from their account balances and the balance in cash), and shall also
transfer all qualified domestic relations orders, within the meaning of Section
414(p) of the Code. Purchaser's 401(k) Plan shall provide for the receipt of
such transfer. Purchaser's 401(k) Plan shall maintain a Westinghouse common
stock fund, in accordance with applicable law, for Transferred Employees who so
elect, for a period of not less than five years following the Closing.
(iii) Medical and Disability Benefits; Life Insurance.
------------------------------------------------
(A) Sellers shall be responsible in accordance with their applicable
welfare plans in effect prior to the Closing for all medical and dental
claims for expenses incurred prior to the Closing Date by Transferred
Employees, Former Employees and their dependents. Reimbursement of
employees and their dependents for medical and dental expenses associated
with such claims (including claims submitted on behalf of disabled
employees and their dependents) shall be determined in accordance with the
terms of Sellers' medical and dental programs as in effect immediately
prior to the Closing Date. Sellers shall terminate coverage of Transferred
Employees and their dependents effective for claims for expenses incurred
on and after the Closing Date. Purchaser shall be responsible for all
medical and dental claims for expenses incurred on and after the Closing
Date (including, but not limited to, responsibility for post-retirement
medical and dental claims) by Transferred Employees and their dependents;
provided, however, that Purchaser's medical and dental programs shall not
-------- -------
contain a pre-existing condition clause and shall otherwise provide
sufficient
medical and dental coverage that Sellers and their affiliates shall have no
obligation to provide "COBRA" continuation coverage under Section 4980B(f)
of the Code.
(B) Purchaser shall be responsible for all long-term disability
income benefits payable in respect of periods on or after the Closing Date
for Transferred Employees who become disabled on or after the Closing Date
and for short-term disability benefits payable in respect of periods on or
after the Closing Date regardless of when the Transferred Employee becomes
disabled. Sellers shall be responsible for long-term disability benefits
payable in respect of periods on or after the Closing Date for Transferred
Employees who become disabled prior to the Closing Date. Nothing herein
shall be construed as modifying Purchaser's obligation to reemploy certain
Division Employees and Center Employees on or after the Closing Date in
accordance with Section 4.5(a)(i).
(C) Purchaser shall be responsible for all life insurance claims
(including post-retirement life insurance claims) of Transferred Employees
and their dependents for losses incurred by such employees or dependents on
and after the Closing Date under group life, travel and
accident, and accidental death and dismemberment insurance policies in
effect prior to or following the Closing. Sellers shall be responsible
solely for claims for such losses incurred prior to the Closing Date.
(e) Severance Obligations. Sellers and Purchaser agree that the
----------------------
transactions contemplated by this Agreement shall not constitute a severance of
employment of any Transferred Employee prior to the consummation of the
transactions contemplated hereby, and that such employees will have continuous
and uninterrupted employment before and immediately after the Closing.
Purchaser shall provide severance and other separation benefits to each
Transferred Employee terminated by Purchaser within two years following the
Closing Date (or, in the case of Transferred Employees who are subject to a
collective bargaining agreement, the period required therein) that are
comparable to the severance and other separation benefits provided by Sellers
and their affiliates in effect on the date of this Agreement. Purchaser shall
recognize service with Sellers and their affiliates prior to the Closing Date
for purposes of determining the amount of such severance and other separation
benefits. Purchaser shall indemnify and hold Sellers and their affiliates
harmless from any claims made
by any Transferred Employee for severance or other contract and from any other
claims arising out of or in connection with the employment or the failure to
offer employment to, or the termination of employment of, any Transferred
Employee or the transactions contemplated hereby (excluding any claims for
wrongful termination with respect to which Section 7.4 is applicable).
(f) Executive Compensation. Without limiting the generality of
-----------------------
Section 4.5(a)(ii), effective as of the Closing, Purchaser shall assume all
liabilities and obligations relating to Transferred Employees under the
Westinghouse Executive Pension Plan.
(g) Cooperation. The parties agree to furnish each other with such
------------
information concerning employees and employee benefit plans, and to take all
such other action, as is necessary and appropriate to effect the transactions
contemplated by this Agreement.
(h) WARN Act. Purchaser agrees to provide any required notice under
---------
the Worker Adjustment and Retraining Notification Act, as amended (the "WARN
Act"), and any similar statute, and otherwise to comply with any such statute
with respect to any "plant closing" or "mass layoff" (as defined in the WARN
Act) or similar event affecting Transferred Employees or
Former Employees and occurring on or after the Closing. Purchaser shall
indemnify and hold harmless Sellers with respect to any liability under the WARN
Act or similar statute arising from the actions of Purchaser on or after the
Closing.
(i) Workers Compensation. Sellers currently sponsor a program that
---------------------
provides workers compensation benefits for eligible current and former Division
Employees and Center Employees ("Sellers' Workers Compensation Program").
Sellers shall be responsible for all claims for workers compensation benefits
which are incurred prior to the Closing Date by such Division Employees and
Center Employees that are payable under the terms and conditions of Sellers'
Workers Compensation Program. Effective as of the Closing Date, Purchaser shall
take all necessary and appropriate action to adopt a workers compensation
program providing such workers compensation benefits as are provided under
Sellers' Workers Compensation Program for the Transferred Employees covered by
such program ("Purchaser's Workers Compensation Program"). Purchaser's Workers
Compensation Program shall be responsible for all claims for benefits which are
incurred from and after the Closing Date by Transferred Employees that are
payable under the terms and conditions of Purchaser's Workers Compensation
Program.
For purposes of this Section 4.5(i), a claim for workers compensation benefits
shall be deemed to be incurred when the event giving rise to the claim occurs.
(j) Free-Standing Plans. Notwithstanding the foregoing provisions of
--------------------
this Section 4.5, effective as of the Closing, Purchaser shall assume and be
responsible for all liabilities and obligations under the Free-Standing Plans.
Sellers shall take all action necessary and appropriate to establish Purchaser
as successor to Sellers as to all rights, assets, duties, liabilities and
obligations under or with respect to such Free-Standing Plans.
(k) Compliance. Seller shall arrange for the corrective actions set
-----------
forth in Schedule 4.5(k), using its best efforts to complete such actions by the
Closing.
SECTION 4.6. Collection of Receivables. From and after the
--------------------------
Closing, Purchaser shall have the right and authority to collect for its own
account all accounts receivable and other items that are included in the
Acquired Assets and to endorse with the name of any of Sellers, any checks or
drafts received with respect to any such accounts receivable or other items and
Seller agrees promptly to deliver or cause to be delivered to Purchaser any cash
or other property received directly or indirectly by any of
Sellers with respect to such receivables and other items, including any amounts
payable as interest.
SECTION 4.7. Expenses. Whether or not the Closing takes place, and
---------
except as otherwise specifically provided in this Agreement (including with
respect to Transfer Taxes as defined in Section 4.14(d)), all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs or expenses.
SECTION 4.8. Brokers or Finders. Each of Purchaser and Seller
-------------------
represents, as to itself and its affiliates, that no agent, broker, investment
banker or other Person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except, as to Seller and its affiliates,
Evercore Partners, L.L.C., X. X. Xxxxxx Securities Inc. and Chemical Securities,
Inc., whose fees and expenses will be paid by Seller and, as to Purchaser and
its affiliates, Salomon Brothers Inc, whose fees and expenses will be paid by
Purchaser, and each of Purchaser and Seller respectively agrees to indemnify and
hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted
by any Person on the basis of any act or statement alleged to have been made by
such party or its affiliate.
SECTION 4.9. License Agreement. (a) On the Closing Date, Purchaser
------------------
shall grant to Seller and its affiliates, pursuant to a license agreement on
terms reasonably acceptable to Purchaser and Seller, a nonexclusive, worldwide,
paid-up, royalty-free, perpetual license (with a right to sublicense suppliers,
customers and others) to use the Intellectual Property and Technology included
in the Acquired Assets, and any Intellectual Property and Technology developed
during the term of the Transitional Services Agreement referred to in Section
4.16(a) with the involvement of any Center Employee (to the extent derived from
work commenced prior to the Closing Date), in connection with any present or
future businesses of Seller and its affiliates that are not competitive with the
Division's current operations and subsequent extensions thereof falling within
the scope of such current operations with respect to the class of customers and
field of products or services (such current operations and extensions,
collectively, "Division Current Operations"); provided, that such license shall
--------
be exclusive with respect to the Division's silicon carbide technology, subject
to a retained right of Purchaser (with a right to sublicense suppliers,
customers and others) to use such silicon carbide technology in connection with
Division Current Operations.
(b) On the Closing Date, Seller shall grant to Purchaser and its
affiliates, pursuant to a license agreement on terms reasonably acceptable to
Purchaser and Seller, a nonexclusive, worldwide, paid-up, royalty-free,
perpetual license (with a right to sublicense suppliers, customers and others)
to use any Intellectual Property of any of Sellers, existing as of the Closing
and used in the current operations of the Division (other than the Excluded
Assets described in Section 1.2(b)(vii) and the Excluded Assets specifically
identified as being exempt from this Section 4.9(b) in Schedule 1.2(b)) in
connection with Division Current Operations.
SECTION 4.10. Certain Information. After the Closing, upon
--------------------
reasonable written notice, Purchaser and Seller shall furnish or cause to be
furnished to each other and their respective accountants, counsel and other
representatives access, during normal business hours, to such information
(including records pertinent to the Division) and assistance relating to the
Division as is reasonably necessary for financial reporting and accounting
matters, the preparation and filing of any returns, reports or forms or the
defense of, or response required under, or
pursuant to, any lawsuit, action or proceeding (including any proceeding
involving Seller and any environmental matters related to the Acquired Assets).
Purchaser and Seller shall also furnish or cause to be furnished to each other
and their respective accountants, counsel and other representative's access,
during normal business hours, to such information for any other reasonable
business purpose. Purchaser and Seller shall, and shall cause their affiliates
to, retain until five years after the Closing Date all such records pertinent to
the Division which are owned by such Person immediately after the Closing
(excluding any Excluded Assets other than any books and records that constitute
Excluded Assets pursuant to Schedule 1.2(b) and which relate primarily to the
Division); after the end of such period, before disposing of any such records,
the applicable party shall give notice to such effect to the other, and shall
give the other, at the other's cost and expense, a reasonable opportunity to
remove and retain all or any part of such records as the other may select.
Cooperation with respect to tax matters shall be governed by Section 4.14(k).
SECTION 4.11. Bulk Transfer Laws. Purchaser hereby waives compliance
-------------------
by Sellers with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to
Purchaser. Seller shall indemnify and hold harmless Purchaser against any and
all liabilities that may be asserted by third parties against Purchaser as a
result of noncompliance with any such bulk transfer law.
SECTION 4.12. Additional Agreements. Subject to the provisions of
----------------------
Section 4.4, each of Purchaser and Seller will use all reasonable efforts to
facilitate and effect the implementation of the transfer of the Acquired Assets
to Purchaser and the assumption of the Assumed Liabilities by Purchaser and, for
such purpose but without limitation, each of Purchaser and Seller promptly will
at and after the Closing execute and deliver or cause to be executed and
delivered to the other party such assignments, deeds, bills of sale, assumption
agreements, consents and other instruments of transfer or assumption as
Purchaser or its counsel or Seller or its counsel may reasonably request as
necessary or desirable for such purpose (it being understood that any such
assignment, deed, xxxx of sale, assumption agreement, consent or other
instrument of transfer or assumption shall not provide for any representations
or warranties or any obligations or liabilities that are not otherwise expressly
provided for in this Agreement). In addition, as soon as practicable after the
Closing, for such purpose but without limitation, Seller shall pay Purchaser,
or Purchaser shall pay Seller, the amount, if any, by which the assets of the
Westinghouse Pension Plan transferred to Purchaser's Pension Plan shall be less
or greater, respectively, than the amount required to be transferred under
Section 4.5(d)(i).
SECTION 4.13. Certain Understandings. Purchaser acknowledges that
-----------------------
none of Sellers or any other Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any information
regarding the Division, the Acquired Assets or other matters not included in
this Agreement or the Schedules hereto, and none of Sellers or any other Person
will be subject to any liability to Purchaser or any other person resulting from
the distribution to Purchaser, or Purchaser's use of, any such information
(including the Descriptive Memorandum dated December 1995). Purchaser
acknowledges that, should the Closing occur, Purchaser will acquire the Acquired
Assets without any representation or warranty as to merchantability or fitness
for any particular purpose, in an "as is" condition and on a "where is" basis,
except as otherwise expressly represented or warranted herein.
SECTION 4.14. Allocation; Tax Matters.
------------------------
(a) Schedule 4.14 sets forth, on a country-by-country basis, the
allocation of the consideration hereunder for tax
purposes. Prior to the Closing, Purchaser and Seller shall agree upon the
allocation of the consideration hereunder for tax purposes among the Acquired
Assets and the assets held by any Sold Subsidiary with respect to which a
Section 338 Election is made, in accordance with Schedule 4.14, and shall set
forth such allocation on a statement (the "Allocation Statement"). After the
Closing, from time to time, Purchaser and Seller shall agree upon revisions to
the Allocation Statement to reflect any adjustments to the consideration for tax
purposes. Purchaser and Seller shall report the tax consequences of the
transactions contemplated by this Agreement in a manner consistent with the
Allocation Statement, as it may be revised from time to time and shall not take
any position inconsistent therewith in any examination of any Tax Return, in any
refund claim or in any litigation or investigation, except as required by
applicable law.
(b) Purchaser and Seller shall file and cause to be filed all Tax
Returns and execute such other documents as may be required by any taxing
authority, in a manner consistent with the Allocation Statement, as it may be
revised from time to time. Seller shall prepare Internal Revenue Service Form
8594 pursuant to Section 1060 of the Code relating to the transactions
contemplated by this Agreement based on the Allocation Statement, as it may
be revised from time to time, and deliver such form to Purchaser. Purchaser and
Seller shall file, or cause the filing of, such form with each relevant taxing
authority.
(c) With respect to the purchase of the capital stock of Sold
Subsidiaries that are U.S. corporations, Seller and Purchaser shall (i) jointly
make the election pursuant to Section 338(h)(10) of the Code and any comparable
election under state and local law (the "Section 338 Elections"), (ii) cooperate
with each other to take all actions necessary to effect and preserve timely
Section 338 Elections in accordance with Treasury Regulation Section
1.338(h)(10) (and any comparable provisions of state and local law and any
successor provisions thereto) and (iii) take no position inconsistent with
treating the purchases of the capital stock of such corporations as Section 338
Elections. Unless prohibited by applicable law, Seller and Purchaser shall
cause the Sold Subsidiaries to elect to end their taxable years as of the
Closing Date in states that do not recognize an election comparable to the
election under Section 338(h)(10) of the Code.
(d) Purchaser shall bear, and to the extent permitted by law shall
pay, all transfer, documentary, sales, use, registration, stamp, value-added and
other similar taxes (including all applicable real estate transfer
taxes and real property gains taxes), including any penalties, interest and
additions to tax, incurred in connection with the transactions contemplated
hereby and any taxes or other costs relating to a transfer, or that would not
otherwise be payable in the absence of such transfer (including as a result of
the transactions contemplated by this Agreement and including the use of a tax
attribute to reduce taxes), made at Purchaser's request pursuant to Section
4.14(l) ("Transfer Taxes"), and Purchaser shall reimburse Seller for any
Transfer Taxes paid by Seller within five days of Seller's written request.
Seller and Purchaser shall cooperate in timely making and filing all Tax Returns
as may be required to comply with the provisions of any Transfer Tax laws and in
making arrangements that lawfully minimize Transfer Taxes without increasing
other taxes above the amount that would otherwise be payable in the absence of
such arrangements. To the extent legally able to do so, Purchaser shall deliver
to Seller exemption certificates satisfactory in form and substance to Seller
with respect to Transfer Taxes if such delivery would reduce the amount of
Transfer Taxes that would otherwise be imposed.
(e) Seller shall terminate and shall cause the termination by the
Closing of any agreement or practice
relating to Taxes between Seller or any of its affiliates (other than any
Investment), on the one hand, and any Investment, on the other hand.
(f) At the Closing, Seller shall deliver to Purchaser duly executed
certificates certifying that the transactions contemplated hereby are exempt
from withholding under Section 1445 of the Code.
(g) For purposes of this Agreement, (i) "tax" means all Federal,
state, foreign or other governmental taxes, assessments duties, fees, levies or
similar charges of any kind, including all income, profit, franchise, excise,
property, use, intangibles, sales, payroll, employment, withholding and other
taxes, and including all interest and penalties imposed with respect to such
amounts, (ii) "Income Tax" means any tax on or determined by reference to net
income and (iii) "Tax Return" means any return, report, form or other
information filed with any taxing authority with respect to taxes.
(h) To the extent permitted by law, Purchaser shall not, and shall
cause each Sold Subsidiary not to, carry back any item of income, loss, credit
or deduction from any period beginning after the Closing Date to any period
including or ending prior to the Closing Date.
(i) Seller shall file any amended consolidated, combined or unitary
tax returns that include any Sold Subsidiary for taxable years ending on or
prior to the Closing Date which are required as a result of examination
adjustments made by any taxing authority as finally determined. For those
jurisdictions in which separate returns are filed by any Sold Subsidiary, any
required amended returns resulting from such examination adjustments, as finally
determined, shall be prepared by Seller and furnished to such Sold Subsidiary,
for signature and filing at least ten days prior to the due date for filing such
returns.
(j) Seller shall cause to be prepared and duly filed all Federal
income Tax Returns and state and local Tax Returns with respect to the Acquired
Assets or the income or operations of the Division for taxable periods ending on
or before the Closing Date. In the case of any taxable period of any Sold
Subsidiary that includes but does not end on the Closing Date, Purchaser shall
cause to be prepared any required state and local Tax Returns, and after
providing Seller with copies no later than 30 days before the date due
(including extensions) and receiving Seller's approval to file (which approval
shall not be unreasonably withheld), shall cause such Tax Returns to be filed.
In the case of
any foreign Sold Subsidiary, Purchaser shall cause to be prepared any required
Tax Returns for Pre-Closing Taxable Periods that have not been filed by the
Closing Date, and after providing Seller with copies no later than 20 days
before the date due (including extensions) and receiving Seller's approval to
file (which approval shall not be unreasonably withheld), shall cause such Tax
Returns to be filed. Each of Seller and Purchaser shall cause all Tax Returns
addressed in this Section 4.14(j) to be prepared in accordance with the
methodology used in prior taxable years.
(k) Seller and Purchaser shall each provide the other with such
assistance as may be reasonably requested (including making employees reasonably
available to provide information or testimony) in connection with the
preparation of any Tax Return, any Tax Controversy (as defined in Section
4.14(m)(ii)), or the determination of liability for taxes with respect to the
Acquired Assets or the income or operations of the Division. Purchaser shall
complete Seller's standard tax packages relating to Tax Returns that Seller is
responsible for filing pursuant to Section 4.14(j) and deliver them to Seller
within 90 days of Purchaser's receipt from Seller and shall cause its
affiliates to, cooperate with Seller in preparing and pursuing any claims for
refunds or credits of Income Taxes
(including refunds or credits relating to any FSC for purposes of the Code,
investment tax credits, research credits and credits for prepayments of Income
Taxes). At Purchaser's request and expense, Seller shall file claims prepared by
Purchaser for refunds of taxes (other than items described in Section
1.3(b)(ii)) and promptly pay over the amount recovered to Purchaser (without any
interest, other than interest paid by the applicable taxing authority with
respect to such refund); provided, however, that Purchaser shall promptly
-------- -------
reimburse Seller to the extent that such refund is reclaimed by a taxing
authority (without any interest, other than interest due to the applicable
taxing authority with respect to such reclamation). Seller and Purchaser each
shall, and shall cause their affiliates to, retain until seven years after the
Closing Date all Tax Returns, schedules, work papers and other records that are
owned by such Person immediately after the Closing and that relate to the
Division or the Acquired Assets; after the end of such period, before disposing
of any such Tax Returns, schedules, work papers or other records, each shall
give notice to such effect to the other, and shall give the other, at the
other's cost and expense, a reasonable opportunity to remove and retain all or
any part of such Tax
Returns, schedules, work papers or other records as the other may select.
(l) At Purchaser's written reasonable request received by Seller no
later than 30 days (or such later date as the parties may mutually agree) after
the date hereof, Seller shall, or shall cause the Selling Subsidiaries to,
transfer such of the Acquired Assets as designated in such request by Purchaser
to one or more newly formed subsidiaries prior to the Closing Date, which newly
formed subsidiaries shall be treated as Sold Subsidiaries for all purposes of
this Agreement.
(m) (i) Purchaser shall, in the event that Purchaser receives notice
(whether orally or in writing) of any examination, claim, proposed settlement,
proposed adjustment or related matter with respect to any taxes for which
Purchaser may be indemnified hereunder (the "Seller Tax Controversies") promptly
notify Seller thereof, provided, however that failure to give such notification
-------- -------
shall not affect the indemnification provided hereunder except to the extent
Seller shall have been actually prejudiced as a result of such failure (except
that the Seller shall not be liable for any expenses incurred during the period
in which the Purchaser failed to give such notice). Seller shall be entitled at
its sole discretion
and expense to handle, control and compromise or settle the Seller Tax
Controversies, and shall reasonably inform Purchaser of the progress of the
Seller Tax Controversies.
(ii) Seller shall, in the event Seller receives notice (whether
orally or in writing) of any examination, claim, proposed settlement, proposed
adjustment or related matter with respect to taxes (other than Seller Tax
Controversies) (the "Purchaser Tax Controversies", and together with the Seller
Tax Controversies, the "Tax Controversies"), promptly notify Purchaser thereof,
provided, however that failure to give such notification shall not affect the
-------- -------
indemnification provided hereunder except to the extent Purchaser shall have
been actually prejudiced as a result of such failure (except that the Purchaser
shall not be liable for any expenses incurred during the period in which Seller
failed to give such notice). Purchaser shall be entitled at its sole discretion
and expense to handle, control and compromise or settle the Purchaser Tax
Controversies, and shall reasonably inform Seller of the progress of the
Purchaser Tax Controversies.
(n) Seller shall use its best efforts to provide Purchaser within 30
days of the date hereof with a list of state and foreign jurisdictions where Tax
Returns for the
Sold Subsidiaries are filed and with copies of the most recently filed foreign
Tax Returns.
(o) Seller shall cooperate with Purchaser in determining prior to the
Closing Date the extent to which any payments that may be required to be made by
Purchaser or the Sold Subsidiaries after the Closing to employees of the
Division would constitute excess parachute payments within the meaning of
Section 280G of the Code.
SECTION 4.15. Supplies. Purchaser shall not use any signs or
---------
stationery, purchase order forms, packaging or other similar paper goods or
supplies, or advertising and promotional materials, product, training and
service literature and materials, or computer programs or like materials
(collectively, the "Supplies"), that state or otherwise indicate thereon that
the Division is a division or unit of Seller or contain any trademarks,
servicemarks, trade names or corporate or business names, derived from or
including the words "Westinghouse Electric Corporation", "Westinghouse" or
"Circle W" (in logotype design or any other style or design) in whole or in
-
part; provided, that to the extent any Supplies included in the Acquired Assets
--------
so indicate, Purchaser may, for a period of 90 days after the Closing Date, use
such Supplies after first crossing out or marking over such statement or
indication or trademark,
servicemark, trade name or corporate or business name and otherwise clearly
indicating on such Supplies that the Division is no longer a division or unit of
Seller. Purchaser shall not reorder or produce any Supplies which state or
otherwise indicate thereon that the Division is a division or unit of Seller or
contain any such trademarks, servicemarks, trade names or corporate or business
names.
(b) Purchaser agrees to use its best efforts to cause those entities
(the "Licensed Entities") listed on Schedule 3.1(j)(xii) that currently have
license agreements with Seller for the use of any trademarks, servicemarks,
trade names or corporate or business names derived from or including the words
"Westinghouse Electric Corporation", "Westinghouse" or "Circle W" (in logotype
-
design or any other style or design) in whole or in part ("Westinghouse-related
Marks") to cease using such Westinghouse-related Marks as soon as possible.
Seller agrees to continue any currently existing license agreement with a
Licensed Entity for the use of such Westinghouse-related Marks until six months
after the Closing Date. Seller further agrees, in the event that Purchaser has
used its best efforts to cause the Licensed Entities to cease using
Westinghouse-related Marks, but any such Licensed Entity has not so ceased
within six months after the Closing Date, to continue any currently
existing license agreement with any such Licensed Entity for the use of
Westinghouse-related Marks for an additional six month period. In all cases,
any such continued license shall terminate when the Licensed Entity ceases to
use the Westinghouse-related Marks.
SECTION 4.16. Post-Closing Agreements. During the period prior
------------------------
to the Closing, Seller and Purchaser agree to negotiate in good faith and
enter into the following agreements:
(a) Transitional Services. The services to be provided by Seller
----------------------
to Purchaser shall be mutually agreed upon and shall consist of (i) services
which are currently provided to the Division by Seller and which are necessary
to conduct and operate the Division as presently conducted, (ii) technical
support provided in connection with the Center and (iii) services provided in
connection with the Contracts set forth in Schedule 3.1(j) pursuant to Section
3.1(j)(xiv). These services shall be provided during the period from the Closing
Date until 12 months after the Closing Date (except for (i) technical support
provided in connection with Center Employees, which shall be provided during
fiscal year 1996, and (ii) services provided in connection with the Contracts
set forth in Schedule 3.1(j) pursuant to Section 3.1(j)(xiv), which shall be
provided for
the duration of such Contracts). Seller will provide these services in
substantially the same manner and consistent with the rates currently charged by
Seller or as adjusted on a uniform basis with respect to the provision of these
types of services to Seller's other non-Division businesses. All such services
shall be provided in accordance with the "Transitional Services Agreement"
substantially in the form set forth in Exhibit A-1 and on such additional terms
as shall be mutually agreeable.
(b) Sublease at the Center. Seller shall sublease to Purchaser
-----------------------
certain facilities at the Center in accordance with the "Center Sublease
Agreement" substantially in the form set forth in Exhibit A-2. Purchaser and
Seller agree that the terms of the covenants contained in the Center Sublease
Agreement will not be materially more restrictive to Purchaser than the terms of
the covenants contained in the master lease with respect to Sellers' Science and
Technology Center are to Seller. Seller further agrees to provide Purchaser with
a copy of the master lease with respect to Sellers' Science and Technology
Center.
(c) Facilities. Seller and Purchaser shall enter into mutually
-----------
agreeable arrangements relating to the use of facilities and equipment for
Transferred Employees currently
located in Sellers' non-Division facilities (other than the Center).
SECTION 4.17. Audited Financials. Seller shall exercise its
-------------------
reasonable good faith efforts to provide to Purchaser prior to January 31, 1996,
but in no event later than February 15, 1996, shall provide audited combined
balance sheets of the Division as of December 31, 1994 and 1995, and audited
combined statements of income and cash flows of the Division for the three years
ended December 31, 1995, in each case prepared from the books and records of
Seller and its subsidiaries relating to the Division in accordance with
generally accepted accounting principles applied on a consistent basis, except
as described in the notes thereto, and Seller shall request from, and use its
reasonable good faith efforts to obtain from, Price Waterhouse a report thereon
prepared and certified by Price Waterhouse. In the event that such audited
financial statements have not been provided to Purchaser on or prior to January
31, 1996, Seller shall provide Purchaser with Seller's good faith estimates of
the information which would be included in such audited financial statements.
SECTION 4.18. Non-Solicitation; No-Hire. For a period of
--------------------------
eighteen months following the Closing Date, Seller shall not solicit for hire or
hire in any capacity any
Transferred Employee (who continues at the time to be employed by Purchaser) for
employment by Seller in any capacity; provided, however, that this prohibition
-------- -------
shall not apply to:
(i) clerical or unionized employees or administrative employees who
do not hold executive titles;
(ii) Transferred Employees who, after the Closing Date, (A) have been
given notice of layoff or termination, (B) are, with or without such
notice, laid off or otherwise terminated by Purchaser or (C) have
voluntarily retired from active employment with Purchaser;
(iii) Transferred Employees who are employed in a facility, operation
or business segment divested by Purchaser after the Closing Date; and
(iv) any Transferred Employees who the Purchaser expressly agrees may
be excepted from the provisions of this Section 4.18. Placement by Seller
during such period of general employment advertisements in any medium,
including trade journals, newspapers and periodicals of general
circulation, electronic media or other public media where such
advertisements are customarily placed shall not operate or be construed as
a breach of the no-solicitation provision of this Section 4.18, whether or
not responded to by any Transferred Employee.
SECTION 4.19. Administration of Insurance. During the period prior
----------------------------
to the Closing, Seller and Purchaser agree to negotiate in good faith and enter
into an Insurance Administration Agreement covering any insurance policy
maintained by any of Sellers applicable to the Acquired Assets providing that
Seller shall continue to administer all such policies consistent with Seller's
corporate practice (including any decision to terminate, commute or modify any
such policy), and shall include appropriate arrangements for the allocation of
deductibles under current coverage and claims processing.
ARTICLE V
Conditions Precedent
--------------------
SECTION 5.1. Conditions to Each Party's Obligation. The
--------------------------------------
obligation of Purchaser to purchase the Acquired Assets and the obligation of
Seller to sell, assign, transfer, convey and deliver the Acquired Assets to
Purchaser shall be subject to the satisfaction prior to the Closing of the
following conditions:
(a) Certain Waiting Periods. Any waiting period under the HSR Act
------------------------
applicable to any of the transactions
contemplated hereby shall have expired or been earlier terminated.
(b) No Injunctions or Restraints. No temporary restraining order,
-----------------------------
preliminary or permanent injunction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect; provided, however, that each of Purchaser,
-------- -------
and, subject to the proviso in Section 4.3(b), Seller shall have used its best
efforts to prevent the entry of any such order, injunction or other restraint or
prohibition and to appeal as promptly as possible any such order, injunction or
other restraint or prohibition that may be entered.
SECTION 5.2. Conditions to Obligation of Purchaser. The obligation
--------------------------------------
of Purchaser to purchase the Acquired Assets is subject to the satisfaction at
and as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
though made at and as of the Closing, except as otherwise contemplated by this
Agreement, and Purchaser shall have received a certificate signed by an
authorized officer of Seller to such effect.
(b) Performance of Obligations of Seller. Seller shall have
-------------------------------------
performed or complied in all material respects with all obligations, conditions
and covenants required to be performed or complied with by it under this
Agreement at or prior to the Closing, and Purchaser shall have received a
certificate signed by an authorized officer of Seller to such effect.
(c) Opinion of Seller's Counsel. Purchaser shall have received (i)
----------------------------
an opinion dated the Closing Date of Cravath, Swaine & Xxxxx, special counsel to
Seller, substantially in the form set forth in Exhibit B, and (ii) an opinion
dated the Closing Date of Xxxxxxx X. Xxxxx, Vice President and Deputy General
Counsel of Seller, substantially in the form set forth in Exhibit C.
(d) Banking Moratorium. There shall not have occurred any
-------------------
declaration of a banking moratorium by Federal or New York state authorities
which results in the Banks failing to provide the financing for the transactions
contemplated hereby pursuant to the Commitments solely as a result of such
banking moratorium.
SECTION 5.3. Conditions to Obligation of Seller. The obligation of
-----------------------------------
Seller to sell, assign, transfer, convey, and deliver the Acquired Assets is
subject to the
satisfaction at and as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Purchaser set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
though made at and as of the Closing, except as otherwise contemplated by this
Agreement, and Seller shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser. Purchaser shall have
----------------------------------------
performed or complied in all material respects with all obligations, conditions
and covenants required to be performed or complied with by it under this
Agreement at or prior to the Closing, and Seller shall have received a
certificate signed by an authorized officer of Purchaser to such effect.
(c) Opinion of Purchaser's Counsel. Seller shall have received (i)
-------------------------------
an opinion dated the Closing Date of Xxxxxx, Xxxx & Xxxxxxxx, special counsel to
Purchaser, substantially in the form set forth in Exhibit D, and (ii) an opinion
dated the Closing Date of Xxxxxxx Xxxxxxx, General Counsel of Purchaser,
substantially in the form set forth in Exhibit E.
ARTICLE VI
Termination, Amendment and Waiver
---------------------------------
SECTION 6.1. Termination. (a) Notwithstanding anything to the
------------
contrary in this Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller and Purchaser;
(ii) by Seller if any of the conditions set forth in Sections 5.1 or
5.3 shall have become incapable of fulfillment, and shall not have been
waived by Seller;
(iii) by Purchaser if any of the conditions set forth in Sections 5.1
or 5.2 shall have become incapable of fulfillment, and shall not have been
waived by Purchaser; or
(iv) by Seller or Purchaser if the Closing does not occur on or prior
to September 30, 1996;
provided, however, that the party seeking termination pursuant to clause (ii),
-------- -------
(iii) or (iv) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
(b) In the event of termination by Seller, on the one hand, or
Purchaser, on the other hand, pursuant to this
Section 6.1, written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(i) Purchaser shall return all documents and other material received
from Sellers relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to Seller; and
(ii) all confidential information received by Purchaser with respect
to the Division and the businesses of Sellers shall be treated in
accordance with the Confidentiality Agreement which shall remain in full
force and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions contemplated
hereby are abandoned pursuant to this Section 6.1 for any reason other than a
termination by Purchaser pursuant to this Section 6.1 as a result of a failure
to satisfy any condition set forth in Section 5.2(a), (b) or (c) (which failure
shall not have been cured within five business days (or, if earlier, September
30, 1996) following Seller's receipt of written notice of such failure from
Purchaser), Purchaser shall pay to Seller on
demand a termination fee of $60,000,000, by wire transfer to an account
designated in writing by Seller of immediately available funds.
(d) If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in this Section 6.1, this Agreement shall
become null and void and of no further force and effect, except for the
provisions of (i) Section 4.2 relating to the obligation of Purchaser to keep
confidential certain information and data obtained by it from Seller, (ii) this
Agreement relating to expenses (including Sections 4.7 and 4.14(d)), (iii)
Section 4.8 relating to finder's fees and broker's fees, (iv) this Section 6.1
and (v) Article VIII. Nothing in this Section 6.1, including any payment of the
termination fee payable pursuant to Section 6.1(c), shall be deemed to release
either party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of either party to compel
specific performance by the other party of its obligations under this Agreement;
it being understood that such termination fee may be credited against any
damages payable by Purchaser to Seller as a result of a breach by Purchaser.
SECTION 6.2. Amendments and Waivers. This Agreement may not be
-----------------------
amended except by an instrument in
writing signed on behalf of each of the parties hereto. By an instrument in
writing Purchaser, on the one hand, or Seller, on the other hand, may waive
compliance by the other party with any term or provision of this Agreement that
such other party was or is obligated to comply with or perform.
ARTICLE VII
Indemnification
---------------
SECTION 7.1. Indemnification by Seller. (a) Except with respect to
--------------------------
environmental matters (which are exclusively the subject of Section 7.3) and the
matters which are the subject of Sections 7.4 and 7.5, Seller hereby agrees to
indemnify Purchaser and its affiliates and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to hold
them harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses), as incurred (payable quarterly upon written
request, with interest from the date which is 30 days from the date of such
request to the date of actual payment, at the prime or base rate of Chase
Manhattan Bank N.A. announced from time to time), to the extent arising from,
relating to or otherwise in respect of (i) any breach of any representation or
warranty of Seller (other than that contained in Section 3.1(p)) which survives
the Closing contained in this Agreement, (ii) any
breach of any covenant of any of Sellers contained in this Agreement or in any
Seller Ancillary Document requiring performance after the Closing or (iii) any
Excluded Liabilities; provided, however, that Seller shall not have any
-------- -------
liability under clause (i) above unless the aggregate of all losses,
liabilities, costs and expenses relating thereto for which Seller would, but for
this proviso, be liable under clause (i) above exceeds on a cumulative pre-tax
basis an amount equal to $50,000,000, and then only to the extent of any such
excess; provided further, however, that Seller shall not have any liability
---------------- -------
under this Section 7.1 to the extent the liability or obligation arises as a
result of the operation of the business of the Division or the Acquired Assets
after the Closing or any action taken or omitted to be taken by Purchaser or any
of its affiliates.
Purchaser acknowledges and agrees that its sole and exclusive remedy
with respect to any and all claims relating to the subject matter of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Article VII. In furtherance of the foregoing, Purchaser hereby waives, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it may have against Sellers, their affiliates and their
respective officers, directors, employees,
stockholders, agents and representatives arising under or based upon any
Federal, state, local or foreign statute, law, ordinance, rule or regulation
(including any such relating to environmental matters or arising under or based
upon common law or otherwise) or otherwise (except pursuant to the
indemnification provisions set forth in this Article VII).
SECTION 7.2. Indemnification by Purchaser. Purchaser hereby agrees
-----------------------------
to indemnify Sellers, their affiliates and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to hold
them harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses), as incurred (payable quarterly upon written
request, with interest from the date which is 30 days from the date of such
request to the date of actual payment, at the prime or base rate of Chase
Manhattan Bank N.A. announced from time to time), to the extent arising from,
relating to or otherwise in connection with (i) any breach of any representation
or warranty of Purchaser contained in this Agreement, (ii) any breach of any
covenant of Purchaser contained in this Agreement or in any Purchaser Ancillary
Document requiring performance after the Closing, (iii) subject to Sections 7.3,
7.4 and 7.5, any Assumed
Liabilities (including Pre-Closing Environmental Liabilities (as defined in
Section 7.3) for which Purchaser is liable pursuant to Section 7.3) or (iv)
subject to Section 7.3, the operation of the business of the Division or the
Acquired Assets, or any actions or omissions of Purchaser, its affiliates,
agents, contractors or subcontractors in connection therewith, after the
Closing.
SECTION 7.3. Environmental Liability. (a) Seller hereby agrees to
------------------------
indemnify Purchaser and its affiliates and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to hold
them harmless from, any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses), as incurred (payable quarterly upon written
request, with interest from the date which is 30 days from the date of such
request to the date of actual payment, at the prime or base rate of Chase
Manhattan Bank N.A. announced from time to time), to the extent arising from,
relating to or otherwise in respect of, but not to the extent that Purchaser's
actions or omissions cause, contribute to or exacerbate (i) any breach of any
representation or warranty of Seller set forth in Section 3.1(p) of this
Agreement and (ii) any Environmental Liability (any of the matters described in
clauses (i) or
(ii) above are collectively referred to as "Pre-Closing Environmental
Liabilities"); provided, however, that Seller shall not have any obligation or
-------- -------
liability for Pre-Closing Environmental Liabilities unless the aggregate of all
Pre- Closing Environmental Liabilities for which Seller, but for this proviso,
would be liable exceeds on a cumulative pre- tax basis an amount equal to $50
million, in which case Seller's liability shall be for sixty percent (60%) of
any such excess over $50 million and Purchaser's liability shall be for forty
percent (40%) of any such excess over $50 million; provided further, however,
---------------- -------
that Seller shall not have any further obligation or liability for Pre-Closing
Environmental Liabilities if and when the aggregate of all Pre-Closing
Environmental Liabilities for which Seller would be liable but for this proviso
and the immediately preceding proviso and but for Section 7.3(b) exceeds on a
cumulative pre-tax basis an amount equal to $150 million, in which case
Purchaser's liability shall be for one hundred percent (100%) of any such excess
over $150 million. For the purposes of the foregoing, any amount spent on
Remedial Actions with respect to the Division's Sunnyvale, California facility
shall not be counted as Pre-Closing Environmental Liabilities to the extent that
such amounts are attributable to the use of cleanup standards more stringent
than those
consistent with industrial or commercial use of that property.
(b) For purposes of this Section 7.3, the aggregate of all Pre-
Closing Environmental Liabilities "on a cumulative pre-tax basis" is the actual
amount of such aggregate without regard to any tax benefit relating to the
accrual or payment of such aggregate; provided, however, that Seller's
-------- -------
indemnification obligation with respect to the amount of any Pre-Closing
Environmental Liability for which Seller is obligated to provide indemnification
under this Section 7.3 shall be subject to the provisions of Section 7.6.
(c) Purchaser acknowledges and agrees that its sole and exclusive
remedy with respect to any and all claims relating to environmental, health and
safety matters shall be pursuant to the indemnification provisions set forth in
this Section 7.3. In furtherance of the foregoing, Purchaser hereby waives, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action it may have against Sellers, their affiliates and their
respective officers, directors, employees, stockholders, agents and
representatives arising under or based upon any Environmental Law or in
connection with any Environmental Liabilities.
(d) Notwithstanding any other provision of this Agreement to the
contrary, Seller shall have no liability pursuant to this Section 7.3 for Pre-
Closing Environmental Liabilities not made known to Seller by Purchaser in a
written statement within three (3) years of the Closing Date. Such written
statement shall be in reasonable detail, including as to the nature and extent
of the Pre-Closing Environmental Liability.
(e) With respect to the first $50 million of Pre-Closing
Environmental Liabilities on a cumulative pre-tax basis for which Purchaser has
liability pursuant to this Section 7.3 and to the extent that such liability
involves the implementation of a Remedial Action, Seller shall have the right to
review and provide Purchaser with written comments in advance of (i) the
Purchaser's selection of consultants and contractors designated to perform the
Remedial Action and (ii) the development of the scope of work for, and type of,
the Remedial Action to be implemented. Purchaser shall review and reasonably
consider Seller's comments. Purchaser shall provide all plans, reports and
submissions to any Governmental Entity regarding any such Remedial Action in
draft form to Seller a reasonable time prior to transmission of such items to
such Governmental Entity and Purchaser shall review and
reasonably consider any of Seller's comments on such plans, reports and
submissions.
(f) If the Pre-Closing Environmental Liabilities for which Seller has
actual liability pursuant to Section 7.3(a) involve the implementation of a
Remedial Action, then Seller shall have the right to review and provide
Purchaser with written comments in advance of (i) the Purchaser's selection of
consultants and contractors designated to perform the Remedial Action and (ii)
the development of the scope of work for, and type of, the Remedial Action to be
implemented. All plans, reports and submissions to any Governmental Entity
regarding any such Remedial Action (including those in connection with the scope
of work for and type of Remedial Action) shall be provided in draft form to
Seller a reasonable time prior to transmission to such Governmental Entity and
shall not be transmitted to such Governmental Entity unless and until Seller and
Purchaser agree as to the form and substance of such plans, reports and
submissions; provided, however, that if Seller and Purchaser, despite reasonable
-------- -------
good faith efforts, cannot agree as to the form and substance of such plans,
reports and submissions, then prior to transmission to the applicable
Governmental Entity, either party may elect to have the disputed matters
presented to an environmental
consultant for a binding arbitration, which environmental consultant shall be
mutually acceptable to both parties and shall be jointly retained by the Seller
and Purchaser who shall share equally such environmental consultant's fees and
expenses; provided further, however, that any such arbitration shall be
---------------- -------
completed prior to any deadline set by the applicable Governmental Entity
relating to such plans, reports and submissions.
SECTION 7.4. Employment Liabilities. (a) Subject to Section 7.4(c),
-----------------------
Seller hereby agrees to indemnify Purchaser and its affiliates and their
respective officers, directors, employees, stockholders, agents and
representatives against, and agrees to hold them harmless from, any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses), as incurred (payable quarterly upon written request, with interest
from the date which is 30 days from the date of such request to the date of
actual payment, at the prime or base rate of Chase Manhattan Bank N.A. announced
from time to time), to the extent arising from, relating to or otherwise in
respect of (i) Xxxxxx Xxxxxx et al. v. Westinghouse Electric Corporation (docket
---------------------------------------------------------
number MJG 00-000 X.X. Xxxx. Xx. Xxxxxxxx filed January 28, 1993) and EEOC v.
-------
Westinghouse Electric Corporation (docket number Y 00-0000 X.X. Xxxx. Xx.
---------------------------------
Maryland) (collectively, "Xxxxxx") and (ii) any claim of wrongful or unlawful
termination (which shall not include "constructive termination" based solely on
the consummation of the transactions contemplated hereby) by any employee of the
Division whose employment was terminated on or prior to the Closing Date (any of
the matters described in clauses (i) or (ii) above are collectively referred to
as "Employment Liabilities"); provided, however, that Seller shall not have any
-------- -------
liability in respect of any Employment Liabilities unless the aggregate of all
Employment Liabilities for which Seller would, but for this proviso, be liable
exceeds on a cumulative pre-tax basis an amount equal to $10 million, in which
case Seller's liability shall be for fifty percent (50%) of any such excess over
$10 million and Purchaser's liability shall be for fifty percent (50%) of any
such excess over $10 million; provided further, however, that Purchaser shall
---------------- -------
not have any further obligation or liability for Employment Liabilities if and
when the aggregate of all Employment Liabilities for which Purchaser and Seller
would be liable but for this proviso and but for Section 7.4(b) exceeds on a
cumulative pre-tax basis an amount equal to $40 million, in which case Seller's
liability shall be for one hundred percent (100%) of any such excess over $40
million; and provided further, however,
---------------- -------
that Seller shall not have any liability under this Section 7.4 to the extent
the liability or obligation arises as a result of the operation of the business
of the Division or the Acquired Assets after the Closing or any action taken or
omitted to be taken by Purchaser or any of its affiliates.
(b) For purposes of this Section 7.4, the aggregate of all
Employment Liabilities "on a cumulative pre-tax basis" is the actual amount of
such aggregate without regard to any tax benefit relating to the accrual or
payment of such aggregate; provided, however, that Seller's indemnification
-------- -------
obligation with respect to the amount of any Employment Liability for which
Seller is obligated to provide indemnification under this Section 7.4 shall be
subject to the provisions of Section 7.6.
(c) Seller shall not consent to any equitable remedy to be imposed
upon Purchaser without Purchaser's written consent, but Purchaser agrees to be
bound to any equitable relief to be imposed upon Purchaser by the final
unappealable order of any Governmental Entity (it being understood that expenses
associated with the implementation of such equitable relief shall not be deemed
to be an Employment Liability).
SECTION 7.5. Foreign Liabilities. (a) Seller hereby agrees
--------------------
to indemnify Purchaser and its affiliates and
their respective officers, directors, employees, stockholders, agents and
representatives against, and agrees to hold them harmless from, any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses), as incurred (payable quarterly upon written request, with interest
from the date which is 30 days from the date of such request to the date of
actual payment, at the prime or base rate of Chase Manhattan Bank N.A. announced
from time to time), to the extent arising from, relating to or otherwise in
respect of the matters described in Schedule 7.5 (such matters, "Foreign
Liabilities"); provided, however, that Seller shall not have any liability in
-------- -------
respect of any Foreign Liabilities unless the aggregate of all Foreign
Liabilities for which Seller would be liable but for this proviso and but for
Section 7.5(b) exceeds on a cumulative pre-tax basis (net of any amounts
recovered or recoverable by Purchaser under any claim or counter-counterclaim
described in Schedule 7.5) an amount equal to $25 million and then only to the
extent of such excess; provided further, however, that Seller shall not have
---------------- -------
any liability under this Section 7.5 to the extent the liability or obligation
arises as a result of the operation of the business of the Division or the
Acquired Assets after the
Closing or any action taken or omitted to be taken by Purchaser or any of its
affiliates.
(b) For purposes of this Section 7.5, the aggregate of all Foreign
Liabilities "on a cumulative pre-tax basis" is the actual amount of such
aggregate without regard to any tax benefit relating to the accrual or payment
of such aggregate; provided, however, that Seller's indemnification
-------- -------
obligation with respect to the amount of any Foreign Liability for which Seller
is obligated to provide indemnification under this Section 7.4 shall be subject
to the provisions of Section 7.6.
SECTION 7.6. Losses Net of Insurance; No Consequential Damages.
--------------------------------------------------
Subject to Sections 7.3(b), 7.4(b) and 7.5(b), the amount of any loss,
liability, claim, damage or expense for which indemnification is provided under
this Article VII shall be net of any amounts recovered or recoverable by the
indemnified party under insurance policies or Government Contracts (it being
understood that if any amount is recovered or recoverable by Purchaser under any
Government Contract, it shall not be subject to indemnification by Seller under
this Article VII) with respect to such loss, liability, claim, damage or expense
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 loss, liability, claim, damage or expense.
An indemnified party shall be deemed to have realized a net tax cost or a net
tax benefit to the extent that, and at such time as, the amount of taxes payable
by such indemnified party is increased above or reduced below, as the case may
be, the amount of taxes that such indemnified party would have been required to
pay but for receipt or accrual of the indemnity payment or the incurrence or
payment of such loss. Notwithstanding anything to the contrary contained herein,
no indemnification shall be provided for under this Article VII in respect of
any consequential damages.
SECTION 7.7. Termination of Indemnification. The obligations to
-------------------------------
indemnify and hold harmless any party, (x) pursuant to clause (i) of Section 7.1
and clause (i) of Section 7.2, shall terminate when the applicable
representation or warranty terminates pursuant to Section 8.3; provided,
--------
however, that such obligations to indemnify and hold harmless shall not
-------
terminate with respect to any item as to which the Person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice pursuant to Section 7.8
(stating in reasonable detail the basis of such claim) to the party to be
providing the indemnification, (y) pursuant to the other clauses of Sections 7.1
and 7.2, and pursuant to Sections 7.4 and 7.5 shall not terminate and (z)
pursuant to Section 7.3 shall terminate as provided therein.
SECTION 7.8. Procedures Relating to Third Party Claims (other than
-----------------------------------------------------
Tax Controversies, Pre-Closing Environmental Liabilities, Employment Liabilities
--------------------------------------------------------------------------------
and Foreign Liabilities). (a) In order for a Person (the "indemnified party"),
------------------------
to be entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a claim made by any Person against the
indemnified party (other than a Tax Controversy a Pre-Closing Environmental
Liability, an Employment Liability or a Foreign Liability, procedures for which
are specified in Section 4.14(m) in the case of Tax Controversies and Section
7.10 in the case of such other matters (except, in the case of such other
matters, to the extent Section 7.10 provides that this Section 7.8 shall
govern)) (a "Third Party Claim"), such indemnified party must notify the
indemnifying party in writing, and in reasonable detail, of the Third Party
Claim within 10 business days after receipt by such indemnified party of written
notice of the Third Party Claim; provided, however, that failure to give such
-------- -------
notification shall not affect the indemnification provided hereunder except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified party
failed to give such notice). Thereafter, the indemnified party shall deliver to
the indemnifying party, promptly after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party will not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party, it
being understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
not assumed the defense thereof (other than during any period in which the
indemnified party shall have failed to give notice of the Third Party Claim as
provided above). If the indemnifying party chooses to defend or prosecute a
Third Party Claim, all the parties hereto shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. If the
indemnifying party chooses to defend or prosecute any Third Party Claim, the
indemnified party will agree to any settlement, compromise or discharge of such
Third Party Claim which the indemnifying party may recommend and which by its
terms obligates the indemnifying party to pay the full amount of the liability
in connection with such Third Party Claim. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld).
SECTION 7.9. Procedures Relating to Non-Third Party Claims. In order
----------------------------------------------
for an indemnified party to be entitled to any indemnification provided for
under this Agreement in respect of a claim that does not involve a Third Party
Claim or Tax Controversy or Pre-Closing Environmental Liability, Employment
Liability or Foreign Liability being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such indemnified
party under this Agreement, except to the extent that the indemnifying party
shall have been actually prejudiced by such failure. If the indemnifying party
does not notify the indemnified party within 30 calendar days following its
receipt of such notice that the indemnifying party disputes its liability to the
indemnified party under this Agreement, such claim specified by the indemnified
party in such notice shall be conclusively
deemed a liability of the indemnifying party under this Agreement and the
indemnifying party shall pay the amount of such liability to the indemnified
party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. If the
indemnifying party has timely disputed its liability with respect to such claim,
as provided above, the indemnifying party and the indemnified party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
SECTION 7.10. Procedures Relating Claims Constituting a Pre-Closing
-----------------------------------------------------
Environmental Liability, Employment Liability or Foreign Liability. (a) After
-------------------------------------------------------------------
the Closing, each of Purchaser and Seller shall notify (the "Notifying Party")
the other in writing, and in reasonable detail, of any claim in respect of,
arising out of or involving a claim made by any Person against the Notifying
Party constituting a Pre-Closing Environmental Liability, an Employment
Liability or a Foreign Liability (a "Shared Claim") (it being agreed that such
notification obligation shall not apply to Xxxxxx or any Foreign Liability),
within
10 business days after receipt by the Notifying Party of written notice of the
Shared Claim; provided, however, that failure to give such notification shall
-------- -------
not affect the indemnification provided hereunder except to the extent the other
party shall have been actually prejudiced as a result of such failure (except
that the other party shall not be liable for any expenses incurred during the
period in which the Notifying Party failed to give such notice). Thereafter,
each party shall deliver to the other party, promptly after such party's receipt
thereof, copies of all notices and documents (including court papers) received
by the such party relating to the Shared Claim.
(b) Subject to the provisions of Sections 7.3(e) and 7.3(f) with
respect to Remedial Actions, during the period from the date hereof to the
Closing Date, Purchaser and Seller shall negotiate in good faith and enter into
one or more agreements governing defense of Shared Claims, it being agreed that
any such agreement shall provide that:
(i) Purchaser and Seller will each be entitled to participate in the
defense of any Shared Claim; provided, that if either Purchaser or Seller
--------
shall have one hundred percent of the liability in respect thereof pursuant
to the second proviso to Section 7.3(a) or 7.4(a) or the first proviso to
Section 7.5(a), as
applicable, such claim shall be treated as a Third Party Claim under
Section 7.8;
(ii) Purchaser and Seller will each cooperate in the defense or
prosecution of any Shared Claim, including the retention and (upon request)
the provision to the requesting party of records and information which are
reasonably relevant to such Shared Claim, and making employees (including
any Transferred Employees familiar with such Shared Claim) available on a
mutually convenient basis to provide additional information and explanation
of any such records and information;
(iii) Purchaser and Seller will consult with each other and shall
mutually agree on any significant strategic decisions in respect of any
Shared Claim;
(iv) Purchaser and Seller will consult with each other and shall
mutually agree on any settlement, compromise or discharge of any Shared
Claim;
(v) neither Purchaser nor Seller shall admit any liability with
respect to, or settle, compromise or discharge, any Shared Claim without
the other party's prior written consent (which consent shall not be
unreasonably withheld); and
(vi) appropriate and mutually agreeable arrangements with respect to
day-to-day administration of any Shared Claim shall be provided for in such
agreements; provided, that Purchaser and Seller agree that Seller shall be
--------
entitled to control the day-to-day administration of Xxxxxx.
SECTION 7.11. Joint Defense Agreement. On the Closing Date, Seller
------------------------
and Purchaser shall enter into a Joint Defense Agreement substantially in the
form set forth in Exhibit F and on such additional terms as shall be mutually
agreeable.
SECTION 7.12. Acknowledgment. The indemnities provided for in
---------------
Sections 7.3, 7.4 and 7.5 shall not be construed as an admission or conclusion,
express or implied, as to liability or damages in respect of the subject-matter
of such indemnities.
ARTICLE VIII
General Provisions
------------------
SECTION 8.1. Notices. All notices and other communications hereunder
-------
shall be in writing (including telecopy or similar writing) and shall be sent,
delivered or mailed, addressed or telecopied:
(a) if to Purchaser, to
Office of General Counsel
Northrop Grumman Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
(b) if to Seller, to
Office of General Counsel
Westinghouse Electric Corporation
Westinghouse Building
00 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Each such notice or other communication shall be given (i) by hand delivery,
(ii) by nationally recognized courier service or (iii) by telecopy, receipt
confirmed. Each such notice or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 8.1 (or in accordance with the latest
unrevoked direction from such party) and (ii) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 8.1 (or
in accordance with the latest unrevoked direction from such party), and
confirmation is received.
SECTION 8.2. Interpretation. When a reference is made in this
---------------
Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section of, or a Schedule or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. For purposes of any
indemnification provision in this Agreement, the word "expenses" shall mean out-
of-pocket expenses, and shall not include any allocations of internal salaries
and other expenses. Whenever the words "included", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". Whenever the word "material" is used in this Agreement
(except when used with respect to the Purchaser), it shall mean material to the
business or financial condition of the Division. Whenever the phrase "reasonably
likely to be adversely determined" is used in this Agreement, it shall not
require a determination that it is more likely than not. Whenever reference is
made to "knowledge" of Seller, it shall mean the actual knowledge of the Persons
named on Schedule 8.2. Any matter set forth in any Schedule shall be deemed set
forth in all other Schedules to the extent relevant.
SECTION 8.3. Survival of Representations. The representations and
----------------------------
warranties contained in this Agreement and in any document delivered in
connection herewith shall survive the Closing solely for purposes of Article VII
and shall terminate at the close of business one year following the Closing
Date; provided, that the representations and
--------
warranties contained in Section 3.1(p) shall terminate at the close of business
three years following the Closing Date and the representations and warranties in
Section 3.1(q) shall not survive the Closing.
SECTION 8.4. Severability. If any provision of this Agreement (or
-------------
any portion thereof) or the application of any such provision (or any portion
thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstances.
SECTION 8.5. Counterparts. This Agreement may be executed in two 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 (including by telecopy) to the other party.
SECTION 8.6. Entire Agreement; No Third Party Beneficiaries. This
-----------------------------------------------
Agreement and the Confidentiality Agreement (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter
hereof and (b) except as provided in Section 1.3(a) and Article VII, are not
intended to confer upon any Person other than the parties hereto (and the
Selling Subsidiaries) and their successors and permitted assigns any rights or
remedies hereunder.
SECTION 8.7. Governing Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely in the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of law.
SECTION 8.8. Consent to Jurisdiction. Each of Purchaser and Seller
------------------------
irrevocably submits to the non- exclusive jurisdiction of (a) the Supreme Court
of the State of New York, New York County, and (b) the United States District
Court for the Southern District of New York located in the Borough of Manhattan
in the City of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of Purchaser and Seller further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth in Section 8.1 shall be effective service of process for any
action, suit or proceeding in New York with respect to any matters
to which it has submitted to jurisdiction as set forth above in the immediately
preceding sentence. Each of Purchaser and Seller irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (a) the
Supreme Court of the State of New York, New York County, or (b) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 8.9. Publicity. From the date of this Agreement through the
----------
Closing, neither Seller, on the one hand, nor Purchaser, on the other hand,
shall issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
without the consent of the other party, which consent shall not be unreasonably
withheld, except as such release or announcement may be required by law or the
rules or regulations of a national securities exchange in the United States, in
which case the party required to make the release or announcement shall allow
the other party
reasonable time to comment on such release or announcement in advance of its
issuance.
SECTION 8.10. Assignment. Neither this Agreement nor any of the
-----------
rights, interests or obligations hereunder (including any rights, interests or
obligations under Article VII) shall be assigned by any party hereto without the
prior written consent of the other party, except that Purchaser may assign to
any wholly owned subsidiary of Purchaser the right to acquire part or all of the
business and assets of the Division hereunder; provided, however, that any such
-------- -------
assignment shall not release Purchaser from any obligation or liability
hereunder (including any right or obligation under Article VII). Subject to the
preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
WESTINGHOUSE ELECTRIC CORPORATION,
by /s/ Xxxxxxx X. Xxxxxxxx
__________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President,
Chief Financial Officer
NORTHROP GRUMMAN CORPORATION,
by /s/ Xxxxxx Xxxxx
__________________________________
Name: Xxxxxx Xxxxx
Title: Corp. V.P. & Treasurer
