ASSET PURCHASE AGREEMENT
AMONG
ALLIEDSIGNAL INC.,
ALLIEDSIGNAL TECHNOLOGIES, INC.,
ALLIEDSIGNAL DEUTSCHLAND GMBH
AND
L-3 COMMUNICATIONS CORPORATION
DATED AS OF MARCH 30, 1998
ASSET PURCHASE AGREEMENT
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ARTICLE 1. PURCHASE AND SALE................................................................................... 1
1.1 Purchase and Sale........................................................................ 1
1.2 Non-Assignable Assets.................................................................... 3
1.3 Excluded Assets.......................................................................... 3
1.4 Transfer of the Assets................................................................... 4
1.5 Sale and Transfer of ELAC Shares......................................................... 4
1.6 License Agreement........................................................................ 5
ARTICLE 2. CLOSING; PURCHASE PRICE............................................................................. 5
2.1 Closing Date and Place................................................................... 5
2.2 Purchase Price........................................................................... 5
2.3 Income Taxes............................................................................. 5
2.4 Cash True-Up............................................................................. 5
2.5 Allocation of Purchase Price............................................................. 6
2.6 Payments................................................................................. 6
2.7 Transfer Taxes........................................................................... 6
ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS............................................................ 7
3.1 Assumed Liabilities...................................................................... 7
3.2 Excluded Liabilities..................................................................... 7
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLERS........................................................... 8
4.1 Corporate Status......................................................................... 8
4.2 Authorization............................................................................ 8
4.3 Compliance............................................................................... 9
4.4 [Intentionally left blank]............................................................... 9
4.5 Personal Property........................................................................ 9
4.6 Intellectual Property.................................................................... 10
4.7 Contracts and Binding Commitments........................................................ 10
4.8 Title.................................................................................... 11
4.9 Litigation............................................................................... 11
4.10 Environmental Matters.................................................................... 11
4.11 Employee Benefit Plans and Policies...................................................... 12
4.12 Material Changes......................................................................... 13
4.13 [Intentionally left blank]............................................................... 15
4.14 Compliance with Law...................................................................... 15
4.15 Consents................................................................................. 15
4.16 Taxes.................................................................................... 15
4.17 Permits and Licenses..................................................................... 16
4.18 Ownership of ELAC Shares................................................................. 16
4.19 Labor Relations.......................................................................... 16
4.20 Brokerage Fees........................................................................... 17
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4.21 Government Contracts..................................................................... 17
4.22 Government Furnished Equipment........................................................... 19
4.23 Entire Business.......................................................................... 19
4.24 Real Estate.............................................................................. 19
4.25 Insurance................................................................................ 20
4.26 Affiliate Transactions................................................................... 20
4.27 No Additional Representations............................................................ 21
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 21
5.1 Corporate Status......................................................................... 21
5.2 Authorization............................................................................ 21
5.3 Compliance............................................................................... 21
5.4 Due Diligence............................................................................ 22
5.5 Financing................................................................................ 22
5.6 Investment Representation................................................................ 22
5.7 Conveyances and Restrictions............................................................. 22
5.8 Brokerage Fees........................................................................... 22
ARTICLE 6. EMPLOYEES AND EMPLOYEE BENEFITS..................................................................... 22
6.1 Employment............................................................................... 22
6.2 Compensation and Benefits - U.S. Employees............................................... 23
6.3 Severance and WARN Act................................................................... 24
6.4 Health Care Continuation Liability....................................................... 24
6.5 Pension Plan............................................................................. 24
6.6 Savings Plan............................................................................. 26
6.7 Labor Agreements......................................................................... 27
ARTICLE 7. PRE-CLOSING COVENANTS............................................................................... 27
7.1 [Intentionally left blank]............................................................... 27
7.2 [Intentionally left blank]............................................................... 27
7.3 [Intentionally left blank]............................................................... 27
7.4 [Intentionally left blank]............................................................... 27
7.5 Workers' Compensation.................................................................... 27
7.6 Insurance-Primary Casualty Program....................................................... 27
7.6.1 Claims Responsibility and Procedures........................................ 27
7.7 No Inconsistent Action................................................................... 28
7.8 [Intentionally left blank]............................................................... 28
7.9 Non-Solicitation......................................................................... 28
7.10 Refunds and Remittances.................................................................. 28
7.11 Enforcement of Confidentiality Provisions................................................ 28
7.12 Novation of Government Contracts......................................................... 28
7.13 Further Actions.......................................................................... 28
7.14 Letters of Credit........................................................................ 29
7.15 1985 Capitalization of ELAC.............................................................. 29
7.16 MCDV Subcontract......................................................................... 29
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ARTICLE 8. CONDITIONS TO CLOSING............................................................................... 30
8.1 Conditions to the Obligations of Purchaser............................................... 30
8.2 Conditions to the Obligations of Sellers................................................. 31
ARTICLE 9. TERMINATION AND SURVIVAL............................................................................ 31
9.1 Termination.............................................................................. 31
9.2 Effect of Termination.................................................................... 32
ARTICLE 10. CLOSING DOCUMENTS.................................................................................. 32
10.1 Documents to be Delivered by Sellers..................................................... 32
10.2 Documents to be Delivered by Purchaser................................................... 33
ARTICLE 11. POST CLOSING OBLIGATIONS........................................................................... 34
11.1 Further Assurances....................................................................... 34
11.2 Access to Books and Records.............................................................. 34
11.3 Cooperation in Litigation................................................................ 34
11.4 Proprietary Information.................................................................. 34
11.5 Covenant Not to Compete.................................................................. 35
11.6 Change of Name........................................................................... 35
11.7 Tax Election............................................................................. 35
11.8 Research and Experimental Expenses....................................................... 35
11.9 Pooling Arrangement...................................................................... 35
ARTICLE 12. INDEMNIFICATION.................................................................................... 35
12.1 Indemnification by Sellers............................................................... 35
12.2 Tax Indemnification...................................................................... 36
12.3 Indemnification by Purchaser............................................................. 36
12.4 Indemnification Procedure................................................................ 37
12.5 Survival and Limitations................................................................. 38
12.6 Adjustment for Insurance and Taxes....................................................... 38
12.7 Environmental Liabilities................................................................ 39
12.8 Facility Sale Agreement.................................................................. 39
ARTICLE 13. MISCELLANEOUS...................................................................................... 39
13.1 Expenses................................................................................. 39
13.2 Notices.................................................................................. 39
13.3 Confidentiality.......................................................................... 40
13.4 Counterparts............................................................................. 40
13.5 Entire Agreement/Termination of December Agreement....................................... 40
13.6 Construction............................................................................. 41
13.7 Assignment............................................................................... 41
13.8 Amendment................................................................................ 41
13.9 Applicable Law........................................................................... 41
13.10 No Third Party Rights.................................................................... 41
13.11 Exhibits and Schedules................................................................... 41
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13.12 Waivers.................................................................................. 41
13.13 Severability............................................................................. 42
13.14 Bulk Sales Law........................................................................... 42
13.15 Knowledge of Sellers..................................................................... 42
13.16 Personal Liability....................................................................... 42
EXHIBIT A -- License Agreement
EXHIBIT B -- Transition Services Agreement
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SCHEDULES
1 Products
1.1(a) Personal Property
1.3(j) Excluded Assets
4.6(a) Intellectual Property
4.6(c) Licensed Intellectual Property
4.6(d) Intellectual Property
4.7 Contracts
4.8 Title and Leases
4.9 Litigation
4.10 Environmental Disclosure
4.11 Benefit Plans and Policies
4.12 Material Changes
4.14 Compliance with Law
4.15 Consents
4.16 ELAC Taxes
4.17 Permits and Licenses
4.19 Labor Relations
4.19(x) Labor Relations
4.21(a) - (e) Government Contracts
4.22 Government Furnished Equipment
4.23 Entire Business
4.24 Real Estate
4.25 Insurance
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4.26 Affiliate Transactions
6.2(a) Retention Agreements
6.5(b) Actuarial Methods and Assumptions
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ASSET PURCHASE AGREEMENT
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ASSET PURCHASE AGREEMENT (the "Agreement") dated as of March 30, 1998
among AlliedSignal Inc., a Delaware corporation ("AlliedSignal"), AlliedSignal
Technologies, Inc., an Arizona corporation and a wholly owned subsidiary of
AlliedSignal ("ASTI"), AlliedSignal Deutschland GmbH, a German corporation and
a wholly owned subsidiary of AlliedSignal ("AS Deutschland" and, collectively
with ASTI and AlliedSignal, the "Sellers"), and L-3 Communications Corporation,
a Delaware corporation ("Purchaser").
WITNESSETH:
WHEREAS, AlliedSignal is engaged exclusively through AlliedSignal's
Ocean Systems business unit ("Ocean Systems") and through AlliedSignal ELAC
Nautik GmbH ("ELAC"), a wholly owned subsidiary of AS Deutschland, in the
business (the "Business") of developing, manufacturing and selling the products
and services (the "Products") listed on Schedule 1 hereto, together with
services associated with such Products; all of which Products as produced by
the Business during the last 24 months are listed in Schedule 1 hereto;
WHEREAS, certain of the intellectual property used by Ocean Systems
is owned by ASTI;
WHEREAS, AlliedSignal desires to sell and Purchaser desires to
purchase the assets of Sellers primarily related to, or used primarily in
connection with, the Business as described herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
representations and warranties contained herein, the parties agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 Purchase and Sale of Assets and Stock. Subject to the terms and
conditions of this Agreement and except as otherwise provided herein, at the
Closing (as defined in Section 2.1), Sellers shall sell, convey, transfer,
assign and deliver to Purchaser, and Purchaser shall purchase and accept from
Sellers, all direct or indirect right, title and interest of Sellers in the
assets, whether tangible or intangible, real or personal, primarily related to,
or used primarily in connection with, the Business prior to the Closing, other
than Excluded Assets (as defined in Section 1.3), together with all of AS
Deutschland's right, title and interest in the ELAC capital stock described in
Section 1.1(o) below (the "Assets"), including, without limitation, the
following:
(a) all machinery and equipment, fixtures, furniture, office
equipment, vehicles, boats, ships, tools and other tangible personal property
set forth on Schedule 1.1(a) as of the date indicated thereon (collectively,
the "Personal Property");
(b) all accounts receivable and other receivables as of the
Closing Date, whether recorded or unrecorded (the "Accounts Receivable");
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(c) all inventory and other supplies on hand, in transit or
on order as of the Closing Date, wherever located, including raw materials,
work-in-process and finished goods (the "Inventory");
(d) subject to the exclusions set forth in Section 1.3(f) and
(h), all intellectual property, including without limitation all (i)
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments, technology, new and useful improvements
thereof and know-how relating thereto, whether or not patented or eligible for
patent protection; copyrights and copyrightable works, including computer
applications, programs, software, databases and related items; trademarks,
service marks, trade names (including, but not limited to, the "Ocean Systems"
trade name), brand names, logos and trade dress, the goodwill of any business
symbolized thereby, and all common-law rights relating thereto; trade secrets
and other confidential information; (ii) registrations, applications,
recordings, and licenses or other similar agreements related to the foregoing;
(iii) rights to xxx at law or in equity for any infringement or other
impairment of the foregoing occurring prior to the Closing Date; and (iv)
rights to obtain reissues, re-examinations, continuations,
continuations-in-part, divisions, extensions, renewals or other legal
protections pertaining to the foregoing (the "Intellectual Property");
(e) all contracts, agreements, arrangements and/or
commitments (the "Contracts");
(f) all transferable governmental and other permits,
licenses, approvals, certificates of inspection, filings, franchises and other
authorizations relating to the Assets including, but not limited to, those
listed in Schedules 4.10 and 4.17 hereto (the "Permits and Licenses");
(g) prepaid expenses, except insurance premiums, but only
if and to the extent of the benefit conferred by such prepaid expenses to the
Business after the Closing Date;
(h) all transferable rights of Sellers pursuant to any
express or implied warranties, representations or guarantees relating to any
Personal Property or made by suppliers furnishing goods or services to Sellers;
(i) all lists, files and documents, including, but not
limited to, all business records, tangible data, computer software, electronic
media and management information systems, disks, files, customer lists,
supplier lists, blueprints, specifications, designs, drawings, plans, operation
or maintenance manuals, bids, personnel records, policy manuals, invoices,
credit reports, sales literature, tax, financial and accounting records and all
other books and records (the "Books and Records").
(j) all interests in real estate, whether leased or owned,
excluding the land, building and improvements located at Sylmar, California
(the "Facility"),
(k) all security (including cash) deposited with third
parties and all security bonds;
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(l) all goodwill and going concern value (without any
representation as to any value thereof);
(m) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind against other parties (other than
those related to Excluded Assets or Excluded Liabilities);
(n) all insurance proceeds arising out of or related to
damage, destruction or loss of any property or asset of or used primarily in
connection with the Business to the extent of any damage or destruction that
remains unrepaired, or to the extent any property or asset remains unreplaced,
at the Closing Date; and
(o) all the issued and outstanding capital stock and rights
in respect of such capital stock of ELAC (the "ELAC Shares").
1.2 Non-Assignable Assets. Notwithstanding anything to the contrary
contained in this Agreement, to the extent the sale, assignment, transfer,
conveyance or delivery to Purchaser of any Asset, or any other item to be
delivered at Closing, such as a permit, license or consent, is prohibited by
any foreign, federal, state or local statutes, laws or regulations applicable
to the Assets or the operation of the Business (an "Applicable Law") or would
require any governmental or third party authorizations, approvals, consents or
waivers which shall not have been obtained prior to the Closing (after Sellers'
reasonable best efforts to obtain them), this Agreement shall not constitute a
sale, assignment, transfer, conveyance or delivery thereof. Following the
Closing, the parties shall use reasonable best efforts and cooperate with each
other to obtain promptly such authorizations, approvals, consents or waivers;
provided, however, that neither Sellers nor Purchaser shall be required to pay
any consideration therefor, other than filing, recordation or similar fees
payable to any governmental authority, which fees shall be paid in accordance
with Section 2.6. Pending such authorization, approval, consent or waiver, the
parties shall cooperate with each other in any commercially reasonable and
lawful arrangements designed to provide to Purchaser the benefits of use of
such Asset. Once such authorization, approval, consent or waiver is obtained,
the Sellers shall promptly assign, transfer, convey and deliver such Asset to
Purchaser for no additional consideration. To the extent that any such Asset
cannot be transferred or the full benefits of use of any such Asset cannot be
provided to Purchaser following the Closing, then Purchaser and Sellers shall
enter into such arrangements for no additional consideration from Purchaser
(including subleasing or subcontracting if permitted) to provide Purchaser the
economic (taking into account tax costs and benefits) and operational
equivalent of obtaining such authorization, approval, consent or waiver.
1.3 Excluded Assets. Notwithstanding anything to the contrary
contained in this Agreement, the following are not included in the Assets and
not intended to be sold, assigned, transferred or conveyed to Purchaser
hereunder (the "Excluded Assets"):
(a) assets primarily related to, or used primarily in
connection with, Sellers' businesses other than the Business, including, but
not limited to, the assets primarily related to, or used primarily in
connection with, Sellers' avionics repair and overhaul business conducted at
the Facility;
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(b) except as set forth in Section 2.4, cash, cash
equivalents and overdrafts;
(c) intercompany receivables and intercompany prepaid
expenses, other than (i) trade receivables of the Business for goods delivered
in the ordinary course of business and (ii) the intercompany note receivable
between Ocean Systems and ELAC with respect to cash in the AlliedSignal German
cash pool (the "Intercompany Note");
(d) Books and Records which Sellers are required by law to
retain; provided, however, that in the event of such legal requirement, Sellers
shall retain copies of such Books and Records and deliver the original Books
and Records to Purchaser unless Sellers are legally obligated to retain the
original records in which case the copies of such Books and Records shall be
provided to Purchaser;
(e) the basic books and records of account and all supporting
vouchers, invoices and other records and materials relating to any or all
income taxes of Sellers; other than all such materials relating solely to the
Business and located at the Facility or at ELAC's headquarters in Kiel, Germany
(the "ELAC Facility");
(f) except as granted pursuant to Section 1.1(d) any right to
use any name or logo of Sellers or any Affiliate or any confusingly similar
variant or derivative thereof, including but not limited to "Allied-Signal",
"AlliedSignal", "Allied", "Allied Chemical," "Signal," "Bendix," "Bendix
Oceanics" or "Bendix Oceanics, Inc.";
(g) the insurance policies of Sellers, including without
limitation those pertaining to the Business and the Facility, and the rights
of Sellers thereunder;
(h) the Intellectual Property listed in Schedule 4.6 (c)
(the "Licensed Property");
(i) assets of employee benefit plans, except as provided
in Article 6;
(j) the assets listed in Schedule 1.3(j); and
(k) the Facility.
1.4 Transfer of the Assets. Sellers shall sell, convey, transfer,
assign and deliver the Assets to Purchaser at the Closing by means of deeds,
bills of sale, assignments, endorsements, consents, certificates and such other
good and sufficient instruments of transfer in form and substance reasonably
satisfactory to Purchaser, and all in recordable form, where applicable, as
shall be necessary or appropriate to vest in Purchaser all right, title,
ownership and interest of Sellers in and to the Assets as provided in this
Agreement or in the Schedules hereto.
1.5 Sale and Transfer of ELAC Shares. Sellers shall cause to be
delivered to the Purchaser certificates representing the ELAC Shares, duly
endorsed, or accompanied by stock powers duly executed, with all necessary
stock transfer stamps attached thereto and cancelled,
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or such other assignments, deeds, share transfer forms, endorsements, notarial
deeds of transfer or other instruments or documents, duly stamped where
necessary.
1.6 License Agreement. On or prior to the Closing Date, ASTI and
Purchaser shall enter into a license agreement in the form attached hereto as
Exhibit A, with respect to the intellectual property identified in Schedule
4.6(c).
ARTICLE 2. CLOSING; PURCHASE PRICE
2.1 Closing Date and Place. On and subject to the conditions set forth
herein, the consummation of the purchase and sale contemplated hereby (the
"Closing") will take place at the offices of AlliedSignal in Morristown, NJ at
10:00 a.m., local time, on March 30, 1998, or at such other time and place as
shall be agreed upon by the parties hereto. The date upon which the Closing
occurs is referred to herein as the "Closing Date". The Closing shall be
effective as of 11:59 p.m. on the Closing Date. In addition, subsequent to the
Closing, Purchaser and Sellers shall call the notary in Europe in order to
perfect the transfer of the ELAC Shares by way of a notarial deed.
2.2 Purchase Price. (a) The purchase price to be paid by
Purchaser for the Assets including the ELAC Shares, is Sixty-Seven Million
Five Hundred Thousand Dollars ($67,500,000) (the "Purchase Price"). The
Purchase Price shall be paid by Purchaser in full at Closing in immediately
available funds.
(b) The parties acknowledge the existence of a receivable
relating to a contract dated December 19, 1997 (the "Turkey Contract") pursuant
to which Ocean Systems is to supply to the Turkish Navy four (4) AQS-18A
dipping sonar systems, plus spares, ground support equipment and performance
testing (the "Turkey Receivable"). In the event that any cash is received by
AlliedSignal in respect of the Turkey Receivable, whether before, on or after
the Closing Date (each a "Turkey Cash Receipt"), AlliedSignal shall pay to L-3
an amount in cash equal to all Turkey Cash Receipts, on April 1, 1998, or if
any Turkey Cash Receipt is received by AlliedSignal after April 1, 1998, on the
date of such receipt.
2.3 Income Taxes. As soon as reasonably practicable, the parties shall
prepare a calculation of income tax liability or tax benefit based on the
income or loss reflected on the books and records of the Business determined on
a basis consistent with prior periods (excluding any income or loss
attributable to the Turkey Contract) for the period beginning after December
31, 1997 (the "Effective Date") and ending on the close of the Closing Date
multiplied by 36.6%. The calculation of book income or loss for such period
shall be computed by means of a closing of the books and records of the
Business as of the Closing Date, and, to the extent not practical, by
apportionment on the basis of elapsed days. Buyer shall pay to Seller any such
income tax liability and Seller shall pay to Buyer any such income tax benefit
within 60 days thereof.
2.4 Cash True-Up. Within fifteen business days after the
Closing Date, AlliedSignal shall prepare and deliver to Purchaser a schedule
setting forth, on a daily basis, the cash generated by the Business from
12:01 a.m. on the first day following the Effective
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Date through and including the Closing Date. Purchaser shall have three
business days from receipt to review the schedule and AlliedSignal shall give
Purchaser reasonable access to its books and records for the purpose of
confirming the calculations of AlliedSignal pursuant to this Section 2.4. Any
dispute with respect to the schedule shall be resolved in good faith by the
parties. Within three business days after the expiration of such review period
(or the resolution of any dispute), Purchaser shall make payment to
AlliedSignal if the schedule shows a net cash usage by the Business during such
period and AlliedSignal shall make payment to Purchaser if the schedule shows
net cash generation during such period in an amount equal to such net cash
usage or net cash generation, as the case may be; provided, however, that if
AlliedSignal shall pay to Purchaser any amount pursuant to Section 2.2(b) in
respect of a Turkey Cash Receipt received on or prior to the Closing Date, and
the amount of such Turkey Cash Receipt would have been a cash generation under
this Section 2.4 but for this proviso, then the amount of any such Turkey Cash
Receipt shall be excluded in calculating net cash generation or a cash usage
under this Section 2.4. Any payment to be made pursuant to this Section 2.4
shall be made in immediately available funds by wire transfer to a bank account
designated in writing by the party entitled to receive the payment.
AlliedSignal shall be responsible for paying any checks outstanding as of the
Effective Date.
2.5 Allocation of Purchase Price. The Sellers and the Purchaser agree
to allocate the Purchase Price of the Assets including the covenant not to
compete, in accordance with the rules under Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
promulgated thereunder. Such allocation shall be mutually agreed between the
Sellers and the Purchaser. The Sellers and the Purchaser recognize that the
Purchase Price does not include Purchaser's acquisition expenses and that
Purchaser will allocate such expenses appropriately. Sellers and the Purchaser
agree to act in accordance with the computations and allocations as determined
pursuant to this Section 2.5 (including any modifications thereto reflecting
any post-Closing adjustments, such adjustments shall be allocated in accordance
with the character of each such adjustment, on a basis consistent with the
allocation under this Section 2.5) in any relevant Tax Returns or filings,
including any forms or reports required to be filed pursuant to Section 1060 of
the Code, the Treasury Regulations promulgated thereunder or any provisions of
local, state and foreign law ("1060 Forms"), and to cooperate in the
preparation of any 1060 Forms and to file such 1060 Forms in the manner
required by Applicable Law.
2.6 Payments. All payments required to be made pursuant to this
Article 2 and other provisions of this Agreement shall be made in United States
dollars in immediately available funds by wire transfer to an account
designated by the party to receive payment in writing to the party making
payment.
2.7 Transfer Taxes. Purchaser and Sellers shall each bear 50% of all
sales, transfer and similar taxes, duties or levies (other than taxes computed
on the basis of income) assessed or payable in connection with the transfer of
the Assets including the ELAC Shares to Purchaser, including notary fees
relating to the transfer of the ELAC Shares; provided that in no event shall
Sellers be required to pay more than $500,000 in respect thereof, including any
amounts paid by AlliedSignal pursuant to Section 2.4 of the real estate
purchase agreement, dated as of December 22, 1997 (the "Facility Sale
Agreement"), between AlliedSignal and Purchaser. Purchaser and Sellers agree to
cooperate with one another to try
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to minimize such taxes to the extent practicable without additional costs or
liabilities to Purchaser or Sellers. To the extent any exemptions from such
taxes are available, Purchaser and Sellers shall cooperate to obtain and
prepare all required resale or other exemption certificates with respect to the
Assets and the ELAC Shares.
ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS
3.1 Assumed Liabilities. Except for the Excluded Liabilities,
Purchaser shall, without any further responsibility or liability of, or
recourse to, Sellers, except as set forth herein, absolutely and irrevocably
assume and be solely liable and responsible for any and all liabilities and
obligations of any kind or nature, whether foreseen or unforeseen, known or
unknown, existing or which may arise in the future, fixed or contingent,
matured or unmatured, to the extent primarily related to the Business or the
Assets prior to, on, or following the Closing Date (the "Assumed Liabilities")
including, but not limited to:
(a) obligations to fill purchase orders of customers
of the Business to the extent such orders are unfilled on the Closing Date;
(b) obligations incurred through the Closing Date to
purchase or pay for goods and services for the Business to be received on or
after the Closing Date;
(c) obligations and liabilities under the Contracts; provided
that any Contract as to which consent to assignment is required but has not
been obtained shall not be deemed an Assumed Liability until Purchaser has
obtained the benefits of such Contract;
(d) obligations and liabilities under licenses and permits of
the Business that are transferred or assigned to Purchaser (but only to the
extent so transferred or to the extent Purchaser receives the benefits
thereunder pursuant to Section 1.2); and
(e) obligations and liabilities specifically assumed or
undertaken by Purchaser hereunder.
3.2 Excluded Liabilities. Notwithstanding anything to the
contrary contained in this Agreement, the liabilities and obligations of
Sellers which are not to be assumed or retained by Purchaser hereunder (the
"Excluded Liabilities") include, but are not limited to, the following:
(a) obligations and liabilities for all Taxes relating to
the Business for all periods prior to the Effective Date;
(b) obligations and liabilities arising out of or related to
past, present or future actions, suits, claims, disputes, investigations and
other proceedings relating to the ownership or operation of the Assets or the
Business on or prior to the Effective Date, including, but not limited to, the
items referred to in Schedule 4.9;
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(c) obligations and liabilities related to employees,
including former employees, not expressly assumed by Purchaser pursuant to
Article 6 hereof;
(d) all obligations and liabilities (whether or not the
subject of any claim by a third party), fixed or contingent, known or unknown,
under any Environmental Laws as have been, are or may in the future be in
effect arising out of or relating to (i) the operation of the Business on or
prior to the Effective Date or the use or ownership of any real property
(including, without limitation, the Facility) used in the Business on or prior
to the Effective Date, including without limitation, the disposal or
arrangement for the disposal of Materials of Environmental Concern prior to the
Effective Date and (ii) the presence of contamination by Materials of
Environmental Concern at or emanating from any real property (whether leased or
owned) used in the Business prior to the Effective Date ("Environmental
Liabilities");
(e) all obligations and liabilities for non-trade accounts
payable to Sellers and their Affiliates (other than the Intercompany Note);
(f) all obligations, liabilities, expenses or charges to
earnings or reserves taken in connection with any restructuring program of
AlliedSignal;
(g) all debts, obligations or liabilities whatsoever to the
extent not primarily related to the Business or the Assets; and
(h) all other obligations and liabilities for which Sellers
have expressly assumed responsibility pursuant to this Agreement.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Purchaser as
follows:
4.1 Corporate Status. AlliedSignal is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, and has full
power and authority and all governmental licenses, authorizations, material
consents and approvals required to carry on the Business as now conducted and
own all of its properties and assets. ASTI is a corporation duly organized,
validly existing and in good standing under the laws of Arizona. AS Deutschland
and ELAC are corporations duly organized, validly existing and in good standing
under the laws of the Federal Republic of Germany. Each Seller has all
requisite corporate and other power and authority to enter into, execute and
deliver this Agreement and any other agreements contemplated hereby (the "Other
Agreements") and to perform its respective obligations and consummate the
transactions contemplated hereunder and thereunder in accordance with the terms
of this Agreement. Each Seller is duly qualified to do business in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the Sellers' conduct of the Business.
4.2 Authorization. All corporate and other proceedings required to be
taken by or on the part of each of the Sellers to authorize Sellers to enter
into and carry out this Agreement have been, or prior to the Closing will be,
duly and properly taken. This
8
Agreement has been, and on the Closing Date each of the Other Agreements will
be, duly authorized, executed and delivered by each Seller and this Agreement
constitutes, and each Other Agreement will upon execution and delivery thereof
constitute, a legal and binding obligation of Sellers, valid and enforceable
against each Seller in accordance with their respective terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and the rules of law governing specific performance, injunctive relief
and other equitable remedies.
4.3 Compliance. Except for (i) the expiration or termination of all
applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act") and under any similar German national
or European Union law and (ii) any novations pursuant to Section 7.12 and any
consents listed on Schedule 4.15, the execution, delivery and performance of
this Agreement and Other Agreements by Sellers and the consummation of the
transactions contemplated hereby and thereby (a) will not violate (with or
without giving of notice or the lapse of time or both), or require any consent,
approval, filing or notice under any provision of any licenses, permits,
approvals, consents, certificates of public convenience, orders, franchises and
other authorizations of any federal, state, local or foreign governmental
authority (collectively, "Licenses"), law, rule or regulation, court or
administrative order, writ, judgement or decree applicable to Sellers, the
Business or any of the Assets or the Assumed Liabilities other than the
facilities clearance requirements of the Defense Investigative Services of the
United States Department of Defense ("DIS"), as set forth in the DIS Industrial
Security Regulation and the DIS Industrial Security Manual, as each may be
amended from time to time and (b) will not (with or without the giving of
notice or the lapse of time or both) (I) violate or conflict with, or result in
the breach, suspension or termination of any provision of, or constitute a
default under, or result in the acceleration of the performance of the
obligations of Sellers under, or (II) result in the creation of any lien,
mortgage, pledge, security interest, claim, charge or encumbrance or other
material restriction of any kind or nature (collectively, "Liens") upon the
Business or the Assets pursuant to, as the case may be, the articles of
incorporation, by-laws or other organization documents of any Seller or any
material agreement, lease, mortgage, note, deed of trust, lease, bond,
indenture, license or other document or undertaking, oral or written, to which
any Seller is a party or by which any Seller is bound and by which any of the
Assets or the Business may be affected.
4.4 [Intentionally left blank]
4.5 Personal Property. In all material respects, the Personal Property
and the machinery and equipment, fixtures, furniture, office equipment,
vehicles, boats or ships, tools and other tangible personal property of ELAC
have been maintained in accordance with standard industry practices, are in
reasonable working condition (normal wear and tear excepted) and are sufficient
for the conduct of the Business as it is currently being conducted.
9
4.6 Intellectual Property.
(a) Schedule 4.6(a) lists all Intellectual Property owned or
used by the Business that is issued or registered by or filed with any
governmental agency, and all licenses of Intellectual Property used by the
Business to or from third parties.
(b) The Sellers own or have the right to use all Intellectual
Property necessary to conduct the Business substantially as it is currently
conducted and consistent with past practice.
(c) Schedule 4.6(c) lists all Intellectual Property not
included in the Assets, the use of which is necessary for the Business as it is
currently conducted. AlliedSignal and ASTI will grant to Purchaser a license to
such Intellectual Property pursuant to the license agreement referred to in
Section 1.6 of this Agreement.
(d) Except as set forth on Schedule 4.6(d): (i) all material
Intellectual Property owned or used by the Business is unexpired, has not been
abandoned and, to the Knowledge of Sellers, does not infringe or otherwise
impair the intellectual property rights of any third party; (ii) no material
Intellectual Property owned or used by the Business is the subject of any
license, security interest, Lien or other agreement granting rights therein to
any third party other than licenses listed on Schedule 4.6(d); (iii) no
judgment, decree, injunction, rule or order has been rendered by any
governmental entity, no action, suit or proceeding is currently pending and
Sellers have not received written notice, and to the Knowledge of Sellers there
are no threatened suits, actions or proceedings, which would limit, cancel or
question the validity of, or Sellers' rights in and to any material
Intellectual Property; and (iv) the Company and its subsidiaries have taken
reasonable steps to protect, maintain and safeguard their material Intellectual
Property, including any Intellectual Property for which improper or
unauthorized disclosure would impair its value or validity, and have executed
appropriate nondisclosure and confidentiality agreements and made appropriate
filings and registrations in connection with the foregoing.
4.7 Contracts and Binding Commitments. Schedule 4.7 lists the
Contracts and the contracts, agreements and/or commitments of ELAC that are
material to the operation of the Business taken as a whole (the "Agreements").
Except as set forth on Schedule 4.7, each of the Agreements is a valid and
binding agreement of the Seller which is a party thereto or ELAC and is in full
force and effect. True and complete copies of all the Agreements have been
delivered to Purchaser or otherwise made available for inspection by Purchaser.
All the Agreements are in full force and effect. Except as set forth on
Schedule 4.7, to the Knowledge of Sellers neither AlliedSignal nor ELAC, as the
case may be, is in default in any material respect under any of the Agreements
and to the Knowledge of Sellers there has been no material default under any of
the Agreements by any other party thereto. AlliedSignal is not obligated to
list in Schedule 4.7 any agreement, contract or commitment identified elsewhere
in this Agreement or any Schedule hereto, or if such agreements, individually
and together with all such other agreements which are not listed on Schedule
4.7 pursuant to this sentence, are not material to the Business taken as a
whole and (a) such agreement, contract or commitment, is related to the sale or
furnishing of products or services by AlliedSignal or ELAC and has a price of
less than $75,000 in the case of AlliedSignal or DM 100,000 in the
10
case of ELAC; (b) such agreement, contract or commitment, if related to the
purchase of materials, supplies, equipment, merchandise or services, imposes a
payment obligation on AlliedSignal or ELAC of less than $75,000; or (c) the
disclosure of such agreement, contract or commitment is proscribed by the terms
of such document or by the provisions of a governmental security agreement or
regulation; provided that if such agreements, individually or in the aggregate,
are material to the Business, a summary of the material terms of such agreement
have been delivered to a properly authorized officer or employee of Purchaser
in accordance with Applicable Law.
4.8 Title. Except as set forth in Schedule 4.8, each Seller and ELAC
holds the entire legal, equitable and beneficial title in and will transfer to
Purchaser good (and, in the case of real property, marketable) title to, or a
valid and binding leasehold interest in, its property included in the Assets
free and clear of all Liens other than (i) Liens for taxes not yet due and
payable or being contested in good faith for which adequate reserves are being
maintained in accordance with United States generally accepted accounting
principles ("GAAP"), and (ii) encumbrances that do not, and are not reasonably
expected to, individually or in the aggregate, materially adversely affect the
value of the Assets subject thereto or the ability of AlliedSignal, ELAC or
Purchaser to conduct the Business as it is now being conducted (collectively,
"Permitted Liens").
4.9 Litigation. Except as disclosed in Schedule 4.9, there is not any
action, suit, proceeding, arbitration or litigation, pending or to the
Knowledge of Sellers threatened against Sellers or to the Knowledge of Sellers
any investigation pending or threatened, relating to the Business, the Assets,
the Assumed Liabilities or the transactions contemplated by this Agreement that
could reasonably be expected to result in any material judgment against,
material liability of, or have a material adverse effect on the Business taken
as a whole. Sellers are not in violation of any term of any judgment, writ,
decree, injunction or order entered by any court or governmental authority
(domestic or foreign) and outstanding against Sellers or with respect to the
Business or any of Sellers' assets (including the Assets) or properties, except
for such violations which could not, individually or in the aggregate, have a
material adverse effect on the Sellers or the Business. An action, suit,
proceeding, investigation, arbitration or litigation shall be considered
"threatened" for purposes of this Section 4.9 if any of the persons referred to
in Section 13.15 shall have received a written notice or communication
reasonably indicating to a business person that an action, suit, investigation,
or proceeding will be commenced.
4.10 Environmental Matters. (a) Except as set forth on Schedule 4.10
to the Knowledge of Sellers: (i) the Business complies and has complied in all
material respects with all applicable Environmental Laws, and possesses and
complies and has possessed and complied in all material respects with all
Environmental Permits (all of which are identified accordingly on Schedule 4.10
and are transferrable as a routine matter to Purchaser); (ii) there are and
have been no Materials of Environmental Concern, or other conditions, at any
property owned, operated, or otherwise used by the Business now or in the past,
or at any other location, that could give rise to any material liability to the
Business under any Environmental Law or result in material costs to the
Business arising out of any Environmental Law; (iii) no judicial,
administrative, or arbitral proceeding (including any notice of violation or
alleged violation) under any Environmental Law is pending or
11
threatened in writing with respect to the Business, nor is the Business the
subject of any investigation or the recipient of any request for information in
connection with any such proceeding; (iv) there are no past or present
conditions, circumstances, practices, plans, or legal requirements that could
be expected to prevent the Business from, or materially increase the burden on
the Business of, complying in all material respects with applicable
Environmental Laws or obtaining, renewing, or complying in all material
respects with all Environmental Permits required under such laws.
(b) The Sellers have provided or made available to Purchaser
true and complete copies of all Environmental Reports in their possession or
control.
(c) Any costs, estimates, projections or other predictions
contained or referred to in Schedule 4.10 are not, and shall not be deemed to
be, representations or warranties of Allied Signal.
(d) For purposes of this Agreement, the following terms
shall have the following meaning:
"Environmental Laws" shall mean any and all laws, rules,
orders, regulations, statutes, ordinances, guidelines, codes, decrees,
or other legally enforceable requirement (including, without
limitation, common law) of the United States or any other national
government, or any state, local, municipal or other governmental
authority, regulating, relating to or imposing liability or standards
of conduct concerning protection of the environment or of human
health, or employee health and safety as of the Closing Date.
"Environmental Permits" shall mean any and all permits,
licenses, approvals, registrations, notifications, exemptions and any
other authorization required of the Business under any Environmental
Law.
"Environmental Report" shall mean any report, study,
assessment, audit, or other similar document that addresses any issue
of actual or potential noncompliance with, or actual or potential
liability under or cost arising out of, any Environmental Law that may
in any way materially adversely affect the Business.
"Materials of Environmental Concern" shall mean any gasoline
or petroleum (including crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity, and any
other substances or forces of any kind, whether or not any such
substance or force is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to
liability under any Environmental Law.
4.11 Employee Benefit Plans and Policies. Schedule 4.11 lists all of
the employment, severance, change-of-control, stock purchase, stock option,
fringe benefits, incentive, bonus, pension, welfare, shop agreements or other
employee benefit plans and policies maintained or contributed to by Sellers or
ELAC for the Business or in which employees of the Business or managing
directors of ELAC, including employees or managing
12
directors of ELAC on short-term disability, medical, sick or other leave of
absence (the "Employees"), are entitled to participate (collectively the
"Benefit Plans") and copies of all such written Benefit Plans have been made
available to Purchaser. Except as listed on Schedule 4.11, (a) such Benefit
Plans that cover U.S. Employees ("U.S. Benefit Plans") comply in all material
respects, to the extent applicable, with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable laws,
rules and regulations; (b) none of the U.S. Benefit Plans subject to Part 3
Subtitle B of Title I of ERISA has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code; (c) no material liability, other than required premium payments, to the
Pension Benefit Guaranty Corporation has been incurred with respect to any of
the U.S. Benefit Plans subject to Title IV of ERISA; (d) AlliedSignal has not
incurred any material liability for any tax imposed under Section 4975 of the
Code or Part 4 Subtitle B of Title I of ERISA with respect to any of the U.S.
Benefit Plans; (e) none of the U.S. Benefit Plans is a multiemployer plan
within the meaning of Section 3(37)(A) of ERISA. Except as otherwise is
provided in this Agreement, all contributions to the U.S. Benefit Plans that
were required to be made under such U.S. Benefit Plans as of the date hereof
have been paid, accrued or otherwise adequately reserved or disclosed in
accordance with GAAP as of such date; and (f) each Benefit Plan covering
non-U.S. Employees complies in all material respects with all Applicable Laws,
rules and regulations.
4.12 Material Changes. Except as set forth on Schedule 4.12 or as
communicated to Xxxxxx Xxxxxxx or any individual who directly reports to Xx.
Xxxxxxx or Purchaser, since December 31, 1997, there has been no:
(a) Lien created on any Asset or ELAC Asset, except
Permitted Liens;
(b) capital expenditures or commitment to make any such
expenditures with respect to the Assets or the ELAC Assets, except with respect
to any such expenditures or commitments incurred prior to the date hereof, to
the extent such expenditures and commitments do not exceed, when combined with
any expenditures permitted under Section 4.7(d) of the Facility Sale Agreement,
$2,100,000 in the aggregate;
(c) rights of substantial value knowingly waived with
respect to the Assets or the Business; or
(d) sale or transfer of any Assets or ELAC Assets other than
dispositions of inventory and obsolete or worn out equipment in the ordinary
course of business.
(e) (i) (x) contract, agreement, proposal or other commitment
entered into for the purchase of goods or services which is not terminable by
the parties upon 30 days' notice or less without penalty or which involves
aggregate consideration in excess of $250,000 or (y) agreement, bid, proposal
or other commitment entered into for the sale of goods or services which is not
terminable by the parties upon 30 days' notice or less without penalty or which
involves aggregate consideration in excess of $5 million or which would result
in a loss in excess of $100,000 for any individual contract or $250,000 in the
aggregate, (ii) amendment, supplement, waiver or modification of any contract
or agreement included in
13
the Assets or the ELAC Assets, other than in the ordinary course of business
consistent with past practice and (iii) Affiliate that has been permitted to
do, or agree, in writing or otherwise, to do, any of the foregoing;
(f) except as required by Applicable Law or to the extent
required under existing employee and director benefit plans, agreements or
arrangements as in effect on the date of this Agreement, (i) increase in the
compensation or fringe benefits of any of the President of Ocean Systems and
his direct reports or other employees (including any such increase pursuant to
any deferred compensation, severance, bonus, pension, profit-sharing or other
plan or commitment), except for increases, in the ordinary course of business
consistent with past practice, in salary or wages of employees who are not
senior managers of the Business, (ii) grant of any severance or termination
pay, (iii) hire, except in the ordinary course of business, of any new
employees or consultants or (iv) amendment or termination, or any agreement to
amend or terminate, any collective bargaining, bonus, profit sharing, thrift,
compensation, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of the President of Ocean Systems and his past or
present direct reports or any other past or present employees of the Business
(except for changes in AlliedSignal benefit plans generally);
(g) (i) transaction with or for the benefit of any other
division or business of Seller or any Affiliate of Seller except as is set
forth in Schedule 4.26 and (ii) Affiliate has been permitted to do, or agree,
in writing or otherwise, to do, any of the foregoing;
(h) (i) waiver of any material claims or rights relating to
the Business or the Assets or (ii) Affiliate has been permitted to do, or
agree, in writing or otherwise, to do, any of the foregoing;
(i) acquisition of or agreement to acquire, by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof;
(j) except for performance guarantees issued in the ordinary
course of business consistent with past practice, incurrence of any
indebtedness for borrowed money, or guarantee of any such indebtedness of
another person, issuance or sale of any debt securities or warrants or other
rights to acquire any debt securities of the Sellers, guarantee of any debt
securities of another person, entrance into any "keep well" or other agreement
to maintain any financial statement condition of another person or entrance
into any arrangement having the economic effect of any of the foregoing, or
loans, advances or capital contributions to, or investments in, any other
person; or
(k) license or agreement entered into with respect to the
Intellectual Property.
14
4.13 [Intentionally left blank]
4.14 Compliance with Law. Except as set forth on Schedule 4.14,
Sellers and ELAC are not in violation of any Applicable Law which, individually
or in the aggregate, would have a material adverse effect on the operation of
the Business, and Sellers and ELAC have not received any notice in writing
alleging any such defaults or violations or potential defaults or violations.
4.15 Consents. Except as set forth in Schedule 4.15, no action,
approval, consent or authorization, including but not limited to any action,
approval, consent or authorization by any third party, financial institution,
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary to make this Agreement or any of the Other
Agreements or instruments to be executed and delivered pursuant hereto a legal,
valid and binding obligation of Sellers or ELAC or to consummate the
transactions contemplated hereunder.
4.16 Taxes. All Taxes (as hereinafter defined) with respect to the
Business that are due and payable or which relate to tax periods ending on or
prior to the Closing Date have been or will be duly and properly computed,
reported, fully paid and discharged by Sellers. There are no unpaid Taxes with
respect to any period, or a portion thereof, ending on or before the Closing
Date which are or could become a Lien on the Assets or the ELAC Assets, except
for current Taxes not yet due and payable or reserved for in the Financial
Statements. Except as set forth on Schedule 4.16, there has been filed by or on
behalf of ELAC all material returns, declarations, statements, reports,
schedules, forms and information returns and any amended tax returns relating
to any Taxes (the "Tax Returns"). All such material Tax Returns are true,
complete and correct in all material respects and all Taxes shown as due on
such Tax Returns have been or will be paid in a timely fashion by Sellers prior
to Closing or have been accrued for on ELAC's financial statements. Except as
set forth on Schedule 4.16, no audit or other proceeding by any Governmental
Authority, or similar person is pending, or to the Knowledge of Sellers, is
threatened with respect to any material Taxes due from or with respect to ELAC.
No material issues relating to Taxes were raised in writing by the relevant
taxing authority during any audit or examination. Except as set forth in
Schedule 4.16, ELAC is not a party to or bound by (nor will it become a party
to or bound by prior to the Closing Date) any tax indemnity, tax sharing, or
tax allocation agreement. There is no material agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes and no power of attorney with respect to any material
Taxes of ELAC has been executed or filed with any Governmental Authority. ELAC
is not, nor has it ever been, a member of a U.S. consolidated, combined unitary
tax group. As used herein, the term "Taxes" shall include all federal, state,
local and foreign taxes, assessments or other governmental charges (including,
without limitation, net income, gross income, excise, franchise, sales and
value added taxes, taxes withheld from employees' salaries and other
withholding taxes and obligations and all deposits required to be made with
respect thereto), levies, assessments, deficiencies, import duties, licenses
and registration fees and charges of any nature whatsoever, including any
interest, penalties, additions to tax or additional amounts with respect
thereto, imposed by any government or taxing authority, provided, however, that
the term "Taxes" does not include the taxes, duties and levies referred to at
Section 2.6.
15
4.17 Permits and Licenses. Schedule 4.17 attached hereto lists all
material governmental or other permits, licenses, approvals, certificates of
inspection, filings, franchises and other authorizations, other than those
relating to the environment, that are issued to, or held or used by Sellers or
ELAC, or for which Sellers or ELAC have applied, in connection with the current
operation of the Business, and any limitations thereto. Except as listed in
Schedule 4.17, Sellers and ELAC have all material governmental or other
permits, licenses, approvals, certificates of inspection, filings, franchises
and other authorizations, other than those relating to the environment, that
are necessary to own and operate the Assets and the ELAC Assets and to conduct
the Business as it is currently being conducted, and Sellers and ELAC have not
received notice alleging that any other material governmental or other permits,
licenses, approvals, certificates of inspection, filings, franchises and other
authorizations, other than those relating to the environment, are required.
"Material" for purposes of this Section 4.17 shall include but not be limited
to permits, licenses and other authorizations which are required to own or
operate the Assets or ELAC Assets owned or operated by Sellers and used for the
production of products in the Business.
4.18 Ownership of ELAC Shares. The ELAC Shares constitute all of the
issued and outstanding shares of capital stock of ELAC. The ELAC Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no securities convertible into or exchangeable or exercisable for
ELAC Shares or any options, warrants or other rights to acquire ELAC Shares. AS
Deutschland is the sole legal and beneficial owner of the ELAC Shares and owns
the ELAC Shares free and clear of any Liens, restrictions, options or rights in
others, encumbrances or other claims, rights of first offer or first refusal,
or voting agreements, and AS Deutschland has full legal right, power and
authority to enter into this Agreement and to transfer and deliver good and
valid title to the ELAC Shares hereunder. At the Closing, Purchaser shall
receive good and valid title to the ELAC Shares free and clear of any Liens
other than as created by Purchaser. ELAC does not constitute a material part of
the assets of AS Deutschland.
4.19 Labor Relations. Except as set forth on Schedule 4.19, (i) there
is no employment agreement, collective bargaining agreement, shop agreement or
written personnel policy applicable to Employees of the Business nor are any
such agreements or policies presently negotiated; (ii) there is no current
labor strike, slowdown or work stoppage or pending lockout, dispute or other
labor controversy in effect, or to the Knowledge of Sellers threatened against
or otherwise affecting the Business, and the Business has not experienced such
labor controversy in the past five years; (iii) there is no unfair labor
practice charge or complaint pending or, to the Knowledge of Sellers,
threatened against or otherwise affecting the Business; (iv) no representation
question exists or has been raised respecting any of the Employees of the
Business within the past five years, nor to the Knowledge of Sellers are there
any campaigns being conducted to solicit cards from Employees of the Business
to authorize representation by any labor organization; (v) no action, suit,
complaint, charge, arbitration, grievance, inquiry, proceeding or investigation
by or before any court, governmental agency, administrative agency or
commission brought by or on behalf of any Employee, prospective employee,
former employee, retiree, labor organization or other representative of the
Business's Employees is pending or, to the Knowledge of Sellers, threatened
against the Business; (vi) the Sellers and ELAC are not party to, or otherwise
bound by, any consent decree with, or citation by, any Government agency
relating to
16
Employees or employment practices; (vii) the Sellers and ELAC are in compliance
in all material respects with all Applicable Laws, agreements, contracts, and
policies relating to employment, employment practices, wages, hours, and terms
and conditions of employment; (viii) other than to the extent accrued in the
financial statements of the Business in accordance with GAAP, the Sellers and
ELAC have paid in full to all Employees of the Business all wages, salaries,
commissions, bonuses, benefits and other compensation due to such employees or
otherwise arising under any policy, practice, agreement, plan, program, statute
or other law; (ix) the Sellers and ELAC are not liable for any severance pay or
other payments to any Employee, or former employee arising from the termination
of employment, nor will the Business have any liability under any benefit or
severance policy, practice, agreement, plan, or program which exists or arises,
or may be deemed to exist or arise, under any Applicable Law or otherwise, as a
result of or in connection with the transactions contemplated hereunder or as a
result of the termination by the Business of any persons employed by the
Sellers on or prior to the Closing Date except to the extent accrued on the
Closing Balance Sheet; (x) except as set forth in Schedule 4.19(x), the Sellers
and ELAC have not closed any Business plant or facility, effectuated any layoff
of Employees or implemented any early retirement, separation or window program
which within the past five years, nor have the Sellers or ELAC planned or
announced any such action or program for the future; (xi) the Sellers and ELAC
are in compliance with their obligations pursuant to the Worker Adjustment and
Retraining Notification Act of 1988, and Sellers and ELAC are in compliance
with all other notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise.
4.20 Brokerage Fees. No person is entitled to any brokerage or
finder's fee or other commission from Sellers in respect of this Agreement
or the transactions contemplated hereby except Bear, Xxxxxxx & Co. Inc. (whose
fee shall be paid by Sellers).
4.21 Government Contracts. (a) With respect to each and every
Government Contract or bid to obtain a Government Contract to which Sellers or
ELAC are a party, and which relates to the Business, and except as set forth in
Schedule 4.21(a): (i) Sellers and ELAC have fully complied with all material
terms and conditions of such Government Contract or bid for a Government
Contract as required as of the date hereof and as of the Closing Date; (ii)
Sellers and ELAC have fully complied with all material requirements of statute,
rule or regulation pertaining to such Government Contract or bid for a
Government Contract; (iii) all representations and certifications executed with
respect to such Government Contract were to the Knowledge of Sellers accurate
in every material respect as of their effective date and Sellers and ELAC to
the Knowledge of Sellers have fully complied with all such representations and
certifications in every material respect; and (iv) no termination for default,
cure notice or show cause notice has been issued or, to the Knowledge of
Sellers will be issued, (v) neither the U.S. Government nor any non-U.S.
government nor any prime contractor, subcontractor or other entity person has
notified in writing any of the Sellers or ELAC that any of the Sellers or ELAC
has breached or violated any Applicable Law, certification, representation,
clause provision or requirement pertaining to such Government Contract or bid;
(vi) no cost incurred by the Sellers or ELAC pertaining to such Government
Contract or bid has been questioned or challenged, is the subject of any
investigation or has been disallowed by the U.S. Government or any non-U.S.
government; (vii) no money due to the Sellers or ELAC pertaining to such
Government Contract or bid has been withheld or set
17
off and the Sellers or ELAC are entitled to all progress payments with respect
thereto and (viii) each Government Contract is valid and in full force and
effect. As used herein, "Government Contract" means any open contract relating
to the Business between any of Sellers or ELAC and (x) the U.S. Government or
any non-U.S. government, (y) any prime contractor of the U.S. Government or any
non-U.S. government or (z) any subcontractor at any tier with respect to any
contract described in clauses (x) and (y) above.
(b) To the Knowledge of Sellers, except as set forth in
Schedule 4.21(b), with respect to the Business; (i) none of its respective
employees, consultants or agents is (or during the last three years has been)
under administrative, civil or criminal investigation, indictment or
information by any foreign, domestic, federal, territorial, state or local
governmental authority, quasi-governmental authority, instrumentality, court,
government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any
political or other subdivision, department or branch of any of the foregoing
("Governmental Authority"), (ii) there is not any pending audit or
investigation by Sellers or ELAC nor within the last three years has there been
any audit or investigation by Sellers or ELAC resulting in a material adverse
finding with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract or bid; and (iii) during
the last three years, the Sellers and ELAC have not made a voluntary disclosure
to the U.S. Government or any non-U.S. government, with respect to any alleged
irregularity, misstatement or omission arising under or relating to a
Government Contract or bid. Except as set forth in Schedule 4.21(b), to the
Knowledge of Sellers there are no irregularities, misstatements or omissions
arising under or relating to any Government Contract or bid that has led or is
expected to lead, either before or after the Closing Date, to any of the
consequences set forth in clause (i) or (ii) of the immediately preceding
sentence or any other material damage, penalty assessment, recoupment of
payment or disallowance of cost.
(c) Except as set forth in Schedule 4.21(c), with respect to
the Business, there exist (i) no outstanding claims against the Sellers or
ELAC, either by the U.S. Government or by any non-U.S. government or by any
prime contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract or bid referred to in Section 4.21(a) and
(ii) no disputes between the Sellers or ELAC and the U.S. Government or any
non-U.S. government under the Contract Disputes Act or any other Federal
statute or between the Sellers or ELAC and any prime contractor, subcontractor
or vendor arising under or relating to any such Government Contract or bid.
Except as set forth in Schedule 4.21(c), to the Knowledge of Sellers there are
no facts that could reasonably be expected to result in a claim or a dispute
under clause (i) or (ii) of the immediately preceding sentence.
(d) Except as set forth in Schedule 4.21(d), neither the
Sellers nor ELAC nor any of their employees, consultants or agents is (or
during the last three years has been) suspended or debarred from doing
business with the U.S. Government or any non-U.S. government or is (or during
such period was) the subject of a finding of nonresponsibility or ineligibility
for U.S. Government or non-U.S. government contracting. Except as set forth
in Schedule 4.21(d), the Sellers, ELAC and their Affiliates have operated the
Business in
18
compliance with all requirements of all material laws pertaining to all
Government Contracts and bids.
(e) Except as set forth in Schedule 4.21(e), no statement,
representation or warranty made by the Sellers or ELAC in any Government
Contract, any exhibit thereto or in any certificate, statement, list, schedule
or other document submitted or furnished to the U.S. Government or any non-U.S.
government in connection with any Government Contract or bid (i) contained on
the date so furnished or submitted any untrue statement of a material fact, or
failed to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading
or (ii) contains on the date hereof any untrue statement of a material fact, or
fails to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading,
except in the case of both clauses (i) and (ii) any untrue statement or failure
to state a material fact that would not result in any material liability to the
Business as a result of such untrue statement or failure to state a material
fact.
4.22 Government Furnished Equipment. Schedule 4.22 incorporates the
most recent schedule delivered to the U.S. Government or any non-U.S.
Government which identifies by description or inventory number certain
equipment and fixtures loaned, bailed or otherwise furnished to or held by the
Business by or on behalf of the United States or any foreign country. To the
Knowledge of Sellers, such schedule was accurate and complete on its date and,
if dated as of the Closing Date, would contain only those additions and omit
only those deletions of equipment and fixtures that have occurred in the
ordinary course of business, except for such inaccuracies that could not
reasonably be expected to have a material adverse effect on the Business.
4.23 Entire Business. Except for the Excluded Assets, and except as
set forth on Schedule 4.23, the Assets, together with the License Agreement,
constitute all of the assets, properties and rights necessary to conduct the
Business in all material respects as currently conducted. Other than ELAC,
Sellers have no subsidiaries primarily engaged in the Business.
4.24 Real Estate. Schedule 4.24 accurately lists all real property
of the Business owned or leased, indirectly or directly, by the Sellers or
ELAC (other than the Facility, the "Real Property"):
(a) The Sellers and ELAC have good and marketable title to
all such owned Real Property and good and valid leasehold interest in all such
leased Real Property, in each case, free and clear of all Liens except for
Permitted Liens;
(b) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the Knowledge of Sellers no written
notice of any threatened action has been received against any Real Property;
(c) All of the Real Property is occupied under a valid and
current certificate of occupation or similar permit, the sale of the Assets
hereunder will not require the issuance or any new or amended certificate of
occupancy and to the Knowledge of Sellers the Real
19
Property may be occupied and used by Purchaser or ELAC after the Closing Date
in the same manner as used by Sellers or ELAC on or before the Closing Date;
(d) All improvements on the Real Property constructed by or
on behalf of Sellers or any other person were at the time installed constructed
in compliance with all applicable federal, state, local or foreign statutes,
laws, ordinances, regulations, rules, codes, orders or requirements (including,
but not limited to, any building, zoning or environmental laws or codes)
affecting the Real Property;
(e) All improvements on the Real Property and the present use
and conditions thereof do not violate any applicable deed restrictions or
applicable covenants, restrictions, agreements, existing site plan approvals,
zoning or subdivision regulations or urban redevelopment plans as modified by
any duly issued variances, and no permits, licenses or certificates pertaining
to the ownership or operation of all improvements on the Real Property, other
than those that are transferable with the Real Property, are required by any
governmental agency having jurisdiction over the Real Property. Such
improvements on the Real Property are wholly within the lot limits of such Real
Property and do not encroach on any adjoining premises and there are no
encroachments on any Real Property by any improvements located on any adjoining
premises;
(f) Sellers and ELAC enjoy peaceful and quiet possession of
each parcel of Real Property, and there is not under any lease of any of the
leased Real Property (a "Lease") any default by any of Sellers or ELAC
thereunder or any condition that with notice or the passage of time or both
would constitute such a default, and Sellers and ELAC have not received notice
asserting the existence of any such default or condition. To the Knowledge of
Sellers there are no defaults under any Lease by the landlord thereunder.
Sellers have heretofore furnished the Purchaser a true and complete copy of
each Lease and all amendments thereto pertaining to any leased Real Property.
Each Lease is valid and binding and in full force and effect;
(g) The rental set forth in each Lease is the actual rental
being paid, and there are not separate agreements or understandings with
respect to the same; and
(h) Neither the execution of this Agreement nor the sale of
the Assets hereunder shall cause a default under any Lease or require prior
written consent of any landlord under any Lease.
4.25 Insurance. Schedule 4.25 lists insurance maintained by Sellers
and ELAC with respect to the Assets and the ELAC Assets and with respect to the
employees and representatives of the Business and the operations of the
Business. The coverage under each such policy and binder is in full force and
effect, and no notice of cancellation or nonrenewal with respect to any such
policy or binder has been received by any of the Sellers or ELAC.
4.26 Affiliate Transactions. Except as set forth in Schedule 4.26,
there are no agreements, arrangements, undertakings or other transactions
between the Business and any other division or business of Sellers or any
person that directly, or indirectly through one or
20
more intermediaries, controls or is controlled by or is under common control
with any of Sellers (including, without limitation, any owner of capital stock
of Sellers) (an "Affiliate").
4.27 No Additional Representations. NOTWITHSTANDING ANYTHING
TO THE CONTRARY CONTAINED IN THIS ARTICLE 4 OR ANY OTHER PROVISION OF THIS
AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT
ALLIEDSIGNAL IS MAKING NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION,
MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE PROPERTIES OR ASSETS OF THE
SELLERS. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE
ASSETS ARE BEING SOLD ON AN "AS IS, WHERE IS" BASIS.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to AlliedSignal as follows:
5.1 Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full power and all governmental licenses, authorizations, consents and
approvals required to carry on its business and to own all of its properties
and assets. Purchaser has all requisite corporate and other power and authority
to enter into, execute and deliver this Agreement and the Other Agreements and
to perform its obligations and consummate the transactions contemplated
hereunder and thereunder in accordance with the terms of this Agreement.
5.2 Authorization. All corporate and other proceedings required to be
taken by or on the part of Purchaser to authorize Purchaser to enter into and
carry out this Agreement have been, or prior to the Closing will be, duly and
properly taken. This Agreement has been, and on the Closing Date each of the
Other Agreements will be, duly executed and delivered by Purchaser and this
Agreement constitutes, and each Other Agreement will upon execution and
delivery thereof constitute, a legal and binding obligation of Purchaser, valid
and enforceable against Purchaser in accordance with their terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and the rules of law governing specific performance, injunctive
relief and other equitable remedies.
5.3 Compliance. The execution, delivery and performance of this
Agreement and Other Agreements and the consummation of the transactions
contemplated hereby will not result in the breach of any of the terms or
conditions of, or constitute a default under, or violate, as the case may be,
the articles of incorporation, by-laws or other organization documents of
Purchaser or any material agreement, lease, mortgage, note, deed of trust,
lease, bond, indenture, license or other document or undertaking, oral or
written, to which Purchaser is a party or by which Purchaser is bound or by
which any of the Assets may be affected other than the consent required under
Purchaser's existing credit facility, which Purchaser believes will be obtained
prior to Closing.
21
5.4 Due Diligence. Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the transactions contemplated by this Agreement and the Other
Agreements. Purchaser confirms that AlliedSignal provided to Purchaser the
opportunity to ask questions of the officers and management employees of
AlliedSignal and to acquire such additional information about the business and
financial condition of the Business as Purchaser requested and all such
information has been received.
5.5 Financing. Purchaser has funds of its own, or has binding
commitments from responsible banks or other financial institutions to provide
funds, which will be sufficient and available to pay the purchase price as set
forth in Section 2.1.
5.6 Investment Representation. Purchaser is acquiring the ELAC
Shares for investment and not with a view to the public distribution thereof.
5.7 Conveyances and Restrictions. The performance by Purchaser of its
obligations hereunder, whether through the purchase of the Assets, the
obtaining of financing to fund the acquisition, and/or the obtaining of
financing for the operations of the Business after the Closing, will not
violate any provision of the Uniform Fraudulent Conveyance Act as enacted by
the United States or any state thereof, or any regulations thereunder or any
state fraudulent conveyance or similar statute in a state in which the Business
or Purchaser is doing business.
5.8 Brokerage Fees. No person is entitled to any brokerage or
finder's fee or other commission from Purchaser in respect of this Agreement
or the transactions contemplated hereby.
ARTICLE 6. EMPLOYEES AND EMPLOYEE BENEFITS
6.1 Employment.
(a) Purchaser shall offer employment effective as of the
Closing Date to all Employees (except that Employees on Long Term Disability
shall be offered employment when such Employees are medically certified to
return to work) employed as of the Closing Date. Nothing herein expressed or
implied confers upon any Employee who accepts Purchaser's offer of employment
(collectively, "Transferred Employees") any rights or remedies of any nature or
kind, including, without limitation, any rights of employment with Purchaser
for a specified period of time.
(b) Notwithstanding Section 6.1(a) above, the employment of
Employees employed by ELAC (collectively, the "German Employees") shall
continue following the Closing Date and shall remain the liability of ELAC.
22
6.2 Compensation and Benefits - U.S. Employees.
(a) Generally. Purchaser shall continue or shall provide, for
a period of at least 12 months immediately subsequent to the Closing Date, for
all Transferred Employees who are employed in the United States (collectively,
"U.S. Transferred Employees") base salary or applicable rate of pay not less
than that provided by Sellers immediately prior to the Closing Date, employee
benefits and incentive compensation comparable, in the aggregate, to those in
effect as of the Closing Date, except that, with respect to those plans
providing a benefit in AlliedSignal stock, Purchaser shall have no obligation
to provide such benefits or comparable benefits or to take into account such
benefits for purposes of this Section. Purchaser shall assume liability for all
deferred compensation, supplemental and excess pension and savings benefits,
all bonus amounts, normal and enhanced severance benefits, and relocation
benefits (whether or not all such employee benefits are vested on the Closing
Date) in respect of all U.S. Transferred Employees incurred or earned, but not
paid, on or before the Closing Date, or as incurred in connection with the sale
of the Business and not paid as of the Closing Date, to the extent accrued on
the Closing Balance Sheet. Purchaser shall assume the retention agreements
listed on Schedule 6.2(a).
(b) Union Employees. Purchaser shall offer employment on or
prior to the Closing Date to each U.S. Employee covered by the Collective
Bargaining Agreements between AlliedSignal and the United Auto Workers ("UAW")
or UAW Local 179, including the Local Agreement between AlliedSignal and UAW
Local 179, the Master Agreement between AlliedSignal and the UAW, and all
associated agreements that are part of such Master Agreement, including the
letters of understanding and agreements covering pensions, insurance and
savings plans (collectively, the "Bargaining Agreements") as described in
Schedule 4.7 (such covered Employees being referred to, collectively, as "Union
Employees"), provided that such Union Employee is actively at work on the
Closing Date. Purchaser shall provide each Union Employee with compensation
(base rate of pay and incentive compensation, if any) no less than that
required by the applicable Bargaining Agreements and any applicable side
letters and schedules immediately prior to the Closing Date. A Union Employee
who is absent on the Closing Date due to illness, vacation, paid leave, holiday
or union office leave or who is otherwise subject to recall with seniority
rights shall to the extent required by the applicable Bargaining Agreement and
any applicable side letters and schedules be considered actively at work on the
Closing Date. The Union Employees who are actively at work on the Closing Date
shall hereafter be called "Union Transferred Employees". Sellers shall retain
the obligation to provide any Union Employee who does not become a Union
Transferred Employee on the Closing Date with benefits under Sellers' Pension
Plans for Union Employees, as defined herein, and all other benefits required
to be provided by the Bargaining Agreements.
(c) Purchaser agrees to credit each U.S. Transferred Employee
service credited with Sellers under the Benefit Plans for participation,
retirement eligibility and vesting under such employee benefit plans or
policies Purchaser maintains or will maintain for or on behalf of the U.S.
Transferred Employees. In addition, such service shall be credited for benefit
purposes under welfare plans (including severance plans), vacation plans and
qualified retirement plans in respect of which assets and liabilities are
transferred to
23
Purchaser's Plans. Sellers shall not in any manner be responsible for any
liability, claim or obligation due under any such plan maintained by Purchaser.
6.3 Severance and WARN Act. (a) Sellers shall pay and be responsible
for all liability, cost or expense for severance, termination indemnity
payments, salary continuation, special bonuses and like costs under Sellers'
severance pay plans, policies or arrangements, with respect to any of the
Employees that arise from or relate to the transactions described in or
contemplated by this Agreement, or of any U.S. Transferred Employees that arise
under Sellers' severance plans from the subsequent termination of employment by
Purchaser after the Closing Date. Purchaser agrees to pay and be responsible
for all liability, cost, expense and sanctions resulting from the Purchaser's
failure to comply after the Closing Date with the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act"), and the regulations
thereunder or for any action by Purchaser which causes WARN to apply.
(b) The Sellers shall not, at any time within the 60-day
period prior to the Closing Date, effectuate a "plant closing" or "mass
layoff", as those terms are defined in the WARN Act or any State law, affecting
in whole or in part any Ocean Systems site of employment, facility, operating
unit or employee.
(c) The Sellers shall indemnify, defend and hold Purchaser
harmless from and against any and all claims, actions, suits, demands,
proceedings, losses, expenses, damages, obligations and liabilities (including
costs of collection, attorney's fees and other costs of defense) ("Damages")
arising out of or otherwise in respect of (i) termination by the Sellers of any
employee of the Business on or prior to the Closing Date; (ii) any claim made
by any employee of the Business for severance pay arising prior to, or upon the
Closing Date; or (iii) any suit or claim of violation brought against the
Purchaser under the WARN Act or any State law for any actions taken by the
Sellers in connection with, on or prior to the Closing Date with regard to any
site of employment, facility, operating unit or employee affected by this
Agreement which action by itself causes WARN to apply.
6.4 Health Care Continuation Liability. With respect to Sellers'
plans, Seller agrees to pay and be responsible for all liability, cost,
expense, taxes and sanctions under Section 4980B of the Internal Revenue Code
(the "Code"), interest and penalties imposed upon, incurred by, or assessed
against Purchaser or Sellers that arise by reason of or relate to any failure
to comply with the health care continuation coverage requirements of Section
4980B of the Code and Sections 601 through 608 of ERISA, as amended, which
failure occurs as a result of the transactions described in or contemplated by
this Agreement or which failure occurs on or after the Closing Date with
respect to any Employee or any qualified beneficiary (as defined in Section
4980B(g)(1)) of such Employee.
6.5 Pension Plan.
(a) AlliedSignal shall amend the Salaried Employees Pension
Program for AlliedSignal Inc., the AlliedSignal Inc. Pension Plan for Hourly
Employees (provisions relating to UAW Local 179) and the AlliedSignal Inc.
Retirement Program (collectively, the "Pension Plans") to fully vest all
Employees employed by the Business as of the Closing Date participating in the
Pension Plan in their accrued benefit as of the Closing Date. Purchaser
24
shall assume the liabilities and obligations as of the Closing Date of Sellers
for the accrued benefits of all U.S. Transferred Employees under the Pension
Plans. Purchaser shall have established as of the Closing Date, or shall
establish as soon as practicable after the Closing Date, a tax-qualified
defined benefit pension plan or plans which shall discharge the pension
obligations of Purchaser set forth in this Section ("Purchaser's Plan"). As
soon as practicable after the Closing Date, AlliedSignal shall cause a transfer
of the pension liabilities and obligations being assumed by Purchaser and of
the assets, as calculated below, to Purchaser's Plan.
(b) The assets to be transferred from the Pension Plans to
Purchaser's Plan shall be an amount equal to the "projected benefit
obligation," within the meaning of Financial Accounting Standard No. 87, as of
the Closing Date attributable to the U.S. Transferred Employees under Sellers'
Pension Plans ("PBO") with adjustments described below. Sellers' actuary shall
calculate the transfer amount (the "Transfer Amount") by applying the
assumptions, methods and methodologies listed on Schedule 6.5(b) and other
actuarial assumptions and methodologies used in the ordinary course in the
preparation of the actuarial valuation not inconsistent with those listed in
Schedule 6.5(b). Notwithstanding any provision herein to the contrary, the
transfer amount shall be subject to the applicable requirements of Sections
414(l) and 401(a)(12) of the Code. The amount as so determined shall be
adjusted for investment earnings at the short term investment fund rate earned
by Sellers' Pension Plans (the "Earnings") for the period between the Closing
Date and the actual dates of transfer (see below) and reduced by the amount of
any benefit payments to U.S. Transferred Employees and a proportional share of
investment and administrative expenses relative to asset values for such
period. The amount of assets caused to be transferred pursuant to this Section
shall be calculated by Sellers' actuary, and the actuarial calculations shall
be subject to review and approval by Purchaser's actuary. In the event that
Purchaser's actuary does not agree with the calculation determined by Sellers'
actuary, the determination of the amount to be transferred pursuant to this
Section shall be made by a third, nationally recognized actuarial firm selected
by Sellers' and Purchaser's actuaries (the cost of which shall be borne equally
between Sellers and Purchaser), and the determination of such third actuary as
to the amount to be transferred shall be binding and conclusive upon all
parties hereto. The transfer of assets from Sellers' Pension Plan to
Purchaser's Plan shall be made in cash pursuant to Section 6.5(c). The parties
shall file any necessary IRS Forms 5310-A with respect to such transfer.
(c) All transfers from the Pension Plans to the Purchaser's
Plan shall be made in accordance with the provisions of this Section 6.5(c). As
soon as is administratively practical, but in no event later than 30 days
following the Closing Date, and conditioned upon AlliedSignal having been
provided evidence reasonably satisfactory to it that Purchaser has established
a trust (or trusts) to hold the assets of the Purchaser's Plan and that
Purchaser's Plan is qualified under Section 401(a) of the Code and the trusts
holding assets of the Purchaser's Plan are tax exempt under Section 501(a) of
the Code ("Initial Transfer Date"), AlliedSignal shall cause its trusts to make
an initial transfer of assets in cash equal to 85% of the amount reasonably
estimated by AlliedSignal in good faith to be equal to the Transfer Amount (the
"Initial Transfer Amount"). In addition, prior to the Initial Transfer Date
AlliedSignal shall provide Purchaser with evidence reasonably satisfactory to
Purchaser that the Pension Plans remain qualified under Section 401(a) of the
Code. As soon as practicable
25
after the final determination of the amounts to be transferred ("True-Up
Date"), AlliedSignal shall cause a second transfer to be made in cash of the
"True-Up Amount." The True-Up Amount shall be equal to the following amount:
(Transfer Amount minus Initial Transfer Amount), minus benefit
payments made to U.S. Transferred Employees since the Closing Date
from the Pension Plans, adjusted for Earnings on the excess of the
Transfer Amount over the Initial Transfer Amount from the Initial
Transfer Date to the True-Up Date,
If the Initial Transfer Amount exceeds the Transfer Amount, as soon as
practicable following such determination Purchaser shall cause a transfer to be
made to the respective Pension Plan equal to the excess of the Initial Transfer
Amount over the Transfer Amount, adjusted to reflect earnings at the short term
investment fund rate earned by Purchaser's Plan from the Initial Transfer Date
until the date of transfer.
6.6 Savings Plan. AlliedSignal shall provide that those Employees
participating in the AlliedSignal Savings Plan and AlliedSignal Thrift Plan
("Savings Plans") immediately prior to the Closing Date shall fully vest on the
Closing Date in their respective Savings Plans accounts (the "Accounts"). As
promptly as practicable following the Closing Date, Sellers and Purchaser shall
arrange for the transfer of the Accounts and the corresponding liabilities with
respect to the U.S. Transferred Employees, from the Savings Plans to one or
more tax-qualified plans established or to be established by Purchaser which
provides benefits substantially equivalent to the benefits available under the
applicable Savings Plans. With respect to the plan or plans receiving assets
from the Savings Plans, to the extent permitted by Applicable Law, such plan or
plans shall also (a) provide for tax-deferred contributions and (b) meet all
requirements for a qualified cash or deferred arrangement under Section 401(k)
of the Code. The transfer of assets from the Savings Plans shall be made in
cash, marketable securities, promissory notes presenting participant loans, or
a combination thereof, as determined by AlliedSignal and consented to by
Purchaser. Without limiting the generality of the foregoing, if AlliedSignal
should determine to transfer assets held in Accounts which, immediately prior
to the Closing Date, provide for holding AlliedSignal common stock in such
form, Purchaser agrees to accept transfer of such Accounts in AlliedSignal's
common stock, and, to the extent permitted by law for such reasonable period of
time as Purchaser may determine, to provide U.S. Transferred Employees with an
election to retain AlliedSignal's common stock in their respective plan
accounts or to dispose of such stock and have the proceeds reinvested in other
investment alternatives offered under each such plan. Prior to the transfer
date, Purchaser shall, to the reasonable satisfaction of AlliedSignal's
counsel, present AlliedSignal with such evidence and information (which may
include or be provided by an opinion of Purchaser's counsel satisfactory to
AlliedSignal) as is reasonably necessary to establish that the tax-qualified
plan or plans established or to be established by Purchaser to which the
transfer or transfers described in this Section are to be made are in full
force and effect and meet all the requirements for qualification under Sections
401 and 411(d)(6) of the Code and Sellers shall, to the reasonable satisfaction
of Purchaser's counsel, present Purchaser with such evidence and information as
is reasonably necessary to establish that the Savings Plan meets the
requirements of Section 401(a) of the Code.
26
6.7 Labor Agreements. Purchaser shall assume Sellers' obligations
under the Bargaining Agreements and any applicable side letters and schedules
according to their terms as in effect of and as of the Closing Date, and shall
honor such Bargaining Agreements for the remainder of the effective term
thereof following the Closing Date.
ARTICLE 7. PRE-CLOSING COVENANTS
7.1 [Intentionally left blank].
7.2 [Intentionally left blank].
7.3 [Intentionally left blank].
7.4 [Intentionally left blank].
7.5 Workers' Compensation. The Seller shall retain responsibility for
all workers' compensation events which relate to incidents occurring on or
before the Closing Date. The Purchaser shall have responsibility for all
workers' compensation events which relate to incidents occurring after the
Closing Date.
7.6 Insurance-Primary Casualty Program. Sellers maintain at present a
series of insurance programs pursuant to which various insurance carriers have
provided and are providing insurance coverage in respect of the Business
relating to automobile liability, general liability, employers liability and
non-aircraft products liability (the "Primary Casualty Program") and Sellers
and Purchaser understand and agree that Sellers are not transferring to
Purchaser pursuant hereto any rights or interests in such Primary Casualty
Program, nor, except as otherwise set forth herein, shall Sellers be required
to maintain any of such coverages or limit in any manner Sellers' right to
change deductible levels or other terms or conditions thereof. As between
Purchaser and Sellers, however, it is agreed that the following shall apply to
claims with a date of occurrence prior to the Closing Date that are covered by
the Primary Casualty Program:
7.6.1 Claims Responsibility and Procedures. Purchaser shall
promptly notify in writing Sellers of any claims against the Business,
Purchaser, Sellers or any of their Affiliates arising from occurrences which
took place prior to the Closing Date relating to the Business or its prior
assets, business or operations. To the extent coverage is available under the
Primary Casualty Program, Purchaser shall handle such claims through the
applicable insurance carrier and to the limited extent required therefor is
hereby appointed as Sellers' agent in dealing with any such applicable
insurance carriers, such agency, however, being subject to revocation at any
time if Purchaser fails to comply with the provisions of this Section 7.6.
Purchaser through the applicable insurance carrier may settle any such claim on
a basis which in its judgment is reasonable provided, however, that Purchaser
agrees not to settle any such claims for an amount in excess of $50,000 without
prior consultation with AlliedSignal. Sellers and Purchasers shall cooperate
with each other in the defense of any such claims and will keep each other
informed of significant developments with respect
27
thereto. Neither Purchaser nor Sellers will knowingly take any action that
prejudices the other party in the collection of any applicable insurance
proceeds.
7.7 No Inconsistent Action. Subject to Sections 9.1 and 9.2, the
parties hereto shall not take any action inconsistent with their obligations
under this Agreement or which could materially hinder or delay the consummation
of the transactions contemplated by this Agreement. None of the parties hereto
shall take or omit to take any action that could result in any of their
respective representations and warranties not being true in all material
respects on the Closing Date.
7.8 [Intentionally left blank].
7.9 Non-Solicitation. Sellers agree that until December 22, 1999, they
shall not, and they shall cause each of their respective Affiliates not to,
without the prior consent of Purchaser, employ or solicit for employment any
person currently employed by the Business (other than a person solicited or
hired as a result of a general solicitation (such as an advertisement) not
specifically directed to employees of the Business).
7.10 Refunds and Remittances. In the event that Sellers or their
Affiliates receive any amount that is properly due and owing to Purchaser in
accordance with the terms of this Agreement, Sellers shall cause same to be
promptly remitted to Purchaser at the address specified in Section 13.2.
7.11 Enforcement of Confidentiality Provisions. Sellers agree to use
reasonable best efforts to enforce, at the written request of Purchaser, (i)
the confidentiality provisions of any agreements related to the sale of the
Business (excluding any employee solicitation provisions) and (ii) all
confidentiality agreements, if any, entered into between Sellers or any of
their Affiliates and any of their employees, in each case to the extent such
provisions pertain to the Business as of the Closing Date.
7.12 Novation of Government Contracts. As soon as reasonably
practicable following the Closing, AlliedSignal shall, in accordance with
Federal Acquisition Regulations Part 42, Section 42.12, submit in writing to
each responsible Contracting Officer (as such term is defined in Federal
Acquisition Regulations Part 42, Section 42.102(a)), a request for the U.S.
Government to (i) recognize Purchaser in accordance with this Agreement and
(ii) enter into a novation agreement (the "Novation Agreement") substantially
in the form contemplated by such regulations. AlliedSignal shall thereby
reasonably assist Purchaser in obtaining all consents, approvals and waivers
required for the purpose of processing, entering into and completing the
Novation Agreement with regard to any of the Government Contracts, including
responding to any reasonable requests for information by the U.S. Government
with regard to such Novation Agreement.
7.13 Further Actions. Subject to the terms and conditions hereof,
Sellers and Purchaser agree to use their reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including without limitation,
taking all necessary or advisable action (i) in respect of the works council of
ELAC and (ii)
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to terminate the profit/loss pooling arrangement (the "Pooling Arrangement")
between AS Deutschland and ELAC not later than December 31, 1998.
7.14 Letters of Credit. Schedule 7.14 identifies letters of credit and
other similar obligations in respect of which AlliedSignal will remain as
account party ("Retained L/Cs") and other letters of credit and similar
obligations ("Assumed L/Cs") in respect of which Purchaser shall, not later
than May 31, 1998, either (a) become account party or (b) issue replacement
letters of credit, with Purchaser as account party, and obtain the cancellation
of the Assumed L/Cs and release Sellers from any obligations under any related
credit agreements. In the event that, after using its reasonable best efforts,
Purchaser cannot perform its obligations under Section 7.14(a) or (b) with
respect to the Assumed L/Cs, Purchaser shall provide back-up letters of credit
with respect to such Assumed L/Cs. Any Assumed L/C in respect of which
Purchaser has not issued a replacement or back-up letter of credit as aforesaid
by May 31, 1998 may be cancelled by AlliedSignal and Purchaser shall reimburse
AlliedSignal forthwith for all amounts drawn by the beneficiary under any such
cancelled letter of credit; provided, however, that prior to May 31, 1998,
AlliedSignal shall not waive any requirements of or agree to amend any such
Retained L/C without the prior written consent of Purchaser. The parties
acknowledge that the identity of the account party under any Retained L/C and
any Assumed L/C and other similar obligations does not alter the terms of this
Agreement, meaning, specifically and without limitation, that the provisions of
Section 3.1 (Assumed Liabilities), 3.2 (Excluded Liabilities) and Article 12
(Indemnification) are unaffected by the identity of the account party, and if a
demand for payment is made under a Retained L/C or an Assumed L/C, the
financial responsibility for the circumstances underlying such demand shall be
determined by this Agreement and not by the identity of the account party under
the letter of credit in question.
7.15 1985 Capitalization of ELAC. AlliedSignal shall ensure that the
1985 capitalization of ELAC is confirmed by German counsel to have been lawful
and proper. The parties shall cooperate in any steps that may be necessary to
correct the capitalization, at AlliedSignal's expense.
7.16 MCDV Subcontract. Following the Closing, AlliedSignal and
Purchaser shall use their reasonable best efforts to prepare a subcontract (the
"MCDV Subcontract") to be entered into between AlliedSignal Canada Inc. ("ASC")
and Purchaser relating to the contract between ASC and XxxXxxxxx, Xxxxxxxxx and
Associates Ltd. for the maritime coastal defense vessel, as amended (the "MCDV
Contract"). The MCDV Subcontract shall be reasonably acceptable to AlliedSignal
and Purchaser and shall transfer to Purchaser in U.S. dollars the full economic
benefit of the MCDV Contract (based on the exchange rate for U.S. and Canadian
dollars as reported in the Wall Street Journal on the date of any payment).
Purchaser shall, and AlliedSignal shall cause ASC to, enter into the MCDV
Subcontract promptly following the finalization thereof to the reasonable
satisfaction of AlliedSignal and Purchaser. In the event that (i) ASC shall be
prohibited from making any payment to Purchaser under the MCDV Subcontract,
(ii) any Canadian withholding tax would be applicable to any payment to
Purchaser by ASC under the MCDV Subcontract or (iii) ASC would lose Canadian
content credit as a result of any payment to Purchaser by ASC under the MCDV
Subcontract, AlliedSignal shall, on the date any such payment is due and in
lieu of such payment from ASC under the MCDV Subcontract, make a payment to
Purchaser in an
29
amount equal to the amount of the payment due under the MCDV Subcontract,
without regard to any Canadian withholding tax. Purchaser shall not have any
liability under the MCDV Subcontract for any obligation or liability relating
to the ownership or operation of the Assets or the Business on or prior to the
Closing Date relating to (a) the provision of Canadian content, (b) any penalty
or excise tax for failure to meet Canadian content obligations or (c) any
obligation for liquidated damages for failure to timely deliver.
ARTICLE 8. CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement are
subject to the fulfillment prior to or at the Closing of each of the following
conditions, any one or more of which may be waived by Purchaser in its sole
discretion:
(a) On the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency
or body of competent jurisdiction that is in effect that restrains or prohibits
the consummation of the transactions contemplated by this Agreement or any such
injunction, restraining order or decree or any pending lawsuit, claim or legal
action relating to the transactions contemplated by this Agreement which would
materially adversely affect such transactions or Purchaser's ownership, use or
enjoyment of the Business or any part thereof.
(b)(i) All of the representations and warranties of Sellers,
including those set forth in Section 8.1(b)(ii) and (iii) below, contained in
this Agreement or in any certificate, instrument or other document delivered to
Purchaser pursuant hereto shall be complete, true and correct in all respects
on and as of the Effective Date, with the same force and effect as though such
representations and warranties had been made on and as of the Effective Date,
except to the extent that any such representation and warranty is made as of a
specified date, in which case, such representation and warranty shall have been
true and correct as of such date;
(ii) The representations and warranties of Sellers contained
in Sections 4.1, 4.2, 4.3, 4.8, 4.10, 4.11, 4.12, 4.15, 4.16, 4.17, 4.18, 4.20,
4.21, 4.22, 4.23, 4.25, 4.26 and 4.27 of this Agreement or in any certificate,
instrument or other document delivered to Purchaser pursuant hereto shall be
complete, true and correct in all respects on the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except to the extent that any such representation
and warranty is made as of a specified date, in which case, such representation
and warranty shall have been true and correct as of such date; and
(iii) To the Knowledge of Sellers, the representations and
warranties contained in Section 4.9 of this Agreement or in any certificate,
instrument or other document delivered to Purchaser pursuant hereto shall be
complete, true and correct in all respects on the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, except to the extent that any such
30
representation and warranty is made as of a specified date, in which case, such
representation and warranty shall have been true and correct as of such date.
(c) Sellers shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by them
prior to or on the Closing Date.
(d) Purchaser shall have received a certificate, dated the
Closing Date, from an authorized officer of each of the Sellers to the effect
that the conditions specified in (b) and (c) above have been fulfilled.
(e) The Transition Services Agreement, attached as Exhibit B
hereto, shall have been executed and delivered by the parties thereto.
8.2 Conditions to the Obligations of Sellers. The obligations of
Sellers under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions, any one or more of which may be
waived by Sellers in their sole discretion:
(a) On the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency
or body of competent jurisdiction that is in effect that restrains or prohibits
the consummation of the transactions contemplated by this Agreement.
(b) The representations and warranties of Purchaser contained
in this Agreement or in any certificates, instruments or other documents
delivered to AlliedSignal pursuant hereto shall be complete, true and correct
on the Closing Date, with the same force and effect as though such
representations and warranties, as updated, had been made on and as of the
Closing Date, except to the extent that any such representation and warranty is
made as of a specified date, in which case, such representation and warranty
shall have been true and correct as of such date.
(c) Purchaser shall have performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by the
Closing Date.
(d) AlliedSignal shall have received a certificate, dated the
Closing Date, from an authorized officer of the Purchaser to the effect that
the conditions specified in (b) and (c) above have been fulfilled.
ARTICLE 9. TERMINATION AND SURVIVAL
9.1 Termination. Notwithstanding anything to the contrary set forth
herein, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Sellers; or
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(b) by Purchaser, on the one hand, or Sellers, on the other
hand, upon written notice to the other, if such other party or its Affiliate
has breached any representation, warranty or covenant contained in this
Agreement in any respect, if the non-breaching party has notified the breaching
party of the breach in writing and the breach has continued without cure for a
period of thirty (30) days after notice of the breach; or
(c) by the Purchaser, on the one hand, or Sellers, on the
other hand, if there shall be in effect any law or regulation that prohibits
the consummation of the Closing or if the consummation of the Closing would
violate any non-appealable final order, decree or judgment of any court or
governmental body having jurisdiction over the transactions contemplated
hereby; or
(d) by either party if the Closing shall not have occurred by
April 1, 1998; provided that the terminating party is not in material breach of
its obligations under this Agreement.
9.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, this Agreement shall become void and of no further force and
effect, and none of the parties hereto (nor their respective Affiliates,
directors, shareholders, officers, employees, agents, consultants,
attorneys-in-fact or other representatives) shall have any liability in respect
of such termination except that the obligations contained in Sections 9.2,
13.1, 13.3 and 13.9 shall survive; provided, however, that if such termination
is effected pursuant to Section 9.1(b) or (d) and the failure to consummate the
transactions contemplated hereby was the result of any of the conditions to
Closing having not been fulfilled by reason of the breach by either Purchaser,
on the one hand, or Sellers, on the other hand, of their respective covenants,
representations and/or warranties set forth in this Agreement or in any
agreement, document or instrument ancillary hereto, the party having so
breached shall remain liable to the other party for such breach.
ARTICLE 10. CLOSING DOCUMENTS
10.1 Documents to be Delivered by Sellers. At the Closing, Sellers
shall deliver to Purchaser the following documents:
(i) Copies of resolutions of each of the Sellers
certified by a Secretary, Assistant Secretary or other appropriate
officer of such entity, authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby;
(ii) Executed deeds, bills of sale or other appropriate
instruments of transfer with respect to all of the Real Property,
Personal Property, Inventory, Accounts Receivable and any other Assets
not transferred or assigned by any other documents or instruments
described in this Section;
(iii) Executed and acknowledged Assignments by ASTI
sufficient to transfer title to the Intellectual Property;
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(iv) Executed assignment and assumption agreements
with respect to the Contracts;
(v) Executed documents of assignment or transfer with
respect to each of the permits, licenses and authorizations listed in Schedule
4.17;
(vi) One executed assumption of liability agreement by
which Purchaser will assume the Assumed Liabilities pursuant to Section 3.1
(the "Assumption of Liability Agreement");
(vii) One executed copy of the License Agreement;
(viii) A certificate of an appropriate officer of
AlliedSignal relating to the representations, warranties and covenants of
AlliedSignal made herein as provided in Section 8.1(b) and (c);
(ix) A share transfer agreement in customary form and
a certificate in the name of Purchaser representing the ELAC Shares;
(x) Any other document reasonably necessary to
effectuate the transactions contemplated hereby;
(xi) Sellers shall have delivered to Purchaser
certificate(s) in form and substance reasonably satisfactory to Purchaser, duly
executed and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding pursuant to the provisions of
the Foreign Investment Real Property Tax Act (e.g., a certificate of
non-foreign status as provided in Treasury Regulation section
1.1445-2(b)(2)(iii)(B)); and
(xii) One executed Transition Services Agreement.
10.2 Documents to be Delivered by Purchaser. At the Closing, Purchaser
shall pay the Purchase Price to AlliedSignal and shall execute where applicable
and deliver to AlliedSignal the following documents:
(i) Copies of resolutions of the Purchaser, certified
by the Secretary or Assistant Secretary of Purchaser, authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby;
(ii) Executed assignment and assumption agreement with
respect to the Contracts;
(iii) One executed Assumption of Liability Agreement;
(iv) A certificate of an appropriate officer of
Purchaser relating to the representations, warranties and covenants
made herein by Purchaser, as provided in Sections 8.2(b) and (c);
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(v) One executed copy of the License Agreement;
(vi) Any other document reasonably necessary to
effectuate the transactions contemplated hereby;
(vii) One resale certificate regarding inventory; and
(viii) One executed copy of the Transition Services
Agreement.
ARTICLE 11. POST CLOSING OBLIGATIONS
11.1 Further Assurances. From time to time after the Closing, without
further consideration, the parties shall cooperate with each other and shall
execute and deliver instruments of transfer or assignment, or such other
documents to the other party as such other party reasonably may request to
evidence or perfect Purchaser's right, title and interest to the Assets, and
otherwise carry out the transactions contemplated by this Agreement, including
providing that Purchaser will be able to utilize the AlliedSignal sales office
in Canada previously used by the Business. Any cash received by the Sellers
after the Closing in respect of any Asset shall be immediately remitted by
Sellers to Purchaser.
11.2 Access to Books and Records. After the Closing, Purchaser shall
permit AlliedSignal to have reasonable access to and the right to make copies
of such of Sellers' books, records and files as constitute part of the Assets
or the ELAC Assets for any reasonable purpose at any time during regular
business hours, such as for use in litigation or financial reporting, tax
return preparation, or tax compliance matters.
11.3 Cooperation in Litigation. The parties shall reasonably cooperate
with each other at the requesting party's expense in the prosecution or defense
of any dispute or litigation or other proceeding arising from their respective
operation of the Business, including but not limited to affording reasonable
access to and providing information regarding amounts in dispute, information
regarding former employees of the Business and documentation created in the
running of the Business relating to such dispute or litigation. Purchaser and
Sellers shall cooperate fully, as and to the extent reasonably requested by the
other party, and at their own cost and expense, in connection with the filing
of Tax Returns, the retention of records and the forwarding of any relevant
notices or other information received from any Taxing authority and any audit,
litigation or other proceeding with respect to Taxes, and shall fully and
accurately submit any tax data packages reasonably requested by Sellers within
the time periods established by the Sellers Tax department consistent with past
practices.
11.4 Proprietary Information. Prior to the Closing Date, the Business
was routinely supplied copies of proprietary and confidential information
relating to strategic, technical, and/or marketing plans of AlliedSignal and
its Affiliates and their various operations unrelated to the Business. Although
AlliedSignal has attempted to recover such information from the Business, some
may still be present within the Business. Purchaser therefore agrees that it
34
will not use such information for any purpose whatsoever, and shall destroy
any remaining copies.
11.5 Covenant Not to Compete. AlliedSignal and each of its Affiliates
agrees that for a period of five years after the Closing Date, neither it nor
any of its Affiliates will, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
any business whether in corporate, proprietorship or partnership form or
otherwise competitive with the Business as currently conducted, except for (i)
any business, service or product line acquired by AlliedSignal, directly or
indirectly, after the Closing Date to the extent the revenues attributable to
the competing business do not account for in excess of 20% of the revenues of
the business acquired or (ii) any investment by the Savings Plans or the
Pension Plans of AlliedSignal.
11.6 Change of Name. To the extent AS Deutschland has not done so
prior to Closing, Purchaser covenants that promptly after Closing it will
change the legal name of ELAC and its wholly owned pension fund subsidiary in
accordance with German law to eliminate the reference therein to
"AlliedSignal."
11.7 Tax Election. The Purchaser may at its option make a section 338
election with respect to the ELAC Shares or in the alternative, the Purchaser
may purchase the ELAC Shares through a German acquisition vehicle; provided
that, in either case, the Seller consents to the making of such election or
purchase which such consent shall not be unreasonably withheld.
11.8 Research and Experimental Expenses. Sellers will furnish to the
Purchaser as soon as reasonably practicable, but in no event more than 180 days
after Closing, at Seller's cost and expense, all information reasonably
requested relating to the base period research expenses and any other
information to allow Purchaser to claim research and experimental credits in
accordance with the relevant sections of the Code and Treasury Regulations
promulgated thereunder.
11.9 Pooling Arrangement. As described in Section 7.13, the Pooling
Arrangement is to be terminated not later than December 31, 1998.
Notwithstanding the existence of the Pooling Arrangement, any net earnings of
ELAC during the period from the Effective Date until the date the Pooling
Arrangement is terminated (the "Pooling Period") shall be treated as an Asset,
and all losses and the consequences thereof shall be treated as an Assumed
Liability, for purposes of this Agreement.
ARTICLE 12. INDEMNIFICATION
12.1 Indemnification by Sellers. Sellers shall defend, indemnify and
hold harmless Purchaser and Purchaser's directors, shareholders, officers,
employees, agents, Affiliates, successors and each of the heirs, executors and
successors and assigns of any of the foregoing (collectively, the "Purchaser
Indemnified Parties") from and against any and all claims, liabilities,
obligations, losses, costs, expenses (including, without limitation, reasonable
legal,
35
accounting and similar fees and expenses), fines, damages (individually a
"Loss" and collectively "Losses"), arising out of:
(a) any breach or violation of any of the covenants or
agreements made by Sellers in this Agreement or the Other Agreements;
(b) any breach of, or any inaccuracy or misrepresentation in,
any of the representation or warranties made by Sellers in this Agreement or in
any Schedule, agreement, instrument, certificate or similar document required
to be delivered pursuant to the terms hereof; or
(c) any of the Excluded Liabilities or Excluded Assets.
12.2 Tax Indemnification. The Sellers shall, jointly and severally, be
responsible for, shall pay or cause to be paid, and shall indemnify and hold
harmless the Purchaser Indemnified Parties from and against any and all Taxes
for or in respect of each of the following:
(a) any and all Taxes with respect to any taxable period or a
portion thereof, of ELAC (or any predecessor) ending on or before the Closing
Date;
(b) with respect to any and all Taxes of any member of a
consolidated, combined or unitary group of which ELAC (or any predecessor) is
or was a member on or prior to the Closing Date by reason of the liability of
ELAC pursuant to Treasury Regulation Section 1.1502-6(a) (or any analogous or
similar state, local or foreign law or regulation), as a transferee or
successor, by contract, or otherwise;
(c) any Taxes arising out of a breach of the representations
and warranties contained in Section 4.16; and
(d) any payments required to be made after the Closing Date
under any Tax sharing, Tax indemnity, Tax allocation or similar contracts
(whether or not written), including but not limited to the profit/loss pooling
arrangement with AS Deutschland set forth on Schedule 4.16, to which ELAC was
obligated, or was a party, on or prior to the Closing Date.
12.3 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless AlliedSignal and AlliedSignal's directors, shareholders, officers,
employees, agents, consultants, representatives, Affiliates, successors and
assigns (the "AlliedSignal Indemnified Parties") from and against any and all
Losses arising out of:
(a) any breach or violation by Purchaser of any of the
covenants or agreements made by Purchaser in this Agreement or the Other
Agreements;
(b) any breach of, or any inaccuracy in any of the
representations or warranties made by Purchaser in this Agreement, or in any
Schedule, agreement, certificate, instrument or similar documents required to
be delivered pursuant to the terms hereof; or
36
(c) any Assumed Liability.
12.4 Indemnification Procedure. (a) Any party seeking indemnification
hereunder (the "Indemnitee") shall notify the party liable for such
indemnification (the "Indemnitor") in writing of any event, omission or
occurrence which the Indemnitee believes has given or could give rise to Losses
which are indemnifiable hereunder (such written notice being hereinafter
referred to as a "Notice of Claim"). Any Notice of Claim shall be given
promptly after the Indemnitee becomes aware of such event, omission or
occurrence; provided, that the failure of any Indemnitee to give notice as
provided in this Section 12.4 shall not relieve the Indemnitor of its
obligations under this Section 12.4, except to the extent that the Indemnitor
is actually prejudiced by such failure to give notice. A Notice of Claim shall
specify in reasonable detail the nature and the particulars of the event,
omission or occurrence giving rise to a right of indemnification to the extent
known by or available to Indemnitee. The Indemnitor shall satisfy its
obligations hereunder within thirty (30) days of its receipt of a Notice of
Claim.
(b) All costs and expenses incurred by the Indemnitor in
defending any claim or demand shall be a liability of, and shall be paid by,
the Indemnitor. Except as hereinafter provided, in the event that the
Indemnitor notifies the Indemnitee within the 30 day period that it desires to
defend the Indemnitee against such claim or demand, the Indemnitor shall be
deemed to waive its right to contest such Indemnitee's right to indemnification
hereunder and shall have the right to defend the Indemnitee by appropriate
proceedings and shall have the sole power to direct and control such defense.
If any Indemnitee desires to participate in any such defense, it may do so at
its sole cost and expense; provided, that such Indemnitee shall have the right
to employ separate counsel to represent such Indemnitee in such defense, at the
Indemnitor's expense, if (i) in such Indemnitee's reasonable judgement and on
the advice of counsel, a conflict of interest between such Indemnitor and such
Indemnitee exists with respect to such claim or demand or (ii) the Indemnitor
agrees to the retention of such counsel. So long as the Indemnitor is
reasonably contesting any such claim or demand in good faith, the Indemnitee
shall not pay or settle a claim or demand without the consent of the Indemnitor
(unless the Indemnitee waives in writing any right to indemnity therefor). The
Indemnitor may settle any claim or demand without the consent of the Indemnitee
provided that such settlement includes a full, unconditional and complete
release of the Indemnitee, and provided also that no such settlement will,
without the prior written consent of the Indemnitee, impose any obligation or
restriction on the Indemnitee or any of its assets or businesses. So long as
the Indemnitor is defending in good faith any such third party claim, demand,
suit, action or proceeding, the Indemnitee shall at all times cooperate in all
reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees available or otherwise render
reasonable assistance to, the Indemnitor and shall be reimbursed for its
reasonable out-of-pocket expenses related thereto. In the event that the
Indemnitor fails to timely defend, contest or otherwise protect against any
such third party claim, demand, suit, action or proceeding, the Indemnitee at
the Indemnitor's expense shall have the right, but not the obligation, to
defend, contest, assert crossclaims or counterclaims, or otherwise protect
against, the same and may make any compromise or settlement thereof and be
entitled to all amounts paid as a result of such third party claim, demand,
suit or action or any compromise or settlement thereof.
37
(c) The Indemnitor, following receipt of any notice from any
Indemnitee requesting reimbursement for a Loss (which notice documents in
reasonable detail the Loss or portion thereof by the Indemnitee) shall promptly
and in any case within thirty days of receipt provide such reimbursement,
unless and only to the extent that the Indemnitor disputes in good faith its
indemnity obligation with respect to such Loss.
(d) Each Indemnitee shall reasonably cooperate in complying
with any applicable foreign, federal, state or local laws, rules or regulations
or any discovery or testimony necessary to effectively carry out the
Indemnitor's obligations hereunder. Such Indemnitee shall be reimbursed for any
reasonable out-of-pocket expenses incurred in connection with such compliance.
12.5 Survival and Limitations. Except as otherwise provided herein,
the warranties and representations of the parties contained in this Agreement
or in any instrument delivered pursuant hereto, as deemed to have been given as
of the Effective Date or the Closing Date, as the case may be, pursuant to
Section 8.1(b), will survive the Closing Date and will remain in full force and
effect thereafter for a period of two years from the Closing Date; provided
that the representations and warranties contained in (i) Sections 4.8 and 4.18
shall survive the Closing Date indefinitely and (ii) Sections 4.3, 4.10, 4.11,
4.16 and 4.21 which shall survive the Closing Date until 90 days following the
expiration of any statute of limitations (or extensions thereof) applicable to
the matters described therein; and provided further that in the event notice of
any claim for indemnification is given within the applicable survival period,
the representations and warranties that are the subject of such indemnification
claim shall survive until such time as such claim is finally resolved. Anything
to the contrary contained herein notwithstanding, (a) neither party shall
assert any claim against the other for indemnification (not including
indemnification for Taxes) hereunder with respect to any inaccuracy or breach
of such warranties or representations unless and until the amount of such claim
or claims, including any claims deemed made pursuant to Section 12.8, shall
exceed $750,000 calculated on a cumulative basis and not a per item basis, and
then only in respect to the excess over said $750,000; and (b) neither party
shall be entitled to recover from the other more than 50% of the sum of (I) the
Purchase Price hereunder and (II) the Purchase Price under the Facility Sale
Agreement with respect to all claims for indemnity with respect to any
inaccuracy or breach of such warranties or representations.
12.6 Adjustment for Insurance and Taxes. The amount (an "Indemnity
Payment") which an Indemnitor is required to pay on behalf of any Indemnitee
pursuant to this Article 12 shall be reduced by the amount of any insurance
proceeds theretofore or thereafter actually received by or on behalf of the
Indemnitee in reduction of the related indemnifiable loss. An Indemnitee which
shall have received or on behalf of which there shall be paid an Indemnity
Payment and which shall subsequently receive, directly or indirectly, insurance
proceeds in respect of the related indemnifiable loss, shall pay to the
Indemnitor the amount of such insurance proceeds or, if lesser, the amount of
the Indemnity Payment. Where any tax benefit is available to the Indemnitee
with respect to an indemnifiable event, the indemnity payment shall be reduced
dollar for dollar by the amount of such tax benefit and where any net Tax cost
is incurred by the Indemnitee arising from the receipt of indemnity payments
hereunder, the indemnity payment shall be increased dollar for dollar by the
amount of such Tax cost (grossed up for such increase), provided that such Tax
benefit or Tax cost shall be computed
38
at the highest federal, state, local and foreign corporate income tax rate of
the jurisdiction in which such Tax benefit or Tax cost so relates.
12.7 Environmental Liabilities. (a) To the fullest extent permitted
under (i) the Stock Purchase Agreement pursuant to which AlliedSignal acquired
ELAC from Honeywell and (ii) Applicable Law, AlliedSignal agrees to assign its
indemnification rights if any in respect of the ELAC facility to Purchaser and
to the extent not assignable to enforce such provisions for the benefit of
Purchaser and to provide any amounts it receives in connection therewith to
Purchaser.
(b) Notwithstanding Section 3.2(d), (i) Purchaser shall
indemnify the AlliedSignal Indemnified Parties from and against the first $3
million of Losses, in aggregate, in respect of the combined Environmental
Liabilities hereunder and under the Facility Sale Agreement and 50% of the next
$2 million of such Losses and (ii) AlliedSignal shall indemnify the Purchaser
Indemnified Parties from and against any other Losses relating to Environmental
Liabilities.
12.8 Facility Sale Agreement. Purchaser agrees to indemnify the Allied
Signal Indemnified Parties from and against amounts up to $750,000, calculated
on a cumulative basis and not a per item basis, paid by Sellers under Article
11 of the Facility Sale Agreement for claims under the Facility Sale Agreement
for indemnification (not including indemnification for Taxes) thereunder with
respect to any inaccuracy or breach of the warranties or representations
thereunder. If AlliedSignal shall be liable to any party pursuant to the
Facility Sale Agreement (a "Facility Sale Liability"), Purchaser shall
indemnify AlliedSignal to the extent the amount of such Facility Sale Liability
exceeds the amount for which Sellers would have been liable under this
Agreement had the Real Estate Assets (as defined in the Facility Sale
Agreement) been included in the Assets. Any payments made pursuant to this
Section 12.8 shall be deemed "claims" for purposes of the $750,000 threshold
set forth in Section 12.5. Sellers shall not be required to pay more than once
in respect of any Loss.
ARTICLE 13. MISCELLANEOUS
13.1 Expenses. Except as specifically set forth elsewhere herein and
except that a party not in breach of this Agreement shall be entitled to
recover from a breaching party all expenses and costs incurred by the
non-breaching party by reason of such breach (including, without limitation all
legal expenses and costs), each of the parties hereto shall pay its own
expenses and costs incurred or to be incurred by it in negotiating, closing and
carrying out this Agreement, and, in no event, shall any such fees and expenses
of the Sellers constitute "Assumed Liabilities" under this Agreement.
13.2 Notices. Any notice or communication given pursuant to this
Agreement by a party hereto to the other party shall be in writing and hand
delivered, or mailed by registered or certified mail, postage prepaid, return
receipt requested (notices so mailed shall be deemed given when mailed), or
sent via facsimile, with an original mailed as follows:
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If to AlliedSignal or Sellers:
AlliedSignal Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Vice President and Chief Financial Officer
Telecopier: 000-000-0000
If to Purchaser:
L-3 Communications Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telecopier: 000-000-0000
with a required copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telecopier: 000-000-0000
13.3 Confidentiality. AlliedSignal and Purchaser have entered into a
Confidentiality Agreement dated September 23, 1997 which notwithstanding any
provision herein to the contrary shall survive the execution and delivery of
this Agreement and the Closing hereunder.
13.4 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.5 Entire Agreement/Termination of December Agreement. Except for
the Confidentiality Agreement referred to in Section 13.3, this Agreement and
the Other Agreements are the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior communications,
representations, agreements and understandings between the parties hereto,
whether oral or written, including any prior version of this Agreement executed
and delivered by the parties hereto. On December 22, 1997, the parties hereto
entered into that certain Purchase Agreement (the "December Agreement")
regarding the purchase and sale of the Assets. Since the date of the December
Agreement, Purchaser has conducted an audit and other examinations of the
Business and has asserted certain claims with respect to the December
Agreement, relating, inter alia, to the financial position and business
prospects of the Business. The parties have resolved all such claims and, for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, have restated their agreement with respect to the purchase and
sale of the Business, as set forth in this Agreement. The December Agreement is
hereby terminated, is
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of no further force or effect, and no party shall have any right or obligation,
whether as a matter of the law of contract or otherwise, under, arising out of
or relating to, the December Agreement or any matter appearing in the December
Agreement that does not appear in this Agreement (including, without
limitation, the representations and warranties of Sellers that do not appear in
this Agreement). The agreement between the parties as to the purchase and sale
of the Business is expressed in its entirety in this Agreement.
13.6 Construction. When the context so requires, references herein to
the singular number include the plural and vice versa and pronouns in the
masculine or neuter gender include the feminine. The headings contained in this
Agreement and the tables of contents, exhibits and schedules are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
13.7 Assignment. This Agreement may not be assigned, in whole or in
part, by any party hereto without the prior written consent of the other
parties hereto, which consent shall not unreasonably be withheld; provided that
Purchaser may, without the consent of Sellers, assign its rights and
obligations, in whole or in part, to any wholly-owned subsidiary of Purchaser
so long as Purchaser remains bound by all the terms of this Agreement.
13.8 Amendment. This Agreement may be amended, supplemented or
otherwise modified only by written agreement duly executed by the parties
hereto.
13.9 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of New York, disregarding its conflicts of laws
principles which may require the application of the laws of another
jurisdiction.
13.10 No Third Party Rights. This Agreement is not intended and shall
not be construed to create any rights in any parties other than Sellers and
Purchaser and no other person shall assert any rights as a third party
beneficiary hereunder.
13.11 Exhibits and Schedules. The Exhibits and Schedules attached
hereto are incorporated into this Agreement and shall be deemed a part hereof
as if set forth herein in full. References herein to "this Agreement" and the
words "herein," "hereof" and words of similar import refer to this Agreement
(including Exhibits and Schedules) as an entirety. In the event of any conflict
between the provisions of this Agreement and any such Exhibit or Schedule, the
provisions of this Agreement shall control.
13.12 Waivers. Any waiver of rights hereunder must be set forth in
writing. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained herein, or in any documents delivered or to be delivered
pursuant to this Agreement or in connection with the Closing hereunder. A
waiver of any breach or failure to enforce any of the terms or conditions of
this Agreement shall not
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in any way affect, limit or waive any party's rights at any time to enforce
strict compliance thereafter with every term or condition of this Agreement.
13.13 Severability. If and to the extent that any court of competent
jurisdiction holds any provisions (or any part thereof) of this Agreement to be
illegal, invalid or unenforceable, such holding shall in no way affect the
validity of the remainder of this Agreement.
13.14 Bulk Sales Law. The parties hereto agree to waive compliance
with the provisions of the bulk sales law of any jurisdiction. The Sellers
agree to indemnify and hold harmless Purchaser from and against any and all
liabilities which may be asserted by third parties against Purchaser as a
result of such noncompliance.
13.15 Knowledge of Sellers. For purposes of this Agreement, Knowledge
of Sellers or any similar expression shall mean the knowledge, after due
inquiry, of (i) the executive officers of Sellers; (ii) Xxxxxx Xxxxxxx; or
(iii) Xxxxxx Xxxxxxx and all individuals who directly report to Xx. Xxxxxxx.
13.16 Personal Liability. The directors, officers, stockholders,
employees, agents, consultants, representatives and affiliates of each of the
parties hereto acting in such capacity shall not in such capacity have any
personal liability or obligation arising under this Agreement (including any
claims that the other parties may assert).
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IN WITNESS WHEREOF, Sellers and Purchaser have duly executed
and delivered this Agreement as of the day and year first above written.
AlliedSignal Inc.
By: /s/ Xxxxxxxx Xxxxxxx
__________________________
AlliedSignal Technologies, Inc.
By: __________________________
AlliedSignal Deutschland GmbH
By: __________________________
L-3 Communications Corporation
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
__________________________
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