Conformed Copy
Exhibit 99.2
AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER
by and among
BE Aerospace, Inc.,
BE Aerospace Acquisition Corp.,
Aerospace Lighting Corporation
and
The Stockholders of
Aerospace Lighting Corporation
JULY 30, 1998
TABLE OF CONTENTS
1. Definitions............................................................1
1.1. Rules of Construction.....................................10
2. The Merger............................................................10
2.1. Constituent Corporations; Surviving Corporation...........10
2.2. Certificate of Incorporation and Bylaws of the Surviving
Corporation.............................................10
2.3. Directors and Officers of the Surviving Corporation.......10
2.4. Conversion of the Shares..................................11
2.5. Sellers' Representatives..................................11
2.6. The Closing...............................................12
2.7. Surrender of Shares; Stock Transfer Books.................12
2.8. Further Assurances........................................13
3. Representations and Warranties of the Sellers.........................13
3.1. Organization of the Company...............................13
3.2. Capitalization and Ownership of the Company...............14
3.3. Authorization of Transaction..............................14
3.4. Noncontravention..........................................15
3.5. Brokers' Fees.............................................15
3.6. Title to Assets...........................................15
3.7. Subsidiaries..............................................16
3.8. Financial Statements......................................16
3.9. Indebtedness; Guarantees..................................17
3.10. Absence of Changes........................................17
3.11. Absence of Undisclosed Liabilities........................19
3.12. Legal and Other Compliance................................20
3.13. No Material Adverse Change................................20
3.14. Taxes.....................................................20
3.15. Property, Plant and Equipment.............................22
3.16. Intellectual Property.....................................23
3.17. Inventories...............................................25
3.18. Contracts.................................................26
3.19. Notes and Accounts Receivable.............................27
3.20. Powers of Attorney........................................28
3.21. Insurance and Risk Management.............................28
3.22. Litigation................................................28
3.23. Product Warranties; Defects; Liability....................28
3.24. Employees.................................................29
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3.25. Employee Benefits.........................................29
3.26. Environment, Health, and Safety...........................30
3.27. Affiliated Transactions...................................32
3.28. Government Contracts......................................33
3.29. Distributors, Customers, Suppliers........................33
3.30. No Illegal Payments.......................................33
3.31. Books and Records.........................................33
3.32. Disclosure................................................34
3.33. Investment Intent; Related Matters, Including Securities
Law Matters.............................................34
4. Representations and Warranties of the Buyer and Acquisition...........35
4.1. Organization of the Buyer.................................35
4.2. Authorization of Transaction..............................35
4.3. Noncontravention..........................................35
4.4. Brokers' Fees.............................................36
4.5. Investment Intent.........................................36
4.6. Status of B/E Common Stock................................36
4.7. Information Concerning Buyer..............................36
4.8. Capitalization of Acquisition.............................36
5. Covenants.............................................................36
5.1. Access to Records after Closing...........................36
5.2. Escrow of Shares Pending Resolution of Certain
Pre-Closing Matters.....................................37
5.3. Pooling of Interests Accounting Treatment.................38
5.4. Plan of Reorganization and other Tax Matters..............38
5.5. Registration Rights.......................................40
5.6. Compliance With New York Law..............................49
6. Deliveries at Closing.................................................49
6.1. Deliveries by Sellers.....................................49
6.2. Deliveries of the Buyer...................................50
7. Confidentiality.......................................................50
8. Noncompetition........................................................50
9. Indemnification.......................................................51
9.1. Survival of Representations and Warranties................51
Indemnity by Sellers..................................................52
9.3. Indemnity by Buyer........................................53
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9.5. Matters Involving Third Parties...........................54
9.6. Other Indemnification Provisions..........................55
10. Miscellaneous.........................................................55
10.1. Press Releases and Public Announcements.............55
10.2. No Third Party Beneficiaries........................55
10.3. Entire Agreement....................................55
10.4. Succession and Assignment...........................56
10.5. Counterparts........................................56
10.6. Headings............................................56
10.7. Notices.............................................56
10.8. Governing Law; Submission to Jurisdiction...........57
10.9. Amendments and Waivers..............................58
10.10. Severability........................................58
10.11. Expenses............................................58
10.12. Construction........................................58
10.13. Incorporation of Exhibits and Schedules.............59
10.14. Specific Performance................................59
10.15. Arbitration.........................................59
10.16. Waiver of Jury Trial................................60
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Exhibits
A - Form of Escrow Agreement
B - Certificate of Merger
C - Financial Statements
D - Form of Consulting Agreement
E - Form of Severance and Non-Competition Agreement
F - Form of Opinion of Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the
Company and the Sellers
G - Form of Opinion of Ropes & ▇▇▇▇, counsel to the Buyer
Schedules
Disclosure Schedule -- Exceptions to Representations and Warranties
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
This Agreement and Plan of Reorganization and Merger (the "Agreement") is
entered into on July 30, 1998, by and among (i) BE AEROSPACE, INC., a Delaware
corporation (the "Buyer"), (ii) BE AEROSPACE ACQUISITION CORP., a New York
corporation and a wholly-owned subsidiary of the Buyer ("Acquisition"), (iii)
AEROSPACE LIGHTING CORPORATION, a New York corporation (the "Company"), and (vi)
the holders (the "Sellers") of all of the outstanding capital stock of the
Company (the "Shares"), all of whom are signatories hereto. The Buyer,
Acquisition, the Company and the Sellers are collectively referred to herein as
the "Parties."
This Agreement contemplates a transaction in which Acquisition will be
merged with and into the Company as a result of which the Company will be the
surviving corporation and a wholly-owned subsidiary of Buyer, upon the terms and
subject to the conditions set forth herein and pursuant to the Business
Corporation Law of the State of New York (the "New York Business Corporation
Law"). The Parties intend that this transaction will constitute a
"reorganization" described in ss. 368(a) of the Code (as hereinafter defined)
and that the Buyer will be able to account for the acquisition of the Company by
Buyer on a "pooling of interests" method (as such term is used in Accounting
Principles Board Opinion No. 16).
AGREEMENT
Therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
1. Definitions.
"AAA" has the meaning set forth in ss. 10.15(a).
"Acquisition" has the meaning set forth in the preamble.
"Affiliate" means, as to the Company (or, if another Person is specified,
as to such other specified Person), (i) each Person directly or indirectly
controlling, controlled by or under direct or indirect common control with the
Company (or such specified Person), including without limitation, in the case of
the Company, each Subsidiary of the Company and each Seller, (ii) any Person who
is or has been within two years of the time in question an officer, director or
direct or indirect beneficial holder of at least 5% of any class of the
outstanding capital stock of any Person referred to in clause (i) above and the
members of the immediate family of each such officer, director or holder (and,
if such specified Person is a natural person, of such specified Person), and
(iii) each Person of which the Company (or such specified Person) or an
Affiliate (as defined in clauses (i) or (ii) above) thereof shall, directly
or indirectly, beneficially own at least 5% of any class of outstanding capital
stock or other evidence or type of beneficial interest.
"Affiliated Group" means any affiliated group within the meaning of Code
ss. 1504(a) or any similar group defined under a similar provision of Law.
"Aggregate Merger Consideration Amount" means $28,073,654.
"Aggregate Deductible" has the meaning set forth in ss. 9.2.
"Aggregate Threshold" has the meaning set forth in ss. 9.2.
"Agreement" has the meaning set forth in the preamble.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably be expected to
form the basis for any specified consequence.
"B/E Common Stock" means the common stock of the Buyer, par value $0.01 per
share.
"B/E Shares" has the meaning set forth in ss. 2.4.
"Blackout Period" has the meaning set forth in ss. 5.5.
"Buyer" has the meaning set forth in the preamble.
"Certificate of Merger" means the certificate of merger attached as Exhibit
B hereto.
"Certificates" has the meaning set forth in ss. 2.7(a).
"Chemical Substance" means any chemical substance, including but not
limited to any (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste; (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyl; (vi) chlorofluoracarbons; and (vii)
other substance, material or waste, which is identified or regulated under any
Environmental Law or Safety Law, as in effect from time to time to the date
hereof, or other comparable Laws as in effect from time to time to the date
hereof.
"Closing" has the meaning set forth in ss. 2.6.
"Closing Date" means the date of this Agreement.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble.
"Company Common Stock" has the meaning set forth in ss. 3.2.
"Confidential Information" means any and all material information
concerning the affairs of any Party or its Affiliates other than that
information which is already generally known by or readily obtainable by the
public through no fault of another Party.
"Contractual Obligation" means, with respect to any Person, any legally
binding contract, agreement, deed, mortgage, lease, license, indenture,
commitment, undertaking, arrangement or understanding, written or oral, or other
document or instrument, including, without limitation, any document or
instrument evidencing or otherwise relating to any indebtedness but excluding
the charter and by-laws of such Person, to which or by which such Person is a
party or otherwise subject or bound or to which or by which any property or
right of such Person is subject or bound.
"Controlled Group of Corporations" has the meaning set forth in Code ss.
1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. ss. 1.1502-13.
"Disclosure Schedule" has the meaning set forth in ss. 3.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the time at which the Certificate of Merger shall be
duly filed in the office of the Secretary of State of the State of New York.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or other fringe benefit
plan or program or (e) profit sharing, bonus, stock option, stock purchase,
equity, stock appreciation, deferred compensation, incentive, severance plan or
other benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.
3(1).
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"Environment" means soil, land surface or subsurface strata, real
property, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, water body sediments,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.
"Environmental Laws" mean the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Clean Air Act, and the Clean Water Act, each as from time to time in effect to
the date hereof and any other Law, as from time to time in effect to the date
hereof, relating to: (a) the Release, containment, removal, remediation,
response, cleanup or abatement of any sort of any Chemical Substance; (b) the
manufacture, generation, formulation, processing, labeling, distribution,
introduction into commerce, use, treatment, handling, storage, recycling,
disposal or transportation of any Chemical Substance; (c) exposure of persons,
including employees, to any Chemical Substance; (d) the management, use,
storage, disposal, cleanup or removal of asbestos, asbestos-containing
materials, polychlorinated biphenyls or any other Chemical Substance; (e) the
pollution, protection or clean up of the Environment; or (f) noise.
"Environmental Liabilities and Costs" means all Losses incurred by the
Buyer or the Company: (i) for the Company to comply with any Environmental Law;
(ii) as a result of a Release of any Chemical Substance; or (iii) as a result of
any environmental conditions created by or arising out of the past or present
operations of Sellers or the Company or any Subsidiary of the Company through
the Closing Date or any environmental conditions present at any facility or site
now or previously owned by the Company.
"Environmental Permit" means any permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time in effect to the date hereof.
"Escrow Agent" has the meaning set forth in ss. 5.2.
"Escrow Agreement" means the escrow agreement executed on the date hereof
in the form of Exhibit A hereto.
"Escrowed Shares" has the meaning set forth in ss. 2.4.
"Extremely Hazardous Substance" has the meaning set forth in ss. 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended from time
to time in effect to the date hereof.
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"Fiduciary" has the meaning set forth in ERISA ss. 3(21).
"Financial Statements" has the meaning set forth in ss. 3.8.
"Formula Price Per Share" means the amount that is equal to the arithmetic
average of the closing sale prices of a share of B/E Common Stock as reported on
the NASDAQ National Market System for the twenty consecutive trading days ending
on July 23, 1998.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indebtedness" has the meaning set forth in ss. 3.9.
"Indemnified Party" has the meaning set forth in ss. 9.5(a).
"Indemnifying Party" has the meaning set forth in ss. 9.5(a).
"Individual Deductible" has the meaning set forth in ss. 9.2.
"Individual Threshold" has the meaning set forth in ss. 9.2.
"Intellectual Property" means the entire right, title and interest in and
to all proprietary rights of every kind and nature, including patents,
copyrights, Trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any license or agreements
granting rights related to the foregoing (i) subsisting in, covering, reading
on, directly applicable to or existing in the Products or the Technology, (ii)
that are owned, licensed or controlled in whole or in part by the Company or any
Subsidiary of the Company and relate to the business of the Company or any
Subsidiary of the Company, or (iii) that are used in or necessary to the
development, manufacture, sales, marketing or testing of the Products.
"Knowledge" means actual knowledge after reasonable investigation and, when
used with respect to the Sellers or the Company, shall mean the knowledge of
each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ Francisco, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇;
provided, however, that reasonable investigation shall not require investigation
of third parties external to the Company, their activities or their documents.
"Laws" means all laws, rules, regulations, codes, injunctions, judgments,
orders, decrees, rulings, interpretations, constitution, ordinance, common law,
treaty, or any other legal requirement of any federal, state, local municipal
and foreign, international, or multinational government or administration and
related agencies.
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"Liability" means any liability or obligation (whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether incurred or consequential), including, without limitation, any liability
for Taxes.
"Lien" means any mortgage, pledge, lien, security interest, charge, claim,
equitable interest, encumbrance, restriction on transfer, conditional sale or
other title retention device or arrangement (including, without limitation, a
capital lease), transfer for the purpose of subjection to the payment of any
Indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include any of the following: (i)
statutory liens for Taxes to the extent that the payment thereof is not in
arrears or otherwise due, (ii) encumbrances in the nature of zoning
restrictions, easements, rights or restrictions of record on the uses of real
property if the same do not detract from the value of the property encumbered
thereby or impair the use of such property in the business of the Company and
its Subsidiaries as currently conducted, (iii) statutory or common law liens to
secure landlords, lessors or renters under leases or rental agreements confined
to the premises rented to the extent that no payment or performance under any
such lease or rental agreement is in arrears or is otherwise due, (iv) deposits
or pledges made in connection with, or to secure payment of, worker's
compensation, unemployment insurance, old age pension programs mandated under
applicable Laws or other social security regulations and (v) statutory or common
law liens in favor of carriers, warehousemen, mechanics and materialmen,
statutory or common law liens to secure claims for labor, materials or supplies
and other like liens, which secure obligations to the extent that payment
thereof is not in arrears or otherwise due, to the extent incurred in the
Ordinary Course of Business.
"Losses" has the meaning set forth in ss. 9.2.
"Material Adverse Effect" means any adverse effect on the business, assets,
operations or condition, financial or otherwise, of the Company or any of its
Subsidiaries which, when considered either singly or in the aggregate together
with all other such effects with respect to which such phrase is used in this
Agreement, constitutes a material adverse effect on the business, assets,
operations or condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole.
"Merger" shall mean the merger of Acquisition with and into the Company,
with the Company being the Surviving Corporation, in accordance with the
provisions of this Agreement and the Certificate of Merger.
"Most Recent Balance Sheet" means the unaudited consolidated balance sheet
for the Company and its Subsidiaries as of June 30, 1998 referred to in ss. 3.8.
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"Most Recent Financial Statements" means the audited Financial Statements
for the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in ss. 3.8.
"Multiemployer Plan" has the meaning set forth in ERISA ss. 3(37).
"New York Business Corporation Law" has the meaning set forth in the
recitals.
"Ordinary Course of Business" means the ordinary course of business of the
Company and its Subsidiaries consistent with past custom and practice (including
with respect to quantity and frequency taking into account the then current
level of business of the Company and its Subsidiaries taken as a whole).
"Original Disclosing Party" has the meaning set forth in ss. 7.
"Party" and "Parties" have the meanings set forth in the preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Per-Share Consideration Amount" means an amount equal to (x) the Aggregate
Merger Consideration Amount divided by (y) the aggregate number of shares of
Company Common Stock outstanding at the Effective Time.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Products" means all past and current products and services of the Company
and, to the extent that they are currently being developed by the Company, (i)
any subsequent versions of such products or services, (ii) any products or
services which are designed to supersede, replace or function as a component of
such products or services, and (iii) any upgrades, enhancements, improvements
and modifications to the foregoing.
"Prohibited Transaction" has the meaning set forth in ERISA ss. 406 and
Code ss. 4975.
"Public Offering" has the meaning set forth in ss. 5.5(a)(ii).
"Registrable Securities" has the meaning set forth in ss. 5.5(a)(i).
"Release" means any actual or threatened spilling, leaking, pumping,
pouring, emitting, dispersing, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of any
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Chemical Substance into the Environment by the Company or its operations that
has caused or could reasonably be expected to cause an Environmental Liability
and Cost (including the disposal or abandonment of barrels, containers, tanks or
other receptacles containing or previously containing any Chemical Substance).
"Release Date" has the meaning set forth in ss. 5.2(a).
"Reportable Event" has the meaning set forth in ERISA ss. 4043.
"Safety Laws" means any Law relating to health or safety, including without
limitation the Occupational Safety and Health Act, as amended, each as from time
to time in effect to the date hereof relating to (a) exposure of employees to
any Chemical Substance or (b) the management, use, storage, disposal, cleanup or
removal of any Chemical Substance.
"Safety Liabilities and Costs" means all Losses incurred by the Buyer or
the Company for the Company to comply with any Safety Law or as a result of any
health or safety conditions created by or arising out of the past or present
operations of the Company or any of its Subsidiaries through the Closing Date.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sellers" has the meaning set forth in the preamble.
"Sellers' Litigation Representative" has the meaning set forth in ss. 2.5.
"Sellers' Representative" has the meaning set forth in ss. 2.5.
"Shares" has the meaning set forth in the preamble.
"Subsidiary" means with respect to any Person, (i) any corporation at least
a majority of whose outstanding voting stock is owned, directly or indirectly,
by such Person or by one or more of its Subsidiaries, or collectively by such
Person and one or more of its Subsidiaries; (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person or by one or more
of its Subsidiaries, or collectively by such Person and one or more of its
Subsidiaries; (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner or at least a majority of whose ownership
interests is owned, directly or indirectly, by such Person or by one or more of
its Subsidiaries, or collectively by such Person and one or more of its
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Subsidiaries; and (iv) any limited liability company at least a majority of
whose ownership interests is owned, directly or indirectly, by such Person or by
one or more of its Subsidiaries, or collectively by such Person and one or more
of its Subsidiaries. For the purposes of this definition, "voting stock" or
"ownership interests" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person other than shares, interests, participations or other
equivalents having such power only by reason of the occurrence of a contingency
which has not occurred and which is not reasonably likely to occur.
"Surviving Corporation" has the meaning set forth in ss. 2.1.
"Tax" or "Taxes" means taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local, or foreign taxing authority,
including, without limitation, income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code ss. 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar, including
FICA), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technology" means all inventions, copyrightable works, discoveries,
innovations, know-how, ideas, research and development, formulas, compositions,
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, business and
marketing plans, proposals, documentation, manuals, computer software, computer
hardware, integrated circuits and integrated circuit masks, electronic,
electrical and mechanical equipment and all other forms of technology, including
improvements, modifications, derivatives or changes, whether tangible or
intangible, embodied in any form, whether or not protectible or protected by
patent, copyright, mask work right, trade secret law or otherwise.
"Third Party Claim" has the meaning set forth in ss. 9.5(a).
"Trademarks" means any trademarks, service marks, trade dress, and logos,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith.
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1.1. Rules of Construction. The following provisions shall be applied
wherever appropriate herein: (a) "herein", "hereby", "hereunder", "hereof" and
other equivalent words shall refer to this Agreement as an entirety and not
solely to the particular portion of this Agreement in which any such word is
used; (b) all definitions set forth herein shall include the singular and the
plural; (c) wherever used herein, any pronoun shall be deemed to include both
the singular and plural and to cover all genders; (d) all accounting terms not
specifically defined herein shall be construed in accordance with GAAP; (e)
except as otherwise stated herein, all references or citations in this Agreement
to statutes or regulations or statutory regulatory provisions, shall, when the
context requires and unless otherwise indicated, be considered citations to such
statutes, regulations or provisions as in effect from time to time, including
any successor statutes, regulations or provisions directly or indirectly
superseding such statutes, regulations or provisions; and (f) any references
herein to a particular Section, Article, Exhibit or Schedule means a Section or
Article of, or Schedule or Exhibit to, this Agreement unless another agreement
is specified.
2. The Merger.
2.1. Constituent Corporations; Surviving Corporation. Acquisition and the
Company, which was originally formed under the New York Business Corporation Law
under the name "Avialume Corp.," shall be the constituent corporations to the
Merger. Subject to the terms and conditions of this Agreement, at the Effective
Time, Acquisition shall be merged with and into the Company in accordance with
the New York Business Corporation Law, and the Company shall be the surviving
corporation of the Merger (the "Surviving Corporation"). At the Effective Time,
the identity and separate existence of Acquisition shall cease, and the
Surviving Corporation shall continue its corporate existence under the laws of
the State of New York as a wholly-owned subsidiary of Buyer. Without limiting
the generality of the foregoing, from and after the Effective Time, the
Surviving Corporation shall possess all of the rights, privileges, powers,
franchises, properties and other interests of the Company and Acquisition.
2.2. Certificate of Incorporation and Bylaws of the Surviving Corporation.
From and after the Effective Time and thereafter until amended as provided by
Law, (i) the Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of Acquisition, except that the name of the
Surviving Corporation shall be "Aerospace Lighting Corporation", and (ii) the
bylaws of the Surviving Corporation shall be the bylaws of Acquisition.
2.3. Directors and Officers of the Surviving Corporation. The directors and
officers of the Surviving Corporation immediately following the Merger shall be
the directors and officers of Acquisition immediately prior to the Merger and
all such directors and officers shall hold office until their respective
successors are duly elected and qualified.
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2.4. Conversion of the Shares. At the Effective Time by virtue of the
Merger and without any action on the part of Acquisition or any Seller:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than any Shares to be canceled pursuant to ss. 2.4(b)) shall be
canceled and shall be converted automatically into the right to receive a
number of shares of B/E Common Stock equal to (w) the Per-Share
Consideration Amount divided by (x) the Formula Price Per Share; provided,
however, that (y) a portion of the shares of B/E Common Stock issuable
pursuant to the Merger in respect of the Shares shall be delivered into
escrow and held as specified in ss. 5.2 (all such shares issuable pursuant
to the Merger, including the Escrowed Shares being referred to herein as
the "B/E Shares" and said portion of the B/E Shares subject to the escrow
provisions of ss. 5.2 being referred to herein as the "Escrowed Shares")
and the Escrowed Shares shall be distributed, to the Sellers only upon
release by the Escrow Agent as provided in ss. 5.2 upon and subject to
resolution of the matters referred to in ss. 9.2 and (z) no fractional
shares of B/E Common Stock shall be issued pursuant to the Merger, with
each Person otherwise entitled to such a fractional share being entitled to
cash, payable by check of the Surviving Corporation, in an amount equal to
such fractional share valued at the Formula Price Per Share.
(b) Notwithstanding the provisions of ss. 2.4(a), each Share held in the
treasury of the Company and each Share owned by Acquisition or by Buyer
immediately prior to the Effective Time shall be canceled without any
conversion thereof and no payment or distribution shall be made with
respect thereto.
(c) Each share of Acquisition common stock, par value $.01 per share,
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
2.5. Sellers' Representatives. Each individual listed on ss. 2.5 of the
Disclosure Schedule hereby is irrevocably appointed attorney-in-fact and
authorized and empowered to act, for and on behalf of the Seller or Sellers
listed opposite his name on such Schedule (with full power of substitution in
the premises) under the escrow provisions of ss. 5.2, the Escrow Agreement, the
registration rights provisions of ss. 5.5, the notice provisions of this
Agreement and such other matters (other than any amendment or modification of
this Agreement pursuant to ss. 10.9) as are reasonably necessary for the
consummation of the transactions contemplated hereby (each of the above named
representatives, as well as any subsequent representatives of the Sellers
appointed by such representatives or after such representative's death or
incapacity appointed by the Sellers being referred to herein as a "Seller's
Representative" and collectively as the "Sellers' Representatives"); provided,
however, that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is appointed as the agent for all of the Sellers
with respect to matters concerning Third Party Litigation pursuant to ss. 9.5
(the "Sellers' Litigation Representative"). By their execution hereof, each of
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Francisco and ▇▇▇▇▇▇▇ ▇▇▇▇▇ hereby accepts such
appointment and agrees to act as Seller's Representative hereunder. Each of
Buyer and Acquisition and their respective Affiliates (including, after the
Closing, the Company) shall be entitled to rely on such appointment and treat
each Seller's Representative as the duly appointed attorney-in-fact of the
Sellers set forth opposite such Person's name in ss. 2.5 of the Disclosure
Schedule. Each Seller who executes this Agreement or votes in favor of the
Merger pursuant to the terms hereof, by such execution or vote, confirms such
appointment and authority and acknowledges and agrees that such appointment is
irrevocable and coupled with an interest, it being understood that the
willingness of the Buyer to enter into this Agreement is based, in part, on the
appointment of such representatives to act on behalf of the Sellers.
2.6. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the New York Conference Center of
Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, commencing at 10:00 a.m. New
York time on the date of this Agreement (the "Closing Date").
2.7. Surrender of Shares; Stock Transfer Books.
(a) At the Effective Time, each holder (other than the Company,
Acquisition or the Buyer, if applicable) of any outstanding certificate or
certificates theretofore representing the Shares converted in the Merger as
described in ss. 2.4(a) (the "Certificates") shall surrender the same to
the Surviving Corporation for cancellation. Upon surrender of a Certificate
to the Surviving Corporation, the holder of such certificate shall receive
in exchange therefor a certificate or certificates representing the number
of B/E Shares to which such holder is entitled pursuant to the Merger
(subject to the escrow provisions contemplated by ▇▇.▇▇. 2.4 and 5.2) and
cash in lieu of any fractional share otherwise to be so issued. Subject to
the restrictions on transfer referred to in the last sentence of ss. 5.2,
if the B/E Shares are to be issued to a Person other than the Person in
whose name the surrendered Certificate is registered on the stock transfer
books of the Company, it shall be a condition of issuance of such B/E
Shares that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the Person requesting
such payment shall have paid all transfer and other Taxes required by
reason of the issuance of B/E Shares pursuant to the Merger in accordance
with ss. 2.4 to a Person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such Taxes either have been paid or are not
applicable.
(b) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and subject to such other
conditions as the Board of Directors of the Surviving Corporation may
impose, the Surviving Corporation shall cause the Buyer to issue in
exchange for such lost, stolen or destroyed Certificate the B/E Shares
deliverable in
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respect thereof as determined in accordance herewith (subject to the escrow
provisions contemplated by ▇▇.▇▇. 2.4 and 5.2). When authorizing such issue
of the B/E Shares in exchange therefor, the Board of Directors of the
Surviving Corporation (or any authorized officer thereof) may, in its
discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificate to give the
Surviving Corporation a bond in such sum as the Board of Directors may
direct as indemnity against any claim that may be made against the
Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
(c) At the close of business on the Effective Date, the stock transfer
books of the Company shall be closed, and no transfer of Shares shall
thereafter be made on such books. From and after the Effective Time, the
holders of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares except as otherwise
provided herein or by applicable Law.
2.8. Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of the Company or Acquisition or otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its officers and directors
shall be authorized to execute and deliver, in the name and on behalf of the
Company or Acquisition, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of the Company or Acquisition,
all such other acts and things necessary or desirable to vest, perfect or
confirm any and all right, title or interest in, to or under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement.
3. Representations and Warranties of the Sellers. The Sellers severally (and not
jointly or jointly and severally) represent and warrant to the Buyer that the
statements contained in this ss. 3 are correct and complete as of the date of
this Agreement, except as set forth in the corresponding section of the
disclosure schedule accompanying this Agreement (collectively, the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this ss. 3.
3.1. Organization of the Company. The Company is a New York corporation,
duly organized under the Laws of the State of New York as then in effect, and is
validly existing and in good standing under the Laws of the State of New York as
now in effect and has the requisite corporate power and authority to carry on
its business and now conducted and to own and lease its properties. Copies of
the certificate of incorporation and bylaws of the Company, each as amended to
date, have been heretofore delivered to Buyer and are accurate and complete. The
Company is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction listed in ss. 3.1 of the Disclosure Schedule,
which such
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jurisdictions are the only jurisdictions where the nature of the activities
conducted by the Company or the character of the property owned, leased or
operated by it make such qualification necessary or appropriate. The minute book
(containing the records of meetings of stockholders, the board of directors and
any committees of the board of directors) of the Company is a correct and
complete record of actions taken, and copies thereof have been made available to
Buyer. The Company is not in default under or in violation of any provision of
its certificate of incorporation or bylaws.
3.2. Capitalization and Ownership of the Company. The authorized capital
stock of the Company consists of 1,000 shares of common stock, no par value per
share (the "Company Common Stock"). Each holder of Company Common Stock is
entitled to one vote per share of Company Common Stock owned by such holder. As
of the date hereof, there are issued (a) 810 shares of Company Common Stock, of
which 150 shares are held as treasury stock and 660 shares are outstanding and
held of record and beneficially by the Persons and in the respective amounts set
forth on ss. 3.2 of the Disclosure Schedule, free and clear of any Liens. All of
the outstanding shares of Company Common Stock have been validly issued, are
fully paid and nonassessable. There are no agreements restricting the transfer
of, or affecting the rights of any holder of, the shares of Company Common Stock
or any other shares of the Company's capital stock, there are no preemptive
rights on the part of any holder of any class of securities of the Company and
no outstanding options, warrants, rights, or other agreements or commitments of
any kind obligating the Company, contingently or otherwise, to issue or sell any
shares of its capital stock or any securities or obligations convertible into,
or exchangeable for, any shares of its capital stock, and no authorization
therefor has been given. Section 3.2 of the Disclosure Schedule sets forth the
names of the record holders of all outstanding options, warrants or other rights
to purchase, sell or otherwise dispose of, or rights to exchange or convert
into, any shares of the Company's capital stock and the number of shares,
exercise prices and expiration dates of such options, warrants or other rights.
None of the outstanding shares of capital stock of the Company was issued in
violation of the Securities Act or the securities or blue sky Laws of any state
or other jurisdiction, as the same were then in effect. Each Seller has full
right, power and authority to transfer the Shares in the respective amounts as
set forth in ss. 3.2 of the Disclosure Schedule to Buyer, free and clear of any
Liens, and no Person, other than the Sellers, has any right, title or interest
in the Company or any of its Subsidiaries or any profits, earnings, cash flows,
equity, gains or losses with respect thereto.
3.3. Authorization of Transaction. Each of the Sellers and the Company has
the legal capacity, power and authority (including, in the case of the Company,
full corporate power and authority) to execute and deliver this Agreement and to
perform their respective obligations hereunder. All corporate and other actions
or proceedings to be taken by or on the part of the Company or the Sellers to
authorize and permit the execution and delivery by Company and the Sellers of
this Agreement and the respective instruments required to be executed and
delivered by the Company and the Sellers pursuant hereto, the performance by
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the Company and the Sellers of their respective obligations hereunder, and the
consummation by the Company and the Sellers of the transactions contemplated
herein, have been duly and properly taken by the Sellers and the Company. This
Agreement has been duly executed and delivered by each of the Company and the
Sellers and constitutes the legal, valid and binding obligation of each of the
Company and the Sellers, enforceable in accordance with its terms and
conditions, except to the extent that enforceability may be limited by
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors' rights generally.
3.4. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including transfer of the Shares and any of the agreements and instruments
required to be delivered pursuant to ss. 2 and ss. 6), will (i) violate any
provision of the charter or bylaws of the Company or any of its Subsidiaries,
(ii) violate any Law or other restriction of any government, governmental agency
or court to which any of the Company, its Subsidiaries or the Sellers or any of
their property is subject or (iii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
consent under any Contractual Obligation to which any of the Company, its
Subsidiaries or the Sellers is a party or by which any of them is bound or to
which any of their assets is subject (or result in the imposition of any Lien
upon any of their assets). None of the Company, its Subsidiaries or the Sellers
needs to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement, except
for the filing of the Certificate of Merger with the Secretary of State of the
State of New York.
3.5. Brokers' Fees. None of the Company, its Subsidiaries or the Sellers
has any Liability to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Buyer or the Company or any of its Subsidiaries could become liable or
obligated.
3.6. Title to Assets. The Company and each of its Subsidiaries has good
and marketable title to, or a valid and subsisting leasehold interest in, and,
in the case of owned property and assets, the power to sell the properties and
assets used by it, located on its premises, or reflected on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all Liens,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet and other assets having a net
book value in the aggregate at the time of disposition of not more than $5,000
and a fair market value in the aggregate at the time of disposition of not more
than $50,000. Each such tangible asset is free from patent defects, has been
maintained in accordance with normal industry practice, is in satisfactory
operating condition and repair (subject to normal wear and tear), and is
suitable, adequate and sufficient for the purposes for which it presently is
used.
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3.7. Subsidiaries. Section 3.7 of the Disclosure Schedule sets forth for
each of the Company's Subsidiaries (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares of
each class of its capital stock, the names of the record and beneficial holders
thereof, and the number of shares held by each such holder, (iv) the number of
shares of its capital stock held in treasury and (v) its directors and officers.
Each Subsidiary is a corporation duly organized under the Laws of the
jurisdiction of its incorporation as then in effect, and is validly existing and
in good standing under the Laws of the jurisdiction of its incorporation as the
same are now in effect. Each Subsidiary is duly authorized to conduct business
and is in good standing as a foreign corporation in each jurisdiction listed in
ss. 3.7 of the Disclosure Schedule, which such jurisdictions are the only
jurisdictions where the nature of the activities conducted by it or the
character of the property owned, leased or operated by it make such
qualification necessary or appropriate. Each Subsidiary has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and to own and use the properties owned
and used by it. The Company has delivered to the Buyer correct and complete
copies of the charter and bylaws of each Subsidiary (each as amended to date).
All of the issued and outstanding shares of capital stock of each Subsidiary
have been duly authorized and are validly issued, fully paid, and nonassessable.
The Company owns of record and beneficially all of the outstanding shares of
each Subsidiary, free and clear of any Taxes, Liens, options, warrants, purchase
rights, contracts and commitments. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require any of the
Company or any of its Subsidiaries to sell, transfer, or otherwise dispose of
any capital stock of any of its Subsidiaries or that could require any
Subsidiary to issue, sell, or otherwise cause to become outstanding any of its
own capital stock (other than pursuant to this Agreement). There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Subsidiary. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of any capital
stock of any Subsidiary. The minute books (containing the records of meetings of
stockholders, the board of directors and any committees of the board of
directors), the stock certificate books, and the stock record books of each
Subsidiary are all correct and complete records of actions taken, and copies
thereof have been made available to Buyer. None of the Subsidiaries of the
Company is in default under or in violation of any provision of its charter or
bylaws. None of the Company or its Subsidiaries controls directly or indirectly
or has any direct or indirect equity participation in or ownership interest in
any Person which is not a Subsidiary of the Company.
3.8. Financial Statements. Attached hereto as Exhibit C are the following
financial statements (collectively the "Financial Statements"): (i) audited
consolidated and unaudited consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1995, 1996 and 1997 (December 31, 1997 being the "Most
Recent Fiscal Year End") for the Company and its Subsidiaries, and
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(ii) unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
quarters ended (and portions of the fiscal year then ended) March 31 and June
30, 1998 for the Company and its Subsidiaries. The Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, are correct and complete in all material respects
and present fairly the financial condition of the Company and its Subsidiaries
as of such dates and the results of operations of the Company and its
Subsidiaries for such periods and are consistent in all material respects with
the books and records of the Company and its Subsidiaries.
3.9. Indebtedness; Guarantees. Except as set forth in the Most Recent
Balance Sheet, neither the Company, nor any of its Subsidiaries had as of the
date of the Most Recent Balance Sheet any indebtedness for borrowed money or for
the deferred purchase price of property or services (other than trade payables
and other accrued current liabilities incurred in the Ordinary Course of
Business), or capital lease obligations, conditional sale or other title
retention agreements ("Indebtedness"). Neither the Company, nor any of its
Subsidiaries is a guarantor or otherwise liable for any Liability or obligation
of any other Person other than with respect to the endorsement of checks for
deposit in the Ordinary Course of Business.
3.10. Absence of Changes. Since June 30, 1998, the Company has conducted
its business only in the Ordinary Course of Business and there has not been:
(a) any sale, lease, transfer, or assignment of any of the assets of
the Company or any of its Subsidiaries, tangible or intangible, having a
net book value in the aggregate at the time of disposition in excess of
$5,000 or a fair market value in the aggregate at the time of disposition
in excess of $50,000, other than sales of inventory for a fair
consideration in the Ordinary Course of Business;
(b) any Contractual Obligation (or series of Contractual
Obligations) entered into by the Company or any of its Subsidiaries other
than in the Ordinary Course of Business and in an amount not in excess of
$10,000 individually;
(c) any acceleration, termination, modification, or cancellation of
any material Contractual Obligation of the Company or any of its
Subsidiaries (or series of Contractual Obligations), except for
expirations of such Contractual Obligations in accordance with their
respective terms, to which the Company or any of its Subsidiaries is a
party or by which it or any of its assets is bound;
(d) any capital expenditure (or series of related capital
expenditures) involving more than $10,000 in the aggregate;
-17-
(e) any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions other than extensions of
credit in the Ordinary Course of Business);
(f) other than as disclosed in ss. 3.9 of the Disclosure Schedule
any issuance of any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any Indebtedness in excess of $10,000 in
the aggregate;
(g) any delay or postponement of payment of accounts payable or
other Liabilities outside the Ordinary Course of Business;
(h) any cancellation, compromise, waiver, or release of any right or
claim or Indebtedness (or series of related rights and claims) outside of
the Ordinary Course of Business;
(i) any grant of any license or sublicense of any rights or modified
any rights under or with respect to, or entered into any settlement
regarding any infringement of its rights to, any Intellectual Property;
(j) any issuance, sale, or other disposition of any capital stock,
or grant of any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of capital stock;
(k) any dividend or distribution (whether in cash or in kind) or
repurchase, redemption or retirement any of capital stock;
(l) any threat or notification in writing or, to the Knowledge of
the Sellers and the Company, orally, that one or more distributors,
customers or suppliers listed in ss. 3.29 of the Disclosure Schedule have
terminated or intend to terminate or are considering terminating its
business relationships or have modified or intend to modify such
relationships with the Company or any of its Subsidiaries in a manner
which is materially less favorable to the Company or any of its
Subsidiaries or have agreed not to or will not agree to do business on
such terms and subject to conditions at least as favorable terms and
conditions as provided to the Company and its Subsidiaries on the date of
the Most Recent Balance Sheet Date or any actual termination or adverse
modification of such relationships.
(m) any damage, destruction, or loss (whether or not covered by
insurance) to its property in excess of $10,000 in the aggregate;
(n) any loan to, or any other transaction with, any of the Company's
Affiliates or, outside the Ordinary Course of Business, with any other
employee;
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(o) any employment Contractual Obligation or collective bargaining
agreement, written or oral, or modification of the terms of any existing
such Contractual Obligation or agreement;
(p) any increase, modification or change in the compensation, bonus
structure or benefits of any directors, officers, consultants, agents and
employees of the Company or any of its Subsidiaries outside the Ordinary
Course of Business;
(q) any adoption, amendment, modification or termination of any
Employee Benefit Plan or other plan, contract, or commitment for the
benefit of any director, officer, consultant, agent or employee of the
Company or any of its Subsidiaries;
(r) any payment pursuant to any Employee Benefit Plan or other plan,
contract or commitment for the benefit of any director, officer,
consultant, agent or employee of the Company or any of its Subsidiaries
inconsistent with the terms thereof;
(s) any modification or change in the employment terms for any of
its directors, officers, consultants, agents or employees outside the
Ordinary Course of Business;
(t) any pledge to make any charitable contribution and no such
contribution was made;
(u) any modification or change in the application of GAAP from the
manner in which it was applied in the Most Recent Financial Statements;
(v) any other occurrence, event, incident, action, failure to act or
transaction outside the Ordinary Course of Business with respect to the
Company or any of its Subsidiaries and involving the expenditures by the
Company or its Subsidiaries in excess of $25,000 in the aggregate or any
material future actions by the Company or any of its Subsidiaries;
(w) any Contractual Obligation entered into pursuant to which a
party thereto is entitled to a commission based on sales to or revenues or
profits derived from one or more customers, or success fees, finders fees
or other compensation related to sales; or
(x) any legally binding commitment to any of the foregoing by any of
the Company, its Subsidiaries or the Sellers.
3.11. Absence of Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any Liability (and, to the Knowledge of the Sellers, there
is no Basis for any
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present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company or any of its Subsidiaries
giving rise to any such Liability of the Company or any of its Subsidiaries),
except for (i) Liabilities disclosed in the Disclosure Schedule or not required
to be disclosed in the Disclosure Schedule because of a materiality qualifier or
a dollar limitation or threshold in a representation or warranty, (ii)
Liabilities set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto), (iii) Liabilities which have arisen after the date of the
Most Recent Balance Sheet in the Ordinary Course of Business and (iv)
Liabilities that result from or arise out of circumstances, events, facts or
occurrences that are the subject matter of any other representation or warranty
contained in ss.3 of this Agreement.
3.12. Legal and Other Compliance. The Company and each of its Subsidiaries
is, and at all times prior to the date of this Agreement has been, in compliance
in all material respects with all applicable material Laws (as then in effect or
as now in effect, as applicable), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against the Company or any of its Subsidiaries alleging any failure so
to comply.
3.13. No Material Adverse Change. Since the date of the Most Recent
Financial Statements, there has not been any change which has resulted in a
Material Adverse Effect and, to the Knowledge of the Sellers and the Company, no
event has occurred and no circumstances exist that could reasonably be expected
to result in a Material Adverse Effect.
3.14. Taxes.
(a) The Company and each of its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns were correct
and complete. All Taxes due and payable by the Company and each of its
Subsidiaries (whether or not shown on any Tax Return) have been paid.
Neither the Company nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return.
No claim has been made in the last five years by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file
Tax Returns that they may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax other than liens for Taxes that are (i) being
contested in good faith by appropriate proceedings and have been reserved
in accordance with GAAP and (ii) set forth on ss. 3.14 of the Disclosure
Schedule.
(b) The Company and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
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(c) There is no dispute, audit, investigation, proceeding or claim
concerning any Liability with respect to Taxes of the Company or any of
its Subsidiaries either (i) claimed or raised by any authority in writing
or (ii) as to which any of the Company or the Sellers has Knowledge based
upon contact with any such authority. All federal, state, local, and
foreign income Tax Returns filed with respect to the Company and each of
its Subsidiaries have been audited and closed or are Tax Returns with
respect to which the applicable statute of limitations has run, and none
of the foregoing are currently open or the subject of audit. The Company
or the Sellers have made available to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by any of the
Company or any of its Subsidiaries for the last five taxable years.
(d) Neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency or has granted any
power of attorney with respect to Taxes which is currently in force.
(e) Neither the Company nor any of its Subsidiaries is or has been a
party to any Tax allocation or sharing agreement or a member of an
Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company). Neither the
Company nor any of its Subsidiaries has any Liability for the Taxes of any
Person other than the Company and its Subsidiaries under Treas. Reg. ss.
1.1502-6 (or any similar provision of Law as now in effect), as a
transferee or successor, by contract, or otherwise.
(f) Neither the Company nor any of its Subsidiaries has filed a
consent under Code ss. 341(f) concerning collapsible corporations. Neither
the Company nor any of its Subsidiaries has made any payments, nor is it
obligated to make any payments, nor is it a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible under Code ▇▇.▇▇. 162, 280G or 404. Neither the
Company nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of Code ss. 897(c)(2) during the
applicable period specified in Code ss. 897(c)(1)(A)(ii).
(g) The unpaid Taxes of the Company and its Subsidiaries (i) did
not, as of the date of the Most Recent Balance Sheet, exceed the reserve
for Tax Liability (other than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of the Company.
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(h) The Company has been an S corporation, within the meaning of the
Code and for all state and local Tax Law purposes, except in those states
and localities that do not recognize S corporation status, at all times
since January 1, 1998 and has filed all forms and taken all actions
necessary to maintain such status. Neither the Company nor any Seller has
taken any action, or omitted to take any action, which action or omission
could result in the loss of S corporation status for such period prior to
the Closing Date, other than the loss of such status anticipated to occur
as a result of the Merger pursuant to this Agreement.
(i) Each Subsidiary of the Company is and has at all times been
properly classified as a domestic international sales corporation within
the meaning of ss. 922 of the Code.
3.15. Property, Plant and Equipment.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Section 3.15(b) of the Disclosure Schedule lists all real
property leased or subleased to the Company or any of its Subsidiaries.
The Company has made available to the Buyer correct and complete copies of
the leases and subleases listed in ss. 3.15(b) of the Disclosure Schedule
and such leases and subleases have not been amended or modified since the
date thereof. With respect to each lease and sublease listed in ss.
3.15(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding and
enforceable against the Company, and, to the Knowledge of the
Sellers and the Company, in full force and effect, except to the
extent that enforceability may be limited by bankruptcy, insolvency
and other similar Laws affecting the enforcement of creditors'
rights generally;
(ii) neither the Company nor any of the Company's
Subsidiaries, or to the Knowledge of the Company or the Sellers, any
other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(iii) neither the Company nor any of its Subsidiaries nor, to
the Knowledge of the Company and the Sellers, any other party to the
lease or sublease has repudiated any provision thereof;
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(iv) there are no disputes, oral or written agreements, or
forbearance programs in effect as to the lease or sublease;
(v) neither the Company nor any Subsidiary of the Company has
assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(vi) the Company and its Subsidiaries have received all
approvals of governmental authorities (including licenses and
permits) for all facilities leased or subleased by the Company
required to be obtained by the Company in connection with the
operation of the business of the Company thereon; and
(vii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities as currently operated.
3.16. Intellectual Property.
(a) The Company and its Subsidiary own or, to the Knowledge of the
Sellers and the Company, have the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary
for the operation of the business of the Company and its Subsidiaries as
presently conducted and as presently proposed to be conducted with respect
to the Products listed in ss. 3.16(a) of the Disclosure Schedule. Section
3.16(a) of the Disclosure Schedule lists each Product which is currently
being developed by the Company or any of its Subsidiaries. Other than with
respect to Intellectual Property used under a license, the Company has
taken commercially reasonable action to maintain and protect each item of
Intellectual Property that the Company or any of its Subsidiaries owns.
(b) With respect to the Intellectual Property owned by the Company,
neither the Company nor any of its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and there has never been
any written (or, to the Knowledge of the Company and the Sellers, any
other) charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that the Company or any of its Subsidiaries must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of the Sellers and the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of the Company or any of its
Subsidiaries.
-23-
(c) Section 3.16(c)(i) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Company or any of its
Subsidiaries with respect to the Intellectual Property of the Company or
any of its Subsidiaries, identifies each pending patent application or
application for registration which has been made with respect to the
Intellectual Property of the Company or any of its Subsidiaries, and
identifies each license, agreement, or other permission which the Company
or any of its Subsidiaries has granted to any third party with respect to
any of such Intellectual Property (together with any exceptions). The
Company has made available to the Buyer correct and complete copies of all
such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
3.16(c)(ii) of the Disclosure Schedule also identifies each trade name or
unregistered trademark or servicemark used by the Company or any of its
Subsidiaries. With respect to each item of Intellectual Property required
to be identified in ss. 3.16(c)(i) of the Disclosure Schedule:
(i) the Company and its Subsidiaries possess all right, title,
and interest in and to the item, free and clear of any Lien,
license, or other restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge
of the Sellers or the Company, is threatened, which challenges the
legality, validity, enforceability, use, or ownership of the item;
and
(iv) except in the Ordinary Course of Business, neither the
Company nor any of its Subsidiaries has agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Section 3.16(d) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that the Company or
any of its Subsidiaries uses pursuant to license, sublicense, agreement,
or permission. The Company has made available to the Buyer correct and
complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss. 3.16(d) of the
Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding and enforceable against the
Company, and, to the
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Knowledge of the Sellers and the Company, in full force and effect,
except to the extent that enforceability may be limited by
bankruptcy, insolvency and other similar Laws affecting the
enforcement of creditors' rights generally;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding and enforceable against the
Company, and, to the Knowledge of the Sellers and the Company, in
full force and effect on identical terms immediately following the
consummation of the transactions contemplated hereby, subject to the
terms and conditions thereof and except to the extent that
enforceability may be limited by bankruptcy, insolvency and other
similar Laws affecting the enforcement of creditors' rights
generally;
(iii) neither the Company nor any of its Subsidiaries nor, to
the Knowledge of the Company and the Sellers, any other party to the
license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) to the Knowledge of the Sellers and the Company, no party
to the license, sublicense, agreement, or permission has repudiated
any provision thereof;
(v) to the Knowledge of the Sellers and the Company, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(vi) to the Knowledge of the Sellers and the Company, no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of the Sellers and
the Company, is threatened, which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
and
(vii) neither the Company nor any of its Subsidiaries has
granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
The representations and warranties in this ss. 3.16 are the only
representations and warranties with respect to Intellectual Property,
notwithstanding any other language of general applicability in this
Agreement.
3.17. Inventories. Section 3.17 of the Disclosure Schedule lists all of
the inventory that is owned by Persons other than the Company and which is
currently being held by the
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Company for the benefit of other Persons. The inventory, taken as a whole, as
reflected in the Most Recent Balance Sheet and books and records of the Company
and its Subsidiaries is reflected on the basis of a complete physical count as
of December 31, 1997 as updated by the Company's cycle counts and is valued at
the lower of cost (on a first-in, first-out basis) or market in accordance with
GAAP, consistently applied. Since the Most Recent Balance Sheet Date, no
inventory has been sold or disposed of except through sales in the Ordinary
Course of Business.
3.18. Contracts. Section 3.18 of the Disclosure Schedule lists the
following Contractual Obligations (excluding any Contractual Obligations that
are terminable by the Company or any of its Subsidiaries on not more than 30
days notice without penalty) to which the Company or any of its Subsidiaries is
a party:
(a) any Contractual Obligation (or group of Contractual Obligations)
for the lease of personal property to or from any Person providing for
lease payments in excess of $25,000 annually;
(b) any Contractual Obligation (or group of related Contractual
Obligations) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of
more than one year or involves consideration in excess of $25,000;
(c) any Contractual Obligation creating or making the Company or any
of its Subsidiaries a party in a partnership, limited liability company or
joint venture;
(d) any Contractual Obligation (or group of related Contractual
Obligations) under which it has created, incurred, assumed, or guaranteed
any Indebtedness in excess of $10,000 or under which it has imposed a Lien
on any of its assets, tangible or intangible, except for the endorsement
of checks for deposit in the Ordinary Course of Business;
(e) any Contractual Obligation concerning confidentiality or
noncompetition;
(f) any material Contractual Obligation relating to the Company or
any of its Subsidiaries, their assets, liabilities or business between or
among the Company and its Affiliates (other than between the Company and
any of the Company's Subsidiaries);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
consultants, agents or employees;
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(h) any collective bargaining agreement;
(i) any Contractual Obligation providing for the employment or
consultancy with any individual on a full-time, part-time, consulting or
other basis in excess of $10,000 or providing severance or retirement
benefits in excess of $25,000 in the aggregate;
(j) any Contractual Obligation under which it has advanced or loaned
any amount to any of its stockholders, Affiliates, directors, officers,
consultants, agents or employees other than in the Ordinary Course of
Business;
(k) any other Contractual Obligation (or group of related
Contractual Obligations) the performance of which involves consideration
in excess of $10,000; or
(l) any Contractual Obligation pursuant to which a party thereto is
entitled to a commission based on sales to or revenues or profits derived
from one or more customers, or success fees, finders fees or other
compensation related to sales.
The Company has made available to the Buyer a correct and complete copy of each
written Contractual Obligation listed in ss. 3.18 of the Disclosure Schedule and
a written summary setting forth the terms and conditions of each oral
Contractual Obligation referred to in ss. 3.18 of the Disclosure Schedule. With
respect to each such Contractual Obligation: (i) to the Knowledge of the Company
and the Sellers, (a) the Contractual Obligation is legal, valid, binding and
enforceable against the Company, except to the extent that enforceability may be
limited by bankruptcy, insolvency and other similar Laws affecting the
enforcement of creditors' rights generally, and, to the Knowledge of the Sellers
and the Company, in full force and effect, and (b) the Contractual Obligation
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms immediately following the consummation of the
transactions contemplated hereby; (ii) none of the Company, any of its
Subsidiaries, any Seller or (to the Knowledge of the Company and the Sellers)
any other party thereto is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the Contractual Obligation;
and (iii) none of the Company, any of its Subsidiaries, any Sellers or (to the
Knowledge of the Company and the Sellers) any other party thereto has repudiated
any provision of the Contractual Obligation.
3.19. Notes and Accounts Receivable. All notes and accounts receivable of
the Company and each of its Subsidiaries are reflected properly on its books and
records in accordance with GAAP without regard to any concept of materiality
other than one based solely on such accounts receivable. The Company has
delivered to Buyer as ss. 3.19 of the Disclosure Schedule a true and correct
list of all receivables which have been deemed by the Company uncollectible and
are not reflected in the Most Recent Balance Sheet.
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3.20. Powers of Attorney. Except pursuant to this Agreement and the
Exhibits hereto, there are no outstanding powers of attorney executed on behalf
of the Company or any of its Subsidiaries, in respect of the Company or any of
its Subsidiaries, their assets, liabilities or business.
3.21. Insurance and Risk Management. Section 3.21 of the Disclosure
Schedule sets forth a list of each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the business operations of the Company or
any of its Subsidiaries is a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy (other than
those which have expired in accordance with their terms) to the Knowledge of the
Sellers and the Company: (i) the policy is legal, valid, binding and enforceable
against the Company, except to the extent that enforceability may be limited by
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors; rights generally, and in full force and effect; (ii) the transactions
contemplated hereby will not result in the cancellation or modification of such
policies; (iii) neither the Company nor any of its Subsidiaries any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; (iv) the Company
has made available true and complete copies of all policies and related
indemnity or premium payment agreements to Buyer; (v) no party to the policy has
repudiated any provision thereof. Section 3.21 of the Disclosure Schedule
describes any self-insurance arrangements with respect to the Company or any of
its Subsidiaries.
3.22. Litigation. There are no judicial or administrative actions, claims,
suits, proceedings or investigations pending or, to the Sellers' and the
Company's Knowledge, threatened, affecting the Company, any of its Subsidiaries
or any of their assets, or that question the validity of this Agreement or of
any action taken or to be taken pursuant to or in connection with the provisions
of this Agreement nor, to the Knowledge of the Company and the Sellers, is there
any Basis for any such action, claim, suit, proceeding or investigation that
question the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement. There are no
judgments, orders, decrees, citations, fines or penalties heretofore assessed
against the Company or any of its Subsidiaries affecting any of its assets,
business or operations under any Law as in effect from time to time to the date
hereof.
3.23. Product Warranties; Defects; Liability. No Product manufactured,
sold, leased, or delivered by the Company is subject to any guaranty, warranty,
or other indemnity beyond the applicable standard terms and conditions of sale
or lease other than those that arise in accordance with applicable Law. Section
3.23 of the Disclosure Schedule includes copies of the standard terms and
conditions of sale for the Company (containing applicable guaranty,
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warranty, and indemnity provisions). The representations and warranties in this
ss. 3.23 are the only representations and warranties with respect to Product
warranties, Product defects and Product Liabilities, notwithstanding any other
language of general applicability in this Agreement.
3.24. Employees. To the Knowledge of the Company and the Sellers, no
executive, key employee or group of employees has any plans to terminate
employment with the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has experienced any material labor disputes or any work
stoppages due to labor disagreements. The Company and each of its Subsidiaries
is in compliance in all material respects with all applicable Laws as in effect
as of the date hereof respecting employment and employment practices and terms
and conditions of employment. Neither the Company nor any of its Subsidiaries is
or has ever been a party to any collective bargaining agreements and, to the
Knowledge of the Sellers and the Company, neither the Company nor any of its
Subsidiaries has been the subject of any organizational activity.
3.25. Employee Benefits.
(a) Section 3.25 of the Disclosure Schedule lists each Employee
Benefit Plan that the Company or any of its Subsidiaries maintains or to
which the Company or any of its Subsidiaries contributes relating to
current or former employees, officers or directors of the Company or any
of its Subsidiaries or any of their dependents or beneficiaries.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA, the Code,
and other applicable Laws.
(ii) All required reports and descriptions (including, without
limitation, Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to each such Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code ss. 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan
subject to such Part.
(iii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Company and its
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Subsidiaries. All premiums or other payments for all periods ending
on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(iv) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to be qualified under Code ss. 401(a)
is so qualified.
(v) The Company has made available to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
and where applicable the most recent determination letter received
from the Internal Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit
Plan.
(b) Neither the Company nor any past or current member of the
Controlled Group of Corporations which includes the Company has ever
maintained or been required to contribute to any Employee Pension Benefit
Plan subject to Title IV of ERISA.
(c) Neither the Company nor any of its Subsidiaries maintains or
contributes to nor has it ever maintained or contributed to, or ever been
required to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code ss. 4980B).
(d) The transactions contemplated by this Agreement shall not alone
or upon the occurrence of any additional or subsequent event, result in
any payment of severance or otherwise, or acceleration, vesting or
increase in benefits under any Employee Benefit Plan for the benefits of
any current or former director, officer or employee of the Company or any
of its Subsidiaries.
3.26. Environment, Health, and Safety.
(a) Except as disclosed in ss. 3.26 of the Disclosure Schedule:
(i) the Company and each of its Subsidiaries is and has been
in compliance in all material respects with all applicable
Environmental Laws and Safety Laws;
(ii) the Company and each of its Subsidiaries has obtained,
and is and has been in material compliance with the conditions of,
all Environmental
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Permits required for the continued conduct of the business of the
Company and its Subsidiaries in the manner now conducted;
(iii) the Company and each of its Subsidiaries has filed all
required applications, notices and other documents necessary to
effect the timely renewal or issuance of all Environmental Permits
for the continued conduct immediately after the Closing of the
business of the Company and its Subsidiaries in the manner now
conducted;
(iv) there are no past or present events, conditions or
circumstances caused by the Company or its operations related to
environmental or health and safety matters or Environmental Laws or
Permits or Safety Laws which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to
interfere in any material respect with compliance with any
Environmental Law or Permit or Safety Law;
(v) there are no circumstances or conditions caused by the
Company or its operations present at or arising out of the present
or former assets, properties, leaseholds, businesses or operations
of the Company or any of its Subsidiaries, including but not limited
to any off-site or on-site storage, transportation, use, disposal or
Release of a Chemical Substance, which could reasonably be expected
to give rise to any Environmental Liabilities and Costs;
(vi) none of the Company, its Subsidiaries or the Sellers or
the present or, to the Knowledge of the Sellers or the Company,
past, assets, properties, business, leaseholds or operations of the
Company or any of its Subsidiaries has received within the past
three years or is subject to, or within the past three years has
been subject to, any outstanding written, or to the Knowledge of the
Sellers and the Company, oral, order, decree, judgment, complaint,
agreement, claim, citation, or notice or is subject to any ongoing
judicial or administrative proceeding indicating that any of the
Company, its Subsidiaries, the Sellers or the past and present
assets of the Company are or may be: (A) in violation of any
Environmental Law; (B) in violation of any Safety Laws in any
material respect; (C) responsible for the on-site or off-site
storage or Release of any Chemical Substance; or, (D) liable for any
Environmental Liabilities and Costs or Safety Liabilities and Costs;
(vii) no investigation or review with respect to such matters
is pending or, to the Knowledge of the Company or the Sellers, is
threatened, nor has any authority or other third party indicated to
the Company in writing an intention to conduct the same;
-31-
(viii) neither the business of the Company or any of its
Subsidiaries nor any of their properties or assets is subject to, or
as a result of the transactions contemplated by this Agreement will
be subject to, the requirements of any Environmental Laws which
require notice, disclosure, cleanup or approval prior to transfer of
the shares or the business of the Company or any of its Subsidiaries
or which will impose Liens on any such asset or property;
(ix) Section 3.26 of the Disclosure Schedule lists all
property presently leased, owned or operated by the Company or any
of its Subsidiaries and identifies all such property (and the area
within that property) that has been used by the Company or any of
its Subsidiaries for the storage or disposal of Chemical Substances;
(x) Section 3.26 of the Disclosure Schedule lists all of the
Persons that the Company currently engages to dispose of Chemical
Substances originating from the Company or any of its Subsidiaries,
or their assets, properties or business;
(xi) Section 3.26 of the Disclosure Schedule sets forth a list
of all underground storage tanks owned or operated by the Company or
any of its Subsidiaries, and no such tank is leaking or has leaked
at any time in the past; and
(xii) Section 3.26 of the Disclosure Schedule lists all
written environmental audits, inspections, assessments,
investigations or similar reports in the possession of the Company
or any of its Subsidiaries or of which the Sellers or the Company
have Knowledge relating to the assets, properties, or business of
the Company or any of its Subsidiaries or the compliance of the same
with applicable Environmental Laws and Safety Laws.
(b) For purposes of this ss. 3.26 only, all references to the
"Company" are intended to include any and all other entities to which the
Company or any of its Subsidiaries may be considered a successor for
purposes of liability under applicable Environmental Laws. The
representations and warranties in this ss. 3.26 are the only
representations and warranties with respect to Environmental Laws or
Environmental Liabilities and Costs, or Safety Laws or Safety Liabilities
and Costs notwithstanding any other language in this Agreement of general
applicability.
3.27. Affiliated Transactions. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Contractual Obligation with any of
the Sellers or any of its other Affiliates or any member of their family and
none of the Sellers, directors or officers of the Company or any of its
Affiliates or members of their family owns or otherwise has any rights
-32-
to or interests in any asset, tangible or intangible, which is used in or
necessary for the business of the Company or any of its Subsidiaries as it is
currently conducted. All transactions between the Company and its Subsidiaries
(on the one hand) and Affiliates of the Company other than its Subsidiaries (on
the other hand) have been on an arms'-length basis and have not resulted in any
understatement or overstatement of the revenues, expenses, cash flows, profits,
assets or liabilities of the Company or any of its Subsidiaries compared to
those which would have been obtained had all such transactions been with third
parties which were not Affiliates of the Company.
3.28. Government Contracts. Neither the Company nor any of its
Subsidiaries has been or is a party to any material Contractual Obligation with
any federal, state or local government agency.
3.29. Distributors, Customers, Suppliers. Section 3.29 of the Disclosure
Schedule sets forth a complete and accurate list of (i) the top ten (in dollar
volume) distributors for the Products of the Company or any of its Subsidiaries
indicating the specific Product, existing Contractual Obligation, if any, with
each such distributor and the volume of Products distributed, (ii) the ten
largest customers (by dollar volume) of the Company and its Subsidiaries during
the Most Recent Fiscal Year, indicating the existing Contractual Obligation with
each such customer by Product, and (iii) the top ten (in dollar volume)
suppliers of materials or services to the Company and its Subsidiaries,
including, without limitation, manufacturing sub-contractors, indicating the
Contractual Obligation for continued supply from such Person.
3.30. No Illegal Payments, Etc. None of the Sellers or the Company or any
of its Subsidiaries nor, to the Knowledge of the Sellers, any of their
directors, officers, consultants, employees, agents or other Affiliates has (a)
directly or indirectly given or agreed to give any illegal gift, contribution,
payment or similar benefit to any supplier, customer, governmental official or
employee or other Person who was, is or may be in a position to help or hinder
the Company or any of its Subsidiaries (or assist in connection with any actual
or proposed transaction) or made or agreed to make any illegal contribution, or
reimbursed any illegal political gift or contribution made by any other Person,
to any candidate for federal, state, local or foreign public office (i) which
might subject any of the Company or its Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or proceeding or (ii) the
non-continuation of which has had or might have a Material Adverse Effect or (b)
established or maintained any unrecorded fund or asset or made any intentionally
false entries on any books or records for any purpose.
3.31. Books and Records. The books and all corporate (including minute
books and stock record books) and financial records of the Company and each of
its Subsidiaries are complete and correct in all material respects and have been
maintained in accordance in all material respects with applicable Laws as in
effect from time to time to the date hereof.
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3.32. Disclosure. The representations and warranties contained in this ss.
3 (including the Disclosure Schedule and any other schedules and exhibits
required to be delivered by Sellers to Buyer pursuant to this Agreement) do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
ss. 3 in light of the circumstances in which they were made not misleading. The
information with respect to customers, aircrafts and products set forth in ss.
3.32(a) of the Disclosure Schedules does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make such
information in light of the circumstances in which they were made not
misleading.
3.33. Investment Intent; Related Matters, Including Securities Law
Matters.
(a) Each Seller is acquiring the shares of B/E Common Stock to be
acquired by such Seller hereunder as a result of the Merger for such
Seller's own account, for investment, and not with a view to, or for sale
in connection with, any distribution thereof within the meaning of the
Securities Act, in a manner which is or would be in violation of any
applicable Law as the same is now in effect, including, without
limitation, the Securities Act.
(b) Such Seller understands and agrees that the shares of B/E Common
Stock to be acquired by such Seller pursuant to the Merger will not be
registered or qualified under the Securities Act or state "blue-sky" or
other securities Laws and therefore cannot be resold unless such resale is
registered under the Securities Act and applicable state Laws or unless an
exemption from such registration requirement is available.
(c) Such Seller is able to bear the economic risk of holding the
shares of B/E Common Stock to be acquired by such Seller pursuant to the
Merger for an indefinite period of time and is experienced and has such
Knowledge and experience in financial and business matters that such
Seller is capable of evaluating the risks and merits of acquiring the
shares of B/E Common Stock. Such Seller acknowledges that the shares of
B/E Common Stock to be acquired by such Seller pursuant to the Merger will
bear a legend to the effect that transfers are restricted unless (i) the
transfer is exempt from the registration requirements under the Securities
Act and the Buyer receives an opinion of counsel satisfactory to the Buyer
to that effect or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
(d) Such Seller understands that, except as provided in ss. 5.5, the
Buyer is under no obligation to effect a registration of any shares of B/E
Common Stock under the Securities Act.
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(e) Such Seller has been provided access to such information and
documents regarding the Buyer as such Seller has requested and has been
afforded an opportunity to ask questions of and receive answers from
representatives of the Buyer concerning the terms and conditions of this
Agreement and the business, assets and condition, financial and otherwise,
of the Buyer.
(f) Such Seller is an "accredited investor" within the definition
set forth in Rule 501(a) of the Securities Act with respect to the shares
of B/E Common Stock to be acquired by such Seller pursuant to the Merger.
4. Representations and Warranties of the Buyer and Acquisition. The Buyer and
Acquisition represent and warrant to the Sellers that the statements contained
in this ss. 4 are correct and complete as of the date of this Agreement.
4.1. Organization of the Buyer. Each of Buyer and Acquisition is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware and New York, respectively.
4.2. Authorization of Transaction. Each of Buyer and Acquisition has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its respective obligations hereunder.
All corporate and other actions or proceedings to be taken by or on the part of
Buyer or Acquisition to authorize and permit the execution and delivery by Buyer
and Acquisition of this Agreement and the respective instruments required to be
executed and delivered by Buyer and Acquisition pursuant hereto, the performance
by Buyer and Acquisition of their respective obligations hereunder, and the
consummation by Buyer and Acquisition of the transactions contemplated herein,
have been duly and properly taken. This Agreement has been duly executed and
delivered by each of Buyer and Acquisition and constitutes the valid and legally
binding obligation of the Buyer and Acquisition, enforceable in accordance with
its terms and conditions, except to the extent that enforceability may be
limited by bankruptcy, insolvency and other similar Laws affecting the
enforcement of creditors' rights generally.
4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any Law or other restriction of any government, governmental agency, or
court to which the Buyer or Acquisition is subject or any provision of their
respective charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any Contractual Obligation to which the Buyer or Acquisition is a party or
by which it is bound or to which any of their assets are subject. Neither the
Buyer nor Acquisition needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
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contemplated by this Agreement, except for the filing of the Certificate of
Merger with the Secretary of State of the State of New York and listing of the
B/E Shares on the NASDAQ National Market.
4.4. Brokers' Fees. Neither Buyer nor Acquisition has any Liability to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4.5. Investment Intent. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of ss. 2(11) of the
Securities Act.
4.6. Status of B/E Common Stock. When issued to the Sellers pursuant to
the Merger, the shares of B/E Common Stock to be so issued will be duly
authorized, validly issued, fully paid and nonassessable.
4.7. Information Concerning Buyer. Each of the Buyer's Registration
Statement on Form S-4 as filed with the SEC on March 9, 1998, the Buyer's Annual
Report on Form 10-K for its fiscal year ended February 28, 1998, as amended (the
"10-K"), the Buyer's Quarterly Report on Form 10-Q for the quarter ended May 30,
1998 (the "10-Q"), and the Buyer's Registration Statement on From S-3 filed with
the SEC on July 30, 1998 (the "S-3"), each as filed with the SEC, copies of
which have been furnished to the Sellers, as of its date did not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading; and since the
date of the filing of the S-3 there has been no material adverse change in the
business, assets, operations or condition, financial or otherwise, of the Buyer
and its Subsidiaries, taken as a whole that have not been disclosed in this
Agreement or other publicly available documents concerning the Buyer filed since
the date on which the S-3 was filed.
4.8. Capitalization of Acquisition. The authorized capital stock of
Acquisition consists of 3,000 shares of common stock, $.01 par value per share
("Acquisition Common Stock"). Each holder of the Acquisition Common Stock is
entitled to one vote per share of Acquisition Common Stock owned by such holder.
As of the date hereof, there are issued and outstanding 1,000 shares of
Acquisition Common Stock, all of which is held of record and beneficially by the
Buyer.
5. Covenants. The Parties agree as follows:
5.1. Access to Records after Closing. For a period of five years after the
Closing Date, the Sellers and their representatives shall have reasonable access
to all of the books and records of the Company and its Subsidiaries to the
extent that such access may reasonably be required by the Sellers in connection
with matters relating to or affected by the operations of the Company and its
Subsidiaries prior to the Closing Date. Such access shall be afforded by
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Buyer upon receipt of reasonable advance notice and during normal business
hours. Sellers shall be solely responsible for any costs or expenses incurred by
them pursuant to this ss. 5.1. If Buyer shall desire to dispose of any of such
books and records prior to the expiration of such five-year period, Buyer shall,
prior to such disposition, give the Sellers a reasonable opportunity, at
Sellers' expense, to segregate and remove such books and records as Sellers may
select.
5.2. Escrow of Shares Pending Resolution of Certain Pre-Closing Matters.
Upon consummation of the Merger, Buyer shall deliver to The Bank of New York, as
escrow agent (the "Escrow Agent"), a certificate for and in the name of each
Seller representing 5% of the aggregate number of B/E Shares issued in the
Merger to such Seller rounded to the nearest whole share. The Escrowed Shares
shall be held and either released to the Sellers or surrendered to the Buyer
according to the provisions of this ss. 5.2 and the Escrow Agreement. The
Escrowed Shares of each Seller shall be applied to indemnify and hold harmless
the Buyer and its Affiliates against and in respect of any and all Losses
specified in ss. 9.2 for which the Buyer and its Affiliates are entitled to
indemnification pursuant to the provisions of ss. 9, the amount of such
indemnification to be determined as provided in ss. 9. With respect to claims
for Losses indemnifiable by the Sellers pursuant to ss. 9.2 made prior to the
Release Date, Buyer agrees to apply the Escrowed Shares (or any remaining
portion hereof) to the satisfaction of such claims prior to proceeding against
any other assets of the Sellers; provided, however, that, subject to the
provisions of ss. 9.2, Buyer's recourse against Sellers shall not be limited by
the existence or amount of the escrow provided hereunder. Each Seller shall be
entitled to vote such Escrowed Shares as are, from time to time, held for such
Seller's account as Escrowed Shares provided that any dividend or distribution
thereon, including without limitation, dividends or distributions in the form of
capital stock of the Buyer or otherwise falling within the definition of
"Escrowed Shares" hereunder, shall be delivered to the Escrow Agent and held as
part of the Escrowed Shares.
(a) Term of Escrow. Except as provided in ss. 5.2(b) and the Escrow
Agreement, the Escrowed Shares shall be released from escrow on the
earlier of (i) the date twenty (20) days following the date on which the
Buyer's independent auditors shall deliver their signed report on their
audit of the Buyer's financial statements for the fiscal year ending
February 27, 1999, or (ii) the date one year from the Closing Date (such
earlier date being hereinafter sometimes referred to as the "Release
Date").
(b) Sale of Shares. Subject to the last sentence of ss. 5.3, each
Seller shall be entitled to sell such Escrowed Shares as are, from time to
time, held for such Seller's account as Escrowed Shares. Upon any such
sale, the proceeds therefrom shall be delivered to the Escrow Agent and
held together with any remaining Escrowed Shares in accordance with the
provisions of this ss. 5.2. Reference in this Agreement and in the Escrow
Agreement to "Escrowed Shares" shall include the proceeds of any sale of
any Escrowed Shares.
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5.3. Pooling of Interests Accounting Treatment. The Company and the
Sellers acknowledge that the Buyer intends to account for the Merger and the
consummation of the transactions contemplated hereby as a "pooling of interests"
under generally accepted accounting principles and principles applied by the
SEC, all as from time to time in effect. The Company and each Seller
acknowledge, represent, warrant and agree that (a) the Company is not and has
never been a division or more than 50% owned Subsidiary of any corporation nor
been part of an acquisition which was later rescinded, (b) neither the Company
nor such Seller has taken, within the previous two years, any action (i) to
change the equity interest of the voting common stock of the Company (or amended
the terms of any securities of the Company or of any Contractual Obligation
relating thereto) in contemplation of the transactions contemplated by this
Agreement, including, without limitation, any additional issuance, exchange or
retirement of any securities of the Company, (ii) to permit the Company to
reacquire any shares of its voting common stock or (iii) to permit the Company
or any Subsidiary of the Company to dispose of a significant portion of its
assets in contemplation of the transactions contemplated by this Agreement, (c)
none of the Sellers has entered into any agreement that would restrict any such
Person's voting rights with respect to the B/E Shares to be issued pursuant to
the Merger in accordance with ss. 2.4, (d) the ratio of the interest in the
Company of each holder of Company Common Stock to each other holder of Company
Common Stock will not be changed by the consummation of the transactions
contemplated by this Agreement and (e) neither the Company nor any Seller has at
any time since January 1, 1996 acquired any shares of B/E Common Stock. In
addition, and notwithstanding the provisions of ss. 5.5, each Seller agrees that
such Seller will not sell or otherwise dispose of any of the B/E Shares to be
received by such Seller, or in any other way reduce such Seller's risk relative
to such B/E Shares, prior to the date on which the Buyer files with the SEC or
makes publicly available financial results covering at least 30 days of
post-merger combined operations, and that the certificates evidencing the B/E
Shares shall bear a legend setting forth the foregoing restriction in the manner
required by the corporate Laws of the State of Delaware.
5.4. Plan of Reorganization and other Tax Matters.
(a) This Agreement shall constitute a "plan of reorganization" for
purposes of ss. 368 of the Code.
(b) Neither any of the Sellers nor the Company nor the Buyer shall,
nor shall any of them cause or permit any of their Affiliates to, take any
actions or make any omissions that will, or could reasonably be expected
to, adversely affect the status of the Merger as a reorganization within
the meaning of ss. 368 of the Code. Each Seller hereby waives (and
releases the Company, the Buyer, Acquisition and their respective
Affiliates from) any claims or Liabilities relating to or arising from,
any and all Taxes imposed upon such Seller or any of its Affiliates as a
result of any action or inaction on
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the part of any Seller before or after the Merger (or any action or
inaction of the Company or any of its Subsidiaries prior to the Merger)
that causes the Merger not to constitute a reorganization which is
tax-free under ss. 368 of the Code. Each Seller hereby acknowledges that
it has consulted with the Sellers' Representative and the Sellers' tax
adviser, Ernst & Young, LLP, concerning the tax consequences of the Merger
and, except for the covenant in the first sentence of this ss. 5.4(b),
neither the Buyer nor the Company is making any representation nor
advising any of the Sellers of the Tax consequences of any transaction
contemplated by this Agreement.
(c) The parties hereto shall, and shall cause the Company to cooperate
with the other parties (including providing reasonable access to employees
and books and records) and to provide such necessary information as any
other party hereto may reasonably request in connection with the
preparation of such party's Tax Returns, or to respond to or contest any
audit, prosecute any claim for refund or credit or otherwise satisfy any
legal requirement relating to Taxes and the Company. Any such information
shall be kept confidential except as may otherwise be necessary in
connection with filing any such Tax Return, responding to or contesting
any audit, prosecuting any such claim or otherwise satisfying such legal
requirement.
(d) The Sellers shall have right to represent the interests of the
Company and any Subsidiary in any Tax audit or administrative or court
proceeding relating to any Taxes of the Company or any Subsidiary for any
Tax periods ending on or prior to the Effective Date, provided that none
of the Sellers, the Company or any of their Affiliates shall compromise or
settle any Tax claim or consent or agree to any Tax liability relating to
the Company or any Subsidiary for any period ending on or prior to the
Effective Date without Buyer's consent (which consent shall not be
unreasonably withheld or delayed), to the extent that such compromise,
settlement, consent or agreement may affect the liability of Buyer, the
Company or any Subsidiary, or any of their Affiliates, for Taxes for any
period (or portion thereof) ending after the Effective Date. The Buyer
shall have the right to represent the interests of the Company and any
Subsidiary in any Tax audit or administrative or court proceeding relating
to any Taxes of the Company or any Subsidiary for any period ending after
the Effective Date, provided that none of the Buyer, the Company or any
Subsidiary, or any of their Affiliates, shall compromise or settle any Tax
claim or consent or agree to any Tax liability relating the Company or any
Subsidiary for any period ending after the Effective Date without the
Sellers' Representatives' consent (which consent shall not be unreasonably
withheld or delayed), to the extent that such compromise, settlement,
consent or agreement may affect the liability of the Sellers, the Company
or any Subsidiary, or any of their Affiliates, for Taxes for any period
(or portion thereof) ending on or prior to the Effective Date. Each of the
Buyer and the Sellers shall promptly notify the other party in writing
upon receipt of notice of any pending or threatened Tax
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audit or assessment relating to the income, properties or operations of
the Company or any Subsidiary for which the other party could be liable.
(e) Subject to ss. 9, the Sellers shall pay or reimburse the Buyer for
any Taxes (including any Taxes imposed under section 1374 of the Code) of
the Company or any of its Subsidiaries or for which the Company or any of
its Subsidiaries may be liable, for all periods ending on or prior to the
Closing Date to the extent such Taxes are not reflected in the reserve for
Tax liabilities (excluding any reserves for deferred Taxes).
(f) The Sellers shall prepare, or cause to be prepared, and, subject
to Buyer's prior review and approval (which shall not be unreasonably
withheld or delayed) timely file or cause to be filed all Tax Returns of
the Company and any Subsidiary that relate to Tax Periods ending on or
before the Effective Date.
5.5. Registration Rights.
(a) General.
(i) Initial Registration. On or prior to the Closing Date, the Buyer
shall file (and shall use its best efforts to cause to become
effective as soon as practicable thereafter) a registration statement
on Form S-3 under the Securities Act, covering the Registrable
Securities, which registration statement shall be kept in effect in
the manner and for the period specified in ss. 5.5(c)(ii). As used
herein, the term "Registrable Securities" shall mean (i) the B/E
Shares at any time outstanding and that are owned by any of the
Sellers, (ii) any shares of common stock or other securities issued as
(or issuable upon the conversion or exercise of any warrant, right,
class of common stock or other security which is issued as) a dividend
or other distribution with respect to, or in exchange by the Buyer
generally for, or in replacement by the Buyer generally of, such B/E
Shares, and (iii) any securities issued in exchange for such B/E
Shares in any merger or reorganization of the Buyer; provided,
however, that once issued, such B/E Shares and other securities shall
cease to be Registrable Securities when (x) a registration statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (y) they
shall have been sold pursuant to Rule 144 or shall no longer be
subject to restriction on resale due to the termination of the holding
period requirements (as in effect from time to time) of Rule 144, or
(z) they shall have ceased to be outstanding.
(ii) Piggyback Registration Rights. Whenever the Buyer proposes to
register any of its Common Stock for its own or others' accounts under
the Securities Act for a public offering (each a "Public Offering"),
the Buyer shall furnish each Seller
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prompt notice of its intent to do so. Upon the request of any Seller
given by written notice to the Buyer in accordance with ss. 10.7
within ten (10) business days after the giving of such notice, the
Buyer will use its best efforts to cause to be included in such
registration all of the Registrable Securities which the Sellers
request to be included in the Public Offering. Notwithstanding the
foregoing provisions of this clause (ii): (x) if the Buyer is advised
in writing by any managing underwriter of the securities being offered
pursuant to any Public Offering that, in its opinion, the number of
securities for accounts other than the Company's to be included in
such Public Offering exceeds the number which can be sold in such
Public Offering without adversely affecting such Public Offering, the
Buyer may reduce pro rata (based upon the number of Registrable
Securities requested to be included by the Sellers exercising such
"piggyback" rights and in the same proportion that the number of
securities offered for the accounts of others other than the Sellers
is reduced in such Public Offering) the number of Registrable
Securities offered for the accounts of such Seller to a number of
Registrable Securities deemed satisfactory by such managing
underwriter and (y) no holder of Registrable Securities shall have any
right of participation or otherwise with respect to any Public
Offering on Form S-4 or Form S-8 or any similar form then in effect.
(iii) Notwithstanding the foregoing provisions of this ss. 5.5(a):
(A) The Buyer may postpone or interrupt taking action with
respect to any registration statement referred to above or may
require, on ten business days' prior written notice to the
Sellers' Representatives, that the Sellers cease making sales
under an effective registration statement, (1) in the case of a
registration statement filed pursuant to ss. 5.5(a)(i), for a
reasonable period of time, (not exceeding sixty (60) days) at any
time during the ninety (90) days after the date on which the
Buyer files with the SEC or makes publicly available financial
results covering at least 30 days of post-merger combined
operations of the Buyer and the Company, and (2) in the case of
any registration statement filed pursuant to ss. 5.5(a), for two
reasonable time periods no less than 30 days apart (not exceeding
two sixty (60) day periods (each, a "Blackout Period")) at any
time after the expiration of the ninety (90) days referred to in
clause (1) above (which ninety (90) day period shall be extended
by the actual number of days that the Sellers are required to
cease making sales pursuant to clause (1) above) in each case,
if, in the good faith opinion of the Buyer, effecting the
registration or allowing such sales would materially adversely
affect a public offering, material financing, acquisition,
disposition of assets or stock, merger or other comparable
transaction or would require the Buyer to make public disclosure
of information the public disclosure of which could reasonably be
expected to
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have a material adverse effect upon the Buyer; provided, however,
that Buyer may elect to terminate or withdraw the registration
statement during either of the Blackout Periods provided for in
clause (2) above and provided further that if Buyer so elects to
terminate or withdraw such registration statement, Buyer agrees
to file, and to use best efforts to cause to become effective, a
new registration statement for the Registrable Securities prior
to the expiration of such Blackout Period;
(B) Each Seller will, in connection with any underwritten
offering of the Buyer's securities (provided that such Seller is
then participating in such underwriting), at the request of the
underwriter, agree not to effect any public sale or distribution
of the Buyer's securities held by such Seller during the period
beginning seven days prior to and ending 60 days after the
effectiveness of the registration statement for such offering,
except as part of such underwritten offering; and
(C) In the event that the Buyer proposes to make a Public
Offering with respect to which the Sellers will have rights under
ss. 5.5(a)(ii), the Sellers shall have the right to provide the
underwriters with a notice (which notice shall be provided to the
underwriters no later than three days after the receipt from such
underwriters of request with respect thereto) indicating the
number of Registrable Securities and a minimum price per share
(the "Minimum Price") at which the Sellers will sell such
Registrable Securities in such Public Offering and if the Sellers
provide such notice to the Underwriters and such Minimum Price is
met or exceeded the Sellers shall include such number of
Registrable Securities (subject to the restrictions set forth in
ss. 5.5(a)(ii)(x)) in such Public Offering.
(iv) Notwithstanding any provision of this ss. 5.5, Sellers
acknowledge and agree that any sale by them of Registrable Securities
is subject to the limitations of the last sentence of ss. 5.3.
(b) Expenses. The Buyer shall pay all expenses incident to the Buyer's
performance of or compliance with its obligations under this ss. 5.5 to
effect the registration of Registrable Securities required hereunder,
including, without limitation, all registration, filing, securities
exchange listing and NASDAQ fees, all registration, filing, qualification
and other fees and expenses of complying with federal, state and other
securities or blue sky Laws, all word processing, duplicating and printing
expenses, messenger, shipping, telephone and delivery expenses, the fees
and disbursement of counsel for the Buyer and of its independent public
accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, and fees and expenses of other Persons
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retained by the Buyer in connection with the registration of the
Registrable Securities but excluding any legal fees and expenses of
counsel retained by the holders of the Registrable Securities being
registered, and further excluding any underwriting discounts and
commissions and transfer taxes, if any, in respect of Registrable
Securities, which discounts, commissions and taxes in respect of
Registrable Securities shall be payable by the holders thereof (in the
case of an underwritten offering and the underwriter's fees, expenses,
discounts or commissions, pro rata among such holders in proportion to the
number of Registrable Securities being sold by them).
(c) Further Obligations. Without limiting the foregoing, the Buyer
will:
(i) prepare, and file with the SEC, the registration statement on
Form S-3 to effect such registration (including such audited financial
statements as may be required by the Securities Act) and use its best
efforts to cause such registration statements to become effective in
the time frame outlined in ss. 5.5(a).
(ii) prepare, and file with the SEC, such amendments and supplements
to the registration statement referred to above and any prospectus
used in connection therewith as may be necessary to maintain the
effectiveness of such registration statement and to comply in all
material respects with the requirements of the Securities Act with
respect to the disposition of all Registrable Securities included in
such registration statement, in accordance with the intended methods
of disposition thereof, until the earlier of (i) such time as all of
such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement or (ii) with respect to any registration
statement filed pursuant to ss. 5.5(a)(i), the date one year from the
Closing Date; and, in the event that any Registrable Securities remain
unsold at the end of any such period, the Buyer may file a
post-effective amendment to the registration statement for the purpose
of removing such Registrable Securities from registered status;
(iii) prior to filing any registration statement hereunder or any
amendment or supplement thereto, the Buyer shall provide the Sellers'
Representative with a copy of such registration statement, amendment
or supplement and shall obtain the consent of the Sellers'
Representative, which consent shall not be unreasonably withheld or
delayed, to the inclusion of any information to be included in such
registration statement, amendment or supplement for which Sellers have
indemnification obligations pursuant to ss. 5.5(d)(ii); provided that
if Sellers' Representative fails to notify Buyer that it objects to
any such reference within five business days after receipt by Sellers
of such copy to any such information, Sellers shall be deemed for all
purposes to have consented thereto;
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(iv) promptly notify in writing each holder of Registrable
Securities and the underwriter or underwriters, if any:
(v) upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in the registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made;
(w) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective;
(x) of any written request by the SEC or any other regulatory
body or other body having jurisdiction over the securities for
amendments or supplements to such registration statement or prospectus
or for supplemental information;
(y) of the notification to the Buyer by the SEC of its initiation
of any proceeding with respect to the issuance by the SEC of, or of
the issuance by the SEC of, any stop order suspending the
effectiveness of such registration statement; and
(z) of the receipt by the Buyer of any notification with respect
to the suspension of the qualification of any Registrable Securities
for sale under the applicable securities or blue sky Laws of any
jurisdiction;
(v) furnish to each holder of Registrable Securities included in the
registration statement such number of conformed copies of the
registration statement and of each amendment and supplement thereto
(in each case including all exhibits and documents incorporated by
reference), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
prospectus supplement) and any other prospectus filed under Rule 424
promulgated under the Securities Act relating to such holder's
Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of such holder's
Registrable Securities;
(vi) use best efforts to register or qualify all Registrable
Securities included in the registration statement under such other
securities or blue sky Laws of such jurisdictions as each holder
thereof shall reasonably request which request is made within ten (10)
days following the original filing of the registration statement and
to keep such registration or qualification in effect for so long as
the registration
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statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such holder to consummate
the disposition in such jurisdictions of the Registrable Securities
owned by such holder, except that the Buyer shall not for any such
purpose be required (a) to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for
the requirements of this paragraph (vi) be obligated to be so
qualified, (b) to consent to general service of process in any such
jurisdiction or (c) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification;
(vii) use its best efforts to list all Registrable Securities
covered by the Registration Statement on each securities exchange and
inter-dealer quotations system on which similar securities of the
Buyer are then listed; and
(viii) use its best efforts to obtain withdrawal of any order
suspending the effectiveness of a registration statement, or the
lifting any suspension of qualification (or exemption from
qualification) of the offer and sale of any of the Registration
Securities in any jurisdiction.
With a view to making available to the Sellers the benefits of Rule 144
promulgated under the Securities Act and any successor rule or regulation
("Rule 144"), the Buyer will (i) make and keep public information
available as those terms are understood and defined in Rule 144, (ii)
furnish to any Seller forthwith upon request (A) a statement by the
Company as to its compliance with the reporting requirements of Rule 144
and (B) a copy of the most recent annual or quarterly report of the
Company.
The Buyer may require each Person whose Registrable Securities are being
registered to, and each such holder, as a condition to including
Registrable Securities in such registration, shall, furnish the Buyer and
any underwriters with such information and affidavits regarding such
holder and the distribution of such securities as the Buyer and such
underwriters may from time to time reasonably request in writing and to
otherwise cooperate in connection with such registration. At any time
during the effectiveness of the registration statement covering
Registrable Securities offered by a holder, if such holder becomes aware
of any change materially affecting the accuracy of the information
contained in such registration statement or the prospectus (as then
amended or supplemented) relating to such holder, such holder will
promptly notify the Buyer of such change.
Upon receipt of any notice from the Buyer of the happening of any event as
a result of which any prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, each holder of
Registrable
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Securities will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement until such
holder receives copies of a supplemented or amended prospectus from the
Buyer and, if so directed by the Buyer, shall deliver to the Buyer (at the
Buyer's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Buyer shall give any such notice (or in the event that the Buyer exercises
its right under ss. 5.5(a)(iv) to require cessation of sales under an
effective registration statement), the period referred to in paragraph
(ii) of this ss. 5.5(c) shall be extended by a number of days equal to the
number of days during the period from the giving of such notice from the
Buyer to stop trading to the date when the copies of the supplemented or
amended prospectus are sent to holders whose Registrable Securities are
included in such registration statement (or, in the case of a cessation of
trading under ss. 5.5(a)(iv) a number of days equal to the period of time
the Buyer so causes cessation of trading under such registration
statement). In the event that the SEC issues a stop order suspending the
effectiveness of any registration statement filed under this ss. 5.5, the
period referred to in paragraph (ii) of this ss. 5.5(c) shall also be
extended by a number of days equal to the number of days during which such
stop order is in effect.
(d) Indemnification.
(i) The Buyer shall, to the full extent permitted by law, indemnify
and hold harmless each seller of Registrable Securities included in
any registration statement filed pursuant to this ss. 5.5, its
directors, officers, and partners, and each other Person, if any, who
controls any such seller within the meaning of the Securities Act,
against any Losses to which such seller or any such director, officer,
partner or controlling Person may become subject under the Securities
Act or otherwise, insofar as such Losses (or claims, actions, suits,
proceedings, arbitration or investigations in respect thereof) arise
out of or are based upon any untrue statement of any material fact
contained in such registration statement, any preliminary prospectus,
final prospectus or prospectus supplement contained therein or filed
with the SEC, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the
case of a prospectus, in the light of the circumstances under which
they were made) not misleading; provided, that the Buyer shall not be
liable in any such case to the extent that any such Loss (or any
claim, action, suit, proceeding, arbitration or investigation in
respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
such registration statement, preliminary prospectus, final prospectus,
amendment or supplement in reliance upon and in conformity with
information furnished in writing to the Buyer for inclusion in such
registration statement by such Seller. Such indemnity shall
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remain in full force and effect regardless of any investigation made
by or on behalf of such seller or any such director, officer, partner
or controlling Person, and shall survive the transfer of such
securities by such seller.
(ii) Each Person whose Registrable Securities are included or are to
be included in any registration statement filed pursuant to this ss.
5.5, as a condition to including such holder's Registrable Securities
in each registration statement, shall to the full extent permitted by
law, indemnify and hold harmless the Buyer, its directors and
officers, and each other Person, if any, who controls the Buyer within
the meaning of the Securities Act, against any Losses to which the
Buyer or any such director or officer or controlling Person may become
subject under the Securities Act or otherwise, insofar as such Losses
(or claims, actions, suits, proceedings, arbitrations or
investigations in respect thereof) arise out of or are based upon any
untrue statement of any material fact contained in any such
registration statement, any preliminary prospectus, final prospectus
or prospectus supplement contained therein or filed with the SEC, or
any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were
made) not misleading, if such untrue statement or omission was made in
reliance upon and in conformity with information furnished in writing
to the Buyer for inclusion in such registration statement by such
Seller. Notwithstanding any contrary provision of ss. 9.2, the
indemnification obligation of the Sellers under this ss. 5.5(d) shall
in no way be limited to (and the Buyer shall not be constrained to
seek in response to any failure to provide indemnity pursuant to this
ss. 5.5(d)) recourse against Escrowed Shares. The foregoing indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of the Buyer or any such director, officer or
controlling Person and shall survive the transfer of such securities
by such seller. Such holders shall also indemnify each other Person
who participates (including as an underwriter) in the offering or sale
of Registrable Securities, their officers and directors and each other
Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above
with respect to the Buyer.
(iii) Promptly after receipt by any party of notice of the
commencement of any action or proceeding involving a claim referred to
in the preceding paragraph (i) or (ii) of this ss. 5.5(d), such party
shall, if a claim in respect thereof is to be made against another
party pursuant to such paragraphs, give written notice to the latter
of the commencement of such action, provided that any failure of any
Person to give notice as provided herein shall not relieve any other
Person of its obligations under the preceding paragraph of this ss.
5.5(d), except to the extent that such other Person is actually
prejudiced by such failure. In case any such action is brought,
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the party obligated to indemnify pursuant to the foregoing provisions
of this ss. 5.5(d) shall be entitled to participate in and, unless, in
the reasonable judgment of any indemnified party, a conflict of
interest between such indemnified party and any indemnifying party
exists with respect to such claim, to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other
than reasonable costs of investigation; provided that the indemnified
party may participate in such defense at the indemnified party's
expense. No indemnifying party shall consent to entry of any judgment
or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
each indemnified party of a release from all liability in respect to
such claim or litigation without the consent of the indemnified party.
No indemnifying party shall be subject to any liability for any
settlement made without its consent, which consent shall not be
unreasonably withheld.
(iv) If the indemnity and reimbursement obligation provided for in
any paragraph of this ss. 5.5(d) is unavailable or insufficient to
hold harmless a party entitled to indemnification hereunder in respect
of any Losses (or claims, actions, suits, proceedings, arbitrations or
investigations with respect thereto) for which indemnification is
provided therein, the party obligated to indemnify hereunder shall
contribute to the amount paid or payable by the indemnified party as a
result of such Losses (or claims, actions, suits, proceedings,
arbitration or investigations) in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand
and the indemnified party on the other hand in connection with
statements or omissions which resulted in such Losses, as well as any
other relevant equitable considerations. Relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions
pursuant to this paragraph were to be determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first
sentence of this paragraph. Notwithstanding anything herein to the
contrary, no participating holder of Registrable Securities shall be
required to contribute any amount in excess of the amount by which the
net proceeds of the offering (before deducting expenses, if any)
received by such participating holder exceeds the
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amount of any damages that such participating holder has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of ss. 11(f) of the
Securities Act) shall be entitled to contribution from any Person not
guilty of such fraudulent misrepresentation.
5.6. Compliance With New York Law. Buyer hereby agrees that it shall, to
the extent that any non-compliance would subject any Seller to any Liability
therefor, comply in all respects with Section 630 of New York Business
Corporation Law, with respect to liability of shareholders for wages due to
laborers, servants or employees.
6. Deliveries at Closing.
6.1. Deliveries by Sellers. The Sellers shall deliver to the Buyer and
Acquisition at the Closing, the following documents and instruments:
(a) Certificate of Merger. The Certificate of Merger;
(b) Escrow Agreement. An Escrow Agreement substantially in the form of
Exhibit A hereto;
(c) Consulting Agreement. A Consulting Agreement substantially in the
form of Exhibit D hereto between the Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be
duly executed and in full force and effect;
(d) Severance and Noncompetition Agreement. A Severance and
Noncompetition Agreement substantially in the form of Exhibit E hereto
between the Buyer and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be duly executed and in full
force and effect;
(e) Opinion. An opinion of counsel to the Company and the Sellers
dated as of the Closing Date and addressed to the Buyer and Acquisition in
form and substance as set forth in Exhibit F attached hereto;
(f) Resignations. Resignations, dated as of the Closing Date, of each
officer and director of the Company and of any of the Company's
Subsidiaries;
(g) Pooling Treatment. A letter, in form and substance satisfactory to
the Buyer, from Ernst & Young, LLP to the effect that such transactions
may be accounted for by the Buyer as a pooling of interests; and
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(h) Certificates. Such other certificates and documents as Buyer has
reasonably requested, including, without limitation, all of the shares of
the Company Common Stock delivered pursuant to the Merger in accordance
with ss.2 of this Agreement.
6.2. Deliveries of the Buyer. The Buyer shall deliver to the Sellers at
the Closing, the following documents and instruments:
(a) Opinion. An opinion of counsel to the Buyer and Acquisition dated
as of the Closing Date and addressed to the Sellers in form and substance
as set forth in Exhibit G attached hereto; and
(b) Certificates. Such other certificates and documents as Sellers
have reasonably requested, including, without limitation, certificates
representing the B/E Shares to be issued pursuant to the Merger in
accordance with ss. 2 of this Agreement.
7. Confidentiality. Each of the Parties will treat and hold as confidential all
of the Confidential Information relating to the other Parties or to the Company
or any of its Subsidiaries or their assets, properties or business, will refrain
from using or disclosing to any Person any such Confidential Information (except
to their respective counsel, accountants and representatives in connection with
this Agreement), and will deliver promptly to the Party who provided the
Confidential Information (or, at the request and option of that Party, destroy)
all tangible embodiments (and all copies) of such Confidential Information which
are in his, her or its possession. In the event that any of the Parties is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Party will
notify the Party who originally disclosed such Confidential Information (the
"Original Disclosing Party") promptly of the request or requirement so that the
Original Disclosing Party may seek an appropriate protective order or waive
compliance with the provisions of this ss. 7. If, in the absence of a protective
order or the receipt of a waiver hereunder, any of the Parties is, on the advice
of counsel, compelled to disclose any Confidential Information of another Party
to any tribunal that such Party may disclose the Confidential Information to the
tribunal; provided, however, that such Party shall use its best efforts to
obtain, at the request and expense of the Original Disclosing Party, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Original Disclosing
Party shall designate. Each of the Sellers also hereby covenants and agrees that
on and after the Closing, such Seller shall maintain the confidentiality of any
Confidential Information relating to the assets, properties or business of the
Company and any of its Subsidiaries. The Buyer shall have no further obligation
under this ss. 7 after the Closing.
8. Noncompetition. (a) Each Seller agrees that, in consideration of the purchase
by Buyer hereunder, it shall not, on or prior to the date which is three (3)
years after the Closing Date,
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directly or indirectly, run, own, manage, operate, control, be employed by,
provide consulting services to, be an officer or director of, participate in,
lend his, her or its name to, invest in or be connected in any manner with the
management, ownership, operation or control of any business, venture or activity
which competes with the business (including parts and accessories therefor)
being conducted at the Closing Date by the Company or any of its Subsidiaries or
relating to Products performing functions similar to those of the Products;
provided, however, no Seller shall be considered to be in default of this ss. 8
solely by virtue of holding for portfolio purposes as a passive investor not
more than five percent (5%) of the issued and outstanding equity securities of a
corporation, if equity securities of the same class and type of such corporation
or quoted on a stock exchange or an over-the-counter market within the United
States.
(b) Each of the Sellers further agrees that for a period of five (5) years
after the Closing Date such Seller will not directly or indirectly, without the
prior written consent of Buyer, recruit, offer employment, employ, engage as a
consultant, lure or entice away or in any other manner persuade or attempt to
persuade any person who is an employee of the Company, any of the Company's
Subsidiaries, the Buyer or any Subsidiary, group, or division of Buyer or any
Affiliate thereof leave such employment unless such person has been terminated
by the Buyer or an Affiliate of Buyer.
9. Indemnification.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of the Sellers (except for those contained in
▇▇.▇▇. 3.1 (first sentence only, relating to the organization and existence of
the Company), 3.2 (Capitalization and Ownership of the Company), 3.3
(Authorization of Transaction), 3.5 (Brokers Fees), 3.7 (Subsidiaries, except
for the first and third sentences thereof), 3.14 (Taxes), 3.26 (Environment,
Health and Safety) and 3.33 (Investment Intent; Related Matters, Including
Securities Law Matters)) contained herein (it being understood that the second
sentence of ss.5.3 is considered a representation and warranty by the Sellers
and the Company) or in any document certificate or other instrument required to
be delivered hereunder shall survive the Closing and continue in full force and
effect until 30 days after the Buyer has filed its Annual Report on Form 10-K
for the fiscal year ending in February, 2000 (the "Survival Period"). The
representations and warranties of Sellers contained in ▇▇.▇▇. 3.1, 3.2, 3.3, 3.7
and ss. 3.26 shall survive the Closing and those contained in ▇▇.▇▇. 3.1 (first
sentence only), 3.2 , 3.3 and 3.7 (except for the first and third sentences
thereof) shall continue in full force and effect for a period of five years
thereafter and those contained in ss. 3.26 shall continue in full force and
effect for a period of three years thereafter. The representations and
warranties of Sellers contained in ▇▇.▇▇. 3.5, 3.14 and 3.33 shall survive the
Closing and shall continue in full force and effect without limit as to time
(subject to any applicable statutes of limitations and any extensions or waivers
thereof). The termination of any such representation and warranty, however,
shall not affect any claim for breaches of representations or warranties if
written notice thereof is given to the breaching
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party or parties prior to such termination date. All of the representations and
warranties of the Buyer contained in ss. 4 shall survive the Closing and shall
continue in full force and effect until three years after the Closing Date. All
covenants and indemnities of any Party in this Agreement or in any document or
certificate delivered hereunder shall, unless otherwise specifically provided
therein, remain in full force and effect forever.
9.2. Indemnity by Sellers. Each Seller hereby agrees severally (and not
jointly, or jointly and severally) to indemnify, defend and hold harmless Buyer,
Acquisition and the Company and each of their directors, officers and Affiliates
(individually a "Buyer Indemnitee" and collectively the "Buyer Indemnitees")
against and in respect of all Liabilities, obligations, judgments, Liens,
injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes, losses, fines, penalties, expenses, fees, costs, amounts paid in
settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any action
or threatened action), arising out of any claim, damages, complaint, demand,
cause of action, audit, investigation, hearing, action, suit or other proceeding
asserted or initiated or otherwise existing in respect of any matter (each a
"Loss" and collectively, the "Losses") that results from (a) the inaccuracy or
breach of any representation or warranty made by such Seller herein or from any
misrepresentation in or omission from any schedule, document, certificate or
other instrument required to be furnished by Sellers hereunder, provided that
for purposes of this clause (a) breaches of all representations and warranties
shall be determined as follows (i) with respect to any individual item of Loss
or related items of Loss, if such item or items exceed $25,000 (the "Individual
Threshold"), then all Losses (without regard to time) that result from, arise
out of or relate to the circumstances, events, facts or occurrences surrounding
such individual item or related items of Loss or Losses of a similar nature in
excess of $10,000 (the "Individual Deductible") shall count toward the Aggregate
Deductible and the Aggregate Threshold, (ii) if the aggregate dollar amount of
Losses which would otherwise be indemnifiable pursuant to this clause (a)
exceeds $300,000 (the "Aggregate Threshold"), in which case the Sellers will be
liable for all Losses under this clause (a) in excess of $200,000 (the
"Aggregate Deductible"), and (iii) the foregoing limitations shall not apply to
any Losses resulting from representations set forth in ss. 3 which were
fraudulently made or any breach or inaccuracy of the representations and
warranties contained in ▇▇.▇▇. 3.1 (first sentence only), 3.2, 3.3, 3.5, 3.7
(except for the first and third sentences thereof), or 3.33 and (b)
nonfulfillment of any agreement or covenant of such Seller contained herein or
in any agreement or instrument required to be entered into in connection
herewith; provided, however, that Sellers' liability under this clause (b) in
respect of Losses resulting from non-fulfillment of the agreement and covenant
contained in ss. 5.4(e) shall be subject to the Individual Threshold, Individual
Deductible, Aggregate Threshold and Aggregate Deductible set forth above;
provided, further, that Sellers shall not be liable for a breach of the covenant
in the last sentence of ss. 5.3 and any Losses thereunder arising from any
action taken by any Seller with respect to the B/E Shares to which the Buyer
specifically consents in writing. Sellers' liability under clause (a) of the
immediately preceding sentence in respect of Losses shall not exceed in the
aggregate $1,500,000, provided that the foregoing
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limitation shall not apply to any Losses resulting from representations set
forth in ss. 3 which were fraudulently made or any breach or inaccuracy of the
representations and warranties contained in ▇▇.▇▇. 3.1 (first sentence only),
3.2, 3.3, 3.5, 3.7 (except for the first and third sentences thereof), 3.14,
3.26 or 3.33. Sellers' liability under clause (a) of this paragraph in respect
of Losses resulting from breach or inaccuracy of the representations and
warranties contained in ss. 3.14 and under clause (b) in respect of Losses
resulting from non-fulfillment of the agreement and covenant contained in ss.
5.4(e) shall not exceed $5,000,000. Sellers' liability under clause (a) of this
paragraph in respect of Losses resulting from breach or inaccuracy of the
representations and warranties contained in ss. 3.26 shall not exceed
$3,000,000. Sellers' liability under clause (b) of this paragraph in respect of
Losses resulting from nonfulfillment of the agreement and covenant of the
Sellers in the last sentence of ss. 5.3 shall not exceed the Aggregate Merger
Consideration. The amounts payable by the Sellers pursuant to this ss. 9.2 shall
be (i) net of any Tax benefit actually realized by the Buyer (on a with or
without basis) and increased by any increased Tax cost incurred by the Buyer as
a result of the Sellers' indemnification payment and (ii) net of any insurance
proceeds (reduced by any applicable increases in premiums) if and when actually
received by Buyer (it being understood that Buyer shall use commercially
reasonable efforts to obtain recovery from an insurer with which Buyer has
insurance covering such Loss, provided that nothing contained herein shall limit
Buyer's ability to simultaneously pursue its right to indemnification
hereunder). Buyer shall provide Sellers written notice for any claim made in
respect of the indemnification provided in this ss. 9.2, whether or not arising
out of a claim by a third party.
9.3. Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and hold
harmless Sellers and their respective directors, officers and Affiliates
(individually a "Seller Indemnitee" and collectively the "Seller Indemnitees")
against and in respect of all Losses that result from the inaccuracy or breach
of any representation or warranty made by Buyer or Acquisition herein, any
misrepresentation in or omission from any schedule, document, certificate or
other instrument required to be furnished by Buyer or Acquisition hereunder or
from any breach or nonfulfillment of any agreement or covenant of Buyer or
Acquisition contained any agreement or instrument required to be entered into in
connection herewith. Sellers shall provide Buyer written notice for any claim
made in respect of the indemnification provided in this ss. 9.3, whether or not
arising out of a claim by a third party.
9.4. Exclusive Remedy. This Agreement shall provide the sole and exclusive
remedy for any and all Losses sustained or incurred by any Buyer Indemnitee or
Seller Indemnitee or their respective successors and assigns other than for
fraud and equitable actions with respect to ▇▇.▇▇. 7, 8 and 10.15. The parties
recognize that there may be a duty to mitigate damages with respect to Losses
under applicable Law.
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9.5. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss. 9, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Subject to ss. 5.4(d), the Indemnifying Party or Parties and the
Indemnified Party will have the right to jointly control the defense
against the Third Party Claim if the Third Party Claim involves only money
damages and does not seek an injunction or other non-monetary relief;
provided, however, that if in the good faith judgment of the Indemnified
Party the Third Party Claim is likely to involve potential Losses of $5
million or greater, the Indemnified Party shall have the right to
determine any matters as to which the parties are unable to agree with
respect to the defense of the Third Party Claim; provided, further, that
neither the Indemnified Party nor the Indemnifying Party or Parties will
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim that would give rise to Liability for or
otherwise affect the other party without the prior written consent of the
other parties, which consent shall not be unreasonably withheld or delayed
and in the event that no response to any such request for consent to
judgment or settlement is received within five business days after receipt
by such other party of the notice with respect thereto, such party shall
be deemed for all purposes to have consented thereto. In connection with
such joint defense of any Third Party Claim pursuant to ss. 9.5(a), the
Indemnifying Party or Parties and the Indemnified Party agree that they
shall regularly consult with each other and cooperate with each other in
the defense, compromise or settlement of such Third Party Claim and shall
make available to each other and their counsel its books, records and
employees whose assistance, testimony or presence is necessary to assist
in evaluating and defending any such action, suit or proceeding. With
respect to Third Party Claims with respect to which the parties shall
jointly control the defense, the Sellers' Litigation Representative is
hereby appointed the sole and exclusive representative in connection with
the defense of such Third Party Claim and any indemnification obligations
of the Sellers with respect thereto.
(c) In the event that the Third Party Claim involves a claim for
injunctive or other equitable relief, the Indemnified Party may retain its
own counsel and defend against the Third Party Claim in any manner it may
deem appropriate and the Indemnified Party need not consult with any
Indemnifying Party in connection therewith; provided, however, that the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim that would give
rise to a
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Liability for or otherwise affect the Indemnifying Party or Parties
without the prior written consent of the Indemnifying Party or Parties,
which consent shall not be unreasonably withheld or delayed and in the
event that no response to any such request for consent to judgment or
settlement is received within five business days after receipt by such
other party of the notice with respect thereto, the Indemnifying Party or
Parties shall be deemed for all purposes to have consented thereto. The
Indemnifying Party or Parties will reimburse the Indemnified Party
promptly upon admission or determination of the Indemnified Party's claim
for indemnification for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and the
Indemnifying Parties will remain responsible for any Losses the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this ss. 9.
9.6. Other Indemnification Provisions. Each of the Sellers hereby agrees
that he or it will not make any claim for indemnification against any of the
Buyer, the Company or any of their Subsidiaries and other Affiliates solely by
reason of the fact that he or it was a director, officer, employee, or agent of
the Company or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, Losses, expenses, or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement, or otherwise) with respect to
any action, suit, proceeding, complaint, claim, or demand brought by the Buyer
or the Company against such Seller (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable Law, or
otherwise).
10. Miscellaneous.
10.1. Press Releases and Public Announcements. Neither the Sellers nor the
Company nor any of their Affiliates or representatives shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement or the transactions contemplated hereby without the prior written
consent of the Buyer.
10.2. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
10.3. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
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10.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
10.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed to have been received (i) upon
confirmation of facsimile, (ii) one business day following the date sent when
sent by overnight delivery and (iii) five business days following the date
mailed when mailed by registered or certified mail return receipt requested and
postage prepaid at the following address:
If to the Sellers:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Sellers' Representative
for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and as the Sellers'
Litigation Representative for each of the Sellers
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, as Sellers' Representative for Trustees U/A ▇▇▇▇▇▇▇
▇▇▇▇▇ dated 1/7/92 and Trustees U/A ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ dated 1/7/92 ▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. Francisco, as Sellers' Representative
for ▇▇▇▇▇ ▇. Francisco and ▇▇▇▇▇ ▇. Francisco
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ 1004
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Buyer or Acquisition:
BE Aerospace, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
With a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
10.8. Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the domestic substantive Laws of
the State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the domestic substantive laws of any
jurisdiction other than the State of New York. Subject to ss. 10.15 the Parties
hereby submit to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of the Supreme Court of New York
sitting in New York County (including its Appellate Division), and any other
appellate court in the State of New York for the purposes of all legal
proceedings arising out of or relating to this Agreement
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or the transactions contemplated hereby. The Parties irrevocably waive, to the
fullest extent permitted by applicable law, any objection which it my now or
hereafter have to the laying the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Notwithstanding the foregoing, any dispute
relating to the provisions of ss. 10.15 shall be governed by the American
Arbitration Act as then in effect.
10.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.11. Expenses. Each of the Buyer and the Sellers will bear his or its
own costs and expenses (including legal and accounting fees and expenses).
Sellers hereby covenant and agree that the expenses of the Company incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, bonuses to management and fees and expenses of
counsel and advisers) shall not exceed $2,226,346.
10.12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any Law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
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10.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
10.14. Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of ▇▇.▇▇. 7, 8 and 10.15 of this Agreement and to enforce specifically
those sections of this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter in addition to any other remedy to
which it may be entitled, at law or in equity.
10.15. Arbitration.
(a) Generally. Except solely as set forth in ss. 10.14 and ss.
10.15(c), each dispute, difference, controversy or claim arising in
connection with or related or incidental to, or question occurring under,
this Agreement or the subject matter hereof shall be finally settled under
the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA") by an arbitral tribunal composed of three arbitrators, at
least one of whom shall be an attorney experienced in corporate
transactions, appointed by agreement of the Parties in accordance with
said Rules. In the event the Parties fail to agree upon a panel of
arbitrators from the first list of potential arbitrators proposed by the
AAA, the AAA will submit a second list in accordance with said Rules. In
the event the Parties shall have failed to agree upon a full panel of
arbitrators from said second list, any remaining arbitrators to be
selected shall be appointed by the AAA in accordance with said Rules. If,
at the time of the arbitration, the Parties agree in writing to submit the
dispute to a single arbitrator, said single arbitrator shall be appointed
by agreement of the parties in accordance with the foregoing procedure,
or, failing such agreement, by the AAA in accordance with said Rules. The
foregoing arbitration proceedings may be commenced by any Party by notice
to all other Parties.
(b) Place of Arbitration. The venue of such arbitration shall be New
York, New York, or any other place mutually agreed to by Buyer and
Sellers.
(c) Recourse to Courts. Subject to ss. 10.14, the Parties hereby
exclude any right of appeal to any court on the merits of the dispute. The
provisions of this ss. 10.15 may be enforced in any court having
jurisdiction over the award or any of the Parties or any of their
respective assets, and judgment on the award (including without limitation
equitable remedies) granted in any arbitration hereunder may be entered in
any such court. Nothing contained in this ss. 10.15 shall prevent any
Party from seeking interim
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measures of protection in the form of pre-award attachment of assets or
preliminary or temporary equitable relief.
(d) Decision of Arbitral Tribunal. In the event of a dispute between
the Parties hereunder, each Party shall present an offer of settlement
which shall address all issues in dispute such that adoption of such offer
of settlement would conclusively settle all items then in dispute. The
arbitral tribunal shall be limited in its decision to choosing between the
offers of settlement presented to it. The decision of the arbitral
tribunal shall be final and binding on the Parties and non-appealable. The
Party whose offer of settlement is not chosen by the arbitral tribunal
shall pay all of the expenses of the arbitration, which, in the event the
Sellers are held responsible for any such expenses prior to the Release
Date, shall be subject to satisfaction by application of the Escrowed
Shares pursuant to the provisions of ss. 5.2 and the Escrow Agreement.
10.16. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE SELLERS, THE BUYER, ACQUISITION AND THE
COMPANY HEREBY WAIVE, AND COVENANT THAT HE OR IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
PASSED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
BE AEROSPACE, INC.
By:
------------------------------
Title:
---------------------------
BE AEROSPACE ACQUISITION CORP.
By:
------------------------------
Title:
---------------------------
AEROSPACE LIGHTING CORPORATION
By:
------------------------------
Title:
---------------------------
---------------------------------
▇▇▇▇▇ ▇. Francisco
---------------------------------
▇▇▇▇▇ ▇. Francisco
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TRUSTEES U/A ▇▇▇▇▇▇▇ ▇▇▇▇▇
dated 1/7/92
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, as Trustee
TRUSTEES U/A ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
U/A dated 1/7/92
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as Trustee
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Sellers'
Representative for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and as the Sellers'
Litigation Representative
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----------------------------------
▇▇▇▇▇ ▇. Francisco, as Sellers'
Representative for ▇▇▇▇▇ ▇. Francisco and
▇▇▇▇▇ ▇. Francisco
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, as Sellers' Representative
for Trustees U/A ▇▇▇▇▇▇▇ ▇▇▇▇▇ dated 1/7/92
and Trustees' U/A ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, dated
1/7/92
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