Exhibit 2(a)
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BY AND AMONG
EDO CORPORATION,
EDO ACQUISITION III CORPORATION
AND
AIL TECHNOLOGIES INC.
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EDO CORPORATION,
EDO ACQUISITION III CORPORATION
AND
AIL TECHNOLOGIES INC.
DATED AS OF JANUARY 2, 2000
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TABLE OF CONTENTS
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1. The Merger............................................... A-7
1.1. The Merger.......................................... A-7
1.2. Closing............................................. A-7
1.3. Conversion of Stock................................. A-8
1.4. Effect of Conversion................................ A-8
1.5. Options............................................. A-9
1.6. Exchange of Certificates Representing Common
Shares................................................. A-9
1.7. Deposits in the Escrow Account...................... A-11
1.8. Shares of Dissenting Stockholders................... A-11
1.9. Adjustments to Prevent Dilution..................... A-12
2. Representations and Warranties of AIL.................... A-12
2.1. Authorization, etc. ................................ A-12
2.2. Title to Shares, Capitalization, etc................ A-12
2.3. No Conflicts, etc................................... A-13
2.4. Corporate Status.................................... A-13
2.5. Discontinued and Acquired Businesses................ A-13
2.6. Company Financial Statements........................ A-13
2.7. Undisclosed Liabilities, etc........................ A-14
2.8. Absence of Changes.................................. A-14
2.9. Taxes............................................... A-14
2.10. Assets.............................................. A-15
2.11. Real Property....................................... A-15
2.12. Contracts........................................... A-16
2.13. Intellectual Property............................... A-18
2.14. Insurance........................................... A-19
2.15. Litigation.......................................... A-19
2.16. Compliance with Laws and Instruments; Consents...... A-19
2.17. Environmental Matters............................... A-20
2.18. Affiliate Transactions.............................. A-21
2.19. Employees, Labor Matters, etc. ..................... A-21
2.20. Employee Benefit Plans and Related Matters; ERISA... A-21
2.21. Accounts Receivable................................. A-23
2.22. Inventories......................................... A-23
2.23. Customers........................................... A-24
2.24. Suppliers; Raw Materials............................ A-24
2.25. Products; Product and Service Warranties............ A-24
2.26. Brokers, Finders, etc............................... A-24
2.27. Disclosure.......................................... A-24
2.28. Opinion of Financial Advisor........................ A-25
2.29. Required Vote of AIL's Stockholders................. A-25
2.30. EDO Share Ownership................................. A-25
2.31. Board Recommendation................................ A-25
2.32. Amendment to AIL ESOP............................... A-25
3. Representations and Warranties of EDO and Merger Sub..... A-25
3.1. Authorization, etc. ................................ ▇-▇▇
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3.2. Capitalization...................................... A-25
3.3. No Conflicts, etc................................... A-26
3.4. Corporate Status.................................... A-26
3.5. Discontinued and Acquired Businesses................ A-27
3.6. SEC Reports; EDO Financial Statements............... A-27
3.7. Undisclosed Liabilities, etc........................ A-27
3.8. Absence of Changes.................................. A-27
3.9. Taxes............................................... A-28
3.10. Assets.............................................. A-28
3.11. Real Property....................................... A-28
3.12. Contracts........................................... A-30
3.13. Intellectual Property............................... A-31
3.14. Insurance........................................... A-32
3.15. Litigation.......................................... A-32
3.16. Compliance with Laws and Instruments; Consents...... A-32
3.17. Environmental Matters............................... A-33
3.18. Affiliate Transactions.............................. A-34
3.19. Employees, Labor Matters, etc. ..................... A-34
3.20. Employee Benefit Plans and Related Matters; ERISA... A-35
3.21. Accounts Receivable................................. A-36
3.22. Inventories......................................... A-36
3.23. Customers........................................... A-37
3.24. Suppliers; Raw Materials............................ A-37
3.25. Products; Product and Service Warranties............ A-37
3.26. Brokers, Finders, etc............................... A-37
3.27. Disclosure.......................................... A-37
3.28. Opinion of Financial Advisor........................ A-38
3.29. Required Vote of EDO's Stockholders................. A-38
3.30. AIL Share Ownership................................. A-38
3.31. Board Recommendation................................ A-38
4. Covenants................................................ A-38
4.1. Conduct of Business................................. A-38
4.2. Access and Information.............................. A-41
4.3. Subsequent Reports and Information.................. A-42
4.4. Public Announcements................................ A-42
4.5. Further Actions..................................... A-42
4.6. Further Assurances.................................. A-43
4.7. Takeover Statute.................................... A-44
4.8. Accountants' "Comfort" Letters...................... A-44
4.9. Tax-Free Reorganization............................. A-44
4.10. No Solicitation..................................... A-44
4.11. Affiliate Agreements................................ A-45
4.12. [Intentionally omitted.]............................ ▇-▇▇
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4.13. Indemnification and Insurance....................... A-45
4.14. Actions Relating to Conversion of Options........... A-46
5. Stockholder Meeting; Share Issuance; etc................. A-46
5.1. Stockholder Approvals................................ A-46
5.2. Board Recommendations............................... A-46
5.3. Proxy Statement/Registration Statement.............. A-47
5.4. NYSE Listing........................................ A-47
6. Certain Post-Closing Covenants.......................... A-47
6.1. Headquarters........................................ A-47
6.2. EDO Board of Directors.............................. A-47
6.3. EDO Officers........................................ A-48
6.4. Employee Stock Ownership Plans...................... A-48
7. Conditions Precedent..................................... A-48
7.1. Conditions to Obligations of Each Party............. A-48
7.1.1. HSR Act Notification............................ A-48
7.1.2. Stockholder Approvals........................... A-48
7.1.3. Registration Statement.......................... A-48
7.1.4. NYSE Listing.................................... A-48
7.1.5. No Injunctions.................................. A-48
7.2. Conditions to Obligations of EDO and Merger Sub...... A-48
7.2.1. Representations, Performance.................... A-48
7.2.2. Consents........................................ A-49
7.2.3. No AIL Material Adverse Effect.................. A-49
7.2.4. Ancillary Agreements............................ A-49
7.2.5. Tax Opinion..................................... A-49
7.2.6. Amendments to AIL ESOP.......................... A-49
7.3. Conditions to Obligations of AIL..................... A-49
7.3.1. Representations, Performance, etc............... A-49
7.3.2. Consents........................................ A-49
7.3.3. No EDO Material Adverse Effect.................. A-50
7.3.4. Ancillary Agreements............................ A-50
7.3.5. Tax Opinion..................................... A-50
7.3.6. Reservation or Authorization of Shares of EDO
Common Stock Subject to Substituted Options..... A-50
8. Termination.............................................. A-50
8.1. Termination or Abandonment........................... A-50
8.2. Effect of Termination................................ A-52
8.3. Termination Fees..................................... A-52
9. Indemnification.......................................... A-52
9.1. Survival of Representations and Warranties, etc...... A-52
9.2. Indemnification by AIL and the Exchanging Common
Stockholders........................................... A-52
9.3. Indemnification By EDO............................... A-54
9.4. Third Party Claims................................... A-54
9.5. Tax Treatment and Limitation of Indemnity Payments... A-55
9.6. Form of Consideration............................... ▇-▇▇
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10. Definitions............................................. A-56
10.1. Terms Generally.................................... A-56
10.2. Certain Terms...................................... A-56
11. Miscellaneous.......................................... A-65
11.1. Expenses........................................... A-65
11.2. Confidentiality.................................... A-65
11.3. Notices............................................ A-65
11.4. Arbitration; Governing Law, etc. .................. A-66
11.5. Binding Effect..................................... A-67
11.6. Assignment......................................... A-67
11.7. No Third Party Beneficiaries....................... A-67
11.8. Amendment; Waivers, etc. .......................... A-67
11.9. Entire Agreement................................... A-67
11.10. Severability....................................... A-67
11.11. Headings........................................... A-67
11.12. Counterparts....................................... A-67
11.13. Common Stockholder Representative.................. A-67
11.14. Escrow Agent....................................... A-68
11.15. Disclosure Schedules............................... A-68
EXHIBITS
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Exhibit A Form of Affiliate Letter
Exhibit B Escrow Agreement
Exhibit C Form of Amendment to AIL ESOP
Exhibit D Board Resolutions
Exhibit E Form of Election Form
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of January 2,
2000, among EDO CORPORATION, a New York corporation ("EDO"), EDO ACQUISITION III
CORPORATION, a Delaware corporation and a wholly-owned subsidiary of EDO
("Merger Sub"), and AIL TECHNOLOGIES INC., a Delaware corporation ("AIL").
Capitalized terms used herein are defined in Section 10.
RECITALS
A. The Boards of Directors of EDO, Merger Sub and AIL have each determined
that it is in the best interests of their respective companies and stockholders,
for AIL to be merged with and into Merger Sub pursuant to the laws of the State
of Delaware and upon the terms and subject to the conditions set forth herein.
The Boards of Directors of AIL and Merger Sub have each approved and declared
the advisability of the Merger and this Agreement.
B. The Common Stockholders are the record holders of all of the issued and
outstanding shares of the common stock, par value $0.10 per share, of AIL (the
"Common Shares").
C. Pursuant to a Stock Purchase Agreement, dated as of the date hereof, by
and among Defense Systems Holding Co. ("Defense Systems"), EDO and Merger Sub
(the "Defense Systems Agreement"), EDO will, immediately prior to Closing,
acquire 754,598 Common Shares from Defense Systems, representing all Common
Shares owned by Defense Systems, and 5,873 shares of Series A Cumulative
Preferred Stock, par value $.01 per share, of AIL (the "Preferred Shares"),
representing all the issued and outstanding Preferred Shares, for a total
purchase price of $11,438,160 payable in cash. Pursuant to a Stock Purchase
Agreement, dated as of the date hereof, by and among certain Common
Stockholders, EDO and Merger Sub (the "Management Stock Purchase Agreement"),
EDO will, immediately prior to Closing, acquire 225,000 Common Shares from such
Common Stockholders for a total purchase price equal to the product of (i)
225,000, (ii) the Exchange Ratio and (iii) the EDO Average Price, payable in
cash. The Common Shares and the Preferred Shares shall hereinafter be referred
to as the "Shares".
D. It is intended, for federal income tax purposes, that the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the Code.
E. Simultaneously with the execution and delivery of this Agreement, each
of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is
executing and delivering an employment agreement with EDO (each, an "Employment
Agreement").
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
1. The Merger
1.1. The Merger. (a) Subject to the terms and conditions of this
Agreement, AIL shall be merged with and into Merger Sub (the "Merger") in
accordance with the provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Following the Merger, the separate corporate existence of
AIL shall cease and Merger Sub shall continue as the surviving corporation (the
"Surviving Corporation") and be a wholly owned direct subsidiary of EDO.
(b) The Merger shall have the effects set forth in the DGCL.
1.2 Closing. (a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 am on a date to be specified
by the parties (the "Closing Date") which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Section
7, unless another time is agreed to in writing by the parties hereto. The
Closing shall take place at the offices of Debevoise & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
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(b) On the Closing Date, the parties shall cause the Merger to become
effective by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware in such form as is required by,
and executed in accordance with, the relevant provisions of the DGCL. The Merger
shall become effective upon the filing of the Certificate of Merger or such
other time specified in the Certificate of Merger (the time of such
effectiveness being the "Effective Time").
1.3. Conversion of Stock. At the Effective Time:
(a) Shares. Each Common Share issued and outstanding immediately
prior to the Effective Time (other than any Common Shares to be canceled
pursuant to Section 1.3(b) and Dissenting Shares) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into the right to receive a number of shares of EDO Common Stock
equal to the Exchange Ratio (such per Common Share amount, the "Merger
Consideration"). The "Exchange Ratio" means a fraction, the numerator of
which is 6,553,229 (the "Merger Shares"), and the denominator of which is
the number of issued and outstanding Common Shares (other than any Common
Shares, including any Common Shares subject to the Defense Systems
Agreement or the Management Stock Purchase Agreement, to be canceled
pursuant to Section 1.3(b)) as of the Effective Time.
(b) Treasury Shares. Each Share then held, directly or indirectly, by
EDO (including any Common Shares subject to the Defense Systems Agreement
or the Management Stock Purchase Agreement), Merger Sub or any other
Subsidiary of EDO, or held in AIL's treasury or held by any Subsidiary of
AIL, shall, by virtue of the Merger and without any action on the part of
the holder thereof, be canceled and retired without payment of any
consideration therefor.
(c) Shares of Merger Sub. Each share of common stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and represent one share of
common stock of the Surviving Corporation.
1.4 Effect of Conversion. (a) No Further Rights. Except as set forth in
Section 1.8, at and after the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, all of the Shares shall
cease to be outstanding and shall be automatically canceled and retired and
shall cease to exist and the certificates representing such Shares shall
thereafter, subject to Sections 1.3(b) and 1.7, represent only the right to
receive (i) the Merger Consideration, (ii) certain dividends and other
distributions in accordance with Section 1.6(g), and (iii) cash in lieu of
fractional shares of EDO Common Stock in accordance with Section 1.6(h), without
interest.
(b) Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with its terms and applicable Law,
except that the name of Merger Sub as set forth in the Certificate of
Incorporation shall be changed to AIL Technologies Inc. at the Effective Time.
(c) By-Laws of the Surviving Corporation. The By-Laws of AIL, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until duly amended in accordance with their terms and applicable
Law.
(d) Directors of the Surviving Corporation. The individuals listed on
Schedule 1.4(d) shall be the directors of the Surviving Corporation as of the
Effective Time and shall hold office until their resignation or removal or until
their successors are duly appointed or elected in accordance with applicable
Law.
(e) Officers of the Surviving Corporation. The officers of AIL immediately
prior to the Effective Time, together with such additions listed on Schedule
1.4(e), shall be the officers of the Surviving Corporation as of the Effective
Time and shall hold office until their resignation or removal or until their
successors are duly appointed or elected in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws and applicable Law.
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1.5. Options. At the Effective Time, each of the Options listed on
Schedule 2.2 hereto which is outstanding and unexercised at the Effective Time
(the "Employee Stock Options") shall be converted automatically into an EDO
Option (a "Substituted Option") in an amount and at an exercise price determined
as provided below:
(a) The number of shares of EDO Common Stock to be subject to each
Substituted Option shall be equal to the product of the number of Common
Shares subject to the corresponding Employee Stock Option and the Exchange
Ratio, provided that any fractional shares of EDO Common Stock resulting
from such multiplication shall be rounded down to the nearest share and,
except with respect to any Options which are intended to qualify as
"incentive stock options" (as defined in Section 422 of the Code ("ISOs")),
EDO shall pay an amount in cash to the holder of such Employee Stock Option
equal to the fair market value immediately prior to the Effective Time of
such fractional shares calculated based on the EDO Average Price; and
(b) The exercise price per share of EDO Common Stock under the
Substituted Option shall be equal to the aggregate exercise price of the
corresponding Employee Stock Option divided by the total number of full
shares of EDO Common Stock subject to the Substituted Option (as determined
under paragraph (a) immediately above), provided that such exercise price
shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any ISOs shall be and is intended
to be effected in a manner that is consistent with section 424(a) of the Code.
The duration and other terms of the Substituted Option shall be the same as that
of the corresponding Employee Stock Option, except that all references to AIL
shall be deemed to be references to EDO.
1.6 Exchange of Certificates Representing Common Shares. (a) Exchange
Agent. Prior to the Effective Time, EDO shall appoint the American Stock
Transfer and Trust Company or a commercial bank or trust company organized and
having an office in the United States having net capital of not less than
$100,000,000 and which is reasonably satisfactory to AIL, to act as agent
hereunder in connection with the Merger (the "Exchange Agent"). As of the
Effective Time, EDO shall provide the Exchange Agent with certificates ("EDO
Certificates") representing (i) the number of whole shares of EDO Common Stock
issuable pursuant to Section 1.3(a) in exchange for outstanding Common Shares,
less (ii) the Total Escrowed Shares to be deposited in the Escrow Account in
accordance with Section 1.7 (such shares of EDO Common Stock, together with any
dividends or distributions with respect thereto payable with regard to a record
date after the Effective Time and any cash payable in lieu of any fractional
shares of EDO Common Stock being hereinafter referred to as the "Exchange
Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time (but no later than the second business day thereafter), the
Exchange Agent shall mail to each holder of record, as of the Effective Time, of
a certificate or certificates, which immediately prior to the Effective Time
represented outstanding Common Shares (the "Certificates"), whose Common Shares
were converted pursuant to Section 1.3(a) into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as EDO may reasonably specify) and
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
EDO, together with such letter of transmittal as may be mutually acceptable to
EDO and AIL, properly completed and duly executed in accordance with the
instructions thereto, the holder of such Certificate, subject to Section 1.7,
shall be entitled to receive in exchange therefor (either directly or through
the Escrow Account in accordance with Section 1.7 and the terms of the Escrow
Agreement) (i) EDO Certificates representing that number of whole shares of EDO
Common Stock which such holder has the right to receive pursuant to Section
1.3(a), provided that any shares of EDO Common Stock that such holder is
entitled to receive in respect of Common Shares that are pledged to secure loans
from AIL shall be delivered into pledge, or if such shares of EDO Common Stock
are delivered into the Escrow Account, shall be delivered into pledge upon
release from the Escrow Account upon
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its termination to the extent the pledgee is entitled thereto, (ii) certain
dividends or other distributions in accordance with Section 1.6(g), (iii) cash
in lieu of any fractional share in accordance with Section 1.6(h) for each
Common Share formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
any cash payable upon the surrender of the Certificates. If the issuance of the
Merger Consideration is to be made to a Person other than the Person in whose
name the surrendered Certificate is registered or the Escrow Agent (as defined
in the Escrow Agreement), it shall be a condition of exchange that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such exchange shall have
paid all transfer and other Taxes required by reason of the issuance to a Person
other than the registered holder of the Certificate surrendered (and which if
not paid could adversely affect EDO or the Surviving Corporation) or shall have
established to the reasonable satisfaction of the Surviving Corporation that
such Tax either has been paid or is not applicable.
(c) Transfer Books; No Further Ownership Rights in the Common Shares. At
the Effective Time, the stock transfer books of AIL shall be closed, and
thereafter there shall be no further registration of transfers of the Common
Shares on the records of AIL. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Common Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Common Shares, except as otherwise provided for herein or by applicable Law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Section 1.6.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Exchange Agent to deliver to it any portion of the Exchange Fund (including
any interest received with respect thereto and any shares of EDO Common Stock)
which had been made available to the Exchange Agent, and holders of Shares shall
be entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the aggregate Merger Consideration payable upon due surrender of their
Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Exchange Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any Certificates
for Common Shares shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate(s) to be lost,
stolen or destroyed and, if required by EDO, the posting by such Person of a
bond or the provision of other indemnity in such sum as EDO may reasonably
direct as indemnity against any claim that may be made against it or the
Surviving Corporation with respect to such Certificate(s), the Exchange Agent
will issue the aggregate Merger Consideration pursuant to Section 1.6(b)
deliverable in respect of the Common Shares represented by such lost, stolen or
destroyed Certificates.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by EDO, on a daily basis. Any
interest and other income resulting from such investments and remaining in the
Exchange Fund after the satisfaction of all its obligations under this Article I
shall be paid to EDO.
(g) Dividends; Distributions. No dividends or other distributions with
respect to EDO Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the Common
Shares and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 1.6(h), and, subject to Section 1.7, all such
dividends, other distributions and cash in lieu of fractional shares of EDO
Common Stock shall be paid by EDO to the Exchange Agent and shall be included in
the Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Section 1.6. Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate and subject to Section
1.7, there shall be paid to the holder of the EDO Certificate representing whole
shares of EDO Common Stock issued in exchange therefor, without interest, (i) at
the time of surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of EDO Common Stock and the amount of any cash
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payable in lieu of a fractional share of EDO Common Stock to which such holder
is entitled pursuant to Section 1.6(h) and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of EDO Common Stock.
The EDO shall make available to the Exchange Agent (or the Escrow Agent, as
applicable) cash for these purposes.
(h) No Fractional Shares. No EDO Certificates or scrip representing
fractional shares of EDO Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of EDO shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of EDO. In
lieu of any such fractional shares, each holder of a Certificate who would
otherwise have been entitled to receive a fractional share interest in exchange
for such Certificate pursuant to this Section shall receive from the Exchange
Agent an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into account all
Common Shares held at the Effective Time by such holder) would otherwise be
entitled by (B) the closing price for a share of EDO Common Stock as reported on
the New York Stock Exchange (the "NYSE") Composite Transactions Tape (as
reported in The Wall Street Journal, or, if not reported thereby, any other
authoritative source) on the Closing Date.
1.7 Deposits in the Escrow Account. (a) Notwithstanding anything in this
Agreement to the contrary, upon the surrender of a holder's Certificates in
accordance with Section 1.6, EDO shall deposit, or shall cause to be deposited,
into the Escrow Account an EDO Certificate representing such holder's Escrowed
Shares, together with any dividends, other distributions or cash in lieu of
fractional shares of EDO Common Stock with respect thereto, calculated in
accordance with Sections 1.6(g) and (h) (the Total Escrowed Shares together with
such additional amounts, the "Escrow Amount"). The aggregate Merger
Consideration payable directly to such holder upon such surrender shall be
reduced by the number of such holder's Escrowed Shares, and any cash amounts
that become part of the Escrow Amount pursuant to this Section 1.7 shall not be
paid into the Exchange Fund. The Escrow Amount shall not be paid to former
holders of Common Shares except in accordance with the Escrow Agreement and
Section 1.7(c) hereof.
(b) A holder's "Escrowed Shares" means (i) with respect to any Common
Stockholder other than the AIL ESOP and those individuals named on Schedule
1.7(b), that number of shares of EDO Common Stock equal to 15% (rounded up to
the nearest whole number) of the Aggregate Consideration to which such holder
(or such holder's pledgee) is entitled; and (ii) with respect to the AIL ESOP
and those individuals named on Schedule 1.7(b), that number of shares of EDO
Common Stock equal to the product of the AIL ESOP Percentage and the Aggregate
Consideration to which the AIL ESOP and those individuals named on Schedule
1.7(b) are entitled (rounded up to the nearest whole number). "Total Escrowed
Shares" means the sum of the Escrowed Shares of all holders of Common Shares
immediately prior to the Effective Time, other than Dissenting Stockholders.
1.8. Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Common Shares held by a
person (a "Dissenting Stockholder") who has neither voted in favor of the Merger
nor consented in writing thereto and who otherwise complies with all the
applicable provisions of the DGCL concerning the right of holders of Common
Shares to dissent from the Merger and require appraisal of their Common Shares
("Dissenting Shares") shall not be converted as described in Section 1.3(a) but
shall become the right to receive such consideration as may be determined to be
due to such Dissenting Stockholder pursuant to the laws of the State of
Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws
his, her or its demand for appraisal or fails to perfect or otherwise loses his,
her or its right of appraisal, in any case pursuant to the DGCL, each of his,
her or its Common Shares shall be deemed to be converted as of the Effective
Time into the right to receive the Merger Consideration, in the manner
contemplated by this Section 1. AIL or, after the Effective Time, the Surviving
Corporation, shall give EDO prompt notice of any demands for appraisal of Common
Shares received by AIL or the Surviving Corporation, as applicable. AIL or,
after the Effective Time, the Surviving Corporation, shall not, without the
prior written consent of EDO, make any payment with respect to, settle or offer
to settle, any such demands.
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1.9. Adjustments to Prevent Dilution. Subject to Section 4.1, in the event
that EDO changes the number of shares of EDO Common Stock, or securities
convertible or exchangeable into or exercisable for shares of EDO Common Stock
issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Merger Consideration shall be equitably
adjusted.
2. Representations and Warranties of AIL. AIL represents and warrants to
EDO and Merger Sub as follows:
2.1 Authorization, etc. (a) AIL. AIL has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is or shall be a party, to perform its obligations hereunder and
thereunder and (subject to stockholder approval) to consummate the transactions
contemplated hereby and thereby, and the execution and delivery of this
Agreement and the Ancillary Agreements to which AIL is or shall be a party, the
performance of AIL's obligations hereunder and thereunder, and (subject to
stockholder approval) the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action of AIL.
(b) Binding Agreement. AIL has duly executed and delivered this Agreement
and at the Effective Time will have duly executed and delivered the Ancillary
Agreements to which it is or shall be a party. This Agreement constitutes, and
each such Ancillary Agreement when so executed and delivered will constitute,
the legal, valid and binding obligation of AIL enforceable against AIL in
accordance with its respective terms.
2.2 Title to Shares, Capitalization, etc. (a) Title. Schedule 2.2(a) sets
forth a complete and accurate list of all record holders of the issued and
outstanding Common Shares as of the date set forth therein, and all of the
holders of issued and outstanding Options (which list shall identify the strike
price, first date of exercisability and expiration date of each such Option) as
of the date of this Agreement. No Subsidiary of AIL holds beneficially or of
record any shares of capital stock of AIL.
(b) Authorized Capital Stock of AIL. The authorized capital stock of AIL
consists of 8,000,000 Common Shares and 20,000 Preferred Shares of which
5,563,781 Common Shares and 5,873 Preferred Shares are issued and outstanding as
of the date hereof, including the Common Shares and Preferred Shares subject to
the Defense Systems Agreement. As of Closing, there will be 6,083,781 Common
Shares and 5,873 Preferred Shares issued and outstanding, including the Common
Shares and Preferred Shares subject to the Defense Systems Agreement and the
Management Stock Purchase Agreement. The Common Shares and the Preferred Shares
have been duly authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, there are outstanding Options to purchase
279,520 shares of Common Shares, no Common Shares are reserved for issuance upon
the exercise of outstanding Options, and no Common Shares are reserved for
future grants under the AIL Stock Option Plans.
(c) Equity Interests Held by the AIL Group. Schedule 2.2(c) sets forth a
complete and correct description of the shares of stock and other equity
interests in any Person owned by any member of the AIL Group. Except as set
forth on Schedule 2.2(c), AIL has no Subsidiaries, and a member of the AIL Group
owns all of the outstanding shares of stock or other equity interests in each of
AIL's Subsidiaries. All such outstanding shares of stock or other equity
interests are duly authorized, validly issued, fully paid and nonassessable.
(d) No Equity Rights. There are no preemptive or similar rights on the
part of any holders of any class of securities of AIL or any member of the AIL
Group. Except for the Options, this Agreement, the Defense Systems Agreement and
the Management Stock Purchase Agreement, no subscriptions, options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind obligating any member of the AIL Group or any of the
Common Stockholders or any other Person, contingently or otherwise, to issue or
sell, or cause to be issued or sold, any shares of capital stock of any class of
AIL, or any securities convertible into or exchangeable for any such shares, are
outstanding, and no authorization therefor has been given. Except for the
Defense Systems Agreement and the Management Stock Purchase Agreement, there are
no outstanding contractual or other rights or obligations to or of any Common
Stockholder or any other Person to repurchase, redeem or otherwise acquire any
outstanding shares or other equity interests of AIL.
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2.3. No Conflicts, etc. Except as set forth in Schedule 2.3, the
execution, delivery and performance of this Agreement and the Ancillary
Agreements by AIL and the consummation of the transactions contemplated hereby
and thereby, do not and will not conflict with, contravene, result in a
violation or breach of or default under (with or without the giving of notice or
the lapse of time or both), create in any other Person a right or valid claim of
termination, amendment, or require modification, acceleration or cancellation
of, or result in the creation of any Lien (or any obligation to create any Lien)
upon any of the properties or assets of any member of the AIL Group under, (a)
any Law applicable to any member of the AIL Group or any of their respective
properties or assets, (b) any provision of any of the Organizational Documents
of any member of the AIL Group or (c) any Contract, or any other agreement or
instrument to which any member of the AIL Group is a party or by which any of
their respective properties or assets may be bound, except, with respect to
clauses (a) and (c), for such conflicts, violations, breaches, defaults or other
occurrences which, individually or in the aggregate, would not have an AIL
Material Adverse Effect. Notwithstanding anything to the contrary in this
Section 2.3 or otherwise in this Agreement, AIL makes no representation or
warranty regarding the obligation of any party hereto to novate any of the
Governmental Contracts or Governmental Subcontracts to which any member of the
AIL Group is a party as a result of the transaction contemplated hereby or
regarding the consequences of failing to obtain any such novations. The
immediately preceding sentence is subject to Section 2.12(c)(vi).
2.4. Corporate Status. (a) Organization. Except as set forth on Schedule
2.4(a), each member of the AIL Group is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to conduct its business
and to own or lease and to operate its properties as and in the places where
such business is conducted and such properties are owned, leased or operated.
(b) Qualification. Each member of the AIL Group is duly qualified or
licensed to do business and is in good standing in each of the jurisdictions
specified in Schedule 2.4(b) (which includes each jurisdiction in which the
nature of its business or the properties owned or leased by it makes such
qualification or licensing necessary), except where the failure to be so duly
qualified, licenced or in good standing would not, individually or in the
aggregate, reasonably be expected to have or result in an AIL Material Adverse
Effect.
(c) Organizational Documents. AIL has delivered or made available to EDO
complete and correct copies of the Organizational Documents of each member of
the AIL Group, as in effect on the date hereof. The Organizational Documents of
each member of the AIL Group are in full force and effect. No member of the AIL
Group is in violation of any of the provisions of its Organizational Documents.
The minute books of each member of the AIL Group, which have heretofore been
made available to EDO, correctly reflect, in all material respects, all meetings
and written consents of the boards of directors, committees and stockholders of
each such member of the AIL Group since October 1, 1997.
2.5. Discontinued and Acquired Businesses. Since October 1, 1997, no
member of the AIL Group has dissolved, discontinued, sold, transferred or
otherwise disposed of any businesses or operations having annual sales in excess
of $1,000,000 or involving assets having a book value in excess of $1,000,000.
Except as set forth on Schedule 2.5, since October 1, 1997, no member of the AIL
Group has acquired any business of any other Person, through the purchase of
assets, merger, consolidation, acquisition of shares or otherwise, with respect
to which any member of the AIL Group is subject to any contractual obligation,
contingent or otherwise, to such Person (including any indemnification
obligation) in an amount that could exceed $500,000 and which would survive at
least until the Closing.
2.6. Company Financial Statements. (a) AIL has delivered or made available
to EDO complete and correct copies of the AIL Financial Statements and the AIL
Proxy Financials. AIL will have delivered to EDO consents from Ernst & Young LLP
("E&Y"), AIL's accountants, permitting the use of E&Y's reports of independent
auditors on AIL's consolidated financial statements for the nine-month period
ended September 30, 1997, the three-month period ended December 31, 1997 and the
years ended December 31, 1996 and 1998 to be included in the Registration
Statement and the Proxy Statement. AIL will obtain a "SAS No. 71" review by E&Y
of the most recent interim consolidated financial statements included in the
Registration Statement and the Proxy Statement.
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(b) The AIL Financial Statements for any and all periods since October 1,
1997 are complete and correct, have been derived from the accounting books and
records of the AIL Group and have been prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods presented in such AIL
Financial Statements, subject, in the case of interim unaudited AIL Financial
Statements, only to normal recurring year-end adjustments. The AIL Proxy
Financials for any and all periods prior to October 1, 1997 are complete and
correct, have been derived from the accounting books and records of the AIL
Group and have been prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods presented in such AIL Proxy Financials.
(c) The consolidated balance sheets included in the AIL Financial
Statements present fairly the financial position of the AIL Group as at the
respective dates thereof, and the consolidated statements of income, statements
of shareholders' equity, and consolidated statements of cash flows included in
such AIL Financial Statements present fairly the results of operations,
shareholders' equity and cash flows of the AIL Group for the respective periods
indicated.
2.7. Undisclosed Liabilities, etc. No member of the AIL Group has any
liabilities or obligations of any nature, whether known, unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, except (a) as
and to the extent disclosed or reserved against in the AIL Balance Sheet or
specifically disclosed in the notes thereto, (b) liabilities and obligations not
required by U.S. GAAP to be reflected or reserved against in the AIL Balance
Sheet (other than any such liabilities or obligations which were not reflected
or reserved against because they were contingent as of the date of the AIL
Balance Sheet, but which would be reflected or reserved against in a balance
sheet prepared in accordance with U.S. GAAP as of the date hereof), and (c)
liabilities and obligations that (i) are incurred after the date of the AIL
Balance Sheet in the ordinary course of business and are not prohibited by this
Agreement and (ii) individually and in the aggregate, would not be reasonably
expected to have or result in an AIL Material Adverse Effect.
2.8. Absence of Changes. Since the date of the AIL Balance Sheet, except
(i) as set forth in Schedule 2.8 and (ii) as specifically permitted after the
date hereof pursuant to Section 4.1, (x) the Businesses of the AIL Group have
been conducted in the ordinary course consistent with past practice, (y) there
has not occurred or come to exist any AIL Material Adverse Effect or any event,
occurrence, fact, condition, change, development or effect that, individually or
in the aggregate, would be reasonably expected to have or result in an AIL
Material Adverse Effect, and (z) no member of the AIL Group has taken any action
or omitted to take any action, which action or omission, if it occurred after
the date hereof, would violate any of the provisions of Sections 4.1(a)(i)-(xvi)
or 4.1(a)(xviii)-(xx).
2.9. Taxes. (a) Except as set forth on Schedule 2.9(a), (i) all Tax
Returns relating to any member of the AIL Group or the business or assets of any
such member that were required to be filed on or before the Effective Time have
been duly and timely filed and are correct and complete in all respects, (ii)
all Taxes shown as owing on such Tax Returns have been paid and (iii) no member
of the AIL Group is currently the beneficiary of any extension of time within
which to file any Tax Return.
(b) Except as set forth on Schedule 2.9(b), (i) all Taxes that are or have
become payable by any member of the AIL Group or chargeable as a Lien upon its
assets as of the Closing Date for which the filing of a Tax Return is not
required have been duly and timely paid, (ii) each member of the AIL Group has
duly and timely withheld all Taxes required to be withheld in connection with
the business or assets of such member, and such withheld Taxes have been either
duly and timely paid to the proper governmental authorities or properly set
aside in accounts for such purpose and (iii) the AIL Financial Statements
reflect an adequate reserve for all Taxes payable or asserted to be payable by
the AIL Group for all taxable periods or portions thereof through the date of
the AIL Financial Statements.
(c) Except as set forth on Schedule 2.9(c), (i) no Returns with respect to
the AIL Group are currently under audit by any taxing authority, (ii) no taxing
authority is now asserting, or to the Best Knowledge of the AIL Group,
threatening to assert against the AIL Group, any deficiency or claim for Taxes
or any adjustment
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to Taxes, and (iii) to the Best Knowledge of AIL, no circumstances exist to form
the basis for such a claim or audit.
(d) Schedule 2.9(d) lists all Tax Returns that have been filed by the AIL
Group that are open or otherwise subject to audit or examination by the IRS or
any other taxing authority.
(e) No member of the AIL Group has (i) waived any statute of limitations,
(ii) agreed to any extension of the period for assessment or collection or (iii)
executed or filed any power of attorney with respect to Taxes, which waiver,
agreement or power of attorney is currently in force.
(f) Except for the nine-month period ended September 30, 1997, the AIL
Group's taxable year for federal, state and local income and franchise tax
purposes has always been a taxable year ending on December 31.
(g) Except as set forth in Schedule 2.9(g), no member of the AIL Group (i)
is a party to or bound by or has any obligation under any tax allocation,
sharing, indemnity or similar agreement or arrangement or (ii) is or has been a
member of any affiliated, consolidated, combined or unitary group for the
purposes of filing Tax Returns or paying taxes.
(h) Schedule 2.9(h) contains a list of states, cities and jurisdictions
(whether foreign or domestic) in which the AIL Group has filed income,
franchise, employment, property, sales and use Tax Returns for the taxable
periods after September 30, 1997.
2.10. Assets. Each member of the AIL Group owns, or otherwise has full,
exclusive, sufficient and legally enforceable rights to use, all of the AIL
Assets (other than Intellectual Property which is addressed elsewhere in this
Agreement). Except as set forth on Schedule 2.10, each member of the AIL Group
has good, valid and marketable title to, or in the case of leased property has
good and valid leasehold interests in, all AIL Assets (other than Intellectual
Property) that are material to its Business, including but not limited to all
such AIL Assets reflected in the AIL Balance Sheet or acquired since the date
thereof (except as may be disposed of in the ordinary course of business after
the date hereof and in accordance with this Agreement), in each case free and
clear of any Lien, except Permitted Liens. Each member of the AIL Group has
maintained all of its tangible AIL Assets in good repair, working order and
operating condition subject only to ordinary wear and tear, and all such
tangible AIL Assets are fully adequate and suitable for the purposes for which
they are presently being used.
2.11. Real Property. (a) Owned Real Property. Schedule 2.11(a) contains a
complete and correct list of Real Property owned by any member of the AIL Group
setting forth the address and owner of each parcel of such owned Real Property
and describing all improvements thereon. Except as set forth on Schedule
2.11(a), the AIL Group has, or on the Closing Date will have, good, valid and
marketable fee simple title to such owned Real Property, free and clear of Liens
other than Permitted Liens. Except as set forth on Schedule 2.11(a), there are
no outstanding options or rights of first refusal to purchase such owned Real
Property or any portion thereof or interest therein.
(b) AIL Leases. Schedule 2.11(b) contains a complete and correct list of
all AIL Leases setting forth the address, landlord and tenant for each AIL
Lease. AIL has delivered or made available to EDO correct and complete copies of
the AIL Leases. Each AIL Lease is legal, valid, binding, in full force and
effect and enforceable against each member of the AIL Group that is a party
thereto. No member of the AIL Group is in default, violation or breach in any
material respect under any AIL Lease, and, to the Best Knowledge of AIL, no
event has occurred and is continuing that constitutes or, with notice or the
passage of time or both, would constitute a default, violation or breach in any
respect under any AIL Lease. Each AIL Lease grants the tenant under the AIL
Lease the exclusive right to use and occupy the premises and rights demised and
intended to be demised thereunder. Each member of the AIL Group has good and
valid title to the leasehold estate under its respective AIL Leases free and
clear of any Liens other than Permitted Liens. Each member of the AIL Group
enjoys peaceful and undisturbed possession under its respective AIL Leases for
its Real Property.
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(c) Fee and Leasehold Interests, etc. Except as set forth on Schedule
2.11(c), the AIL Group's Real Property constitutes all the fee or leasehold
interests in real property held by the AIL Group, and constitutes all of the fee
or leasehold interests in real property used or held for use in connection with,
necessary for the conduct of, or otherwise material to, the Business of any
member of the AIL Group.
(d) No Proceedings. There are no proceedings in eminent domain or other
similar proceedings pending or, to the Best Knowledge of AIL, threatened,
affecting any portion of the AIL Group's Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any Litigation, pending
or, to the Best Knowledge of AIL, threatened, relating to the ownership, lease,
use, occupancy or operation by any Person of any of the AIL Group's Real
Property.
(e) Current Use. The use and operation of the AIL Group's Real Property in
the conduct of the Business of each member of the AIL Group does not violate in
any material respect any instrument of record or agreement affecting such Real
Property. There is no violation of any covenant, condition, restriction,
easement or agreement or order of any Governmental Authority that materially
affects the AIL Group's Real Property or the ownership, operation, use or
occupancy thereof. No damage or destruction has occurred with respect to any of
such Real Property.
(f) Real Property Taxes. Each parcel included in the AIL Group's Real
Property is assessed for real estate tax purposes as a wholly independent tax
lot, separate from any adjoining land or improvements not constituting a part of
that parcel.
(g) Compliance with Laws. The AIL Group's Real Property is in full
compliance with all Real Property Laws, and no member of the AIL Group has
received any notice of violation or claimed violation of any Real Property Law.
There is no pending or, to the Best Knowledge of AIL, anticipated, change in any
Real Property Law that could reasonably be expected to have or result in a
material adverse effect upon the ownership, alteration, use, occupancy or
operation of the AIL Group's Real Property or any portion thereof. No current
use by any member of the AIL Group of its Real Property is dependent on a
nonconforming use or other Governmental Approval, the absence of which would
materially limit the use of any of the properties or assets in its Business. The
AIL Group's Real Property and its continued use, occupancy and operation as
currently used, occupied and operated do not constitute nonconforming uses under
any Law, and, except for permits, licenses and other forms of authorizations
issued in the ordinary course of business and held pursuant to applicable
Environmental Laws, the continued existence, use, occupancy and operation of
each improvement located on any of such AIL Group's Real Property is not
dependent on any Consent or Governmental Approval that is limited in duration.
To the Best Knowledge of AIL, the permits, licenses and other authorizations
referred to in the prior sentence will be issued or renewed without undue delay.
(h) Real Property Consents. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by AIL and the consummation of the
transactions contemplated hereby and thereby, do not and will not require the
Consent of any Person pursuant to any of the AIL Leases or any instrument of
record or agreement affecting the AIL Group's Real Property. The enforceability
of the AIL Leases will not be affected in any manner by the execution, delivery
or performance of this Agreement, and no AIL Lease contains any change in
control provision or other terms or conditions that will become applicable or
inapplicable as a result of the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements.
2.12 Contracts. (a) Disclosure. Schedule 2.12(a) contains a complete and
correct list, as of the date hereof, of all Contracts that are material to the
Business of any member of the AIL Group ("AIL Material Contracts"). AIL has
delivered or made available to EDO complete and correct copies of all written
AIL Material Contracts, and accurate descriptions of all material terms of all
oral AIL Material Contracts, set forth or required to be set forth in Schedule
2.12(a).
(b) Enforceability. All Contracts are legal, valid, binding, in full force
and effect and enforceable against each member of the AIL Group that is a party
thereto, except to the extent that any failure to be enforceable, individually
and in the aggregate, would not reasonably be expected to have or result in an
AIL Material Adverse Effect. Except as set forth in Schedule 2.12(b), to the
Best Knowledge of AIL, there does
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not exist under any AIL Material Contract any violation, breach or event of
default, or event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default thereunder, on the part
of AIL, any of its Subsidiaries or any other Person. Except as set forth in
Schedule 2.12(b), the enforceability of all AIL Material Contracts will not be
affected in any manner by the execution, delivery or performance of this
Agreement or the Ancillary Agreements, and no AIL Material Contract contains any
change in control or other terms or conditions that will become applicable or
inapplicable as a result of the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements.
(c) Government Contracts.
(i) Except as specified on Schedule 2.12(c), to the Best Knowledge of
AIL, since October 1, 1997: (A) each member of the AIL Group has complied
with all material terms and conditions of each Government Contract or
Government Subcontract, (B) each member of the AIL Group has complied in
all material respects with all requirements of all Laws or agreements
pertaining to each Government Contract or Government Subcontract and (C)
all representations and certifications executed, acknowledged or set forth
in or pertaining to each Government Contract or Government Subcontract were
complete and correct in all material respects as of their effective date
and the AIL Group has complied in all material respects with all such
representations and certifications.
(ii) Except as set forth on Schedule 2.12(c), since October 1, 1997:
(A) neither any Governmental Authority nor any prime contractor,
subcontractor or other Person has notified AIL, either in writing or, to
the Best Knowledge of AIL, orally, that any member of the AIL Group has
breached or violated any Law, certification, representation, clause,
provision or requirement pertaining to any Government Contract or
Government Subcontract, (B) no termination for convenience, termination for
default, cure notice or show cause notice is currently in effect pertaining
to any Government Contract or Government Subcontract, (C) no material cost
incurred by any member of the AIL Group pertaining to any Government
Contract or Government Subcontract has been questioned or challenged by
representatives of the Administrative Contracting Officer or the Defense
Contract Audit Agency, is, to the Best Knowledge of AIL, the subject of any
investigation, or has been disallowed by any Governmental Authority, and
(D) no amount of money due to any member of the AIL Group, pertaining to
any Government Contract or Government Subcontract has been withheld or set
off nor has any claim been made to withhold or set off money, and the
members of the AIL Group are entitled to all progress payments received
with respect thereto.
(iii) Except as set forth on Schedule 2.12(c): (A) to the Best
Knowledge of AIL, neither any member of the AIL Group nor any of its
directors, officers, employees, consultants or agents is or during the past
three years has been under administrative, civil or criminal investigation,
indictment or information by any Governmental Authority with respect to any
alleged irregularity, misstatement or omission arising under or relating to
any Government Contract or Government Subcontract, and (B) during the past
three years, no member of the AIL Group has conducted or initiated any
internal investigation or made a voluntary disclosure to any Governmental
Authority with respect to any alleged irregularity, misstatement or
omission arising under or relating to a Government Contract or Government
Subcontract.
(iv) Except as set forth on Schedule 2.12(c), to the Best Knowledge of
AIL, there exist (A) no outstanding claims against any member of the AIL
Group, either by any Governmental Authority or by any prime contractor,
subcontractor, vendor or other Person, arising under or relating to any
Government Contract or Government Subcontract and (B) no material disputes
between any member of the AIL Group and any Governmental Authority under
the Contract Disputes Act or any other federal statute or regulation or
between any member of the AIL Group and any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or
Government Subcontract. Schedule 2.12(c) lists each Government Contract or
Government Subcontract which is currently under audit by any Governmental
Authority or any other person that is a party to such Government Contract
or Government Subcontract.
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(v) Except as set forth on Schedule 2.12(c), since October 1, 1997, no
member of the AIL Group has been debarred or suspended from participation
in the award of contracts with the DOD or any other Governmental Authority
(excluding for this purpose ineligibility to bid on certain contracts due
to generally applicable bidding requirements). To the Best Knowledge of
AIL, there exist no facts or circumstances that would warrant suspension or
debarment or the finding of nonresponsibility or ineligibility on the part
of any member of the AIL Group. Neither AIL nor any member of the AIL Group
nor any director, officer, agent or employee of any member of the AIL Group
directly or indirectly has (A) used any funds for contributions, gifts,
entertainment or other expenses relating to political or governmental
activity in violation of any Law; (B) made any payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns in violation of any Law, or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or the
OECD's Convention on Combating Bribery of Foreign Officials in
International Business Transactions; or (C) made any other payment in
violation of any Law. Except as set forth in Schedule 2.12(c), AIL's cost
accounting and procurement systems and the associated entries reflected in
the AIL Financial Statements with respect to the Government Contracts and
Government Subcontracts are in compliance in all material respects with all
Laws.
(vi) AIL (as opposed to its Subsidiaries) is not a party to any
Governmental Contracts or Governmental Subcontracts.
2.13. Intellectual Property. (a) Disclosure. Schedule 2.13(a) sets forth
a complete and correct list of all filed or registered AIL Owned Intellectual
Property that is material to the Business of the AIL Group.
(b) Title. A member of the AIL Group either owns or has adequate rights,
pursuant to license or otherwise, to use all of the Intellectual Property used
or held for use in connection with, necessary for the conduct of, or otherwise
material to, the Businesses of the AIL Group (the "AIL Intellectual Property").
The AIL Group has, and at the Closing will have, adequate rights to use the AIL
Intellectual Property for the life thereof for any purpose in connection with
their Businesses, free from any Liens (except for Permitted Liens incurred in
the ordinary course of business). Immediately after the Effective Time, the
Surviving Corporation or one of its Subsidiaries shall own or have adequate
rights, pursuant to license or otherwise, to use all the AIL Intellectual
Property, in each case free from Liens (except for Permitted Liens incurred in
the ordinary course of business) and on the same terms and conditions owned,
licensed or used by the AIL Group as in effect prior to the Effective Time.
(c) Licensing and Similar Arrangements. AIL has delivered or made
available to EDO complete and correct copies of all written or oral agreements,
arrangements and applicable Laws (i) pursuant to which any member of the AIL
Group has licensed Intellectual Property to, or the use of Intellectual Property
is otherwise permitted (through non-assertion, settlement or similar agreements
or otherwise) with respect to, any other Person and (ii) pursuant to which any
member of the AIL Group has had Intellectual Property licensed to it, or has
otherwise been permitted to use Intellectual Property (through non-assertion,
settlement or similar agreements or otherwise). All royalties, license fees,
charges and other amounts payable by, on behalf of, to or for the account of any
member of the AIL Group in respect of any Intellectual Property are reflected in
the AIL Financial Statements.
(d) No Infringement. The conduct of the AIL Group's Businesses does not
infringe or otherwise conflict with any rights of any Person in respect of any
Intellectual Property. To the Best Knowledge of AIL, none of the AIL
Intellectual Property is being infringed or otherwise used or available for use
by any Person without a license or permission from a member of the AIL Group,
except as set forth in Schedule 2.13(d).
(e) Due Registration, etc. To the Best Knowledge of AIL, the AIL Owned
Intellectual Property has been duly registered with, filed in or issued by, as
the case may be, the United States Patent and Trademark Office, the United
States Copyright Office or other filing offices, domestic or foreign, to the
extent necessary to ensure full protection under any applicable Law, and such
registrations, filings, issuances and other actions remain in full force and
effect. The AIL Group has taken all necessary actions to ensure full protection
of the AIL Owned Intellectual Property (including maintaining the secrecy of all
confidential Intellectual Property) under any applicable Law.
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(f) Software. The AIL Group has valid licenses to all copies of all
material Software that are utilized in connection with the AIL Group's Business
that are not owned by AIL ("AIL Commercial Software"), and the use by the AIL
Group of such AIL Commercial Software, including all modifications and
enhancements thereto (whether created by a member of the AIL Group or by a third
party) is in material compliance with the terms and provisions of such licenses.
Each member of the AIL Group owns all right, title and interest in and to all
material Software marketed or licensed by it to its customers or held for use or
in development for marketing and licensing to the customers of each member of
the AIL Group (collectively, the "AIL Owned Software"), including all
Intellectual Property rights therein and thereto, except for AIL Commercial
Software identified on Schedule 2.13(f) as Software incorporated into the AIL
Owned Software. None of the AIL Commercial Software or AIL Owned Software, and
no use thereof by the AIL Group or permitted use by its licensees, infringes
upon or violates any patent, copyright, trade secret or other Intellectual
Property right of any person or entity, and no claim or demand with respect to
any such infringement or violation has been made or threatened.
(g) Calendar Function. Except as set forth on Schedule 2.13(g), to the
Best Knowledge of AIL, all Software, hardware and equipment owned by the AIL
Group and all Software, hardware and equipment used in the AIL Group's Business
that contains or calls on a calendar function, including any function that is
indexed to a computer processing unit clock, provides specific days, dates or
times, or calculates spans of dates or times, is and will be able to record,
store, process, calculate, compare, sequence and provide true and accurate day,
date and time data from, into and between the twentieth and twenty-first
centuries, including but not limited to with respect to the years 1999, 2000 and
2001 and leap year calculations, except for failures to do any of the foregoing
which, individually or in the aggregate, would not reasonably be expected to
have or result in an AIL Material Adverse Effect.
2.14. Insurance. Schedule 2.14 contains a complete and correct list and
summary description of all insurance policies maintained (at present or since
October 1, 1997) by or on behalf of the AIL Group. AIL has delivered or made
available to EDO complete and correct copies of all such policies together with
all riders and amendments thereto. Such policies are in full force and effect,
and all premiums due thereon have been paid. Each member of the AIL Group has
complied in all material respects with the terms and provisions of such
policies. The insurance coverage provided by such policies is adequate and
suitable for the AIL Group's Businesses, and is on such terms (including without
limitation as to deductibles and self-insured retentions), covers such risks,
contains such deductibles and retentions, and is in such amounts, as the
insurance customarily carried by comparable companies of established reputation
similarly situated and carrying on the same or similar business.
2.15. Litigation. Except as set forth on Schedule 2.15, there is and has
been since October 1, 1997, no Litigation that, individually or in the
aggregate, is material and is pending or, to the Best Knowledge of AIL,
threatened, against any member of the AIL Group or any of its properties or
assets. There are no outstanding orders, judgments, decrees or injunctions
issued by any Governmental Authority against any member of the AIL Group, or
that in any way affect the AIL Group's Businesses and would reasonably be
expected to have or result in an AIL Material Adverse Effect.
2.16. Compliance with Laws and Instruments; Consents. (a)
Compliance. Except as set forth on Schedule 2.16(a), (i) no member of the AIL
Group is, or, since October 1, 1997, has been, in conflict with or in violation
or breach of or default under (and there exists no event that, with notice or
passage of time or both, would constitute a conflict, violation, breach or
default with, of or under) (x) any Law applicable to it or any of its
properties, assets, operations or business (except Laws compliance with which is
specifically addressed elsewhere in this Agreement), (y) any provision of its
Organizational Documents, or (z) any Contract, or any other agreement or
instrument to which it is party or by which it or any of its properties or
assets is bound or affected, except in the case of the foregoing clauses (x) and
(z) for any such conflicts, breaches, violations and defaults that, individually
or in the aggregate, would not reasonably be expected to have or result in an
AIL Material Adverse Effect, and (ii) no member of the AIL Group has received
any written notice or, to the Best Knowledge of AIL, oral notice alleging any
such conflict, violation, breach or default which has not been cured or waived.
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(b) Consents. No Governmental Approval or other Consent is required to be
obtained or made by any member of the AIL Group in connection with the execution
and delivery of this Agreement and the Ancillary Agreements or the consummation
of the transactions contemplated hereby or thereby, except (x) as specified on
Schedule 2.16(b)(i), (y) for applicable requirements, if any, of the Exchange
Act, state securities or "blue sky" laws, notification requirements under the
HSR Act and filings required under Delaware and New York Law, and (z) where
failure to obtain such Consents or make such filings or notifications would not
reasonably be expected, individually or in the aggregate, to have or result in
an AIL Material Adverse Effect.
(ii) All Governmental Approvals and other Consents necessary for, or
otherwise material to, the conduct of the AIL Group's Business, have been duly
obtained and are held by a member of the AIL Group and are in full force and
effect. Each member of the AIL Group is, and at all times since October 1, 1997,
has been, in compliance with all Governmental Approvals and other Consents held
by them. Except as specified in Schedule 2.16(b)(i), the execution, delivery and
performance of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby do not and will not violate
any such Governmental Approval or Consent, or result in any revocation,
cancellation, suspension, modification or nonrenewal thereof.
2.17 Environmental Matters. (a) Compliance with Environmental Law. Each
member of the AIL Group has complied and is in compliance in all but de minimis
respects with all applicable Environmental Laws pertaining to their respective
assets and the use, ownership or transferability thereof, the manufacturing and
commercial distribution of its products and to the operation of its Business. To
the Best Knowledge of AIL, no member of the AIL Group is alleged to be in
violation of any applicable Environmental Law relating to the operation of its
Business or the use or ownership of its assets.
(b) Other Environmental Matters. No member of the AIL Group has caused or
taken any action that would result in, and no member of the AIL Group is subject
to, any liability or obligation relating to (x) the environmental conditions on,
under, or about the AIL Group's Real Property or other properties or assets
owned, leased or used by any member of the AIL Group at the present time or in
the past, including the soil and groundwater conditions at such properties, or
(y) the past or present use, management, handling, transport, treatment,
generation, storage or Release of any Hazardous Materials, other than such
liabilities and obligations that, individually or in the aggregate, do not
exceed $250,000.
(ii) The present value of the aggregate amount of the liabilities and
obligations listed on Schedule 2.17(b), net of reserves therefor, does not
exceed $150,000.
(c) Without limiting the generality of the foregoing:
(i) Except as disclosed in Schedule 2.17(c), none of the AIL Group's
current or past operations and none of the currently or formerly owned or
occupied property or assets of any member of the AIL Group is related to
or, to the Best Knowledge of AIL, subject to any investigation or
evaluation by any Governmental Authority, as to whether any Remedial Action
is needed to respond to a Release or threatened Release of any Hazardous
Materials.
(ii) Except as disclosed in Schedule 2.17(c), no member of the AIL
Group is subject to any outstanding order from, or contractual or other
obligation with, any Governmental Authority or other person in respect of
which such member of the AIL Group may be required to incur any
Environmental Liabilities and Costs arising from the Release or threatened
Release of a Hazardous Material and no member of the AIL Group has entered
into any contractual or other obligation with any governmental body or
other person pursuant to which such member assumed responsibility for,
either directly or indirectly, the remediation of any condition arising
from or relating to the Release or threatened Release of Hazardous
Materials.
(iii) Except as disclosed in Schedule 2.17(c), none of the AIL Group's
Real Property, to the Best Knowledge of AIL, no properties adjacent to the
AIL Group's Real Property, and no properties previously owned or leased by
any member of the AIL Group or any of their predecessors or affiliates is,
and, since January 1, 1995, no member of the AIL Group has transported or
arranged for transportation (directly or indirectly) of any Hazardous
Materials to any location that is, listed or formally proposed for
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listing under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. sec.sec. 9601, et seq., or on
any similar state list, or, to the Best Knowledge of AIL, the subject of
federal, state or local enforcement actions or investigations or Remedial
Action.
(iv) Except as disclosed in Schedule 2.17(c), there are no
Environmental Laws applicable to any member of the AIL Group, the AIL
Group's Real Property, the AIL Group's assets or the AIL Group's Business
that would require any member of the AIL Group, Merger Sub, EDO, the
Surviving Corporation, or any other party to provide notice to, to take
actions to satisfy, or to obtain the approval of, any governmental entity
as a condition to the consummation of the transactions contemplated by this
Agreement.
(d) AIL has disclosed and made available to EDO all material information,
including all studies, analyses and test results, in its possession, custody or
control relating to (i) the environmental conditions on, under or about the AIL
Group's Real Property or any other real property previously owned, leased,
operated or otherwise used by any member of the AIL Group, and (ii) Hazardous
Materials used, managed, handled, transported, treated, generated, stored or
Released by any member of the AIL Group at any time or by any member of the AIL
Group or any other person on any of the AIL Group's Real Property or any other
real property previously owned, leased, operated or otherwise used by any member
of the AIL Group, or otherwise in connection with the use or operation of the
AIL Group's assets or Businesses.
2.18 Affiliate Transactions. (a) Schedule 2.18(a) contains a complete and
correct list of all agreements, contracts, arrangements, understandings,
transfers of assets or liabilities or other commitments or transactions, whether
or not entered into in the ordinary course of business, to or by which AIL, on
the one hand, and any of its Affiliates (other than its wholly-owned
Subsidiaries), on the other hand, are or have been a party or otherwise bound or
affected, and that (i) were entered into since October 1, 1997, (ii) are
currently pending or in effect and (iii) involve continuing liabilities and
obligations. Except as disclosed in Schedule 2.18(a), each agreement, contract,
arrangement, understanding, transfer of assets or liabilities or other
commitment or transaction set forth or required to be set forth in Schedule
2.18(a) was on terms and conditions as favorable to AIL as would have been
obtainable by it at the time in a comparable arm's-length transaction with a
Person other than an Affiliate.
(b) Except as set forth in Schedule 2.18(b), no stockholder, officer,
director or employee of any member of the AIL Group, or any family member,
relative or Affiliate of any such stockholder, officer, director or employee,
(i) owns, directly or indirectly, and whether on an individual, joint or other
basis, any interest (other than in such Person's capacity as a stockholder) in
(x) any property or asset, real or personal, tangible or intangible, used in or
held for use in connection with or pertaining to the Business of any member of
the AIL Group, or (y) to the Best Knowledge of AIL, any Person that is a
supplier, customer or competitor of any member of the AIL Group, (ii) to the
Best Knowledge of AIL, serves as an officer, director or employee of any Person
that is a supplier, customer or competitor (other than EDO) of any member of the
AIL Group or (iii) has received any loans from or is otherwise a debtor of, or
made any loans to or is otherwise a creditor of, any member of the AIL Group.
2.19. Employees, Labor Matters, etc. Except as set forth on Schedule 2.19,
no member of the AIL Group is a party to or bound by any collective bargaining
agreement, and there are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees employed by any
member of the AIL Group. Since October 1, 1997, there has not occurred or, to
the Best Knowledge of AIL, been threatened any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees of any member of the AIL Group. Except as set
forth on Schedule 2.19, there are no labor disputes currently subject to any
grievance procedure, arbitration or litigation and there is no representation
petition pending or, to the Best Knowledge of AIL, threatened with respect to
any employee of any member of the AIL Group.
2.20. Employee Benefit Plans and Related Matters; ERISA. (a) Employee
Benefit Plans. Schedule 2.20(a) sets forth a complete and correct list of each
"employee benefit plan", as such term is defined in section 3(3) of ERISA, and
each bonus, incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock appreciation, stock purchase,
phantom stock or
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other equity-based, performance or other employee or retiree benefit or
compensation plan, program, arrangement, agreement, policy or understanding,
whether written or unwritten, that provides or may provide benefits or
compensation in respect of any employee or former employee of any member of the
AIL Group or the beneficiaries or dependents of any such employee or former
employee (collectively, the "AIL Employees") or under which any AIL Employee is
or may become eligible to participate or derive a benefit and that is or has
been maintained or established by any member of the AIL Group or any other trade
or business, whether or not incorporated, which, together with AIL or any of its
Subsidiaries, is or would have been at any date of determination occurring (x)
since October 1, 1997 or (y) to the Best Knowledge of AIL, within the six years
preceding the date hereof, treated as a single employer under Section 414 of the
Code (such other trades and businesses hereinafter referred to as the "AIL
Related Persons"), or to which any member of the AIL Group or any AIL Related
Person contributes or (x) since October 1, 1997 or (y) to the Best Knowledge of
AIL, within the six years preceding the date hereof, is or has been obligated or
required to contribute (collectively, the "AIL Plans"). With respect to each
such AIL Plan, the AIL Parties have provided or made available to Merger Sub
complete and correct copies of: (i) such AIL Plan, if written, or a description
of such AIL Plan if not written, and (ii) to the extent applicable to such AIL
Plan, all trust agreements, insurance contracts or other funding arrangements,
the two most recent actuarial and trust reports, the two most recent Forms 5500
required to have been filed with the IRS and all schedules thereto, the most
recent IRS determination letter, all current summary plan descriptions, all
material communications received from or sent to the IRS, the Pension Benefit
Guaranty Corporation or the Department of Labor (including a written description
of any oral communication), any actuarial study of any post-employment life or
medical benefits provided under any such AIL Plan, if any, statements or other
communications regarding withdrawal or other multiemployer plan liabilities, if
any, and all amendments and modifications to any such document. Except as set
forth on Schedule 2.20(a), no member of the AIL Group and no officer of AIL has
communicated to any AIL Employee any intention or commitment to modify any AIL
Plan or to establish or implement any other employee or retiree benefit or
compensation plan or arrangement.
(b) Qualification. Each AIL Plan intended to be qualified under section
401(a) of the Code, and the trust (if any) forming a part thereof, has received
a favorable determination letter from the IRS as to its qualification under the
Code and to the effect that each such trust is exempt from taxation under
Section 501(a) of the Code, and nothing has occurred since the date of such
determination letter that could adversely affect such qualification or
tax-exempt status.
(c) Compliance; Liability.
(i) None of AIL, its Subsidiaries or any AIL Related Person has been
involved in any transaction that could cause the AIL Group or any AIL
Related Person or the Surviving Corporation to be subject to liability
under Section 4069 or 4212 of ERISA. None of AIL, its Subsidiaries, the
Surviving Corporation or any AIL Related Person has incurred (either
directly or indirectly, including as a result of an indemnification
obligation) any material liability under or pursuant to Title I or IV of
ERISA or the penalty, excise Tax or joint and several liability provisions
of the Code relating to employee benefit plans and no event, transaction or
condition has occurred or exists that could result in any such liability to
any member of the AIL Group, any such AIL Related Person or the Surviving
Corporation or any of its Affiliates. Except as set forth on Schedule
2.20(c), all contributions and premiums required to have been paid by the
AIL Group and each AIL Related Person to any employee benefit plan (within
the meaning of Section 3(3) of ERISA) (including each plan) under the terms
of any such plan or its related trust, insurance contract or other funding
arrangement, or pursuant to any applicable Law or collective bargaining
agreement (including ERISA and the Code) have been paid within the time
prescribed by any such plan, agreement or applicable Law.
(ii) Except as set forth in Schedule 2.20(c), each of the AIL Plans
has been operated and administered in all respects in compliance with its
terms, all applicable Laws and all applicable collective bargaining
agreements. There are no material pending or threatened claims by or on
behalf of any of the AIL Plans, by any AIL Employee or otherwise involving
any such AIL Plan or the assets of any AIL Plan (other than routine claims
for benefits, all of which have been fully reserved for on the regularly
prepared balance sheets of AIL).
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(iii) No AIL Plan is a "multiple employer plan" within the meaning of
section 4001(a)(3), 4063 or 4064 of ERISA.
(iv) Except to the extent set forth in Schedule 2.20(a) hereto, no AIL
Employee is or will become entitled to post-employment benefits of any kind
by reason of employment with AIL, including death or medical benefits
(whether or not insured), other than (x) coverage mandated by section 4980B
of the Code, (y) benefits payable under any AIL Plan qualified under
section 401(a) of the Code or (z) deferred compensation accrued as a
liability as of the Closing Date. Except as set forth in Schedule 2.20(a),
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not result in an increase in the amount of
compensation or benefits or the acceleration of the vesting or timing of
payment of any compensation or benefits payable to or in respect of any AIL
Employee. AIL has disclosed or made available information regarding any and
all liabilities and obligations of any member of the AIL Group to or in
respect of the AIL Employees or the AIL Plans for (A) unpaid compensation,
salaries, wages, vacation and sick pay, disability payments and other
payroll items (including, without limitation, bonus, incentive and deferred
compensation), (B) unpaid contributions, insurance premiums, Pension
Benefit Guaranty Corporation premiums, costs and expenses to or in respect
of any AIL Plan and (C) severance or other termination benefits relating
to, resulting from or arising in respect of any claim of actual or
constructive termination of employment occurring on or prior to the
Effective Time or otherwise in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
(v) The AIL ESOP qualifies as an "employee stock ownership plan"
within the meaning of sec.4975(e)(7) of the Code, and no non-exempt
prohibited transaction has occurred with respect thereto.
2.21. Accounts Receivable. (a) AIL has delivered or caused to be delivered
to Merger Sub a complete and accurate aging of all billed accounts receivable of
the AIL Group as of September 26, 1999. Except as set forth in Schedule 2.21(a),
no billed account receivable of the AIL Group reflected on the AIL Balance Sheet
and no billed account receivable arising after the date of the AIL Balance Sheet
and reflected on the books of any member of the AIL Group is uncollectible or
subject to counterclaim or offset, except to the extent of the aggregate
reserves thereon for doubtful accounts for billed receivables and except to the
extent that any billed account receivable is or becomes uncollectible due to
insolvency, of which the AIL Group is not presently aware, of the account debtor
thereunder. All billed accounts receivable reflected on the AIL Balance Sheet or
on such books have been generated in the ordinary course of business and reflect
a bona fide obligation for the payment of goods or services provided by a member
of the AIL Group. All allowances, rebates and cash discounts to customers of the
AIL Group are as shown on its books and records and in no event exceed one
percent of billed receivables to which they relate.
(b) To the Best Knowledge of AIL, the unbilled account receivable balances
of the AIL Group reflected on the AIL Balance Sheet and the unbilled account
receivable balances arising after the date of the AIL Balance Sheet and
reflected on the books of any member of the AIL Group will convert into billed
accounts receivable, except (i) to the extent of the aggregate reserves
associated with unbilled receivables, or (ii) to the extent that any unbilled
account receivable is or becomes uncollectible due to insolvency, of which the
AIL Group is not presently aware, of the account debtor thereunder and would not
reasonably be expected to have or result in an AIL Material Adverse Effect. All
unbilled accounts receivable reflected on the AIL Balance Sheet or on such books
have been generated in the ordinary course of business and will reflect a bona
fide obligation for the payment of goods or services provided by a member of the
AIL Group, except for failures to result in bona fide obligations that,
individually or in the aggregate, would not reasonably be expected to have or
result in an AIL Material Adverse Effect.
2.22. Inventories . All inventories reflected on AIL's most recently
prepared quarterly balance sheet of raw materials, supplies, work in progress
and finished goods of the AIL Group are of good, usable and merchantable
quality. Except as set forth in Schedule 2.22, (a) all such inventories are of
such quality as to meet the quality control standards of the AIL Group and any
applicable governmental quality control standards, (b) all such finished goods
are saleable as current inventories at the current prices of the AIL Group in
the ordinary course of business in the aggregate net of reserves for
inventories, and (c) no write-down in inventory has been made or should have
been made pursuant to U.S. GAAP during the past two years.
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2.23. Customers. No member of the AIL Group has received any notice that
any existing customer of the AIL Group (i) has ceased, or will cease, to use the
products, goods or services of any member of the AIL Group, (ii) has reduced or
will reduce, the use of products, goods or services of any member of the AIL
Group or (iii) has sought, or is seeking, to reduce the price it will pay for
products, goods or services of any member of the AIL Group, except for any such
cessations or reductions that, individually or in the aggregate, would not
reasonably be expected to have or result in an AIL Material Adverse Effect.
2.24. Suppliers; Raw Materials. Schedule 2.24 sets forth for each of the
years ended December 31, 1998, 1997 and 1996 and for the nine-month period ended
September 26, 1999 (a) the names of the ten largest suppliers to the AIL Group
based on the aggregate value of raw materials, supplies, merchandise and other
goods and services ordered by the AIL Group from such suppliers during each such
period and (b) the amount for which each such supplier invoiced the AIL Group.
No member of the AIL Group has received any notice or has any reason to believe
that there has been any material adverse change in the price of such raw
materials, supplies, merchandise or other goods or services, or that any such
supplier will not sell raw materials, supplies, merchandise and other goods to
the AIL Group at any time after the Closing Date on terms and conditions
substantially the same as those used in its current sales to the AIL Group,
subject to general and customary price increases.
2.25. Products; Product and Service Warranties. (a) Schedule 2.25(a)
contains a complete and correct list of the ten products currently manufactured,
produced, assembled, sold or marketed by the AIL Group that generated the
highest revenues during the nine-month period ended September 26, 1999 (the
"Products"). Schedule 2.25(a) also sets forth the amount of revenues during such
period for each such Product.
(b) Except as required by Law or as set forth on Schedule 2.25(b), no
product manufactured, sold, leased or delivered by, or service rendered by or on
behalf of, any member of the AIL Group is subject to any guaranty, warranty or
other indemnity, express or implied, beyond its standard terms and conditions.
(c) Product Liability. No member of the AIL Group has any liability or
obligation of any nature (whether known or unknown, accrued, absolute,
contingent or otherwise, and whether due or to become due), whether based on
strict liability, negligence, breach of warranty (express or implied), breach of
contract or otherwise, in respect of any Product manufactured, sold, designed or
produced prior to the Effective Time by, or service rendered prior to the
Effective Time by or on behalf of, any member of the AIL Group or any
predecessor thereto, that (i) is not fully and adequately covered by policies of
insurance or by indemnity, contribution, cost sharing or similar agreements or
arrangements by or with other Persons and (ii) is not otherwise fully and
adequately reserved against in the AIL Balance Sheet.
2.26. Brokers, Finders, etc. No actions taken or agreements entered into
by any member of the AIL Group in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements or otherwise will give rise to
any valid claim against any member of the AIL Group, the EDO Group or the
Surviving Corporation or any of their Affiliates for any brokerage or finder's
commission, fee or similar compensation, other than (i) the fee of $825,000
payable to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), (ii) the fee of
$100,000 payable to Valumetrics, or (iii) for any bonus payable to any officer,
director, employee, agent or representative of or consultant to any member of
the AIL Group upon consummation of the transactions contemplated hereby or
thereby.
2.27. Disclosure. (a) Proxy Statement; Registration Statement. None of the
information with respect to AIL, the Common Stockholders or any member of the
AIL Group to be included in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement or any
amendments or supplements thereto, and at the time of the EDO Meeting, or, in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by AIL with respect to
information supplied by any party other than the AIL Group specifically for
inclusion in the Proxy Statement.
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(b) General. The senior officers of AIL do not believe there is any fact
(other than matters of a general economic or political nature that do not affect
the Business of any member of the AIL Group uniquely) that would reasonably be
expected to have or result in an AIL Material Adverse Effect, except as
described in the Schedules hereto.
2.28. Opinion of Financial Advisor. The Board of Directors of AIL has
received the opinion of ▇▇▇▇▇▇▇▇, dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio is fair to AIL's stockholders
from a financial point of view. A copy of the written opinion of ▇▇▇▇▇▇▇▇ will
be delivered to EDO as soon as practicable after the date of this Agreement.
2.29. Required Vote of AIL's Stockholders. The affirmative vote of the
holders of a majority of the outstanding Common Shares is required to approve
the Merger and approve and adopt this Agreement. No other vote of the holders of
the capital stock of AIL is required by Law, the Organizational Documents of AIL
or otherwise in order for AIL to consummate the Merger and the transactions
contemplated hereby and under the Ancillary Agreements.
2.30. EDO Share Ownership. Except as set forth on Schedule 2.30, no member
of the AIL Group owns any shares of EDO Common Stock or other securities
convertible into EDO Common Stock.
2.31. Board Recommendation. The Board of Directors of AIL, at a meeting
duly called and held, (a) determined that this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby are fair and in
the best interests of AIL and its stockholders, and (b) resolved to recommend
that the Common Stockholders and the holder of Preferred Shares approve this
Agreement and the transactions contemplated hereby.
2.32. Amendment to AIL ESOP. AIL has adopted, subject to the AIL ESOP
Trustee's approval, an amendment to the AIL ESOP in the form of Exhibit C
hereto, effective on the date hereof, so that the AIL ESOP, as so amended,
provides that decisions made with respect to unallocated shares as to (a)
selling such shares in response to offers to buy and (b) voting on all matters
are made in the same proportions as such decisions are made with respect to
allocated shares, and such decisions with respect to allocated shares are kept
confidential by the Trustee.
3. Representations and Warranties of EDO and Merger Sub. EDO and Merger
Sub, jointly and severally, represent and warrant to AIL and the Exchanging
Common Stockholders as follows:
3.1 Authorization, etc. (a) Each of EDO and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is or shall be a party, to perform its obligations
hereunder and thereunder and (subject to stockholder approval) to consummate the
transactions contemplated hereby and thereby, and the execution and delivery of
this Agreement and the Ancillary Agreements to which EDO or Merger Sub is or
shall be a party (subject to stockholder approval), the performance of EDO's and
Merger Sub's obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action of each of EDO and Merger Sub.
(b) EDO and Merger Sub have each duly executed and delivered this Agreement
and at the Effective Time will have duly executed and delivered the Ancillary
Agreements to which each is or shall be a party. This Agreement constitutes, and
each such Ancillary Agreement when so executed and delivered will constitute,
the legal, valid and binding obligation of each of EDO and Merger Sub,
enforceable against such EDO or Merger Sub in accordance with its respective
terms.
3.2. Capitalization. (a) Authorized Capital Stock of EDO and Merger
Sub. (i) The authorized capital stock of EDO consists of 25,000,000 shares of
EDO Common Stock and 500,000 shares of EDO Preferred Stock, of which 8,453,902
shares of EDO Common Stock (of which 1,698,892 are held in Treasury) and 57,384
shares of EDO Preferred Stock are issued and outstanding as of the date hereof.
As of the date hereof, there are outstanding EDO Options to purchase 630,975
shares of EDO Common Stock, and 3,321,908 shares of EDO Common Stock are
reserved for issuance upon the exercise of outstanding EDO Options (908,450
shares), conversion of EDO's 7% Convertible Subordinated Debentures due 2011
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(1,332,458 shares) and conversion of shares of EDO Preferred Stock (1,081,000
shares). The EDO ESOP is the only record holder of EDO Preferred Stock. The
shares of EDO Common Stock to be issued in the Share Issuance will, when issued,
be validly issued, fully paid and non-assessable.
(ii) The authorized capital stock of Merger Sub consists of 100 shares of
common stock, par value $0.01 per share, of Merger Sub, of which 100 shares are
issued and outstanding as of the date hereof, and EDO is the record holder of
all such shares. As of the date hereof, there are no options or warrants
outstanding to purchase shares of common stock of Merger Sub.
(b) Equity Interests Held by the EDO Group. Schedule 3.2(b) sets forth a
complete and correct description of the shares of stock and other equity
interests in any Person owned by any member of the EDO Group. Except for Merger
Sub and as set forth on Schedule 3.2(b), EDO has no Subsidiaries, and a member
of the EDO Group owns all of the outstanding shares of stock or other equity
interests in each of EDO's Subsidiaries. All such outstanding shares of stock or
other equity interests are duly authorized, validly issued, fully paid and
nonassessable.
(c) No Equity Rights. There are no preemptive or similar rights on the
part of any holders of any class of securities of EDO or any member of the EDO
Group. Except for the EDO Options, EDO Preferred Stock, the EDO Convertible
Debentures and this Agreement, no subscriptions, options, warrants, conversion
or other rights, agreements, commitments, arrangements or understandings of any
kind obligating any member of the EDO Group or any other Person, contingently or
otherwise, to issue or sell, or cause to be issued or sold, any shares of
capital stock of any class of EDO, or any securities convertible into or
exchangeable for any such shares, are outstanding, and no authorization therefor
has been given. There are no outstanding contractual or other rights or
obligations to or of any Person to repurchase, redeem or otherwise acquire any
outstanding shares or other equity interests of EDO from EDO.
3.3. No Conflicts, etc. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by each of EDO and Merger Sub and the
consummation of the transactions contemplated hereby and thereby, do not and
will not conflict with, contravene, result in a violation or breach of or
default under (with or without the giving of notice or the lapse of time or
both), create in any other Person a right or valid claim of termination,
amendment, or require modification, acceleration or cancellation of, or result
in the creation of any Lien (or any obligation to create any Lien) upon any of
the properties or assets of any member of the EDO Group under, (a) any Law
applicable to any member of the EDO Group or any of their respective properties
or assets, (b) any provision of any of the Organizational Documents of any
member of the EDO Group or (c) any EDO Contract, or any other agreement or
instrument to which any member of the EDO Group is a party or by which any of
their respective properties or assets may be bound, except, with respect to
clauses (a) and (c), for such conflicts, breaches, defaults or other occurrences
which, individually or in the aggregate, would not have an EDO Material Adverse
Effect.
3.4. Corporate Status. (a) Organization. Each member of the EDO Group is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full corporate power and
authority to conduct its business and to own or lease and to operate its
properties as and in the places where such business is conducted and such
properties are owned, leased or operated. Merger Sub was incorporated in
Delaware on December 9, 1999 and has conducted no business since the date of its
incorporation and has no outstanding assets or liabilities, except in each case
as expressly contemplated by this Agreement.
(b) Qualification. Each member of the EDO Group is duly qualified or
licensed to do business and is in good standing in each of the jurisdictions
specified in Schedule 3.4(b) (which includes each jurisdiction in which the
nature of its business or the properties owned or leased by it makes such
qualification or licensing necessary), except where the failure to be so duly
qualified, licenced or in good standing, would not, individually or in the
aggregate, reasonably be expected to have or result in an EDO Material Adverse
Effect.
(c) Organizational Documents. EDO has delivered or made available to AIL
complete and correct copies of the Organizational Documents of each member of
the EDO Group, as in effect on the date hereof. The Organizational Documents of
each member of the EDO Group are in full force and effect. No member of
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the EDO Group is in violation of any of the provisions of its Organizational
Documents. The minute books of each member of the EDO Group, which have
heretofore been made available to AIL, correctly reflect, in all material
respects, all meetings and written consents of the boards of directors,
committees and stockholders of each such member of the EDO Group since January
1, 1993.
3.5. Discontinued and Acquired Businesses. Except as set forth on Schedule
3.5, since October 1, 1997, no member of the EDO Group has dissolved,
discontinued, sold, transferred or otherwise disposed of any businesses or
operations having annual sales in excess of $1,000,000 or involving assets
having a book value in excess of $1,000,000. Except as set forth on Schedule
3.5, since October 1, 1997, no member of the EDO Group has acquired any business
of any other Person, through the purchase of assets, merger, consolidation,
acquisition of shares or otherwise, with respect to which any member of the EDO
Group is subject to any contractual obligation, contingent or otherwise, to such
Person (including any indemnification obligation) in an amount that could exceed
$500,000 and which would survive at least until the Closing.
3.6. SEC Reports; EDO Financial Statements. (a) EDO has made available to
AIL each registration statement, report, proxy statement or information
statement prepared by it for filing with the SEC since January 1, 1994, each in
the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "EDO Reports"). As of their respective dates, the EDO Reports
(a) complied as to form in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") or the Exchange Act, as the case
may be, and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) EDO has delivered or made available to AIL complete and correct copies
of the EDO Proxy Financials and the EDO Financial Statements. The EDO Proxy
Financials are complete and correct, have been derived from the accounting books
and records of the EDO Group and have been prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods presented in the EDO Proxy
Financials subject, in the case of interim unaudited EDO Proxy Financials, only
to normal recurring year-end adjustments.
(c) The consolidated balance sheets included in the EDO Financial
Statements present fairly the financial position of the EDO Group as at the
respective dates thereof, and the consolidated statements of earnings,
consolidated statements of shareholders' equity, and consolidated statements of
cash flows included in such EDO Financial Statements present fairly the results
of operations, shareholders' equity and cash flows of the EDO Group for the
respective periods indicated.
3.7. Undisclosed Liabilities, etc. No member of the EDO Group has any
liabilities or obligations of any nature, whether known, unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, except (a) as
set forth in Schedule 3.7, (b) as and to the extent disclosed or reserved
against in the EDO Balance Sheet or specifically disclosed in the notes thereto,
(c) liabilities and obligations not required by U.S. GAAP to be reflected or
reserved against in the EDO Balance Sheet (other than any such liabilities and
obligations which were not reflected or reserved against because they were
contingent as of the date of the EDO Balance Sheet, but which would be reflected
or reserved against in a balance sheet prepared in accordance with U.S. GAAP as
of the date hereof), and (d) liabilities and obligations that (i) are incurred
after the date of the EDO Balance Sheet in the ordinary course of business and
are not prohibited by this Agreement and (ii) individually and in the aggregate,
would not be reasonably expected to have or result in an EDO Material Adverse
Effect.
3.8. Absence of Changes. Since the date of the EDO Balance Sheet, except
(i) as set forth in Schedule 3.8 and (ii) as specifically permitted after the
date hereof pursuant to Section 4.1, (x) the Business of the EDO Group have been
conducted in the ordinary course consistent with past practice, (y) there has
not occurred or come to exist any EDO Material Adverse Effect or any event,
occurrence, fact, condition, change, development or effect that, individually or
in the aggregate, would be reasonably expected to have or result in an EDO
Material Adverse Effect, and (z) no member of the EDO Group has taken any action
or omitted to
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take any action which action or omission, if it occurred after the date hereof,
would violate any of the provisions of Sections 4.1(b)(i)-(xvi) and
(xviii)-(xxi).
3.9. Taxes. (a)(i) All Tax Returns relating to any member of the EDO Group
or the business or assets of any such member that were required to be filed on
or before the Effective Time have been duly and timely filed and are correct and
complete in all respects, (ii) all Taxes shown as owing on such Tax Returns have
been paid and (iii) no member of the EDO Group is currently the beneficiary of
any extension of time within which to file any Tax Return.
(b) (i) All Taxes that are or have become payable by any member of the EDO
Group or chargeable as a Lien upon its assets as of the Closing Date for which
the filing of a Tax Return is not required have been duly and timely paid, (ii)
each member of the EDO Group has duly and timely withheld all Taxes required to
be withheld in connection with the business or assets of such member, and such
withheld Taxes have been either duly and timely paid to the proper governmental
authorities or properly set aside in accounts for such purpose and (iii) the EDO
Financial Statements reflect an adequate reserve for all Taxes payable or
asserted to be payable by the EDO Group for all taxable periods or portions
thereof through the date of the EDO Financial Statements.
(c) Except as set forth on Schedule 3.9(c), (i) no Returns with respect to
the EDO Group are currently under audit by any taxing authority, (ii) no taxing
authority is now asserting, or to the Best Knowledge of the EDO Group,
threatening to assert against the EDO Group, any deficiency or claim for Taxes
or any adjustment to Taxes, and (iii) to the Best Knowledge of EDO, no
circumstances exist to form the basis for such a claim or audit.
(d) Schedule 3.9(d) lists all Tax Returns that have been filed with respect
to the EDO Group that are, open or otherwise subject to audit or examination by
the IRS or any other taxing authority.
(e) Except as set forth on Schedule 3.9(e), no member of the EDO Group has
(i) waived any statute of limitations, (ii) agreed to any extension of the
period for assessment or collection or (iii) executed or filed any power of
attorney with respect to Taxes, which waiver, agreement or power of attorney is
currently in force.
(f) The EDO Group's taxable year for federal, state and local income and
franchise tax purposes has always been a taxable year ending on December 31.
(g) Except as set forth in Schedule 3.9(g), no member of the EDO Group (i)
is a party to or bound by or has any obligation under any tax allocation,
sharing, indemnity or similar agreement or arrangement or (ii) is or has been a
member of any affiliated, consolidated, combined or unitary group for the
purposes of filing Tax Returns or paying taxes.
(h) Schedule 3.9(h) contains a list of states, cities and jurisdictions
(whether foreign or domestic) in which the EDO Group has filed income,
franchise, employment, property, sales and use Tax Returns for past three years.
3.10. Assets. Each member of the EDO Group owns, or otherwise has full,
exclusive, sufficient and legally enforceable rights to use, all of the EDO
Assets (other than Intellectual Property which is addressed elsewhere in this
Agreement). Each member of the EDO Group has good, valid and marketable title
to, or in the case of leased property has good and valid leasehold interests in,
all EDO Assets (other than Intellectual Property) that are material to its
Business, including but not limited to all such EDO Assets reflected in the EDO
Balance Sheet or acquired since the date thereof (except as may be disposed of
in the ordinary course of business after the date hereof and in accordance with
this Agreement), in each case free and clear of any Lien, except Permitted
Liens. Each member of the EDO Group has maintained all of its tangible EDO
Assets in good repair, working order and operating condition subject only to
ordinary wear and tear, and all such tangible EDO Assets are fully adequate and
suitable for the purposes for which they are presently being used.
3.11. Real Property. (a) Owned Real Property. Schedule 3.11(a) contains a
complete and correct list of Real Property owned by any member of the EDO Group
setting forth the address and owner of each parcel of such owned Real Property
and describing all improvements thereon. The EDO Group has, or on the Closing
Date will have, good, valid and marketable fee simple title to such owned Real
Property, free and clear
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of Liens other than Permitted Liens. There are no outstanding options or rights
of first refusal to purchase such owned Real Property or any portion thereof or
interest therein.
(b) EDO Leases. Schedule 3.11(b) contains a complete and correct list of
all EDO Leases setting forth the address, landlord and tenant for each EDO
Lease. EDO has delivered or made available to AIL correct and complete copies of
the EDO Leases. Each EDO Lease is legal, valid, binding, in full force and
effect and enforceable against each member of the EDO Group that is a party
thereto. No member of the EDO Group is in default, violation or breach in any
material respect under any EDO Lease, and, to the Best Knowledge of EDO, no
event has occurred and is continuing that constitutes or, with notice or the
passage of time or both, would constitute a default, violation or breach in any
respect under any EDO Lease. Each EDO Lease grants the tenant under the EDO
Lease the exclusive right to use and occupy the premises and rights demised and
intended to be demised thereunder. Each member of the EDO Group has good and
valid title to the leasehold estate under its respective EDO Leases free and
clear of any Liens other than Permitted Liens. Each member of the EDO Group
enjoys peaceful and undisturbed possession under its respective EDO Leases for
its Real Property.
(c) Fee and Leasehold Interests, etc. The EDO Group's Real Property
constitutes all the fee or leasehold interests in real property held by the EDO
Group, and constitutes all of the fee or leasehold interests in real property
used or held for use in connection with, necessary for the conduct of, or
otherwise material to, the Business of any member of the EDO Group.
(d) No Proceedings. There are no proceedings in eminent domain or other
similar proceedings pending or, to the Best Knowledge of EDO, threatened,
affecting any portion of the EDO Group's Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any Litigation, pending
or, to the Best Knowledge of EDO, threatened, relating to the ownership, lease,
use, occupancy or operation by any Person of any of the EDO Group's Real
Property.
(e) Current Use. The use and operation of the EDO Group's Real Property in
the conduct of the Business of each member of the EDO Group does not violate in
any material respect any instrument of record or agreement affecting such Real
Property. There is no violation of any covenant, condition, restriction,
easement or agreement or order of any Governmental Authority that materially
affects the EDO Group's Real Property or the ownership, operation, use or
occupancy thereof. No damage or destruction has occurred with respect to any of
such Real Property.
(f) Real Property Taxes. Each parcel included in the EDO Group's Real
Property is assessed for real estate tax purposes as a wholly independent tax
lot, separate from any adjoining land or improvements not constituting a part of
that parcel.
(g) Compliance with Laws. The EDO Group's Real Property is in full
compliance with all Real Property Laws, and no member of the EDO Group has
received any notice of violation or claimed violation of any Real Property Law.
There is no pending or, to the Best Knowledge of EDO, anticipated, change in any
Real Property Law that could reasonably be expected to have or result in a
material adverse effect upon the ownership, alteration, use, occupancy or
operation of the EDO Group's Real Property or any portion thereof. No current
use by any member of the EDO Group of its Real Property is dependent on a
nonconforming use or other Governmental Approval, the absence of which would
materially limit the use of any of the properties or assets in its Business. The
EDO Group's Real Property and its continued use, occupancy and operation as
currently used, occupied and operated do not constitute nonconforming uses under
any Law, and, except for permits, licenses and other forms of authorizations
issued in the ordinary course of business and held pursuant to applicable
Environmental Laws, the continued existence, use, occupancy and operation of
each improvement located on any of such Real Property is not dependent on any
Consent or Governmental Approval that is limited in duration. To the Best
Knowledge of EDO, the permits, licenses and other authorizations referred to in
the prior sentence will be issued or renewed without undue delay.
(h) Real Property Consents. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by EDO and the consummation of the
transactions contemplated hereby and thereby, do not and will not require the
Consent of any Person pursuant to any of the EDO Leases or any instrument of
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record or agreement affecting the EDO Group's Real Property. Except as set forth
in Schedule 3.11(h), the enforceability of the EDO Leases will not be affected
in any manner by the execution, delivery or performance of this Agreement, and
no EDO Lease contains any change in control provision or other terms or
conditions that will become applicable or inapplicable as a result of the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
3.12. Contracts. (a) Disclosure. Schedule 3.12(a) contains a complete and
correct list, as of the date hereof, of all EDO Contracts that are material to
the Business of any member of the EDO Group ("EDO Material Contracts"). EDO has
delivered or made available to AIL complete and correct copies of all written
EDO Material Contracts, and accurate descriptions of all material terms of all
oral EDO Material Contracts, set forth or required to be set forth in Schedule
3.12(a).
(b) Enforceability. All EDO Contracts are legal, valid, binding, in full
force and effect and enforceable against each member of the EDO Group that is a
party thereto, except to the extent that any failure to be enforceable,
individually and in the aggregate, would not reasonably be expected to have or
result in an EDO Material Adverse Effect. Except as set forth in Schedule
3.12(b), to the Best Knowledge of EDO, there does not exist under any EDO
Material Contract any violation, breach or event of default, or event or
condition that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder, on the part of EDO, any of its
Subsidiaries or any other Person. Except as set forth in Schedule 3.12(b), the
enforceability of all EDO Material Contracts will not be affected in any manner
by the execution, delivery or performance of this Agreement or the Ancillary
Agreements, and no EDO Material Contract contains any change in control or other
terms or conditions that will become applicable or inapplicable as a result of
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
(c) Government Contracts.
(i) Except as specified on Schedule 3.12(c), to the Best Knowledge of
EDO, since October 1, 1997: (A) each member of the EDO Group has complied
with all material terms and conditions of each Government Contract or
Government Subcontract, (B) each member of the EDO Group has complied in
all material respects with all requirements of all Laws or agreements
pertaining to each Government Contract or Government Subcontract and (C)
all representations and certifications executed, acknowledged or set forth
in or pertaining to each Government Contract or Government Subcontract were
complete and correct in all material respects as of their effective date
and the EDO Group has complied in all material respects with all such
representations and certifications.
(ii) Except as set forth on Schedule 3.12(c), since October 1, 1997:
(A) neither any Governmental Authority nor any prime contractor,
subcontractor or other Person has notified EDO, either in writing or, to
the Best Knowledge of EDO, orally, that any member of the EDO Group has
breached or violated any Law, certification, representation, clause,
provision or requirement pertaining to any Government Contract or
Government Subcontract, (B) no termination for convenience, termination for
default, cure notice or show cause notice is currently in effect pertaining
to any Government Contract or Government Subcontract, (C) no material cost
incurred by any member of the EDO Group pertaining to any Government
Contract or Government Subcontract has been questioned or challenged by
representatives of the Administrative Contracting Officer or the Defense
Contract Audit Agency, is, to the Best Knowledge of EDO, the subject of any
investigation, or has been disallowed by any Governmental Authority, and
(D) no amount of money due to any member of the EDO Group, pertaining to
any Government Contract or Government Subcontract has been withheld or set
off nor has any claim been made to withhold or set off money, and the
members of the EDO Group are entitled to all progress payments received
with respect thereto.
(iii) (A) to the Best Knowledge of EDO, neither any member of the EDO
Group nor any of its directors, officers, employees, consultants or agents
is or during the past three years has been under administrative, civil or
criminal investigation, indictment or information by any Governmental
Authority with respect to any alleged irregularity, misstatement or
omission arising under or relating to any Government Contract or Government
Subcontract, and (B) during the past three years, no member of the EDO
Group has conducted or initiated any internal investigation or made a
voluntary disclosure to
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any Governmental Authority with respect to any alleged irregularity,
misstatement or omission arising under or relating to a Government Contract
or Government Subcontract.
(iv) To the Best Knowledge of EDO, there exist (A) no outstanding
claims against any member of the EDO Group, either by any Governmental
Authority or by any prime contractor, subcontractor, vendor or other
Person, arising under or relating to any Government Contract or Government
Subcontract and (B) no material disputes between any member of the EDO
Group and any Governmental Authority under the Contract Disputes Act or any
other federal statute or regulation or between any member of the EDO Group
and any prime contractor, subcontractor or vendor arising under or relating
to any Government Contract or Government Subcontract.
(v) Since October 1, 1997, no member of the EDO Group has been
debarred or suspended from participation in the award of contracts with the
DOD or any other Governmental Authority (excluding for this purpose
ineligibility to bid on certain contracts due to generally applicable
bidding requirements). To the Best Knowledge of EDO, there exist no facts
or circumstances that would warrant suspension or debarment or the finding
of nonresponsibility or ineligibility on the part of any member of the EDO
Group. Neither EDO nor any member of the EDO Group nor any director,
officer, agent or employee of any member of the EDO Group directly or
indirectly has (A) used any funds for contributions, gifts, entertainment
or other expenses relating to political or governmental activity in
violation of any Law; (B) made any payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns in violation of any Law, or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, or the OECD's
Convention on Combating Bribery of Foreign Officials in International
Business Transactions; or (C) made any other payment in violation of any
Law. EDO's cost accounting and procurement systems and the associated
entries reflected in the EDO Financial Statements with respect to the
Government Contracts and Government Subcontracts are in compliance in all
material respects with all Laws.
3.13. Intellectual Property. (a) Disclosure. Schedule 3.13(a) sets forth
a complete and correct list of all filed or registered EDO Owned Intellectual
Property that is material to the Businesses of the EDO Group.
(b) Title. A member of the EDO Group either owns or has adequate rights,
pursuant to license or otherwise, to use all of the Intellectual Property used
or held for use in connection with, necessary for the conduct of, or otherwise
material to, the Businesses of the EDO Group (the "EDO Intellectual Property").
The EDO Group has, and at the Closing will have, adequate rights to use the EDO
Intellectual Property for the life thereof for any purpose in connection with
their Businesses, free from any Liens (except for Permitted Liens incurred in
the ordinary course of business). Immediately after the Effective Time, EDO or
one of its Subsidiaries shall own or have adequate rights, pursuant to license
or otherwise, to use all the EDO Intellectual Property, in each case free from
Liens (except for Permitted Liens incurred in the ordinary course of business)
and on the same terms and conditions owned, licensed or used by the EDO Group as
in effect prior to the Effective Time.
(c) Licensing and Similar Arrangements. EDO has delivered or made
available to AIL complete and correct copies of all written or oral agreements,
arrangements and applicable Laws (i) pursuant to which any member of the EDO
Group has licensed Intellectual Property to, or the use of Intellectual Property
is otherwise permitted (through non-assertion, settlement or similar agreements
or otherwise) with respect to, any other Person and (ii) pursuant to which any
member of the EDO Group has had Intellectual Property licensed to it, or has
otherwise been permitted to use Intellectual Property (through non-assertion,
settlement or similar agreements or otherwise). All royalties, license fees,
charges and other amounts payable by, on behalf of, to or for the account of any
member of the EDO Group in respect of any Intellectual Property are reflected in
the EDO Financial Statements.
(d) No Infringement. The conduct of the EDO Group's Businesses does not
infringe or otherwise conflict with any rights of any Person in respect of any
Intellectual Property. To the Best Knowledge of EDO, none of the EDO
Intellectual Property is being infringed or otherwise used or available for use
by any Person without a license or permission from a member of the EDO Group,
except as set forth in Schedule 3.13(d).
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(e) Due Registration, etc. To the Best Knowledge of EDO, the EDO Owned
Intellectual Property has been duly registered with, filed in or issued by, as
the case may be, the United States Patent and Trademark Office, the United
States Copyright Office or other filing offices, domestic or foreign, to the
extent necessary to ensure full protection under any applicable Law, and such
registrations, filings, issuances and other actions remain in full force and
effect. Except as set forth in Schedule 3.13(e), the EDO Group has taken all
necessary actions to ensure full protection of the EDO Owned Intellectual
Property (including maintaining the secrecy of all confidential Intellectual
Property) under any applicable Law.
(f) Software. The EDO Group has valid licenses to all copies of all
material Software that are utilized in connection with the Business that are not
owned by EDO ("EDO Commercial Software"), and the use by the EDO Group of such
EDO Commercial Software, including all modifications and enhancements thereto
(whether created by a member of the EDO Group or by a third party) is in
material compliance with the terms and provisions of such licenses. Each member
of the EDO Group owns all right, title and interest in and to all material
Software marketed or licensed by it to its customers or held for use or in
development for marketing and licensing to the customers of each member of the
EDO Group (collectively, the "EDO Owned Software"), including all Intellectual
Property rights therein and thereto. None of the EDO Commercial Software or EDO
Owned Software, and no use thereof by the EDO Group or permitted use by its
licensees, infringes upon or violates any patent, copyright, trade secret or
other Intellectual Property right of any person or entity, and no claim or
demand with respect to any such infringement or violation has been made or
threatened.
(g) Calendar Function. To the Best Knowledge of EDO, all Software,
hardware and equipment owned by the EDO Group and all Software, hardware and
equipment used in the Business that contains or calls on a calendar function,
including any function that is indexed to a computer processing unit clock,
provides specific days, dates or times, or calculates spans of dates or times,
is and will be able to record, store, process, calculate, compare, sequence and
provide true and accurate day, date and time data from, into and between the
twentieth and twenty-first centuries, including but not limited to with respect
to the years 1999, 2000 and 2001 and leap year calculations , except for
failures to do any of the foregoing which, individually or in the aggregate,
would not reasonably be expected to have or result in an EDO Material Adverse
Effect.
3.14. Insurance. Schedule 3.14 contains a complete and correct list and
summary description of all insurance policies maintained (at present or since
October 1, 1997) by or on behalf of the EDO Group. EDO has delivered or made
available to AIL complete and correct copies of all such policies together with
all riders and amendments thereto. Such policies are in full force and effect,
and all premiums due thereon have been paid. Each member of the EDO Group has
complied in all material respects with the terms and provisions of such
policies. The insurance coverage provided by such policies is adequate and
suitable for the EDO Group's Businesses, and is on such terms (including without
limitation as to deductibles and self-insured retentions), covers such risks,
contains such deductibles and retentions, and is in such amounts, as the
insurance customarily carried by comparable companies of established reputation
similarly situated and carrying on the same or similar business.
3.15. Litigation. EDO has disclosed to AIL all Litigation pending, or to
the Best Knowledge of EDO threatened, against any member of the EDO Group or any
of its properties or assets since October 1, 1997 and has disclosed all material
facts and given or referenced all documents regarding all such Litigation and
threatened Litigation that are active as of the date hereof. Except as set forth
on Schedule 3.15, there is and has been since October 1, 1997, no Litigation
that, individually or in the aggregate, is material and is pending or, to the
Best Knowledge of EDO, threatened, against any member of the EDO Group or any of
its properties or assets. There are no outstanding orders, judgments, decrees or
injunctions issued by any Governmental Authority against any member of the EDO
Group, or that in any way affect the EDO Group's Businesses and would reasonably
be expected to have or result in an EDO Material Adverse Effect.
3.16. Compliance with Laws and Instruments; Consents. (a) Compliance. (i)
No member of the EDO Group is, or since October 1, 1997, has been, in conflict
with or in violation or breach of or default under (and there exists no event
that, with notice or passage of time or both, would constitute a conflict,
violation, breach or default with, of or under) (x) any Law applicable to it or
any of its properties, assets, operations or
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business (except Laws compliance with which is specifically addressed elsewhere
in this Agreement), (y) any provision of its Organizational Documents, or (z)
any EDO Contract, or any other agreement or instrument to which it is party or
by which it or any of its properties or assets is bound or affected, except in
the case of the foregoing clauses (x) and (z) for any such conflicts, breaches,
violations and defaults that, individually or in the aggregate, would not
reasonably be expected to have or result in an EDO Material Adverse Effect, and
(ii) no member of the EDO Group has received any written notice or, to the Best
Knowledge of EDO, oral notice alleging any such conflict, violation, breach or
default which has not been cured or waived.
(b) Consents. (i) No Governmental Approval or other Consent is required to
be obtained or made by any member of the EDO Group in connection with the
execution and delivery of this Agreement and the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby, except (x) as
specified on Schedule 3.16(b)(i), (y) for applicable requirements, if any, of
the Exchange Act, state securities or "blue sky" laws, notification requirements
under the HSR Act and filings required under Delaware and New York Law, and (z)
where failure to obtain such Consents or make such filings or notifications
would not reasonably be expected, individually or in the aggregate, to have or
result in an EDO Material Adverse Effect.
(ii) All Governmental Approvals and other Consents necessary for, or
otherwise material to, the conduct of the EDO Group's Business, have been duly
obtained and are held by a member of the EDO Group and are in full force and
effect. Each member of the EDO Group is, and at all times since October 1, 1997,
has been, in compliance with all Governmental Approvals and other Consents held
by them. Except as specified in Schedule 3.16(b)(i), the execution, delivery and
performance of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby do not and will not violate
any such Governmental Approval or Consent, or result in any revocation,
cancellation, suspension, modification or nonrenewal thereof.
3.17. Environmental Matters. (a) Compliance with Environmental Law. Each
member of the EDO Group has complied and is in compliance in all but de minimis
respects with all applicable Environmental Laws pertaining to their respective
assets and the use, ownership or transferability thereof, the manufacturing and
commercial distribution of its products and to the operation of its Business. To
the Best Knowledge of EDO, no member of the EDO Group is alleged to be in
violation of any applicable Environmental Law relating to the operation of its
business or the use or ownership of its assets.
(b) Other Environmental Matters. (i) Except as disclosed on Schedule
3.17(b), no member of the EDO Group has caused or taken any action that would
result in, and no member of the EDO Group is subject to, any liability or
obligation relating to (x) the environmental conditions on, under, or about the
EDO Group's Real Property or other properties or assets owned, leased or used by
any member of the EDO Group at the present time or in the past, including the
soil and groundwater conditions at such properties, or (y) the past or present
use, management, handling, transport, treatment, generation, storage or Release
of any Hazardous Materials, other than such liabilities and obligations that
individually or in the aggregate, do not exceed $250,000.
(ii) The present value of the aggregate amount of the liabilities and
obligations listed on Schedule 3.17(b), net of reserves therefor, does not
exceed $150,000.
(c) Without limiting the generality of the foregoing:
(i) Except as disclosed in Schedule 3.17(c), none of the EDO Group's
current or past operations and none of the currently or formerly owned or
occupied property or assets of any member of the EDO Group is related to
or, to the Best Knowledge of EDO, subject to any investigation or
evaluation by any Governmental Authority, as to whether any Remedial Action
is needed to respond to a Release or threatened Release of any Hazardous
Materials.
(ii) Except as disclosed in Schedule 3.17(c), no member of the EDO
Group is subject to any outstanding order from, or contractual or other
obligation with, any Governmental Authority or other person in respect of
which such member of the EDO Group may be required to incur any
Environmental Liabilities and Costs arising from the Release or threatened
Release of a Hazardous Material and no member of the EDO Group has entered
into any contractual or other obligation with any governmental body or
other person pursuant to which such member assumed responsibility for,
either directly or
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indirectly, the remediation of any condition arising from or relating to
the Release or threatened Release of Hazardous Materials.
(iii) Except as disclosed in Schedule 3.17(c), none of the EDO Group's
Real Property, to the Best Knowledge of EDO, no properties adjacent to such
Real Property, and no properties previously owned or leased by any member
of the EDO Group or any of their predecessors or affiliates is, and, since
January 1, 1995, no member of the EDO Group has transported or arranged for
transportation (directly or indirectly) of any Hazardous Materials to any
location that is, listed or formally proposed for listing under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. sec.sec. 9601, et seq., or on any similar state
list, or, to the Best Knowledge of EDO, or the subject of federal, state or
local enforcement actions or investigations or Remedial Action.
(iv) Except as disclosed on Schedule 3.17(c), there are no
Environmental Laws applicable to any member of the EDO Group, the EDO
Group's Real Property, the EDO Group's assets or the EDO Group's Business
that would require any member of the AIL Group, Merger Sub, EDO, the
Surviving Corporation, or any other party to provide notice to, to take
actions to satisfy, or to obtain the approval of, any governmental entity
as a condition to the consummation of the transactions contemplated by this
Agreement.
(d) EDO has disclosed and made available to AIL all material information,
including all studies, analyses and test results, in its possession, custody or
control relating to (i) the environmental conditions on, under or about the EDO
Group's Real Property or any other real property previously owned, leased,
operated or otherwise used by any member of the EDO Group, and (ii) Hazardous
Materials used, managed, handled, transported, treated, generated, stored or
Released by any member of the EDO Group at any time or by any member of the EDO
Group or any other person on any of the EDO Group's Real Property or any other
real property previously owned, leased, operated or otherwise used by any member
of the EDO Group, or otherwise in connection with the use or operation of the
EDO Group's assets or its business.
3.18. Affiliate Transactions. (a) Schedule 3.18(a) contains a complete and
correct list of all agreements, contracts, arrangements, understandings,
transfers of assets or liabilities or other commitments or transactions, whether
or not entered into in the ordinary course of business, to or by which EDO, on
the one hand, and any of its Affiliates (other than its wholly owned
Subsidiaries), on the other hand, are or have been a party or otherwise bound or
affected, and that (i) were entered into since October 1, 1997, (ii) are
currently pending or in effect and (iii) involve continuing liabilities and
obligations. Except as disclosed in Schedule 3.18(a), each agreement, contract,
arrangement, understanding, transfer of assets or liabilities or other
commitment or transaction set forth or required to be set forth in Schedule
3.18(a) was on terms and conditions as favorable to EDO as would have been
obtainable by it at the time in a comparable arm's-length transaction with a
Person other than an Affiliate.
(b) Except as set forth in Schedule 3.18(b), no officer, director or
employee of any member of the EDO Group, or, to the Best Knowledge of EDO, any
5% Stockholder, or any family member, relative or Affiliate of any such officer,
director or employee, (i) owns, directly or indirectly, and whether on an
individual, joint or other basis, any interest (other than in such Person's
capacity as a stockholder) in (x) any property or asset, real or personal,
tangible or intangible, used in or held for use in connection with or pertaining
to the Business of any member of the EDO Group, or (y) to the Best Knowledge of
EDO, any Person that is a supplier, customer or competitor of any member of the
EDO Group, (ii) to the Best Knowledge of EDO, serves as an officer, director or
employee of any Person that is a supplier, customer or competitor (other than
AIL) of any member of the EDO Group or (iii) has received any loans from or is
otherwise a debtor of, or made any loans to or is otherwise a creditor of, any
member of the EDO Group.
3.19. Employees, Labor Matters, etc. No member of the EDO Group is a party
to or bound by any collective bargaining agreement, and there are no labor
unions or other organizations representing, purporting to represent or
attempting to represent any employees employed by any member of the EDO Group.
Since October 1, 1997, there has not occurred or, to the Best Knowledge of EDO,
been threatened any strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect to any
employees of any member of the EDO Group. There are no labor disputes currently
subject to
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any grievance procedure, arbitration or litigation and there is no
representation petition pending or, to the Best Knowledge of EDO, threatened
with respect to any employee of any member of the EDO Group.
3.20. Employee Benefit Plans and Related Matters; ERISA. (a) Employee
Benefit Plans. Schedule 3.20(a) sets forth a complete and correct list of each
"employee benefit plan", as such term is defined in section 3(3) of ERISA, and
each bonus, incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock appreciation, stock purchase,
phantom stock or other equity-based, performance or other employee or retiree
benefit or compensation plan, program, arrangement, agreement, policy or
understanding, whether written or unwritten, that provides or may provide
benefits or compensation in respect of any employee or former employee of any
member of the EDO Group or the beneficiaries or dependents of any such employee
or former employee (collectively, the "EDO Employees") or under which any EDO
Employee is or may become eligible to participate or derive a benefit and that
is or has been maintained or established by any member of the EDO Group or any
other trade or business, whether or not incorporated, which, together with EDO
or any of its Subsidiaries, is or would have been at any date of determination
occurring within the preceding six years, treated as a single employer under
section 414 of the Code (such other trades and businesses hereinafter referred
to as the "EDO Related Persons"), or to which any member of the EDO Group or any
Related Person contributes or is or has been obligated or required to contribute
(collectively, the "EDO Plans"). With respect to each such EDO Plan, EDO has
provided or made available to AIL complete and correct copies of: (i) such EDO
Plan, if written, or a description of such EDO Plan if not written, and (ii) to
the extent applicable to such EDO Plan, all trust agreements, insurance
contracts or other funding arrangements, the two most recent actuarial and trust
reports, the two most recent Forms 5500 required to have been filed with the IRS
and all schedules thereto, the most recent IRS determination letter, all current
summary plan descriptions, all material communications received from or sent to
the IRS, the Pension Benefit Guaranty Corporation or the Department of Labor
(including a written description of any oral communication), any actuarial study
of any post-employment life or medical benefits provided under any such EDO
Plan, if any, statements or other communications regarding withdrawal or other
multiemployer plan liabilities, if any, and all amendments and modifications to
any such document. Except as set forth on Schedule 3.20(a), no member of the EDO
Group and no officer of EDO has communicated to any EDO Employee any intention
or commitment to modify any EDO Plan or to establish or implement any other
employee or retiree benefit or compensation plan or arrangement.
(b) Qualification. Each EDO Plan intended to be qualified under section
401(a) of the Code, and the trust (if any) forming a part thereof, has received
a favorable determination letter from the IRS as to its qualification under the
Code and to the effect that each such trust is exempt from taxation under
section 501(a) of the Code, and nothing has occurred since the date of such
determination letter that could adversely affect such qualification or
tax-exempt status.
(c) Compliance; Liability.
(i) None of EDO, its Subsidiaries or any EDO Related Person has been
involved in any transaction that could cause the EDO Group or any EDO
Related Person or the Surviving Corporation to be subject to liability
under section 4069 or 4212 of ERISA. None of EDO, its Subsidiaries, the
Surviving Corporation or any EDO Related Person has incurred (either
directly or indirectly, including as a result of an indemnification
obligation) any material liability under or pursuant to Title I or IV of
ERISA or the penalty, excise Tax or joint and several liability provisions
of the Code relating to employee benefit plans and no event, transaction or
condition has occurred or exists that could result in any such liability to
any member of the EDO Group, any such EDO Related Person or the Surviving
Corporation or any of its Affiliates. All contributions and premiums
required to have been paid by the EDO Group and each EDO Related Person to
any employee benefit plan (within the meaning of Section 3(3) of ERISA)
(including each plan) under the terms of any such plan or its related
trust, insurance contract or other funding arrangement, or pursuant to any
applicable Law or collective bargaining agreement (including ERISA and the
Code) have been paid within the time prescribed by any such plan, agreement
or applicable Law.
(ii) Each of the EDO Plans has been operated and administered in all
respects in compliance with its terms, all applicable Laws and all
applicable collective bargaining agreements. There are no material pending
or threatened claims by or on behalf of any of the EDO Plans, by any EDO
Employee or
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otherwise involving any such EDO Plan or the assets of any EDO Plan (other
than routine claims for benefits, all of which have been fully reserved for
on the regularly prepared balance sheets of EDO).
(iii) No EDO Plan is a "multiple employer plan" within the meaning of
section 4001(a)(3), 4063 or 4064 of ERISA.
(iv) Except to the extent set forth in Schedule 3.20(c) hereto, no EDO
Employee is or will become entitled to post-employment benefits of any kind
by reason of employment with EDO, including death or medical benefits
(whether or not insured), other than (x) coverage mandated by section 4980B
of the Code, (y) benefits payable under any EDO Plan qualified under
section 401(a) of the Code or (z) deferred compensation accrued as a
liability as of the Closing Date. Except as set forth on Schedule 3.20(c),
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not result in an increase in the amount of
compensation or benefits or the acceleration of the vesting or timing of
payment of any compensation or benefits payable to or in respect of any EDO
Employee. EDO has disclosed or made available information regarding any and
all liabilities and obligations of any member of the EDO Group to or in
respect of the EDO Employees or the EDO Plans for (A) unpaid compensation,
salaries, wages, vacation and sick pay, disability payments and other
payroll items (including, without limitation, bonus, incentive and deferred
compensation), (B) unpaid contributions, insurance premiums, Pension
Benefit Guaranty Corporation premiums, costs and expenses to or in respect
of any EDO Plan and (C) severance or other termination benefits relating
to, resulting from or arising in respect of any claim of actual or
constructive termination of employment occurring on or prior to the
Effective Time or otherwise in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
(v) The EDO ESOP qualifies as an "employee stock ownership plan"
within the meaning of sec.4975(e)(7) of the Code, and no non-exempt
prohibited transaction has occurred with respect thereto.
3.21. Accounts Receivable. (a) EDO has delivered or caused to be delivered
to AIL a complete and accurate aging of all billed accounts receivable of the
EDO Group as of September 30, 1999. Except as set forth in Schedule 3.21(a), no
billed account receivable of the EDO Group reflected on the EDO Balance Sheet
and no billed account receivable arising after the date of the EDO Balance Sheet
and reflected on the books of any member of the EDO Group is uncollectible or
subject to counterclaim or offset, except to the extent of the aggregate
reserves thereon for doubtful accounts for billed receivables and except to the
extent that any billed account receivable is or becomes uncollectible due to
insolvency, of which the EDO Group is not presently aware, of the account debtor
thereunder. All billed accounts receivable reflected on the EDO Balance Sheet or
on such books have been generated in the ordinary course of business and reflect
a bona fide obligation for the payment of goods or services provided by a member
of the EDO Group. All allowances, rebates and cash discounts to customers of the
EDO Group are as shown on its books and records and in no event exceed one
percent of billed receivables to which they relate.
(b) Except as set forth in Schedule 3.21(b), to the Best Knowledge of EDO,
the unbilled account receivable balances of the EDO Group reflected on the EDO
Balance Sheet and the unbilled account receivable balances arising after the
date of the EDO Balance Sheet and reflected on the books of any member of the
EDO Group will convert into billed accounts receivable, except (i) to the extent
of the aggregate reserves associated with unbilled receivables, or (ii) to the
extent that any unbilled account receivable is or becomes uncollectible due to
insolvency, of which the EDO Group is not presently aware, of the account debtor
thereunder and would not reasonably be expected to have or result in an EDO
Material Adverse Effect. All unbilled accounts receivable reflected on the EDO
Balance Sheet or on such books have been generated in the ordinary course of
business and will result in a bona fide obligation for the payment of goods or
services provided by a member of the EDO Group, except for failures to reflect
bona fide obligations that, individually or in the aggregate, would not
reasonably be expected to have or result in an EDO Material Adverse Effect.
3.22. Inventories. All inventories reflected on EDO's most recently
prepared quarterly balance sheet of raw materials, supplies, work in progress
and finished goods of the EDO Group are of good, usable and merchantable
quality. Except as set forth in Schedule 3.22, (a) all such inventories are of
such quality as to meet the quality control standards of the EDO Group and any
applicable governmental quality control standards, (b) all such finished goods
are saleable as current inventories at the current prices of the EDO
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Group in the ordinary course of business in the aggregate net of reserves for
inventories, and (c) no write-down in inventory has been made or should have
been made pursuant to U.S. GAAP during the past two years.
3.23. Customers. No member of the EDO Group has received any notice that
any existing customer of the EDO Group (i) has ceased, or will cease, to use the
products, goods or services of any member of the EDO Group, (ii) has reduced or
will reduce, the use of products, goods or services of any member of the EDO
Group or (iii) has sought, or is seeking, to reduce the price it will pay for
products, goods or services of any member of the EDO Group, except for any such
cessations or reductions that, individually or in the aggregate, would not
reasonably be expected to have or result in an EDO Material Adverse Effect.
3.24. Suppliers; Raw Materials. Schedule 3.24 sets forth for each of the
years ended December 31, 1998, 1997 and 1996 and for the nine-month period ended
September 30, 1999 (a) the names of the ten largest suppliers to the EDO Group
based on the aggregate value of raw materials, supplies, merchandise and other
goods and services ordered by the EDO Group from such suppliers during each such
period and (b) the amount for which each such supplier invoiced the EDO Group.
No member of the EDO Group has received any notice or has any reason to believe
that there has been any material adverse change in the price of such raw
materials, supplies, merchandise or other goods or services, or that any such
supplier will not sell raw materials, supplies, merchandise and other goods to
the EDO Group at any time after the Closing Date on terms and conditions
substantially the same as those used in its current sales to the EDO Group,
subject to general and customary price increases.
3.25. Products; Product and Service Warranties. (a) Schedule 3.25(a)
contains a complete and correct list of the ten products currently manufactured,
produced, assembled, sold or marketed by the EDO Group that generated the
highest revenues during the nine-month period ended September 30, 1999 (the "EDO
Products"). Schedule 3.25(a) also sets forth the amount of revenues during such
period for each such Product.
(b) Except as required by Law or as set forth on Schedule 3.25(b), no
product manufactured, sold, leased or delivered by, or service rendered by or on
behalf of, any member of the EDO Group is subject to any guaranty, warranty or
other indemnity, express or implied, beyond its standard terms and conditions.
(c) Product Liability. No member of the EDO Group has any liability or
obligation of any nature (whether known or unknown, accrued, absolute,
contingent or otherwise, and whether due or to become due), whether based on
strict liability, negligence, breach of warranty (express or implied), breach of
contract or otherwise, in respect of any EDO Product manufactured, sold,
designed or produced prior to the Effective Time by, or service rendered prior
to the Effective Time by or on behalf of, any member of the EDO Group or any
predecessor thereto, that (i) is not fully and adequately covered by policies of
insurance or by indemnity, contribution, cost sharing or similar agreements or
arrangements by or with other Persons and (ii) is not otherwise fully and
adequately reserved against in the EDO Balance Sheet.
3.26. Brokers, Finders, etc. No actions taken or agreements entered into
by any member of the EDO Group in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements or otherwise will give rise to
any valid claim against any member of the AIL Group, the EDO Group or the
Surviving Corporation or any of their Affiliates for any brokerage or finder's
commission, fee or similar compensation, other than (i) the fee of $300,000
payable to ▇▇ ▇▇▇▇▇▇▇ & Sons Inc. ("▇▇ ▇▇▇▇▇▇▇") and (ii) the fee of $400,000
payable to ▇▇▇▇▇▇▇▇ Ball and Company.
3.27. Disclosure. (a) Proxy Statement; Registration Statement. None of
the information with respect to any member of the EDO Group to be included in
the Proxy Statement or the Registration Statement will, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement or any amendments or supplements thereto, and at
the time of the EDO Meeting, or, in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by EDO or
Merger Sub with respect to information supplied
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by any party other than the EDO Group specifically for inclusion in the Proxy
Statement. The Proxy Statement and the Registration Statement will comply as to
form in all material respects with the provisions of the Securities Act and the
Exchange Act.
(b) General. The senior officers of EDO do not believe there is any fact
(other than matters of a general economic or political nature that do not affect
the Business of any member of the EDO Group uniquely) that would reasonably be
expected to have or result in an EDO Material Adverse Effect except as described
in the Schedules hereto.
3.28. Opinion of Financial Advisor. The Board of Directors of EDO has
received the opinion of ▇▇ ▇▇▇▇▇▇▇, dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration, together with the
consideration paid pursuant to the Defense Systems Agreement and the Management
Stock Purchase Agreement, are fair in the aggregate to EDO from a financial
point of view. A copy of the written opinion of ▇▇ ▇▇▇▇▇▇▇ will be delivered to
AIL as soon as practicable after the date of this Agreement.
3.29. Required Vote of EDO's Stockholders. The affirmative vote of the
holders of shares of EDO Common Stock and EDO Preferred Stock (voting together
as a single class) representing a majority of the votes cast at the EDO Meeting
is required to approve the Share Issuance. No other vote of the stockholders of
EDO is required by law, the charter or by-laws of EDO or otherwise in order for
EDO to consummate the Merger and the transactions contemplated hereby.
3.30. AIL Share Ownership. Except for any Common Shares purchased by
Merger Sub pursuant to the Defense Systems Agreement and the Management Stock
Purchase Agreement, no member of the EDO Group owns any Common Shares or other
securities convertible into Common Shares.
3.31. Board Recommendation. The Board of Directors of EDO, at a meeting
duly called and held, has by the unanimous vote of all directors present, (a)
determined that this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby are fair and in the best interests of EDO and
its stockholders, and (b) resolved to recommend that the holders of shares of
EDO Common Stock and EDO Preferred Stock approve the Share Issuance.
4. Covenants.
4.1. Conduct of Business. (a) AIL. On and after the date hereof to the
Closing Date, except as required by this Agreement or as otherwise expressly
consented to by EDO in writing, or except as set forth on Schedule 4.1(a), AIL
will and will cause each of its Subsidiaries to:
(i) carry on its Business in, and only in, the ordinary course of
business consistent with past practice, and use reasonable best efforts to
preserve intact its present business organization, keep available the
services of its present officers and significant employees, and preserve
its relationships with customers, suppliers and others having business
dealings with it, to the end that its goodwill and ongoing business shall
be in all material respects unimpaired following the Effective Time;
(ii) other than regular dividends on the Preferred Shares, not declare
dividends or distributions on, or redeem or repurchase any shares of, any
class of its capital stock, increase or enter into any obligations of AIL
with respect to Indebtedness, make capital expenditures in excess of
$500,000 in any case or $2,000,000 in the aggregate, pay any material
bonuses or advances against salaries, or make any other cash payments or
year-end bonuses other than in the ordinary course of business, provided
that nothing shall preclude AIL from borrowing under its current revolving
line of credit;
(iii) maintain all of the tangible Assets and all other tangible
properties and assets owned, leased, occupied, operated or used by it in
good repair, working order and operating condition subject only to ordinary
wear and tear;
(iv) not transfer, assign, mortgage, pledge, hypothecate, grant any
security interest in, or otherwise subject to any other Lien, any of its
assets;
(v) use reasonable best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to insurance now
carried by it;
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(vi) pay accounts payable and other obligations, when they become due
and payable, in the ordinary course of business;
(vii) perform in all material respects all of its obligations under
any Material Contracts, agreements or other instruments relating to or
affecting any of its properties and assets;
(viii) not enter into or assume any Contract, or enter into or permit
any amendment, supplement, waiver or other modification in respect thereof
other than in the ordinary course of business consistent with past
practice;
(ix) maintain its books of account and records in the usual, regular
and ordinary manner consistent with past policies and practice;
(x) comply in all material respects with all Laws applicable to it or
any of its properties, assets or business;
(xi) not compromise, settle, grant any waiver or release relating to
or otherwise adjust any Litigation in excess of $100,000;
(xii) not cause or permit any amendment, supplement, waiver or
modification to or of any of its Organizational Documents;
(xiii) use reasonable best efforts to maintain each member of the AIL
Group's good standing in its state of incorporation and in the
jurisdictions in which it is qualified to do business as a foreign
corporation and to maintain all Governmental Approvals and other Consents
necessary for, or otherwise material to, the Businesses of the AIL Group;
(xiv) except as may be permitted under Section 4.10, not merge or
consolidate with, or agree to merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire, any business,
business organization or division thereof, or any other Person, and not
effect any type of recapitalization;
(xv) not sell, transfer or otherwise dispose of, any Business,
Subsidiary, or assets that are material to the AIL Group taken as a whole,
or fixed assets that are sold, transferred or otherwise disposed of, either
individually or in the aggregate, with a net book value in excess of
$100,000;
(xvi) not take any action or omit to take any action, which action or
omission would result in a breach of any of the representations and
warranties set forth in Section 2 (including Section 2.8);
(xvii) promptly advise EDO in writing of any event, occurrence, fact,
condition, change, development or effect that, individually or in the
aggregate, would reasonably be expected to have or result in an AIL
Material Adverse Effect or a breach of this Section 4.1(a);
(xviii) not split, combine or reclassify any shares of its capital
stock, or authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock of any class or any
securities convertible into or exchangeable for shares of capital stock of
any class, except as required by any AIL Stock Option Plan existing as of
the date hereof;
(xix) conduct all Tax affairs relating to the AIL Group only in the
ordinary course of business, in substantially the same manner as heretofore
conducted and in good faith in substantially the same manner as such
affairs would have been conducted if this Agreement had not been entered
into; and
(xx) not cause or permit any amendment, supplement, waiver or
modification to or of the AIL ESOP; and
(xxi) not agree or otherwise commit to take any of the actions
described in the foregoing paragraphs (ii), (iv), (viii), (xi), (xii),
(xiv), (xv), (xvi, (xviii) or (xx), and not agree or otherwise commit to
any actions inconsistent with the foregoing paragraphs (i), (iii),
(v)-(vii), (ix)-(x), (xiii), (xvii) or (xix).
A-39
(b) EDO. On and after the date hereof to the Closing Date, except as
required by this Agreement or as otherwise expressly consented to by AIL in
writing, or except as set forth on Schedule 4.1(b), EDO will and will cause each
of its Subsidiaries to:
(i) carry on its Business in, and only in, the ordinary course of
business consistent with past practice, and use reasonable best efforts to
preserve intact its present business organization, keep available the
services of its present officers and significant employees, and preserve
its relationships with customers, suppliers and others having business
dealings with it, to the end that its goodwill and ongoing business shall
be in all material respects unimpaired following the Effective Time;
(ii) other than the regular quarterly dividend of $0.03 per share of
EDO Common Stock and regular dividends on the EDO Preferred Stock, not
declare dividends or distributions on, or redeem or repurchase any shares
of, any class of its capital stock, increase or enter into any obligations
of EDO with respect to Indebtedness, make capital expenditures in excess of
$500,000 in any case or $2,000,000 in the aggregate, pay any material
bonuses or advances against salaries except as set forth on Schedule
4.1(b), or make any other cash payments or year-end bonuses other than in
the ordinary course of business, provided that nothing contained herein
shall be deemed to restrict EDO from redeeming or repurchasing any of the
EDO Convertible Debentures in order to satisfy any current sinking fund
requirement related to such EDO Convertible Debentures, and provided
further that nothing shall preclude EDO from borrowing under its current
revolving line of credit;
(iii) maintain all of the tangible EDO Assets and all other tangible
properties and assets owned, leased, occupied, operated or used by the EDO
Group in good repair, working order and operating condition subject only to
ordinary wear and tear;
(iv) not transfer, assign, mortgage, pledge, hypothecate, grant any
security interest in, or otherwise subject to any other Lien, any of its
assets;
(v) use reasonable best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to insurance now
carried by it;
(vi) pay accounts payable and other obligations, when they become due
and payable, in the ordinary course of business;
(vii) perform in all material respects all of its obligations under
any EDO Material Contracts, agreements or other instruments relating to or
affecting any of its properties and assets;
(viii) not enter into or assume any EDO Contract, or enter into or
permit any amendment, supplement, waiver or other modification in respect
thereof other than in the ordinary course of business consistent with past
practice;
(ix) maintain its books of account and records in the usual, regular
and ordinary manner consistent with past policies and practice;
(x) comply in all material respects with all Laws applicable to it or
any of its properties, assets or business;
(xi) not compromise, settle, grant any waiver or release relating to
or otherwise adjust any Litigation in excess of $100,000;
(xii) not cause or permit any amendment, supplement, waiver or
modification to or of any of its Organizational Documents;
(xiii) use reasonable best efforts to maintain each member of the EDO
Group's good standing in its state of incorporation and in the
jurisdictions in which it is qualified to do business as a foreign
corporation and to maintain all Governmental Approvals and other Consents
necessary for, or otherwise material to, the Businesses of the EDO Group;
(xiv) except as may be permitted under Section 4.10, not merge or
consolidate with, or agree to merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire, any
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business, business organization or division thereof, or any other Person,
and not effect any type of recapitalization;
(xv) not sell, transfer or otherwise dispose of, any Business,
Subsidiary, or assets that are material to the EDO Group taken as a whole,
or fixed assets that are sold, transferred or otherwise disposed of, either
individually or in the aggregate, with a net book value in excess of
$100,000;
(xvi) not take any action or omit to take any action, which action or
omission would result in a breach of any of the representations and
warranties set forth in Section 3 (including Section 3.8);
(xvii) promptly advise AIL in writing of any event, occurrence, fact,
condition, change, development or effect that, individually or in the
aggregate, would reasonably be expected to have or result in an EDO
Material Adverse Effect or a breach of this Section 4.1(b);
(xviii) not split, combine or reclassify any shares of its capital
stock, or authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock of any class or any
securities convertible into or exchangeable for shares of capital stock of
any class, except as required by any EDO Stock Option Plan existing as of
the date hereof;
(xix) conduct all Tax affairs relating to the EDO Group only in the
ordinary course of business, in substantially the same manner as heretofore
conducted and in good faith in substantially the same manner as such
affairs would have been conducted if this Agreement had not been entered
into;
(xx) not cause or permit any amendment, supplement, waiver or
modification to or of any of the Employment Agreements; and
(xxi) not agree or otherwise commit to take any of the actions
described in the foregoing paragraphs (ii), (iv), (viii), (xi), (xii),
(xiv), (xv), (xvi), (xviii) or (xx), and not agree or otherwise commit to
any actions inconsistent with the foregoing paragraphs (i), (iii),
(v)-(vii), (ix)-(x), (xiii), (xvii) or (xix).
4.2. Access and Information. (a) AIL. So long as this Agreement remains
in effect, AIL will (and will cause its Representatives to) give EDO, Merger
Sub, their lenders and the Representatives of any of them full access (subject
to DOD security requirements) during reasonable business hours and upon
reasonable prior notice to all of the properties, assets, books, contracts,
commitments, Tax Returns, reports and records of the AIL Group, and furnish to
them all such documents, records and information with respect to the properties,
assets and business of the AIL Group and copies of any work papers relating
thereto as EDO, Merger Sub, their Affiliates and lenders or the Representatives
of any of them shall from time to time reasonably request, provided, that
nothing herein shall require AIL to disclose any information to EDO that would
cause significant competitive harm to such disclosing party or its Affiliates if
the transactions contemplated by this Agreement or the Ancillary Agreements are
not consummated or would cause any member of the AIL Group to violate any
confidentiality agreement with a third party to which such member is subject. In
addition, AIL will, and will cause each of its Representatives to, permit EDO,
Merger Sub, their Affiliates and lenders and the Representatives of any of them
reasonable access during reasonable business hours and upon reasonable prior
notice to the non-confidential information of lenders, customers and suppliers,
other Persons with whom any member of the AIL Group does or has done business,
and other Representatives or other personnel of AIL, as may be necessary or
useful to EDO, Merger Sub, their Affiliates or lenders in their judgment in
connection with their review of the properties, assets and business of the AIL
Group and the above-mentioned documents, records and information. AIL will, and
will cause its Representatives to, keep EDO generally informed as to the affairs
of AIL's Business.
(b) EDO. So long as this Agreement remains in effect, EDO will (and will
cause each of their Representatives to) give AIL, the AIL ESOP and its
Representatives full access (subject to DOD security requirements) during
reasonable business hours and upon reasonable prior notice to all of the
properties, assets, books, contracts, commitments, Tax Returns, reports and
records of EDO and its Subsidiaries, and furnish to them all such documents,
records and information with respect to the properties, assets and business
A-41
of EDO and its Subsidiaries and copies of any work papers relating thereto as
AIL and its Representatives shall from time to time reasonably request, provided
that nothing herein shall require EDO to disclose any information to AIL that
would cause significant competitive harm to such disclosing party or its
Affiliates if the transactions contemplated by this Agreement and the Ancillary
Agreements are not consummated or would cause any member of the EDO Group to
violate any confidentiality agreement with a third party to which such member is
subject. In addition, EDO will, and will cause each of its Representatives to,
permit AIL, its Affiliates and lenders and the Representatives of any of them
reasonable access during reasonable business hours and upon reasonable prior
notice to the non-confidential information of lenders, customers and suppliers,
other Persons with whom any member of the EDO Group does or has done business,
and other Representatives or other personnel of EDO, as may be necessary or
useful to AIL, its Affiliates or lenders in their judgment in connection with
their review of the properties, assets and business of the EDO Group and the
above-mentioned documents, records and information. EDO will, and will cause its
Representatives to, keep AIL generally informed as to the affairs of EDO's
Business.
(c) Confidentiality. The parties hereby agree that each of them will treat
any information provided pursuant to this Section 4.2 or Section 4.3 in
accordance with the Confidentiality Agreement. Notwithstanding any provision of
this Agreement to the contrary, no party shall be obligated to make any
disclosure in violation of applicable Laws, including any such Laws pertaining
to the treatment of classified information.
4.3. Subsequent Reports and Information. (a) Subsequent AIL Reports. From
the date hereof to the Effective Time, AIL will (i) provide to EDO a monthly
management report in scope and detail consistent with those management reports
that have historically been distributed to AIL's senior management, and (ii)
timely prepare, and promptly deliver to EDO, unaudited monthly financial
statements, to be in scope and detail consistent with such monthly financial
statements as historically distributed to AIL's senior management. Each such
financial statement shall present fairly the financial position, assets and
liabilities of the AIL Group as at the date thereof and in comparison to the
previous month and the results of its operations and its cash flows for the
period then ended and in comparison to the previous month, in accordance with
accounting policies and procedures consistent with those historically used by
AIL in the preparation of such monthly financial statements.
(b) Subsequent EDO Reports. From the date hereof to the Effective Time,
EDO will (i) provide to AIL a monthly management report in scope and detail
consistent with those management reports that have historically been distributed
to EDO's senior management, and (ii) timely prepare, and promptly deliver to
AIL, unaudited monthly financial statements, to be in scope and detail
consistent with such monthly financial statements as historically distributed to
EDO's senior management. Each such financial statement shall present fairly the
financial position, assets and liabilities of the EDO Group as at the date
thereof and in comparison to the previous month and the results of its
operations and its cash flows for the period then ended and in comparison to the
previous month, in accordance with accounting policies and procedures consistent
with those historically used by EDO in the preparation of such monthly financial
statements.
4.4. Public Announcements. Except as required by applicable Law, AIL shall
not, and prior to the Closing, EDO and Merger Sub shall not, make any public
announcement in respect of this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby without the prior written consent of
EDO or AIL, as applicable, and prior to Closing, in no event without timely
consultation with the other party to this Agreement. The initial announcement of
this Agreement shall be mutually agreed to by the parties hereto.
4.5. Further Actions. (a) Reasonable Best Efforts. (i) AIL shall use all
reasonable best efforts to take or cause to be taken all actions, and to do or
cause to be done all other things, necessary, proper or advisable in order for
AIL to fulfill and perform its obligations in respect of this Agreement and the
Ancillary Agreements to which it is a party, to cause the conditions set forth
in Article 7 to be fulfilled and otherwise to consummate and make effective the
transactions contemplated hereby and thereby.
A-42
(ii) Each of EDO and Merger Sub shall use all reasonable best efforts to
take or cause to be taken all actions, and to do or cause to be done all other
things, necessary, proper or advisable in order for each of EDO and Merger Sub
to fulfill and perform their respective obligations in respect of this Agreement
and the Ancillary Agreements to which it is a party, to cause the conditions set
forth in Article 7 to be fulfilled, and otherwise to consummate and make
effective the transactions contemplated hereby and thereby.
(b) Filings; Consent. (i) AIL shall, as promptly as reasonably
practicable, (i) make, or cause to be made, all filings and submissions
(including those under the HSR Act and any Law governing DOD security
clearances) required under any Law applicable to AIL if necessary, and give such
reasonable undertakings as may be required in connection therewith, and (ii)
subject to Section 4.1(a), use reasonable best efforts to obtain, cause to be
obtained by AIL, all Governmental Approvals and Consents necessary to be
obtained or made by AIL in each case in connection with this Agreement or the
Ancillary Agreements, the Merger, or the consummation of the other transactions
contemplated hereby or thereby. Notwithstanding anything to the contrary in this
Agreement, neither AIL nor any of its Affiliates shall be required to enter into
any "hold-separate" agreement or take any action that involves divestiture of an
existing business of AIL or any of its Affiliates, that involves unreasonable
expense or that could reasonably be expected to impair the overall benefit
expected to be realized from the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(ii) EDO shall, as promptly as practicable, (i) make, or cause to be made,
all filings and submissions (including those under the HSR Act and any Law
governing DOD security clearance) required under any Law applicable to EDO or
Merger Sub if necessary, and give such reasonable undertakings as may be
required in connection therewith, and (ii) subject to Section 4.1(b), use
reasonable best efforts to obtain or make, or cause to be obtained or made, all
Governmental Approvals and Consents necessary to be obtained or made by EDO or
Merger Sub, in each case in connection with this Agreement or the Ancillary
Agreements, the Merger pursuant hereto, or the consummation of the other
transactions contemplated hereby or thereby. Notwithstanding anything to the
contrary in this Agreement, neither EDO nor Merger Sub nor any of their
Affiliates shall be required to enter into any "hold-separate" agreement or take
any action that involves divestiture of an existing business of EDO or any of
its Affiliates or the Surviving Corporation, that involves unreasonable expense
or that could reasonably be expected to impair the overall benefit expected to
be realized from the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
(c) Coordination. AIL and EDO shall coordinate and cooperate with each
other in exchanging such information and supplying such reasonable assistance as
may be reasonably requested in connection with the filings and other actions
contemplated by this Section 4.5.
(d) Notification; Cooperation. At all times prior to the Effective Time,
AIL shall promptly notify EDO, and EDO shall promptly notify AIL, in writing of
any fact, condition, event or occurrence that reasonably could be expected to
result in the failure of any of the conditions contained in Sections 7.1, 7.2 or
7.3 to be satisfied, promptly upon becoming aware of the same. AIL, EDO and
Merger Sub shall cooperate with one another in order to lift any injunction or
remove any other impediment to the consummation of the transactions contemplated
hereby.
(e) Advance Agreement of DOD. AIL and EDO shall take all such action as
reasonably may be necessary to obtain the advance agreement of the DOD to
provide any Consent required with respect to any Government Contract or
Government Subcontract in connection with the transactions contemplated by the
Agreement and the Ancillary Agreements.
4.6. Further Assurances. EDO and the Surviving Corporation shall, from
time to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by the Exchanging Common Stockholders, in each
case to confirm and assure the rights and obligations provided for in this
Agreement and the Ancillary Agreements and render effective the consummation of
the transactions contemplated hereby and thereby, or otherwise to carry out the
intent and purposes of this Agreement.
A-43
4.7. Takeover Statute. If any "fair price," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated by this Agreement or the Ancillary
Agreements, each of AIL, EDO, Merger Sub and the members of the Boards of
Directors of AIL, EDO and Merger Sub shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated by
this Agreement and the Ancillary Agreements may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and thereby.
4.8. Accountants' "Comfort" Letters. EDO and AIL will each use reasonable
best efforts to cause to be delivered to each other letters from their
respective independent accountants, dated a date within two business days before
the effective date of the Registration Statement, in form reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
on Form S-4 under the Securities Act.
4.9. Tax-Free Reorganization. (a) The parties intend that the transactions
contemplated by this Agreement and the Ancillary Agreements qualify as a
reorganization under Section 368(a)(2)(D) of the Code, and each party hereto and
its Affiliates shall use their reasonable best efforts to cause such
transactions to so qualify. Neither the parties hereto nor any of their
Affiliates shall take any action that would cause such transactions not to
qualify as a reorganization under such Section, and the parties hereto will take
the position for all purposes that the transactions qualify as a reorganization
under such Section.
(b) The parties will cooperate with one another in obtaining opinions of
Debevoise & ▇▇▇▇▇▇▇▇, counsel to EDO, and Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇ P.C.,
counsel to AIL, dated as of the Effective Time, to the effect that the
transactions contemplated hereby and by the Ancillary Agreements will qualify as
a reorganization within the meaning of Section 368(a)(2)(D) of the Code. In
connection therewith, each of EDO, AIL and Merger Sub shall deliver to Debevoise
& ▇▇▇▇▇▇▇▇ and Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇ P.C., respectively,
representation letters in form and substance reasonably satisfactory to such
counsel.
4.10. No Solicitation. (a) AIL (i) During the term of this Agreement, AIL
shall not, and AIL shall cause each of its Representatives not to, (x) directly
or indirectly solicit or encourage any inquiries or proposals for, or enter into
or continue any discussions with respect to, the acquisition by any Person of
any of the Shares, any other shares of capital stock or other securities of any
member of the AIL Group, or all or any material portion of the Business or of
the assets of any member of the AIL Group, or any merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving AIL
or any of its Subsidiaries (an "AIL Acquisition Transaction"), (y) furnish or
permit to be furnished any non-public information concerning any member of the
AIL Group or the Business of any member of the AIL Group to any Person (other
than EDO, Merger Sub and their Representatives) other than information furnished
in the ordinary course of business after prior written notice to and
consultation with EDO, or (z) directly or indirectly, with or through any other
party, market or otherwise publicize or make any arrangements to market or
otherwise publicize the sale of, or sell, any securities of AIL in a public
offering or make any public announcement or disclosure regarding such a public
offering. Notwithstanding the foregoing, if the Board of Directors of AIL
determines in its good faith judgment, after consultation with outside counsel,
that failure to do so would constitute a breach of fiduciary duty under
applicable Law, AIL may, in response to an unsolicited inquiry or proposal with
respect to an AIL Acquisition Transaction, (A) furnish non-public information
with respect to AIL and its Subsidiaries to the Person that made such inquiry or
proposal pursuant to a customary and reasonable confidentiality agreement and
(B) participate in negotiations regarding such AIL Acquisition Transaction. AIL
shall immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Person other than EDO in respect of any AIL
Acquisition Transaction. AIL shall promptly notify EDO of any inquiry or
proposal received by AIL or any Representative thereof with respect to an AIL
Acquisition Transaction, which notice shall include the identity of the
inquiring party, and the terms of the proposal, and promptly deliver to EDO
copies of any documents or agreements proferred to AIL with respect thereto.
(ii) The Board of Directors of AIL shall not cause or permit AIL to enter
into any letter of intent, agreement in principle, acquisition agreement or
other agreement (an "AIL Acquisition Agreement") with
A-44
respect to an AIL Acquisition Transaction, unless (A) the Board of Directors of
AIL shall have determined in its good faith judgment, after consultation with
outside counsel, that failure to do so would constitute a breach of fiduciary
duty under applicable Law, (B) AIL shall have delivered a copy of such AIL
Acquisition Agreement to EDO and notified EDO of its intent to enter into such
AIL Acquisition Agreement at least five Business Days prior to executing such
AIL Acquisition Agreement and (C) AIL shall have terminated this Agreement in
accordance with Section 8.1(j).
(b) EDO. (i) During the term of this Agreement, EDO shall not, and EDO
shall cause each of its Representatives not to, (x) directly or indirectly
solicit or encourage any inquiries or proposals for, or enter into or continue
any discussions with respect to, the acquisition by any Person of any shares of
EDO Common Stock, any other shares of capital stock or other securities of any
member of the EDO Group, or all or any material portion of the Business or of
the assets of any member of the EDO Group, or any merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving EDO
or any of its Subsidiaries (an "EDO Acquisition Transaction"), (y) furnish or
permit to be furnished any non-public information concerning any member of the
EDO Group or the Business of any member of the EDO Group to any Person (other
than AIL and its Representatives) other than information furnished in the
ordinary course of business after prior written notice to and consultation with
AIL, or (z) directly or indirectly, with or through any other party, market or
otherwise publicize or make any arrangements to market or otherwise publicize
the sale of, or sell, any securities of EDO in a public offering or make any
public announcement or disclosure regarding such a public offering.
Notwithstanding the foregoing, if the Board of Directors of EDO determines in
its good faith judgment, after consultation with outside counsel, that failure
to do so would constitute a breach of fiduciary duty under applicable Law, EDO
may, in response to an unsolicited inquiry or proposal with respect to an EDO
Acquisition Transaction, (A) furnish non-public information with respect to EDO
and its Subsidiaries to the Person that made such inquiry or proposal pursuant
to a customary and reasonable confidentiality agreement and (B) participate in
negotiations regarding such EDO Acquisition Transaction. EDO shall immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person in respect of any EDO Acquisition Transaction. EDO
shall promptly notify AIL of any inquiry or proposal received by EDO or any
Representative thereof with respect to an EDO Acquisition Transaction, which
notice shall include the identity of the inquiring party and the terms of the
proposal, and promptly deliver to AIL any documents or agreements proferred to
EDO with respect thereto.
(ii) The Board of Directors of EDO shall not cause or permit EDO to enter
into any letter of intent, agreement in principle, acquisition agreement or
other agreement (an "EDO Acquisition Agreement") with respect to an EDO
Acquisition Transaction, unless (A) the Board of Directors of EDO shall have
determined in its good faith judgment, after consultation with outside counsel,
that failure to do so would constitute a breach of fiduciary duty under
applicable Law and (B) EDO shall have delivered a copy of such EDO Acquisition
Agreement to AIL and notified AIL of its intent to enter into such EDO
Acquisition Agreement at least five Business Days prior to executing such EDO
Acquisition Agreement.
4.11. Affiliate Agreements. AIL shall, prior to the Effective Time,
deliver to EDO a list setting forth in AIL's reasonable judgment the names and
addresses of all Persons who are, as of the date hereof, in AIL's reasonable
judgment, "affiliates" of AIL for purposes of Rule 145 under the Securities Act.
The parties agree that the AIL ESOP Trustee is an "affiliate" for such purposes.
AIL shall furnish such information and documents as EDO may reasonable request
for the purpose of reviewing such list. AIL shall use its reasonable best
efforts to cause any Person who is identified as an "affiliate" on such list to
execute a written agreement on or prior to the Effective Time substantially in
the form of Exhibit A hereto.
4.12. [Intentionally omitted.]
4.13. Indemnification and Insurance. (a) From and after the Effective
Time, the Surviving Corporation shall indemnify and hold harmless each present
and former director and officer of AIL determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the
A-45
Effective Time (including without limitation in connection with the transactions
contemplated by this Agreement), whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent permitted under the DGCL (and
the Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(b) For a period of two years after the Effective Time, EDO shall cause to
be maintained in effect the current policies of directors' and officers'
liability insurance maintained by AIL ("D&O Insurance") with respect to claims
arising from facts or events which occurred before the Effective Time, provided
that EDO may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous; provided,
however, that nothing contained herein shall require EDO or the Surviving
Corporation to incur any annual premium in excess of 150% of the last annual
estimated aggregate premium paid prior to the date of this Agreement for all
current D&O Insurance policies maintained by AIL, which AIL estimates to be
$85,000 (the "Current Premium"). If such premiums for such insurance would at
any time exceed 150% of the Current Premium, then EDO shall cause to be
maintained policies of insurance which, in EDO's good faith determination,
provide the maximum coverage available at an annual premium equal to 150% of the
Current Premium.
(c) If EDO or any of its successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provision shall be made so that the successors and assigns of EDO shall assume
all of the obligations set forth in this Section.
4.14. Actions Relating to Conversion of Options. EDO shall, prior to the
Effective Time, take all necessary actions to ensure that the aggregate number
of shares of EDO Common Stock to be issued upon the exercise of the Substituted
Options be reserved for or otherwise authorized to be issued under the 1996 Long
Term Incentive Plan.
5. Stockholder Meeting; Share Issuance; etc.
5.1. Stockholder Approvals. Subject to the terms and conditions contained
in this Agreement, (a) the issuance of EDO Common Stock in connection with the
Merger (the "Share Issuance") shall be submitted for approval to the holders of
shares of EDO Common Stock and EDO Preferred Stock at a meeting to be duly held
for this purpose by EDO (the "EDO Meeting"), and (b) this Agreement shall be
submitted for approval and adoption by the holders of Common Shares at a meeting
to be duly held for this purpose by AIL (the "AIL Meeting"). AIL and EDO shall
coordinate and cooperate with respect to the timing of such meetings, shall each
give its respective shareholders at least 10 days written notice of its meeting,
shall not change the date or time of such meeting (including adjournment) unless
the other party approves in writing the changed date and time and shall each
endeavor to hold its meeting as soon as practicable after the date hereof.
5.2. Board Recommendations. (a) Subject to Section 5.2(b), the respective
recommendations of the Boards of Directors of AIL and EDO described in Sections
2.31(b) and 3.31(b) shall be contained in the Proxy Statement.
(b) (i) Neither AIL nor its Board of Directors may withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement, the Ancillary Agreements or the Merger and neither AIL nor its Board
of Directors may approve or recommend, or propose publicly to approve or
recommend, an AIL Acquisition Transaction, unless, in each case, in the good
faith judgment of the Board of Directors of AIL, after consultation with outside
counsel, failure to so withdraw, modify, approve or recommend would constitute a
breach of fiduciary duty under applicable Law.
(ii) Neither EDO nor its Board of Directors may withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement, the Ancillary Agreements or the Merger unless, in the good faith
judgment of the Board of Directors of EDO, after consultation with outside
counsel, failure to so
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withdraw or modify would constitute a breach of fiduciary duty under applicable
Law. Neither EDO nor its Board of Directors may approve or recommend, or propose
publicly to approve or recommend, an EDO Acquisition Transaction, unless (A) in
the good faith judgment of the Board of Directors of EDO, after consultation
with outside counsel, failure to so approve or recommend would constitute a
breach of fiduciary duty under applicable Law, and (B) EDO shall have notified
AIL of its intent to approve or recommend such EDO Acquisition Transaction at
least five Business Days prior to publicly doing so.
(iii) Nothing contained in this Agreement shall prohibit EDO from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
under the Exchange Act, provided that for all purposes of this Agreement, taking
a position under Rule 14e-2(a)(2) or 14e-2(a)(3) with respect to an EDO
Acquisition Transaction shall be deemed to be an approval or recommendation of
such EDO Acquisition Transaction.
5.3. Proxy Statement/Registration Statement. (a) EDO and AIL shall
cooperate and promptly prepare and file with the SEC as soon as is reasonably
practicable the Proxy Statement and the Registration Statement, and shall use
their reasonable best efforts to have the Proxy Statement cleared by the SEC
under the Exchange Act and the Registration Statement declared effective by the
SEC under the Securities Act. EDO shall use its reasonable best efforts to cause
the Proxy Statement to be mailed to holders of shares of EDO Common Stock and
EDO Preferred Stock, and AIL shall use its reasonable best efforts to cause the
Proxy Statement and Registration Statement to be mailed to holders of Common
Shares, in each case as soon as practicable after the Registration Statement has
been declared effective by the SEC. EDO shall also take any action required to
be taken under state blue sky or other securities laws in connection with the
issuance of EDO Common Stock in the Merger.
(b) No filing of, or amendment or supplement to, the Registration Statement
or the Proxy Statement will be made by EDO without providing AIL a reasonable
opportunity to review and comment thereon. EDO will advise AIL promptly after it
receives notice thereof of any request by the SEC for amendment of the Proxy
Statement or the Registration Statement or comments thereof or requests by the
SEC for additional information. EDO shall provide AIL with copies of any
communication received from or sent to the SEC in connection with the Proxy
Statement or the Registration Statement and with a reasonable opportunity to
review all responses to SEC comments or other requests prior to their being sent
to the SEC. If at any time prior to the Effective Time any information relating
to AIL or EDO, or any of their respective affiliates, officers or directors,
should be discovered by AIL or EDO which should be set forth in an amendment or
supplement to the Registration Statement or the Proxy Statement, so that any
such documents would not include any misstatement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovered such information shall promptly
notify the other party hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of EDO and AIL.
5.4. NYSE Listing. EDO shall promptly prepare and file with the NYSE a
listing application covering the shares of EDO Common Stock issuable in the
Merger and use its reasonable best efforts to obtain, prior to the Effective
Time, approval for the listing of such EDO Common Stock, subject only to
official notice of issuance.
6. Certain Post-Closing Covenants.
6.1. Headquarters. The headquarters of EDO and AIL immediately following
the Merger shall be located in New York City.
6.2. EDO Board of Directors. The composition of the Board of Directors of
EDO immediately following the Effective Time shall be as set forth in Schedule
6.2. Attached hereto as Exhibit D are the duly adopted resolutions of the Board
of Directors of EDO expanding the size of the board to 11 and appointing to the
board, and nominating for election to the board at the next annual meeting of
stockholders, Messrs. ▇. ▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇, all in accordance with Sections
2.02 and 2.08 of the By-Laws of EDO. It
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is contemplated by the parties that the size of the board will be reduced to
nine within one year following the Closing.
6.3. EDO Officers. The officers of EDO, immediately following the
Effective Time shall be as set forth in Schedule 6.3, and EDO shall take all
necessary action to appoint such individuals to such offices effective as of the
Closing.
6.4. Employee Stock Ownership Plans. The parties agree that the AIL ESOP
and the EDO ESOP shall be merged into a single employee stock option plan within
one year of the Effective Time subject to any approvals or consents of the AIL
ESOP Trustee and the trustee of the EDO ESOP.
7. Conditions Precedent.
7.1. Conditions to Obligations of Each Party. The obligations of AIL, EDO
and Merger Sub to consummate the transactions contemplated hereby shall be
subject to the fulfillment or written waiver by both parties at or prior to the
Effective Time of the following conditions:
7.1.1. HSR Act Notification. The notifications of EDO and AIL
pursuant to the HSR Act, if any, shall have been made and the applicable
waiting period and any extensions thereof shall have expired or been
terminated.
7.1.2. Stockholder Approvals. (a) The holders of issued and
outstanding Common Shares shall have approved and adopted this Agreement in
accordance with applicable Law and the AIL Organizational Documents.
(b) The holders of issued and outstanding shares of EDO Common Stock
and EDO Preferred Stock shall have approved the Share Issuance in
accordance with applicable Law, the EDO Organizational Documents and the
rules of the NYSE.
7.1.3. Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act,
no stop order suspending such effectiveness shall have been issued and
remain in effect and no proceeding for that purpose shall have been
initiated or threatened by the SEC.
7.1.4. NYSE Listing. The shares of EDO Common Stock issuable in the
Merger shall have been approved for listing on the NYSE, subject only to
official notice of issuance.
7.1.5. No Injunctions. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, promulgated or
enforced by any court or other tribunal or Governmental Authority which
prohibits the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements substantially on the terms
contemplated hereby and thereby. In the event any order, decree or
injunction shall have been issued, each party shall use its reasonable best
efforts to remove an such order, decree or injunction.
7.2. Conditions to Obligations of EDO and Merger Sub. The obligations of
EDO and Merger Sub to consummate the transactions contemplated hereby shall be
subject to the fulfillment or written waiver by EDO at or prior to the Effective
Time of the following additional conditions:
7.2.1. Representations, Performance. (a) The representations and
warranties of AIL contained in Section 2 or in any Ancillary Agreement
shall be, ignoring for these purposes any qualification as to materiality
or AIL Material Adverse Effect, (i) true and correct in all material
respects at and as of the date hereof, and (ii) repeated and shall be true
and correct in all material respects at and as of the Effective Time with
the same effect as though made at and as of the Effective Time.
(b) AIL shall have in all material respects duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by AIL prior to or at the
Effective Time.
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(c) AIL shall have delivered to EDO and Merger Sub a certificate,
effective at the Closing Date and signed by the Chief Executive Officer and
the Chief Financial Officer of AIL confirming the items set forth above in
this Section 7.2.1.
7.2.2. Consents. All Governmental Approvals required to be made or
obtained by AIL in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby and all other Consents listed
on Schedule 2.16(b) shall have been made or obtained. Complete and correct
copies of all such Governmental Approvals and Consents shall have been
delivered to EDO and Merger Sub.
7.2.3. No AIL Material Adverse Effect. No event, occurrence, fact,
condition, change, development or effect shall exist or have occurred or
come to exist or been threatened since the date of this Agreement that,
individually or in the aggregate, has had or resulted in, or would
reasonably be expected to become or result in, an AIL Material Adverse
Effect.
7.2.4. Ancillary Agreements. The Ancillary Agreements shall have been
executed and delivered by each of the parties thereto (other than EDO and
Merger Sub), and the Escrow Agreement shall have been executed and
delivered by the parties thereto (other than EDO and Merger Sub) in the
form attached hereto as Exhibit B or otherwise in form and substance
satisfactory to EDO. Neither the Defense Systems Agreement nor the
Management Stock Purchase Agreement shall have been terminated, and all of
the conditions precedent to the obligations of the parties to such
agreements (other than Section 6.3 of the Defense Systems Agreement and
Section 5.3 and 6.3 of the Management Stock Purchase Agreement) shall have
been satisfied or waived.
7.2.5. Tax Opinion. EDO shall have received an opinion of Debevoise &
▇▇▇▇▇▇▇▇, tax counsel to EDO, dated as of the Effective Time, to the effect
that the transactions contemplated by this Agreement and the Ancillary
Agreements will qualify as a reorganization within the meaning of Section
368(a)(2)(D) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by such tax counsel of representation letters from each of
AIL, Merger Sub and EDO, in each case, in form and substance reasonably
satisfactory to such tax counsel. The specific provisions of each such
representation letter shall be in form and substance reasonably
satisfactory to such tax counsel, and each such representation letter shall
be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect.
7.2.6. Amendments to AIL ESOP. The amendments to the AIL ESOP
referred to in Section 4.12 shall be in full force and effect.
7.3. Conditions to Obligations of AIL. The obligation of AIL to consummate
the transactions contemplated hereby shall be subject to the fulfillment or
written waiver by AIL at or prior to the Effective Time of the following
additional conditions:
7.3.1. Representations, Performance, etc. (a) The representations and
warranties of EDO and Merger Sub contained in Section 3 or in any Ancillary
Agreement shall be, ignoring for these purposes any qualification as to
materiality or EDO Material Adverse Effect, (i) true and correct in all
material respects at and as of the date hereof and (ii) repeated and shall
be true and correct in all material respects at and as of the Effective
Time with the same effect as though made at and as of such time.
(b) Each of EDO and Merger Sub shall have in all material respects
duly performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed or complied with by it prior to
or at the Effective Time.
(c) Each of EDO and Merger Sub shall have delivered to AIL a
certificate dated the Closing Date and signed by its Chief Executive
Officer and Chief Financial Officer to the effect set forth above in this
Section 7.3.1.
7.3.2. Consents. All Governmental Approvals required to be made or
obtained by EDO in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby and all other Consents listed
on
A-49
Schedule 3.16(b)(i) shall have been made or obtained. Complete and correct
copies of all such Governmental Approvals and Consents shall have been
delivered to AIL.
7.3.3. No EDO Material Adverse Effect. No event, occurrence, fact,
condition, change, development or effect shall exist or have occurred or
come to exist or been threatened since the date of this Agreement that,
individually or in the aggregate, has had or resulted in, or would
reasonably be expected to become or result in, an EDO Material Adverse
Effect.
7.3.4. Ancillary Agreements. The Ancillary Agreements shall have been
executed and delivered by each of the parties thereto (other than AIL or a
Common Stockholder), and the Escrow Agreement shall have been executed and
delivered by the parties thereto (other than the Common Stockholder
Representative) in the form attached hereto as Exhibit B or otherwise in
form and substance satisfactory to AIL. Neither the Defense Systems
Agreement nor the Management Stock Purchase Agreement shall have been
terminated, and all of the conditions precedent to the obligations of the
parties to such agreements (other than Section 6.3 of the Defense Systems
Agreement and Section 5.3 and 6.3 of the Management Stock Purchase
Agreement) shall have been satisfied or waived.
7.3.5. Tax Opinion. AIL shall have received an opinion of Kleinberg,
Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇ P.C., tax counsel to AIL, dated as of the Effective
Time, to the effect that the transactions contemplated by this Agreement
and the Ancillary Agreements will qualify as a reorganization within the
meaning of Section 368(a)(2)(D) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such tax counsel of representation
letters from each of AIL, Merger Sub and EDO, in each case, in form and
substance reasonably satisfactory to such tax counsel. The specific
provisions of each such representation letter shall be in form and
substance reasonably satisfactory to such tax counsel, and each such
representation letter shall be dated on or before the date of such opinion
and shall not have been withdrawn or modified in any material respect.
7.3.6. Reservation or Authorization of Shares of EDO Common Stock
Subject to Substituted Options. EDO shall have taken, to the reasonable
satisfaction of AIL, the actions referred to in Section 4.14 to ensure that
the aggregate number of shares of EDO Common Stock to be issued upon the
exercise of Substituted Options be reserved for or otherwise authorized to
be issued under the 1996 Long Term Incentive Plan.
8. Termination.
8.1. Termination or Abandonment. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Effective Time, whether before or after any approval of
the matters presented in connection with the Merger by the respective
stockholders of EDO and AIL:
(a) by the mutual written consent of EDO, Merger Sub and AIL;
(b) by either AIL or EDO if the Effective Time shall not have occurred
on or before June 15, 2000; provided that the party seeking to terminate
this Agreement pursuant to this clause 8.1(b) shall not have breached in
any material respect its obligations under this agreement in any manner
that shall have proximately contributed to the failure to consummate the
Merger on or before such date;
(c) by either AIL or EDO if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements substantially on the terms contemplated hereby and
thereby or (ii) an order, decree, ruling or injunction shall have been
entered permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements substantially on the terms contemplated hereby and
thereby and such order, decree, ruling or injunction shall have become
final and non-appealable; provided that the party seeking to terminate this
Agreement pursuant to this clause 8.1(c)(ii) shall have used its reasonable
best efforts to prevent or remove such injunction, order or decree;
(d) by either AIL or EDO if (i) the holders of issued and outstanding
shares of EDO Common Stock and EDO Preferred Stock (voting together as a
single class) shall have failed to approve the Share Issuance at the EDO
Meeting or any adjournment thereof or (ii) the holders of issued and
outstanding
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Common Shares shall have failed to approve and adopt this Agreement at the
AIL Meeting or any adjourned thereof;
(e) by either AIL or EDO if the Defense Systems Agreement or the
Management Stock Purchase Agreement has been terminated in accordance with
its terms;
(f) by AIL if (i) the representations and warranties of EDO and Merger
Sub contained in Section 2 or in any Ancillary Agreement are not, ignoring
for these purposes any qualification as to materiality or EDO Material
Adverse Effect, (A) true and correct in all material respects at and as of
the date hereof, and (B) true and correct in all material respects at and
as of the Effective Time with the same effect as though made at and as of
the Effective Time (except for representations and warranties made of a
specific date, which must be true and correct in all material respects as
of such date, and except as expressly contemplated by this Agreement), or
(ii) EDO or Merger Sub has materially breached any agreement, covenant or
condition required by this Agreement to be performed or complied with by
EDO or Merger Sub prior to or at the Effective Time, and in the case of
either clause (i) or (ii), such breach or failure to be true and correct
shall not be curable or shall not have been cured within 15 days after
notice thereof shall have been received by EDO;
(g) by EDO if (i) the representations and warranties of AIL contained
in Section 3 or in any Ancillary Agreement are not, ignoring for these
purposes any qualification as to materiality or AIL Material Adverse
Effect, (A) true and correct in all material respects at and as of the date
hereof, and (B) true and correct in all material respects at and as of the
Effective Time with the same effect as though made at and as of the
Effective Time (except for representations and warranties made of a
specific date, which must be true and correct in all material respects as
of such date, and except as expressly contemplated by this Agreement), or
(ii) AIL has materially breached any agreement, covenant or condition
required by this Agreement to be performed or complied with by it prior to
or at the Effective Time, and in the case of either clause (i) or (ii),
such breach or failure to be true and correct shall not be curable or shall
not have been cured within 15 days after notice thereof shall have been
received by AIL;
(h) by EDO if the Board of Directors of AIL shall have (i) withdrawn
or modified in a manner adverse to EDO, or proposed publicly to withdraw or
modify in a manner adverse to EDO, its position with respect to this
Agreement and the transactions contemplated hereby or (ii) approved or
recommended, or proposed publicly to approve or recommend, an AIL
Acquisition Transaction;
(i) by AIL if the Board of Directors of EDO shall have (i) withdrawn
or modified in a manner adverse to AIL, or proposed publicly to withdraw or
modify in a manner adverse to AIL, its position with respect to this
Agreement and the transactions contemplated hereby or (ii) approved or
recommended, or proposed publicly to approve or recommend, an EDO
Acquisition Transaction, provided that AIL may not terminate this Agreement
pursuant to this Section 8.1(i)(ii) unless (I) EDO has notified AIL of its
intent to approve or recommend such EDO Acquisition Transaction pursuant to
Section 5.2(b)(ii), (II) prior to the end of the five Business Day period
specified in Section 5.2(b)(ii) AIL has notified EDO that it intends to
terminate this Agreement pursuant to this Section 8.1(i)(ii), and (III)
five Business Days have elapsed since the end of the five Business Day
period specified in Section 5.2(b)(ii) and EDO has failed to publicly
recommend against such EDO Acquisition Transaction;
(j) by AIL if AIL enters into an AIL Acquisition Agreement pursuant to
Section 4.10(a)(ii), provided that AIL may not terminate this Agreement
pursuant to this Section 8.1(j) unless and until (i) five Business Days
have elapsed following delivery to EDO of a written notice of the
determination by the Board of Directors of AIL to terminate this Agreement,
and during such five Business Day period AIL informs EDO of the terms and
conditions of the AIL Acquisition Transaction and the identity of the
person making such AIL Acquisition Transaction, and (ii) at the end of such
five Business Day period the Board of Directors of AIL makes a good faith
judgment, after consultation with outside counsel, that, taking into
account any amendment of the terms of this Agreement or the Merger offered
by EDO or any firm proposal (without conditions) by EDO to amend the terms
of this Agreement or the Merger, failure
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to enter into the AIL Acquisition Agreement would still constitute a breach
of fiduciary duties under applicable Law;
(k) by AIL if (I) EDO has notified AIL of its intent to enter into an
EDO Acquisition Agreement pursuant to Section 4.10(b)(ii), (II) at the end
of the five Business Day period specified in Section 4.10(b)(ii) AIL has
notified EDO that it intends to terminate this Agreement pursuant to this
Section 8.1(k), and (III) five Business Days have elapsed since the end of
the five Business Days period specified in Section 4.10(b)(ii) and either
(x) EDO has entered into and failed to terminate such EDO Acquisition
Agreement, (y) EDO has entered into and terminated with penalty such EDO
Acquisition Agreement or (z) EDO has failed to cease all discussions and
negotiations with the third party proposing to enter into the EDO
Acquisition Agreement and to notify AIL that it has done so.
8.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 8.1, this Agreement, other than
Sections 8, 11.1, 11.2, 11.3, 11.4, 11.5 (with respect only to the other
Sections that survive termination) and 11.13, shall become void and have no
effect, without any liability to any Person in respect hereof or of the
transactions contemplated hereby on the part of any party hereto, or any of its
directors, officers, Representatives, stockholders or Affiliates, except for any
liability resulting from such party's breach of this Agreement. Notwithstanding
the foregoing, the payment by AIL of the AIL Termination Fee or the payment by
EDO of the EDO Termination Fee in respect of a termination pursuant to Section
8.1(f) or 8.1(g), respectively, shall constitute liquidated damages, and, in the
absence of fraud, the breaching party shall not be liable to the terminating
party for any additional damages whatsoever resulting from or arising out of the
breach or breaches that gave rise to the termination of this Agreement.
8.3. Termination Fees. (a) Notwithstanding any provision in this Agreement
to the contrary, if this Agreement is terminated by AIL pursuant to Section
8.1(j) or by EDO pursuant to Section 8.1(g) or 8.1(h), then AIL shall pay to EDO
a fee (the "AIL Termination Fee") of $3,000,000 in cash, such payment to be made
as soon as practicable (but in no event more than two days) following a
termination pursuant to Section 8.1(g), 8.1(h) or 8.1(j).
(b) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated by AIL pursuant to Section 8.1(f), 8.1(i) or
8.1(k), then EDO shall pay to AIL a fee (the "EDO Termination Fee") of
$3,000,000 in cash, such payment to be made as soon as practicable (but in no
event more than two days) following such termination.
(c) EDO and AIL each acknowledges that the agreements contained in this
Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, EDO on the one hand and AIL on
the other would not enter into this Agreement; accordingly, if either EDO or AIL
fails to promptly pay any amounts owing pursuant to this Section 8.3 when due,
EDO or AIL, as the case may be, shall in addition thereto pay to the other all
costs and expenses (including, fees and disbursements of counsel) incurred in
collecting such amounts, together with interest on such amounts (or any unpaid
portion thereof) from the date such payment was required to be made until the
date such payment is received by the EDO or AIL, as the case may be, at the
prime rate of Chase Manhattan Bank, as in effect from time to time during such
period.
9. Indemnification.
9.1. Survival of Representations and Warranties, etc. The representations
and warranties of AIL, EDO and Merger Sub contained in this Agreement shall
survive the execution and delivery of this Agreement, any examination by or on
behalf of the parties hereto and the completion of the transactions contemplated
herein, but only until the earlier of (x) the date of the acceptance by EDO's
audit committee of the consolidated audit of EDO for the fiscal year ended
December 31, 2000, and (y) June 30, 2001 (the "Survival Date"), and all claims
for indemnification under this Section 9 by any party, whether against the
Escrow Account under the Escrow Agreement or otherwise, must be asserted on or
prior to the date that is 30 days after such Survival Date.
9.2. Indemnification by AIL and the Exchanging Common
Stockholders. Subject to Section 9.2(z), AIL (prior to the Closing) and the
Exchanging Common Stockholders severally (on and after the Closing)
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shall indemnify EDO, Merger Sub, their respective Affiliates, and their
respective stockholders, partners, members, officers, directors, advisory
directors, employees, agents, advisors and representatives (collectively, the
"EDO Indemnitees") and hold such EDO Indemnitees harmless from and against, and
pay and reimburse the EDO Indemnitees for, any and all demands, claims, actions,
losses, damages, liabilities, obligations, fines, Taxes, royalties,
deficiencies, costs and expenses (including reasonable consultants' and
attorneys' fees), whether or not resulting from third-party claims, including
interest and penalties with respect thereto (collectively, "EDO Damages"),
asserted against or incurred or sustained by any EDO Indemnitee as a result of
or arising out of:
(a) any breach of any representation or warranty of AIL contained in
this Agreement; or
(b) any breach of any covenant or agreement of AIL contained in this
Agreement.
Any EDO Indemnitee's right to indemnity hereunder for any EDO Damages shall
be subject to the following limitations:
(y) No indemnification shall be required to be made under Section
9.2(a) or (b) for a breach of representation, warranty, covenant or
agreement until the aggregate amount of EDO Damages exceeds $500,000;
provided that, if the aggregate amount of EDO Damages exceeds such amount,
AIL or the Exchanging Common Stockholders, as the case may be, shall be
liable for indemnification for the entire amount of EDO Damages, subject to
the other provisions of this Section.
(z) (i) After the Effective Time, any claim by the EDO Indemnitees
under this Section 9.2 may be asserted against any or all of the Exchanging
Common Stockholders (through the Common Stockholder Representative or
otherwise). Notwithstanding the foregoing, in no event shall any Exchanging
Common Stockholder be required to indemnify the EDO Indemnitees for any
single claim for EDO Damages under this Section 9.2 in excess of an amount
equal to the product of (I) the amount of such single claim and (II) a
fraction, the numerator of which is equal to the sum of the number of
Common Shares held by such Exchanging Common Stockholder that were
converted into the right to receive the Merger Consideration and the number
of Common Shares purchased from such Exchanging Common Stockholder pursuant
to the Management Stock Purchase Agreement, and the denominator of which is
equal to the total number of Common Shares that were so converted and
purchased.
(ii) Notwithstanding anything in this Agreement (other than Section
9.6(a)) or the Escrow Agreement to the contrary, except as contemplated by
Section 9.6(a), under no circumstances will any EDO Indemnitee be entitled
to indemnification pursuant to this Agreement or otherwise from any
Exchanging Common Stockholder other than from the portion of the Escrow
Account that is attributable (based on the percentages set forth on Exhibit
A to the Escrow Agreement) to such Exchanging Common Stockholder.
Notwithstanding anything in this Agreement to the contrary other than the
immediately succeeding paragraph, the Common Stockholder Representative shall
have the full power and authority to represent, negotiate on behalf of and bind
the Exchanging Common Stockholders with respect to the enforcement by any EDO
Indemnitee or any disputes with any EDO Indemnitee arising out of the rights of
any EDO Indemnitee under this Section 9.2, and the EDO Indemnitees shall be
entitled to deal exclusively with the Common Stockholder Representative in
respect of such rights. For the avoidance of doubt, the Common Stockholder
Representative shall not be personally liable for any nonpayment by any other
Exchanging Common Stockholder. Nothing in this Section 9.2 shall prevent an
Exchanging Common Stockholder from making a claim individually under Section
9.3.
Notwithstanding anything else contained herein to the contrary, the Common
Stockholder Representative (i) shall deliver to the AIL ESOP Trustee, promptly
upon receipt, copies of all notices received by the Common Stockholder
Representative in her capacity as such from EDO, AIL, the Escrow Agent or any
other party, (ii) will not agree (or be deemed to agree by failure to respond to
a notice given or failure to take any other action) to any settlement of any
claim, consent (or be deemed to consent by failure to respond to a notice given
or failure to take any other action) to the release of any amounts in the Escrow
Fund that are attributable to the Merger Shares issued to the AIL ESOP or that
otherwise adversely affects the AIL
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ESOP, without the prior consent of the AIL ESOP Trustee, (iii) will consult with
the AIL ESOP Trustee in connection with exercising its authority hereunder, and
(iv) has been granted no authority to act on behalf of the AIL ESOP or any of
its property in violation of the foregoing. Any action required of the Common
Stockholder Representative to dispute a claim of an EDO Indemnitee or otherwise
preserve any rights of the AIL ESOP not taken by the Common Stockholder
Representative without the consent of the AIL ESOP Trustee to refrain from
taking such action may be taken by the AIL ESOP Trustee on behalf of the AIL
ESOP. Any action taken in violation of the foregoing shall be void and of no
effect. Any deemed waiver or acquiescence by reason a failure to take any action
without the consent of the AIL ESOP Trustee shall be void and of no effect,
except if the AIL ESOP Trustee shall have received copies of the notices
referred to in clause (i) above, shall have been notified that the Common
Stockholder Representative intends to waive objection by inaction and shall have
failed to take any action on its own under the second preceding sentence within
a reasonable time. Any action taken by the AIL ESOP Trustee shall be effective
solely with respect to the AIL ESOP and not with respect to any other Exchanging
Common Stockholder.
9.3. Indemnification By EDO. EDO and Merger Sub jointly and severally
shall indemnify AIL (prior to Closing) and the Exchanging Common Stockholders
(on and after Closing) (collectively, the "AIL Indemnitees") and hold the AIL
Indemnitees harmless from and against, and pay and reimburse the AIL Indemnitees
for, any and all demands, claims, actions, losses, damages, liabilities,
obligations, fines, Taxes, royalties, deficiencies, costs and expenses
(including reasonable consultants' and attorneys' fees), whether or not
resulting from third-party claims, including interest and penalties with respect
thereto (collectively, the "Common Stockholder Damages"), asserted against or
incurred or sustained by any AIL Indemnitee as a result of or arising out of:
(a) any breach of any representation or warranty of EDO or Merger Sub
contained in this Agreement; or
(b) any breach of any covenant or agreement of EDO or Merger Sub
contained in this Agreement.
Any AIL Indemnitee's right to indemnity hereunder for any Common
Stockholder Damages shall be subject to the following limitations:
(y) No indemnification shall be required to be made under Section
9.3(a) or (b) for a breach of representation, warranty, covenant or
agreement until the aggregate amount of all Common Stockholder Damages
exceeds $500,000; provided that, if the aggregate amount of Common
Stockholder Damages exceeds such amount, EDO shall be liable for
indemnification for the entire amount of Common Stockholder Damages,
subject to the other provisions of this Section.
(z) In no event shall the AIL Indemnitees be entitled to indemnity for
Common Stockholder Damages in excess of an aggregate dollar amount equal to
7.5% of the product of (m) the sum of the number of Merger Shares and the
number of Management Shares and (n) the EDO Average Price.
9.4. Third Party Claims. All claims for indemnification by an EDO
Indemnitee or an AIL Indemnitee, as the case may be (any such indemnitee, an
"Indemnitee"), relating to a Third Party Claim shall be asserted and resolved as
follows:
(a) In the event any claim or demand for which indemnification may be
sought hereunder is made against or sought to be collected from any
Indemnitee by a third party (a "Third Party Claim"), such Indemnitee shall
give to the indemnifying party or parties (the "Indemnifying Parties"), or,
if the Exchanging Common Stockholders are the Indemnifying Parties, to the
Common Stockholders Representative, prompt notice of such Third Party
Claim, and such Indemnitee shall permit the Indemnifying Parties (at their
own expense and with the Indemnifying Parties' counsel) to assume the
defense of such Third Party Claim or any litigation resulting therefrom,
provided that (i) counsel for the Indemnifying Parties who shall conduct
the defense of such Third Party Claim or litigation shall be reasonably
satisfactory to such Indemnitee, (ii) such Indemnitee may participate in
such defense at the expense of such Indemnitee and (iii) the failure of
such Indemnitee to give notice as provided herein shall not relieve the
Indemnifying Parties of their respective indemnification obligation under
this Agreement except to the extent that such failure results in a lack of
actual notice to the Indemnifying
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Parties and then only to the extent that the Indemnifying Parties are
significantly prejudiced as a result of such failure. The notice referred
to above shall describe in reasonable detail the claim or demand for which
indemnification is being sought and shall identify the section of this
Agreement under which indemnification is being sought. The Person seeking
indemnification shall provide all materials in its possession with respect
to such claim or demand.
Except with the prior written consent of such Indemnitee, such consent
not to be unreasonably withheld, the Indemnifying Parties, in the defense
of any such Third Party Claim or litigation, shall not consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnitee of a release from all liability with respect to such Third Party
Claim or litigation, or that would materially increase the Tax liability of
any Indemnitee. After notice from the Indemnifying Parties to such
Indemnitee of their election to assume the defense of such Third Party
Claim or litigation, the Indemnifying Parties shall not be liable to such
Indemnitee under this Section 9.4 for any legal or other expenses
subsequently incurred by such Indemnitee in connection with the defense
thereof; provided, that such Indemnitee shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses for such counsel shall be at the expense
of such Indemnitee unless (x) the employment thereof has been specifically
authorized by the Indemnifying Parties or (y) such Indemnitee shall have
been advised by counsel that, due to a conflict of interest (or a potential
conflict of interest) between such Indemnitee and the Indemnifying Parties,
in the reasonable judgment of such counsel it is advisable for such
Indemnitee to employ separate counsel and the Indemnifying Parties do not
employ other reasonably satisfactory counsel for the Indemnitee. The
Indemnifying Parties shall in any event keep the Indemnitee reasonably
apprised of material developments with respect to such Third Party Claim or
litigation and shall furnish a copy to the Common Stockholder
Representative or EDO, as the case may be, of all relevant documents except
to the extent delivery of any such documents would jeopardize any
attorney-client privilege available to the Indemnifying Parties.
(b) In the event that within 15 Business Days after an Indemnitee's
delivery of any notice pursuant to Section 9.4(a), the Indemnifying Parties
fail to notify such Indemnitee of their intention to defend, such
Indemnitee shall (upon further notice to the Indemnifying Parties) have the
right to undertake the defense, compromise, settlement or payment in full
of such Third Party Claim or litigation for the account of the Indemnifying
Parties.
(c) Notwithstanding anything in this Agreement to the contrary, all
rights of the Exchanging Common Stockholders as either Indemnitees or
Indemnifying Parties under this Section 9.4(c) shall be exercisable
exclusively by the Common Stockholder Representative, and EDO and Merger
Sub shall be entitled to deal exclusively with the Common Stockholder
Representative in respect of all such rights.
9.5. Tax Treatment and Limitation of Indemnity Payments. EDO, Merger Sub
and the Exchanging Common Stockholders agree to treat any indemnity payment made
pursuant to Section 9 of this Agreement as an adjustment to the aggregate Merger
Consideration paid at Closing for all Tax purposes.
9.6. Form of Consideration. (a) Each Exchanging Common Stockholder may
elect in an Election Form substantially in the form of Exhibit E hereto to pay
any indemnity obligations payable by him or her pursuant to Section 9.2 in cash,
provided that the applicable Election Form has been executed and delivered to
EDO no later than 10 days following the Closing. Any Exchanging Common
Stockholder who has not executed and delivered an Election Form within such
period or has not indicated a preference will be required to pay any indemnity
obligations in shares of EDO Common Stock. All payments in respect of indemnity
obligations shall be made out of the Escrow Account, provided that if an
Exchanging Common Stockholder has elected to pay in cash, payments in respect of
indemnity obligations of such Exchanging Common Stockholder shall be made by
such Exchanging Common Stockholder in cash, and property in the Escrow Account
having a value equal to such cash payment (with shares of EDO Common Stock being
valued at the Indemnity Share Price) shall be promptly released to such
Exchanging Common Stockholder in accordance with the Escrow Agreement; provided
further that if an Exchanging Common Stockholder has elected to pay in cash, but
fails to tender such payment to EDO within seven Business Days after such
payment is due under
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Section 5 of the Escrow Agreement, such Exchanging Common Stockholder shall no
longer be permitted to pay such claim in cash and such Exchanging Common
Stockholder's indemnity obligation shall be satisfied out of the Escrow Account
as if such Exchanging Common Stockholder had not executed and delivered an
Election Form. If an Exchanging Common Stockholder has elected (or is required)
to pay in shares of EDO Common Stock, the number of shares of EDO Common Stock
payable with respect to any portion of such Exchanging Common Stockholder's
indemnity obligation shall equal the amount of such portion divided by the
Indemnity Share Price.
(b) EDO may elect to pay any indemnity obligations payable by it pursuant
to Section 9.2 in cash or shares of EDO Common Stock, at EDO's option, provided
that if EDO elects to pay in shares of EDO Common Stock, such shares will be
issued or otherwise transferred pursuant to an effective registration statement
or an exemption from registration under the Securities Act. If EDO elects to pay
in shares of EDO Common Stock, the number of shares of EDO Common Stock payable
with respect to its indemnity obligation shall equal the amount of such
obligation divided by the Indemnity Share Price.
(c) Any shares of EDO Common Stock paid to EDO by the Exchanging Common
Stockholders shall be put into EDO's treasury.
10. Definitions.
10.1. Terms Generally. The words "hereby", "herein", "hereof", "hereunder"
and words of similar import refer to this Agreement as a whole (including any
Exhibits and Schedules hereto) and not merely to the specific section, paragraph
or clause in which such word appears. All references herein to Sections,
Exhibits and Schedules shall be deemed references to Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation." The definitions given for terms in this Section
10 and elsewhere in this Agreement shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. Except as
otherwise expressly provided herein, all references to "dollars" or "$" shall be
deemed references to the lawful money of the United States of America.
10.2. Certain Terms. Whenever used in this Agreement (including in the
Schedules), the following terms shall have the respective meanings given to them
below or in the Sections indicated below:
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management policies of a Person, whether through the ownership of
voting securities, by contract, as trustee or executor, or otherwise.
▇▇ ▇▇▇▇▇▇▇: as defined in Section 3.26.
Aggregate Consideration: (i) with respect to a Common Stockholder not
party to the Management Stock Purchase Agreement, the aggregate Merger
Consideration to which such Common Stockholder is entitled pursuant to
Section 1, and (ii) with respect to a Common Stockholder party to the
Management Stock Purchase Agreement, the sum of (x) the aggregate Merger
Consideration to which such Common Stockholder is entitled pursuant to
Section 1 and (y) that number of shares of EDO Common Stock equal to the
quotient of the consideration to which such Common Stockholder is entitled
pursuant to the Management Stock Purchase Agreement divided by the EDO
Average Price.
Agreement: this Merger Agreement, including the Exhibits and
Schedules hereto.
AIL: as defined in the first paragraph to this Agreement.
AIL Acquisition Agreement: as defined in Section 4.10(a).
AIL Acquisition Transaction: as defined in Section 4.10(a).
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AIL Assets: the properties and assets (real, personal or mixed,
tangible or intangible) used or held for use in connection with, necessary
for the conduct of, or otherwise material to, the Business of any member of
the AIL Group.
AIL Balance Sheet: the audited balance sheet of AIL and its
Subsidiaries, as of December 31, 1998, included in the AIL Financial
Statements.
AIL Commercial Software: as defined in Section 2.13(f).
AIL Employees: as defined in Section 2.20(a).
AIL ESOP: the AIL Employee Stock Ownership Plan, as amended through
the date hereof.
AIL ESOP Percentage: (i) 13%, if the EDO Closing Price is $6.25 or
greater; (ii) 9.0%, if the EDO Closing Price is $6.00 or greater, but less
than $6.25; (iii) 7.0%, if the EDO Closing Price is $5.75 or greater, but
less than $6.00; or (iv) 5.0%, if the EDO Closing Price is less than $5.75.
AIL ESOP Trustee: means Marine Midland Bank, now known as HSBC Bank
USA, solely in its capacity as Trustee of the AIL ESOP.
AIL Financial Statements: the unaudited consolidated financial
statements of the AIL Group as at and for the nine-month period ended
September 26, 1999, and the audited consolidated financial statements of
the AIL Group as at and for the year ended December 31, 1998, and the
three-month period ended December 31, 1997 together with reports on such
year-end statements (including the statement for the period ended December
31, 1997) by E&Y, including in each case a consolidated balance sheet, a
consolidated statement of income, a statement of shareholders' equity and a
consolidated statement of cash flows, and accompanying notes.
AIL Group: AIL and its Subsidiaries.
AIL Indemnitee: as defined in Section 9.3.
AIL Intellectual Property: as defined in Section 2.13(b).
AIL Leases: the real property leases, subleases, licenses and
occupancy agreements pursuant to which any member of the AIL Group is the
lessee, sublessee, licensee, user or occupant of real property used in or
held for use in connection with its Business.
AIL Material Adverse Effect: any (a) event, occurrence, fact,
condition, change, development or effect that is materially adverse to the
business, operations, results of operations, financial condition,
properties (including intangible properties), assets (including intangible
assets) or liabilities of the AIL Group taken as a whole or (b) material
impairment or delay of the ability of AIL to perform its obligations
hereunder or under any of the Ancillary Agreements.
AIL Material Contract: as defined in Section 2.12(a).
AIL Meeting: as defined in Section 5.1(b).
AIL Owned Intellectual Property: all Intellectual Property that is
owned by any member of the AIL Group and that either has been filed or
registered or is material to the Business of the AIL Group.
AIL Owned Software: as defined in Section 2.13(g).
AIL Plans: as defined in Section 2.20(a).
AIL Proxy Financials: the unaudited consolidated financial statements
of the AIL Group as at and for the nine-month period ended September 26,
1999, and the audited consolidated financial statements of the AIL Group as
at and for the years ended December 31, 1998 and 1996, the nine-month
period ended September 30, 1997 and the three-month period ended December
31, 1997, together with reports on such year-end and partial year
statements (other than the statements as at and for the nine-month period
ended September 26, 1999) by E&Y, including in each case a consolidated
balance sheet, a consolidated statement of income, a statement of
shareholders' equity and a consolidated statement of cash flows, and
accompanying notes.
AIL Related Persons: as defined in Section 2.20(a).
A-57
AIL Stock Option Plans: the AIL Systems Inc. Stock Option Plan and
the AIL Systems Inc. 1998 Long Term Stock Option Plan.
AIL Termination Fee: as defined in Section 8.3(a).
Ancillary Agreements: the Defense Systems Agreement, the Management
Stock Purchase Agreement and the Escrow Agreement.
Appraisal Rights: any and all rights of Dissenting Stockholders to
the proposed Merger, including any and all rights of appraisal arising out
of Section 262 of the DGCL and the certificate of incorporation and by-laws
of AIL.
Best Knowledge of EDO: the actual knowledge of any officer of EDO,
after reasonable inquiry of the employees of the EDO Group having
responsibility for the matter knowledge of which is involved.
Best Knowledge of AIL: the actual knowledge of any officer of AIL,
after reasonable inquiry of employees of the AIL Group having
responsibility for the matter knowledge of which is involved.
Business: the business and operations of any Person, in each case as
currently conducted by such Person.
Business Day: a day other than a Saturday or a Sunday when banks in
New York are lawfully open for business.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. sec. 9601 et seq.
Certificate: as defined in Section 1.6(b).
Certificate of Merger: as defined in Section 1.2(b).
Closing: as defined in Section 1.2(a).
Closing Date: as defined in Section 1.2(a).
Code: the Internal Revenue Code of 1986, as amended.
Common Shares: as defined in the second recital to this Agreement.
Common Stockholder: any record holder of issued and outstanding
Common Shares.
Common Stockholder Damages: as defined in Section 9.3.
Common Stockholder Representative: as defined in Section 11.13.
Confidentiality Agreement: as defined in Section 11.2.
Consent: any consent, approval, authorization, waiver, permit, grant,
filing, report or notice of, with or to any Person.
Contract: all loan agreements, indentures, letters of credit
(including related letter of credit applications and reimbursement
obligations), mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, surety obligations, non-governmental
licenses, powers of attorney, purchase orders and other agreements,
contracts, instruments, obligations, offers, commitments, arrangements and
understandings, written or oral, including all Governmental Contracts and
Governmental Subcontracts, to which any member of the AIL Group is a party
or by which it or any of its properties or assets may be bound or affected,
in each case as amended, supplemented, waived or otherwise modified.
Costs: as defined in Section 4.13(a).
DGCL: as defined in Section 1.1(a).
DOD: means the United States Department of Defense or any branch or
agency thereof.
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Defense Systems: as defined in the third recital to this Agreement.
Defense Systems Agreement: as defined in the third recital to this
Agreement.
Dissenting Shares: as defined in Section 1.8.
Dissenting Stockholder: as defined in Section 1.8.
E&Y: as defined in Section 2.6(a).
EDO: as defined in the first paragraph of this Agreement.
EDO Acquisition Agreement: as defined in Section 4.10(b).
EDO Acquisition Transaction: as defined in Section 4.10(b).
EDO Assets: the properties and assets (real, personal or mixed,
tangible or intangible) used or held for use in connection with, necessary
for the conduct of, or otherwise material to, the Business of any member of
the EDO Group.
EDO Average Price: the average of the closing prices per share of EDO
Common Stock as reported on the NYSE Composite Transactions Tape (as
reported in The Wall Street Journal, or, if not reported thereby, any other
authoritative source) on each of the 5 consecutive NYSE trading days ending
on (and including) the trading day immediately prior to the Closing Date.
EDO Balance Sheet: the audited balance sheet of EDO and its
Subsidiaries, as of December 31, 1998, included in the EDO Financial
Statements.
EDO Certificates: as defined in Section 1.6(a).
EDO Closing Price: the closing price per share of EDO Common Stock as
reported on the NYSE Composite Transactions Tape (as reported in The Wall
Street Journal, or if not reported thereby, any other authoritative source)
on the last NYSE trading day prior to the Effective Time.
EDO Commercial Software: as defined in Section 3.13(f).
EDO Common Stock: means shares of common stock, par value $1.00 per
share, of EDO.
EDO Contracts: all loan agreements, indentures, letters of credit
(including related letter of credit applications and reimbursement
obligations), mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees, surety obligations, non-governmental
licenses, powers of attorney, purchase orders and other agreements,
contracts, instruments, obligations, offers, commitments, arrangements and
understandings, written or oral, including all Governmental Contracts and
Governmental Subcontracts, to which any member of the EDO Group is a party
or by which it or any of its properties or assets may be bound or affected,
in each case as amended, supplemented, waived or otherwise modified.
EDO Convertible Debentures: the 7% Convertible Subordinated
Debentures Due 2011 of EDO.
EDO Damages: as defined in Section 9.2.
EDO Employees: as defined in Section 3.20.
EDO ESOP: the EDO Employee Stock Ownership Plan, as amended through
the date hereof.
EDO Financial Statements: the unaudited consolidated financial
statements of the EDO Group as at and for the nine-month period ended
September 30, 1999, and the audited consolidated financial statements of
the EDO Group as at and for the years ended December 31, 1998 and 1997
together with reports on such year-end statements by KPMG LLP, including in
each case a consolidated balance sheet, a consolidated statement of
earnings, a consolidated statement of shareholders' equity and a
consolidated statement of cash flows, and accompanying notes.
EDO Group: EDO and its Subsidiaries (including Merger Sub).
A-59
EDO Indemnitee: as defined in Section 9.2.
EDO Intellectual Property: as defined in Section 3.13(b).
EDO Leases: the real property leases, subleases, licenses and
occupancy agreements pursuant to which any member of the EDO Group is the
lessee, sublessee, licensee, user or occupant of real property used in or
held for use in connection with its Business.
EDO Material Adverse Effect: any (a) event, occurrence, fact,
condition, change, development or effect that is materially adverse to the
business, operations, results of operations, financial condition,
properties (including intangible properties), assets (including intangible
assets) or liabilities of the EDO Group taken as a whole or (b) material
impairment or delay of the ability of EDO or Merger Sub to perform its
obligations hereunder or under any of the Ancillary Agreements.
EDO Material Contracts: as defined in Section 3.12(a).
EDO Meeting: as defined in Section 5.1(a).
EDO Option: any option or warrant to purchase shares of EDO Common
Stock.
EDO Owned Intellectual Property: all Intellectual Property that is
owned by any member of the EDO Group and that either has been filed or
registered or is material to the Business of the EDO Group.
EDO Owned Software: as defined in Section 3.13(f).
EDO Plans: as defined in Section 3.20.
EDO Proxy Financials: the unaudited consolidated financial statements
of the EDO Group as at and for the nine-month period ended September 30,
1999, and the audited consolidated financial statements of the EDO Group as
at and for the years ended December 31, 1998, 1997 and 1996 together with
reports on such year-end statements by KPMG LLP, including in each case a
consolidated balance sheet, a consolidated statement of earnings, a
consolidated statement of shareholders' equity and a consolidated statement
of cash flows, and accompanying notes.
EDO Preferred Stock: means shares of EDO ESOP Convertible Cumulative
Preferred Stock, Series A, par value $1 per share.
EDO Products: as defined in Section 3.25.
EDO Related Persons: as defined in Section 3.20.
EDO Reports: as defined in Section 3.1.
EDO Stock Option Plans: the 1996 Long Term Incentive Plan and the
1997 Non-Employee Director Stock Option Plan.
EDO Termination Fee: as defined in Section 8.3(b).
Effective Time: as defined in Section 1.2(b).
Election Form: means an Election Form, the form of which is attached
hereto as Exhibit E.
Employment Agreement: as defined in Recital E.
Employee Stock Options: as defined in Section 1.5.
Environmental Laws: all Laws relating to the protection of the
environment, including (a) CERCLA, the Resource Conservation and Recovery
Act, and the Occupational Safety and Health Act, (b) all other requirements
pertaining to reporting, licensing, permitting, investigation or
remediation of emissions, discharges, Releases or threatened Releases of
Hazardous Materials into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of Hazardous
Materials, and (c) all other requirements pertaining to the protection of
the health and safety of employees or the public.
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Environmental Liabilities and Costs: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or future,
imposed by, under or pursuant to Environmental Laws, including, without
limitation, all Losses related to Remedial Actions, and all fees,
disbursements and expenses of counsel, experts, personnel and consultants
based on, arising out of or otherwise in respect of: (i) the ownership or
operation of the business of any member of the AIL Group or the EDO Group,
as applicable, the Real Property of the AIL Group or the EDO Group, as
applicable, or any other real property, assets, equipment or facilities, by
the any member of the AIL Group or the EDO Group, as applicable, or any of
their predecessors or Affiliates; (ii) the environmental conditions
existing at the Effective Time on, under, above, or about any Real Property
of the AIL Group or the EDO Group, as applicable, or any other real
property, assets, equipment or facilities currently or previously owned,
leased or operated by any member of the AIL Group or the EDO Group, as
applicable, or any of their respective predecessors or Affiliates; and
(iii) expenditures necessary to cause any Real Property of the AIL Group or
the EDO Group, as applicable, or any aspect of the business of any member
of the AIL Group to be in compliance with any and all requirements of
Environmental Laws as of the Effective Time, including, without limitation,
all Environmental Permits issued under or pursuant to such Environmental
Laws, and reasonably necessary to make full economic use of any Real
Property of the AIL Group or the EDO Group, as applicable.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
Escrow Account: means the account pursuant to the Escrow Agreement.
Escrow Agreement: means the agreement, the form of which is attached
hereto as Exhibit B.
Escrow Amount: as defined in Section 1.7(a).
Escrowed Shares: as defined in Section 1.7(b).
Exchange Act: Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
Exchange Agent: as defined in Section 1.6(a).
Exchange Fund: as defined in Section 1.6(a).
Exchange Ratio: as defined in Section 1.3(a).
Exchanging Common Stockholder: any Common Stockholder who receives
the Merger Consideration in the Merger.
5% Stockholder: as to any Person, a beneficial owner of at least five
percent of the common equity of such Person, as calculated pursuant to Rule
13d-3 under the Exchange Act, who has on file with the SEC a Schedule 13D
or 13G stating that such holder is the beneficial owner of at least five
percent of such common equity.
Governmental Approval: any Consent of, with or to any Governmental
Authority, including any DOD security clearance.
Governmental Authority: any nation or government, any state or other
political subdivision thereof; any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including the DOD; any court, tribunal or
arbitrator of competent jurisdiction; and any self-regulatory (including
securities self-regulatory) organization.
Governmental Contract: means a contract, agreement, commitment,
guaranty, bid or proposal between a member of the AIL Group or the EDO
Group, as applicable, and the DOD or any other Governmental Authority,
including any facilities contract for the use of government-owned
facilities.
Governmental Subcontract: means a contract, agreement, commitment,
guaranty, bid or proposal that is a subcontract between a member of the AIL
Group or the EDO Group, as applicable, and any third party relating to a
prime contract with the DOD or any other Governmental Authority.
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Hazardous Materials: any substance that: (a) is or contains asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, or related materials (b) requires
investigation, removal or remediation under any Environmental Law, or is
defined, listed or identified as a "hazardous waste" or "hazardous
substance" thereunder, or (c) is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous
and is regulated by any Governmental Authority or Environmental Law.
▇▇▇▇▇▇▇▇: as defined in Section 2.26.
HSR Act: the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
Indebtedness: as applied to any Person, means, without duplication,
(a) all indebtedness for borrowed money, (b) all obligations evidenced by a
note, bond, debenture, letter of credit, draft or similar instrument, (c)
that portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with U.S. GAAP,
(d) notes payable and drafts accepted representing extensions of credit,
(e) any obligation owed for all or any part of the deferred purchase price
of property or services, which purchase price is due more than six months
from the date of incurrence of the obligation in respect thereof, and (f)
all indebtedness and obligations of the types described in the foregoing
clauses (a) through (e) to the extent secured by any Lien on any property
or asset owned or held by such Person regardless of whether the
indebtedness secured thereby shall have been assumed by such Person or is
nonrecourse to the credit of such Person.
Indemnified Party: as defined in Section 4.13(a).
Indemnifying Party: as defined in Section 9.4(a).
Indemnitee: as defined in Section 9.4.
Indemnity Share Price: means (i) the average of the closing prices of
EDO Common Stock on the NYSE (or, if the EDO Common Stock is no longer
trading on the NYSE, on any other national securities exchange on which the
EDO Common Stock is then trading) on the first Business Day immediately
prior to each of (A) delivery by an Indemnitee to any Indemnifying Party
(or its representative) of written notice requesting indemnification under
Section 9.2 or 9.3, as applicable, and (B) payment of such indemnity claim
or (ii) if the EDO Common Stock is no longer trading on any national
securities exchange, the average of the values of a share of EDO Common
Stock on such dates based on the most current appraisal performed for the
AIL ESOP (or its successor) on each of such dates.
IRS: the Internal Revenue Service.
Intellectual Property: the United States and foreign trademarks,
service marks, trade names, trade dress, domain names, copyrights, and
similar rights, including registrations and applications to register or
renew the registration of any of the foregoing, the United States and
foreign letters patent (including design patents, industrial designs and
utility models) and patent applications (including docketed patent
disclosures awaiting filing, reissues, revisions, divisions, continuations,
continuations-in-part, extensions and re-examinations), patent disclosures
awaiting filing determination, and improvements thereto, and inventions
(whether patentable or unpatentable and whether or not reduced to
practice), and improvements thereto, processes, designs, formulae, trade
secrets, know-how, ideas, research and development, manufacturing and
production processes and techniques, technical data, copyrightable works,
engineering notebooks, confidential information, Software, firmware,
Internet Web sites, mask works and other semiconductor chip rights and
applications, registrations and renewals thereof, and all similar
intellectual property rights (including moral rights), all rights to ▇▇▇
for and remedies against past, present and future infringements of any or
all of the foregoing and rights of priority and protection of interests
therein under the Laws of any jurisdiction, tangible embodiments of any of
the foregoing (in any medium including electronic media), and licenses of
any of the foregoing.
ISO: as defined in Section 1.5.
Law: all applicable provisions of all (a) constitutions, treaties,
statutes, the common law, codes, rules, regulations, ordinances or orders
of any Governmental Authority, and (b) orders, decisions,
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injunctions, judgments, awards and decrees of or written consent agreements
with any Governmental Authority.
Lien: any mortgage, pledge, deed of trust, hypothecation, right of
others, claim, security interest, encumbrance, burden, title retention
agreement, license, occupancy agreement, easement, covenant, condition,
encroachment, voting trust agreement, interest, option, right of first
offer, negotiation or refusal, proxy, lien, lien with respect to Taxes,
charge or other restrictions or limitations of any nature whatsoever,
including but not limited to such Liens as may arise under any written or
oral contract, agreement, instrument, obligation, offer, commitment,
arrangement or understanding.
Litigation: any action, cause of action, claim, demand, suit,
proceeding, summons, subpoena, civil, criminal, regulatory or otherwise, in
law or in equity.
Losses: any and all claims, demands, liabilities, obligations,
losses, fines, costs, expenses, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third
party claims), including interest and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
or under any Ancillary Agreement.
Management Shares: the product of the number of Common Shares subject
to the Management Stock Purchase Agreement and the Exchange Ratio.
Management Stock Purchase Agreement: as defined in the third recital
to this Agreement.
Merger: as defined in Section 1.1(a).
Merger Consideration: as defined in Section 1.3(a).
Merger Shares: as defined in Section 1.3(a).
Merger Sub: as defined in the first paragraph of this Agreement.
NYSE: as defined in Section 1.6(h).
Option: any option or warrant to purchase Common Shares.
Organizational Documents: as to any Person, its certificate or
articles of incorporation, by-laws and other organizational documents.
Permitted Liens: (a) Liens for Taxes not yet due and payable or (b)
those Liens that (i) are set forth in Schedule 2.10 or Schedule 3.10 or
(ii) individually and in the aggregate with all other Permitted Liens, do
not and will not materially detract from the value of any of the property
or assets of any member of the AIL Group or the EDO Group, as applicable,
or materially interfere with the use thereof as currently used or
contemplated to be used, or otherwise have or result in an AIL Material
Adverse Effect or an EDO Material Adverse Effect, as applicable.
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
Preferred Shares: as defined in the third recital to this Agreement.
Prime Rate: the rate of interest publicly announced by Citibank N.A.
from time to time in New York City as its prime rate.
Products: as defined in Section 2.25(a).
Proxy Statement: the letters to stockholders, notices of meeting,
proxy statement and forms of proxies to be distributed to stockholders in
connection with the Share Issuance and the approval and adoption of this
Agreement, and any schedules required to be filed with the SEC in
connection therewith.
Real Property: all interests leased pursuant to the AIL Leases or the
EDO Leases, as applicable, together with all real property owned, operated
or occupied by any member of the AIL Group or the EDO Group, as applicable,
on the date of this Agreement or at the Effective Time, including all
improvements and fixtures, located on, or attached to such real property,
and all easements, licenses, rights and appurtenances relating to the
foregoing.
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Real Property Laws: all applicable building, zoning, subdivision and
other land use and similar Laws affecting the EDO Group's Real Property or
the AIL Group's Real Property, as the case may be.
Registration Statement: the Registration Statement on Form S-4 under
the Securities Act with respect to the EDO Common Stock to be issued in the
Merger.
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, leeching or migration into the environment, including into or
upon, any land, soil, surface water, ground water or air.
Remedial Action: all actions required to (i) clean up, remove, treat
or in any other way remediate any Hazardous Materials; (ii) prevent the
release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the environment; or (iii)
perform studies, investigations and care related to any such Hazardous
Materials.
Representatives: as to any Person, its accountants, counsel,
consultants (including actuarial, environmental and industry consultants),
officers, directors, employees, agents and other advisors and
representatives.
SEC: U.S. Securities and Exchange Commission.
Securities Act: as defined in Section 3.6.
Share Issuance: as defined in Section 5.1(a).
Shares: as defined in the third recital to this Agreement.
Software: all computer software, including but not limited to,
application software and system software, including all source code and
object code versions thereof, in any and all forms and media, whether
recorded on paper, magnetic media or other electronic or non-electronic
media (including user manuals, training materials, flow charts, diagrams,
descriptive tests and programs, computer print-outs, underlying tapes,
computer databases and similar items), integrated circuits, embedded
systems, and other electro-mechanical or processor based systems.
Subsidiaries: each corporation or other Person in which a Person owns
or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or
other equity interests.
Substituted Option: as defined in Section 1.5.
Survival Date: as defined in Section 9.
Surviving Corporation: as defined in Section 1.1(a).
Tax: any federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, profits, windfall profits, gross receipts, sales, use, value added,
transfer, registration, stamp, premium, excise, customs duties, severance,
environmental (including taxes under section 59A of the Code), real
property, personal property, ad valorem, occupancy, license, occupation,
employment, payroll, social security, disability, unemployment, workers'
compensation, withholding, estimated or other similar tax, duty, fee,
assessment or other governmental charge or deficiencies thereof (including
all interest and penalties thereon and additions thereto).
Tax Return: any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Third Party Claim: as defined in Section 9.4(a).
Total Escrowed Shares: as defined in Section 1.7(b).
Treasury Regulations: the regulations prescribed under the Code.
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U.S. GAAP: United States generally accepted accounting principles.
11. Miscellaneous.
11.1. Expenses. Except as otherwise specifically provided for in this
Agreement, whether or not the transactions contemplated hereby shall be
consummated, all costs and expenses incurred in connection with this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby
shall be paid by the party incurring such expenses, except that the expenses
incurred in connection with the printing and mailing of the Proxy Statement and
Registration Statement and the filing fee in connection with any HSR Act filing
shall be shared equally by EDO and AIL. AIL will pay any real property transfer
Taxes imposed on it or its stockholders.
11.2. Confidentiality. The parties hereto agree that with respect to the
disclosure of information furnished hereunder or in connection herewith, the
parties shall continue to be bound by the terms of that certain confidentiality
agreement, dated April 6, 1999 (the "Confidentiality Agreement"), between EDO
and AIL until the Effective Time, at which time such Confidentiality Agreement
shall terminate automatically. The parties hereto agree that they shall use its
reasonable best efforts to cause its officers, employees and Representatives and
their Subsidiaries and their respective officers, employees and Representatives
to, hold in strict confidence all data and information given to them by any
other party hereto (unless such information is or becomes readily ascertainable
from public or published information) and shall not, and shall use their
reasonable best efforts to ensure that such officers, employees and
Representatives do not, disclose such information to others without the prior
written consent of such other party.
11.3. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) if to Merger Sub or EDO,
EDO Corporation
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
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(ii) if to AIL,
AIL Technologies Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (w) if by personal delivery on the day after
such delivery, (x) if by certified or registered mail, on the seventh business
day after the mailing thereof, (y) if by next-day or overnight mail or delivery,
on the day delivered, (z) if by telecopy or telegram, on the day following the
day on which such telecopy or telegram was sent, provided that a copy is also
sent by certified or registered mail.
11.4. Arbitration; Governing Law, etc. (a) Arbitration. Any dispute in
connection with this Agreement shall be resolved by binding arbitration pursuant
to the most expedited method available. The arbitration shall be held in New
York City, New York and shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect at the
time of the arbitration. The arbitrator shall be a lawyer acceptable to both AIL
(or the Common Stockholder Representative or the relevant AIL Indemnitee, if
applicable) and EDO (or the relevant EDO Indemnitee, if applicable). If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, all of whom shall be lawyers, one appointed by
each of the parties and the third appointed by the other two arbitrators. The
arbitrator or arbitrators shall make findings of fact and reach conclusions of
law and shall submit such findings of fact and conclusions of law in writing to
all parties to the arbitration. Any expense of arbitration shall be borne by the
party who incurs such expense and joint expenses (including, without limitation,
the arbitrator's fees) shall be shared equally.
(b) Governing Law, etc. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (EXCEPT TO THE EXTENT THE DGCL IS IMPLICATED), WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS RULES THEREOF. Solely in connection with the
enforcement of the arbitration provisions of, or an arbitral award made pursuant
to, Section 11.4(a), Merger Sub, EDO and AIL hereby irrevocably submit to the
exclusive jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America located in the State, City and County of
New York and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the enforcement of such provisions or award, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that such provisions or award may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a New York State
or Federal court. EDO, Merger Sub and AIL hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
11.3 or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
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11.5. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, the Exchanging Common Stockholders and their
respective heirs, successors and permitted assigns.
11.6. Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
parties hereto.
11.7. No Third Party Beneficiaries. Except as provided in Sections 3, 9
and 11.5, nothing in this Agreement shall confer any rights upon any person or
entity other than the parties hereto and their respective heirs, successors and
permitted assigns.
11.8. Amendment; Waivers, etc. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom or which
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver with respect to only the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
none is exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity. The representations and warranties of AIL
shall not be affected or deemed waived by reason of any investigation made by or
on behalf of EDO or Merger Sub (including by any of its advisors, consultants or
Representatives) or by reason of the fact that EDO or Merger Sub or any of such
advisors, consultants or Representatives knew or should have known that any such
representation or warranty is or might be inaccurate. The representations and
warranties of EDO and Merger Sub shall not be affected or deemed waived by
reason of any investigation made by or on behalf of any of AIL (including by any
of its advisors, consultants or Representatives) or by reason of the fact that
AIL or any of such advisors, consultants or Representatives knew or should have
known that any such representation or warranty is or might be inaccurate.
11.9. Entire Agreement. This Agreement, including the Schedules and
Exhibits, the Confidentiality Agreement, the Escrow Agreement, the Defense
Systems Agreement, the Management Stock Purchase Agreement and the Employment
Agreements constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
11.10. Severability. If any provision, including any phrase, sentence,
clause, section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering such provision in question invalid, inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
11.11. Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
11.12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
11.13. Common Stockholder Representative. Subject to the last paragraph of
Section 9.2, each of the Exchanging Common Stockholders pursuant to this
Agreement irrevocably appoints as his, her or its agent, proxy and
attorney-in-fact for all purposes of this Agreement and the Escrow Agreement,
with full power to act in the place and stead of such Exchanging Common
Stockholders in all matters arising under or in connection with this Agreement
and the Escrow Agreement, (i) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (ii) in the event of the death,
disability, termination of employment or absence of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, and (iii) in the event of the death, termination of employment or
disability of both of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, such other persons
as a majority in the interest of the remaining Exchanging Common Stockholders
shall designate (each such agent, proxy and attorney-in-fact being herein
referred to as the "Common Stockholder Representative").
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11.14. Escrow Agent. The Escrow Agent shall be selected by mutual
agreement of EDO and AIL. EDO and AIL agree to ask Mellon Bank to serve as the
Escrow Agent.
11.15. Disclosure Schedules. Information disclosed on any of Schedules 2.1
through 2.30 that could reasonably be understood on its face to be responsive to
the requirements of any other of such Schedules shall be deemed disclosed for
the purposes of such other Schedule. Information disclosed on any of Schedules
3.1 through 3.30 that could reasonably be understood on its face to be
responsive to the requirements of any other of such Schedules shall be deemed
disclosed for the purposes of such other Schedule.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
AIL TECHNOLOGIES INC.
By:
--------------------------------------
Name:
Title:
EDO CORPORATION
By:
--------------------------------------
Name:
Title:
EDO ACQUISITION III CORPORATION
By:
--------------------------------------
Name:
Title:
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EXHIBIT B
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is dated as of [ ]
among (i) EDO CORPORATION, a New York corporation ("EDO"); (ii) [insert name of
Escrow Agent] (the "Escrow Agent") and (iii) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Common
Stockholder Representative (the "Common Stockholder Representative").
Capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings ascribed thereto in the Agreement and Plan of Merger, dated as
of January 2, 2000 (the "Merger Agreement"), among EDO, EDO Acquisition III
Corporation ("Merger Sub") and AIL Technologies Inc. ("AIL"); provided that,
solely for purposes of this Agreement, the term "Exchanging Common Stockholders"
shall include the Common Stockholders party to the Management Stock Purchase
Agreement referred to below.
R E C I T A L S:
A. Pursuant to a Stock Purchase Agreement, dated as of January 2, 2000, by
and among certain Common Stockholders, EDO and Merger Sub (the "Management Stock
Purchase Agreement"), EDO will, immediately prior to the closing of the Merger,
acquire 225,000 Common Shares from such Common Stockholders for a total purchase
price equal to the product of (i) 225,000, (ii) the Exchange Ratio and (iii) the
EDO Average Price, payable in cash.
B. Pursuant to the Merger Agreement, (i) AIL will merge with and into
Merger Sub; (ii) holders of Common Shares will receive, in exchange for their
Common Shares, shares of EDO Common Stock; (iii) AIL shall cease to exist and
Merger Sub shall continue as the surviving corporation (the "Surviving
Corporation"); and (iv) the Surviving Corporation will become a wholly-owned
direct subsidiary of EDO.
C. AIL has made certain representations, warranties, covenants and
agreements to and for the benefit of EDO and Merger Sub under or in connection
with the Merger Agreement.
D. Pursuant to the Management Stock Purchase Agreement and the Merger
Agreement, and in order to secure the indemnification obligations of the
Exchanging Common Stockholders, a certain portion of the consideration to be
issued in connection with the Merger (the "Escrow Amount") is to be deposited in
escrow (the "Escrow Account"), subject to the terms and conditions of this
Agreement.
E. EDO desires the Escrow Agent to hold and dispose of the Escrow Amount
and the Escrow Agent is willing to do so on the terms and conditions hereinafter
set forth.
A G R E E M E N T
NOW THEREFORE, in consideration of the premises and of the mutual
agreements, covenants and provisions herein contained and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed to
act as Escrow Agent hereunder and agrees to accept, hold and distribute the
Escrow Amount in accordance with and subject to the terms hereof.
2. Deposit of Escrow Amount. (a) Pursuant to the Management Stock Purchase
Agreement and the Merger Agreement, EDO has deposited, or has caused to be
deposited, the Escrow Amount with the Escrow Agent, and the Escrow Agent hereby
acknowledges receipt of the Escrow Amount. On the date hereof, the Escrow Amount
is comprised of shares of EDO Common Stock, and $ in cash.
The Escrow Amount shall be deemed to have been contributed into escrow hereunder
by the Exchanging Common Stockholders in proportion to the percentages set forth
next to the name of each such Exchanging Common Stockholder in Exhibit A hereto
as amended pursuant to Section 6.1(b). The shares of EDO Common Stock deposited
with the Escrow Agent hereunder (together with any shares or other securities
subsequently
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distributed in respect of such shares of EDO Common Stock as contemplated
pursuant to Section 3.1(a), the "Escrow Deposit Shares") are and will be
registered in the name of the Escrow Agent for convenience only; the parties
hereto acknowledge that, unless and until the Escrow Deposit Shares are
distributed to EDO hereunder, the Exchanging Common Stockholders are the
beneficial owners of the Escrow Deposit Shares.
(b) The Escrow Amount shall be used to secure the Exchanging Common
Stockholders' indemnification obligations under Section 9 of the Merger
Agreement.
3. Dividends; Voting Rights.
3.1(a) Subject to Section 3.1(b), all dividends or other property
distributed in respect of the Escrow Deposit Shares, including, without
limitation, any shares issued as a result of stock splits, stock dividends or
other recapitalizations, shall be retained in and become a part of the Escrow
Amount upon issuance or payment, as the case may be. The term "Escrow Deposit
Shares" shall be deemed to include all shares of EDO Common Stock and other
securities of EDO distributed in respect of the Escrow Deposit Shares, except as
contemplated pursuant to Section 3.1(b).
(b) All dividends or other property distributed in respect of those Escrow
Deposit Shares retained in the Escrow Account pursuant to Section 6.3,
including, without limitation, any shares issued as a result of stock splits,
stock dividends or other recapitalizations, at any time after the Survival Date,
shall be paid by EDO or, on their receipt by the Escrow Agent, by the Escrow
Agent, to the Exchanging Common Stockholders in accordance with the percentages
set forth in Exhibit A as amended pursuant to Section 6.1(b).
3.2 The Escrow Deposit Shares shall be voted on all matters submitted to
the shareholders of EDO as the Exchanging Common Stockholders shall direct in
respect of that number of Escrow Deposit Shares deemed contributed by each under
Section 2 above and not distributed pursuant to Section 6.1 or 6.2. In the
absence of direction from an Exchanging Common Stockholder, such Escrow Deposit
Shares shall be voted proportionately in accordance with the votes of the other
Exchanging Common Stockholders.
4. Investments. The Escrow Agent shall cause the cash portion of the
Escrow Amount from time to time to be invested and reinvested as directed in
writing by the Common Stockholder Representative in (a) debt securities for the
payment of which the full faith and credit of the United States of America is
pledged ("U.S. Securities") and repurchase agreements collateralized with U.S.
Securities, or (b) money market funds investing exclusively in U.S. Securities.
Absent direction by the Common Stockholder Representative to the Escrow Agent,
the Escrow Agent shall invest the cash portion of the Escrow Amount in the Pilot
Short Term U.S. Treasury Fund. The portion of the Escrow Amount consisting of
Escrow Deposit Shares shall remain invested in Escrow Deposit Shares.
5. Application of the Escrow Amount to Claims of EDO.
5.1 In the event any EDO Indemnitee suffers any EDO Damages ("Loss") which
it believes in good faith is covered by the Exchanging Common Stockholders'
indemnification obligations under Section 9.2 of the Merger Agreement, EDO shall
have the right (but not the obligation) to deliver to the Escrow Agent, with a
copy to the Common Stockholder Representative, a written notice (a "Disbursement
Notice"). A Disbursement Notice shall set forth (i) the amount of such Loss for
which reimbursement is then sought hereunder (the "Claimed Amount"), (ii) a
description, in reasonable detail, of the facts giving rise to such Loss to the
extent then known by EDO, and (iii) payment instructions for any cash portion of
such payment. Subject to Section 5.3(b) below, on the forty-fifth calendar day
following the date of receipt of such notice by the Escrow Agent, the Escrow
Agent shall pay to EDO the Claimed Amount pursuant to Section 5.3 and in
accordance with such payment instructions, provided, however, that if the Escrow
Agent receives a Contest Notice (as defined below) from the Common Stockholder
Representative to such Disbursement Notice prior to the forty-fifth calendar day
following the date the Escrow Agent receives such Disbursement Notice, the
Escrow Agent shall disburse all or a portion of the amounts sought under such
Disbursement Notice, but only in accordance with (x) joint written instructions
executed by EDO and the Common Stockholder Representative authorizing such
disbursement or (y) a letter of instruction from EDO specifying the portion of
the Claimed Amount to which it is entitled to receive payment and attaching a
copy of a decision by an arbitrator establishing such EDO Indemnitee's right to
receive payment in such amount. It is expressly agreed
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that, provided EDO has given notice as provided in this Agreement, the failure
by the Common Stockholder Representative to deliver a Contest Notice within the
time period specified above shall be deemed an irrevocable acceptance by the
Exchanging Common Stockholders of their liability for the Claimed Amount as set
forth in such Disbursement Notice or for such portion of the Claimed Amount as
to which the Common Stockholder Representative did not object.
5.2 If the Common Stockholder Representative disagrees in good faith with
any item or amount shown on any Disbursement Notice, the Common Stockholder
Representative may, prior to the forty-fifth calendar day following the date of
receipt by the Escrow Agent of the Disbursement Notice, deliver a notice to EDO
(with a copy to the Escrow Agent), setting forth, in reasonable detail, each
disputed item or amount and the basis of the Exchanging Common Stockholders'
disagreement (the "Contest Notice"). EDO and the Common Stockholder
Representative first shall attempt in good faith to resolve all of the issues
set forth in the Contest Notice within 45 calendar days after EDO's receipt of
the Contest Notice. After such 45 day negotiation period, (a) EDO and the Common
Stockholder Representative shall deliver joint written instructions to the
Escrow Agent directing the Escrow Agent to disburse or retain any portion of the
Claimed Amount with respect to which all disputes have been resolved and (b)
either EDO or the Common Stockholder Representative may submit outstanding
disputes set forth in the Contest Notice to arbitration pursuant to Section 16
below. On receipt of a decision by the arbitrator resolving any outstanding
disputes set forth in the Contest Notice, EDO will send a letter of instruction
to the Escrow Agent, attaching a copy of the arbitrator's decision, and the
Escrow Agent shall disburse or retain such portion of the Claimed Amount in
accordance with the terms of such arbitrator's decision.
5.3(a) Any payment by the Escrow Agent of any amounts payable to EDO under
this Agreement shall be paid from the Escrow Amount (i) in cash in immediately
available funds in accordance with the instructions described in Section 5.1 in
an amount equal to the Cash Percentage (as defined below) of such payment and
(ii) by transfer, delivery and assignment to EDO of Escrow Deposit Shares
(rounded up or down to the nearest whole share) together with stock powers and
other transfer documents as are necessary to transfer such Escrow Deposit
Shares, in an amount equal to the Share Percentage (as defined below) of such
payment. For purposes of the determination of the above proportions, Escrow
Deposit Shares shall be valued at the Indemnity Share Price.
(b) Notwithstanding anything in this Agreement to the contrary but subject
to Section 5.3(c), if an Exchanging Common Stockholder has elected in a duly
executed Election Form delivered to EDO prior to the tenth day following the
Closing Date to pay indemnity claims in cash, then, immediately upon
presentation to the Escrow Agent of a receipt executed by EDO evidencing the
receipt by EDO of the appropriate portion of the aggregate amount payable to EDO
in respect of such an indemnity claim, the Escrow Agent shall release from
Escrow to such Exchanging Common Stockholder the same amount and kind of
property (if any) that would have been paid to EDO out of the Escrow Account on
behalf of such Exchanging Common Stockholder if such Exchanging Common
Stockholder had not elected to pay in cash.
(c) Notwithstanding anything in this Agreement to the contrary, if an
Exchanging Common Stockholder has elected in a duly executed Election Form
delivered to EDO prior to the tenth day following the Closing Date to pay
indemnity claims in cash, but fails to tender payment to EDO of his, her or its
portion of any indemnity claim within seven Business Days after the date on
which the Escrow Agent has made a payment with respect to such indemnity claim
pursuant to Section 5.3(a) or 5.3(b), as the case may be, such Exchanging Common
Stockholder shall no longer be permitted to pay such claim in cash and such
Exchanging Common Stockholder's indemnity obligation shall be satisfied out of
the Escrow Account as if such Exchanging Common Stockholder had failed to
execute and deliver an Election Form.
5.4(a) For purposes of this Agreement, the term "Cash Percentage" means the
total amount of cash in the Escrow Account on the date of payment pursuant to
this Section 5 divided by the sum of (i) such total amount of cash and (ii) the
product of the number of Escrow Deposit Shares in the Escrow Account as of the
date of payment pursuant to this Section 5 and the Indemnity Share Price.
(b) For purposes of this Agreement, the term "Share Percentage" means one
minus the Cash Percentage.
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5.5 Notwithstanding anything else contained herein to the contrary, the
Common Stockholder Representative (i) shall deliver to the AIL ESOP Trustee,
promptly upon receipt, copies of all notices received by the Common Stockholder
Representative in her capacity as such from EDO, AIL, the Escrow Agent or any
other party, (ii) will not agree (or be deemed to agree by failure to respond to
a notice given or failure to take any other action) to any settlement of any
claim, consent (or be deemed to consent by failure to respond to a notice given
or failure to take any other action) to the release of any amounts in the Escrow
Fund that are attributable to the Merger Shares issued to the AIL ESOP or that
otherwise adversely effects the AIL ESOP, without the prior consent of the AIL
ESOP Trustee, (iii) will consult with the AIL ESOP Trustee in connection with
exercising its authority hereunder, and (iv) has been granted no authority to
act on behalf of the AIL ESOP or any of its property in violation of the
foregoing. Any action required of the Common Stockholder Representative to
dispute a claim of an EDO Indemnitee or otherwise preserve any rights of the AIL
ESOP not taken by the Common Stockholder Representative without the consent of
the AIL ESOP Trustee to refrain from taking such action may be taken by the AIL
ESOP Trustee on behalf of the AIL ESOP. Any action taken in violation of the
foregoing shall be void and of no effect. Any deemed waiver or acquiescence by
reason a failure to take any action without the consent of the AIL ESOP Trustee
shall be void and of no effect, except if the AIL ESOP Trustee shall have
received copies of the notices referred to in clause (i) above, shall have been
notified that the Common Stockholder Representative intends to waive objection
by inaction and shall have failed to take any action its own under the second
preceding sentence within a reasonable time. Any action taken by the AIL ESOP
Trustee shall be effective solely with respect to the AIL ESOP and not with
respect to any other Exchanging Common Stockholder.
6. Distributions to Exchanging Common Stockholders.
6.1 [Intentionally Omitted.]
6.2 Subject to Section 6.3 below, as soon as practicable after the date
that is 45 days after the Survival Date, the Escrow Amount, together with all
income earned thereon, less any amounts distributed to EDO from the Escrow
Amount pursuant to Section 5.3, shall be distributed by the Escrow Agent to the
Exchanging Common Stockholders in accordance with the percentages set forth in
Exhibit A as amended pursuant to Section 6.1(b), provided that EDO may direct
the Escrow Agent to deliver any Escrow Deposit Shares that are to be released
pursuant to this Section 6.2 and that were originally delivered in the Merger in
respect of Common Shares that were subject to pledge to secure loans to the
Exchanging Common Stockholders, into pledge to the extent that the pledgee is
entitled thereto.
6.3 Distributions pursuant to Section 6.2 shall be subject to the proviso
that if any claim(s) asserted by EDO on or prior to the date of such
distribution(s) shall not have been paid or finally determined to be without
merit or the amount of such claim(s) shall not have been finally determined, a
portion of the Escrow Amount having an aggregate value (determined and allocated
between Escrow Deposit Shares and cash as provided in Sections 5.3 and 5.4
above, except that for the purpose of such determination and allocation the date
of distribution pursuant to Section 6.2 shall be deemed to be the date of
payment) equal to the amount of such pending claim(s) on such date shall be
retained and held in escrow in the Escrow Account, until such pending claim(s)
shall have been paid or finally determined to be without merit, whereupon any
remaining portion of the Escrow Amount shall be distributed as provided in
Section 6.2. Any such distribution shall be net of any required tax or other
withholding or deduction.
6.4 For the avoidance of doubt and notwithstanding anything herein to the
contrary, with respect to any Exchanging Common Stockholder, in no event will
the Escrow Agent disburse to EDO Escrow Deposit Shares attributable to such
Exchanging Common Stockholder with a dollar value greater than 15% of the dollar
value of the Aggregate Consideration applicable to such Exchanging Common
Stockholder measured as of the Effective Time.
7. Provisions Concerning the Escrow Agent.
7.1 The duties of the Escrow Agent shall be as expressed herein and the
Escrow Agent shall have no implied duties nor shall the permissive right or
power to take any action be construed as a duty to take such
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action under any circumstances and it shall not be liable except in the event of
its gross negligence or willful misconduct.
7.2 The fees and expenses of the Escrow Agent (including the fees and
expenses of legal counsel engaged pursuant to Section 7.10) shall be paid by
EDO. The Escrow Agent need not take any action under the Escrow Agreement which
may involve it in any expense or liability until indemnified to its satisfaction
for any expense or liability it reasonably believes it may incur.
7.3 Any recitals contained herein shall be deemed to be those of the
parties hereto other than the Escrow Agent.
7.4 The Escrow Agent shall not be required to give any bond or surety or
report to any court despite any statute, custom or rule to the contrary.
7.5 The Escrow Agent shall be protected in acting upon any notice, request,
consent, certificate, order, affidavit, letter, telegram, or other paper or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons.
7.6 The Escrow Agent may execute any of the duties under this Escrow
Agreement by or through agents or receivers.
7.7 The Escrow Agent shall not be required to take notice or be deemed to
have notice of any default or other fact or event under the Agreement unless the
Escrow Agent shall be specifically notified in writing of such default, fact or
event.
7.8 The Escrow Agent may at any time resign from the position created in
the Escrow Agreement by giving thirty (30) days written notice prior to the
proposed resignation date by registered or certified mail to EDO and the Common
Stockholder Representative. However such resignation shall take effect only upon
the appointment of, and acceptance by, a successor mutually acceptable to EDO
and the Common Stockholder Representative. If EDO and the Common Stockholder
Representative fail to agree on the identity of a successor Escrow Agent 15 days
prior to the proposed resignation date, the existing Escrow Agent shall in its
sole discretion choose the successor Escrow Agent. In the event of such
resignation, the Escrow Agent shall deliver all funds, securities and other
property held by it pursuant to this Agreement to the successor Escrow Agent.
Upon receipt of such escrow funds the successor Escrow Agent shall be bound by
all of the provisions hereof.
7.9 In the event the Escrow Agent becomes involved in litigation by reason
hereof, it is hereby authorized to deposit with the Clerk of the Court in which
the litigation is pending any and all funds, securities, or other property held
by it pursuant hereto and thereupon shall stand fully relieved and discharged of
any further duties hereunder. Also, in the event the Escrow Agent is threatened
with litigation by reason hereof, it is hereby authorized to implead all
interested parties in any court of competent jurisdiction and to deposit with
the Clerk of such Court any such funds, securities, or other property held by it
pursuant hereto and thereupon shall stand fully relieved and discharged of any
further duties hereunder.
7.10 The Escrow Agent may engage legal counsel, who may be counsel for any
party to the Escrow Agreement, and shall not be liable for any act or omission
taken or suffered pursuant to the opinion of such counsel.
7.11 Unless specifically required by the terms of the Escrow Agreement, the
Escrow Agent need not take notice of or enforce any other document or
relationship, including, without limiting the generality of the foregoing, any
contract, settlement, arrangement, plan, assignment, pledge, release, decree or
the like, but its duties shall be solely as set out in the Escrow Agreement.
7.12 EDO shall indemnify and save harmless the Escrow Agent from and
against any loss, liability or expense reasonably incurred, without gross
negligence or willful misconduct on its part, arising out of or in connection
with the Escrow Agreement, including the expense of defending itself against any
claim or liability in the premises. This indemnity agreement shall survive the
termination of the Escrow Agreement.
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7.13 The appointment of the Escrow Agent hereunder may be terminated on the
written agreement of EDO and the Common Stockholder Representative communicated
by written notice to the Escrow Agent specifying the proposed date upon which
such termination shall take effect providing that no such termination shall be
effective until the appointment of and acceptance by a successor Escrow Agent.
In the event of such termination, EDO and the Common Stockholder Representative
shall before the date of such termination appoint a mutually acceptable
successor Escrow Agent. If EDO and the Common Stockholder Representative fail to
agree on the identity of a successor Escrow Agent 15 days prior to the date of
such proposed termination, the original Escrow Agent shall, in its sole
discretion, choose the successor Escrow Agent. In the event of such termination,
the Escrow Agent shall deliver all funds, securities and other property held by
it pursuant to this Agreement to the successor Escrow Agent. Upon receipt of
such escrow funds, the successor Escrow Agent shall be bound by all of the
provisions hereof.
8. Notices. (a) All notices, requests, demands, waivers and other
communications to be given by any party hereunder shall be in writing and shall
be (i) mailed by first-class, registered or certified mail, postage prepaid,
(ii) sent by hand delivery or reputable overnight delivery service or (iii)
transmitted by telefax (provided that a copy is also sent by reputable overnight
delivery service) addressed as follows:
If to EDO Corporation: Copy to
[ ] Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
If to the Escrow Agent Copy to
[ ] [ ]
If to the Common Copy to
Stockholder Representative Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(b) All notices, requests, demands, waivers and other communications to be
given to any Exchanging Common Stockholder by EDO shall be given by the Escrow
Agent in accordance with Section 8(a) promptly, but in no event later than one
business day, after such notice, request, demand, waiver or other communication
was received by the Escrow Agent. If the Escrow Agent receives any notice,
request, demand, waiver or other communications from any Exchanging Common
Stockholder which is intended for EDO, the Escrow Agent shall, promptly, but in
no event later than one business day, after it was received by the Escrow Agent,
forward such notice, request, demand, waiver or other communication to EDO in
accordance with Section 8(a). If the Escrow Agent receives any notice, request,
demand, waiver or other communications from EDO which is intended for the Common
Stockholder Representative, the Escrow Agent shall, promptly, but in no event
later than one business day, after it was received by the Escrow Agent, forward
such notice, request, demand, waiver or other communication to the Common
Stockholder Representative in accordance with Section 8(a).
(c) All such notices, requests, demands, waivers and other communications
shall be deemed to have been given and received (i) if by personal delivery or
telecopy, on the day of such delivery, (ii) if by first-class, registered or
certified mail, on the fifth business day after the mailing thereof or (iii) if
by reputable overnight delivery service, on the day delivered.
9. Amendments; Waivers. The provisions of this Agreement may not be
amended or modified and no waiver hereunder shall be valid and binding except by
a writing duly executed by a party against whom enforcement of the amendment,
modification, supplement or discharge is sought. The failure of any party at
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any time or times to require performance of any provision of this Agreement
shall in no manner affect the rights at a later time to enforce the same. No
waiver by any party of the breach of any term contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such breach or the
breach of any other term of this Agreement.
10. Severability. If the final determination of a court of competent
jurisdiction declares, that any term or provision hereof is invalid or
unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired
and (b) the invalid or unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
11. Representatives, Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective parties hereto and their
respective successors and assigns, but neither this Agreement nor any right,
interest or obligation hereunder shall be assigned, whether by operation of law
or otherwise by any of the respective parties hereto without the prior written
consent of all of the other parties hereto.
12. No Third-Party Beneficiaries. Except for the Exchanging Common
Stockholders and the EDO Indemnitees all of whom shall be deemed to be
third-party beneficiaries to this Agreement, nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (EXCEPT TO THE EXTENT THE DGCL IS IMPLICATED), WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS RULES THEREOF. Solely in connection with the
enforcement of the arbitration provisions of, or an arbitral award made pursuant
to, Section 11.4(a) of the Merger Agreement, each of the parties hereto, for
itself and its successors and assigns hereby irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America in each case located in the State, City
and County of New York and hereby waives, and agrees not to assert, as a defense
in any action, suit or proceeding for the enforcement of such provisions or
award, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in said courts or that the venue
thereof may not be appropriate or that such provisions or award may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a New York State or Federal court. Each of the parties hereto hereby
consents to and grants any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such action or proceeding in
the manner provided in Section 8 or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
14. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.
15. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party or
other indemnitee may otherwise have at law or in equity or otherwise.
16. Arbitration. Other than in respect of any matter for which this
Agreement specifies a mechanism for dispute resolution, any dispute in
connection with this Agreement shall be resolved by binding arbitration pursuant
to Section 11.4(a) of the Merger Agreement.
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IN WITNESS THEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
EDO CORPORATION
By:
------------------------------------
Name:
Title:
[ESCROW AGENT]
By:
------------------------------------
Name:
Title:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Common
Stockholder Representative
By:
------------------------------------
Name:
Title:
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EXHIBIT E
FORM OF ELECTION FORM
Reference is made to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 2, 2000, among EDO Corporation ("EDO"), EDO
Acquisition III Corporation and AIL Technologies Inc. ("AIL"). All capitalized
terms in this Election Form that are not defined herein shall have the meanings
set forth in the Merger Agreement; provided that, solely for purposes of this
Election Form, the term "Exchanging Common Stockholders" shall include the
Common Stockholders party to the Management Stock Purchase Agreement.
The undersigned understands that, by executing and delivering this Election
Form within ten Business Days after the Closing, he, she or it may elect to pay
indemnity claims made by EDO in cash. The undersigned also understands that the
decision whether to pay in cash is irrevocable and may not be changed once this
Election Form has been executed and delivered. The undersigned further
understands that the election under this Election Form is subject to the
limitations set forth in Section 9.6(a) of the Merger Agreement.
The undersigned hereby elects to pay all indemnity claims to EDO in cash.
The terms of the indemnity, the method of payment and related matters are
more fully described and governed by the terms of the Merger Agreement and the
Escrow Agreement.
The undersigned hereby represents and warrants to EDO as follows:
(a) Immediately prior to the Effective Time, the undersigned was the
record holder of shares of common stock, par value $0.10 per
share, of AIL.
(b) The undersigned has full power and authority to execute and
deliver this Election Form.
(c) The undersigned has received copies of and has read the Merger
Agreement, the Proxy Statement and the Registration Statement.
The undersigned agrees to be bound by all of the provisions of Sections 9
("Indemnification"), 10 ("Definitions") and 11 ("Miscellaneous") of the Merger
Agreement (other than Sections 11.1 and 11.2 thereof) to the same extent as if
the undersigned had been an original signatory of the Merger Agreement. The
undersigned understands and agrees that he, she or it is an Exchanging Common
Stockholder for all purposes of the Merger Agreement, including the provisions
of Sections 9, 10 and 11 thereof. The undersigned further irrevocably appoints
(i) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (ii) in the event of the death, disability, termination
of employment or absence of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and (iii) in the
event of the death, termination of employment or disability of both ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, such other persons as a majority in interest of the
remaining Exchanging Common Stockholders shall designate, as the undersigned's
agent, proxy and attorney-in-fact for all purposes in connection with the Merger
Agreement and the Escrow Agreement and agrees that such person may represent and
bind the undersigned to the fullest extent permitted under Sections 9.2, 9.4 and
11.13 of the Merger Agreement and as provided under the Escrow Agreement.
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This Election Form is hereby executed on the day of
, 2000.
-------------------------------------------------------------------------------
Please send an executed copy Address for Notices and
of this Election Form to: Return of Shares
EDO Corporation (if applicable):
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ --------------------------------
Suite 5010 --------------------------------
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ --------------------------------
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
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